Court rules SF can tax businesses for homeless funds

On Friday, San Francisco Superior Court ruled that Proposition C, the contentious tax law that funnels money from the city’s wealthiest companies toward homeless services, is legal.

Proposition C places an average 0.5 percent gross receipts tax on companies that make more than $50 million in a year and uses the money to fund SF’s homeless relief efforts. The tax passed in November with more than 61 percent of the vote.

The anti-tax Howard Jarvis Taxpayers Association sued the city, alleging that under California law SF should need two-thirds of the vote to institute new taxes.

However, the city said that new taxes placed on the ballot by the public—and not by lawmakers—only need a simple majority. City Attorney Dennis Herrera cited a 2017 court case, California Cannabis Coalition vs City of Upland, claiming that “the California Supreme Court clarified [...] that certain restrictions bind local officials, but do not bind the voters themselves.”

Therefore, “a two-thirds majority is required to pass a special tax initiative placed on the ballot by government officials,” but not for proposals from voters themselves.

There was some question about whether the courts would agree with Herrera’s assessment. Earlier this year, the Howard Jarvis Association sued the city over Proposition C, calling it “an illegal tax that violates decades of constitutionally protected taxpayer rights.”

But Judge Ethan Schulman vindicated Herrera on Friday, calling the complaint “easily dismissed” and declaring that of the various justifications for the challenge “none has merit” and that they “supply no convincing evidence.”

Schulman ruled that there was no precedent anywhere in California statutes requiring a two-thirds majority for this kind of initiative.

Herrera issued a statement Friday, saying, “We’re pleased the court has confirmed that when voters act through the initiative process, a simple majority vote is required. The initiative right is about direct democracy.”

Since November, the city has collected Proposition C funds, but afraid of a possible ruling against the law, refused to spend them.

City Hall may continue to hold off even after Friday’s ruling, anticipating future legal challenges. The Howard Jarvis Association plans to appeal.