The California Supreme Court has declined to hear a challenge to Proposition C, a San Francisco ballot measure that will raise an estimated $300 million annually in business taxes to fund homeless services.
Proposition C created a tax on San Francisco businesses earning more than $50 million in gross receipts and dedicated that money to preventing homelessness, through building new affordable housing as well as providing increased mental health and substance use services. After the proposition passed in 2018, it was quickly challenged by anti-tax and pro-business organizations, arguing that the ballot measure, which received 61% of the votes, had not received a 2/3 majority, as required by the California Constitution.
The Supreme Court’s decision Wednesday not to hear an appeal leaves in place the June decision of the First District Court of Appeals, affirming a ruling in favor of the city’s authority to implement the tax.
The appellate court was interpreting two amendments to the California Constitution, Propositions 13 and 218, which “both require a 2/3 majority of the electorate to approve certain taxes enacted by a local government.” The court held that these propositions only apply to taxes originating in the legislature, not voter-initiated ballot measures. It wrote that the propositions in question had been intended to “coexis[t] with, not displac[e], the people’s power to enact initiatives by majority vote.”
The Supreme Court’s decision to allow the First District’s holding to stand means that San Francisco can now begin to spend the $470 million dollars collected under Proposition C but held in escrow during the multi-year legal challenge. The decision is a sign to other cities in California that they will be free to pass local taxes without meeting the 2/3 threshold, as long as the laws originate in a ballot measure from voters.