Taxpayer organizations recently lost two lawsuits against the City of Los Angeles alleging violations of Proposition 218. In its first interpretation of the initiative, the California Supreme Court held that the city's apartment inspection fee was not subject to the voter approval provisions of Proposition 218. In the other case, an appellate court ruled that the city's water service fees and the transfer of money from the water fund to other funds were not subject to Proposition 218. In the apartment inspection fee case, the state Supreme Court chose a fairly narrow interpretation of Proposition 218, the 1996 Right to Vote on Taxes Act, which added article XIII D to the California Constitution. The ruling pleased many cities, about 90 of which filed amicus briefs in the case, but angered taxpayer groups, which said the court created a loophole for local government. In July of 1998, the City Council approved an apartment inspection program intended to combat slum housing. To fund the program, the council levied a $12-a-year fee on each of the city's approximately 750,000 apartments. Apartment owners filed a lawsuit, but lost at the trial court level when the judge ruled that the fee was not subject to Proposition 218 because it applied only to owners of rental units. However, a unanimous three-judge panel of the Second District Court of Appeal reversed the lower court, saying the charge was a user fee for property related service and, thus, subject to Proposition 218 (see CP&DR Legal Digest, October 1999). The city had argued that it could avoid putting the fee to voters because the levy was a regulatory charge on a business, not a tax on property. In a 5-2 decision, the California Supreme Court overturned the appellate court. Writing for the majority, Justice Stanley Mosk said neither the apartment owners nor the city were entirely correct. "The mere fact that a levy is regulatory (as this inspection fee clearly is) or touches on business activities (as it clearly does) is not enough, by itself to remove it from article XIII D's scope," Mosk wrote. "But the city is correct that article XIII D only restrict fees imposed directly on property owners in their capacity as such. The inspection fee is not imposed solely because a person owns property. Rather it is imposed because the property is being rented. It ceases along with the business operation, whether or not ownership remains in the same hands. For that reason, the city must prevail." Mosk dissected the language of Proposition 218, noting a crucial difference between a fee imposed on an incident of property ownership, versus a fee on a person or parcel as an incident of property ownership. "[T]axes, assessments, fees and charges are subject to the constructional strictures when they burden landowners as landowners. The [Los Angeles] ordinance does not do so: it imposes a fee on its subjects by virtue of their ownership of a business — i.e. because they are landlords," Mosk wrote. "What plaintiffs ask us to do is alter the foregoing language — change ‘as an incident of property ownership' to ‘on an incident of property ownership.' But to do so would be to ignore its plain language meaning — namely, that it applies only to exactions levied solely by virtue of property ownership. We may not interpret article XIII D as if it had been rewritten." Chief Justice Ronald George, and Justices Joyce Kennard, Kathryn Werdegar and Ming Chin joined Mosk. Justice Janice Rogers Brown issued a dissent that was joined by Marvin Baxter. "In my view, the voters did not intend the courts to look any further than a standard dictionary in applying the terms of article XIII D," Brown wrote. "The dictionary defines an ‘incident' as ‘something incident to something else,' that is ‘dependent upon or involved in something else.' In other words, if the imposition of a fee depends upon one's ownership of property, it comes within the purview of article XIII D unless otherwise excepted." The water fees case was more clear cut, as a unanimous three judge panel of the Second District Court of Appeal upheld Ronald Sohigian's decision that a taxpayers' group had no grounds for its lawsuit. "Appellants contend that the charges imposed for water service in Los Angeles are in reality special taxes, imposed as an incident of property ownership, and therefore, require voter approval. We disagree," Justice Gary Hastings wrote for the court. "The usage rates are basically commodity charges which do not fall within the scope of Proposition 218. … The charges for water service are based primarily on the amount consumed, and are not incident or directly related to property ownership." The court also held that the city charter authorized the City Council to transfer water fund surpluses to a reserve fund, and then to the general fund. The Cases: Apartment Association of Los Angeles County v. City of Los Angeles, No. S082645, 01 C.D.O.S. 209, 2001 Daily Journal D.A.R. 237, filed January 8, 2001. Howard Jarvis Taxpayers Association v. City of Los Angeles, No. B137639, 00 C.D.O.S. 9465, filed November 1, 2000, ordered published November 29, 2000. The Lawyers: For Apartment Association: Trevor Grimm, California Apartment Law Information Foundation, (213) 380-0303. For Jarvis: Timothy Bittle, (916) 444-9950. For L.A. in apartment case: Miguel Dager, deputy city attorney, (213) 847-0165. For L.A. in Jarvis case: Fay Chu, deputy city attorney, (213) 367-4580.