Opinion ID: 2350715
Heading Depth: 3
Heading Rank: 1

Heading: The Sales Tax Voter Ratification Requirement Is Satisfied By The 1964 Authorization Of A Three-Percent Sales Tax And The 2006 Defeat Of The Repeal Referendum.

Text: Alaska Statute 29.45.670 provides that an increase in the rate of levy of a sales tax approved by ordinance does not take effect until ratified by a majority of the voters at an election. ACT argues that Ordinance 9, which increased the sales tax rate from two to three percent without direct ratification by the voters, is contrary to the requirements of AS 29.45.670. The Borough agrees voter ratification is required by AS 29.45.670, but argues that the requirement was satisfied by both the 1964 authorization of a sales tax rate of up to three percent and the 2006 defeat of the referendum that would have repealed Ordinance 9. ACT argues on appeal that neither of these events fulfilled the statutory requirement. We generally give `liberal construction... to the powers of local government units.' [15] In regard to municipalities' power to levy and collect taxes, we have cautioned that we will not be quick to [infer] limitations on the taxing authority of a municipality where none are expressed. [16] And in reviewing AS 29.45.670 in City of St. Mary's v. St. Mary's Native Corp ., we observed that Alaska's constitution and our prior case law require us to interpret AS 29.45.650(a) in favor of the broad power of municipal governments. [17] Moreover, there is a presumption that proceedings of the governing body of a municipality have been conducted in accordance with the law. [18] ACT contends that the 1964 ordinance authorizing a sales tax rate of three percent did not satisfy the voter ratification requirement of AS 29.45.670 because the rate of levy referred to in the statutory text refers to the actual rate of levy in place at the time an increase is contemplated, not some earlier authorized rate of levy. [19] The statute specifies, however, that only an increase in the rate of levy of a sales tax approved by ordinance must be submitted to voters for ratification. In 1964 Borough voters approved a proposition that authorized the Borough to the extent provided by law... to levy a ... sales and use tax subject to such exemptions as the Assembly may prescribe and not exceeding three percent. In 1975 the Borough Assembly found that a reduction in taxes [could] be made without interfering [sic] with any essential services. The Assembly therefore enacted an ordinance lev[ying] a consumers' sales tax of two percent. No voter action was taken regarding this reduction. The public voted to allow the Borough to levy a sales tax of up to three percent and the Borough has adjusted that rate over the years without voter ratification. Because the three-percent rate of levy in Ordinance 9 was not an increase from the rate previously approved by ordinance, no additional voter ratification was required. [20] In addition, the savings clause included in the same chapter as AS 29.45.670 specifically preserves any right of the Borough as it existed in 1986. [21] As the Borough points out, when AS 29.53.420, the precursor to AS 29.45.670, was enacted in 1972, the Borough sales tax rate of levy was three percent. If the Borough had the right to impose a sales tax at a rate of levy of three percent in 1972, there does not appear to be any reason that the savings clause would not have preserved that right. California considered a similar issue in AB Cellular LA, LLC v. City of Los Angeles. [22] The California court of appeals considered AB Cellular's contention that the City was required to submit an increased cell phone tax to voters for approval pursuant to a proposition giving voters the right to approve any increase of local tax before it goes into effect. [23] The language of that proposition stated in part that [n]o local government may impose, extend, or increase any general tax unless and until that tax is submitted to the electorate and approved by a majority vote. [24] Initially, the court noted that a tax is not deemed increased under California's statutory definition if it [i]mplements or collects a previously approved tax, ... so long as the rate is not increased beyond the level previously approved. [25] The California court then explained: [A] local taxing entity can enforce less of a local tax than is due under a voter-approved methodology, or a grandfathered methodology, and later enforce the full amount of the local tax due under that methodology without transgressing [the voter approval proposition] .... The evil to be counteracted is the increase of local taxes beyond what was formerly approved. [26] We agree with the California court's reasoning in AB Cellular. The Borough voters expressly authorized the Borough to enact a sales tax of up to three percent, and the savings clause at AS 29.45.670 preserved the Borough's right to do so. Although the Borough subsequently reduced the tax rate to two percent, it did not need to seek further voter ratification to raise the tax rate to the amount approved by voters in 1964. [27]