Return of Jail Funds Urged by 1-Cent Cut in Sales Tax

Arguing that $379.3 million shouldn’t go to waste, San Diego County urged a state appeal court Wednesday to let it use the cash collected under a 1988 local ballot measure for jails and courts that was ultimately deemed unconstitutional.

In a special hearing before the 4th District Court of Appeal, lawyers made it clear the county is desperate to find ways to pay for the cops, courts and jails that the public demands.

But opponents of the tax said the money, collected until the state Supreme Court ruled that the measure was enacted improperly, is tantamount to stolen cash. They urged the court to refund the money to consumers through a temporary 1-cent sales tax rollback.

The court may have signaled its intention last week when it asked which “distribution mechanism” would be best “to disburse the invalidly collected tax.” But the three-judge panel offered no further clues at Wednesday’s hearing. The court must issue a ruling within 90 days.

The $379.3 million has been sitting in a special account, untouched since the State Supreme Court ruled last December that a half-cent sales tax increase had been improperly enacted.

Voters set up the tax in 1988 by approving a local initiative, Proposition A, by 50.6% of the vote. But the Supreme Court ruled that it would have taken a two-thirds margin to approve the levy under provisions of Proposition 13, the landmark 1978 property tax-cutting measure.

The Supreme Court ruling was finalized Feb. 13, and local retailers immediately stopped collecting the levy, dropping the sales tax in the county to 7.75% from 8.25%.

The Supreme Court sent the case back to the 4th District to figure out what to do with the millions.

The county wants the money. But the loose coalition that brought suit challenging the tax--mostly activists linked to the Libertarian Party--want it refunded by an additional 1-cent temporary rollback in the sales tax. In March, 1989, Riverside Superior Court Judge Gordon Burkhart sided with opponents in striking down the tax, ordering a temporary rollback.

That was the right order then and it remains correct, Lewis Wenzell, the San Diego lawyer challenging Proposition A for the Libertarians, told the court Wednesday.

In 1989, even Lynn R. McDougal, a lawyer defending the legality of Proposition A, told Burkhart that a rollback was “the only fair way to return this tax.”

McDougal said Wednesday he made that statement upon realizing that Burkhart’s ruling “faced (county officials) with choosing hanging or poison.”

The better solution, McDougal said, would be for consumers to ask merchants to file individual refund claims with the State Board of Equalization, the agency that administers state sales taxes. Only retailers are “taxpayers” eligible under state law to apply for sales tax refunds.

The procedure is obscure and burdensome--so obscure that no such claims have been filed to date, McDougal said. After all claims are satisfied--McDougal conceded the procedure is likely to discourage applications--the huge pot of leftover money should go to the county, he said.

Wenzell, who stressed the comparative simplicity of a 1-cent rollback, said it would take about 2 1/2 years to make up $379.3 million.

The financially strapped county sought voter approval in Tuesday’s election for another half-cent sales tax hike to fund jails and courts. It too was called Proposition A. It did not pass.