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By Laura Dougherty, Senior Staff Attorney

Government lawyers, with the approval of the courts, continue to devise new loopholes to avoid the two-thirds voter approval requirement for special taxes. But as we’ve done in the past when the courts chipped away at Proposition 13, HJTA is pressing for new laws to affirm the original intent of the voters. Here is a summary of the mostly dismal court treatment of the two-thirds vote on special taxes.

In 2017, the California Supreme Court was asked, in California Cannabis Coalition v. City of Upland, to decide a narrow procedural question regarding the election date for a general tax proposed by a citizens’ initiative. In answering that question, the Court treaded carelessly and needlessly on Proposition 218 as a whole, giving local government officials ammunition for trouble statewide. HJTA has been surprised to see the Court refuse to follow up with clarification. This leaves us with various conflicting superior and appellate court decisions on a variety of situations.

What the Supreme Court actually decided in 2017 was that a general tax election in the City of Upland should have been placed on the ballot sooner than the city thought was required. In its opinion, however, the Court used some overly broad language called “dicta,” a kind of academic pondering that’s not necessary for deciding the opinion. The legal rule is that it’s not to be relied upon. Nevertheless, since the dicta made sweeping statements about Proposition 218 as a whole, government lawyers could not resist importing the Court’s statements to other situations. For example, even though the Supreme Court’s dicta never said anything specific about the two-thirds vote for special taxes, San Francisco’s government officials argued it was implied. Soon, special taxes were declared passed without two-thirds voter approval if those tax proposals arrived on the ballot as citizens’ initiatives — by whatever means.

HJTA and private firms led the litigation effort to challenge these techniques. All of us were sure the Supreme Court would take up at least one case in order to follow up on its dicta, perhaps a case with a challenging set of facts. We thought, for example, it might take up our in-house case over San Francisco’s June 2018 Proposition C, HJTA v. City and County of San Francisco. In that case, politicians had copied and pasted their own special tax proposal verbatim into a voter initiative petition, gathered signatures on the petition, placed it on the ballot as “citizens” and declared the special tax passed upon 50.8% voter approval. The Supreme Court denied review, leaving the scheme intact and available for future use.

The Supreme Court will next be deciding whether to review Nowak v. City and County of San Francisco, the case of June 2018 Proposition G, a parcel tax increase for teacher salaries. Prop. G was born when the school district incentivized the union to start a citizens’ initiative in exchange for raises. The “proponents” merely provided their names and signatures as the citizens proposing the tax, while a law firm representing the school district wrote the measure, paid the filing fee, gathered the signatures and otherwise ran the campaign. The court of appeal called the district’s behavior “support” and “nothing sinister.” What’s uniquely worse in this case is that parcel taxes are an exception to general property taxes specific to, and inseparable from, Propositions 13 and 218. But apparently their two-thirds vote requirements are separable.

As of the writing of this article, the Supreme Court has turned down review in all three of the special tax initiative cases presented to it. Without comment on the application of its own dicta, it’s now letting cities like San Francisco and Fresno avoid the two-thirds vote requirement contained in Propositions 13 and 218 simply by presenting government tax proposals to the voters as “initiatives.” Other cities that were watching San Francisco are now jumping on the bandwagon, including Oakland and San Diego.

More loopholes are popping up, not just using the citizens’ initiative petition process. In 2016, San Francisco’s board of supervisors proposed Proposition W to increase its documentary transfer tax. As a “general” tax not for a special purpose, this measure would normally need only simple majority approval. However, just before the board of supervisors placed this “general” tax increase on the ballot, it had passed a resolution saying the next documentary transfer tax increase would be dedicated to making City College tuition free. But dedicated taxes are special taxes. And to boot, Proposition 13 prohibits documentary transfer taxes from becoming special taxes. However, since the board could technically undo its resolution at any time, even though it didn’t, and thus render the funds available for any general purpose, it has argued that Proposition W was a normal general tax increase and needed only simple majority approval.

A challenge to Proposition W, CIM Reit v. City and County of San Francisco, will soon be heard in the First District Court of Appeal. HJTA has filed a “friend of the court” brief arguing that if this resolution-before-the-next-election technique is permitted, local governments will start declaring specific purposes for “general” tax increases right before each election and avoid the two-thirds vote on all special tax proposals, not just those made through citizens’ initiatives under the Upland ruling.

Another ploy for evading the two-thirds vote requirement is something we call an “A/B” scheme, where a tax is divided from its specific purposes and presented to voters as two “companion” measures on the same ballot. In 2016, the Mendocino County Board of Supervisors simultaneously placed two measures on the ballot, Measures AI and AJ. Measure AI proposed a tax on commercial cannabis businesses. Measure AJ proposed to “advise” the board to spend such tax proceeds, if approved, on a handful of various needs: enforcement of marijuana regulations, mental health services, road repair and fire and emergency medical services. In this case titled Johnson v. County of Mendocino, the court found that since the vote on specific purposes was only “advisory,” the board wasn’t bound, the tax remained general, and it needed only a simple majority to pass.

The only brake pedal the courts have pressed is on board amendments to voter-initiated taxes. This is helpful but still not enough. For example, in Humboldt County in 2016, Measure S appeared on the ballot as a voter initiative. Measure S proposed to tax marijuana cultivation and allowed the board of supervisors to amend only its enforcement regulations. The board of supervisors, however, amended Measure S in three ways to expand the taxation: by applying the tax to property owners instead of just persons (i.e., the actual growers or business operators), by applying the tax to permitted areas instead of to cultivation and by commencing the taxation upon permit issuance rather than cultivation. The First District Court of Appeal made clear that a governing body may not amend a voter initiative to expand who is taxed, what is taxed or when a tax begins. This decision had been unpublished, meaning it could not be cited as a precedent in other cases. However, HJTA requested publication and that request was granted, making this decision available authority to halt further expansions of taxation, including those legitimately prompted by citizens’ initiative.

The next test coming is over San Diego’s March 2020 Measure C, a hotel tax proposed by citizens’ initiative. It was a special tax, and it received 65% voter approval, shy of two-thirds. San Diego’s city council chose not to declare the election result, but to wait for decisions from San Francisco, Fresno and their courts of appeal, even though such decisions are not binding on them because San Diego lies in a different judicial district. Then in April 2021, a whole year after the election, based on the decisions out of San Francisco and Fresno, the San Diego City Council “declared” Measure C passed. Legally, the council should have declared results within about a month of the election. The case is also complicated by the fact that voters were told in the ballot pamphlet that two-thirds approval was required. Now that the council is finally seeking court approval, will the court correctly declare it is too late? And will the court declare it cannot retract its statement to voters that two-thirds approval was required? HJTA calls this an issue of ballot integrity, and we will inform you of results as they unfold.

Given these many absurd court interpretations, HJTA stands ready to support new initiatives to uphold voter intent in Propositions 13 and 218. For the security of local budget planning, a two-thirds vote is necessary for all special taxes. Otherwise, loophole by loophole, the two-thirds vote will be erased.