California Supreme Court Paves the Way for Electorate’s Majority-Vote to Adopt Special Taxes

In a decision issued August 28, 2017, the California Supreme Court concluded that a local tax measure submitted to voters by initiative petition is not subject to the state constitutional requirement, added by Proposition 218, that general taxes be considered only at “a regularly scheduled general election for members of the legislative body.”  The reasoning of the case, California Cannabis Coalition v. City of Upland, paves the way for special taxes to be adopted by a simple majority vote of the local electorate. (No. S23418 (Cal. Supreme Ct. Aug. 28, 2017).)  Upland suggests that special tax measures proposed directly by the voters (initiatives) become law if approved by a majority of the electorate, unlike measures proposed by local legislative bodies, which are subject to two-thirds voter approval.  The Upland decision thereby creates new opportunities for local voters interested in generating new revenue to fund local priorities.

In Upland, the California Supreme Court considered the interplay between two constitutional provisions – the initiative power and Proposition 218.  The electorate’s initiative power is the power to propose, and either adopt or reject, statutes and constitutional amendments.  Proposition 218, which is itself a constitutional amendment adopted by the state’s electorate, restricts local governments’ ability to impose taxes.  Specifically, Proposition 218 prohibits a “local government” from imposing any general tax unless the tax is approved by a majority vote of the electorate at a regularly scheduled general election, or imposing any special tax unless the tax is approved by a two-thirds vote of the electorate.

Considering a dispute between the City of Upland and proponents of an initiative ordinance that would allow medical marijuana dispensaries and impose a general tax on such operations, the Supreme Court held that the electorate’s initiative power is not subject to Proposition 218’s requirement that general taxes be submitted to the electorate at a regularly scheduled general election. The Court reasoned that the phrase “local government,” as used in the relevant portions of Proposition 218, refers to the local public entity and does not include the electorate exercising its constitutional initiative power.  In reaching its decision, the Court stressed that a main purpose of Proposition 218 was to constrain the ability of local politicians to impose taxes, not to constrain the electorate.

While the specific issue before the Court was whether an initiative imposing a general tax can be submitted to the electorate at a special election, the Court’s decision is likely to have far broader implications.  Proposition 218 prohibits a “local government” from imposing a special tax without a two-thirds vote of the electorate.  The Court’s reasoning suggests that this requirement only applies to taxes submitted to the voters by a local agency, and not to taxes proposed through the electorate’s initiative power.  This issue was not directly decided by the Court, and tax measure opponents can be expected to challenge the approval of special taxes by initiative with simple-majority approval, although there is little in the Court’s reasoning to support such a challenge.

The decision, therefore, presents new opportunities for local communities in which voters actively support and are interested in qualifying initiatives to fund local priorities.  It raises new questions, however, about the role that local public agencies may play with regard to such efforts.  The California Supreme Court has previously issued decisions addressing what types of publically funded communications related to ballot measures are permissible, for example.  Those and other decisions will have to be reexamined in the context of a voter-sponsored initiative to approve special taxes.  Meyers Nave attorneys are available to consult with local government agencies and groups of interested voters about all aspects of these questions.