WATCH OUT FOR ‘UPLAND’ TAXES

Pay close attention to the local measures on your ballot this fall. California’s state courts have been carving out a new loophole in Proposition 13, and special interests are trying to drive a truck through it.

According to the state constitution, as amended by Prop. 13 in 1978, local tax increases for a special purpose must be approved by two-thirds of voters. General taxes that can fund any purpose need a simple majority, 50% plus one vote.

That’s been the law for decades. Then something odd happened. In 2017, the California Supreme Court decided a case known as California Cannabis Coalition v. City of Upland. In that case, the Court hinted that there might be a legal distinction between tax measures that are proposed by a government body, such as a city council or a school board, and tax measures put on the ballot by a citizens’ initiative.

Although the Upland decision related only to the timing of elections, a few local governments around the state quickly pushed the envelope and asserted that tax measures put forward by citizens’ initiatives did not have to meet the two-thirds vote threshold but instead could pass with a simple majority.

So far, appellate courts around the state have agreed with that. Your Howard Jarvis Taxpayers Association continues to work hard on getting one of these cases back to the state Supreme Court so the issue can be reviewed.

Fortunately, voters may be blocking some of these taxes before they can even get to court. In Manhattan Beach, for example, a “citizens’ initiative” was proposed to require property owners to pay a $1,095 tax per parcel, with an inflation adjustment every year. Measure A said the money “shall be used” to, among other things, “increase salaries of teachers,” “provide more competitive compensation to other School District staff” and “increase staffing.”

Under Prop. 13, Measure A would be a special tax that requires approval by a two-thirds vote of the electorate. But under the Upland decision, the city of Manhattan Beach said it would pass with a simple majority because it was a “citizens’ initiative.”

The voters thought it was a nonstarter. Measure A went down to a thunderous defeat, with 68% of voters saying no to the tax increase.

In Kings County, a “citizens’ initiative” to raise the sales tax by 0.5% for fire department funding was resoundingly defeated, 64% to 36%.

But the fight goes on. In the city of Los Angeles, voters will be asked this fall to approve a “citizens’ initiative” proposing a new transfer tax on high-value real estate sales, which include the sales of apartment buildings and commercial buildings. The tax will add 4% to sales of $5 million or more, 5.5% to sales valued at $10 million or more. The money will go to homeless housing and service providers.

This is a tax for a special purpose, but since it was proposed by citizens — in this case, by the homeless housing and service provider organizations that will receive the money — the city of Los Angeles says this tax needs only a simple majority, not a two-thirds vote, to pass.

Your Howard Jarvis Taxpayers Association has been hard at work to qualify a ballot measure that would close this loophole and clearly require a two-thirds vote for all special taxes. We’ve been working with a large coalition of business and taxpayer groups to collect the roughly 1.5 million signatures we estimate we need to make sure there are enough valid signatures to qualify.

Unfortunately, the measure started too late to qualify for this November’s ballot, but signature verification is underway as Taxing Times goes to press, and we hope the Taxpayer Protection and Government Accountability Act will qualify now for the November 2024 ballot.

In the meantime, read your ballot very carefully and watch out for “citizens’ initiatives” from special interests that are directing the revenue to their own pockets.