Salesforce CEO Marc Benioff helped lead support for Proposition C, a measure that imposes a tax on large corporations to fund homelessness initiatives. (Laura Waxmann/S.F. Examiner)

Salesforce CEO Marc Benioff helped lead support for Proposition C, a measure that imposes a tax on large corporations to fund homelessness initiatives. (Laura Waxmann/S.F. Examiner)

SF wins legal battle over Prop. C tax for homeless services

Unsuccessful lawsuit argued ballot measure needed two-thirds majority to pass

Homeless advocates and city officials on Wednesday celebrated a legal victory that upholds the November 2018 passage of Proposition C, ensuring hundreds of millions of dollars from a tax on big businesses will fund homeless services annually.

The Coalition on Homelessness placed the proposition on the ballot through signatures to increase funding for those living in shelters and on the streets and ran a successful “Our City, Our Home” campaign. The measure is expected to generate about $300 million annually.

“Massive victory!” wrote Jennifer Friedenbach, head of the coalition, on Twitter as the news came down that the California Supreme Court had declined to review the case.

The campaign for the measure pitted progressive politicians, who backed the tax, against more moderate politicians who opposed it, and even ignited a feud among tech titans, with Salesforce CEO Marc Benioff coming out for the measure.

The measure, which increased the tax on businesses with more than $50 million in gross receipts annually, passed with 61 percent of the vote, but got caught up in a legal challenge along with two other tax measures that passed on the June 2018 ballot. The City was sued by Howard Jarvis Taxpayers Association, California Business Properties Association and the California Business Roundtable to overturn the tax measures on the grounds it needed a two-thirds majority to pass, rather than a simple majority vote.

City Attorney Dennis Herrera, who successfully defended the measure as it wended its way through the legal system, celebrated its victory Wednesday when the California Supreme Court refused to take up the case.

“We’re pleased that this legal victory will free up millions of dollars to provide services, housing and mental health treatment for those in our city who most desperately need it,” Herrera said in a statement. “That is what the voters wanted when they passed Proposition C in November 2018. That is what this victory secures.”

In June, the First District Court of Appeals affirmed a ruling in The City’s favor, setting expectations for Wednesday’s victory. “Following two California Supreme Court cases interpreting other language from Proposition 13 and Proposition 218, we construe the supermajority vote requirements that these propositions added to the state constitution as coexisting with, not displacing, the people’s power to enact initiatives by majority vote,” the June court ruling said.

The news was celebrated by members of the Board of Supervisors.

“Aaaafffreakingamaaaazzzing!!!! Justice prevails!!!” Supervisor Hillary Ronen tweeted.

The City was already collecting the tax revenue from the businesses, but holding it on reserve in case it lost the case and would need to return it. The decision allows The City to now spend the money.

Wednesday’s court decision does not resolve the legal battle ongoing in the courts over two other June 2018 tax measures that were challenged on similar grounds, but it seems to bode well for supporters of those measures.

One of the measures, also called Proposition C, is a gross receipts tax on commercial real estate that would raise about $130 million annually to fund childcare and early educator salary increases.

Board President Norman Yee, a proponent of the June 2018 Prop. C, let out a “hooray!” at the news.

“Something bright for a dark day,” Yee said. “Even though I’m disappointed it didn’t move through the court system at the same time, I still feel optimistic that June Prop. C is going to follow suit with the November Prop. C. I don’t see any difference in terms of the arguments.”

Opponents also argued that because Yee and then Supervisor Jane Kim led the campaign for the June Prop. C, it wasn’t a true citizen’s initiative, which The City disagrees with.

Examiner staff writer Ida Mojadad contributed to this report.

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