Last Monday, Aug. 28, the California Supreme Court upheld that taxes imposed by voter initiative are not bound by the same requirements as taxes imposed by local governments.
This is both good and bad news to residents of the Kern River Valley, who recently found themselves involved in a passionate debate over Measure C, a tax proposal to fund state-mandated upgrades to facilities at the Kern Valley Healthcare District (KVHD) by 2030.
The topic was contentious; some residents decried the tax for placing the burden directly on property owners, while others were concerned that the hospital would have to close its doors if it did not receive this funding by the state-mandated deadline.
Measure C was defeated in a special election in June. While the measure did receive a simple majority’s approval, it did not receive the supermajority approval that was required.
This requirement is found in the State Constitution Article XIII C, which was added in 1996 by voters in the interest of limiting the ability of local governments to impose taxes.
However, the California Supreme Court specified, this supermajority rule does not apply when taxes are imposed by voter initiative measures.
The initiative process is a form of direct democracy that was adopted in California in 1911. It allows measures to pass with a simple majority vote, bypassing the legislation. Many of California’s propositions are voted on and passed in this way.
The California Supreme Court’s decision on how taxes are imposed originated with a disagreement between the city of Upland, Calif., and the California Cannabis Coalition.
Upland had banned marijuana dispensaries via a city ordinance. In 2014, the Cannabis Coalition proposed that this ordinance be replaced with certain regulations on dispensaries. One of the regulations proposed was a $75,000 annual “licensing and processing fee” for each of these businesses.
The Coalition gathered 15 percent of the electorate’s signatures as required by law to present the initiative to the City. The City ordered an agency report and determined that since $75,000 was in excess of the actual costs of licensing and processing, which were estimated at $15,000, the additional fee should be considered a tax. As such, the City determined that this proposal should be voted upon in a general election with a supermajority required to pass – stipulations that are requirements of local governments under Art. XIII C.
However, the California Supreme Court specified that the classification of the Cannabis Coalition as a “local government” was too broad and restricted the electorate’s right to the initiative process.
The crux of the City of Upland’s argument was that the list of restricted entities under Art. XIII C ends with “or any other local or regional governmental entity.” However, given the Court’s requirement to “jealously guard” and “liberally construe” the electorate’s right to the initiative process, it was determined that placing the Cannabis Coalition under the distinction of “local government” constituted overreach.
Given that initiative measures are passable with a simple majority, this decision distinctly allows for tax measures to pass with a smaller majority – as long as they are proposed by the electorate and not a local government.
This could change the way tax propositions are approached, such as Measure C.
KVHD, as a “special district,” is restricted by Art. XIII C to pass taxes with a supermajority. Special interest groups, as members of the electorate, are not. If campaigning on behalf of KVHD’s improvements, they could potentially find more traction in the Kern River Valley than KVHD could themselves.
Whether or not the decision will have an effect on KVHD remains to be seen.
KVHD could not be reached for comment over the holiday weekend.