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Court of Appeal, First District, Division 1, California.

CITY AND COUNTY OF SAN FRANCISCO, a municipal Corporation, Petitioner, v. Charles C. FARRELL, Controller of the City and County of San Francisco, Respondent.

Civ. 50061.

Decided: February 27, 1981

George Agnost, City Atty., Burk E. Delventhal, Paula Jesson, Mark Kertz, Deputy City Attys., Helry L. Holst, Legal Asst., San Francisco, for petitioner. Julian Rhine, San Francisco, Legal Counsel to Controller. Ronald A. Zumbrun, John H. Findley, James L. Meyer, Sacramento, Pacific Legal Foundation. Daniel G. Nauman, Sacramento, Stanley E. Remelmeyer, City Atty., Roger P. Freeman, Deputy City Atty., Torrance, amicus curiae.

Petitioner, City and County of San Francisco, seeks a writ of mandamus to compel respondent, John C. Farrell, as Controller of the City and County of San Francisco, to certify the availability of certain funds to be used for the renovation of elevators at the Laguna Honda Hospital.

On June 6, 1978, California voters approved Proposition 13, now embodied in the California Constitution as Article XIIIA. This amendment, in essence, limits the amount of ad valorem tax which may be imposed on real property and, in section 4, restricts the ability of state and local governments to impose other taxes as follows: “Cities, counties and special districts, by a two-thirds vote of the qualified electors of such district, may impose special taxes on such district, except ad valorem taxes on real property or a transaction tax or sales tax on the sale of real property within such City, County or special district.”

In the middle of the 1979-1980 fiscal year, it became apparent to San Francisco City officials that predicted revenues from all existing sources would be insufficient to finance the operation of City services during the 1980-1981 fiscal year. At that time, the Deputy Mayor for Budget and Management, the Controller, and the Budget Analyst of the Board of Supervisors jointly predicted a budget deficit for 1980-1981 of approximately $126 million.

To avert the deficit, a plan was developed which included the following components: (1) A reduction in the City's employment roll; (2) Adoption of certain revenue-raising measures, such as the doubling of parking meter rates, parking fines and Municipal Railway fares, and the submission to the voters of measures which would provide for an increase in certain taxes such as the parking tax and hotel room occupancy tax; and (3) A proposal recommending the amendment of the payroll expense tax and business tax to require businesses in San Francisco to pay either a payroll expense tax of 1.5 percent (originally 1.1 percent) or an equivalent percentage of gross receipts, whichever was greater businesses with a tax liability not exceeding $500 being exempted.

On March 28, 1980, the San Francisco Board of Supervisors passed, and the Mayor signed into law, Ordinances No. 118-80 and 119-80, adopting the rate increases proposed in what is known as the Mayor's Revenue “Package.”

A 4 percent rate increase in the “Payroll or Gross Receipts” tax was initially enacted for a three-month period April 1, June 30, 1980, and its passage was made contingent upon adoption of a local initiative, Proposition Q, by a simple majority of the voters of San Francisco. On June 3, 1980, Proposition Q received a favorable vote of approximately 55 percent, thereby extending the rate increase indefinitely. Under current business conditions, this rate increase generates approximately $17 million annually for general revenue purposes, that is, such uses as are determined by the Mayor and the Board of Supervisors.

On May 29, 1980, Laguna Honda Hospital submitted to the Mayor a request for supplemental appropriation of funds to be used for the renovation of the hospital's elevators. The Mayor approved the request, and, pursuant to San Francisco Charter section 6.306,1 requested respondent to certify that $1.1 million of the revenue obtained from Ordinances No. 118-80 and 119-80 was available for such appropriation.

On June 4, 1980, respondent refused in writing to certify the funds accrued pursuant to these ordinances on grounds that the subject tax was illegal because the underlying increase in the business tax rate was a “special tax,” and one which had not been approved by two-thirds of the qualified electors of the City, as required by section 4, Article XIIIA of the California Constitution.

Petitioner directs our attention to the fact that considerably more than the $1.1 million directly at issue is at stake since respondent will certainly continue to refuse to certify as available for appropriation any of the revenue obtained from this increased tax rate, whether the increases are imposed pursuant to Ordinances No. 118-80 and 119-80 or Proposition Q, and that therefore the Board of Supervisors will be precluded from appropriating such funds pursuant to San Francisco Charter section 6.306.

Petitioner first sought mandamus from the California Supreme Court. On July 10, 1980, that court transferred the petition to this court with directions that we issue an alternative writ of mandamus.


A threshold question is the legal significance of the Supreme Court's action in granting a hearing and transferring the matter to this court.

A grant of hearing by our high court does not conclusively establish that a petitioner is entitled to the relief sought. (Charlton v. Superior Court (1979) 93 Cal.App.3d 858, 861, 156 Cal.Rptr. 107.) While one appellate decision has held that the effect of such a grant and transfer is a determination that the petition is procedurally appropriate (Atlantic Richfield Co. v. Superior Court (1975) 51 Cal.App.3d 168, 170, 124 Cal.Rptr. 63), that holding has not been followed, as may be seen from later appellate decisions. (Krueger v. Superior Court (1979) 89 Cal.App.3d 934, 939, 152 Cal.Rptr. 870; Charlton v. Superior Court, supra, at p. 861, 156 Cal.Rptr. 107.)

In Krueger v. Superior Court, supra, the Court of Appeal denied the petition without ruling on substantive questions, holding that because it was untimely, had an insufficient record, and was unverified, the peremptory writ should be denied, despite the Supreme Court's grant of hearing and transfer. (Id., at pp. 939-940, 152 Cal.Rptr. 870; cf. also Popelka, Allard, McCowan & Jones v. Superior Court (1980) 107 Cal.3d 496, 500, 165 Cal.Rptr. 748, Div. I.)

Although these cases dealt with a situation where the Supreme Court granted hearing and transfer after the Court of Appeal had denied the original petition, their rationale seems equally applicable to a case such as this, where petitioners originally sought relief directly from the Supreme Court. Accordingly, we view the Supreme Court's action as signifying only that we are to decide all issues of procedure and substance, as if the petition had first been filed with us.


Finding no other procedural issue of moment, we turn to petitioner's substantive contentions, chief among which is that since the business tax at issue is not a “special tax,” it cannot conceivably be subject to the constraints placed on the raising of “special taxes” by Article XIIIA section 4.

Respondents, while advancing other, more formidable contentions, reply in part with an elaborate if somewhat strained argument that the subject tax is indeed a “special tax , within what they regard as the settled meaning of that phrase.‘ The tax involved here, however, in fact, seems to us closer to what has traditionally been viewed as a general tax. (City of Glendale v. Trondsen (1957) 48 Cal.2d 93, 99-100, 308 P.2d 1; County of Fresno v. Malmstrom (1979) 94 Cal.App.3d 974, 983, 156 Cal.Rptr. 777; City of San Diego v. Atlas Hotels, Inc. (1967) 252 Cal.App.2d 591, 593-594, 60 Cal.Rptr. 644; City of Glendale v. Crescenta Mut. Water Co. (1959) 135 Cal.App.2d 784, 799, 288 P.2d 105; 62 Ops.Cal.Atty.Gen. 673, 686 (1979).) But as will be developed more fully hereinafter, we are persuaded that in their understanding of the phrase ‘special taxes,‘ both the draftsman and the electorate eschewed any traditional definitions - a conclusion made more tenable when one considers that ‘special tax‘ is a phrase susceptible of no absolute legal meaning, but must be defined in the context in which it is used.2

In the discussion which follows, therefore, we have kept in mind the evident public purposes which inspired the sweeping changes mandated by the ‘Jarvis-Gann‘ initiative in which we discern the electorate's intention not only to achieve radical tax reform, but also to rigorously circumscribe the ability of local government to generate new taxes in lieu on those ‘lost‘ by Proposition 13.

No case, as the court recently observed in Trent Meredith etc. v. City of Oxnard, supra, 114 Cal.App.3d 317. 323, 170 Cal.Rptr. 685, has attempted to decide what ‘special tax‘ as used in section 4 means. What alone is clear in the interpretive thicket planted by the draftsmen of Article XIII A section 4 is that, as a recent decision observed, the terms involved have become ‘hopelessly entangled in judicial opinions, legistlation and legal treatises.‘ (County of Fresno v. Malmstrom, supra, 94 Cal.App.3d 974, 983, 156 Cal.Rptr. 777. In consequence, we repeat thtat the taxes intended to be subject to the two-thirds rule of Article XIII A section 4 can only be determined by reference to the (Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization (1978) 22 Cal.3d 208, 245, 149 Cal.Rptr. 239, 583 P.2d 1281).

We are guided in our search for an appropriate interpretation of section 4 by directions laid down in the Amador Valley case, which, while holding that Article XIIIA did not violate the “single-subject requirement” of the state Constitution, also found that the article is “in a number of respects imprecise and ambiguous.” Summarizing these directions, the court stated: “ California courts have held that constitutional and other enactments must receive a liberal, practical common-sense construction which will meet changed conditions and the growing needs of the people. (Los Angeles Met. Transit Authority v. Public Util. Com. (1963) 59 Cal.2d 863, 869, 31 Cal.Rptr. 463, 382 P.2d 583 ; see People v. Davis (1968) 68 Cal.2d 481, 483, 67 Cal.Rptr. 547, 439 P.2d 651 ; Rose v. State of California (1942) 19 Cal.2d 713, 723, 123 P.2d 505 ) A constitutional amendment should be construed in accordance with the natural and ordinary meaning of its words. (In re Quinn (1973) 35 Cal.App.3d 473, 482, 110 Cal.Rptr. 881 ) The literal language of enactments may be disregarded to avoid absurd results and to fulfill the apparent intent of the framers. (See Friends of Mammoth v. Board of Supervisors (1972) 8 Cal.3d 247, 259, 104 Cal.Rptr. 761, 502 P.2d 1049 ; In re Kernan (1966) 242 Cal.App.2d 488, 491, 51 Cal.Rptr. 515 )

“Most importantly, apparent ambiguities frequently may be resolved by the contemporaneous construction of the Legislature or of the administrative agencies charged with implementing the new enactment. (See State of South Dakota v. Brown (1978) 20 Cal.3d 765, 777, 144 Cal.Rptr. 758, 576 P.2d 473 ; Associated Home Builders etc., Inc. v. City of Livermore, supra, 18 Cal.3d 582 at p. 598, 135 Cal.Rptr. 41, 557 P.2d 473; Reynolds v. State Board of Equalization (1946) 29 Cal.2d 137, 140, 173 P.2d 551, 174 P.2d 4 ) In addition, when, as here, the enactment follows voter approval, the ballot summary and arguments and analysis presented to the electorate in connection with a particular measure may be helpful in determining the probable meaning of uncertain language. (See Carter v. Seaboard Finance Co. (1949) 33 Cal.2d 564, 580-581, 203 P.2d 758 ; People v. Ottey (1936) 5 Cal.2d 714, 723, 56 P.2d 193 ; In re Quinn, supra, 35 Cal.App.3d 473, 483, 110 Cal.Rptr. 881.)” (Id., at pp. 245-246.) (Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization, supra, 22 Cal.3d 208, 245-246, 149 Cal.Rptr. 239, 583 P.2d 1281; cf. Board of Supervisors v. Lonergan (1980) 27 Cal.3d 855, 866, 167 Cal.Rptr. 820, 616 P.2d 802.)

Using these criteria, and with the assistance of conclusions already reached by the Amador court and County of Fresno v. Malmstrom, supra, 94 Cal.App.3d 974, 983, 156 Cal.Rptr. 777, we discern, first, that while the primary purpose of Article XIIIA was to provide effective real property tax relief, it had as well the more generalized purpose however draconian in section 4 of “cutting general government funds and expenditures” and “limiting local governments' ability to replace funds reduced by other sections of the article by shifting to other types of taxes.” (County of Fresno v. Malmstrom, supra, 94 Cal.App.3d 974, 983, 156 Cal.Rptr. 777.) We accordingly are convinced that sustaining the tax at issue would mark the first crack in the wall of tax reform contemplated by Proposition 13, would lead to the creation of a loophole nearly as large as the wall itself, and would flout the public will as we understand it to have been expressed in the subject initiative.

This conclusion is buttressed by reference to the California Voters' Pamphlet and the opinion of the legislative analyst expressed therein, warning that, “if the initiative is approved, new taxes would also have to be approved by two-thirds of the local voters. Thus the initiative would restrict the ability of local governments to impose new taxes in order to replace the property tax revenue losses.”

In sum, we think the substance of the subject tax rather than its form, or designation, is determinative, and that it is such a tax as the California electorate intended to be enacted only upon a vote of two-thirds of the voters of the local government involved. Accordingly, even though the tax does not fall within one of the traditional (albeit disparate) categories usually denominated ‘special taxes,‘ we conclude that it is a ‘special tax‘ in the unique context of Article XIII A. In so concluding, we reiterate the instruction of our high court (cf. Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization, supra, 22 Cal.3d 208, 245, 149 Cal.Rptr. 239, 583 P.2d 1281) that we are to interpret Article XIII A section 4 with primary reference to the intent of the draftsmen and the electorate.

In our view, the intent of Article XIII A section 4 as envisioned by the electorate which enacted it, was to impose a two-thirds popular vote requirement as a prerequisite to the establishment of any new tax, including a rate adjustment, so as to prevent local governments from circumventing the tax-cutting purpose of Article XIII A in the absence of such a popular mandate. (County of Malmstrom, supra, 94 Cal.App.3d 974, 983, 156 Cal.Rptr. 777.) Under any other interpretation we need hardly emphasise the ease and frequency which new taxes would be permitted to “soften the blow imposed by the “legislative battering ram” of Article XIIIA. (Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization, supra, 22 Cal.3d 208, 149 Cal.Rptr. 239, 583 P.2d 1281.)

In arriving at this conclusion, we are painfully aware of the strictures our interpretation would place on local governments, which may be precluded from providing even essential services to the elderly and infirm, as is the case here. It may be that the Electorate which adopted Article XIIIA section 4 has not yet fully appreciated its scope and impact. Our function, however, is limited to a judicial interpretation of the language of the Article.


Petitioner makes further contentions: first, that Article XIIIA should be treated as an authorization to tax in favor of local chartered governments, rather than a limitation on government taxing power; and, second, that Article XIIIA is to be applied only to general law communities and not to charter cities and counties.

In support of these related claims, petitioner points to the fundamental taxing power vested in chartered communities, asserting that “the power to tax for local purposes clearly is one of the privileges accorded chartered cities by the home rule provision of the California Constitution. (Cal. art. XI, s 5, subd. (a).)” (Weekes v. City of Oakland (1978) 21 Cal.3d 386, 392, 146 Cal.Rptr. 558, 579 P.2d 449.) Moreover, the revenue raising authority granted chartered cities by virtue of the home rule provision is, as petitioner argues, broader than that conferred upon general law communities by Article XI, section 5, subdivision (a), of the California Constitution. (Cf. Rancho Santa Anita v. City of Arcadia (1942) 20 Cal.2d 319, 322-323, 125 P.2d 475.)

We are cognizant that section 4 specifically provides that cities, counties and special districts “may impose special taxes” (emphasis added), and have no doubt language placing such radical limitations on the otherwise considerable taxing authority of local governments ought to have been more clearly expressed.3

However, the spirit and objectives of Article XIIIA would truly be subverted if this court were to rule section 4 inapplicable to chartered communities.

In the comments of the legislative analyst set out in the California Voters Pamphlet (p. 60) the electorate is informed that the initiative would “restrict the authority of local governments” by requiring special taxes “to be approved by two-thirds of the local voters.” (Emphasis added.) The limitation on the taxing power so expressed, in our view refers to all local governments rather than merely to general law cities, and has been so understood in ensuing appellate decisions, as for example, in Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization, supra, 22 Cal.3d 208, 231, 149 Cal.Rptr. 239, 583 P.2d 1281, where the court made the following observation: “Moreover, since any tax savings resulting from the operation of sections 1 and 2 could be withdrawn or depleted by additional or increased state or local levies of other than property taxes, sections 3 and 4 combine to place restrictions upon the impositions of such taxes.” (Emphasis added.) Similarly, in County of Fresno v. Malmstrom, supra, 94 Cal.App.3d 974, 983, 156 Cal.Rptr. 777, the court noted that section 4 was addressed to “limiting local governments” ability to impose special taxes.

Nothing in the language of section 4 or the cases thus far construing it favors exemption of chartered cities from its limitations. On the contrary, Article XIIIA was a statewide initiative, intended to apply statewide: both the drafters of the initiative and the voters who enacted it appear to have intended that section 4 would apply to all local governments.

Respondents also argue that section 4 cannot be construed as a mere tax authorization applicable only to chartered cities when such authority already existed. (See Weekes v. City of Oakland, supra, 21 Cal.3d 386, 392, 146 Cal.Rptr. 558, 579 P.2d 449; Century Plaza Hotel Co. v. City of Los Angeles (1970) 7 Cal.App.3d 616, 622, 87 Cal.Rptr. 166.) If we are to assume, in accordance with fixed rules of interpretation, that section 4 was inserted for some useful purpose, the only rational new purpose consistent with the intent of the article of which it forms a part is in our opinion a limitation on the taxing authority of all local governments, including chartered cities.

Finally, contrary to petitioner's contention, section 4, as interpreted to apply to chartered cities, does not conflict with the “home rule” provision of article XI, section 5, subdivision (a) of the California Constitution. Since section 4 is part of the state Constitution, it may apply to chartered cities in limitation or defeasance of any conflicting “home rule” powers. (City of Glendale v. Trondsen, supra, 48 Cal.2d 93, 98, 308 P.2d 1; Pesola v. City of Los Angeles (1975) 54 Cal.App.3d 479, 487, 126 Cal.Rptr. 580.)

We thus hold that section 4 applies to chartered as well as to general law cities, as a limitation upon the authority to tax.

The petition for a peremptory writ of mandate is denied.


1.  San Francisco Charter section 6.306 provides in relevant part: “No ordinance or resolution for the expenditure of money, except the annual appropriation ordinance, shall be passed by the board of supervisors unless the controller first certify to such board that there is sufficient unencumbered balance in a fund that may legally be used for such proposed expenditure, and that, in the judgment of the controller, revenues as anticipated in the appropriation ordinance for such fiscal year and properly applicable to meet such proposed expenditure will be available in the treasury in sufficient amount to meet the same as it becomes due ”

2.  We are familiar with the recent decision in Trent Meredith etc. v. City of Oxnard (1981) 114 Cal.App.3d 317, 323, 170 Cal.Rptr. 685, which regards as “overbroad” the Attorney General's interpretation of “special taxes‘ as meaning any new taxes, or additional taxes. It should be noted that the fees exacted from a dubdivider in that case were found to be in the nature of assessments, and not taxes, and were thus outside the scope of Article XIII A section 4.

3.  As petitioner notes, section 4 could, for example, simply have been phrased in the negative, or in the form “shall impose special taxes” to make the limitation unambiguous.

NEWSOM, Associate Justice.

RACANELLI, P. J., and ELKINGTON, J., concur.