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Special Taxes Now Easier to Pass

By Vanessa Gonzales posted 05-11-2021 07:49 AM

  

By Guest Authors: Gary B. Bell and Michael G. Colantuono of Colantuono, Highsmith & Whatley, PC

 

Recent court decisions provide good news for local taxing authority. On April 28, the California Supreme Court denied review in Howard Jarvis Taxpayers Association v. City and County of San Francisco, the latest of three decisions — from appellate courts in San Francisco and Fresno — concluding that special taxes proposed by initiative may be approved by a simple majority (50% + 1) of voters. Special taxes are those the proceeds of which are legally restricted to a particular purpose, like public safety, fire prevention, facilities upgrades, infrastructure, road improvements, and many others. Many special districts are authorized by their principal acts to levy special taxes, sometimes with a requirement that the taxes apply uniformly to all taxpayers or all real property in the district. A special tax applied to real property is referred to as a “parcel tax.”

 

Before the California Supreme Court’s 2017 decision in California Cannabis Coalition v. City of Upland, the law had required two-thirds voter approval of special taxes, whether proposed by local government officials or by initiative petition. In Upland, the Court held that restrictions in Proposition 218 referring to “local government” were meant to constrain local government officials and not the electorate. The people’s initiative power is “one of the most precious rights of our democratic process,” the Court reaffirmed, and there must be a clear indication voters meant to curtail it, which was missing from Proposition 218.

 

In the San Francisco case, a simple majority of voters approved Measure C, an initiative measure imposing a special tax, and the Howard Jarvis Taxpayers Association challenged the measure as requiring two-thirds voter approval. Citing the Upland case, the Court of Appeal concluded that Measure C was validly approved by a simple majority of voters because it was proposed by initiative. The decision followed 2020 opinions in City of Fresno v. Fresno Building Healthy Communities and City and County of San Francisco v. All Persons Interested in the Matter of Proposition C, which applied the same reasoning to uphold initiative measure special taxes approved by a simple majority of voters. And the California Supreme Court denied review of both. The latest San Francisco case adds one more point – the fact that an initiative proponent was a San Francisco Supervisor using his City Hall address on election forms did not change the result. There are strict rules against using public resources to urge a “yes” or a “no” vote once a measure in on the ballot, however.

 

By denying review in the latest San Francisco case too, Upland’s suggestion has become the holding of these three cases and settled law: special taxes proposed by initiative may be approved by a simple majority of voters.

 

Some litigation continues, however, asking whether transactions and use taxes (“sales taxes”) must receive two-thirds voter approval because the Revenue and Taxation Code requires it. We are defending that issue for Alameda County and expect the courts to conclude — as they did in the cases described above — that procedural requirements for taxes are not intended to apply to voters acting by initiative unless they say so expressly. A trial court decision is some months off, and an appeal is likely. It may be a year or two before this point is settled. However, few special districts have statutory authority to impose sales taxes. We’ll keep you posted as the law continues to develop!

 


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