The California Supreme Court will take up the constitutionality of a November ballot measure that would kill the voter-approved “mansion tax,” or Measure ULA, in Los Angeles.
The state’s top court will hear arguments on May 8 regarding the constitutionality of the real estate transfer tax, plus dozens of other recently enacted special taxes, Bisnow reported. The court said it would issue a ruling by the end of June.
The court agreed to examine the measure after Gov. Gavin Newsom and the state legislature petitioned to strip the anti-Measure ULA measure from the ballot.
The measure, known as the Taxpayer Protection and Government Accountability Act, seeks to change the percentage of a voter majority that proposed special taxes need to become law.
Measure ULA, enacted a year ago, included a 4 percent tax on nearly all commercial and residential property sales or ownership transfers above $5 million, and a 5.5 percent levy on properties selling or transferring above $10 million.
A failed court challenge has been appealed on grounds it had been misrepresented as a “mansion tax,” while the transfer taxes have mostly impacted commercial sales.
“There’s a two-tiered system right now,” Matthew Hargrove, CEO of the California Business Properties Association, told Bisnow, describing the way the state can pass special taxes.
The ballot measure that he and a coalition of supporters are backing aims to shut down that two-tiered system.
The system was made possible by a 2017 court decision on how cities can get special taxes approved. It essentially created two thresholds for approval — one allowing ballot measures proposed by citizen groups to pass with a simple majority, and another requiring government-proposed measures to pass with a two-thirds majority.
Measure ULA was passed in November 2022 with with 57.8 percent voter approval.
“If the City of L.A. had put [Measure] ULA on the ballot, it would have required a two-thirds vote,” Hargrove said. “But because the City of L.A. did not do it, they deferred to community groups to do it, they got the benefit of that 50 percent vote threshold.”
Hargrove and other measure backers say it restores the historical two-thirds requirement to pass special taxes. They also tout its transparency measures that require detailed ballot descriptions of how the money will be spent.
Closing the loophole would require making changes to the state constitution to clarify the voting threshold.
It would also require expanding the definition of a tax to include charges that state and local governments now classify as fees, according to the state Legislative Analyst’s Office. The measure could require them to be approved by two-thirds of California voters.
Newsom, the legislature and the United to House LA coalition that supported Measure ULA, contend the new measure is unconstitutional.
They argue the measure considered by the state Supreme Court seeks to restructure the state constitution, altering the fiscal powers of the legislative and executive branches and those of the voters well beyond the level of a constitutional amendment, Jonathan Jager, an attorney with Public Counsel who authored an amicus brief for United to House LA, told Bisnow.
“The governor’s position, which the coalition agrees with, is that the Taxpayer Protection Act measure so fundamentally rewrites the state constitution … it’s a revision to the constitution,” Jager said.
Unlike constitutional amendments, revisions to the state constitution can’t be proposed by citizens. They have to come from the legislature, Jager said.
If approved, the new measure would go into effect retroactively, requiring such initiatives passed since Jan. 1, 2022, to return to voters and get the two-thirds majority approval in 2025. That would effectively kill Measure ULA, among about 40 tax initiatives that would be invalidated, Hargrove said
The League of California Cities counts more than 130 initiatives that would be overturned, a figure that Hargrove contested.
— Dana Bartholomew
Read more
Los Angeles
A year into Measure ULA, a stiff real estate market in the city
Los Angeles
Residential brokers dish on Measure ULA
Politics
Los Angeles
Measure ULA challenge lands in federal appeals court