Proposition 218’s Ban On Tax Increases Without Voter Approval Does Not Apply To Annexations

In Citizens Association of Sunset Beach v. Orange County Local Agency Formation Commission (--- Cal.Rptr.3d ----, Cal.App. 4 Dist., October 5, 2012), a California Court of Appeal considered whether Proposition 218’s ban on tax increases without voter approval required a vote in a newly annexed area in order for a city’s existing taxes to become applicable to its new residents.  The court found that because there are no references to annexations either in the language of Proposition 218, nor in the political arguments made in its favor, Proposition 218 was not intended to apply in cases of annexations.

Facts

Sunset Beach was an unincorporated community in Orange County until the Orange County Local Agency Formation Commission approved its annexation by the City of Huntington Beach in 2010.

As the annexation was pending, a group of Sunset Beach residents called the Citizens Association of Sunset Beach (“Association”) brought suit, seeking to force a vote by Sunset Beach residents as to whether they would become subject to two existing Huntington Beach city taxes: a utility tax, and a “retirement property tax” to fund the pensions of certain retired city employees.  The trial court denied the Association’s petition and allowed the annexation to proceed.  The Association appealed.

Decision

The question was whether Proposition 218, approved by voters in 1996 to prohibit local governments from imposing tax increases without votes of the people, applied to annexations, resulting in people in the annexed areas becoming newly subject to previously existing taxes.  The court said the answer to that question must lie in the intent of the framers of Proposition 218 and the voters who approved it.

The court analyzed the language of Proposition 218, as well as the ballot arguments made by proponents at the time.  Nowhere in any of those documents was there any reference to annexations whatsoever.  The determined that strongly indicates that neither the framers of Proposition 218 nor the voters were concerned with applying it to annexations. 

The court found it significant that Proposition 218 spells out different voter thresholds for different types of taxes: majority votes for general taxes, supermajority votes for special taxes.  “If the proponents of Proposition 218 had intended to require votes on annexations whenever there is a difference in the taxes between the annexing territory and the territory being annexed, they would, at the very least, have made provision for the fact that some of the taxes would require only a majority vote, but other taxes would require a two-thirds vote.  None of that is in the text of Proposition 218.”

The court also reviewed the political arguments made in favor of Proposition 218 when it was before the voters.  They overwhelmingly centered on the need to prohibit politicians from imposing new or increased taxes or fees on people without their consent.  Nowhere was there the suggestion that new residents of a municipality should vote on whether previously existing taxes now applied to them.  “Any doubt about our conclusion is removed by examination of the history of Proposition 218,” the court concluded. “Its proponents simply never intended it to apply to annexations.”

Therefore, the trial court was correct to find that Proposition 218 does not apply to annexations. The judgment was affirmed.

Questions

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