The Legal Front

Confusing Supreme Court Decision Threatens Propositions 13 and 218

By Tim Bittle, HJTA Director of Legal Affairs

In his last few years of life my dad suffered increasing dementia. It began as forgetfulness that we attributed to normal aging, but progressed to confusion and eventually inability to navigate the daily routine that should be second nature. Somewhere in the early stages of that process, he did something so bizarre it made us realize this wasn’t just normal aging.

My parents had a flowering tree planted near a fence in their backyard. They kept it trimmed so that the branches wouldn’t hang over the fence and drop debris in their neighbor’s pool. One day my mom was going grocery shopping and asked my dad to trim a couple overhanging branches while she was gone. She returned to find that my dad had taken his chainsaw and cut down the entire tree.

Our state Supreme Court in August issued a decision that is abnormally confusing and reminds me of my dad felling a tree when the only thing asked of him was to trim it. The case, California Cannabis Coalition v. City of Upland, was one of ours even though our name is not in the title.

It began with an initiative petition, circulated by the California Cannabis Coalition, to legalize medical marijuana dispensaries in the City of Upland. In addition to legalizing them, the initiative proposed that each dispensary pay the city an annual “inspection fee” of $75,000.

The Coalition turned in signatures totaling more than 15% of Upland’s registered voters, which would ordinarily be enough to qualify for a special election. Before calling an election, the city council requested a financial report from city staff.

The report concluded that the initiative’s $75,000 annual fee would greatly exceed the city’s actual costs to issue a license and conduct annual inspections. The city attorney opined that the “fee,” to the extent of the excess, constituted a proposed tax — specifically a “general tax” because the initiative did not specify how the excess revenue should be spent.

Under article XIII C, section 2, which was added to the California Constitution by Proposition 218, a proposed general tax must be presented to voters at a regularly scheduled general election for city council candidates. The purpose of this requirement is to force candidates to identify for or against the tax, which helps voters choose the taxpayer-friendly candidates. The Upland City Council, therefore, placed the initiative on the ballot for the general election in November.

The Cannabis Coalition sued, asking the court to order the city to call a special election. The trial court sided with the city. The court of appeal sided with the Coalition, reversing the decision of the trial court. The court of appeal ruled that Proposition 218 applies only to tax proposals emanating from the government. Tax proposals arising from the people, it held, are not subject to the taxpayer protections contained in Proposition 218, including its election date requirement.

The court of appeal certified its opinion for publication, which made it a binding precedent statewide. We at HJTA were alarmed when we read the opinion because Proposition 218’s taxpayer protections include the right to vote on taxes. If initiatives are exempt from those protections, then elected officials could easily deny taxpayers their right to vote on taxes by colluding with supporters to propose taxes in the form of an initiative, then adopting the initiative without an election.

When an initiative receives enough signatures to require an election, the California Elections Code gives the city council two choices: “(a) Adopt the ordinance, without alteration [or] (b) Submit the ordinance, without alteration, to the voters.”

By choosing option (a), a city council could adopt the tax increase itself, in lieu of holding an election. Even though Proposition 218 requires an election, that requirement would not apply to taxes proposed by initiative according to the court of appeal.

As HJTA’s Director of Legal Affairs, I called the Upland City Attorney to verify that the city would be seeking Supreme Court review. When the city attorney informed me that the city planned to cut its losses and move on, I offered that HJTA would represent the city before the Supreme Court at no charge. This pleased the city council, which voted at its next meeting to accept HJTA’s representation.

HJTA filed a Petition for Review, explaining to the Supreme Court that “the importance of this case to taxpayers cannot be overstated. The published decision in this case, unless reversed, will be remembered in history as the case that killed the constitutional right of California taxpayers to vote on new taxes.”

The Supreme Court granted review. The case was fully briefed. At the hearing, HJTA argued that the court of appeal had overstepped; that the only thing asked of the court was to decide the proper election date for a tax initiative, yet the court took a chainsaw and cut down the voters’ entire right to vote.

In August the Supreme Court issued a decision that has court commentators, the press and the legal community scratching their heads. It is clear that taxpayers lost. Beyond that, however, the opinion is internally inconsistent and no one is quite sure how much they lost.

The opinion begins with a sweeping statement: “The question before us is whether article XIII C…restricts the ability of voters to impose taxes via initiative.” That obviously is a much broader question than “what is the proper election date?” In the same paragraph the Court summarizes in broad terms the conclusion it will reach: “We agree with the Court of Appeal that article XIII C does not limit voters’ power to raise taxes by statutory initiative.”

The Court later quotes the language in article XIII C, section 2, which requires voter approval of new taxes, then notes, “By its terms, article XIII C, section 2 only applies to actions taken by a ‘local government.'” As to whether “local government” includes the voters when legislating via initiative, the Court answered no: Proposition 218’s “intended purpose did not include limiting voters’ power to raise taxes by statutory initiative.”

All this sounds as though the Court tossed out all of article XIII C. But wait. Several pages later, the opinion seems much narrower. After pages of analysis, the Court wraps it up with this conclusion: “Taking account of this legal context, along with the relevant provision’s text and other indicia of purpose, we conclude that the requirement in article XIII C, section 2, subdivision (b) — mandating that general taxes be submitted to the voters at a regularly scheduled general election — applies only to local governments and not to the electorate’s initiative power.”

Does that mean the decision is limited to only the election date, and has no impact on the right to vote or the requirement that special taxes need two-thirds voter approval? Perhaps, because a few sentences later the Court directly addresses the two-thirds vote requirement: “When an initiative’s intended purpose includes imposing requirements on voters, evidence of such a purpose is clear. In article XIII C, section 2, subdivision (d), for example, the enactors adopted a requirement providing that, before a local government can impose, extend, or increase any special tax, voters must approve the tax by a two-thirds vote…That the voters explicitly imposed a procedural two-thirds vote requirement on themselves in article XIII C, section 2, subdivision (d) is evidence that they did not implicitly impose a procedural timing requirement in subdivision (b).”

So the two-thirds vote requirement is intact, even when a special tax is proposed by initiative. That much is clear. Or is it? Subdivision (d), requiring the two-thirds vote, is worded the same as subdivision (b), requiring taxes to be voted on at a general election. It reads, “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.” Didn’t the Court just finish ruling that taxes proposed by initiative are not enacted by “local government”?

Because of the confusion generated by this opinion, HJTA has filed a motion with the Court asking for a modification of the opinion to clarify whether the right to vote and the two-thirds vote requirement still apply to taxes proposed by initiative. The League of California Cities has filed a letter supporting our request for clarification. Hopefully the Court will acquiesce.