Hotel-Tax Backers Are Weighing Plan C: the Courts - Voice of San Diego

Politics

Hotel-Tax Backers Are Weighing Plan C: the Courts

Business and labor leaders who backed Measure C will decide in the coming weeks whether to pursue a last-ditch option they prepared themselves for two years ago: the prospect that they’ll have to persuade a court that the measure passed because it won a simple majority.

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

The coalition behind a hotel-tax hike whose members campaigned alongside superheroes may soon turn to the courts to rescue Measure C.

For months, proponents of the hotel-tax increase that would fund a Convention Center expansion, homeless initiatives and road repairs said they were seeking the backing of two-thirds of voters, the threshold required to pass taxes for a specific purpose in California.

Initial results show the measure has 63.6 percent support – far more than a majority but still short of two-thirds. Now, business and labor leaders will likely decide in the coming days and possibly even weeks whether to pursue a last-ditch option they prepared themselves for two years ago: the prospect that they’ll have to persuade a court that the measure passed because it won a simple majority.

That’s based on a legal theory currently being tested in court 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 Measure C campaign and its supporters said Wednesday they were waiting for more ballots to be tallied before making any decisions. They are unlikely to make any legal moves until after both the city and the San Diego County Registrar of Voters sign off on the election results, a process that will take at least 30 days.

“What’s very clear is that a large majority of San Diegans support priorities in Measure C,” Measure C spokeswoman Rachel Laing wrote in a Wednesday statement. “In the coming days, the coalition will discuss our options for how to move forward if the measure ultimately falls short of the two-thirds threshold.”

Mayor Kevin Faulconer, who made the campaign his prime focus in recent weeks, struck a similar tone.

“There is clearly a mandate from voters for the solutions in Measure C, and I am proud of what our bipartisan coalition has accomplished in the face of very steep odds,” Faulconer wrote in a statement. “Hundreds of thousands of votes still need to be counted, many of which are from city voters, so we are going to allow more definitive results to come in before we make decisions on other potential paths forward.”

The Registrar of Voters projected that 350,000 ballots still needed to be tallied as of early Wednesday. Registrar Michael Vu said it is not clear how many of those ballots are from city voters.

Tourism Authority CEO Joe Terzi, who for years has advocated for a Convention Center expansion, said he believed the campaign would at least consider the legal option it established years ago if additional tallies show Measure C won’t cross the two-thirds threshold.

“I don’t think we should give up,” Terzi said.

If the campaign opts to pursue legal action, it will likely need to raise additional cash to finance that effort.

The campaign has already expended significant resources to give itself this option. It poured hundreds of thousands of dollars into a signature-gathering effort to get the citizens’ initiative on the ballot after a blockbuster 2017 court ruling opened up the possibility that citizen-backed ballot measures could pass with a simple majority, a much easier path to victory.

For more than two decades, efforts to raise taxes in the state have been crippled by Proposition 218, a voter-approved addition to the state Constitution that set the two-thirds requirement for new taxes for specific purposes.

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.

“When voters exercise the initiative power, they do so subject to precious few limits on that power,” the Supreme Court wrote.

Legal analysts quickly seized on the ruling, theorizing that citizens’ groups might only need a simple majority to pass tax increases while governments would still need to cross the two-thirds threshold that has for two decades hampered efforts to raise taxes in California. The ruling did not specifically address that issue.

Faulconer and boosters who have long wanted to expand San Diego’s Convention Center responded to the ruling by refashioning their effort after the mayor tried and failed to get a similar measure on the ballot in 2017. Rather than have Faulconer push another measure himself, they would pursue a citizens’ initiative. Boosters sought to build a broad coalition of business and labor groups, and negotiated behind closed doors before debuting what would become Measure C in early 2018. They then poured hundreds of thousands of dollars into the effort.

That work stalled after the hotel-tax campaign failed to gather enough signatures to appear on the November 2018 ballot. The labor and business coalition later successfully pushed for the measure to appear on the March 2020 ballot, despite a city law mandating that initiatives appear before voters in November.

In the meantime, legal challenges emerged – and continued to play out – over proposed tax increases in Oakland, San Francisco and Fresno that passed with a simple majority.

A business group sued the city of Oakland after the City Council passed a resolution declaring that a new parcel tax had passed with 63 percent of the vote, shy of the 67 percent threshold. San Francisco officials faced legal challenges after they began collecting new taxes associated with two citizens’ measures that pulled in a simple majority but failed to garner the two-thirds vote. Fresno leaders were also hit with a lawsuit after they opted against collecting a new sales tax after a citizens’ measure to increase the tax received 52 percent of the vote.

Those cases, all of which have made their way to the state Court of Appeal, are continuing to wind their way through the court process following differing rulings on the issue – leading to legal uncertainty over whether citizens’ measures can indeed pass with a simple majority.

Attorney Laura Murray of the Howard Jarvis Taxpayers Association, a plaintiff in the San Francisco cases, said the tax cases have been given preference on court calendars but that rulings are months away. She and other experts expect the Supreme Court will ultimately need to clarify the issue.

“One or all of these cases will go the California Supreme Court,” Murray said. “We do expect they will take up this issue.”

Now the coalition behind Measure C must decide whether to pursue their own challenge, wait for additional rulings in other cases or simply abandon their effort.

For months, City Attorney Mara Elliott’s office has advised the City Council and voters that existing legal precedent meant that Measure C would need a two-thirds vote to pass. Elliott could ostensibly ask the City Council to weigh in on whether to proceed with the hotel-tax hike and a court challenge.

In a Tuesday statement, Elliott spokeswoman Hilary Nemchik hinted that it will likely be incumbent on the Measure C campaign to pursue a challenge.

“If proponents of Measure C were to seek and obtain a court order holding that this (two-thirds) rule does not apply in the context of a citizens’ initiative and the vote threshold is instead a simple majority with respect to Measure C, the city would abide by the court’s decision,” Nemchik wrote. “At least two similar cases are now in the appellate process and are likely to be resolved by the California Supreme Court.”

San Francisco-based election law attorney Jim Sutton said the Measure C campaign could still benefit if the state’s high court decides that citizens’ measures only require a simple majority in one of the outstanding cases.

But he suggested Measure C supporters have a strong case of their own given how close they appear to be to the two-thirds margin.

“Here the stakes are so high the money and legal fees are a drop in the bucket, and I just think that the chances of the outcome they want would be higher if they got into the legal game now,” Sutton said.

Another election law attorney Brian Hildreth, a past president of the California Political Attorneys Association who is based in Sacramento, emphasized the unpredictability of any legal actions.

Courts have thus far had differing takes on the Upland case and its impact on citizens’ initiatives, meaning that success in court isn’t a sure thing for Measure C if proponents pursue that avenue. There are also years of case law supporting the requirement that tax measures must reach the two-thirds threshold.

“The only authority that the tax proponents have is the Upland case, and Upland is vague in terms of the 50 percent margin at best, so in my own mind it’s an uphill battle for the tax proponents if they come in under two-thirds,” Hildreth said.

Correction: An earlier version of this post misstated where attorney Jim Sutton is based; it is San Francisco.

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