Expanded assessment powers are seen in California, but opposition building.

SANTA MONICA, Calif.--State lawmakers in California seem more willing nowadays to draft legislation to expand the use of special assessments, while a taxpayer watchdog group believes voters should have the final say on their imposition, attendees at a public finance conference were told Friday.

Peter M. Detwiler, principal consultant to the state Senate Local Government Committee, recapped several bills pending late last week before Gov. Pete Wilson that would authorize the use of assessments for such atypical purposes as cleaning up graffiti and funding library services.

Samuel A. Sperry, an attorney with Orrick, Herrington & Sutcliffe, said the library assessments proposal by Sen. David Roberti, D-Van Nuys, "looks and smells like a tax."

Detwiler and Sperry were among the speakers on a panel on special assessments at the third annual California Public Finance Conference, sponsored by The Bond Buyer.

Sperry said he expects "tension to build" among voters when they see public officials create benefit assessment districts to fund services traditionally handled by special taxes or a locality's general fund.

Taxpayer watchdog groups are already fuming. At least one group, the Howard Jarvis Taxpayer Association, expects to prepare a constitutional initiative that would require voter approval for special assessments.

Jonathan M. Coupal, director of legal affairs for the association, said assessment district reform is a top priority among the organization's 200,000 members.

"There is dissatisfaction unparalleled since the days of Proposition 13," Coupal said, referring to the landmark 1978 property tax initiative co-sponsored by the late Howard Jarvis.

Coupal said the Jarvis group has not decided when it would launch a signature-gathering campaign. He said he hopes to place the proposal before voters in either the 1994 or 1996 election cycle. A total of 615,958 signatures are required to place an initiative on the California ballot.

The panel speakers agreed that a California Supreme Court decision last year set the stage for the current focus on special assessments.

Coupal said the December 1992 decision in Knox v. City of Orland "caused a jolt" to the Jarvis organization because the ruling gives local governments broader latitude to impose special assessments without a public vote.

Sperry and Detwiler disagreed with Coupal over some points, including whether assessments in certain circumstances run afoul of state definitions on special taxes.

Another speaker, Pamela J. Peters, a vice president at Financial Security Assurance, said she expects to see increased credit enhancement for assessment financings.

Peters outlined various reasons why use of bond insurance for assessment bonds has been limited, ranging from poor market perception to credit and disclosure concerns.

But certain developments--such as new credit structures and extensive build-out in some existing districts --should give more comfort and spur more of a role for bond insurance, Peters said.

Friday's keynote address was delivered by Russell S. Gould, director of the California Department of Finance, who said recent reports on job losses from defense cuts and a softness in the construction industry represent possible "warning signals" about continued sluggishness in state revenue collections.

However, Gould said his department is standing by its revenue projections and plans no adjustments for now.

"We're tracking right on target" for revenue forecasts through September, with actual collections slightly better than expected, he said.

In a session on Thursday in which sales taxes were examined, panelists discussed the latest reverberations from a 1991 California Supreme Court ruling, Rider v. County of San Diego.

The state high court held in Rider that a San Diego County sales tax increase was invalid because the measure did not receive the necessary two-thirds vote required under Proposition 13, the 1978 property tax relief initiative.

Barney A. Allison, a partner at Nossaman, Guthner, Knox & Elliott, said the Rider case continues to have repercussions for California public finance.

Allison noted that a California appellate court is expected to rule within 90 days on a Santa Clara County sales tax case. The court will decide whether voters last November legally approved, with a simple majority rather than a two-thirds threshold, a half-cent sales tax for a county transportation authority.

The viability of future sales tax measures for transportation could be on the line in Santa Clara County, said William Kempton, a lobbyist for D.J. Smith & Associates.

If the tax increase "goes down to defeat, we will lose a valuable tool for raising money in California," said Kempton, who is serving as interim executive director of the Santa Clara transportation authority.

Amy S. Doppelt, senior vice president for Fitch Investors Service, said the rating agency has grown "very comfortable" providing investment grade ratings for sales tax-backed transportation bonds in the wake of Rider. Several recent court rulings have clarified that such tax increases are legal as long as they are not created to circumvent voter approval requirements of Proposition 13, she said.

Leslie V. Porter, treasurer of the Los Angeles County Metropolitan Transportation Authority, explained how his agency has coped with declining sales tax revenues due to the region's softening economy.

Porter, who said the authority expects a fiscal 1995 deficit of more than $ 100 million, said new revenue sources could help finance certain construction projects.

One proposal under study by authority officials is the creation of six benefit assessment districts. They would be formed within a half-mile radius of planned Metro Rail subway stations. The assessment levies on commercial property owners would provide a revenue stream allowing the issuance of $75 million in assessment bonds, Porter said.

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