Santa Monica will officially defend the voter approved Measure GS from a lawsuit seeking to overturn the measure.
Measure GS was part of an expansive list of lawsuits discussed behind closed doors at last week’s Council meeting and the City’s official decision to fight the suit was the only reportable action taken after several hours of discussion.
An organization called the California Business Roundtable, which is composed of senior executive leadership from major employers throughout the state, is filing a suit against the City of Santa Monica to block Measure GS, which established a third tier of real estate transfer tax.
The measure was one of two that sought to raise money from the sale of large properties. GS was by far the larger charging an unprecedented $5,600 per $100,000 on all real property sales or transfers of more than $8 million, with revenue going to fund homelessness prevention, housing projects and schools.
Approved in November 2022, Measure GS was sponsored by then mayor Sue Himmelrich and beat out Measure DT, sponsored by Councilmember Phil Brock. The lawsuit contends GS is invalid as it stipulates money would be split between two causes: funding schools and affordable housing and California law prohibits ballot measures on more than one subject.
According to the analysis presented to voters prior to last year’s election, it is intended to "provide ongoing or emergency income assistance, acquire and rehabilitate existing rental properties as deed-restricted affordable housing, create new deed-restricted housing, and fund programs and services designed to preserve and improve affordable housing for lower income households."
According to the measure, the first $10 million of funds raised annually will go to support public schools, the next $40 million of funds to the homelessness / housing and anything above $50 million will be split 80/20 between housing and schools.
However, the plaintiff argues that Measure GS violates section (8)(d) of article II of the California Constitution, sometimes referred to as the "single-subject" rule. That states, "An initiative measure embracing more than one subject may not be submitted to the electors or have any effect."
More than half of states have a similar clause and courts have upheld the concept of single-subject rules citing possible voter confusion and disenfranchisment when unrelated subjects are combined.
The plaintiffs in the suit say Measure GS includes two separate and disparate subjects. On the one hand, the initiative provides increased funding for general public education, provided by the Santa Monica-Malibu Unified School District. On the other hand, the initiative provides increased funding for a new comprehensive affordable housing program.
According to the plaintiff, if the Measure GS tax increase is imposed as planned on March 1, 2023, "great and irreparable harm will result to members of the plaintiff, and to many other Santa Monica property owners desiring to sell or transfer their real property. Moreover, the citizens of Santa Monica (and Malibu) may be harmed if the unlawful revenue source is relied on to incur debt, or long-term financial commitments by the City or the school district beneficiaries."
A similar measure in Los Angeles has also been challenged in court. Los Angeles voters approved a transfer tax proposal, Measure ULA, in November to support affordable housing and homeless programs. That measure has 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.
The City of Malibu lost a "single-subject" lawsuit over passage of its Measure R in 2014. That law gave voters approval over some retail developments and limiting the percentage of formula retail that a retail center could hold.
The Los Angeles Superior Court ruled the measure illegal in 2016 and an appeal was rejected in 2017.
