California Supreme Court puts taxpayers at big risk
On Wednesday of last week, the California Supreme Court declined to hear a case involving the validity of a local special tax initiative that failed to secure two-thirds voter approval.
That requirement is found in Proposition 13 (1978) as well as Proposition 218 (1996), also known as the Right to Vote on Taxes Act, both of which were sponsored by the Howard Jarvis Taxpayers Association.
Taxpayers had petitioned the Supreme Court to review a lower Court of Appeal’s ruling refusing to apply well-settled law.
The significance of the Supreme Court’s failure to provide clarity on this important issue cannot be overstated.
Unless it resolves this question in other cases now working their way up through the court system, a gaping new loophole will have been created in the constitutional protections for taxpayers that voters have repeatedly ratified over the decades. Moreover, the failure to act is a green light to tax-and-spend interests to extract even more dollars from the most heavily taxed citizens in the United States.
By way of background, Proposition C was a voter initiative that proposed a new tax in San Francisco for the special purpose of expanding services for the city’s homeless. It was approved by a majority, but not by a two-thirds margin, of the local electorate in November of 2018.
Proposition 13, approved by California voters in 1978, requires a two-thirds vote of the electorate to pass a tax increase for any special purpose. This has been the law for 40 years. It has also been the consistent understanding of interests often hostile to taxpayer rights.
The Legislative Analyst’s Office, California League of Cities, and numerous other local governments have agreed that all local special taxes require two-thirds voter consent.
Despite this consensus, and two older published cases that invalidated special tax initiatives for not receiving two-thirds approval, the San Francisco Court of Appeal ruled that Proposition C passed with only a simple majority. This creates a huge loophole in Propositions 13 and 218 because local officials can simply structure their special tax proposals as initiatives to avoid the two-thirds voter approval requirement.
The basis for the court’s strange ruling was a 2017 California Supreme Court case, California Cannabis Coalition v. City of Upland, which had nothing to do with vote thresholds.
Rather, it was limited to a narrow technical question: When a local initiative seeks to impose a new tax, does the measure need to be put to the voters at the next general election or can the proponents, relying on other laws, require a special election that happens sooner?
The lower court had ruled that taxes increased by initiative are exempt from Proposition 218 provisions regarding the timing of an election. But Upland never ruled that the two-thirds vote requirement would be inapplicable to a tax increase proposed by initiative.
The Supreme Court in Upland reasoned that local voters were different from the governing body when it comes to enacting legislation.
But for decades courts have said that when voters use the initiative power they are simply “stepping into the shoes” of the governing body and have the same powers and same limitations.
For example, a local city council cannot seize someone’s real property without paying “just compensation.”
But the rationale of the court suggests that if local housing advocates passed an initiative to seize someone’s property, there’s no requirement to pay for it. That is surely an absurd result.
Until the Supreme Court clarifies this issue, the ruling of the Court of Appeal in the Proposition C case will create a bizarre system whereby different vote thresholds — including no vote at all — will govern election outcomes depending on whether a tax was proposed by the local governing body or by the initiative process. The potential for abuse is unlimited.
Can politicians themselves, acting in their capacity as private voters, use the citizens’ initiative process in order to circumvent the requirement of two-thirds voter consent? It would seem so.
Another abuse that will surely manifest itself is that public agencies will collude with outside interests to propose new taxes in the form of an initiative, then submit a tax under a lower vote threshold than that currently required. The worst-case scenario would be if a local government recruited an outside interest to qualify an initiative proposing a tax that the politicians desired, then adopt the proposed tax without any election at all.
If there is any good news in this, it is that HJTA has prevailed in this issue in a case arising out of Fresno County.
There, a tax that was sponsored by a local organization also failed to achieve a two-thirds vote and the trial court concluded — correctly — that the tax should not go into effect. Moreover, a trial court in Alameda County invalidated an Oakland special tax that fell short of the two-thirds threshold.
Ultimately, the Supreme Court will have to resolve the issue, one way or another. And if it is against taxpayers, another statewide measure in the mold of Prop. 13 will surely be on the table.
Jon Coupal is president of the Howard Jarvis Taxpayers Association.