Chargers’ Stadium Effort: New Ruling Could Affect Voter Approval Requirements

As most San Diegans know, whether the Chargers stay in San Diego depends on whether the team can get a new stadium built in San Diego.  Any such stadium, however, will require some type of voter approval if taxes will be used to build the stadium.

With the deadlines for placing initiatives on the ballot fast approaching, further details of the Chargers’ proposed plan for obtaining the necessary voter approval are already beginning to leak out.  One potential site for a new stadium is near the San Diego Convention Center.  As a result, the stadium effort has become intertwined with an (initially separate) effort to expand the San Diego Convention Center.

In 2011, the San Diego City Council passed an ordinance that resulted in the creation of a special tax district.  This special tax district was created to impose a special tax that would only be used to help finance a proposed expansion of the San Diego Convention Center. Only certain San Diego hotels were subject to this special tax and only those hotels voted on the tax.

In City of San Diego v. Shapiro, (2014) 228 Cal.App.4th 756, the Court of Appeal held that the special tax was invalid because all registered voters in the City of San Diego were not allowed to vote on whether to enact the tax.  The decision was based, in part, on Proposition 218, which added the following provision to the California Constitution:

“No local government may impose, extend, or increase any special tax unless and until that tax is submitted to the electorate and approved by a two-thirds vote.”

Cal Const, Art. XIII C § 2, subsection (d) (emphasis added).

Although the City of San Diego defined the “electorate” for the purposes of this special tax as only those hotels that would actually be subject to the special tax, the Court held this was impermissible because, based on the way the City’s ordinance was structured, the “electorate” had to include all registered voters, not just those who were subject to the special tax.  In turn, the Court held the special tax was invalid because it was not approved by two-thirds of all registered voters.  As a result, the expansion of the San Diego Convention Center did not go forward as planned.

Proposition 218, however, also added a provision to the California Constitution that allows local governments to impose taxes with only a simple majority vote (rather than the two-thirds vote) as long as the tax is a general fund tax and not a special tax:

“No local government may impose, extend, or increase any general tax unless and until that tax is submitted to the electorate and approved by a majority vote.”

Cal Const, Art. XIII C § 2, subsection (b) (emphasis added).  The difference between a “general tax” and a “special tax” is that a general tax is a tax imposed for “general governmental purposes” whereas a special tax is tax imposed for “specific purposes.”  See Cal Const, Art. XIII C § 1.

Until last week, this appeared to pose a major hurdle for the Chargers because if the Chargers were going to seek tax money for the specific purpose of building a new stadium, it is likely such a tax would be a special tax.  As outlined above, a special tax requires approval from two-thirds of the electorate.  The Chargers, however, would presumably prefer a tax measure that only requires approval from a majority of the electorate rather than from two-thirds of the electorate.  To do so, the tax measure would need to be structured in such a way that it qualifies as a general tax, while at the same time still providing funds necessary for the specific purpose of building a stadium.  This would seemingly be a difficult line to walk.

On March 18, 2016, however, the Fourth District Court of Appeal announced a decision in California Cannabis Coalition v. City of Upland that could be a major boost for the Chargers’ position.  In Upland, the Court held, “[W]e decline to construe [Cal Const, Art. XIII C§ 2] as applying to taxes imposed by initiative.”  The Court’s basis for doing so was that the very language of the article restricts its applicability to only those taxes imposed by a local government:

“No local government may impose, extend, or increase any special tax unless and until that tax is submitted to the electorate and approved by a two-thirds vote.”

Cal Const, Art. XIII C § 2, subsection (d) (emphasis added).  Article XIII, of course, is the same article that sunk the San Diego Convention Center expansion due to the two-thirds vote requirement.

The expansion of the San Diego Convention Center, however, was attempted via a tax measure placed on the ballot by the local government, not through an initiative.  When it comes to voter initiatives, the California Constitution states:

“An initiative statute or referendum approved by a majority of votes thereon takes effect the day after the election unless the measure provides otherwise.”

Cal Const, Art. II § 10 (emphasis added).

In other words, it appears the Upland decision provides a way for the Chargers to obtain tax money for a new stadium with only a simple majority vote so long as they place a special tax on the ballot via an initiative rather than via the local government.  Upland states that Article XIIIC, which is the source of the heightened two-thirds voter approval requirement for special taxes, applies only to taxes imposed via local government and does not apply to taxes originating from a voter’s initiative.  Thus, the Chargers could likely use an initiative to place a measure on the ballot that creates a special tax specifically to fund a new stadium and, if so, they would only need a majority of voters in order for the measure to pass.

Given the fact that Upland may be appealed to the California Supreme Court, and given the City of San Diego’s legal history with special tax measures, it will certainly be interesting to see how and whether the Chargers can walk the line necessary to build a stadium in San Diego.