The state Supreme Court on Wednesday cleared the way for San Francisco to pay for additional childcare and early education services with commercial rental taxes approved by 51% of the city’s electorate in June 2018.
The move, Proposition C, was an electoral initiative aimed at raising $ 146 million a year, primarily to fund childcare and education for children under 6 years of age. It has been challenged in court by anti-tax advocates who argued that electoral action to raise local taxes requires approval from two-thirds of voters.
The Howard Jarvis Taxpayers Association, named after the 1978 California tax cut sponsor Prop. 13, relied on a subsequent government initiative, Prop. 218 of 1996, which required two-thirds of voters approval for each of a. the proposed tax increase required local government to fund specific programs.
But California appeals courts recently ruled that the two-thirds requirement does not apply to actions taken by signing initiative motions on local ballot papers, as they are actions of voters, not local governments. That was the conclusion reached by the First District Court of Appeal in San Francisco last June when it upheld another city-wide initiative, a November 2018 move to increase corporate taxes to fund programs for the homeless. Another chamber of the court issued a similar judgment in January and upheld Prop. C of June 2018.
The power of initiative is “one of the most valuable rights of our democratic process” and must be interpreted broadly, said appellate judge Mark Simons in a 3-0 judgment, citing the earlier decision. He said the two-thirds majority of Prop. 218 only applies to measures that are decided by a city council, a supervisory body or a school board and presented to the electorate.
The Jarvis Association appealed to the state Supreme Court, which unanimously denied review on Wednesday. The court also denied review of the earlier appeal decision that allowed San Francisco to fund homeless programs with $ 250 million to $ 300 million a year in new taxes on gross income from companies with annual sales in excess of $ 50 million.
The June 2018 vote included a 3.5% tax on business income from leasing commercial space and a 1% tax on leasing warehouse space, excluding companies that receive up to $ 1 million in rental income annually .
In response to the verdict, City Attorney Dennis Herrera said, “San Francisco voters have the right to direct democracy and self-government. This cements our victory and ensures long-term help for working families. “
Jarvis Association attorney Laura Dougherty said the court had falsely allowed “another loophole” in the nationwide vote to curb tax increases. As a result, she said, “If politicians simply copy and paste a government tax proposal into a citizens’ initiative, they can dramatically reduce the voter approval required for enforcement.”
Although the state’s Supreme Court did not make a decision of its own as to whether Prop. 218 applies to initiatives, the court interpreted the measure narrowly in one 2017 case. In determining that a Southern California city’s tax initiative was not covered by any other provision of Prop. 218 that required special elections for local tax measures, the Supreme Court said that neither the text nor the context of Prop. 218 “supports the conclusion, that the term “local government” should encompass the electorate. “
Jonathan Coupal, president of the Jarvis Association, said his organization is ready to support another referendum effort that requires approval from two-thirds of voters for any increase in local taxes for specific purposes.
The case is Howard Jarvis Taxpayers Association vs. San Francisco, S267516.
Bob Egelko is a contributor to the San Francisco Chronicle. Email: begelko@sfchronicle.com Twitter: @BobEgelko
