(a) A local agency may levy, or have levied on its behalf, a rate in addition to the maximum property tax rate established pursuant to this chapter (commencing with Section 2201) for the purpose of meeting the costs of written contractual obligations, leases and agreements, including determinations made pursuant to the Meyers-Milias-Brown Act (Chapter 10 (commencing with Section 3500) of Division 4 of Title 1 of the Government Code), which were entered into, or authorized by the governing body or by the voters of such agency, prior to January 1, 1973, if:

(1) The local agency incurred no costs or budgeted no expenditures under the contractual obligation or agreement during the 1972–1973 fiscal year but will incur such costs in subsequent fiscal years, or

(2) The local agency did incur costs pursuant to the contractual obligation or agreement in the 1972–1973 fiscal year, but in subsequent fiscal years such costs increase in an amount which exceeds either the growth rate in the local agency’s assessed value or its growth rate in population and cost of living as determined pursuant to Section 2212 and Sections 2227 or 2228.

(b) The additional rate which may be levied to meet costs described in paragraph (1) of subdivision (a) shall be that rate in each fiscal year which produces the amount of revenue needed to meet the actual annual costs of the contract or obligation.

(c) The additional rate which may be levied in each fiscal year to meet costs described in paragraph (2) of subdivision (a) shall be that rate which produces an amount of revenue equal to the difference between (i) the cost of the contract for the current year and (ii) the adjusted base year cost of the contract. Such adjusted base year cost shall be determined as follows: (i) for the 1973–1974 fiscal year, the actual cost of the contract in the 1972–1973 fiscal year shall be multiplied by either the percentage increase in population and the cost of living or the percentage increase in assessed value which is applicable to the local agency, whichever is greater. The product of such multiplication plus the actual cost of the contract during the 1972–1973 fiscal year shall be the adjusted base cost of the contract; (ii) for each subsequent fiscal year, the adjusted base year cost of the contract of the prior year shall be multiplied by either the percentage increase in the cost of living and population or the percentage increase in assessed value which is applicable to the local agency, whichever is greater. The product of such multiplication plus the adjusted base year cost of the contract in the prior fiscal year shall be the adjusted base cost of the contract in the current year. For the 1981–82 fiscal year, the assessed value for the 1980–81 fiscal year shall be multiplied by four prior to calculating the percentage increase in assessed value.

(d) No local agency may levy an additional rate as provided in this section after the termination of the contractual obligation or agreement described in subdivision (a); provided that a local agency may continue to levy an additional rate equal to the rate levied for the entire last year of such a contract or agreement if (i) the local agency enters a new contractual obligation which provides for substantially similar kinds of services or goods as the terminated contract, and (ii) the new contractual obligation concerns personal services, consumable goods or personal property and does not in any manner involve real property as defined in Section 104.

The additional property tax rate authorized by this section shall apply (i) to contractual obligations arising from the exercise of options and (ii) to contractual obligations arising from contingent promises. Except as specifically provided by this section, the additional property tax rate authorized by this section does not apply to contractual obligations incurred by mutual agreement of the contracting parties after January 1, 1973.

(Amended by Stats. 1980, Ch. 1208, Sec. 83.)