Tax Ruling Welcomed by Communities

Officials in several South Bay cities applauded a state appellate court decision last week that overturned Proposition 62’s restrictions on local tax increases--even though questions remain about the officials’ power to raise taxes without voter approval.

Under the proposition--the last of several tax-restricting initiatives sponsored by the late Howard Jarvis--cities were required to stop collecting new taxes imposed after July 31, 1985, unless they were approved by voters no later than the election this November.

Ruling in a case involving a Westminster utility users’ tax, the 4th District Court of Appeal in Santa Ana ruled that the proposition was unconstitutional because it applied retroactively to tax increases approved before the proposition was approved by voters statewide in November, 1986.

It was on the retroactivity issue that Westminster challenged the proposition, but the judges ruled that the entire measure was unconstitutional. Requiring city governments to obtain voter approval for tax proposals, the ruling said, is a “gross interference with the fiscal responsibility of local governments.”

In light of the court decision, Rancho Palos Verdes officials said Friday that the city can continue to collect a utility users’ tax despite a public vote against it last June. The tax had been established by the City Council in May, 1986.

City Manager Dennis McDuffie said he and City Atty. Steve Dorsey concluded after “preliminary discussions” that the City Council does not have to abide by the June vote, in which the extension of the 5% utility tax was rejected by 52% of the voters. The tax, which raises about $1.8 million a year, was to expire Nov. 15.

Tax Issue May Be Moot

The tax issue will be on the council agenda Tuesday, but it could be a moot point. Three council members--Mayor Robert Ryan and councilmen Mel Hughes and Douglas Hinchliffe--said Friday they either oppose or are not inclined to go against the popular vote, even if they may do so legally.

“The message is there; the people do not want this kind of tax,” said Richard M. Grotz, chairman of the citizens committee that opposed the tax in June. He said if the council extends the tax, there could be a voter backlash in future elections aimed at anything on the ballot, “including the election of officials.”

In Hermosa Beach, City Atty. James P. Lough said he will not recommend pulling three tax provisions off the November ballot, even though the Proposition 62 ruling allows the city to continue the taxes without voter approval.

Should they be defeated, he said, “the council would have the right to reimpose them” as long as the appellate court ruling remains in effect.

Lough said the tax proposals, packaged as Proposition W on the Nov. 8 ballot, would extend business license fees and hotel and recreation taxes that were enacted in 1985.

The city imposes an 8% tax on hotel and motel guests and a $3,500 tax on each new residential unit to pay for park and recreation facilities. Business license fees vary with the type of business.

He said he believes the ultimate fate of Proposition 62 will “depend on what the Supreme Court has to say.”

McDuffie also said the Supreme Court could have the last say: “I have no idea if it will go and be overturned or sustained or what. There are many cases on this initiative.”

Joel Fox, president of the California Tax Reduction Movement, the organization started by tax crusader Jarvis, said the court clearly invalidated the retroactive provision. But Fox said the court went too far in declaring the entire proposition unconstitutional.

“We, of course, disagree with that and we will appeal it to the state Supreme Court,” he said.

In the meantime, Fox said he believes that cities that imposed taxes during the so-called “window” period from July, 1985 to November, 1986 are “going to continue collecting the tax without any punishment.”

The court decision will have no effect on an advisory vote this November in Inglewood on a plan to finance 20 new police officer positions by establishing a new citywide assessment district. The plan calls for a new parcel tax of $45 a year for a single family home, with a sliding scale for apartments and commercial properties.

Assistant City Manager Norman Cravens said Friday that the vote is only advisory and is not required because “the assessment district could have been imposed without any vote.”