Santa Monica’s voter approved measure targeting the sale of luxury properties has passed muster following a court ruling last week.
A statewide business group filed the lawsuit claiming the fees were unconstitutional but a judge disagreed.
In November 2022, Measure GS was approved by Santa Monica voters to raise funds from the sale of large properties. The measure imposes a $5,600 per $100,000 charge on real property sales or transfers exceeding $8 million. The generated revenue will be used to support homelessness prevention, housing projects, and schools. Measure GS was sponsored by former mayor Sue Himmelrich and won over Measure DT, sponsored by Councilmember Phil Brock.
However, a lawsuit was filed challenging the validity of Measure GS, arguing that it violated the "single-subject" rule in the California Constitution. This rule prohibits ballot measures from addressing more than one subject. Measure GS proposed splitting the funds between funding schools and affordable housing, which the lawsuit contended was in violation of this rule.
The measure’s intended use of funds was to provide ongoing or emergency income assistance, acquire and rehabilitate rental properties as affordable housing, create new affordable housing, and support programs for improving affordable housing for lower-income households. The first $10 million annually was allocated for public schools, the next $40 million for homelessness and housing, and any amount over $50 million was to be split 80/20 between housing and schools.
This lawsuit brought attention to the "single-subject" rule, which is present in more than half of states, and has been the subject of other legal disputes, such as the case of Measure R in the City of Malibu in 2014.
Last week, Los Angeles Superior Court Judge H. Jay Ford, III, ruled in favor of the defendants City of Santa Monica, Santa Monica-Malibu Unified School District, and Measure GS’s official proponents, Sue Himmelrich and Michael Soloff, in a case brought by Plaintiff California Business Roundtable to challenge Measure GS.
According to the city, Judge Ford found that Measure GS’s findings support the view that the programs supported by the School Fund and the Homelessness Prevention and Affordable Housing Fund are reasonably connected to the common theme of addressing the City’s rent burden problem. As such, Judge Ford found that Measure GS is valid and does not violate the single-subject rule.
The ruling directs the parties to prepare a proposed judgment consistent with the Court’s decision.
Rob Lapsley, president of the California Business Roundtable, said he was disappointed.
"There is no doubt that the proponents of Measure GS violated the single-subject rule by claiming revenue from the measure would go to two unrelated services," he said. "The claim the revenue would fund both schools and affordable housing was a dishonest and deliberately deceptive move on the part of the proponents to garner more support for Measure GS. We are currently reviewing our legal options in this matter."
A similar measure in Los Angeles has also been challenged in court. Los Angeles voters approved a transfer tax proposal, Measure ULA, to support affordable housing and homeless programs. That measure has also been challenged based on the specificity of the proposal. According to the plaintiffs (The Howard Jarvis Tax and the Apartment Association of Greater Los Angeles), the City can’t pass a "special" measure that earmarks funds for only one cause. Rather, measures must be general in nature and fund the general fund.
