September 17, 2020

Last week, the California Supreme Court declined to review a state appellate court decision that allows local government special taxes to be increased by a simple majority, rather than two-thirds, if the tax increase is placed on the ballot by initiative petitions and not the governments themselves. This comes as a victory for those in favor of making tax increases easier to pass, as well as groups who might not seek taxes to benefit their causes via local initiative.

In 1996 California voters passed Proposition 218, which established that new local government taxes must be approved by the voters. The measure set two different standards, depending on the type of tax increase. It established that special taxes require a two-thirds vote, while general taxes require only a majority. These thresholds were followed regardless of how the tax was placed on the ballot until 2017 when the California Supreme Court took up California Cannabis Coalition v. City of Upland. In their ruling in the Upland case, the Court seemed to indicate that that while the state Constitution does place limitations on the power of local governments to increase taxes, those restrictions do not apply to voter initiatives unless a new law specifically declares so.

Following this decision, two San Francisco Supervisors personally sponsored two special tax increases, one to fund early childhood education and one to combat homelessness. After receiving the requisite number of signatures and being placed on the ballot, both measures received a majority vote, but did not reach the two-thirds threshold. However, a local judge ruled that they because they were citizen initiatives they did receive enough votes to become law. The judge’s decision on the homelessness measure, known as Proposition C, was appealed in City and County of San Francisco v. All Persons Interested in the Matter of Proposition C and an appellate court upheld the judge’s decision. This is the case which the Supreme Court declined to take up last week, effectively upholding the previous ruling.

This case has far-reaching implications for local tax policy in California. In addition to the two San Francisco measures, both Oakland and Fresno passed special taxes in a similar manner. In both cases local judges blocked the measures citing the Proposition 218 requirement for a two-thirds vote. Will these decision be reversed in light of the Supreme Court’s decision not to hear the San Francisco case? Or will conflicting appellate rulings eventually force the Court’s hand to take up a case and make an affirmative decision? Will votes that fell between majority and 2/3 approval from previous years be reinterpreted in light of this change? The answers to these questions and more will be highly anticipated by local government tax aficionados.