October 30, 2000
By HANH KIM QUACH
The Orange County Register

No city has placed a fee on your potato chips. And you don't pay a surcharge for that slice of fat-oozing bacon.

But some of California's biggest businesses say special fees for such unhealthy vices might be in your future if government regulators have their way. That's why, business interests say, they wrote Proposition 37, which would make it harder to institute such fees.

At the crux of the debate is a 1997 Supreme Court decision that gave the state and local governments more leeway to charge fees on businesses.

In response, Prop. 37 proposes redefining certain regulatory "fees'' as "taxes'' in the state Constitution - thereby requiring a two-thirds vote of the Legislature, local officials or the electorate to pass. "Fees" require a simple majority vote.

Prop. 37 would only make it harder to enact new regulatory levies on companies making products that cause environmental, health or social problems. The biggest supporters of Prop. 37 are the oil, tobacco and alcohol industries.

"Fees happen below the radar screen, but taxes get lots of public attention,'' said Fred Main, of the state Chamber of Commerce and one of the measure's authors.

Only two such "regulatory fees'' have passed since the 1997 ruling. But Prop. 37 authors say it's important to enact the measure before the number of fees explodes.

"Clearly, there are not a substantial number of examples,'' said Larry McCarthy, director of the California Taxpayers' Association and supporter of the measure. "Prop. 37 is a little like repairing the levee so that there's not a deluge."

Opponents of the measure, however, say the initiative would allow big corporations to weasel out of paying for the damage they cause society.

Big business is "trying to scare voters to the polls with the bogeyman,'' said Mike Madrid, executive director of Action for Better Cities.

Corporate interests such as oil, tobacco and alcohol had poured $2.2 million into the campaign, or 94 percent of the money in the pro-Prop. 37 treasury, as of the reporting period that ended Oct. 5. Prop. 37's opponents had raised $42,200.

Pocketbook issue

What's really at risk, the measure's opponents say, is your pocketbook.

Because the measure is written so vaguely, not defining which fees are "regulatory fees,'' every fee could be challenged in court as a "tax," Madrid said.

The resulting court trials will end up costing taxpayers millions, he said, not to mention cleanup costs for environmental problems that taxpayers would have to pay.

Critics say local governments would find it harder to impose fees on businesses and ensure that they pay for their share of "damage'' caused by cutting into streets -- to install cables for telecommunications, for example.

"It lets those who do the damage get off the hook,'' said Lenny Goldberg, director for the California Tax Reform Association.

Brockovich opposes

The opposition has attracted such big names as Erin Brockovich, whose fight against Pacific Gas & Electric plants' leaching of heavy metal contaminants into a California town's water inspired a film that bears her name. Also opposed are the American Cancer Society, the League of Conservation Voters and the American Lung Association.

McCarthy and other Prop. 37 supporters argue that they could be unfairly saddled with paying for new government programs through a variety of concocted fees.

They argue that regulatory "fees" should be used simply to reimburse the state for the cost of regulating industries - the office staff time and space used to process paperwork and ensure that industries are following procedures correctly.

Anything beyond that - studies of problems their industries could cause and programs providing health care for problems their products may cause - should be considered a "tax."

Roots in court case

The measure would overturn a 1997 state Supreme Court decision in which Sinclair Paint Co. sued the state, saying that it should not be required to pay $98,000 in fees for a state program screening children for lead poisoning. The fee, Sinclair argued, was actually a "tax'' and should have been subject to the higher two-thirds vote.

The high court ruled that government has the right to charge businesses "regulatory fees'' to correct problems caused by their operations or products.

The U.S. Supreme Court has ruled that before governments charge a fee, they must show a "nexus,'' or connection, between the fee they're charging and the problem they're trying to combat.

Because of that, Prop. 37 opponents said, no threat exists for governments to enact new fees willy-nilly - especially fees for fatty foods, say - because the nexus wouldn't be strong enough.

But Prop. 37 supporters cite two fees imposed on businesses after the 1997 decision.

One was an alcohol sales fee enacted by Santa Cruz and Oakland that reimburses the cities for extra police to control and monitor the area around such businesses.

The other was an increase in the state's tire-disposal fee from 25 cents to $1 per tire.

Under the previous program, the 25-cent fee paid for tire disposal. But this year, the program was broadened to study how tire fires in two northern Central Valley counties have affected the soil and water supplies. The money would also pay for a study of uses for old tires.

"In the end, someone's gotta pay,'' said David Jones, legislative advocate with the California League of Cities, which opposes the measure. "The question is whether it's someone who's responsible for the degradation or someone at the end - usually the taxpayers - holding the bag.''

 Copyright 2000 The Orange County Register