CA Supreme Court Analysis: California Cannabis Coalition v. City of Upland

By: Ken Jensen

Doubling-down on the people’s initiative power, described as “one of the most precious rights of our democratic process,” the state Supreme Court’s recent ruling in California Cannabis Coalition v. City of Upland could reduce the approval threshold for measures placed on the ballot by citizen’s initiative from two-thirds to a simple majority.   CALIFORNIA CANNABIS COALITION et al., Plaintiffs & Appellants, v. CITY OF UPLAND et al., Defendants & Respondents., No. S234148, 2017 WL 3706533 (Cal. Aug. 28, 2017)  California has a long history of limiting local government from raising taxes without appealing to the consent of the governed.  Since 1978, the voters amended the California Constitution several times to require voter approval for local government tax increases.[1] Unless determined to be a “general tax”, tax hikes submitted to voters either by local governments or proposed through voter initiative process require two-thirds.  The consensus is that this may no longer be the case for voter initiatives after Cannabis.

California Cannabis involved an initiative to repeal an ordinance in the City of Upland that banned medical marijuana dispensaries, allowing three new dispensaries.  After satisfying the requirements for an initiative, California Cannabis requested the City to hold a special election as required under Elections Code 9214.  The City, however, insisted on a general election because the City identified a proposed fee in the initiative as a general tax, which, under California Constitution, which requires general election.  The California Supreme Court held that the City was wrong – under article II, section 11 and Elections Code, the initiative should be submitted to voters at a special election.  The Court’s reasoning was broad.  The Court ruled that the California Constitutional requirements for taxation do not constrain voters’ constitutional power to propose and adopt initiatives, and specifically, that Article XIII C does not limit voters’ “power to raise taxes by statutory initiative.”

Broadly read, the Court in Cannabis all but eviscerates constitutional procedures regarding local taxation passed through initiatives.  One can infer from the opinion, as many commentators have, that the two-third voter threshold requirement for special taxes is no longer a requirement under the initiative process.   The Court reasoned with broad support for the initiative process: when voters exercise the initiative power, they do so subject to precious few limits on that power.  Absent a clear explicit purpose otherwise, initiatives are not subject to the procedural requirements imposed on the Legislature and local governments.  This would seemingly wipe away any requirement imposed on limiting taxation initiated through the initiative process.  Indeed, the Court repeatedly cited to its decision in Kennedy Wholesale, Inc. v. State Bd. of Equalization, 53 Cal. 3d 245, 806 P.2d 1360 (1991), holding that the constitutional requirement that the Legislature obtain a two-thirds vote before raising taxes (Cal. Const., art. XIII A, § 3) is a requirement that does not apply to voters’ initiative power.

However, declaring the death of the two-third threshold for all initiative taxation is perhaps premature.  It is important to note that the Supreme Court in California Cannabis did not specifically rule as to what voter threshold initiative taxation must meet.  The distinction between different thresholds as it relates to locally proposed tax increases and those enacted via the initiative process was not squarely addressed in the holding, which narrowly only concerned whether a particular initiative required a special or general election.   Further, the case involved the conclusion by the City that a fee constituted a general tax, which under current law requires a 50% threshold.  The question of whether the opinion will lower the threshold for all taxes proposed under the initiative process (“special”) will certainly be fought another day and any group proposing a tax initiative should be prepared for the inevitable legal challenge on this issue.

Should the courts ultimately conclude that the two-thirds threshold is not required for initiatives leads to some conflicting concerns for those involved in social and justice advocacy.  On the one hand, it may ease a structure that by design prevents some common sense funding for local benefit (transit, parks, etc.)  This could excite social justice advocates who may have an avenue for additional funding for specific needs in the community that heretofore have faced the two-thirds hurdle.

On the other hand, this decision cuts both ways – any special interest group could seek voter approval for pet projects, setting aside tax revenue for any concern with fewer checks on the benefit to the citizens they impact.  PIAC’s amicus brief to the Supreme Court in the California Cannabis case highlighted in detail the local story of Dean Spanos and Proposition C for the development of a downtown stadium.   As stated in PIAC’s brief, “rather than negotiating with the city in an open, public two-sided negotiated process, Spanos chose to draft a ballot measure in a private one sided process. He then paid signature gatherers to acquire the approximately 110,000 signatures needed to qualify for the November ballot.”   While there is nothing illegal or even necessarily nefarious here, the point raised by PIAC in its amicus brief is “that many “citizens’” initiatives neither originate from nor benefit the citizens they impact.”  Reducing the voter-threshold in this situation seemingly benefits those with means to short-circuit the representative system of local government.  So much for declaring the initiative process “one of the most precious rights of our democratic government.”

Another fear is that the Cannabis opinion will only increase the influence of big money and special interests in the politics of local government.  Serious concerns exist of collusion by elected officials with special interests and attempts by local government to circumvent restrictions through the initiative process.   The Supreme Court in California Cannabis, recognized some of these concerns, essentially stating that their resolution in the courts was “for another day.”  The Court stated: “Thus, the city council could effectively skirt article XIII C, section 2’s command that “[n]o local government may impose, extend, or increase any general tax unless and until that tax is submitted to the electorate and approved by a majority vote.” These facts are not presented here, and we decline to take up what would happen should they arise.”  CALIFORNIA CANNABIS COALITION et al., supra, No. S234148, 2017 WL 3706533, at *12 (Cal. Aug. 28, 2017).

Imposing lower a lower threshold for voter initiative may play well to democracy, but it makes little sense in a representative democracy.  In a democracy, there will always be debate about what constitutes a benefit to the citizens worthy of tax expenditure.  But in a representative democracy, local representatives are elected to be a check on the expenditure.  In this author’s opinion, California Cannabis continually erodes the functionality of a representative democracy.

Perhaps many of the limits on taxation are the culprit. Maybe Cannabis is a progressive effort to make headway in a taxation system that, in many cases, blocks good government.  But why should local representatives and voter-initiatives play by different rules?

[1] For an excellent summary of basic voter approval requirements for local taxation see the Legislative Analyst Office March 20, 2014 summary.

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