Thursday, July 2, 2020
Court of Appeal:
While Creation of Special Taxes by Local Lawmakers Must Be Approved by Two-Thirds Vote by Electorate, Opinion Says, Simple Majority Vote Is Needed for Approval of Tax Initiatives
By a MetNews Staff Writer
The First District Court of Appeal has held that the state constitutional requirement that no special taxes may be enacted by local governmental entities without approval of the electorate by a two-thirds vote does not apply to special taxes created by initiatives which may be adopted by a simple majority.
Justice Alison M. Toucher of Div. Four wrote the opinion, filed late Tuesday. It affirms a judgment on the pleadings granted by San Francisco Superior Court Judge Ethan P. Schulman in favor of the City and County of San Francisco, rejecting a challenge to an initiative creating special taxes, imposed on businesses, to fund homeless services.
The measure was approved at the polls in 2018 by a 61 percent vote.
Proposition 13 (the “Jarvis Amendment”), enacted by California voters in 1978, among other things created Art. XIIIA, §4 of the state Constitution which provides:
“Cities, Counties and special districts, by a two-thirds vote of the qualified electors of such district, may impose special taxes on such district, except ad valorem taxes on real property or a transaction tax or sales tax on the sale of real property within such City, County or special district.”
Supreme Court Decision
Tucher noted that the California Supreme Court in 1991 held in Kennedy Wholesale, Inc. v. State Board of Equalization that the statewide electorate may create new taxes by a simple majority.
There, then-Justice Edward Panelli, now retired, wrote for a unanimous court (with Justice Stanley Mosk, now deceased, offering a concurring opinion) in upholding a tobacco tax enacted by voters in 1988 through Proposition 99. Opponents argued that under Art. XIIIA, §3(a), created by Proposition 13, only the Legislature may enact new taxes.
The provision acted on in that case says:
“Any change in state statute which results in any taxpayer paying a higher tax must be imposed by an act passed by not less than two-thirds of all members elected to each of the two houses of the Legislature, except that no new ad valorem taxes on real property, or sales or transaction taxes on the sales of real property may be imposed.”
“[P]laintiff has not demonstrated that the voters who adopted Proposition 13 intended to limit the reserved power of initiative. Because section 3 can reasonably be interpreted not to limit that power, and because ‘we are required to resolve any reasonable doubts in favor of the exercise of this precious right’ …, we hold that Proposition 99 does not violate section 3.”
Tucher Applies Precedent
Tucher said in Tuesday’s opinion:
“…Kennedy Wholesale rejected the taxpayer’s argument that Proposition 13 impliedly repealed the voters’ power to raise state taxes, relying on legal principles and evidentiary facts that apply equally here. To avoid abridging by implication the people’s initiative right, and to comport with the intent of the voters as it can be gleaned from the ballot pamphlet, we will not apply the two-thirds vote requirement to local citizens’ initiatives.”
Examining the intent of voters, the jurist said:
“When Proposition 13 was approved by California voters in 1978, the initiative power had long been ensconced in our Constitution….If the voters who approved Proposition 13 (by a majority vote) intended to constrain the constitutionally protected power of future voters to approve initiatives by majority vote, would they not have manifested that intent by some express reference to the initiative power?”
The initiative was created in 1911, she noted.
Reviewing the ballot pamphlet, Tucher wrote:
“[W]e find in the official ballot pamphlet nothing to support an inference that the voters adopting Proposition 13 intended to limit their own ability to raise local taxes by initiative, and to adopt such initiatives by majority vote. In addition to the populist arguments cited in Kennedy Wholesale, there are multiple references in the Legislative Analyst’s discussion of Proposition 13 that characterize the measure as restricting the ability of ‘local governments to impose’ taxes, with no suggestion the initiative similarly constrains local electorates.”
Accordingly, she said, approval of the 2018 ballot measure by a majority of the voters in the city/county was all that was needed for enactment.
The opinion also deals with Proposition 218, approved by voters in 1996. It created Art. XIII C, §2 (d) which provides:
“No local government may impose, extend, or increase any special tax unless and until that tax is submitted to the electorate and approved by a two-thirds vote….”
In Citizens for Fair REU Rates v. City of Redding, a 2018 opinion, the California Supreme Court construed ¶(b) which relates to general taxes. It said that the term “local government” does not encompass the local electorate, with Justice Mariano-Florentino Cuéllar explaining:
“A contrary conclusion would require an unreasonably broad construction of the term ‘local government’ at the expense of the people’s constitutional right to direct democracy, undermining our long-standing and consistent view that courts should protect and liberally construe it.”
While initially setting forth that “we are helped” by those words in deciding the applicability of Proposition 218, Tucher later said that the state high court’s proclamation that the words “local government” are not “broad enough to include the electorate” is a holding which “applies here.”
In light of “two California Supreme Court cases interpreting other language from Proposition 13 and Proposition 218,” she said, “we construe the supermajority vote requirements that these propositions added to the state constitution as coexisting with, not displacing, the people’s power to enact initiatives by majority vote.”
The case is City and County of San Francisco v. All Persons Interested in the Matter of Proposition C, 2020 S.O.S. 3336.
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