In the same week the International Municipal Lawyers Association named a prestigious award after deceased Deputy City Attorney Buck Delventhal, a Court of Appeals ruling affirmed the legal theory the City Hall maven co-developed underpinning Proposition C.
That 2018 voter-generated initiative established a business tax aimed at raising some $300 million a year for homeless and housing causes.
In a major development for a cash-starved city, today’s ruling puts San Francisco one step closer to accessing hundreds of millions of dollars it has collected and held in abeyance.
Proposition C, which passed with 61 percent of the vote in November 2018, established a tax on companies with gross receipts exceeding $50 million. Sixty-one percent is a heavy majority, but it ain’t two-thirds. With notable exceptions, tax measures in California require two-thirds approval. Delventhal and Scott Reiber in the City Attorney’s office felt that, in part, since Proposition C was a voter-generated initiative, it could legally pass with a bare majority.
The Howard Jarvis Taxpayers Association, the California Business Properties Association and the California Business Roundtable did not.
Litigation ensued. Last year, a Superior Court judge sided with the city. Today that opinion was validated by a three-judge panel with the First District Court of Appeal.
“Following two California Supreme Court cases interpreting other language from Proposition 13 and Proposition 218, we construe the supermajority vote requirements that these propositions added to the state constitution as coexisting with, not displacing, the people’s power to enact initiatives by majority vote,” reads today’s ruling.
“Because a majority of San Francisco voters who cast ballots in November 2018 favored Proposition C, the initiative measure was validly enacted.”
The plaintiffs may appeal the case to the California Supreme Court within 40 days — but, as the Court of Appeal referenced two state Supreme Court precedents and the city’s legal strategy is derived from another, it would appear San Francisco is in a commanding legal position.
San Francisco may, in the not-too-distant future, tax high-grossing companies and use the money for homeless and housing causes because of a seemingly arcane matter regarding the California Cannabis Coalition’s ultimately failed battle with a San Bernardino County municipality about marijuana dispensaries.
That 2017 case — California Cannabis Coalition v. City of Upland — involves questions over whether a $75,000 fee placed on a San Bernardino dispensary constitutes a tax and, if so, whether a tax measure can be placed on the ballot during a special election rather than a general election … and just how we should interpret Article XIII C of the state Constitution.
In short, it’s complicated.
But, for San Francisco’s purposes, the dissenting opinion in this case was the most germane: “From here on out,” wrote a pair of disgruntled justices, “special taxes can be enacted by a simple majority of the electorate, as long as proponents can muster the necessary quantum of support to require consideration of the measure.”
Today, the Court of Appeal agreed, declining to limit the people of California, via signature-gathered voter initiatives, from exercising political power.
Mission Local is informed that the hundreds of millions of dollars in Proposition C money the city has collected and held awaiting legal clearance will be released at the discretion of the city controller. It is highly unlikely that controller Ben Rosenfield would authorize such a move prior to the ultimate conclusion of this case.
“This issue has been before the court in San Francisco in three recent cases. In all three the court has upheld the will of the voters and said a simple majority is required,” said City Attorney Dennis Herrera. “And now the Court of Appeal has agreed. San Francisco voters have the right to direct democracy and self-government. We will continue to defend that right for however long is necessary.”
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