Appeals court makes tax increases easier

The March primary election was rough on advocates of new taxes.

Hundreds of tax hikes — sales and parcel taxes, mostly — were placed on the ballot by cities, counties and school districts whose finances were being squeezed. However, voters rejected roughly half of them, reversing what had been a recent trend.

The election occurred as the COVID-19 pandemic was erupting, followed by widespread economic shutdowns to curb the disease. The March election results, the pandemic and the deep recession that resulted gave pause to local officials hoping to place tax increases on the November ballot and one-by-one, local governments have throttled back on their plans.

Amidst that situation, a state appellate court last month issued an opinion that could make passage of new local taxes easier in the future. The state constitution’s two-thirds voter approval requirement for single-purpose taxes doesn’t apply, the three-judge panel declared, if they reach the ballot via initiative petitions signed by registered voters.

The decision is the latest wrinkle in a legal squabble over such taxes arising from a somewhat ambiguous 2017 state Supreme Court decision called “Upland” because it dealt with a ballot measure on taxing marijuana in that Southern California city.

Writing the 5-2 majority opinion, Supreme Court Justice Mariano-Florentino Cuéllar declared, “Multiple provisions of the state constitution explicitly constrain the power of local governments to raise taxes. But we will not lightly apply such restrictions on local governments to voter initiatives.”

He thus implied that special purpose taxes placed before voters via initiative may not be affected by the two-thirds vote requirement for taxes sought by governments themselves.

Thereupon, advocates of new taxes quickly turned to the initiative process, hoping that Cuéllar’s opinion would allow them to succeed with only simple-majority votes. Several tests of the theory emerged from the 2018 elections, but trial court judges differed sharply on whether they should be validated.

Two of the tests were San Francisco taxes placed on the ballot via initiatives personally sponsored by members of the city’s Board of Supervisors, one for early childhood education, the other to battle homelessness. Both received less than two-thirds votes, but a local judge, Ethan Schulman, validated them anyway.

However, Fresno Superior Court Judge Kimberly Gaab went the other way on a sales tax measure to improve city parks that received just 52% of the vote. Gaab wrote, “The two-thirds vote requirement applies to all special tax proposals, regardless of the proponent of the proposal.”

Alameda County Superior Court Judge Ronni MacLaren agreed with Gaab, declaring a 2018 Oakland parcel tax for education a failure with 62% of the vote. “Allowing Measure AA to be enacted with less than two-thirds of the votes would constitute a fraud on the voters,” MacLaren wrote.

Given the obvious conflict posed by those and other trial court decisions, the issue was destined to hit the appellate courts and the first to make it was the San Francisco measure imposing new taxes on business to battle homelessness.

It resulted in last month’s declaration by San Francisco’s First District Court of Appeal that Cuéllar’s Upland decision does, indeed, mean special taxes proposed in initiatives require only simple-majority passage, not supermajorities.

It was a setback for antitax groups, but other cases are still pending, including one involving Oakland’s education parcel tax. So it’s certain that the issue will eventually make its way back to the Supreme Court for an unambiguous decision.

If the San Francisco tax’s validity is upheld, as seems likely, voters will see a cavalcade of new special tax measures in future elections.