High Court Kills S.D. Sales Tax : Ruling: State high court rejects pleas of local officials, forcing an immediate end of the half-cent Prop. A tax.

The California Supreme Court declared Proposition A dead Thursday, prompting an immediate rollback in San Diego County of a half-cent sales tax levied for new jails and courts and leaving prospects uncertain for other public works projects around the state.

Rejecting pleas from local and state officials and from a coalition of transit agencies, the Supreme Court refused to reconsider its December ruling that Proposition A, a 1988 ballot measure, was unconstitutional. The action leaves a legal cloud over billions of dollars’ worth of projects being financed by special sales taxes in counties around California.

San Diego County retailers were promptly ordered to stop collecting the half-cent levy as of midnight Thursday, dropping the county sales tax to 7.75% from 8.25%.

Ernest J. Dronenburg Jr., vice chairman of the state Board of Equalization, said it would be up to another court to decide what to do with the $340 million already collected under Proposition A.

The Supreme Court ruling made it unlikely--though not impossible--that San Diego County officials will ever see any of that $340 million. The ruling also finally put to rest any hope county officials had that the life of the tax--which would have generated $1.6 billion over 10 years--could be prolonged.

“It was a very faint glimmer of hope, anyway,” said Rich Robinson, director of the county agency that plans for new courts and jails, the Office of Special Projects. “I think we knew that. But this seems to bring it to an unfortunate conclusion.”

The Supreme Court struck down the tax on Dec. 19, ruling in a 5-2 decision that it would have taken a two-thirds vote to approve the levy under provisions of Proposition 13, the landmark 1978 property tax-cutting initiative. Voters approved Proposition A in 1988 by a 50.6% margin.

The aim of the ruling was to limit the ability of local governments to sidestep the initiative’s restrictions on property taxes by simply imposing a different kind of tax.

Within weeks after Proposition A was approved, activists linked to the San Diego chapter of the Libertarian Party challenged it, filing a lawsuit that claimed a majority vote was not enough.

Lower court rulings produced a legal split. A Superior Court judge said the measure was illegal but the 4th District Court of Appeal in San Bernardino ruled it was valid.

The Supreme Court ruling that Proposition A was illegal shocked local government agencies throughout the state that in recent years had enacted similar measures--without two-thirds approval--to finance public works projects.

The Supreme Court did not explain in December whether the two-thirds rule applied to similar special taxes already enacted. For instance, voters in Orange and Los Angeles counties last year approved--by bare majorities--separate transit measures financed by a local sales tax. Legal challenges to both are pending.

Seeking to clarify the ruling, a coalition of 18 local transit agencies--including the Los Angeles County Transportation Commission--asked the Supreme Court to rehear the case.

The coalition urged the court to apply the ruling to future cases only, warning that uncertainty could threaten the future of some $24 billion in projects already in progress.

Gov. Pete Wilson and State Treasurer Kathleen Brown also joined the bid for a rehearing, saying the December ruling, if not clarified, would create problems for the state in the bond market.

Meanwhile, seeking to save Proposition A, the San Diego County Regional Justice Facility Financing Agency, the panel created by the ballot initiative to distribute the levy, also asked for a rehearing.

In the brief opinion issued Thursday at the court’s office in San Francisco, Justices Stanley Mosk and Joyce R. Kennard said they would have voted for a second hearing.

But by 5-2, the court let stand the portion of the ruling that declared Proposition A invalid. The majority then said the legality of other projects must be considered on a case-by-case basis.

The court added, however, that “the degree of hardship or other adverse consequences” on local governments could be considered in each case.

San Diego County has one of the most crowded jail systems in the nation and a dilapidated downtown courthouse beset by rats, roaches, asbestos and sewage leaks.

But the Supreme Court did not take those hardships into account in deciding the Proposition A case, apparently for the simple legal reason that they became irrelevant after the court found the ballot measure plainly unconstitutional, said lawyers who worked on the case.

Lawyers for the Libertarians said there is another reason the court did not consider San Diego hardships: the county never presented evidence during the case that it is financially strapped.

“They never sought to prove once, not by one scintilla of evidence, that by re-prioritizing the county budget, those county funds would have been available,” said Lewis Wenzell, a San Diego lawyer for the Libertarians who challenged Proposition A. “Never once has it been claimed that this case is about a lack of money.”

Lynn R. McDougal, the Finance Agency’s attorney, took issue with that claim.

“In my opinion, and I think the county’s opinion, there is not sufficient money in the county budget for jails and courtrooms and that has always been the situation,” McDougal said. “And that was abundantly clear from all the evidence that was presented.”

Debate is likely to escalate through the next phase in the case, a hearing before the 4th District Court of Appeal in San Bernardino over what to do with the $340 million already collected. The Supreme Court told the 4th District court, a mid-level state appellate court, to tackle the issue.

County Supervisor Susan Golding, a member of the Finance Agency, said Thursday the county is, in fact, strapped, and desperately needs the $340 million. But since the tax has been deemed illegal, she said she was unwilling to predict whether the 4th District appellate court would let the county get at any or all of the cash.

“I find it not a good idea to bet on what judges will do,” Golding said. “But it’s very clear that most of the people in this county would like (the money) spent to make streets safe and build courts and jails. I would hope democracy is still alive and the courts will let us do that.”

Wenzell said that was just so much rhetoric. The key, he said, is that the tax is clearly illegal. That, he said, means all $340 million collected under the tax is tainted and off limits.

It’s tough luck that county officials suddenly find themselves without contingency plans, Wenzell said.

“It’s like, ‘Let us have the money because we’re idiots,’ ” Wenzell said. “ ‘Let us keep it because we didn’t have any planning if we lost.’ Get real.”

Dick Rider, the Libertarian activist who filed the suit challenging Proposition A, said Thursday he hoped the 4th District court would not only deny the county the cash but knock another 1.5% or 2% off the San Diego County sales tax--down to about 6%.

Then, he said, the tax should stay at that reduced rate for however long it takes for taxpayers to recoup $340 million.

“There’s no perfectly equitable solution,” said Rider, a candidate for Golding’s 3rd District supervisorial seat.

“Unlike a property tax or an income tax, which you can trace back to the payor, this money has all been dumped into a pot with 95% of the people lacking receipts,” Rider said. “The only solution is to pay it back in the form of a reduced sales tax. And the quicker, the better.”

Dronenburg, vice chairman of the state Board of Equalization, which collects and administers state sales taxes, said the agency lacks authority to reduce the tax rate by itself. In this case, it’s up to the 4th District court to do that if it chooses, he said.

The state board voted informally Thursday to order the half-cent cut when it became clear the Supreme Court decision on Proposition A was final, he said. The immediate rollback is “unprecedented in state history,” he said, and the next few days are likely to be a struggle for merchants and consumers.

“We know there are going to be a few problems,” he said “But we’re going to do our best to work with consumers and retailers.”

At 7.75%, the San Diego County sales tax rate will be the same as rates in Orange, Imperial and Riverside counties, Dronenburg said. In Los Angeles County, it’s 8.25%, he said.