Should local governments be able to impose a dedicated tax with only a simple majority? Read on for a look at the debate.
It's often been said that nothing is certain but death and taxes, but a pair of lawsuits in response to two voter-approved special taxes have placed the taxes on hold and left the threshold for voter approval of future local taxes in question. Whether or not a special tax requires simple majority approval or supermajority approval will be of critical importance to SFAA members, property owners, and business owners over the coming years.
One of the most debated and contested ballot measures last year was November’s Proposition C, which taxed large businesses to pay for services for one of the city’s most intractable problems: homelessness. The measure was expected to raise more than $300 million annually for homeless services, and inspired thousands of internet posts, tweets, newspaper articles and debates, most notably between two high profile tech billionaires, about whether voters should approve a significant spending increase when it is currently unclear how much exactly the city is already spending on homeless and supportive services.
In the months before November, volunteers from the Coalition for Homelessness and other groups collected enough signatures to place the tax on the ballot, and on Election Day, voters approved the tax by a not-so-insignificant margin of 23 points, with 61% of voters approving the measure and 38% opposing it. And there’s the rub.
Stepping back a few years to 1996, California voters approved Proposition 218, which included a requirement that local governments could only enact, extend, or increase a dedicated tax (a tax for a specific purpose) with a two-thirds supermajority vote of the electorate. After Prop 218 was approved, the two-thirds threshold was applied to special taxes included in citizen initiatives (measures placed on the ballot by collecting signatures from the general public).
Jumping forward 20 years, to August of 2017: the California Supreme Court ruled in California Cannabis Coalition v. City of Upland that the article in the Prop 218 law that required a supermajority approval of special taxes did not apply to citizen initiatives. This ruling brought the 66.67% approval threshold into question and gave local governments the ability to make a determination as to whether they should apply the traditional 66.67% approval threshold or whether they should interpret the California Supreme Court’s ruling in the Upland decision to allow special taxes by citizen initiative to be passed into law just by receiving 50% +1 of the vote.
As of the writing of this article, and perhaps unsurprisingly, the City and County of San Francisco is the only
jurisdiction in California that has decided to apply the 50%+1 approval threshold to special taxes, and as a result, within a year and three months of the Court decision, San Francisco voters passed two special taxes via citizen initiative. Voters approved a tax impacting SFAA members of around $300 per parcel for teacher salaries in June of 2018, and then Proposition C, which largely does not impact SFAA members, in November of 2018.
As was anticipated, the Howard Jarvis Taxpayers Association filed a lawsuit against San Francisco after the June 2018 election, arguing that the tax did not meet the two-thirds approval threshold. At the end of 2018, a group of impacted San Francisco businesses also filed suit arguing November 2018’s Prop C also did not receive enough votes to be enacted.
As a result, both taxes have been frozen until the courts can decide whether or not these sorts of taxes should require a mere majority vote or a supermajority vote.
As boring as the history of tax law, the voting history on California and San Francisco tax measures, and the recent court decisions on taxation are, the above history and pending decisions should be of critical importance to SFAA members.
SFAA property owners and business owners should see the passage of Prop C in June of 2018 and of (the other) Prop C in November of 2018, in the two immediate elections after the Upland ruling, as a harbinger that we will see more and more
taxes targeting property and business in the coming years. If lawsuits against each of the measures fail, residents in San Francisco will have a green light to target property owners and business owners (who are each in the voting minority) with significant taxes, which can then be approved with only a simple majority of the votes. You can stay updated on each of the lawsuits in future editions of SF Apartment Magazine.
Looking forward from today, as of this writing, there has already been one tax that will be placed on the November 2019 ballot. Although the text of the tax has not yet been made public, the tax will likely target “intentional” residential and commercial vacancies. It is rumored that the residential vacancy tax will apply to property owners with 3 or more vacant units, and that the commercial vacancy tax will apply to vacancies in neighborhood commercial districts.
Although the above conversation about threshold for voter approval is germane to future taxes in San Francisco, the proposed Vacancy Tax is expected to go through the legislative process and will be placed on the ballot through a vote of the Board of Supervisors, rather than through the collection of signatures. This means that there is no legal question that the vote will require a supermajority vote of 66.67% approval. The fact that the tax will go through the legislative process instead of the initiative process also means that it is subject to change, giving SFAA the opportunity to work with the San Francisco Board of Supervisors to amend the tax, and will aim to nullify its impact on residential housing providers.
While SFAA members should be encouraged that the proposal is subject to change and requires a supermajority vote, the idea of a vacancy tax, particularly on commercial property, resonates with many who have noticed the spate of empty storefronts in our neighborhood corridors. Though there are many difficulties in filling storefront vacancies—the “Amazon effect,” a crippling homeless crisis, the changing nature of retail, and a ban on formula retail and certain stores in certain areas—SFAA members should also expect that voters will want to see a solution sooner rather than later.
Charley Goss covers Government Affairs for SFAA. He can be reached at firstname.lastname@example.org.