SAN FRANCISCO – The 4th District Court in California in a recent court case may have created a loophole to get around Proposition 218. Now the state Supreme Court has agreed to review it. 

Proposition 218 was approved by voters in 1996 to close a special taxes and assessment loophole.

This March, the court ruled in the case of California Cannabis Coalition v. city of Upland that could make local tax increases easier to approve if they are placed on a ballot by the initiative of citizens rather than a government agency.

Proposition 218 limits how most local government revenues can be obtained, Michael Colantuono of the firm Colantuono, Highsmith & Whatley said.

“Taxes require voter approval. Assessments require property owner approval and some fees require approval by one or the other,” Colantuono told the Northern California Record.

In the case of California Cannabis Coalition v. city of Upland he said, the state Supreme Court granted review and de-published the case.

“The loophole will give local entities a way to avoid a taxpayer vote in some instances,” attorney Meriem Hubbard of the Pacific Legal Foundation told the Northern California Record.

In that case, the California Cannabis Coalition drafted and sponsored a medical marijuana initiative in an effort to repeal the city of Upland’s ban on such dispensaries. That voter initiative would also have adopted regulations and established standards for dispensaries and would have required them to pay an annual licensing fee of $75,000 per dispensary.

The fee would have been a general tax as it was about $60,000 more than the city’s cost to license and inspect the dispensaries. The extra money would have gone to the city to be placed in its general fund.

The Coalition was able to get 15 percent of registered voters to sign the petition for a special election on the matter. Under the city election code that was enough for a local government to either adopt it themselves or put the initiative to a public vote.

“The case should concern all Californians who pay taxes, fees, assessments, levies, charges or extractions. Californians have worked hard to obtain the right to vote on new taxes and tax increases, adopting several initiatives which are now included in our state constitution,” Hubbard said.

Under Proposition 218, the signature threshold is very low, thus special taxes could be approved by a simple majority rather than two-thirds that had been required.

“What it said was that Proposition 218’s restrictions on taxes apply only to city councils and board of supervisors, not to voters acting by initiative. If that were so, all taxes would be proposed by initiative,” Colantuono said.

In the Coalition case, if the city were to simply adopt the initiative it would have denied the right of the voters to act on the new taxes and would have not meet the requirement that taxes out into the general fund be approved by the majority of voters in a general election.

“This makes it easier to tax and easier to tie up a government’s revenues in restrictions imposed by simple majority,” Colantuono said.

The loophole affects California residents by making it easier for them to be taxed and to limit how government money is spent.

“For example, consider a union-sponsored measure to set aside money for wages, an environmental measure to set aside money for parks and a PTA measure to set aside money for kids’ programs. There will be nothing left for unpopular, but vital services like infrastructure, insurance, administration, etc.,” Colantuono said.

Colantuono said the court of appeals’ decision is hard to square with a lot of existing law.

“I think the Supreme Court did well to take it on and I expect the court to have little difficulty concluding Proposition 218 applies to initiatives and councils of board ordinance alike,” he said.

Hubbard said the California Supreme Court did accept review of the case a couple of weeks ago, so there will be more briefing and oral argument in the future. She said the briefing usually goes quickly, but the oral argument can take a long time to set - sometimes more than a year.

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