Court holds California local taxes not subject to supermajority voting requirement

Eversheds Sutherland (US) LLP

Eversheds Sutherland (US) LLPOn July 5, a San Francisco trial court held that local taxes imposed by voter initiative are not taxes imposed by a “local government” and therefore are not subject to the two-thirds supermajority voter approval requirement provided for in the California Constitution. This decision is the opening salvo in what likely will be a protracted battle that could potentially open the floodgates for new and increased local taxes.


Article XIII C, Section 2(d) of the California Constitution provides in relevant part: “No local government may impose, extend, or increase any special tax unless and until that tax is submitted to the electorate and approved by a two-thirds vote.” Proposition C, a November 2018 San Francisco voter ballot initiative designed to increase the local gross receipts tax on certain businesses to fund homelessness services, passed with just over 61% of the vote. This proposition was but one in a recent spate of local tax initiatives passed by a simple majority of voters in cities and counties across the state, nearly all of which have been challenged under the state constitution.1

Anticipating a similar challenge, the City and County of San Francisco (the City) brought an action in Superior Court to validate the voter initiative based on the reasoning of the California Supreme Court’s decision in California Cannabis Coalition v. City of Upland.2 In Upland, the Supreme Court determined that the requirement that local general taxes be submitted to the electorate at a general election, as opposed to a special election, under Article XIII C, Section 2(b) of the California Constitution, does not apply to taxes voters seek to impose via the initiative process. A coalition of interested taxpayer and business associations challenged the City’s validation action, and both sides filed motions for judgment on the pleadings.

The Trial Court Decision

In City and County of San Francisco v. All Persons Interested in the Matter of Proposition C on the November 6, 2018 San Francisco Ballot,3 the trial court drew heavily from the opinion in Upland, highlighting the “nearly identical language” of the constitutional provision at issue in that case.4 The trial court concluded the shared term “local government” must be interpreted in the same way in both provisions, such that, following Upland, the term “local government” in Article XIII C, Section 2(d) does not encompass the electorate. The trial court also applied the Upland court’s conclusion that Proposition 218, the initiative which added Article XIII C, Section 2(d) to the constitution, did not contain any “‘clear statement or equivalent evidence’ that it was intended to constrain the people’s power of initiative.”5 The trial court held that the general requirement in Article XIII C, Section 2(d) that special taxes be approved by a two-thirds vote does not apply to taxes proposed by voter initiative. In doing so, the trial court fulfilled the doomsday scenario presented by the dissent in Upland, namely that “‘from here on out, special taxes can be enacted by a simple majority of the electorate’ rather than the two-thirds vote otherwise required for approval of a special tax.”6

Additionally, the trial court held the two-thirds vote requirement in Article XIII A, Section (4) does not apply to taxes by voter initiative either, noting the “closely similar language to that of Article XIII C, section 2(d)” and the lack of “any ‘clear statement’ of the voters’ intent to constrain the people’s initiative power” in the enacting initiative (Proposition 13).7

Eversheds Sutherland Observations

  • This decision is certain to be appealed. If the trial court’s decision is affirmed, it will significantly reduce the approval threshold for new or increased local taxes across the state. Indeed, a number of other local special taxes passed by a simple majority over the past year paint a picture of the potentially altered landscape, including a separate gross receipts tax and parcel tax in San Francisco, a transient occupancy tax in Del Norte County, a sales tax increase in Fresno, and a parcel tax increase in Oakland.
  • Additionally, there is a concern that local government officials might use the voter initiative process as an end-around to avoid the two-thirds supermajority approval requirement by placing initiatives on the ballot in an individual capacity. In a companion case also decided on July 5, 2019, the same trial court held that the relevant provisions of the City Charter and the California Elections Code “draw a clear distinction between measures proposed by the voters by initiative petition and measures proposed by a legislative body,” such that even active involvement by a local official in the “development and promotion of the ballot initiative” does not “transform it from a voter initiative into a legislative initiative.”8
  • While the trial court focused on the parallel language of the two constitutional provisions and the Upland court’s analysis of the term “local government,” the language in Upland suggests the California Supreme Court drew a distinction between the “procedural timing requirement” in Article XIII C, Section 2(b) that local general taxes be submitted at a general election and the “procedural two-thirds vote requirement” in Article XIII C, Section 2(d) that local special taxes be approved by a two-thirds vote.9 This distinction may become clearer upon consideration of the 40-plus-year history of the constitutional two-thirds vote requirement for local special taxes that has survived court challenges10 and has been reiterated by the passage of subsequent voter propositions.11 This case likely will provide the California Supreme Court an opportunity to clarify its decision in Upland.


1 Other initiatives were challenged as violating Article XIII A, Section (4), which provides: “Cities, Counties and special districts, by a two-thirds vote of the qualified electors of such district, may impose special taxes on such district, except ad valorem taxes on real property or a transaction tax or sales tax on the sale of real property within such City, County or special district.”
2 (2017) 3 Cal.5th 924.
3 (July 5, 2019) Cal. Super. Ct. (County of San Francisco), Dkt. No. CGC-19-573230.
4Id. at 7. Article XIII C, Section 2(b) provides in pertinent part: “No local government may impose, extend, or increase any general tax unless and until that tax is submitted to the electorate and approved by a majority vote.”
5Matter of Proposition C at 8 (quoting Upland, 3 Cal.5th at 946).
6Matter of Proposition C at 6 (quoting Upland at 956 [conc. and dis. opn. of Kruger, J., joined by Liu, J.]).
7Matter of Proposition C at 9-10.
8Howard Jarvis Taxpayers Assn. et al. v. City and County of San Francisco, et al. (July 5, 2019) Cal. Super. Ct. (County of San Francisco), Dkt. No. CGC-18-568657, 9, 13-14.
9Upland, 3 Cal.5th at 943.
10See, e.g., Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization (1978) 22 Cal.3d 208 (two-thirds voting requirement did not discriminate against voters in favor of new taxes); Santa Clara County Local Transportation Authority v. Guardino (1995) 11 Cal.4th 220 (two-thirds voting requirement not unconstitutionally discriminatory).
11See, e.g., Proposition 62 (1986) (reiterated two-thirds supermajority approval required for passage of any local special tax); Proposition 26 (2010) (amendments to Articles XIII A and C did not change the two-thirds vote requirement for local special taxes).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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