SOME THOUGHTS ON PROPOSITIONS 62 AND 218 Jay-Allen Eisen Jay-Allen Eisen Law Corporation Sacramento CA January 8, 2003 1. Does Proposition 62 affect a charter municipality s local taxing powers? Proposition 62, a statewide initiative adopted by the voters in November 1986, enacted statutes limiting the power of local government agencies to impose taxes. Under the proposition, a local government may not impose any special tax unless it is submitted to the voters and approved by two-thirds vote, and may not impose any general tax until that tax is submitted to the electorate and approved by a majority of voters. Gov t. Code 53722, 53723; Howard Jarvis Taxpayers Assn. v. City of La Habra, 25 Cal.4th 809, 813 (2001). Local governments are defined to include charter cities. Gov t Code 53720, subd. (a). The problem is that charter cities derive their authority from the California Constitution, which grants charter cities sovereign power over municipal affairs. Cal. Const., art XI, 5. 1 Proposition 62, however, is a statutory, not a constitutional initiative. Santa Clara County Local Transportation Auth. v. Guardino, 11 Cal.4th 220, 231 (1995). When it was presented to the voters, it was identified as an initiative statute, and it adopted only statutory provisions, 53720-53730 of the Government Code. Id. at 272-1 It shall be competent in any city charter to provide that the city governed thereunder may make and enforce all ordinances and regulations in respect to municipal affairs, subject only to restrictions and limitations provided in their several charters and in respect to other matters they shall be subject to general laws. City charters adopted pur- 1
273; City of Westminster v. County of Orange, 204 Cal.App.3d 623, 635-636 (1988). Can the statutes enacted by Proposition 62 affect the power of charter cities to levy local taxes? The Supreme Court has, to date, declined to decide whether Proposition 62 may be applied to charter cities. Santa Clara County Local Transportation Auth., 11 Cal.4th at 260. The Court has, however, recognized the sweeping self-governing authority granted to charter cities by art. XI, 5, of the California Constitution. Rossi v. Brown, 9 Cal.4th 688, 698 n.4 (1995). A long line of authority holds that a charter city s levy of taxes for city purposes is a municipal affair beyond the reach of state legislation. The levy and collection of taxes by a city having a charter under our Constitution is a municipal affair. The power is broad, being limited only by the charter and the Constitution. City of Glendale v. Trondsen, 48 Cal.2d 93, 98 (1957) (emphasis added). See also Ex Parte Braun, 141 Cal. 204, 207-209 (1903); City of Grass Valley v. Walkinshaw, 34 Cal.2d 595, 599 (1949). Although our Supreme Court has not directly addressed the effect of Proposition 62 on the power of charter cities to levy local taxes, every court of appeal decision addressing the issue has concluded that Proposition 62 is inapplicable to charter cities exercising their sovereign authority to govern municipal affairs. In Fielder v City of Los Angeles, 14 Cal.App.4th 137, 140 (1993), the Second Appellate District upheld a charter city s adoption of a real estate transfer tax without the 2/3 vote required by Proposition 62. The court recognized that charter cities such as defendant have sovereign power suant to this Constitution shall supersede any existing charter, and with respect to munic- 2
over municipal affairs (Cal. Const., art. XI, 5). Id. at 143. The real estate transfer tax was purely local in its effects, as it operated only in the city and affected only taxpayers doing business in the city. Id. at 146. The power to levy the tax, therefore, was beyond the reach of legislative enactment in the case of charter cities. Id., quoting California Fed. Savings & Loan Assn. v. City of Los Angeles, 54 Cal.3d 1, 17 (1991). The Fielder court went on to explain that statutes may limit the power of charter cities only where the matter addressed is one of such statewide concern as to warrant the Legislature s action. Id. at 143. Determining whether a matter is a municipal affair or a subject of statewide concern is an ad hoc inquiry based several factors. Id., at 143-144. The court recognized that the purpose of Proposition 62, easing property taxation, was a matter of statewide concern. Id. But, municipal taxes on the transfer of property, rather than directly on the property itself, cannot have the effect of imposing an increasing burden on property ownership.... Id. at 145. Such a tax has no impact on the remediation of the recognized evils which undergird the state s interest in controlling ad valorem real property taxation. Id. The First Appellate District reached the same conclusion in Fisher v. County of Alameda, 20 Cal.App.4th 120, 130-131 (1993). Fisher also concerned a municipal real estate transfer tax, this one adopted by the City of Berkeley, a charter city. Id. As in Fielder, plaintiffs argued that the tax was illegal under Proposition 62 because it was not adopted by 2/3 of the voters and it was linked to the statewide concern for limiting ad vaipal affairs shall supersede all laws inconsistent therewith. Cal. Const., art. XI, 5. 3
lorem property taxes. The court held the transfer tax was unrelated to that concern and it had no impact outside the limits of the taxing municipality but rather is purely local in its effect. Id., at 130, quoting Fielder, 14 Cal. 4th at 146. In Trader Sports, Inc. v. City of San Leandro, 93 Cal.App.4th 37, 40 (2001), the issue was whether Proposition 62 affected a charter city s ability to adopt a gross receipts tax businesses selling concealable firearms and ammunition. The tax was adopted by majority vote, as the city charter allowed. The court of appeal, again the First Appellate District, held that the 2/3 vote requirement of Proposition 62 cannot override San Leandro's core constitutional authority over the conduct of its local elections. (See Cal. Const., art. XI, 5, subd. (a).) Id. at 41. The court went on to consider whether Proposition 62 could validly enact statutes limiting the power of charter cities to impose local taxes. Even though Government Code 53720, subd. (a), ostensibly made charter cities subject to Proposition 62, our Supreme Court has made it abundantly clear that even if a statute purports to apply to all municipalities throughout the state, including charter cities, it is not necessarily a general law if it does not relate to a matter of statewide concern. Id. at 48. See also Burbank- Glendale-Pasadena Airport Auth. v. City of Burbank, 64 Cal.App.4th 1217, 1226 (1998). 2. What is the effect of Proposition 218? The voters adopted Proposition 218 as an initiative measure in 1996. It added two articles to the California Constitution, Articles XIII C and XIII D, which require local governments to obtain voter approval to adopt or increase taxes, assessments, fees, or charges. Ventura Group Ventures, Inc. v. Ventura Port Dist., 24 Cal.4th 1089, 1105 4
(2001). Unlike Proposition 62, which adopted only statutory changes, Proposition 218 amended the California Constitution and, therefore, it applies to charter cities. Howard Jarvis Taxpayers Ass n v. City of Roseville, 97 Cal.App.4th 637, 642 (2002). Proposition 218 does not, however, make every local tax measure subject to voter approval. a. Proposition 218 applies only to new taxes. Proposition 218, Article XIII C of the California Constitution, provides, No local government may impose, extend, or increase any general or special tax unless and until that tax is submitted to the electorate.... Id., 2, subds. (b) and (d) (emphasis added). 2 Proposition 218 also requires voter approval of [a]ny general tax imposed, extended, or increased, without voter approval, by any local government on or after January 1, 1995.... Cal. Const., art. XIII C, 2, subd. (c). 3 Proposition 218 applies only to new taxes. It has no effect on general taxes imposed prior to 1995. And, it is inapplicable to municipal action after 1995 that does not impose, extend, or increase a tax. Examples would include an ordinance recodifying an existing tax provision, one rewriting a provision without substantive change. In a case now pending in the Court of Appeal, Third Appellate District, the question is whether 2 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.... Cal. Const., art. XIII C, 2, subd. (b). 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.... Cal. Const., art. XIII C, 2, subd. (d). 3 Any general tax imposed, extended, or increased, without voter approval, by any local government on or after January 1, 1995, and prior to the effective date of this article, shall continue to be imposed only if approved by a majority vote of the voters vot- 5
Proposition 218 required a 2/3 vote when voters in the City of Roseville approved a ballot measure that put an existing municipal utility tax into the city charter without raising the tax rate or otherwise extending the tax. The words impose, extend or increase necessarily require some action by the local government either to create a new tax or to augment or enlarge an existing tax. McBrearty v. City of Brawley, 59 Cal.App.4th 1441(1997), disapproved on other grounds in La Habra, 25 Cal.4th at 815-817. There, the court rejected the argument that Proposition 218 should apply to a tax that the city decreased in 1996. The court reasoned that mere continued collection of a tax does not constitute an imposition or extension of that tax. If the continued collection of a tax were subject to Proposition 218, this would require a local government to annually resubmit taxes previously approved by the voters, even in the absence of any change in the amount or duration of those taxes. Such an absurd result was clearly not intended by the voters. Id. b. General v. special taxes. Proposition 218 requires a 2/3 vote only for new special taxes; new general taxes are permitted so long as they are approved by a majority of voters. Cal. Const., art. XIII C, 2, subd. (b). Under Proposition 218, a special tax is any tax imposed for specific purposes, including a tax imposed for specific purposes, which is placed into a general fund. Cal. Const., art. XIII C, 1, subd. (d). A general tax is any tax imposed for general governmental purposes. Cal. Const., art XIII C, 1, subd. (a). ing in an election on the issue of the imposition, which election shall be held within two 6
The Sixth Appellate District construed these provisions in Monterey Peninsula Taxpayers Ass n v. County of Monterey, 8 Cal.App.4th 1520, 1534 (1992). The court held that a single tax with certain amounts earmarked for specific projects was a special tax subject to the 2/3 vote requirement of Proposition 218. Id, 8 Cal.App.4th at 1535. But suppose the voters adopt a measure directing that proceeds of an existing tax, which is not increased or extended, are to be put into the general fund to be appropriated only for particular purposes say, for police, fire, parks and recreation or library services without earmarking specific amounts for any of those purposes, leaving it to the allocation of the revenues among those purposes to the discretion of the city council. This kind of hybrid tax does not fit squarely within the County of Monterey definition of a special tax. Whether it is subject to Proposition 218 should be answered shortly by the Third Appellate District in Howard Jarvis Taxpayers Ass n v. City of Roseville, 3 Civil No. C039942 (argued January 28, 2003). c. What extends a tax for purposes of Proposition 218? As noted previously, Proposition 218 requires voter approval to extend a tax. Cal. Const., art. XIII C, 2, subds. (b) and (d). The only reported decision discussing the meaning the term is White v. State of California, 88 Cal.App.4th 298 (2001). Plaintiff challenged state legislation that allowed Orange County to emerge from bankruptcy. Among other things, the legislation reallocated certain county tax revenues that had previously been allocated to special districts, diverting the revenue to the county general years of the effective date of this article.... Cal. Const., art. XIII C, 2, subd. (c). 7
fund. Plaintiffs, therefore, argued that the diversion required voter approval under Article XIII C, 2, because it extended the taxes to different purposes than those for which they had been used in the past. The Fourth Appellate District, Division Three, rejected the argument. The statutes, the court held, only reallocated revenues from pre-existing taxes and nothing in Article XIII C, section 2 requires voter approval before the Legislature may divert an existing tax. Id., 88 Cal.App.4th at 316. The court went on to hold, Read in context, the prohibition against extending taxes without a vote means a prohibition against extending the imposition of a tax for a continued time period. This did not occur here. Id. (Emphasis added.) So, in the White court s view, extend refers only to a temporal extension. Proposition 218, in other words, requires voter approval only when an existing tax, adopted until a a specified time, is extended beyond the expiration date. Suppose, though, that a city that has a tax on widget dealers decides to apply the same tax to gizmo dealers, also. So far, no reported decision has considered whether that would extend the existing tax for purposes of Proposition 218. In one case, plaintiff did argue that a city extended a business tax by applying it to home business operators, who had not previously been taxed. Howard Jarvis Taxpayers Assn. v. City of Los Angeles, 79 Cal.App.4th 242 (2000). The Second Appellate District did not reach that question, however, ruling that the action was barred by the statute of limitation. Id., 79 Cal.App.4th at 247-249. 8
It can be expected that tax limitation advocates would argue that the White definition of extend should not be applied to allow a municipality to enlarge or expand the scope of a tax without voter approval. Several arguments seem possible. One might that White is inconsistent with Proposition 218 itself. Section 5 of the adopting initiative measure declared that its provisions shall be liberally construed to effectuate its purposes of limiting local government revenue and enhancing taxpayer consent. West s. Ann. Cal. Const., art. XIII C, Historical Note. Giving extend only a temporal meaning, it might be argued, is inconsistent with that declaration of intent. On the other hand, as Division One of the Fourth Appellate District has noted, Liberal construction cannot overcome the plain language of Proposition 218.... Howard Jarvis Taxpayers Assn. v. City of San Diego, (1999) (refusing to extend Cal. Const. art. XIII D to assessments on businesses, not real property). If Article XIII C were intended to include enlargement of a tax, rather than an extension in time, the argument would go, it would have been easy to say so. Another argument is that White considered the word extended in Article XIII C, subdivision (2)(c). That was the gap provision designed to prevent municipalities from adopting new taxes without voter approval between January 1, 1995 and the effective date of Proposition 218. Under subdivision (c), [a]ny general tax imposed, extended, or increased, without voter approval, by any local government during the gap period shall continue to be imposed only if approved by a majority of voters in a subsequent election. In that context, where an extended tax could not continue to be imposed without voter approval, the word extended has a temporal meaning. But subdivisions (b) 9
and (d), which require voter approval for future tax extensions, do not refer to continuation of the extended tax. Therefore, the argument would be, in those subdivisions extend has a broader meaning and, particularly in light of the policy of liberal construction in 5 of the enabling initiative, it should be read to include enlargement or expansion of an existing tax to cover different taxpayers. That argument may prove too much. It is an argument that the same word, extend, has different meanings within the same constitutional article indeed, within the same section of that article.. That violates the ordinary presumption is that when a word is used in a particular sense in one part of a statute, it is intended to have the same meaning if it appears in another part of the same statute. Delaney v. Baker, 20 Cal.4th 23, 41 (1999). Constitutional provisions, including those adopted by initiative, are subject to the same rules of construction as statutes. People v. Bustamante, 57 Cal.App.4th 693, 699 n5 (1997). It might also be argued that the White definition of extend in temporal terms is dictum. The court had already held in the preceding sentence that nothing in Proposition 218 requires voter approval before taxes are diverted. The definition of extend,. it might be contended, was unnecessary to the decision. On the other hand, White s discussion of what extend means might also be considered an alternative ground for the court s holding. It is well settled that where two independent reasons are given for a decision, neither one is to be considered mere dictum, since there is no more reason for calling one ground the real basis of the decision than the other. The ruling on both grounds is the judgment of the court and is of equal validity. 10
Southern Cal. Chapter of Associated Builders and Contractors, Inc., Joint Apprenticeship Comm. v. California Apprenticeship Council, 4 Cal.4th 422, 431 (1992) (internal quotations and citations omitted) Finally, it might be argued, White did not consider whether extend in Proposition 218 embraces municipal action enlarging the scope or application of an existing tax; White concerned only a re-allocation of taxes. It is axiomatic that an opinion is not authority for an issue not considered therein. Guardino, 11 Cal.4th at 243. But White held that the meaning of extended came from the context in which the word is used in Proposition 218. The court s holding, in other words, rests on the language of Article XIII C. That language remains the same, and will continue to do so unless and until it is amended or repealed. 11