Voter-initiated tax measures need only simple majority

San Francisco officials properly allowed a 2018 ballot measure that raised business taxes for homelessness services to pass with a simple majority since it was proposed by voters, a state appellate court ruled.

Potentially reshaping how local governments impose new taxes, the 1st District Court of Appeal confirmed on Tuesday the city's position that citizen-proposed tax measures do not need a supermajority to pass, unlike those brought by government officials.

"The initiative power is one of the most precious rights of our democratic process," wrote Justice Alison Tucher. "It has long been our judicial policy to apply a liberal construction to this power wherever it is challenged in order that the right be not improperly annulled."

The Howard Jarvis Taxpayers Association will appeal the decision to the state Supreme Court, said organization attorney Laura Dougherty.

San Francisco voters passed Proposition C, which taxed the city's biggest corporations to fund homelessness programs, in November 2018. Anti-tax groups immediately moved to invalidate the results since it was passed with a majority rather than a supermajority. Howard Jarvis Taxpayers Association v. City and County of San Francisco, CGC-18-568657 (S.F. Super. Ct., filed Aug. 3, 2018).

In a unanimous decision, the three-judge appellate panel found tax measures brought by voters for a specific purpose -- called "special taxes" -- are not subject to the same constraints as those brought by government officials. It protected the initiative powers of the electorate in doing so.

"Pursuant to our duty to jealously guard and liberally construe this right, we must resolve doubts in favor of the exercise of the right whenever possible," Tucher wrote.

The panel of Justices Tucher, Jon Streeter and Tracie Brown upheld San Francisco Superior Court Judge Ethan Schulman's ruling last year that the city properly allowed Proposition C to pass with 61% of the vote.

City Attorney Dennis Herrera emphasized that courts are backing his office's position that only a simple majority is required when voters act through the initiative process.

"We brought this case to uphold the will of the voters," Herrera said in a statement. "San Francisco voters have the right to direct democracy and self-government. We will continue to defend that right for however long is necessary."

Anti-tax and pro-business organizations, led by the Howard Jarvis Taxpayers Association and the California Business Properties Association, have challenged the city's use of a majority vote to pass special taxes at every turn. They have maintained that a supermajority is required to pass any special tax.

San Francisco has won in two other similar cases on the issue that are now on appeal.

Dougherty warned of a "slippery slope" if cities are allowed to sidestep supermajority thresholds to impose taxes. She predicted the appellate decision paves the way for cities to potentially "adopt special taxes with no vote."

"This ruling opens the door to that possibility," she said. "I don't know if any local government will go that far, but it's a possibility."

Dougherty also argued that local politicians will now simply conspire with citizen groups to pass new taxes. She said there are "no safeguards in the process."

Best Best & Krieger partner Lutfi Kharuf disagreed, calling the claim "speculative and not accurate." Among other requirements, he noted that there's a process to collect signatures and get them verified to get a measure on the ballot.

"The court made clear it won't take this very precious constitutional right away from people without directive to do so," he said.

Now that there's appellate guidance on the issue, local governments might be more inclined to use the citizen-driven initiative process, Lutfi continued. He said, "It's in the back of a lot of agencies' minds."

The San Francisco city attorney was the first public law office to interpret a 2017 state Supreme Court ruling to imply that only a simple majority is required when voters propose tax measures. The city passed two other ballot measures applying the precedent. California Cannabis Coalition v. City of Upland, 3 Cal. 5th 924 (2017).

Deputy City Attorney Burk Delventhal wrote in a memo at the time that the opinion "relies on the court's duty to protect and liberally construe the people's constitutional right to direct democracy."