S.F. judge upholds business tax hikes
Simple majority ruled OK for initiatives led by voters
A San Francisco judge ruled Friday that city officials did not break the law when they allowed two ballot measures that raised business taxes to pass last year with a simplemajority vote.
The rulings mark a major development in what’s likely to be an ongoing legal fight to unlock as much as $500 million in annual tax revenue for San Francisco. It’s a dispute that could reshape the ways local governments pass new taxes in California.
San Francisco Superior Court Judge Ethan Schulman’s rulings followed a lengthy hearing on the two measures — both called Proposition C — on Wednesday. The city attorney’s office and lawyers representing the Howard Jarvis Taxpayers Association and probusiness organizations argued over whether San Francisco violated the state Constitution and its
own City Charter by allowing the propositions to pass with a simplemajority threshold and not a twothirds majority.
June’s Prop. C sought to raise $146 million annually for early education and child care by raising taxes on commercial landlords. That measure squeaked by with just under 51% of the vote.
The Prop. C in November passed with more than 61% of the vote, raising taxes on the city’s biggest businesses to bring in as much as $300 million a year for homelessness services and housing.
The city is collecting those taxes on schedule but will not spend the money until the legal questions are settled. That could take years with appeals, which the antitax and probusiness groups have already vowed to pursue.
“We are disappointed in today’s ruling but will continue to fight to uphold the will of the voters. Prop. 13 and Prop. 218 are unambiguous — voters want a twothirds vote requirement for special taxes. We will be filing an immediate appeal,” said Rex Hime, president of the California Business Properties Association on behalf of the Howard Jarvis association and the California Business Roundtable.
Still, Christin Evans, one of the main proponents of November’s Prop. C and a San Francisco smallbusiness owner, said she and other supporters were celebrating the rulings Friday.
“Obviously, we’re thrilled. We felt that Prop. C was on firm legal ground from the beginning, and the judge’s opinion left no question that voterled initiatives will be possible going forward to allow the people to help shape city policy,” she said. “In the end, if the people see a crisis on the street with their own eyes, then we can take action and we can do that through the initiative process.”
A third measure, Proposition G from June, also passed with a simple majority and has been challenged in court by San Francisco resident Wayne Nowak with help from the multinational law firm Greenberg Traurig. A hearing on that measure, which levied a $298 parcel tax to fund $50 million in teacher pay raises, is scheduled for August. It’s likely that Schulman’s rulings will impact the fate of Prop. G — he’s handling that case, too.
Since the mid1990s, any ballot measure that would raise taxes for a specific purpose has required a twothirds majority for passage. The Howard Jarvis Taxpayers Association played an integral role in passing two amendments to the state Constitution that set that standard: Propositions 13 and 218. But in 2017, the San Francisco city attorney’s office issued a pivotal memo interpreting a state Supreme Court ruling from that same year to mean that tax measures put on the ballot by citizens — not government leaders — needed only a simple majority to pass. The threshold is still twothirds for tax measures put on the ballot by government officials.
The state Supreme Court’s ruling made clear that ballot measures generated by citizens aren’t subject to the same constraints as those generated by local governments but didn’t explicitly address questions about voter thresholds.
Schulman sided with the city’s contention that the state Supreme Court’s ruling allowed cities to rely on a simplemajority threshold for tax measures brought by citizen groups. Both the state Constitution and the San Francisco City Charter, he ruled, are meant to put stricter limits on government bodies to raise taxes, not citizens using the initiative process.
He also rejected an argument that June’s Prop. C should have been considered a governmentled measure because of the close involvement of Supervisor Norman Yee. An attorney for the Howard Jarvis association argued that government officials shouldn’t be allowed to collude with citizen groups to raise taxes by taking advantage of the lower, simple-majority threshold.
Yee was a coauthor of the measure and a prominent supporter in the runup to the June election, but the measure was put on the ballot by a signature petition. Yee’s involvement wasn’t enough to define the petition as a governmentsponsored tax, Schulman ruled.
The rulings are expected to be appealed up to the state Supreme Court. Officials predict a full resolution could take as much as three years.
“These cases have always been about upholding the will of San Francisco voters,” City Attorney Dennis Herrera said in a statement Friday. “We’re pleased the court has confirmed that when voters act through the initiative process, a simple majority vote is required. The initiative right is about direct democracy. It is one of the most precious rights of our democratic process. These decisions are a victory for voters and a victory for democracy.”
“If the people see a crisis on the street with their own eyes, we can take action ... through the initiative process.” Christin Evans, small business owner