High Court Hits at Heart of Initiative on Local Taxes

The state Supreme Court has left intact an appellate ruling that struck down a key provision of Proposition 62 and raised grave doubt about the constitutionality of the remainder of the 1986 initiative requiring voter approval of general taxes imposed by local governments.

The measure, sponsored by the late Howard Jarvis, was aimed at what the noted tax crusader had considered to be loopholes in Proposition 13, his landmark property tax-reduction initiative enacted in 1978.

In a brief order issued Thursday, the justices refused to hear an appeal from the Jarvis political organization of a state Court of Appeal ruling invalidating a requirement for voter approval of taxes passed between August, 1985, and November, 1986.

Ruling Binds Courts

The effect of the action was to make the appellate court’s ruling binding, at least for now, on trial courts throughout the state.

However, attorneys noted that other cases involving the initiative are pending in lower courts that may provide the justices with an opportunity for a more definitive ruling on the constitutionality of the measure and whether it must apply to taxes after November, 1986.

Under Proposition 62, a two-thirds vote of a local governing body and then majority approval by the local electorate were required before new or increased general taxes could be imposed. Sales and property taxes were not affected.

According to a legislative analyst’s interpretation, the initiative applied only to general-law cities in California--and not the 82 more-populous cities, including Los Angeles, that have their own charters.

Held Unconstitutional

A state Court of Appeal in Santa Ana, ruling in a case involving the city of Westminster, last September held unconstitutional a provision of the initiative barring collection of a general tax enacted after August, 1985, and before November, 1986, unless the electorate approved it by November, 1988.

The so-called “window” provision was intended to prevent taxes from being imposed without voter approval between the time the measure qualified for the ballot and its enactment.

It was this provision that was challenged by Westminster, which had enacted a utility-user tax without a citywide vote in September, 1986. About 45 cities enacted general-tax measures during the window period, but only three, including Westminster, did not seek voter approval.

The appeal court, citing the constitutional authority of local governments to impose taxes, said the requirement that local tax measures be submitted to the electorate by either referendum or initiative “would be a gross interference with the fiscal responsibility of local governments.” But the ruling, while clearly striking down the measure’s window provision, left lawyers unclear about the validity of the rest of the initiative and its effect on tax increases after November, 1986.

On Thursday, lawyers for the California Tax Reduction Movement, the Jarvis group backing Proposition 62, expressed disappointment with the court’s refusal to hear their challenge to the appellate ruling. But they contended that because the appeal court did not specifically strike down the requirement for voter approval of post-November, 1986, taxes, that provision was still in effect.

“The appeal court was careful to limit its ruling to the window period,” said Paul T. Gough of Santa Monica, one of the attorneys for the group. “But we’re obviously disappointed. We had hoped the Supreme Court would have taken this opportunity to clear up any question about the validity of the measure.” However, Steven L. Mayer of San Francisco, an attorney for Westminster, said the appeal court had clearly signaled its disapproval of the entire initiative, and that the high court’s refusal to hear a challenge to the ruling all but sealed the fate of the initiative.

“While the appeal court’s ruling technically applied only to the window provision, its logic applies to the entire initiative,” Mayer said. “As to the guts of Proposition 62--its requirement that general taxes be submitted for local approval--that’s dead as a doornail.”

Sheryl Patterson, an attorney for the League of California Cities, said the action Thursday came as “wonderful news” to the state’s financially pressed municipalities.

But she said that despite the appellate court ruling, a conclusive resolution of the initiative’s legality may well have to await the outcome in a similar case involving a tax measure in Sonoma County that is pending before a state Court of Appeal in San Francisco. Meanwhile, she said, it was advisable that general-law cities continue to abide by the initiative.

Another case involving the initiative is pending in Los Angeles Superior Court, where backers of the measure are contending that, contrary to the view of the legislative analyst, the initiative does apply to charter cities such as Los Angeles.

Michael L. Klekner, a deputy city attorney, said he believes that Los Angeles will ultimately prevail in its case in the wake of the high court’s action. About $200 million in tax revenue is at stake in the case.

“We have always felt, since its enactment, that Proposition 62 ran afoul of the state Constitution,” Klekner said.

The city plans to seek dismissal of the suit, but probably will wait until after the Court of Appeal has acted in the Sonoma County case, he said.