RIDER v. COUNTY OF SAN DIEGO (1990)

OPINION

This case calls upon us to determine the validity of a retail transaction and use tax (a sales tax) imposed throughout the County of San Diego to finance the construction and operation of criminal detention and/or courthouse facilities in that county.   We shall conclude that the tax is valid.   Consequently, we reverse the judgment entered below.

FACTS

In 1987, the State Legislature passed the San Diego County Regional Justice Facility Financing Act.  (Government Code, §§ 26250–26285—hereinafter, the Act.) ¹  In bare terms, the Act creates a separate governmental entity, the San Diego County Regional Justice Facility Financing Agency (hereinafter, the Agency), and charges that entity with various duties and responsibilities concerning the financing of the construction of criminal detention and/or courthouse facilities (collectively referred to as justice facilities).²

The Act provides that the Agency is to raise the revenues needed to fund the carrying out of its duties and responsibilities by adopting a tax ordinance imposing a supplemental sales tax of one-half of one percent (0.5%) throughout the County of San Diego (hereinafter referred to as County).  (§§ 26271–26275.)   However, the Act also specifically provides that the tax ordinance shall not take effect unless it is approved by a majority of the electors voting on the matter at a special county-wide election held for the purpose of securing such approval.  (§ 26271.)  Of significance to our later analysis, the Act clearly states that the Agency has no power to assess any sort of tax other than the sales tax specifically provided for in the Act itself.  (§ 26283.)

In accordance with the requirements of the Act, the Agency adopted a tax ordinance (hereinafter, Proposition A) and submitted it to the voters of the County in conjunction with the general elections of June 1988.   The electors approved Proposition A by a bare majority.

Shortly thereafter, the instant case was filed by interested persons (hereinafter referred to as taxpayers) under the authority of section 863 of the Code of Civil Procedure to challenge the validity of the supplemental sales tax imposed by Proposition A.   As originally pled, the complaint asserted three causes of action:  (1) The tax violated the requirement of section 4 of Article XIII A of the California Constitution (Proposition 13) that local “special” taxes be approved by a two-thirds vote;  (2) the tax violated the requirement contained in Proposition 62 (§§ 53720–53730) that special taxes imposed by a district be approved by a two-thirds vote;  and (3) the tax violated the proscription against “excess appropriations” set forth in Article XIII B of the California Constitution.

During the pendency of the action, on January 1, 1989, the supplemental sales tax went into effect.³

The matter eventually came to trial.   The trial itself lasted something less than one day and consisted primarily of the parties' submitting voluminous materials to the trial court and then summarizing their respective positions in closing arguments.   The taxpayers did not pursue the Article XIII B cause of action at trial, and instead chose to focus on their Proposition 13 and Proposition 62 arguments.

The trial court found in the taxpayers' favor, basing its decision solely on the argument that the sales tax constituted a deliberate and unlawful avoidance of Proposition 13 and violated that constitutional provision's requirement of a two-thirds voter approval for local special taxes.   Judgment declaring the sales tax invalid was thereafter entered in accordance with the trial court's findings.⁴

County and Agency have appealed from the judgment.   Both governmental entities have made largely the same arguments on appeal:  (1) The sales tax does not run afoul of Proposition 13 because the sales tax is a general tax, not a special tax, and the Agency is not a special district encompassed by Proposition 13's proscriptions;  (2) the sales tax does not run afoul of Proposition 62's voter approval requirements because the sales tax is a general tax that secured the required majority voter approval;  and (3) even if Proposition 62's two-thirds voter approval requirement is deemed to apply to the sales tax, that requirement cannot be allowed to invalidate the sales tax because such a voter approval requirement, in that context, would constitute an unconstitutional referendum.

As we discuss below, we conclude that:  (1) The provisions of Proposition 13 have no application to the matter at hand;  and (2) the two-thirds voter approval requirement set forth in Proposition 62, if found applicable under the provisions of the Act to the sales tax here in issue, would constitute an unconstitutional local tax referendum that could not be permitted to invalidate that tax.   We find that our conclusions in these regards are dispositive of the appeal before us and decline to address other arguments asserted by the parties.

Additional facts will be referred to, as needed, in the discussion which follows.

DISCUSSION

I.THE APPLICABILITY OF ARTICLE XIII A (PROPOSITION 13)

 Adopted in 1978, Proposition 13 (Article XIII A of the California Constitution) “․ was a stern tax-cutting measure, intended to prescribe fiscal responsibility and ease the tax burden on residential and business property.”  (Carman v. Alvord (1982) 31 Cal.3d 318, 334, 182 Cal.Rptr. 506, 644 P.2d 192.)   Of greatest pertinence here, section 4 of this constitutional provision (hereinafter cited simply as section 4) was clearly intended to circumscribe the taxing power of local governments:  “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.”

Given the “imprecise and ambiguous” wording of Proposition 13 (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), the courts of this state were almost immediately called upon to interpret the various provisions of Proposition 13.

In Los Angeles County Transportation Com. v. Richmond (1982) 31 Cal.3d 197, 182 Cal.Rptr. 324, 643 P.2d 941 (hereinafter cited simply as Richmond), our Supreme Court dealt with the interpretation to be given the phrase “special districts” in section 4.   Acknowledging the fact that section 4's requirement of an extraordinary (two-thirds) majority was of a “fundamentally undemocratic nature” (id., at p. 205, 182 Cal.Rptr. 324, 643 P.2d 941), Richmond declared that “the language of section 4 must be strictly construed and ambiguities resolved in favor of permitting voters of cities, counties and ‘special districts' to enact ‘special taxes' by a majority rather than a two-thirds vote.”  (Id.)  In line with this interpretative guideline, Richmond went on to hold that “a governmental body ․ which does not have the power to levy a property tax[ ] is not the type of ‘special district’ governed by [section 4].”  (Id., at p. 201, 182 Cal.Rptr. 324, 643 P.2d 941.)

Richmond is dispositive of the Proposition 13 argument in this case:  The Agency does not have the power to levy a property tax and, consequently, is not a “special district” subject to the provisions of section 4.

In the interest of preserving this issue for further appellate review by our Supreme Court, the taxpayers argue that Richmond itself contains a “seed” of contrary analysis that has full application in this case.   In making this argument, the taxpayers highlight both an observation made by Justice Richardson in his Richmond dissent and the Richmond majority's response to that observation.   In his Richmond dissent, Justice Richardson observed:  “The majority has cut a hole in the financial fence which the people in their Constitution have erected around their government.   Governmental entities may be expected, instinctively, to pour through the opening seeking the creation of similar revenue-generating entities in myriad forms which will be limited only by their ingenuity.”  (Richmond, at p. 213, 182 Cal.Rptr. 324, 643 P.2d 941.)   The Richmond majority, in response to this observation by Justice Richardson, stated:  “Nor are we impressed with a suggestion that our interpretation of section 4 could result in the wholesale avoidance of the purpose of article XIII A by the Legislature, which could reorganize existing ‘special districts' to remove their property-taxing power or create new ones without such power, thereby allowing them to adopt a ‘special tax’ by majority vote.   We cannot assume that the Legislature will attempt to avoid the goals of article XIII A by such a device.   In any event, that problem can be dealt with if and when the issue arises.”  (Richmond, at p. 208, 182 Cal.Rptr. 324, 643 P.2d 941.)

The taxpayers point to the above “exchange” in Richmond and argue that “the issue has arisen,” that we are now inundated with “revenue-generating entities in myriad forms” that are singularly intent on the “wholesale avoidance of the purpose of article XIII A” and that now is the time to “deal with the problem.” ⁵  There are two fundamental shortcomings to this argument, however:

First, contrary to an implicit assumption made by the taxpayers, the majority's statement in Richmond that the “problem can be dealt with if and when the issue arises” does not necessarily suggest that the appropriate branch of government to deal with the issue is the judiciary.   Given the fact that it was the vague and ambiguous wording of section 4 that gave rise to the need for our Supreme Court to interpret that provision in the first place, it would seem the better position to argue that the electorate and/or the State Legislature should see to mending any perceived “holes in the financial fence.”

Second, and most importantly, we are bound to follow the Supreme Court's holding in Richmond.  (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455, 20 Cal.Rptr. 321, 369 P.2d 937.)

II.

THE APPLICABILITY OF PROPOSITION 62

 The trial court expressly declined to reach the issue of Proposition 62's applicability to the matter before us.   However, in light of the fact that the interpretation of statutes presents pure questions of law (Estate of Madison (1945) 26 Cal.2d 453, 456, 159 P.2d 630) and the issue of the applicability of Proposition 62 to the matter at hand has been fully briefed and argued by the parties, there is nothing to be gained or served by returning this case to the trial court for further proceedings in this regard.   The interests of judicial economy and efficiency are best served by our resolving the matter at this time.

Proposition 62 was a statutory initiative that was approved by the state electorate in 1986.   The adoption of the measure had the effect of adding sections 53720 through 53730 to the Government Code.   The general intent of the measure was to secure to local electorates a greater degree of voter control over the exercise of local taxing power.  (See City of Westminster v. County of Orange (1988) 204 Cal.App.3d 623—especially at pp. 637–638, 251 Cal.Rptr. 511, wherein copies of the Proposition 62 ballot arguments are set forth.)   Insofar as this case is concerned, the key provision of Proposition 62 is set forth in section 53722:  “No local government or district may impose any special tax unless and until such special tax is submitted to the electorate of the local government, or district and approved by a two-thirds vote of the voters voting in an election on the issue.”

The taxpayers argued to the trial court, as they have before this court, that the sales tax here in issue (having been approved only by a majority vote of the electorate) violates section 53722's two-thirds voter approval requirement and must be declared invalid for that reason—regardless of the tax's validity under Proposition 13.   The Agency and the County argued to the trial court, as they have before this court, that section 53722 has no application in this instance because (1) the Agency is not a “district,” as that term is used in section 53722, and (2) the sales tax here in issue is not a “special tax,” as that term is used in section 53722.⁶

A resolution of the issues raised by these various arguments is required, however, only if the two-thirds voter approval provision of section 53722 had valid application to the voters' adoption of Proposition A (the ordinance which imposed the sales tax in question) in 1988.⁷  We conclude that it did not.

The Agency and the County have argued that the two-thirds voter approval requirement of section 53722 constitutes an unconstitutional referendum on local taxing power in violation of the proscription set forth in sections 9, subdivision (a), and 11 of article II of the California Constitution.   We agree.

 To fully understand the application of these constitutional provisions to the matter at hand, it is necessary that they be viewed in the context of the overall taxing scheme that exists in California.   Generally, the State Legislature exercises a supreme and inherent power with respect to taxation—a power which does not derive from our state Constitution, but, rather, is constrained by it.  (California Bldg. Industry Assn. v. Governing Bd. (1988) 206 Cal.App.3d 212, 226–227, 253 Cal.Rptr. 497.)   Local governments, on the other hand, have only that taxing power which is granted to them by the State Legislature.  (Id., at pp. 227–228, 253 Cal.Rptr. 497;  Cal.Const., art. XIII, § 24.)   Thus, any restriction on the State Legislature's power to condition local taxing authority (by, for example, requiring voter approval as to the same) must be found in the state Constitution itself.

Article IV, section 1, of the state Constitution reserves the power of the initiative and the power of the referendum to the people.   The power of the referendum, in turn, is itself defined in the Constitution:  Article II, section 9, subdivision (a), provides that “The referendum is the power of the electors to approve or reject statutes or parts of statutes except urgency statutes, statutes calling elections, and statutes providing for tax levies or appropriations for usual current expenses of the State[;]” and section 11 of the same article provides:  “Initiative and referendum powers may be exercised by the electors of each city or county under procedures that the Legislature shall provide.   This section does not affect a city having a charter.”

As noted above, Article II, section 9, subdivision (a) of the Constitution does contain the express constraint that the referendum cannot be applied to “tax levies or appropriations for usual current expenses of the State.”   Our Supreme Court has clearly held that this restriction on the exercise of the referendum applies not only on a statewide level, but also on a local level—and that the State Legislature is, consequently, without authority to “allow” local governments to exercise the power of the referendum as to local tax measures.  (Geiger v. Board of Supervisors (1957) 48 Cal.2d 832, 836–837, 313 P.2d 545.)

With the above in mind, we turn to the facts of the case before us.   Two questions present themselves:  (1) Is the sales tax imposed by Proposition A a tax levy “for usual current expenses”?;   and (2) If it is, is the two-thirds voter approval requirement of section 53722 thus an invalid referendum?

The tax proceeds collected pursuant to Proposition A can be spent by the Agency on, among other things:  (a) the retirement of preexisting capital debt incurred by the County for justice facilities (§ 26267, subd. (a)(5));  and (b) (to the extent of fifty percent (50%) of the Agency's annual tax receipts) the County's expenses incurred in operating justice facilities (§ 26267, subd. (a)(6)(B)).   In light of the fact that the County exercises what is tantamount to total control over the Agency's ability to prioritize its expenditures, these “usual current expenses” of the County are “current usual expenses” of the Agency.

The two-thirds voter approval requirement of section 53722 is an invalid referendum:  “The referendum is ‘the right reserved to the people to adopt or reject any act or measure which has been passed by a legislative body, and which, in most cases, would without action on the part of the electors become a law.’ ”  (City of Westminster v. County of Orange, supra, 204 Cal.App.3d at p. 627, 251 Cal.Rptr. 511, quoting from Whitmore v. Carr (1934) 2 Cal.App.2d 590, 592, 38 P.2d 802.)   In this instance, the mere fact that the voters' ability to adopt or reject a tax measure is included in the statutory process incident to the adoption of the measure is irrelevant.   This fact does nothing more than convert the voters' “right” to reject or adopt a measure into a requirement that the voters either reject or adopt the tax measure in question.   The State Legislature cannot, by means of merely altering the manner in which power is exercised, change the fundamental nature of the power itself.   We are made more certain of our conclusion in this regard by the fact that “[D]ecisions invalidating initiative or referendum measures to repeal local tax levies have indicated a policy of resolving any doubts in the scope of the initiative or referendum in a manner that avoids interference with a local legislative body's responsibilities for fiscal management.”  (Birkenfeld v. City of Berkeley (1976) 17 Cal.3d 129, 143, 130 Cal.Rptr. 465, 550 P.2d 1001.)

Finally, we address the issue of severability.   Inasmuch as it is the Act, and not Proposition 62, by which the State Legislature expressly authorized the adoption of the taxing measure here in question, Proposition A, our concern with the issue of severability is focused on the provisions of the Act rather than on the provisions of Proposition 62.   Even if section 53722' s invalid requirement of an extra-majority voter approval is assumed to somehow implicitly apply to the adoption of Proposition A (through, and as an implicit part of, the Act—and notwithstanding the fact that the Act itself explicitly requires only a majority voter approval for that adoption), that invalid requirement is clearly severable from the other provisions of the Act and our rejection of that requirement on constitutional grounds does not necessitate our rejection of the entirety of the Act.⁸  The general rules concerning severability were recently addressed by our Supreme Court in Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d 805, at p. 821, 258 Cal.Rptr. 161, 771 P.2d 1247:  Severability is easiest to establish when there is an express severability clause, when the invalid part can be mechanically severed, and when the remainder is complete unto itself and would have been adopted by the legislative entity even if the invalidity of the offending part had been anticipated.   All three of these factors obtain in this instance.  First, section 26285 of the Act is an express severability clause that applies to the entirety of the Act.   Second, the requirement of an election to approve the adoption of the taxing ordinance (primarily contained in sections 26271 and 26273 of the Act) can be easily and mechanically severed from the rest of the Act without doing damage to the sense and integrity of the remaining provisions.   Third, it seems clear from a reading of the Act as a whole that the State Legislature's primary concern in passing the Act into law was the securing of additional financing for justice facility construction and operation.   This concern is not defeated by the deletion of an implicit voter approval provision from the Act.

In summary, we hold that there was no valid requirement that Proposition A be approved by an extraordinary majority of voters.   Consequently, Proposition A and the tax levied thereunder are fully valid.

DISPOSITION

The judgment is reversed.

FOOTNOTES

1.   Unless otherwise indicated, all statutory section-number citations refer to the Government Code.

2.   The Act also provides that the Agency can, to a limited extent:  (1) Engage directly in the construction, furnishing and/or acquisition of justice facilities;  and (2) utilize its finances to pay for the operation of justice facilities.

3.   Since that date, the sales tax revenues have been collected but not spent—pending a final resolution of this case.

4.   The trial court specifically declined to rule on the Proposition 62 argument asserted by the taxpayers.

5.   There is merit to the taxpayers' observation as to the increase in the number of revenue-generating governmental entities which lack the power to assess property taxes.   Leaving aside other sorts of governmental entities, there are now numerous “justice facility financing agencies” (such as the Agency herein) which have been given life by the State Legislature.   In particular, the Government Code now contains provisions for a San Joaquin County Regional Justice Facility Financing Agency (§§ 26290–26293.4) and an Orange County Regional Justice Facilities Commission (§§ 26295–26298.58) as well as provisions for the creation of regional justice facilities financing agencies in Humboldt, Los Angeles, Riverside, San Bernardino and Ventura Counties (see the “County Regional Justice Facilities Financing Act,” §§ 26299.000–26299.083).   Further, the Revenue and Taxation Code now contains a generalized provision (Rev. & Tax. Code, § 7285.5) which permits “rural” counties (those counties with a population of 350,000 or less as of January 1, 1987) to establish “an authority for specific purposes” with the power to assess a sales tax (a transaction and use tax) of one-half of one percent (0.5%).

6.   Both parties have gone to rather remarkable extremes in maintaining these arguments:The taxpayers, in a somewhat grotesque effort to avoid being placed in the position of saying that any tax imposed by a limited-purpose governmental entity is a “special tax” solely by virtue of its having been imposed by such an entity, make the astounding assertion that a limited-purpose governmental entity could impose a general tax by imposing a tax and then “donating” the tax revenues thus generated to another, but general-purpose, governmental entity.   We are unaware of any authority for such an assertion.The Agency and the County, in an equally strained effort, have gone on at some length to delineate the autonomy of the Agency as a distinct taxing authority.   What is totally ignored by both the Agency and the County is the fact that the Act, unlike every other similar legislative enactment of which this court is aware (including those which have created other justice facility agencies), gives the Agency no significant governmental discretion (whether legislative or administrative) with respect to how the tax revenues will be spent.   In this case, it is distressingly clear that the Agency is nothing more than an empty shell through which the Board of Supervisors of the County of San Diego can exercise its discretion.

7.   Given the fact that Proposition A was approved by a majority of the electorate, we need pursue an extended inquiry only as concerns the possibility that the law required something more than a majority for approval.   The only such possibility is that which is presented by section 53722.

8.   We speak in terms of an “assumed application” of section 53722's extra-majority voter requirement because we have declined to directly resolve the issue of whether section 53722's extra-majority voter requirement actually applied to the adoption of Proposition A—finding, instead, that the apparent constitutional infirmity of section 53722 rendered any such resolution unnecessary.

HOLLENHORST, Acting Presiding Justice.

DABNEY and McDANIEL *, JJ., concur.