Legal Alerts Aug 13, 2020

Challenge to Prop 15: Courts Don’t Mess with Initiatives (or AGs Who Summarize Them)

Swift Decision Rejects Ballot Language Opposition

A trial court recently rejected a challenge to the California Attorney General’s ballot label, title and summary of a proposed initiative amendment to Proposition 13. In so doing, the court upheld several longstanding traditions: to steer clear of the initiative process, to honor the separation of powers that delegates this role to the Attorney General and to expedite these challenges during election season.

Legal challenges at every step of the process are common for a controversial initiative like Proposition 15. The court’s quick and wholesale rejection of those challenges is unusual.

In a 10-page tentative ruling issued only five days after the Howard Jarvis Taxpayers Association filed a petition for writ of mandate, complaining that the Attorney General’s drafts of the ballot label, title and summary for Prop. 15 were false and misleading, a Sacramento Superior Court denied the writ in full. Two days later, after a hearing, the court adopted its tentative order as a final order, entering judgment for the State respondents on Aug. 7, a mere eight days after it opened the case. While the Association may feel that justice was denied, they certainly cannot complain that it was not swift.

What is Prop. 15?
Prop. 15 proposes to partially repeal Prop. 13’s limitations on property taxation by changing the manner in which commercial and industrial properties are taxed. Rather than tying the taxation trigger to the date of purchase and sale and the “purchase price” of the property and adjusting the tax for inflation up to 2 percent each year, Prop. 15 proposes to tax commercial and industrial properties (with certain exceptions and available exemptions) on an annually reassessed market value basis (i.e., what it could be sold for today). The funds generated would be allocated to:

  1. the state general fund, to compensate for reductions in personal income tax and corporation tax revenue due to increased tax deductions; then,
  2. counties, for costs of implementing the measure; then,
  3. cities, counties and special districts (60 percent) and schools and community colleges (40 percent).

The Challenge and the Denial
The Attorney General’s ballot label read:

"INCREASES FUNDING SOURCES FOR PUBLIC SCHOOLS, COMMUNITY COLLEGES, AND LOCAL GOVERNMENT SERVICES BY CHANGING TAX ASSESSMENT OF COMMERCIAL AND INDUSTRIAL PROPERTY. INITIATIVE CONSTITUTIONAL AMENDMENT. Taxes such properties based on current market value, instead of purchase price. Fiscal Impact: Increased property taxes on commercial properties worth more than $3 million providing $6.5 billion to $11.5 billion in new funding to local governments and schools."

The Association alleged that:

  • INCREASES FUNDING SOURCES” was misleading because the initiative does not add a new funding source. Rather, it “modifies the method of calculating the tax owed under an existing funding source – the tax on real property.”
  • FOR … LOCAL GOVERNMENT SERVICES” was factually inaccurate because nothing in the initiative required local agencies to use any newfound property tax revenue on “services.”
  • “Purchase price” was misleading because Prop. 13 says “full cash value,” and sometimes those two bases are not the same.
  • “[C]ommercial properties worth more than $3 million” was false and misleading, because it did not clarify that the $3 million threshold was cumulative.

While the court addressed each of these allegations in turn and in detail, the gist and bottom line of the court’s denial rested on the substantial deference the judiciary grants to the Attorney General with respect to titling and summarizing ballot measures.

Three years ago, the Court of Appeal, under similar facts, recognized that “drafting a [ballot] title and summary can be a difficult task where multiple reasonable interpretations … are possible.” (Becerra v. The Superior Court of Sacramento County) And where reasonable minds may differ as to sufficiency of the AG’s title and summary, the AG’s work must be upheld where all legitimate presumptions should be indulged in favor of the propriety of the AG’s actions. To overcome that presumption, a petition must show, by “clear and convincing proof,” that the ballot label and title summary are “false, misleading, or inconsistent with the requirements of” the Elections Code. In other words, as the court found here, while the Attorney General’s summary could stand to be “more accurate,” that does not meet the test for setting aside a ballot label for being false or inaccurate.

This quick and comprehensive decision is another brick in the wall of judicial deference in favor of the Attorney General when the AG drafts ballot labels, titles and summaries for voter consideration. It is also a first procedural hurdle easily overcome by Prop. 15 proponents as they sprint toward the Nov. 3 finish line.

Disclaimer: BB&K Legal Alerts are not intended as legal advice. Additional facts, facts specific to your situation or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information herein.

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