California's Fourth Appellate District on Friday struck down a special hotel tax that San Diego hotel operators had willingly imposed on themselves, as members of an unusually defined special district, to raise money for the city's convention center expansion. The court ruled that the tax required a two-thirds citywide popular vote for approval.
Under Proposition 13 as broadened in 1996 by Proposition 218, special taxes must be approved by a two-thirds vote of "the qualified electors" of the affected district, also expressed as "the electorate" of the district.
A detailed opinion by Justice Cynthia Aaron, joined by Justices Judith McConnell and Terry O'Rourke, found the City of San Diego did not get past that requirement when it enacted an ordinance in November 2011 to define a special "electorate" by reference to a special Convention Center Facilities District (CCFD). Under the ordinance, the special district consisted of hotel properties throughout the city; its voters were described as being the owners and lessees of properties with hotels on them.
The San Diego Union-Tribune, reporting on the decision, said hotel operators had "eagerly embraced" the tax in hopes that the convention center expansion would increase overall hotel stays, amid concern that the annual San Diego Comic-Con was outgrowing its venue. See http://bit.ly/1uhsEdG.
Aaron's opinion found that both Proposition 13 and the city charter required special taxes to be approved by two-thirds of the "qualified electors," who, she wrote, are the same as the registered voters for the geographic area affected -- i.e., in this case, the whole city. She separately ruled that the subset of landowners and lessees did not "comprise a proper 'electorate'," citing in part to Greene v. Marin County Flood Control and Water Conservation Dist. (2010) 49 Cal.4th 277, 297 for the rule that property qualifications are not permitted in elections on special taxes.
Aaron cited Neilson v. City of California City (2005), 133 Cal.App.4th 1296, for the rule that "qualified electors" are registered voters under Proposition 13. She additionally followed Rider v. County of San Diego (1991) 1 Cal.4th 1, which blocked a prior San Diego attempt to raise money for public works -- at that time, for "justice facilities" -- by inviting city voters to approve a supplemental sales tax by a majority vote. The Rider court found a two-thirds vote was needed instead.
The new San Diego CCFD ordinance had borrowed language and approaches from the Mello-Roos Act, which does allow a vote of landowners to approve taxes for community facilities in districts that do not affect residential property; San Diego's ordinance described hotel use as other than residential. But the opinion said the Legislature's relevant interpretation of Proposition 13 dates from 1979 and trumps the 1986 amendment to the Mello-Roos Act that the city relied on. Aaron wrote that the Legislature, in enacting Mello-Roos, showed no sign of having considered who were "qualified electors" in the context of Proposition 13. She wrote further that, in any case, Proposition 13's careful anti-loophole provisions, at article XIII A, § 4, requires a two-thirds vote of the actual registered voters, and "[a] statute cannot trump the Constitution".
Further, the court found it unfair that hotel landowners or lessees would be viewed as the only parties burdened by the tax and hence entitled to control its use, because guests of hotels would be affected too.
San Diego activist attorney Cory Briggs represented one of the challengers, San Diegans for Open Government, which at https://www.facebook.com/sandiegansforopengovernment/info states support for "responsible and equitable environmental development" and government transparency. Briggs called the ruling "a huge victory for the taxpayers and the voters" in comments reported by the KPBS news station on August 1. The station quoted Mayor Kevin Faulconer as highlighting economic advantages of the Convention Center expansion that the tax was meant to fund, while former mayor Jerry Sanders, now with the Chamber of Commerce, called it "a great loss for our city."
KPBS quoted a spokesman for the City Attorney's office, Michael Giorgino, as saying, "As we stated in the 2012 briefing...the most reliable way to impose this tax is to place it on the general ballot... Two and a half years later, it still is." With this, KPBS linked to a document dated February 1, 2012 on the San Diego City Attorney's site at http://www.sandiego.gov/cityattorney/pdf/2012/120201boundaries.pdf saying that creation of the CCFD "borrows, in part, from a similar structure used by the City of San Jose in 2010 to finance its convention center project," and that "Lawyers within our office have differing opinions" on the plan's legality. It looked toward the city-filed validation action that was the underlying case in last week's decision.
As of the KPBS report, it was not clear if the city would appeal to the state Supreme Court. See http://bit.ly/1qOniUV.
The case is City of San Diego v. Shapiro, No. D063997, at http://www.courts.ca.gov/opinions/documents/D063997.PDF.
(In a separate matter, the City Attorney's office on July 10, announced it had defeated an effort by Briggs to enjoin the use of "over $1 million raised by 18 San Diego Business Improvement Districts" for events and street amenities. See http://www.sandiego.gov/cityattorney/pdf/news/2014/nr140710.pdf.)
[Bill Fulton did not participate in the drafting of this article.]