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Caltrain tax legal opinion

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Adina Levin
Adina Levin

The letter discusses a recent California law, SB 797, that provides an opportunity for Caltrain to place a one-eighth cent sales tax measure on the ballot to support its rail services. The law requires that the net revenues from the tax must be used solely for Caltrain's operating and capital purposes. Specifically, any political body approving the ballot measure cannot impose additional conditions on the use of funds or link the fiscal measure to unrelated organizational objectives. Doing so could render the tax vulnerable to a legal challenge. Separate discussions about potential changes to Caltrain's governance or management structure can continue but should not be tied to approval of the economic measure.

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July 21, 2020 VIA EMAIL Jim Hartnett San Mateo County Transit District hartnettj@samtrans.com Dear San Mateo County Transit District Board Members: As Special Counsel to the San Mateo County Transit District, I was tasked with looking at SB 797, the recent California law that provides a unique opportunity for Caltrain to submit a one-eighth cent sales tax measure to the voters to support our vital local train service. However, the one thing that is clear is that it must be a clean ballot proposal requiring that “the net revenues from the tax” must “be used by the board for the operating and capital purposes of the Caltrain rail services.” Simply put, the law means the political bodies needing to approve the ballot measure must not impose collateral or delaying conditions on use of the funds. Thus, the law prohibits linking the straightforward fiscal measure designed to save Caltrain to unrelated—even if salutary—organizational or other objectives. Specifically, it is my strong opinion that larding approval with requirements of changed governance or targeted or restricted spending requirements will render the tax subject to a successful taxpayer legal challenge. Importantly, there is nothing that prevents the three members of the JPA from continuing their separate discussions about organizational change and management structure. Plainly, however, the California Legislature was saying you can do that, just don’t tie such political negotiations to the overall economic wellbeing of the railway. Very truly yours, James M. Wagstaffe

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Caltrain tax legal opinion

  • 1. July 21, 2020 VIA EMAIL Jim Hartnett San Mateo County Transit District hartnettj@samtrans.com Dear San Mateo County Transit District Board Members: As Special Counsel to the San Mateo County Transit District, I was tasked with looking at SB 797, the recent California law that provides a unique opportunity for Caltrain to submit a one-eighth cent sales tax measure to the voters to support our vital local train service. However, the one thing that is clear is that it must be a clean ballot proposal requiring that “the net revenues from the tax” must “be used by the board for the operating and capital purposes of the Caltrain rail services.” Simply put, the law means the political bodies needing to approve the ballot measure must not impose collateral or delaying conditions on use of the funds. Thus, the law prohibits linking the straightforward fiscal measure designed to save Caltrain to unrelated—even if salutary—organizational or other objectives. Specifically, it is my strong opinion that larding approval with requirements of changed governance or targeted or restricted spending requirements will render the tax subject to a successful taxpayer legal challenge. Importantly, there is nothing that prevents the three members of the JPA from continuing their separate discussions about organizational change and management structure. Plainly, however, the California Legislature was saying you can do that, just don’t tie such political negotiations to the overall economic wellbeing of the railway. Very truly yours, James M. Wagstaffe