City and County of San Francisco v. Farrell

Decision Date05 August 1982
Docket NumberS.F. 24177
Citation184 Cal.Rptr. 713,32 Cal.3d 47,648 P.2d 935
CourtCalifornia Supreme Court
Parties, 648 P.2d 935 CITY AND COUNTY OF SAN FRANCISCO, Petitioner, v. John C. FARRELL, as Controller, etc., Respondent.

George Agnost, City Atty., Burke E. Delventhal, Paula Jesson and Mark Kertz, Deputy City Attys., Jerome B. Falk, Jr., Peter J. Busch and Howard, Prim, Rice, Nemerovski, Canady & Pollak, San Francisco, for petitioner.

Stanley E. Remelmeyer, City Atty., Torrance, Roger P. Freeman, Deputy City Atty., Lyn R. McDougal, City Atty., El Cajon, Daniel J. Curtin, Jr., City Atty., Walnut Creek, Donald R. Haile, City Atty., Watsonville, Robert W. Parkin, City Atty., Long Beach, John R. Calhoun, Asst. City Atty., Phil J. Shafer, Deputy City Atty., James L. Markman, City Atty., Brea and La Mirada, Samuel Gorlick, City Atty., Burbank, Marvin E. Helon, City Atty., Clovis, David J. Levy, City Atty., Concord, Bush, Ackley, Milich & Hallinan, Escalon, Oakdale and Riverbank, Gail Hutton, City Atty., Huntington Beach, Constance K. Heneke, City Atty., Los Altos, John J. Murphy, City Atty., Lynwood, Elwyn L. Johnson, City Atty., Modesto, K. D. Lyders, City Atty., Oxnard, William J. Adams, City Atty., Palm Springs, Evelynn M. Finn, City Atty., Pasadena, P. Lawrence Klose, City Atty., Petaluma, John Woodhead, City Atty., Riverside, Ralph H. Prince, City Atty., San Bernardino, Edwin J. Moore, City Atty., Santa Clara, J. Dennis Crabb, City Atty., South Lake Tahoe, Charles Haughton, City Atty., Beverly Hills, Burke, Williams & Sorensen Mark C. Allen, Jr., Michael W. Stamp, Deputy City Atty., Jeffrey N. Haney, Acting City Atty., Oakland, and Gerald A. Sperry, City Atty., Stockton, as amici curiae on behalf of petitioner.

Ronald A. Zumbrun, John H. Findley, James L. Meyer, Sacramento, and Julian Rhine, San Francisco, for respondent.

Daniel G. Nauman, Sacramento, Robert S. Thompson, Thomas J. Ready, Hufstedler, Miller, Carlson & Beardsley, Los Angeles, A. Charles Dell'Ario, Elizabeth J. Robison and Wendel, Lawlor, Rosen & Black, Oakland, as amici curiae on behalf of respondent.

MOSK, Justice.

In 1978, the voters adopted Proposition 13 (now art. XIIIA of the Const.), which places limitations on the taxation powers of state and local government. Section 4 provides, "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." 1

In our recent decision in Los Angeles County Transportation Commission v. Richmond (1982) 31 Cal.3d 197, 182 Cal.Rptr. 324, 643 P.2d 941, we interpreted the effect of this provision as it applies to "special districts," holding that as used in section 4 that term encompasses only entities empowered to levy a property tax. The present action involves the meaning of another term used in section 4: the issue is whether a payroll and gross receipts tax, the proceeds of which are placed into a city's general fund to be used for general governmental expenditures, constitutes a "special tax" so that a two-thirds vote of the electors is required in order to adopt such a tax.

Prior to March 28, 1980, San Francisco, a charter city and county, imposed on businesses operating in the city a tax of 1.1 percent on payrolls or gross receipts. The proceeds of the tax were to be used for general revenue purposes. On April 1, 1980, ordinances increasing the tax rate to 1.5 percent became effective. 2 These increases were to expire on June 30, 1980, but prior to that date, the board of supervisors placed on the election ballot an initiative measure proposing to extend the expiration date. The voters approved the extension by a majority vote of 55 percent on June 3, 1980.

On May 29, 1980, the mayor approved a request for a supplemental appropriation of $1.1 million by the department of health to pay for improvement of the elevator system at the municipally owned Laguna Honda Hospital. The request specified that the appropriation was to come from the proceeds of the increases in the payroll and gross receipts taxes.

Respondent Farrell, the city's controller, refused to certify that funds were available for the proposed expenditure. He asserted that the increased tax adopted by the voters constituted a "special tax" as defined in article XIIIA, section 4 of the Constitution, and it had not been lawfully collected because its imposition was not approved by two-thirds of the electorate, as required by that section. The taxes collected pursuant to the increase have been accruing in the city's treasury since April 1, 1980, at a rate of $17 million dollars annually.

The city filed an original petition for a writ of mandate in this court to compel Farrell to certify that funds are available from the proceeds of the increases in the payroll and gross receipts taxes for the supplemental appropriation sought by the department of health. An alternative writ was issued.

In claiming that the imposition of an increase in the payroll and gross receipts taxes does not require a two-thirds vote of the electorate, the city makes two basic arguments. It claims that section 4 does not apply to charter cities. In the alternative, it argues that the term "special taxes," as used in that provision, applies only to taxes earmarked for a specific purpose, and that since the payroll and gross receipts taxes at issue here are not so designated, their imposition is not subject to the two-thirds vote requirement. We shall conclude that the city prevails as to the second of these assertions.

The rules of construction applicable to constitutional initiatives were set forth in detail in Amador Valley Joint Union High School District v. State Board of Equalization (1978) 22 Cal.3d 208, 219, 245-246, 149 Cal.Rptr. 239, 583 P.2d 1281, and it is not necessary to repeat them in detail here. In that decision, we upheld the constitutionality of various provisions of article XIIIA, and in doing so we applied the familiar rules that an initiative measure should receive a practical construction, that its literal language may be disregarded to avoid absurd results and to fulfill the intent of the framers, and that ambiguities in the wording of the measure may be clarified by reference to the material presented to the voters in the ballot pamphlet and the contemporaneous construction of the measure by the Legislature.

We expanded on these general propositions in Richmond with a qualification applicable specifically to a provision which, like section 4, requires a two-thirds vote for the adoption of a tax measure. The Richmond case involved the adoption of a sales and use tax by the Los Angeles County Transportation District. Prior to the enactment of article XIIIA, the Legislature had authorized the district to adopt such a tax for the purpose of improving public transit, upon a majority vote of the electors who voted in the election; the district had no authority to enact a property tax. The tax was approved by a majority but less than two-thirds of the voters after the effective date of the constitutional amendment. We held that the tax was valid despite the absence of a two-thirds favorable majority because the language of the section and extrinsic aids to its construction indicated that the term "special districts" in section 4 referred only to those entities authorized to levy a property tax.

In reaching this conclusion, we held that, while the requirement for a two-thirds vote as a condition for adoption of a tax is not unconstitutional (see Gordon v. Lance (1971) 403 U.S. 1, 6, 91 S.Ct. 1889, 1892, 29 L.Ed.2d 273), the language of section 4 must be strictly construed and ambiguities therein resolved so as to limit the measures to which the two-thirds requirement applies. In this connection, we reasoned that the two-thirds vote requirement in section 4 is inherently undemocratic; the requirement was imposed by a simple majority of the voters throughout the state upon a local entity to prohibit a majority (but less than two-thirds) of the voters of that entity from taxing themselves for programs or services which would benefit largely local residents; and the sales tax in issue in that case unlike the levy in Gordon, did not result in "committing ... the credit of ... generations yet unborn." (31 Cal.3d at pp. 203-205, 182 Cal.Rptr. 324, 643 P.2d 941.)

Two additional observations we made in Richmond are relevant to the present case: We recognized that section 4 is ambiguous in various respects, and that, although its language is framed affirmatively so as to authorize local entities to adopt "special taxes," it is actually a limitation on the enactment of such taxes because it requires a two-thirds vote for their approval.

With this background, we turn to the meaning of the term "special taxes" in section 4. The city claims that these words refer to a tax whose proceeds are used for a special purpose, while Farrell asserts that they refer to additional or supplemental taxes other than those specifically excepted.

There can be no doubt that the term "special taxes" is ambiguous in the sense that it has been interpreted to mean different things in different contexts. One meaning frequently attributed to it by cases and statutes is a tax "collected and earmarked for a special purpose, rather than being deposited in a general fund." (See County of Fresno v. Malmstrom (1979) 94 Cal.App.3d 974, 983, 156 Cal.Rptr. 777; People v. Lodi High School Dist. (1899) 124 Cal. 694, 697, 57 P. 660; Ruane v. City of San Diego (1968) 267 Cal.App.2d 548, 551, 73 Cal.Rptr. 316; City of San Diego v. Atlas Hotels, Inc. (1967) 252 Cal.App.2d 591, 592-593, 60 Cal.Rptr. 644; Gov. Code, § 26100; Health & Saf. Code, § 850; Sts. & Hy. Code, § 8809.) 3

Farrell, relying on some of a number of dictionary definitions of the word ...

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