Attorney Warns Bond Language Could Sink Measure C - Voice of San Diego

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Attorney Warns Bond Language Could Sink Measure C

A former deputy city attorney who for years helped the city craft bond financing efforts, is arguing there’s a fatal flaw in Measure C.

Measure C supporters hold a press conference in downtown San Diego. / Photo by Adriana Heldiz

Yet another potential hitch has emerged in the long, dramatic effort to pass Measure C, a hotel-tax increase to fund a Convention Center expansion, homeless initiatives and road repairs.

As of Wednesday evening, the initiative had pulled in 64.86 percent of the vote, shy of the required two-thirds threshold. The campaign’s supporters, however, have always had a backup plan: They plan to argue in court that the measure can legally pass with just a simple majority.

But Brant Will, a former deputy city attorney who helped draft an earlier version of the initiative, is arguing there’s a fatal flaw in that plan.

Will said the Measure C coalition’s potential attempt to persuade the courts that the initiative passed with a simple majority could be scuttled by its decision to include bond financing in the measure because the state Constitution requires a two-thirds vote for many bond approvals.

“They made a mistake,” said Will, who for years helped the city craft bond financing efforts.

Three other attorneys who spoke with VOSD differed on the issue, but one thing is clear: The outcome of any legal fight over the measure is uncertain and fraught with potential pitfalls.

Over the past few years, cities and interest groups across the state have filed lawsuits to test a legal theory that citizens’ measures – as opposed to those introduced by government entities – are not constrained by the California Constitution’s requirement that two-thirds of voters must approve them. The business and labor coalition behind Measure C poured hundreds of thousands of dollars into a signature-gathering effort to give themselves this option.

The Measure C campaign disagrees with Will’s assessment.

Measure C spokeswoman Rachel Laing wrote in a statement that the campaign believes it will have a powerful legal argument if it ultimately pursues one.

“The proponents believe they will have a strong case if they are in the position of having to fight for Measure C in the courts after all the votes are counted. This is all unsettled law at this point,” Laing wrote. “What’s really clear is that there’s a strong mandate for action, with 65 percent of votes counted so far showing that San Diegans want what this measure offers. That means doing nothing is not an acceptable option.”

City Attorney Mara Elliott’s office, which has previously said Measure C requires a two-thirds vote to pass, declined to take a side.

“Our office is aware of a potential argument that the bond component of Measure C could trigger an independent requirement for two-thirds voter approval of Measure C,” Elliott spokeswoman Hilary Nemchik wrote in an email to Voice of San Diego. “Without commenting on the legal merit of that argument, if a lawsuit is filed by Measure C proponents seeking to confirm the vote threshold, the city will abide by the court’s final judgment.”

For more than two decades, efforts to raise taxes in the state have been crippled by Proposition 218, a voter-approved amendment to the state Constitution requires new taxes that fund a specific government program to be approved by two-thirds of voters.

The state Supreme Court seemingly changed the calculus two years ago with its ruling in California Cannabis Coalition v. City of Upland declaring that citizens’ initiatives weren’t bound by the same rules as those placed on the ballot by local governments. Legal analysts across the state saw that ruling as an opening to argue that citizens’ groups might only need a simple majority to pass tax increases, while governments would still need to cross the two-thirds threshold.

In the wake of that ruling, the business and labor coalition behind Measure C drafted a citizens’ initiative that proposed raising hotel taxes and giving the City Council the authority to seek up to $2 billion in bond financing for the Convention Center expansion, homeless services and road repairs. Measure C counts on the new hotel-tax money covering annual debt payments for any bonds that are issued.

Will said the Measure C campaign shouldn’t have included bonding plans if it envisioned a simple majority challenge in court, since pursuing bonds requires its own two-thirds vote.

“Once it was going to be a citizens’ initiative, you should have just taken out the bond authorization,” Will said.

Measure C supporters and other attorneys see the situation differently.

Some note that Measure C includes a passage that specifically references the Upland challenge and the city’s Charter Section 90.1, which limits the city’s use of bonds repaid from specific revenues to those paid by water ratepayers.

The clause in Measure C says that voters’ intent is to approve the bonds and that Charter Section 90.1 “applies to the City Council and other city officials but not to the voters” in the Upland case. It also states that if a court decides bonds allowed by the initiative are governed by the charter section, “voters express their desire that the City Council exercise their authority” to approve the bonds.

San Francisco-based election law attorney Jim Sutton and San Diego attorney Gil Cabrera, a Measure C supporter, both said that passage was significant. They separately read the clause to show that its framers had thought through the implications of both the Upland case and the city charter, and sought to proactively address them. They also agreed that there would likely be two separate legal issues – one over the tax proposal and another over bonds it seeks – if the campaign pursues them.

Sutton emphasized the fact that the measure directs the City Council to pursue bond financing but doesn’t directly do so.

“If the measure doesn’t actually borrow the money, then I don’t think the two-thirds vote would be implicated,” Sutton said.

Cabrera noted the measure also doesn’t outline the specific types of bonds the city could pursue, a feature he read as giving the city flexibility to choose bonds it decides pass legal muster.

Measure C does include a strong incentive for the city to pursue bond financing for a Convention Center expansion – even if it’s not technically required. Per the measure, if the city does not pursue upfront financing to expand the Convention Center in the next decade, the additional tax collections will halt unless the city has borrowed money for homelessness initiatives or street repairs that it must repay.

Former City Attorney Mike Aguirre said the success of any legal challenge would come down to judges’ perspectives on the initiative, its bonding language and the angle they choose to focus on.

He said some judges may strictly focus on the constitutional issue of voter approval for a citizens’ initiative above all else while others could scrutinize Mayor Kevin Faulconer’s role in pushing the initiative and whether that truly makes it a citizens’ initiative. There’s also a chance they could see the mayor’s role as a trigger to look more closely at city charter requirements.

Aguirre also said he believes Measure C would face a “heavy burden” in court but said he didn’t blame the campaign for considering that route.

“I think they have a shot,” Aguirre said. “Nobody can blame them for taking that shot.”

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