S.F. wins ruling on businesstax increase in state appeals court
A California appellate court on Tuesday confirmed that San Francisco officials did not break the law when they allowed a 2018 ballot measure that raised business taxes to fund homelessness services to pass with a simplemajority vote.
The ruling, from the First District Court of Appeal, marks a major victory for the proponents of 2018’s Proposition C and for the attorneys and other city officials who have invested considerable time and resources defending San Francisco’s trailblazing stance on citizendriven tax measures — one that could have effects statewide.
Tuesday’s ruling inches San Francisco closer to being able to utilize hundreds of millions of dollars for homelessness services and permanent supportive housing, urgent issues compounded by the COVID19 pandemic and the nearly $2 billion hole it’s blown in the city’s budget.
The threejudge appellate court panel agreed with the city’s arguments that tax measures brought by citizen groups for a specific purpose — called “special taxes” — are not subject to the same restrictions as tax measures placed on the ballot by government officials. The decision upholds a 2019 ruling from San Francisco Superior Court Judge Ethan Schulman that the city abided by the law when it allowed Prop. C to pass with a less restrictive simplemajority vote instead of a twothirds supermajority.
The “passage of Proposition C pursuant to a majority vote of the city’s electorate was a valid exercise of the people’s initiative power,” the judges ruled.
“We brought this case to uphold the will of the voters, and we’re pleased the First District Court of Appeal has agreed with us in a unanimous decision,” City Attorney Dennis Herrera said in a statement. “San Francisco voters have the right to direct democracy and selfgovernment. We will continue to defend that right for however long is necessary.”
Antitax and probusiness organizations — the California Business Properties Association, the Howard Jarvis Taxpayers Association and the California Business Roundtable — challenged the city’s use of a simplemajority threshold to approve the measure, arguing that doing so violated the state Constitution. They also contended that local governments would conspire with citizen groups to pass new taxes with the lower threshold.
The city has won two other cases over the voterthreshold question on tax measures at the trial court level. Both are awaiting rulings from state appellate courts. But the legal challenges have forced the city to collect the taxes, but hold off on spending the revenue until each case is resolved, freezing hundreds of millions of dollars for homelessness services, early child care services and teacher pay raises. The city is seeking to circumvent that blockade in the interim with an elaborate workaround built into businesstax reform measures headed for the November ballot.
Since the mid1990s, any ballot measure that would raise taxes for a specific purpose has required a twothirds majority for passage. The Howard Jarvis 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 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. Across California, local governments and citizen groups have closely watched San Francisco confront the voterthreshold question, and the outcome could impact how citizens levy new taxes for specific issues.
Laura Dougherty, a staff attorney with the Howard Jarvis association, said the organization “naturally” intends to appeal the case to the state Supreme Court.
“The voters who passed Propositions 13 and 218 never intended to create multiple voter approval margins,” she said. “Constitutionally, a twothirds vote is necessary for any special tax.”