Did Court Give Citizens’ Plan Advantage over Chargers Initiative?

San Diego, CALIF. – The California Supreme Court has stayed a lower court ruling allowing proposed tax increases for earmarked purposes, like the one planned to pay for a new NFL stadium in downtown San Diego, to pass via a simple majority.

What it means is that the initiative sponsored by the Chargers to raise taxes on hotel guests to pay for the stadium must now pass the two-thirds vote threshold unless the state high court itself adopts the lower court’s conclusion.

The Chargers proposal, now Measure C, seeks to raise the hotel tax to 16.5 percent from 10.5 percent to help pay for the city’s share of the $1.8 billion stadium project and attached convention center expansion. The Chargers would contribute $650 million.

The key issue surrounding this Supreme Court wrinkle, is what it might mean for the Citizens’ Plan Initiative  (now Measure D). That initiative is expected to be verified by the City Clerk’s office in two weeks, and placed before the voters of San Diego in November.

Sponsored by former Councilmember Donna Frye and supported by a coalition of environmental groups and former Padres owner John Moores, the initiative would set the TOT at 15.5 percent and establish a series of incentives and limitations on future council decisions related to tourism.

Most importantly, the Citizens’ Plan, unlike the Chargers Plan, does not trigger the two-thirds threshold because it is a general tax — the money goes directly into the general fund and is not earmarked.

Jim Sutton, one of most respected election law attorneys in the state, whose firm was part of the team involved in drafting the Citizens’ Plan, said in this recent op-ed piece, “Among the reasons the Citizens’ Plan enacts a general tax and requires only a majority vote are: whether hotels will avail themselves of the tax credits to promote tourism and expand the Convention Center is completely voluntary and by definition not yet known, and there is no guarantee of any funding, or any particular amount of funding, for these specific purposes; any hotel tax revenues deposited into the general fund will be used for general governmental purposes as determined by the Council, and not for any specific purpose; and the Citizens’ Plan does not constitute ‘ballot box budgeting’ of the type implicated when voters are asked to approve a tax to be used for a named purpose, does not tie the Council’s hands relative to spending and does not involve any bonds or indebtedness.”

An attorney with one of the firms involved in reviewing the measure told IVN San Diego, “It’s easy to understand why at first pass, many qualified attorneys could misread this initiative. They’re simply seeing the creation of a new authority in language which is actually a limitation on a current authority. The only part of the initiative that requires a public vote at all is the setting of the TOT rate. The balance of the provisions are either voluntary incentives or limits on the council’s current authority.” He continued, “The Citizens’ Plan limits spending authority by prohibiting the use of general fund money to pay for a stadium and capping general fund subsidies for a convention center expansion to an amount equal to 2% of taxable hotel revenues. The plan also requires a separate public vote to approve any spending on the waterfront.”

The only part of the initiative that requires a public vote at all is the setting of the TOT rate. The balance of the provisions are either voluntary incentives or limits on the council's current authority.

Author and attorney for the Citizens’ Plan, Cory Briggs, told the San Diego County Taxpayers Association last week that the Chargers and/or the NFL would likely have to come up with $100 to $150 million more to fund their joint facility should it come to fruition with the Citizens’ Plan, instead of their own initiative.

Briggs and City Attorney Jan Goldsmith have had public battles over the legality of the Citizens’ Plan. But that frosty relationship might be beginning to thaw.

Last week Briggs characterized a recent memo from Goldsmith that suggested both measures might require a two-thirds vote as quote, “raising the correct questions.” Briggs said there are simple, direct, and legally sound answers that are supported by previous court precedents that clears the Citizens’ Plan of any legal hurdles.

Briggs told IVN San Diego, “Without the initiative, the Council has the right to fund or subsidize (directly or through credits) both the Chargers and the convention center expansion without limit and without a vote of the people. The City Attorney memo asks legitimate legal questions that we will be happy to answer.” Briggs continued, “The correct answer is that The Citizens’ Plan does not create a new financing authority or a special tax. It limits the current authority of the Council. The courts have made it clear that the voters have the right to limit government spending authority by a majority vote.”

Former city councilmember Donna Frye was the signer of the initiative. On the recent court developments Frye told IVN San Diego, “We’ve always believed that the Citizens’ Plan only needs a simple majority because no money is earmarked. That belief is based upon sound legal counsel from multiple independent reviews. For over a decade the public has been denied the right to vote on whether to increase tourist taxes. The Citizens’ Plan provides a public vote and a public benefit, neither of which has happened the last two times the tourism tax was increased.”