Does Proposition 2 1/2 allow increases in the tax levy?
Proposition 2 1/2 contains several provisions for an increase in the tax levy limit:
The levy can be increased by the adoption of an exclusion. The exclusion provision allows the voters of the city or town to exclude bonds or debt issued for municipal capital improvements and is in place only for the length of the borrowing. It does not add to the base for calculating future years' levy limits.
The levy can be increased by the adoption of an override. An override provision allows the voters of the city or town to raise additional revenues (or to reduce the levy) by the specific amount. This can be accomplished by placing an override question on the ballot in a general or special election, and approving the measure by a simple majority of voters. The increase approved by the voters then becomes part of the base for calculating future years' levy limits.
It is important to consider, however, that Proposition 2½ also mandates that the property tax levy for any given year can never exceed the property tax levy ceiling (which is, again, 2½% of the assessed value of all taxable properties within a city or town). An override of the Proposition 2½-levy limit does not allow the levy to exceed the levy ceiling.
The levy can be increased by the value of new construction and newly taxable parcels. This provision ensures that cities and towns can recover additional service costs resulting from new taxable projects.
The levy limit can be increased by 2.5% each year so long as the levy does not exceed 2.5% of the full cash value of all property in the city or town.