HomeMy WebLinkAboutAgenda Statement 1987/11/24 Item 12•
COUNCIL AGENDA STATEMENT
Item 12
Meeting Date 11/24/87
ITEM TITLE: Resolution ~,~j~ Q- Adopting a Policy for Waiving Fees for
Community Service~1O/rganizations
SUBMITTED BY: City Attorney ;~~
(4/5ths Vote: Yes No X )
This report discusses two alternative policies for waiving fees for community
,, service organizations.. One would include religious organizations, the other
would not. The staff recommendation is to adopt the policy which does not
• include religious organizations because including religious organizations
could result in a policy so broad that waivers would be made where they are
not merited.
RECOMMENDATION: That Council adopt a policy for waiver of fees for
secular community service organizations only
BOARDS/COMMISSIONS RECOMMENDATION: N/A
• DISCUSSION:
There have been numerous requests over the years from community organizations
and religious groups for waiver of City fees. There is no problem with
granting these requests when they involve secular community service
organizations. The only legal concern would be that this does not constitute
a gift of public funds. We are given broad discretion to determine what
constitutes a public purpose and the fact that these waivers may indirectly
benefit individuals does not make them invalid. We are also able to carefully
scrutinize the organization to determine whether we feel the waiver is
appropriate when balanced against the value of the activity to the community.
Potential constitutional problems arise when we seek to extend this benefit to
., religious organizations. The First Amendment of the United States
Constitution prohibits laws which establish religion. The government may not
` pass laws which aid one religion, aid all religions or prefer one religion
over another. McCollum v. Board of Education (1948) 333 U.S. 203 The basic
purpose of the First Amendment's provisions respecting freedom of religion is
to insure that no religion is sponsored or favored. Everson v. Board of
Education (1947) 330 U.S. 855.
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Agenda Item No. 1?
• Meeting Date: 11/24/87
Page Two
This is not to say that all governmental policies which benefit religious
organizations are going to be unconstitutional. In Walz v. Tax Commission of
the City of New York (1970) 397 U.S. 664, the court upheld a tax exemption for
property belonging to a broad class of nonprofit quasi-public corporations
which included hospitals, libraries, playgrounds, scientific, professional,
and patriotic groups and all houses of religious worship. Former Chief
Justice Burger writing for the majority described two tests to determine
whether the policy was constitutional:
1. Is the policy aimed at establishing, sponsoring or supporting
religion?; and
` 2. Does the policy result in an excessive government entanglement with
religion?
~.
'i'he court held that the aim of the New York tax exemption was not to single
out churches for special benefit but rather to provide this benefit to a broad
range of entities that exist in a "harmonious relationship to the community at
large and that foster its moral and mental improvement". In a concurring
opinion, Justice Brennan wrote that "the very breath of this scheme of
exemptions negates any suggestion that the state intends to single out
religious organizations for special preference".
• Based on Walz, it appears that we can grant waivers to religious organizations
as long as it is part of a broad scheme which provides this benefit to
organizations that pursue cultural, moral, or spiritual improvement in a
secular way.
California state law provides a similar exemption to that discussed in Walz.
Revenue and Taxation Code Section 23701d, a copy of which is attached,
provides an exemption for "religious, charitable, scientific, testing for
public safety, literary, educational, amateur sports or humanitarian
corporations". If we choose to have a similar policy, it would in all
.. likelihood pass constitutional muster, but due to its broadness, it would also
open the door for waivers to many organizations who we may feel do not merit
waivers. One of the bases for the court approving the New York tax exemption
iri Walz was that it did not single out a particular church or religious
group. We will not be able to pick and choose which religions qualify for the
" waiver. Courts will not allow inquiry into the truth or falsity of the
., religious beliefs. People v. Woody (1969) 61 C.2d 716.
There are many religious organizations whose practices have been called into
question in the recent past. The Reverend Sun Mung Moon, head of the
Unification Church, was convicted for tax evasion. Investigations into the
..
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Agenda Item No. 12
• Meeting Date: 11/24/87
Page Three
Hare Krishna sect have led to the convictions of two West Virginia commune
members for the 1983 murder of a drug dealer linked to the group. Earlier
' this year, a ~l billion class action suit was filed by more than 500 people
against the Church of Scientology, the group founded by science fiction writer
Ron Hubbard. Confessions made in private were allegedly used to coerce and
extort money from members. In another case, Betsy Dalton Dovydenas, the
Dayton Department Store millionairess sued the "Bible Speaks" for the return
of nearly ~7 million she donated while a member--money she says she gave after
• church leaders exerted undue influence. In its August 31, 1987 issue,
Newsweek noted that tele-evangelism was considered a billion dollar business
and is free of scrutiny from agencies like the Internal Revenue Service.
Because of the prohibition against "excessive entanglement", it would be
y difficult if not impossible for us to separate the bad from the good when
applying our fee waiver policy.
Aside from the problems with religious organizations, there are also questions
being raised about nonprofit entities. Delegates to the 1986 White House
Conference on Sfiall Businesses felt the problem of nonprofit institutions
entering the for profit markets constitute a major problem facing small
businesses today. Nonprofit entities generated 300 billion in annual
revenues or about 8$ of the gross national product for 1986. They are
considered one of the fastest growing segments of the economy and nonprofit
entities are allowed to make as much profit as they want free from federal
taxation as long as the profits accrue to the organization's "charitable
mission". As a result, nonprofit entities whose purpose was originally to
serve some charitable mission have now begun running for profit subsidiaries.
Newsweek, January 5, 1987 and Forbes, March 25, 1987. Businesses may opt for
nonprofit status purely for economic reasons. The "profits" are taken out in
salaries as opposed to corporate dividends. A further advantage to the
business is the favorable treatment received from government due to its
nonprofit status.
The purpose of fees, of course, is to reimburse the City for its cost of
processing and reviewing permits. When the City's situation is compared to
some of these nonprofit organizations which are economic powerhouses, it would
seem that the City's interest in collecting the fees far outweighs the
nonprofit organization's interest in having them waived.
If we include religious organizations in our policy and attempt to scrutinize
their activities, we run up against the prohibition against "excessive
entanglement". As the court said in Walz with regard to evaluating the social
welfare services of churches:
The extent of social services may vary depending on whether
the church serves an urban or rural or rich or poor
constituency. To give emphasis to so variable an aspect of
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Agenda Item No. 1?_
• Meeting Date: 11/24/87
Page Four
the work of religious bodies would introduce an element of
governmental evaluation and standards as to the worth of
particular social welfare programs thus producing a kind of
continuing day to day relationship which the policy of
neutrality seeks to minimize.
If we don't scrutinize the activities of organizations seeking a waiver, we
run the risk of giving benefits to organizations which do not merit them.
In order to avoid this catch 22 situation, staff considered an alternative
where we include religious organizations in our policy, but only scrutinize
' applications for waivers when they come from secular organizations. This
would allow us to scrutinize many of the applications and at the same time we
could avoid excessive entanglement with the religious groups. The reason we
rejected this alternative is because it appears to create a policy within a
policy that gives special favorable treatment to religious organizations. In
the cases where the courts have upheld a governmental benefit to religious
organizations, there was no similar "special benefit" to the religious groups.
If we do not include religious organizations in our policy, we do not have to
worry about the "excessive entanglement" standard and we can closely
scrutinize organizations to assure ourselves that there is a benefit to the
• community commensurate with the waiver of the fees. There is no
constitutional prohibition against excluding religious organizations from
receiving a financial benefit. See Wilmington Christian School v. Red Clay
School District (1982) 545 F. Supp. 440 and Valencia v. Blue Hen Conference
(1979) 475 F. Supp. 809. For this reason, the policy excluding religious
organizations is recommended over the policy which includes them.
Policy A, attached hereto, is the policy which would provide for fee waivers
for secular community service organizations only.
Policy B is the policy which includes religious organizations along with other
community service organizations as beneficiaries of the fee waiver policy.
Policy B is modeled on California Revenue and Taxation Code Section 23701d.
FISCAL IMPACT:
3560a
•
Undetermined amount based on number of requests for waivers.
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