As dozens of local governments ask their voters for tax increases this year, the laws governing tax elections are in a state of legal flux. A test case on the vote requirements for local taxes involves a tax for children’s services approved by San Francisco voters in June.
California’s booming economy is pouring many billions of additional tax dollars into state and local government treasuries.
Nevertheless, the locals – cities and school districts, especially – find themselves in an ever-tightening fiscal vise because mandatory payments into public employee pension funds are growing much faster than revenues.
That’s why dozens of them are asking their voters this year to approve new taxes, although they typically, for political reasons, don’t specify pensions as the reason.
Laws governing those tax elections, however, are in a state of legal flux.
The state constitution separates local tax proposals into those meant for general purposes and those for specially designated purposes. It allows simple majority voter approval of the former and requires two-thirds voter approval for the latter.
Last year, the state Supreme Court shook up those provisions, implying in a Southern California marijuana case that if special purpose tax measures are placed on the ballot by initiative petition, rather than by the local governments themselves, the two-thirds vote threshold might not apply.
The ruling was not definitive, but ever since it was issued, those in the cloistered world of local government finance have speculated about its potential effects. Everyone’s been waiting for a test case and it might be a special property-related tax approved by San Francisco voters on June 5.
Measure C, placed on the ballot by an initiative petition sponsored by members of the city’s Board of Supervisors and approved by 51 percent of its voters, imposes a 3.5 percent tax on local commercial rents, such as office buildings, and a 1 percent tax on warehouse rents.
Entitled “Universal Childcare for San Francisco Families,” the measure dedicates tax proceeds to child care and early childhood education.
Commercial property owners and the Howard Jarvis Taxpayers Association sued, contending that Measure C is clearly a special tax, since its proceeds are designated for one purpose, and thereby needed a two-thirds vote.
It’s evident that tax sponsors see it as a way of converting the Supreme Court’s earlier implication into rock-solid case law, thus making it easier to enact new local taxes. And just as clearly, Jarvis and other plaintiffs in the suit see it as a potential erosion of the constitution’s two-thirds vote requirement for special taxes.
Thus, the die appears to be cast for a legal showdown. But wait, as the TV peddlers say, there’s more.
As the San Francisco suit was being launched, the state Supreme Court issued another ruling regarding a pension reform initiative sponsored by former San Diego Mayor Jerry Sanders in 2012 and overwhelmingly approved by the city’s voters.
City employee unions waged a legal battle to overturn the measure and won a ruling by the state Public Employee Relations Board that said Sanders was acting as a city official when he sponsored the initiative, not as an ordinary citizen.
Therefore, the board said, as mayor, Sanders was legally obligated under state labor law to “meet and confer” with unions on something that affected their members’ compensation. The Supreme Court upheld the board’s ruling.
Logically, if Sanders was under that legal obligation as an official, then members of the San Francisco Board of Supervisors also were acting officially, and not as ordinary citizens, when they sponsored Measure C. If so, they were placing a special tax on the ballot that would require a two-thirds vote.
Logic does not always prevail in legal battles, but the outcome of this one will reverberate for decades to come.