General Tax Measure with Related Advisory Measure on Same Ballot Does Not Turn It Into a Special Tax

Last week, the California Court of Appeal clarified what happens to a general tax measure when it is placed on the same ballot as a related advisory measure that asks how revenues from the general tax measure should be spent. In Johnson v. County of Mendocino, the court held that a Mendocino County cannabis business tax measure remained a “general tax” under state law, even though an advisory measure on the same ballot asked County voters their priorities for using those cannabis tax revenues.  
 
At the November 2016 election, Mendocino County voters approved Measures AI (cannabis tax) and AJ (advisory measure). Throughout the election, the County consistently identified Measure AI as a “general tax” and Measure AJ as a non-binding advisory measure. Measure AI received 63 percent voter approval. Under Proposition 218, general taxes may be adopted with a simple majority of voters while special taxes require a two-thirds supermajority.         
 
A local taxpayer challenged the tax, contending that under Proposition 218, the placing of the two measures on the same ballot effectively made them “inseparable” and thereby changed Measure AI into a “special tax” requiring supermajority approval of County voters. The taxpayer alleged that the tax was invalid because it did not secure a two-thirds supermajority.   
 
The court focused on the definitions of “general tax” and “special tax” contained in Proposition 218 and related cases, stating that “[A] tax is general ‘when its revenues are placed into the general fund and are available for expenditure for any and all government purposes.” The court also stated, “a tax is ‘special’ when ‘its proceeds are earmarked or dedicated in some manner to a specific project or projects.’”   
 
The court noted that Measure AI placed a general tax on cannabis businesses and that revenue from the tax would help fund County services. The court also noted that Measure AJ, which proposed that a majority of that revenue be used to fund marijuana business regulation, mental health services, County road repair and other specific services, was nonetheless advisory and not legally binding on the County. In other words, passage of Measure AJ would not legally limit the County Board of Supervisor’s discretion in how Measure AI funds could be spent.   
 
As a result, the court concluded that, because no Measure AI funds were legally “earmarked or dedicated” to any specific project by Measure AJ, the cannabis tax remained “general”. Therefore, Measure AI was properly passed as a “general tax” by a simple majority of voters.
 
If you have any questions about Proposition 218 or would like assistance in drafting ballot measures, please contact the authors of this Legal Alert listed to the right in the firm’s Municipal Law and Special Districts practice groups, or your BB&K attorney.
 
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