The California First Appellate District ruled on June 30 that San Francisco’s Proposition C of the November 2018 general election only required a simple majority vote instead of a two-thirds supermajority vote to become law. The court concluded that Proposition C, otherwise known as the Homelessness Gross Receipts Tax, was a voter initiative and not a government initiative. The measure imposed a tax on taxable gross receipts over $50 million, and for those subject to tax under the alternative ‘administrative office’ taxing regime an additional 1.5 percent payroll tax, the proceeds of which were to be used for funding homeless services in San Francisco.
The City of San Francisco has collected hundreds of millions of dollars so far in Proposition C tax revenue but has not used any of the funds due to the possibility that the pending litigation could invalidate the law. Both San Francisco Mayor Breed and the Board of Supervisors have proposed ballot measures to unlock these funds in the event a negative court decision does invalidate the Homelessness Gross Receipts Tax. (See PwC’s previous Insight San Francisco considers new taxes to address economic disruption and revenue concerns.)