A San Francisco judge is expected to rule this week on the legality of two tax measures passed in the last year that together stand to generate more than $500 million annually for housing, homelessness and early education services.
A commercial rent tax funding early childcare and education services received 51 percent voter approval in the June 2018 election, while a gross receipts tax initiative funding homeless and housing services passed with 61 percent approval in November.
Both appeared on the ballot as Proposition C, and both have been challenged by business interest groups and the Howard Jarvis Taxpayer Association, an anti-tax group.
Homelessness and child care advocates packed the courtroom of San Francisco Superior Court Judge Ethan Schulman to capacity for a hearing on the measures on Tuesday, with many more forced to wait outside.
Schulman grilled the opponents’ attorneys on the validity of their arguments, which included allegations of collusion by city leaders.
The Howard Jarvis Taxpayers argued that both propositions should have required a two-thirds voter approval to pass, per the California constitution and San Francisco Charter. Proposition 13, adopted by California voters in 1978, and Proposition 218 adopted in 1996, limited local governments’ ability to raise property taxes, with the former mandating that local taxes imposed for specific governmental projects, or special taxes, must be approved by two-thirds of the voters.
To that end, the group filed a reverse validation action in August for the early childcare and early education measure, while The City is seeking validation for the homeless tax measure.
Schulman said the group presented a “novel argument” by claiming that the childcare and early education tax measure, although placed on the ballot as a result of a citizen signature drive, should not be treated as a citizen’s initiative, which only requires a majority voter approval to pass, but as a legislative initiative, which is subject to the two-thirds requirement.
“The rationale is the proponent for that initiative was [Board of Supervisors President] Norman Yee, and city resources were devoted to it so the court should regard it as a legislative initiative,” said Schulman.
Howard Jarvis attorney Laura Dougherty, who challenged the propositions alongside Christopher Skinnell, an attorney representing the California Business Properties Association and California Business Roundtable, argued that since Prop. 13’s passage, local governments have “looked for ways to evade” its provisions.
“The evasion is deliberate,” said Dougherty, who said that “two versions” of the childcare and early education measure were introduced and that “as soon as signatures were gathered, the board immediately dropped its identical version.”
Schulman appeared skeptical of the argument.
“Isn’t it true that local and state officials get involved in one capacity or another all the time with ballot initiatives?” said Schulman. “Howard Jarvis is not a stranger to that — they get involved all the time in ballot propositions. Where is the dividing line?’
Dougherty argued that Yee’s involvement was “so much heavier here,” and that the “creation of the tax came from the board.”
“It opens the door that initiatives can be proposed and simply adopted by the board without going before the voters,” she alleged.
The childcare and early education measure would raise some $146 million annually, and the homeless and housing measure around $300 million. The City has begun collecting the taxes but “is not yet spending” the money, according to City Attorney’s Office spokesperson John Cote.
Advocates for both measures said the funding is badly needed to address the City’s homelessness crisis and bolster recruitment and retention efforts for early childcare educators, who are among the lowest paid in the education field at a time when waitlists for childcare slots are growing.
“For both propositions, we feel like we voted, and we really need this money. People are saying all the time, ‘When is it going to come down?’” said Sarah Hicks-Kilday, of the group Early Care Educators of San Francisco. “I felt like the judge really took a deep reading of the cases and was well versed. I was really pleased with that.”
Dougherty indicated that HJTA plans to file an appeal should Schulman uphold the tax.
Schulman has up to 90 days to issue a final written ruling, but after hearing arguments from both sides of the aisle Wednesday indicated that he would likely make a decision by Friday.