The short term victory opponents of the sale of medical marijuana in Upland registered in 2015 has redounded to what now appears to be their lasting detriment in the wake of a California Supreme Court ruling which will prevent those opponents from using that tactic ever again. Moreover, the decision has now opened the door for the city to, potentially, impose taxes on city residents unilaterally, bypassing the need for the city’s voters to approve the imposition of those taxes.
In October 2014, the California Cannabis Coalition began collecting signatures in Upland for a petition seeking to place a measure on the ballot calling for the city’s ban on medical marijuana dispensaries to be overturned. The measure specified locating the clinics in a relatively limited area along Foothill Boulevard on the far west end of the city, limited the number of operations allowed to sell marijuana to three, and imposed a $75,000 annual per-dispensary fee to pay for licensing and inspections of and regulation and enforcement at and around the establishments.
The petition gatherers went beyond the requirement of getting the signatures of ten percent of the number of registered voters who had voted in the previous election, which would have required that the vote be put on the ballot at the next regularly scheduled municipal election. They managed to collect 6,865 signatures, 5,736 of which were verified by the registrar of voters office as having been signed by registered voters in the city, a number of signatures equivalent to more than 15 percent of the voters participating in the previous election. This triggered a requirement that the ballot measure be placed before the voters in a more timely fashion, in a so-called special election to be held no more than 105 days after the city council accepted the city clerk’s verification of the petition signatures. Thus, the City of Upland appeared to be mandated to hold the election in either May or June of 2015.
A group of Upland residents, consistent with their social and fiscal conservatism, was miffed at the taxpayers having to hold and pay the cost of an off-year election. Even more, they were concerned that the backers of the initiative, who were well aware that on balance Upland’s residents were opposed to marijuana availability in their city, were pushing to have a referendum on the issue in the forum of a special election because of the advantage a special election would provide the initiative’s proponents. Special elections normally have poor voter turnout. In such an electoral forum, proponents would be able to conduct an aggressive and energetic social media and networking campaign among that portion of the city’s electorate most favorably inclined to the accessibility to medical marijuana and marijuana use in general, initiative opponents feared. If this effort to drive enough voters inclined to support dispensaries in Upland to the polls worked and a significant portion of the city population opposed to the concept of open access failed to participate, the initiative’s opponents reckoned the measure might prevail.
Seeking to head off such an eventuality, those adamantly opposed to marijuana availability in Upland convinced the three-member majority of the city council – then-Mayor Ray Musser, councilwoman Carol Timm and then-councilman Glenn Bozar, who were already philosophically opposed to Upland hosting such marijuana clinics – to assist them in stymieing the California Cannabis Coalition’s effort. City attorney Richard Adams, sensing the direction the council majority wanted to take, researched the issue and referenced Section 17.158.100 of the coalition sponsored initiative, Article XIII C Section 1(e) of the California Constitution and Proposition 26 approved by California’s voters in 2010 in propounding a theory that the initiative vote could be held off until the November 2016 general municipal election in Upland. The referenced section of the initiative calls for levying a $75,000 “fee” upon the applicants for a dispensary license. Adams said that the California Constitution and Proposition 26 required that any tax to be levied upon local residents by a municipality must be approved by voters at a general municipal election. The fee designated in the Upland marijuana dispensary initiative qualified as a tax, Adams reasoned, and this gave the council leeway to postpone the initiative election until the following year. The council took official action to do just that.
This was not the end of the matter, however, as the Cannabis Coalition, bankrolled by Randy Welty, the owner of the Tropical Lei strip club and a would-be operator of one of the marijuana clinics envisioned in the initiative, retained famed constitutional rights attorney Roger Diamond to file on behalf of the coalition as well as on behalf of the Upland voters who signed the voter petitions a legal petition for a writ of mandate with San Bernardino Superior Court. In that writ, Diamond stated the California Elections Code Section 9214 and Article 2, Section 11 of the California Constitution required that the city hold the special election that year and that Adams had misinterpreted Article 13c of the California Constitution as applying to a voter initiated initiative when it applies exclusively to an initiative sponsored by a public entity such as a city.
“By its conduct respondents [i.e., Upland city officials] are violating the California constitutional guarantee of the right of initiative and petitioners’ rights under Elections Code Section 9214. There is no conflict between Article 13c of the California Constitution and Elections Code Section 9214,” Diamond asserted in the filing for a writ of mandate.
Furthermore, according to Diamond, the city of Upland mislabeled the $75,000 fee specified in the initiative as a tax. “Petitioners’ proposed medical marijuana dispensary initiative ordinance does not impose any general tax,” Diamond’s filing stated. “Article 13c, Section 1 of the California Constitution defines a ‘general tax’ as ‘any tax imposed for general governmental purposes.’ Petitioners submitted evidence to respondents demonstrating conclusively that the $75,000.00 annual licensing and inspection fee established by proposed Section 17.158.100 of the proposed medical marijuana dispensary initiative petition would not be a general tax but rather a regulatory fee. Without any support in the record whatsoever, respondents have asserted and have allegedly based their position on the false claim that Section 17.158.100 is a general tax.”
The matter came before Judge David Cohn in San Bernardino on Tuesday, May 19. 2015. After Cohn got Adams, assistant city attorney James Touchstone and Diamond to agree to have the matter adjudicated by motion, i.e., on the basis of his ruling rather than through a court trial, he angled most of his questions at Diamond, pressing him to controvert the city’s assertion that the $75,000 fee is a tax. Though Diamond asserted that the city had “artificially minimized” the cost of background checks, licensing processing, follow-up inspections and investigations to a maximum of $56,540 and had acted similarly in making a claim that enforcement and prosecutions of violations would run no more than another $10,000, Cohn asked Diamond to provide a more exact estimation of those costs. Cohn then seized upon Diamond’s statement that “You cannot come up with an exact mathematical figure when you are talking about a future event,” to assert that city had offered an exact figure consisting of total itemized costs of $66,540, which was under the $75,000 specified in the initiative. Cohn ruled in favor of the city. Undeterred, Diamond appealed the matter to the Fourth District Appellate Court, which reversed Cohn, ruling in favor of the California Cannabis Coalition. With the clock ticking toward the 2016 election, the city appealed the matter to the California Supreme Court, again delaying the election in a move widely seen as a stalling tactic. Indeed, the anti-marijuana availability forces prevailed, at least temporarily, claiming tactical victory when the initiative was ultimately placed on the November 2016 ballot with other general municipal election items regularly scheduled for that year, at which time the city’s voters soundly defeated the initiative, which had been given the nomenclature Measure U, with 64.38 percent voting against it and 35.62 percent voting in favor of it.
Despite the city’s show of force, it was having severe difficulty covering the legal fees to keep the California Cannabis Coalition and Diamond at bay. Significantly, the position the city had taken – that the fee was a tax – was at a variance from the position taken by practically every other city in the state, as governments in general are in favor of expanding their ability to raise revenues rather than curtail them. For that reason, in May 2016, the Howard Jarvis Taxpayers Association jumped at the chance to come in and carry on the battle when it appeared the city was staggering under the financial weight of continuing.
With the Howard Jarvis Taxpayers Association representing the city at no cost, the matter remained before the California Supreme Court, even after the point of whether the actual initiative vote would take place before the 2016 election became moot. To the California Cannabis Coalition and Diamond, a determination as to whether the City of Upland had been justified under the California Constitution to deprive those who had qualified their petition for a vote lived on.
On Monday, August 28, the California Supreme Court ruled Upland officials overstepped their authority when they denied the initiative proponents the opportunity to have the matter voted upon in a special election after they secured the requisite number of signatures to do so.
The matter proved to be a highly complex one with a multitude of issues pivoting around the central gravitas of whether the voters’ rights to utilize the initiative process is compromised by the limits put into the State Constitution relating to the imposition of taxes.
In the Supreme Court’s majority opinion, authored by Justice Mariano-Florentino Cuellar, a clash between those two principles, an “interplay of two constitutional provisions” was acknowledged. Cuellar wrote that “multiple provisions of the State Constitution explicitly constrain the power of local governments to raise taxes.” Those, however, come up against, Cuellar noted, “the people’s initiative power.” In that context, he said, “We will not lightly apply such [taxing] restrictions on local governments to voter initiatives, ‘one of the most precious rights of our democratic process.’”
The City of Upland erred in its blurring of the distinction between a citizen-sponsored initiative and one put on the ballot by the city itself through the authority of its city council, Cuellar said.
Even the dissenting opinion, written by Justice Leondra Kruger, upheld the idea that the city should have put the measure on a special election ballot.
“I agree with the majority that the city council erred in refusing the request,” she stated, but said her reasoning was “narrow. The city council should have put the initiative on the special election ballot and left questions about the validity of the fee to be sorted out in the courts. That conclusion would suffice to dispose of this case, which, as the majority says, is now moot in any event. 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.”
An upshot of the entire case is that the previously assumed protection that taxpayers had which prevented local governments from imposing taxes on their constituents without getting those who are to pay the tax to approve it by a majority vote has been compromised. An option now open to those who want to levy a tax without such a vote is that they can have a group of citizens ostensibly independent of City Hall carry out a petition-gathering drive for an initiative containing a tax provision, get the requisite number of signatures on petitions to put the issue on the ballot and then present the initiative to the city council. At that point, under current California law, a city council has two options: it can place the initiative on the ballot or, on its own authority, adopt the initiative by a vote of the council. This offers a way of bypassing the voters in imposing a tax on them.
Diamond told the Sentinel that the Cannabis Coalition achieved victory with the Supreme Court ruling in that, “This sets a precedent so that those who are seeking to have an early election through the initiative process, in the form of a special election on any measure, even if that measure means a tax will be imposed, cannot be denied. The Supreme Court said the right to a speedy election trumps, if I can use that word, a different provision of the State Constitution guaranteeing that a vote on taxes will be held during a general election.”
Diamond said, “This was a very complicated case,” which led to an outcome at least some of those who had precipitated it did not intend. One of those unintended consequences includes removing the taxpayer protection provision that requires that a taxing initiative originating with the government for a specific purpose must be approved by a two-thirds majority of the voters. The Supreme Court ruling compromises that.
Of tremendous moment with the Howard Jarvis Taxpayers Association, Diamond said, was that a ruling along the lines that Supreme Court made will open the flood gates for citizen initiatives entailing tax components that need only a majority vote to pass.
The anti-tax forces “really did screw themselves” in pursuing the case, Diamond said, explaining, “One of the arguments the attorneys for the Howard Jarvis Association were making was that if the appellate court’s decision was allowed to stand as the final decision, you are going to have the hypothetical problem created by the collusion of an unethical city council and mayor where they could have a citizens’ petition done by city employees who drafted it do the dirty work of a city council that wants to give those city employees raises and do all sorts of things bad politicians and corrupt city employees would want to do with that kind of tax money. So once the initiative got enough valid signatures, it would go before the city council and under the initiative petition process the city council would have the option of putting it on the ballot for a vote where people could vote for or against it or the council could just approve it on their own. This illicit collusion would be a way for unethical politicians to arrange it so there would not be a vote of the people. They could manipulate the initiative process to deprive the voters of their right to approve taxes. Once they have that, thereafter they would be able to bypass the electorate altogether and have the city council vote for it. And they are right, that could happen. But the court said that a lot of circumstances could happen and that if something like that comes up they would deal with it at that time, but that they would not rule against us on those grounds because those were extraordinary circumstances that might not occur.”
Within the realm of the intended rather than the unintended consequences, Diamond said, the city had fared no better.
“The city was trying to argue that the $75,000 wasn’t a fee and that it was a tax and that fees are exempt from certain restrictions whereas taxes are not,” Diamond said. “The city was making a legal argument that was the opposite of what they would normally argue. As it turned out, it didn’t matter because the Supreme Court ruled that whether it was fee or a tax, the petitioners were still entitled to a speedy election. The petitioners have the right to get an early election without having to sue the city in advance. The court favored letting the initiative go to the ballot. They [the city] can then sue if they think the provisions are invalid. The Supreme Court’s ruling shifts the burden to those who would challenge the constitutionality of an initiative. Under this ruling, the city cannot force the proponents of a measure to go to court prior to an election to get relief.”
A perhaps minor consideration is the monetary price the City of Upland will now have to bear because of the ploy it used in denying the petitioners their right to a speedy election. Diamond has yet to make a motion to recover his fees from the city, but that is anticipated. He said his application for reimbursement should come in under $100,000. “It will be for something less than that,” Diamond said. “I work very fast. The work in trial court went by very fast because we were trying to get to trial court as quickly as possible. I submitted documents, which mostly came from the city and I had arguments one day in court. There wasn’t a protracted trial. It was done by oral arguments and submissions. The work with the appellate court was just a writ and some arguments. I had to go to San Francisco [for the arguments before the Supreme Court]. It was complicated in terms of the implication for the city but not all that involved on my end. I haven’t totaled the hours at this point. I would say I’m probably beneath $100,000.”
At the Howard Jarvis Taxpayers Association they are ruing the day they took up the Upland case.
“They were very upset with the decision,” said Diamond.
Based upon the language in the decision, the Howard Jarvis Taxpayers Association must be more vigilant than ever in monitoring local governments and the support networks they have which will use the precedent set in the Upland case to place before voters initiatives that have taxes layered into them and which can now be approved by a simple majority vote rather than the two-thirds threshold previously needed.   -Mark Gutglueck