Court Upsets 1986 Jarvis Tax Initiative

A state appellate court in Santa Ana ruled unconstitutional Thursday Proposition 62, an initiative sponsored by Howard Jarvis in 1986 that requires voters to approve all taxes imposed by local governments.

Ruling that the Westminster City Council has the authority to impose a utility users tax without a citywide vote, the 4th District Court of Appeal unanimously reversed a decision by a Santa Ana Superior Court judge who in January declared Proposition 62 “constitutional and enforceable.”

The appeal court ruled, in an opinion written by Justice Thomas F. Crosby Jr., that requiring city governments to obtain voter approval for tax proposals would be a “gross interference with the fiscal responsibility of local governments.”

Stop Collecting Taxes

Proposition 62 requires local agencies to stop collecting a new tax imposed after July 31, 1985, unless it is approved by the voters by Nov. 5, 1988--or face the loss of an equivalent amount of property tax revenue.

Westminster is among 45 cities in California, including Los Angeles, that faced a potential loss of property tax revenue under Proposition 62, according to state and county officials.

What effect the ruling will have statewide is uncertain. In March, a Sonoma County Superior Court judge ruled that Proposition 62 was unconstitutional. That decision has been appealed to the 1st District Court of Appeal in San Francisco.

“It’s possible that one district court could rule one way and another district court rule another,” said Sonoma County Counsel Jim Botz.

Botz said if there were such a “split decision,” it would increase the chances of a hearing before the Supreme Court to resolve the issue.

Westminster City Manager Murray Warden said the ruling could mean an extra $2.5 million a year in city revenue. Like some other smaller Southern California cities, Westminster has been financially strapped this year and has had to dip into its reserve fund to prevent any reduction in city services.

“We need the money,” Warden said.

A spokesman for the California Tax Reduction Movement, which campaigned for Proposition 62 after Jarvis died of a blood disease on Aug. 12, 1986, said: “It’s a sad day for the California taxpayer.”

Joel Fox, president of the Los Angeles-based anti-tax group, said Thursday’s decision will be appealed to the California Supreme Court. The Tax Reduction Movement participated in the Westminster case as a intervenor.

“We will consult with other groups in California, like the California Taxpayers’ Assn., and if the Supreme Court chooses not to consider our appeal we will certainly not close the door on mounting another initiative campaign,” he said.

Fox said that two cities in Los Angeles County, Lynwood and South Gate, have tax proposals on their November ballots in accordance with Proposition 62.

But South Gate City Counsel Bruce Boogaard, who recommended placement of a police telephone users tax on the city’s ballot, said “we’re going to have to reevaluate this” when told of the ruling on Thursday.

Last Fight for Jarvis

In his written opinion, Justice Crosby said Proposition 62 was defective because the “requirement of local voter ratification violates the California Constitution.”

Though the Constitution permits the use of a statewide initiative to repeal statewide tax laws, Crosby wrote, it is a “well established proposition that municipal referendum and initiative powers may not be used to invalidate municipal tax measures.”

“The major thrust of Proposition 62, at least as it was presented to the voters, was the fatally defective attempt to shift control of local taxation to the local electorate,” the opinion said.

Lawyers for the City of Westminster declined to comment on the decision.

The 1986 initiative was the last hurrah for tax crusader Jarvis. In the months before he died, Jarvis drafted Proposition 62 and campaigned for its passage. At the time, he said it was needed to plug a gaping hole the California Supreme Court drilled into Proposition 13--the statewide initiative passed in 1978 that sharply curtailed property taxes.

The measure requires a two-thirds vote of a local governing body, such as a City Council, and approval by a majority of the voters in a general election before new or increased local taxes can be imposed.

Westminster challenged the portion of Proposition 62 that says taxes enacted after July 31, 1985, may be collected only if endorsed by the voters.

When Santa Ana Superior Court Judge William McDonald ruled that the city’s 5% utilities tax, imposed by the City Council in September, 1986, could not be collected after the Nov. 5 date unless it had been approved by the voters, the city appealed.

Concurring in the 3-0 ruling Thursday were Justices Harmon Scoville and Edward J. Wallin.