Since California voters approved Proposition 13 in 1978 to limit property taxes, raising taxes to fund infrastructure, facilities, and services has required a vote at a general election. In subsequent years, Propositions 62, 218, and 26 added a range of additional limitations on taxation and other forms of public finance. Collectively, those measures have had myriad effects on the ways cities and counties accomplish the public’s business, including the “fiscalization of land use” and the creation of complicated alternative public finance techniques.

On August 28, 2017, a divided California Supreme Court issued an important new decision authored by Justice Cuéllar—California Cannabis Coalition v. City of Upland, __ Cal.5th __ (Case No. S234148)—that addresses whether constitutional measures such as Proposition 218, which limit the ability of “local governments” to impose, extend, or increase general taxes, also restrict the constitutional right of voters to impose taxes via ballot initiative.

The case arose following a nonprofit corporation’s qualification of an initiative that proposed to (1) repeal an existing local ordinance banning medical marijuana dispensaries, (2) adopt regulations permitting and establishing standards for the operation of up to three dispensaries within the City, and (3) require that each dispensary pay the City an annual licensing fee. The City prepared an elections report that concluded the fee would exceed the cost of issuing a license and conducting annual inspections. The City thus concluded that the initiative constituted a general tax that could not be voted on at a special election but rather, under Proposition 218, it had to be voted on at a general election.

In response, the initiative proponents filed for writ of mandate in superior court arguing that the City was required by elections law to submit the initiative to the voters at a special election and that Proposition 218 did not apply because the fee was not a tax and it was not imposed by “local government.” The superior court disagreed and denied the writ, but the Court of Appeal reversed, holding that Proposition 218 only governs taxes that are imposed by “local government” and thus does not apply to an initiative adopted by the voters.

The Supreme Court granted the City’s petition for review in June of 2016, but before it could hear the case the initiative was submitted to the voters and resoundingly defeated in November of 2016. Despite the fact it was moot for the parties, the Court decided to address the case because it presented important public issues that could evade review.

Following a detailed analysis of the language and purpose of Proposition 218 and the people’s right of “direct democracy” via ballot initiatives, the Court held that the Proposition 218 requirement that general taxes be submitted to the voters at a regularly scheduled general election applies only to “local governments” and not to the voters unless there is unambiguous evidence that the measure was intended to constrain the initiative power. In the Court’s view, nothing in Proposition 218 supports the conclusion that “local government” was meant to include the electorate.

The Court reasoned that its holding was based squarely on “the longstanding and consistent line of cases emphasizing courts’ obligation to protect and liberally construe the initiative power and to narrowly construe provisions that would burden or limit its exercise.” In so reasoning, the Court noted that the state constitution refers to the power of initiative not as a right granted to the people but rather as a power reserved by them. Since then, courts have consistently declared it their duty to “jealously guard” and “liberally construe” the right so that it not be “improperly annulled.”

The Court also provided guidance for other cases that involve the tensions of competing constitutional provisions. In particular, the Court noted that once a city receives a petition signed by at least 15 percent of the voters, elections law requires the city to (1) adopt the ordinance without alteration, (2) immediately order a special election, or (3) order a report and, once the report is presented to the city council, adopt the ordinance or order a special election. Because these requirements are mandatory, the City erred in ignoring them. In the future, according to the Court, “cities should follow section 9214 and order a special election. At that point, either the city or other interested parties may pursue any appropriate legal challenge to the measure either in the pre, or more likely, postelection context.”

Justice Kruger wrote a lengthy opinion, joined by Justice Liu, concurring in the judgment and agreeing that the City erred in ignoring the election law deadlines but dissenting from the majority’s holding regarding Proposition 218. According to Justice Kruger, “[a] tax passed by voter initiative, no less than a tax passed by vote of the city council, is a tax of the local government, to be collected by the local government, to raise revenue for the local government. None of this could have been lost on the electorate that, also by initiative, amended the California Constitution to set ground rules for voter approval of local taxes.”

Given that it is far easier to achieve a simple majority vote on a tax measure, California Cannabis Coalition could have enormous effects—at least in the short run—on local efforts to raise revenues to fund a broad range of infrastructure, facilities, and services. In the long run, however, this case may well be seen as a Pyrrhic victory. Ironically, the Supreme Court majority itself seemed to inadvertently recognize the potential temporary nature of this victory, acknowledging that the voters have the power to adopt a measure that is unambiguous in its purpose to restrict the electorate’s own initiative power, tying themselves to the proverbial mast as Ulysses did.