Westminster Loses Bid to Block Tax Initiative

In a decision with serious financial implications, the City of Westminster lost its bid Tuesday to have a Superior Court judge declare part of Howard Jarvis’ 1986 tax initiative unconstitutional because it interferes with the city’s ability to manage its budget.

Judge William F. McDonald rejected the city’s legal arguments and found that Jarvis’ Proposition 62, a statewide initiative requiring that new or increased general taxes be approved by the voters, was “constitutional and enforceable.”

As a result of McDonald’s ruling, Westminster could lose $2.5 million in annual revenue it receives from a utility user tax imposed by the council in September, 1986, two months before Proposition 62 was approved. That figure amounts to about 12% of the city’s $20-million annual budget and could mean “serious, serious cutbacks” by 1989, said Robert Huntley, Westminster’s interim city administrator.

Ruling to Be Appealed

The city will appeal Tuesday’s decision, Huntley said, and if it loses that appeal the user tax will be put to a citywide vote.

McDonald’s ruling came in a lawsuit challenging the portion of Proposition 62 that says any new or higher general taxes enacted by local governments after July 31, 1985, can be collected after Nov. 5, 1988, only if endorsed by the voters.

An official representing an anti-tax group known as California Tax Reduction Movement, which entered the case as an intervenor, said the city should have asked voters to approve the utility tax hike rather than fighting the initiative in court.

“This was a clear victory for the voters of California,” said Joel Fox, president of the Los Angeles-based reduction movement group.

“The city has the option to put this issue on the ballot and let the people decide rather than sue and fight this.”

But city officials said it was very unlikely that voters would have approved the user tax.

Proposition 62 requires both a two-thirds vote of a local governing body, such as a city council, and a majority popular vote before new or increased general taxes can be imposed.

Cities that blatantly violate its restrictions by not allowing popular votes on tax increases are to be penalized by the state through withholding of property tax revenues.

“If the city continues to collect their taxes after Nov. 5, 1988, (without a popular vote), then the county shall reduce the city’s property tax allocation dollar by dollar,” McDonald said in his ruling.

Fox’s group is one of the anti-tax organizations supported by Jarvis, who died of a blood disease Aug. 12, 1986, at age 83.

Lawrence J. Straw Jr., an attorney for Fox’s group, left Tuesday’s hearing elated.

“Howard must be smiling right now,” he said.

Huntley said he was optimistic the city could win on appeal.

“The judge ruled against us, but that gives us control over the appeal timing,” Huntley said. “And we can file an appeal immediately.”

He said he hopes that the case will reach the Supreme Court.

“We want a definitive decision,” Huntley said.