Taxpayers group loses bids for major change in tax initiative arguments

Sacramento County judges rejected most challenges to the ballot title and arguments in a major property tax initiative that would allow the Legislature to reassess commercial and other industrial properties, but a taxpayers' group filed an emergency petition Thursday asking an appeals court to intervene to fix what it claims is a misleading ballot title.

Superior Court Judge Laurie M. Earl, in a decision in favor of Secretary of State Alex Padilla, cited a 3rd District Court of Appeal ruling that grants Attorney General Xavier Becerra "considerable latitude" in preparing ballot titles and summaries because the task of doing so is difficult and often subject to different but reasonable interpretations. Becerra v. Superior Court, 19 Cal. App. 5th 967 (2017).

In the ruling against the Howard Jarvis Taxpayer Association, the judge wrote the ballot title or summary is not actually false of misleading, and that the proposed alternatives are no better. Coupal et al. v. Padilla, 34-2020-80003440 (Sacramento County Sup. Ct., filed July 24, 2020).

Thomas W. Hiltachk, a partner with Bell, McAndrews & Hiltachk LLP who represents the association, filed the emergency petition Thursday arguing Becerra has been "emboldened" by the authority granted in the 2017 appellate decision "and has applied it in a clearly prejudicial manner."

Hiltachk targeted the ballot title, "INCREASES FUNDING SOURCES FOR PUBLIC SCHOOLS, COMMUNITY COLLEGES, AND LOCAL GOVERNMENT SERVICES BY CHANGING TAX ASSESSMENT OF COMMERCIAL AND INDUSTRIAL PROPERTY," which he said deliberately skirts the fact the initiative is a tax increase. In his petition to the Court of Appeal, he cites newspaper editorials blasting Becerra for trying to hide that.

"The ballot label is the summary that every voter gets to read," Hiltachk said in a telephone interview. "It shouldn't be prejudicial."

Proposition 15 is intended to raise $6.5-$11.5 billion each year for the benefit of local governments and public schools. Proponents say the initiative would not affect residential homeowners, but Hiltachk argued its language leaves an opening for the Legislature to raise taxes on people who operate businesses from their homes.

During oral arguments Thursday in a second lawsuit over the opponents' ballot arguments against the initiative, he argued the use of the term "limited commercial uses" leaves an opening for the Legislature to count some uses as commercial. "Ballot arguments frequently predict that horrible things will happen, but sometimes they do," Hiltachk told Sacramento County Superior Court Judge James P. Arguelles.

Deborah B. Caplan, a partner with Olson Remcho LLP defending the initiative, said its language clarifies that home offices, home-based businesses and short-term rentals would count as residential in the same sentence.

On Thursday afternoon, Arguelles eliminated a paragraph in the proposed opposition argument saying the proposition lets the Legislature raise taxes on homeowners and made another amendment in a tentative decision. The judge said he planned to issue a final ruling Friday morning with one modification. Chavez et al. v. Padilla, 34-2020-80003431 (Sacramento County Sup. Ct., filed July 24, 2020).

In another lawsuit filed by an initiative opponent attacking proponents' ballot argument as false and misleading, Arguelles rejected the main claims but ordered a minor change. Canete et al. v. Padilla, 34-2020-80003433 (Sacramento County Sup. Ct., filed July 27, 2020). A fourth petition was rejected outright.

Attorneys and judges have until 5 p.m. Monday to work out the details of the ballot title, summary and arguments before it's sent to the printer and then on to California voters to decide in November.