The electorate does not have a fundamental right to vote on an assessment levied upon a specific group of taxpayers for a limited (non-general governmental) purpose, a California Appellate court found in Reid et al. v. City of San Diego et al. In Reid, plaintiffs challenged a two percent assessment levied on lodging businesses operating in the City with 70 or more sleeping rooms by the City of San Diego Tourism Marketing District (TMD) to fund coordinated joint marketing and promotional activities for tourism development as violative of Proposition 26 and the Equal Protection Clause, among other causes of action.
Specifically, plaintiffs (hotel guests who paid the assessment as part of their hotel bill) argued that the assessment violates Proposition 26 because it was never submitted to the electorate for a vote. The City Council passed, by resolution in 2007 and again in 2012, the subject assessment and only permitted hotel owners and operators within the City to participate in the vote for its approval. Plaintiffs alleged that the City was using the TMD assessment power as a means to raise revenue for the general fund without having to seek voter approval to impose a new tax. However, the Court disagreed with plaintiffs’ claims.
First, the Court found that although the right to vote is considered fundamental, it may be limited to those subject to the assessment without having to undergo strict scrutiny. The Court relied on the California Supreme Court case, Southern Cal. Rapid Transit Dist. v. Bolen, in rendering its decision, wherein the Court upheld statutes limiting the vote, in referenda on proposed metro rail beneficial assessment districts, to owners of commercial property who would be subject to the assessment. As is the case here, the Court found that because (1) the TMD does not exercise general governmental powers or provide traditional public services such as schools transportation, utilities, or any service ordinarily financed by a municipal entity; (2) the hotel owners and operators bear the obligation of paying the TMD assessment; and (3) the TMD assessment is a limited purpose assessment for tourism development and expansion of the lodging industry within the TMD geographical area, the voting scheme need only be rationally related to the achievement of TDM’s objectives. While the Court acknowledged plaintiffs’ argument that the assessment is passed on and paid by the guests of the impacted hotels, this so-called secondary effect does not invalidate the assessment.
Second, the Court held that the TMD assessment is not subject to Proposition 26’s requirement for voter approval of taxes imposed by a local government. The TMD Procedural Ordinance, i.e., the ordinance establishing the TMD and authorizing the assessment, does not enact or impose any assessment. The ordinance creates a framework and procedure for the City to define a district and levy assessments by resolution of the City Council. Because the ordinance does not itself impose a tax, there is no Proposition 26 violation.
All in all, the general public does not have a fundamental right to vote under Proposition 26 or the Equal Protection Clause on a limited purpose assessment for non-public services.