The initiative at issue proposed to allow up to three dispensaries in the city and to require that each dispensary pay the city an “annual Licensing and Inspection fee” of $75,000. After accepting a certificate of sufficiency for the petition, the Upland City Council had three options to proceed under California Elections Code section 9214 — they could (1) adopt the ordinance without alteration, (2) order a special election or (3) order an agency report, and then decide whether to adopt the ordinance or order a special election. The Upland City Council opted to order an agency report.
The report concluded that the $75,000 “fee” was significantly in excess of the city’s estimated costs of permitting and inspection, and therefore constituted a general tax that, under article XIIIC of the California Constitution (added by Proposition 218), had to be submitted to the voters at the next general election. The city council thus directed that the initiative be placed on the November 2016 ballot.
The proponents of the initiative — the California Cannabis Coalition — then filed a petition seeking to obtain a court order directing the city to place the initiative on a special election ballot. The superior court denied the petition and the proponents appealed. The Court of Appeal reversed the ruling of the superior court, holding that article XIII C did not apply to preclude the initiative from being placed on a special election ballot under Elections Code section 9214. The Court reasoned that article XIII C refers to taxes “imposed by local government” and taxes imposed by initiative are not “imposed by local government.”
The California Supreme Court voted 5-2 to affirm the Court of Appeal. Writing for a majority of the Court, Justice Mariano-Florentino Cuéllar emphasized that courts have long declared it their duty to “jealously guard” the initiative power by narrowly interpreting provisions that would limit its exercise by the voters. With this principle in mind, the Court interpreted the term “local government” in article XIII C to mean “a locality’s governing body, public officials, and bureaucracy” and found nothing in the Prop. 218 ballot materials or the text of article XIII C, section 2, to suggest an intent to include the electorate in the definition of “local government.” The Court then concluded that the general election requirement of article XIII C, section 2, subsection (b) did not apply to the initiative since it was not imposed by “local government.” Therefore, the Court held the city should have ordered a special election for the initiative under Elections Code section 9214.
Although the Court found no evidence the term “local government” was intended to include the electorate, the Court appeared to find some evidence that the two-thirds vote requirement in article XIII C, section 2, subdivision (d) would still apply to special taxes proposed by initiative. However, the majority’s basis for distinguishing between article XIII C, section 2, subdivision (b) (general taxes) and article XIII C, section 2, subdivision (d) (special taxes) is less than clear, and the Court’s discussion in this area would benefit from further explanation.
In light of the lack of clarity in the Court’s discussion, cities faced with a citizens’ initiative imposing a tax should consult with their city attorney.
The League would like to thank Michael Colantuono of Colantuono, Highsmith & Whatley, Robin Johansen of Remcho, Johnasen & Purcell, and Dan Hentschke for drafting the League’s amicus brief in this case.