STANDING UP FOR PROPOSITION 13’S BAN ON SPECIAL TRANSFER TAXES
HJTA & AAGLA v. City of Los Angeles and All Persons Interested in the Matter of Measure ULA (aka the “Mansion Tax), Consolidated Cases
Effective April 1, 2023, Measure ULA, ostensibly enacted by city voters in November, imposes a 4% tax on sales and transfers of real property valued at over $5 million and a 5.5% tax on those over $10 million. The funds are earmarked for housing and homelessness services, making this a special tax as well as a transfer tax. This will extract hundreds of millions of dollars from property owners throughout the City of Los Angeles, and not just from “mansions,” but commercial buildings and apartment buildings. Nor is it on net revenue, but the entire value. The downstream effects on tenants and consumers will be devastating.
In HJTA & Apartment Association of Greater Los Angeles (AAGLA), HJTA asks the court to invalidate Measure ULA. A transfer tax as proposed in Measure ULA is specifically prohibited by Proposition 13 and the Los Angeles City Charter.
The tax was proposed seeking to further exploit ambiguous language in the state Supreme Court’s 2017 decision in California Cannabis Coalition v. City of Upland. Some courts have wrongfully relied on that language to rule that special taxes proposed by citizen initiatives need only a simple majority. But here, the initiative ordinance named Measure ULA is simply invalid legislation.
Proposition 13 banned all transfer taxes in 1978 to prevent local governments from taking a “lump sum” at the end of one’s ownership to end run the 1% cap. In the early 1990s, some court cases carved out exception for charter cities to charge transfer taxes, but only if they go to the general fund. Courts have remained firm that no government is allowed to charge a special transfer tax such as Measure ULA. So clear is this law that none have tried until now. Only because of the interpretations of the California Cannabis decision has it been attempted now in the form of an initiative.
But section 450 of the Los Angeles City Charter imposes a substantive limit on initiative legislation. It requires initiative legislation to be something the City Council could adopt. No one would disagree that the City Council could never have put Measure ULA on the ballot because of its invalidity under Proposition 13. The initiative process, under the constitution of the city, has no greater power to expand the potential substance of legislation. This provision in the city charter has been operational for over 110 years.
The most common question we receive is whether an injunction is possible pending the litigation. It is not. However, to preserve your right to a refund if you have paid this tax, please see our instructions here.
STANDING UP AGAINST HOME EQUITY THEFT
Tyler v. Hennepin County, Minnesota
HJTA was formed to protect homeowners from being exploited through such high property taxes that they were being forced to run boarding houses or sell their hard-earned homes to pay the ever-rising taxes. In this case, Pacific Legal Foundation represents Geraldine Tyler at the United States Supreme Court because the State of Minnesota is exploiting her in the tax sale process itself. PLF invited HJTA to file an amicus brief on this scheme known as home equity theft. Life happens and circumstances change and when Geraldine Tyler’s circumstances changed, she could no longer afford her property taxes anymore. But, as during the inflationary times of the 1970s, that does not permit the government to take unfair advantage of her.
Any home equity remaining after the satisfaction of a tax debt clearly belongs to the homeowner. After all, a home is likely an individual’s sole resource to carry them through their next stage of life.
However, several states, including California (in its own covert way), are turning a blind eye to counties taking windfalls at the expense of distressed former homeowners. They claim that when real property is forfeited for non-payment of taxes, the entire property is forfeited. Entire proceeds from tax sales have been retained by counties in cases of as little as $8.41 of unpaid taxes. In Geraldine Tyler’s case, her unpaid taxes plus interest and penalties came to $15,000. When Hennepin County sold her condo for $40,000, it kept the $25,000 surplus. PLF argues, rightly, on her behalf that this is both a Fifth Amendment Taking and an Eighth Amendment Excessive Fine. Hennepin County owes Geraldine Tyler $25,000, plus interest for her time.
HJTA urged the United States Supreme Court to grant certiorari because home equity theft occurs in California too, though more subtly. In California, tax-defaulting homeowners have just one year to claim the surplus from a tax sale. And special interests can “object” to the traditional sale procedure to trigger a special procedure giving them an advantage to absorb the equity. As recently as April 2022, legislation was introduced to expand this procedure for special interest groups.
There is hope. On January 13, 2023, the United States Supreme Court granted certiorari. HJTA filed an amicus brief on the merits on March 3rd, one of an amazing 25 amicus briefs filed in support of Ms. Tyler. A 26th was filed by the Chamber of Commerce of the United States in support of neither party. The United States Supreme Court heard the case on April 26th.
DEFENDING TWO-THIRDS VOTER APPROVAL ON LOCAL SPECIAL TAXES
*We hope that certain devastating decisions below will be overturned through the statewide initiative power on the November 2024 ballot. Please see https://taxpayerprotection.com/ for exciting information on the Taxpayer Protection and Government Accountability Act.*
Alliance San Diego v. City of San Diego
City of San Diego v. All Persons, Consolidated Cases
On July 1, 2021, HJTA was the first to answer the City of San Diego’s complaint belatedly seeking validation of Measure C, a special hotel tax (for the convention center, homelessness, and street repairs) from its March 3, 2020, ballot. As in the previous special tax cases shared below, Measure C received less than two-thirds voter approval, but the City declared it passed. This case, however, is now on appeal in the Fourth District Court of Appeal, which has not yet had the chance to assess the two-thirds voter approval requirements of Propositions 13 and 218. HJTA continues to argue that the voter intent clearly and expressly applies to all special tax proposals, no matter how they are proposed.
This case includes two issues beyond the two-thirds voter approval issue as well.
The first is Measure C’s structure. It was an unusual “three-in-one” set of tax increases ranging from 1-3% based on the Measure’s internally defined geographic areas. The three different rates may seem palatable in this case because they would be imposed on hotel guests. But a “three-in-one” tax measure based on geography alone violates Proposition 219, a constitutional amendment passed in the wake of Proposition 218 to further protect taxpayers from certain machinations in the election process. Allowing different tax increases in different parts of a city based on one overall vote could be dangerous precedent.
The second is ballot integrity and voter trust. The ballot pamphlet as written by the City expressly told voters that two-thirds approval was necessary to pass Measure C. One year after the election, the City changed its mind and declared Measure C passed. Precedent exists in this district that such is “fraud on the voters” and must not stand. However, this case is now competing with the outcome of a related case from the First District Court of Appeal, Jobs & Housing Coalition v. City of Oakland (2021) 73 Cal.App.5th 505. According to Jobs & Housing Coalition, it may be “lamentable” for voters to be misinformed by their ballot pamphlets, but so long as the local government was not intentionally misleading them, the behavior is excusable.
HJTA v. City and County of San Francisco, and All Interested Persons
Based on a City Attorney memorandum from October 2017 interpreting the Supreme Court’s decision in California Cannabis Coalition v. City of Upland to mean that special taxes proposed by initiative need only simple majority approval, the San Francisco Board of Supervisors declared that Proposition C (a gross receipts tax on commercial rents) passed with only 50.87% voter approval at the June 2018 election.
On August 3, 2018, HJTA filed a reverse validation action, joined by Building Owners and Managers Association of California, California Business Properties Association, and California Business Roundtable, asserting that two-thirds approval was required by Propositions 13 and 218.
The City answered our Complaint, admitting that a member of the City’s Board of Supervisors was the proponent of the measure and obtained the signatures. At a hearing on July 3, 2019, the judge was entirely unconcerned with the Supervisors hijacking the voter initiative process for the purpose of evading the two-thirds vote requirement. He ruled that the analysis applied by the Supreme Court (to answer an election timing question) in California Cannabis Coalition v. Upland compelled the conclusion that taxes proposed by voter initiatives are not subject to Proposition 218’s two-thirds vote requirement. Therefore, he ruled, Proposition C passed with a simple majority.
HJTA appealed to the First District Court of Appeal, but the Court of Appeal affirmed. It too was unconcerned that the “initiative” was copied and pasted by the Board of Supervisors onto initiative petition paperwork. The Supreme Court denied our petition for review.
City of Fresno v. Fresno Building Healthy Communities
Fresno Building Healthy Communities v. City of Fresno
(Cases Considered Together, Consolidated on Appeal)
Fresno’s Measure P was an initiative on the November 2018 ballot that proposed a sales tax increase to provide extra funding for city parks and recreation programs. The measure received 52% of the vote and was declared failed for lacking a two-thirds vote.
Following San Francisco’s line of thought, the initiative proponents argued that the two-thirds vote requirement applies only to special taxes proposed by the government, not taxes proposed by a voter initiative. The City took a position of neutrality.
HJTA intervened on the grounds that the interest of taxpayers was unrepresented in the litigation. HJTA argued that it would open a huge loophole in the two-thirds vote protection if taxes proposed by initiative were exempt.
On September 16, 2019, the superior court entered a judgment in HJTA’s favor, declaring that the two-thirds vote requirement applies to the voters, not the government, regardless of who proposes the tax, in direct contrast to the judge in San Francisco. The proponents appealed the decision to the Fifth District Court of Appeal.
Unfortunately, the Court of Appeal reversed against taxpayers on December 17, 2020. The Supreme Court denied our petition for review.
Nowak v. City and County of San Francisco
In negotiations between the San Francisco School Board and the teachers’ union, the Board rejected higher salaries for its teachers unless the union could pass an initiative, drafted by the Board’s attorney, authorizing a new special tax to fund faculty salaries. The union collected the signatures needed to place Proposition G on the June 2018 San Francisco ballot. Proposition G proposed a flat annual tax on each parcel of land, with the amount of the tax based on the parcel’s use. It received more than majority voter approval, but less than two-thirds. The City declared it passed.
HJTA filed an amicus brief in the Court of Appeal. We argued that this two-thirds vote case was unique because it involved a parcel tax. The superior court, following the lead of the cases reported above, held that Proposition 13 does not apply to special taxes proposed by an initiative. HJTA argued that, if Proposition 13 does not apply to initiatives, then an initiative cannot enact a parcel tax because parcel taxes are not constitutionally authorized except as special taxes under section 4 of Proposition 13. Conversely, if section 4 does include initiatives within its authorization to impose parcel taxes, then the proposed tax needs two-thirds voter approval to pass because the authorization and the two-thirds vote requirement are all part of the same sentence.
Disappointingly, the Court of Appeal was not persuaded. It held that voters could impose a parcel tax by initiative on a simple majority vote. HJTA supported the petition for review, but the Supreme Court denied review on November 17, 2021.
CHALLENGING WASTE OF TAXPAYER FUNDS
HJTA v. Chiang and the California Secure Choice Retirement Savings Program (AKA “CalSavers”)
This was HJTA’s federal court case challenging a new state-run retirement savings program for private employees known as CalSavers (formerly “Secure Choice”). We contended that CalSavers is preempted by the federal Employee Retirement Income Security Act (ERISA) of 1974. There was a short-lived Department of Labor regulation under the Obama Administration which might have authorized state-run retirement programs, but it was repealed by Congress in May 2017. The State Treasurer proceeded to implement CalSavers anyway.
HJTA contended that the Treasurer is wasting taxpayer funds by implementing an illegal—not to mention unnecessary—program and a source of potential liability for private employers. Anyone can save for retirement by opening an IRA and setting up automatic payroll debits for deposit therein. A personal, self-directed IRA is more secure than the CalSavers approach which has employers taking money from an employee’s paycheck and remitting it to the State, and where it is then commingled with other funds that the State manages. CalSavers will also impose substantial burdens and risks on private employers since participation is mandatory for most employers who do not already have an ERISA retirement program.
The State filed a motion to dismiss the case, arguing that the lawsuit was premature, that HJTA had no standing, and that ERISA did not apply to CalSavers. The State’s ripeness and standing objections were overruled. However, the Judge granted the motion as to ERISA, but allowed us leave to amend our complaint. We filed an amended complaint and the State again moved to dismiss. This time, however, to our surprise and delight, the United States intervened. The U.S. Attorney General’s office filed a brief supporting our claim that CalSavers violates federal law. The State responded and HJTA filed a reply. Unfortunately, in March 2020, the Judge again granted the State’s motion to dismiss.
HJTA filed a timely notice of appeal to the Ninth Circuit Court of Appeals. The parties filed their briefs and excerpts of record, and the United States filed an amicus brief in support of HJTA. After the briefing was complete, the new Biden administration instructed the Department of Labor to withdraw from participating in the case. This was expected, but it did not change the analysis already submitted to the court. Unfortunately, the Ninth Circuit ruled against us, affirming the decision of the superior court judge.
HJTA petitioned the United States Supreme Court to review the case. The State did not file an Answer, but the Supreme Court ordered it to. We took that as a sign of true interest and filed our Reply on February 4, 2022. Sadly, the Supreme Court denied review on February 28, 2022.
STANDING UP FOR VOTER APPROVAL ON BONDS AND THE LIMIT ON GRANDFATHERING PROPERTY TAXES UNDER PROPOSITION 13
City of San Jose v. All Persons Interested
This is one of two active cases pending over the right of voters to approve or disapprove new debt in the form of pension obligation bonds (POBs). HJTA has been answering many cases brought by cities asking the courts to validate their bond proposals without voter approval. Almost a dozen cities have dismissed their cases and rescinded their resolutions to issue the debt after HJTA has answered. Two cities have chosen to litigate: San Jose and Oxnard.
The City of San Jose seeks authority to issue a whopping $3.5 billion in POBs to prepay its unfunded accrued actuarial liability (UAAL). The POBs would formally quantify the UAAL, which is a current estimate of the City’s unfunded pension debt owed to the California Public Employees’ Retirement System (CalPERS) in the future. A POB would permanently finance that estimated liability, taking a risk the Government Finance Officers Association of the United States and Canada strongly recommends against. It would put taxpayers on the hook.
But the California Constitution guarantees voters the right to approve or disapprove any new debt that would exceed revenue available to pay it. In fact, two-thirds voter approval is required.
The City acknowledges the constitutional provision, but claims an exception to the voter approval requirement. It argues that prepaying the UAAL now qualifies for a judicial exception known an “obligation imposed by law.” But, per case law, these obligations cannot be self-assumed, which a POB is. They must be imposed by a superior tier of government, like a court order to pay a judgment or a state law mandate.
Unfortunately for now, HJTA, joined by Citizens for Fiscal Responsibility and Pat Waite, received a negative superior court decision in late December 2022. We have filed our notice of appeal.
City of Oxnard v. All Persons Interested
The City of Oxnard is seeking the same judicial authorization to issue POBs without voter approval as the City of San Jose. It will use the same argument of an “obligation imposed by law.”
Unfortunately for now, HJTA, joined by Ventura County Taxpayers Association and Aaron Starr, received a negative superior court decision in late December 2022. We filed our notice of appeal on April 20, 2023.
While the San Jose POB will be considered in the 6th District Court of Appeal, the Oxnard POB will be considered in the 2nd District Court of Appeal, where we have filed our notice of appeal.
CA Department of Water Resources v. All Persons
In August 2020, the State Department of Water Resources sought court approval to sell a series of revenue bonds to fund construction of a large tunnel to transport water to Central and Southern California from the Sacramento-San Joaquin Delta. Proposition 13 does not grandfather a property tax to repay these new bonds for this new project.
HJTA has no position on the wisdom of building the planned Delta Tunnel. We joined the suit to protect Proposition 13. The California Constitution requires statewide voter approval before the State may issue bonds, unless an existing stream of revenue is dedicated to repay the bonds. Water sales to water customers is one such stream of revenue.
HJTA wants to ensure that the State, through this case, does not seek court approval to raise property taxes as an additional or alternative method of repaying the bonds. HJTA’s concern is warranted because certain agencies have floated that idea in the past.
DEFENDING YOUR RIGHTS OF REFERENDA AND INITIATIVE
Castellanos, et al. v. State of California, et al.
Proposition 22 was a voter-initiated measure to define Lyft and Uber drivers, among others, as independent contractors rather than employees. It passed with approximately 58% approval in November 2020. The exercise of the people’s initiative power to make that change in the law was challenged in this case.
On August 20, 2021, an Alameda County superior court judge found Prop. 22 unconstitutional. He concluded that it interfered with the Legislature’s constitutional power to operate the worker’s compensation system. Under the order’s sweeping interpretation of the Legislature’s authority, the Legislature would have exclusive power to define the term “worker” or “employee,” so the people could not do so by initiative.
HJTA filed an amicus brief in support of the voters’ statewide initiative power when the case went up on appeal. Courts have a duty to jealously guard the initiative power and to harmonize legislation wherever possible. The judge in this case failed to do that.
HJTA’s amicus brief explained the ways the superior court judge overreacted and failed to harmonize and uphold the initiative power. One is that when the Constitution says the Legislature has “plenary” power over the worker’s compensation system, that was not meant to keep the people from legislating as well. It was meant to clarify that the whole function was being transferred from the judicial branch to the legislative branch because, previously, the judiciary had had exclusive authority over on-the-job injuries, so it was a major shift that needed to be made clear. Another way the judge erred — and HJTA was unique to point this out — is that the judge failed to recognize the strong voice of the voters when establishing the initiative power in 1911.
In 1911, both the proposition to establish the statewide initiative power and the proposition creating the worker’s compensation system were on the ballot at the same time. If there is any conflict between two measures on one ballot, the one with more votes prevails. The proposition to establish the initiative power received more votes. Thus, even if it were impossible to harmonize Prop. 22 with the Legislature’s power to run worker’s compensation, the votes of 1911 would still break the tie in favor of the initiative power.
Good news came on March 13th. The First District Court of Appeal reversed the superior court. It agreed that Proposition 22 does not intrude on the Legislature’s power. In fact, the Legislature’s constitutional authority to enact worker’s compensation laws never diminished the people’s initiative power.
Mobilize the Message v. Bonta
This case has an ironic link to the Proposition 22 case above, and we hope it will be turned around as well. Both cases were initially prompted by Assembly Bill 5 from 2019. AB5 partially codified a California Supreme Court decision creating a new test for whether someone is an employee or an independent contractor. Lyft, Uber, and other app-based drivers were the main targets of AB5. But now, unless the California Supreme Court should review and reverse, Proposition 22 has successfully re-classified app-based drivers as independent contractors with some added benefits. In other words, the main targets of the bill have gotten out from under it – using the initiative power!
But meanwhile, AB5 attacked the initiative power itself. This is because other parts of AB5 re-classified solicitors, including signature gatherers. Signature gatherers under AB5 are now employees, dramatically driving up the cost of the initiative process and unfairly restricting intentionally independent workers from speaking politically. In this case, a petition management company named Mobilize the Message has already left California because it cannot afford to function here. And it is unknowable what kind of grassroots legislation will not even be able to get off the ground with these increased costs.
The core of this case is First Amendment free speech. In AB5, a contrasting classification disfavors the initiative process. Though signature gatherers have become employees, door-to-door salespersons somehow remain independent contractors. Because the only difference between a door-to-door salesperson and a door-to-door signature gatherer is the content of the speech, Mobilize the Message argues that AB5 favors commercial speaking over political speaking, violating the First Amendment. We agree.
The Ninth Circuit Court of Appeals, however, with Judge VanDyke dissenting, found this part of AB5 constitutional. It rationalized that this part of AB5 regulates economic activity, not speech, and that it applies consistently across the California economy. Well, that’s true. It consistently applies to destroy the initiative power because it will become so expensive that only the extremely wealthy and powerful will now be able to afford to exercise it.
HJTA filed an amicus brief in November 2022 supporting the petition for rehearing en banc at the Ninth Circuit. That was denied. HJTA is now filing an amicus brief supporting the Petition for Writ of Certiorari to the United States Supreme Court. In our brief, we emphasize the importance of grassroots legislation and the incredible cost of gathering signatures even before AB5. We assert that since direct democracy is suffering right now, this case should be reviewed rather than waiting for any other on this issue.
Board of Supervisors of the County of San Bernardino, Nadia Renner v. Lynna Monell
Citizens in San Bernadino County put Measure K on the ballot to limit county supervisors to one term and to set their salary at a reduced rate. Naturally, the County argued in court that this was an invalid exercise of the people’s initiative power. The superior court was fine with the people reducing the supervisors’ salary, but invalidated Measure K because of its one-term limit. It applied a balancing test common to election cases and found the one-term limit “too severe” and inseverable from the salary provision.
However, since there was nothing legally wrong with a one-term limit, HJTA filed an amicus brief on appeal in support of the initiative power. The superior court judge had framed its conclusion of invalidity as based on the 1st and 14th amendment rights of incumbents and voters to vote for a particular person. HJTA briefed the court on the fact that incumbents do not have any special rights and it is established that voters do not have rights to vote for just anyone as governments may ban write-in voting. As long as election procedures are neutral and neutrally applied, no candidate or voter is violated.
In a tentative opinion, the Court of Appeal would have reversed. It applied the same balancing test to find the term limit is not severe. It also relied on two cases validating the statewide term limits set by the voter-initiated Proposition 140 in 1990. HJTA had pointed out that those cases validated a six-year limit on state assemblypersons, which is not very far off from Measure K’s four-year limit on county supervisors. The Court of Appeal agreed with this point as well, finding “we cannot meaningfully distinguish a four-year maximum.” In short, the one-term limit is neutral, not severe, and the people had the power to implement it via initiative.
Oral argument was postponed in this case because the Board proposed another measure to re-set their salaries and terms. What’s worse, with a poison pill, the measure “offered” a false sense of taxpayer protection in a four-fifths vote requirement of the board for any new tax proposals to go on the ballot. The poison pill is that if voters ever try to decrease supervisor compensation or terms, as they just did with Measure K, the four-fifths vote requirement goes away. Of course, it already takes two-thirds of 5 board members to propose a tax anyway, so there is effectively already a four-fifths requirement. Known as Measure D, it passed. The voters were tricked into thinking they were voting for something pro-taxpayer, but really, the Board of Supervisors set their own term limits.
Whether the passage of Measure D prevents the Court of Appeal’s well-reasoned decision from being published remains an open question. On February 21st, the Court apparently denied the Board’s request to stay the litigation and ordered that oral argument be re-set as soon as possible. Hopefully, despite the Board’s trickery through Measure D, the Court of Appeal will still publish its decision explaining that Measure K was a valid exercise of local initiative power. Oral Argument is scheduled for May 2, 2023.
CHALLENGING UNLIMITED CHARGES FOR TRASH SERVICE, BRIDGE CROSSINGS, and TELEPHONE SERVICE, aka “GOVERNMENT PROPERTY”
Zolly v. City of Oakland
In August 2022, the Supreme Court provided a positive decision for ratepayers that should help lower trash bills. In this game-changing decision, it is possible that most franchise fees for trash service will have to be eliminated.
After “negotiating” with companies that responded to its Request for Proposals, the City of Oakland granted exclusive franchises to two waste haulers, one for solid waste pickup and one for recycling. Each agreement included the payment of an annual franchise fee to the City ($25 million from the solid waste hauler and $3 million from the recycler). Plaintiffs Robert Zolly, et al., challenged the franchise fees as disguised taxes that needed voter approval under California Constitution, article XIII C, as amended by Proposition 26.
The City argued that it could charge the franchise fees for two reasons: 1) The City asserted it had a “property interest” in selling the exclusive opportunity, and 2) the haulers use city streets. It was undisputed that the fees were unrelated to city costs or the value of the haulers’ temporary use of the streets.
The superior court ruled against the taxpayers, but the Court of Appeal reversed, rejecting the City’s argument that franchise fees enjoy a carte blanche exemption from the article XIII C, § 1(e) definition of “tax” added by Proposition 26.
The California Supreme Court granted review. HJTA filed an amicus brief in support of the ratepayers who had seen their monthly bills skyrocket from the charges. Many local government associations also filed amicus briefs in support of the City of Oakland.
Fortunately, the Supreme Court affirmed in favor of ratepayers. It found the fees were not exempt under Proposition 26 because what the City grants to a waste hauler is not “local government property” at all and anyone can drive on city streets. The Supreme Court remanded the case for “proceedings consistent with this opinion.”
The standing of a party to sue was another significant issue for ratepayers in this case because Oakland had belatedly argued that the ratepayers were not “directly obligated” to pay the franchise fees. In other words, the City argued that only the waste haulers should have been allowed to challenge the multimillion dollar fees even though ratepayers were ultimately paying them. While not required to consider the City’s belated argument, the Supreme Court did so and affirmed that the ratepayers had standing because of their economic injury. This should prove extremely helpful for a variety of future cases. We understand litigation is already under way in Los Angeles to eliminate trash franchise fees.
HJTA v. Bay Area Toll Authority, California State Legislature (consolidated with) Whitney v. Metropolitan Transportation Commission
The Supreme Court had been holding review of this case pending Zolly. It concerned a question left open in Zolly over charges for use of government property and Proposition 26. But here, unlike in Zolly, the property is real: the Bay Area bridges.
In 2018, HJTA filed an action to invalidate Regional Measure 3 (RM3), a $3 toll increase on the seven state-owned Bay Area bridges, which appeared on the June ballot in the nine Bay Area counties. Among other things, our lawsuit challenged SB 595, the bill that authorized the toll increase, because it did not receive two-thirds approval in the State Legislature. Revenue from the increase will be used primarily for activities unrelated to bridge maintenance (i.e. BART, MUNI, ferries, Port of Oakland, and bicycle and pedestrian trails). In our view, that makes it a tax under the broad definition of “taxes” added to the state constitution through Proposition 26, and state tax increases require the approval of two-thirds of each house of the Legislature.
The connection to Zolly is in the Proposition 26 exemption for use of “government property.” In Zolly, the Supreme Court did not find an abstract ability to choose a waste hauler to be “government property” at all. Therefore, it could not charge a valid fee for “selling” that franchise. But in this case, the use of a bridge is the use of a tangible, physical piece of government property. And, unfortunately, the Supreme Court in Zolly did not analyze whether a charge for use of government property must be reasonable.
BATA and the Legislature argued that the increase need not be reasonably related to bridge maintenance. They argued that Proposition 26 actually opened a large loophole in the definition of “taxes” – larger than had existed before voters enacted it. They said the Proposition 26 exception for a fee to use government property allows them to charge any amount for crossing a state-owned bridge, and to spend the money as they see fit. We filed our opposition brief, calling out their argument as a perversion of Proposition 26, which was intended to close loopholes, not open new ones.
In April 2019, the superior court ruled in favor of BATA and the Legislature, finding fees for entering or using government property, such as roads and bridges, are exempt from Proposition 26, thus agreeing that, although an election was held, no voter approval was needed, nor was any special legislative approval required.
HJTA appealed the decision, but the Court of Appeal affirmed. The Court noted its disagreement with another panel of the Court of Appeal in Zolly which came to the correct conclusion that fees for entering or using government property under Proposition 26 must be reasonable. Because the Supreme Court did not reach this issue on review, however, the correct answer we once had from the Court of Appeal is no longer usable.
We had hoped the Supreme Court would review whether fees for use of government property must be reasonable under Proposition 26, but it dismissed the case on January 25th.
In Re County Inmate Telephone Service Cases
This case was a class action seeking to correct the continued practice of charging “commissions” to exclusive telephone service providers for inmate calls. While the State of California recently — and commendably — ended the practice of charging inmates and their families exorbitant fees for telephone calls, nine county governments still do. By charging these “commissions,” much like the trash service franchise fees in Zolly v. City of Oakland, the counties reap millions of dollars every year from the state’s lowest-income citizens for essential family communication, which is also a known factor in reducing recidivism.
One fifteen-minute call costs an inmate or their family the obviously inflated price of $5. The counties reason that they can charge any “negotiated” amount as they own “government property” in the form of exclusive telephone contracts. HJTA filed an amicus brief in support of the plaintiffs’ appeal in the Second District Court of Appeal. Unfortunately, the Court decided for the counties and the plaintiffs’ petition for review was denied. This all took place before the Supreme Court’s decision in Zolly, which does seem at odds with the outcome here because there should be no “government property” in the telephone contracts and the actual payers of the telephone charges still have no standing. We encourage you to contact your local representative to urge change through the Legislature.
CHALLENGING PUBLICLY FUNDED CAMPAIGNS
HJTA v. County of Los Angeles and the formation of HJTA’s “Public Integrity Project”
HJTA sought repayment to the public treasury of almost $1 million in taxpayer funds spent by
The County of Los Angeles campaigning for Measure H on the March 2017 ballot, a ¼ cent sales tax increase for homelessness. From January to March 2017, County officials spent this money on a comprehensive multi-media campaign telling voters to vote in favor of the tax increase.
The use of public funds for political advocacy is prohibited under the Political Reform Act of 1974. A 1976 California Supreme Court decision, Stanson v. Mott. Stanson, said it is a fundamental precept of fair elections that the public treasury cannot take sides. This creates an unfair advantage and violates the taxpayer’s First Amendment right against compelled speech.
HJTA had simultaneously filed a complaint with the Fair Political Practice Commission (FPPC) and supported the recent expansion of FPPC authority over similar violations. In August 2020, the FPPC approved a settlement agreement of HJTA’s case in which the County of Los Angeles was fined $1.35 million. This is the largest fine ever imposed against any agency in California.
Funds received by the Howard Jarvis Taxpayers Foundation are being used to establish and operate the Public Integrity Project. The Public Integrity Project will act as an enforcement mechanism for similar campaign funding violations across the state.
If you believe a local government agency or school district is planning to use your taxpayer dollars to take a side in a campaign, please see our sample letters you can use to put them on notice here, or file a report with the FPPC AdWatch program here. If you believe the spending is already occurring, please supplement your letter with a Public Records Act Request using our sample request here.
CALLING OUT ILLEGAL FEES
HJTA, et al. v. City of Long Beach
Code enforcement is a common feature of local government, serving to police for health and safety by enforcing safe building conditions and eliminating debris, graffiti, and other hazardous nuisances. It is normal to expect fines and follow-up inspection fees if a violation is first found.
In the City of Long Beach, however, there is a new annual fee for a “program” of monitoring vacant lots regardless of any violation. This is either an illegal fee for general governmental service or a property-related service fee under Proposition 218. As a Proposition 218 fee for service, it would need approval of a majority of affected property owners or two-thirds of the electorate. But the City didn’t think that necessary. So, HJTA asserts the fee is void.
The fee is also disproportionate. For perspective, it costs one lot owner $420/year to keep the lot mowed, but it costs $780/year for the City to drive by and look at it. And presumably, the City is already driving by during its regular code enforcement routines or capable of receiving information as it is regarding any property in the city. Proposition 218 was meant to stop local governments from targeting property owners for extra funds without a voice of the owners and proportionality to cost of a legitimate service. The Long Beach vacant lot fee disregards Proposition 218 altogether.
To challenge the fee, HJTA is joined by a local property owner who paid the fee under protest. HJTA appeared on his behalf at the Board of Examiners, Appeals, and Condemnation on March 21, 2022. Naturally, this administrative appeal was denied. HJTA filed a case in the superior court shortly thereafter. A hearing on the merits is set for June 14th, 2023.
HJTA, Silicon Valley Taxpayers Association, Silicon Valley Public Accountability Foundation, James Barry, and George Arrington v. City of San Jose and All Persons Interested
The City of San Jose passed a gun control ordinance infringing on taxpayer rights. The ordinance requires all gun owners to maintain gun liability insurance and to pay an “Annual Gun Harm Reduction Fee” to a private nonprofit organization that the City Manager will designate from time to time. The amount of the fee will be set annually by the City Council, but will be collected and spent by the nonprofit. The nonprofit is supposed to offer training and counseling in violence reduction, including gender-based violence reduction, suicide prevention, mental health, substance abuse and firearm safety, but the City will exert no direct control over the nonprofit’s spending decisions.
HJTA, together with Silicon Valley Taxpayers Association, Silicon Valley Public Accountability Foundation, James Barry, and George Arrington, filed a complaint in state court for reverse validation on March 7, 2022, because the Annual Gun Harm Reduction Fee is a disguised special tax lacking voter approval. HJTA further alleged that the City has unlawfully delegated its taxing power to a private entity and is coercing donations to a private organization in violation of the payers’ rights to free speech and association under both the state and federal constitutions.
Because our complaint contained a federal free speech claim, the case was removed to federal court, where the City then tried to have the case dismissed on an argument of prematurity. The federal judge agreed with this argument, which is that the case is premature because the City has yet to designate the nonprofit that will receive the funds. The federal judge suggested that amending the complaint and going back to state court was an option she would approve. Since there is another case in federal court which will litigate the free speech issue, HJTA attempted to take this back to state court where we can focus on the disguised taxation skirting voter approval.
Unfortunately, however, this case is suffering from catch-22 delays. The City of San Jose still has not designated the nonprofit to receive the funds. So, when HJTA filed its amended complaint and motion to remand to state court, all in alignment with the federal judge’s suggestion, the City opposed based on prematurity. And that prematurity is its own ongoing failure to designate the nonprofit to receive the funds.
HJTA regularly files amicus curiae briefs (“friend of the court” briefs) in cases brought by others where we have determined that the case could affect taxpayer rights. Courts have often expressed appreciation for our perspective, and the contribution that our legal analysis adds to the case.