Jarvis’ Prop. 62 Tax Initiative Undercut by State High Court

Supporters of Proposition 62, a 1986 initiative requiring all taxes imposed by local governments to be submitted to the voters, were dealt a setback Thursday when the state Supreme Court announced it will not hear an appeal from a Westminster case.

In September, a state appellate court in Santa Ana ruled that a key provision of Proposition 62 is unconstitutional, holding that the Westminster City Council had the right to impose a utility user’s tax without putting it on the ballot.

The effect of the Supreme Court’s decision is to let that ruling stand, said Steven L. Mayer, a San Francisco attorney who represented Westminster.

Proposition 62 requires local governments to stop collecting taxes imposed after July 31, 1985, unless they are approved by the voters by Nov. 5, 1988--or face the loss of an equivalent amount of property tax revenue.

Westminster was among several governmental entities, including the city of Los Angeles and Sonoma County, that faced a potential loss of property tax revenue under the initiative, according to state and county officials.

Westminster City Manager Murray L. Warden, whose city receives $2.5 million in revenue annually from its utility user’s tax, said he was elated over the decision.

“Instead of a worst-case scenario,” Warden said, “the city will be able to devote more of its resources to its infrastructure needs, such as improving its roads, median strips and buildings, which have been deferred in recent years.”

But a spokesman for the California Tax Reduction Movement in Los Angeles, which carried on the campaign for passage of Proposition 62 after its primary proponent, Howard Jarvis, died of a blood disease in August of 1986, said the decision was disappointing.

“No doubt this was a major setback and a disappointment for us, but the movement is not dead,” said Joel Fox, president of the group.

The decision in the Westminster case may affect a lawsuit against the city of Los Angeles filed by Fox’s group in June, 1987, said Los Angeles Assistant City Atty. Richard A. Dawson.

At stake in the Superior Court lawsuit, Dawson said, is $125 million in city revenue generated by a 5% “temporary” utility user’s tax that is passed each year by the Los Angeles City Council.

“In our view, the Westminster case would control our case because we have a similar argument,” Dawson said. “We never got voter approval, but in the Westminster case, getting voter approval was declared unconstitutional.”

While the full impact of the Supreme Court’s decision was unclear Thursday, in Mayer’s opinion it “will affect cities and counties throughout California who want to raise general taxes without a vote of the people.”

In the ruling that the Supreme Court refused to review, the 4th District Court of Appeal in Santa Ana said that requiring voter approval of tax proposals would be a “gross interference with the fiscal responsibility of local governments.”

Fox said he had conferred with his group’s attorneys, and they agreed that the appellate court decision applied only to taxes that were imposed between July 31, 1985, and November, 1986, and were not approved by the voters by November of this year. Attorneys for Westminster, Los Angeles and Sonoma County disagree.

Said Fox: “Yes, the (appellate) court’s decision did have biting language about the rest of Proposition 62, but we’re not going to give up just yet. Remember, 58% of the people said when they passed this in 1986 that they wanted to vote on taxes affecting them.

“If we get another court setback on Proposition 62, then we will go back and mount a new initiative campaign.”

Last March, a Sonoma County Superior Court judge also ruled that Proposition 62 was unconstitutional; that decision has been appealed to the 1st District Court of Appeal in San Francisco.

It was unclear Thursday what the Supreme Court’s decision not to review the Westminster case might mean for the Sonoma case.

Proposition 62 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.

In an opinion filed last September, Justice Thomas F. Crosby Jr. said the Constitution permits the use of a statewide initiative to repeal statewide tax laws. But, he said, 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 stated.