Is Prop. 13 tax-revolt banner unraveling?

By , Staff correspondent of The Christian Science Monitor

The tax-revolt banner hoisted so jauntily by Howard Jarvis and a majority of California voters in 1978 appears to be in tatters.

Mr. Jarvis and Proposition 13 co-author Paul Gann charge the California Supreme Court with shredding their precedent-setting tax-limitation law in several recent decisions -- especially an Aug. 5 ruling that upheld a San Francisco business levy.

''Prop. 13'' itself remains in force, but the State Supreme Court's interpretations of specific provisions -- as in the recent San Francisco case -- have opened the way to circumventing its intent and undercut a basic provision: that local taxes may not be raised except with the approval of two-thirds of the voters.

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Meeting in Los Angeles after the Aug. 5 decision, Messrs. Gann and Jarvis announced their intention to propose a new initiative that will give the court no leeway in its interpretation.

Five of the seven members of the California Supreme Court ruled that a business tax, enacted by San Francisco's Board of Supervisors and ratified by a simple majority of the city's voters in 1980, was not in violation of a Prop. 13 requirement that local governments may impose ''special'' taxes only by a two-thirds vote. The judges held that only taxes earmarked for special purposes, not general government expenditures, require the two-thirds majority.

Several observers, including Pacific Legal Foundation attorney John Findley, who argued the case against the San Francisco tax, say the ruling may even mean that a simple majority of a city council could levy a new tax without having to seek voter approval. That point, said one muncipal official, may be the next to be tested before the state's high court.

Meanwhile, a spokeswoman for the League of California Cities indicated that a number of municipal governments that have been waiting for the San Francisco decision probably will act on similar taxes of their own in the wake of the decision.

In a dissenting opinion, Justice Frank Richardson charged the court majority with widening ''the hole which they have cut in that protective fence which the people of California thought they had constructed around their collective purse by the adoption of Proposition 13.''

In prior cases, the court ruled:

April 30, 1982 -- that voters in local tax districts could raise nonproperty taxes (in this case a sales tax to finance Los Angeles transit operations) by simple majority votes. This was the first major exception to Prop. 13.

May 10, 1982 -- that local governments could increase property taxes without voter ratification to finance public employee retirement systems approved prior to the passage of Proposition 13.

Prop. 13 has at least one other feature its proponents might address in any new referendum. Each time a new or existing house is sold, the selling price becomes its valuation for tax purposes. A real estate slump hit before communities could significantly benefit from this provision. But eventual recovery in the housing market should -- despite the 1 percent tax limitation -- escalate revenues.

San Francisco Mayor Diane Feinstein said the court decision ''means fiscal survival'' for her city -- ''the ability to plan ahead.'' The mayor indicated new hope that a ''transit-development fee'' -- a one-time, $5-per-square-foot assessment on downtown construction, which is facing a court challenge -- will be upheld.

But even in the city which most directly benefits from the new ruling there is strong dissent. Quentin Kopp, president of the Board of Supervisors, said Aug. 5 was ''a sorrowful day for San Francisco business.'' He added that the decision was predictable, given the ''propensity of the California Supreme Court to drive a hole in Proposition 13 every chance it gets.''

The San Francisco Chronicle charged the court ''has taken a meat-ax to Proposition 13. It has reduced the great 'tax revolt' of 1978 . . . to little more than a muted whisper.''

Writing the decision for the court majority, Justice Stanley Mosk called the two-thirds vote requirement ''inherently undemocratic.'' He noted that Prop. 13 itself was passed by less than a two-thirds majority.

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