The power of the initiative is the power of the electorate to propose new laws subject to approval by voters. Filed yesterday, California Cannabis Coalition v. City of Upland et al. looks at the interplay between the initiative power and restrictions imposed by California Constitution article XIII C. The California Supreme Court has held that Article XIII C, which limits local governments’ ability to adopt new or increased general or special taxes, does not constrain voters’ power to raise taxes by statutory initiative. Rather, voters may impose taxes via initiative by complying with Article II, sections 8 and 11 of the California Constitution, and the California Elections Code (starting with section 9200). In holding that the initiative is “one of the most precious rights of our democratic process,” the Court found that Article XIII C serves only as a limitation on local governments, and not on the voters’ ability to impose taxes via initiative.
 
This case reinforces the importance of the initiative power under the California Constitution, and the role of the court to ensure that this power is not curtailed without the express intent to do so by the voters themselves. Looking forward, local agencies may see voter initiatives in which the electorate, as part of a new or different set of regulations, seeks to impose new taxes without the restrictions imposed on local agencies to take the same action. This could include, for example, further expansion of commercial cannabis businesses like dispensaries throughout California, despite bans put in place by the relevant jurisdiction.
 
Article XIII C, section 2 of the California Constitution was adopted by California voters in 1996 as a part of Proposition 218 and curtails the ability of local governments to impose taxes, assessments, and fees and charges. Among other things, it requires general tax elections to be “consolidated with a regularly scheduled general election for members of the governing body of the local government, except in cases of emergency declared by a unanimous vote of the governing body.” Special taxes may be presented to the voters at any election.
 
In California Cannabis Coalition v. City of Upland et al., voters in the City of Upland proposed an initiative to repeal an existing City ordinance banning medical marijuana dispensaries. The initiative, if adopted, would have imposed new regulations permitting and establishing standards for up to three dispensaries within the City, as well as imposing a $75,000 annual “licensing and inspection fee” on the dispensaries. In compliance with the Elections Code sections governing initiatives, proponents circulated a petition and obtained signatures from at least 15 percent of the voters within the City after filing a notice of intent with the City. Pursuant to Section 9214 of the Elections Code, the City was obliged to either adopt the initiative without alteration, immediately order a special election or order an agency report and, once the report was presented, adopt the initiative or order a special election.
 
The City ordered a joint agency report to be prepared which showed, among other things, that the $75,000 annual fee would generate income in excess of the costs of regulating a dispensary, and would thus generate revenue for general governmental purposes. The report further found that this excess amount (approximately $15,000) was a general tax. The report then concluded that, with this general tax in the initiative, the initiative could not be voted on during a special election as required under the Elections Code but rather, had to be submitted to the voters at the next general election. The City Council received the report and submitted the initiative to the voters in November 2016, the next general city election. A nonprofit corporation that drafted the initiative filed a petition for writ of mandate, arguing that Article XIII C was inapplicable because the annual fee was not imposed by a local government. The initiative was not approved by the voters, however, the Court determined that the case was not moot and decided the legal issues related to the initiative power and Article XIII C.
 
The California Supreme Court agreed with the Plaintiff, holding that Article XIII C was enacted to restrict only the local governments’ ability to impose taxes, and not to restrict the voters’ initiative power. The Supreme Court relied on prior decisions finding that procedural requirements imposed on local governments do not constrain the voters’ initiative power without evidence that this was the intended purpose, emphasizing the democratic interest in protecting the voters’ initiative power with as few restrictions as possible. Conversely, the California Supreme Court looked to the legislative history and plain language of Article XIII C. Article XIII C, section 2 refers specifically to “local government” in providing for restrictions to adoption or increases of taxes, which is defined in Article XIII C, section 1. Though the City argued that “local government” was broad enough to include the electorate, the Supreme Court looked to the findings and declarations of Proposition 218, which distinguish between taxpayers and local governments: “local governments have subjected taxpayers to excessive tax, assessment, fee and charge increases …. This measure protects taxpayers by limiting the methods by which local governments exact revenue from taxpayers without their consent.” [Emphasis added] The Supreme Court therefore found that the restrictions in Article XIII C only applied to local government, which did not include the electorate, and therefore did not restrict the voters’ initiative power.

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