Appellate court finds state law unconstitutionally penalizes charter cities for exercising home rule authority

The appellate court’s ruling is consistent with the arguments made in the League of California Cities’ amicus brief and serves to reinforce the strength of the home rule doctrine.

The California Court of Appeal for the Third Appellate District recently ruled a 2018 state law unconstitutional to the extent it penalizes charter cities for exercising their “home rule” authority to manage their own municipal affairs under Article XI, Section 5 of the California Constitution. Cal Cities had filed an amicus brief in the case, Cultiva La Salud v. State of California.

The 2018 state law — as part of the “Keep Groceries Affordable Act” — prohibited cities from adopting taxes on certain groceries, including sodas and other sugary beverages. If a charter city adopted a prohibited tax and a court found that the tax was a valid exercise of the city’s home rule authority, then the state law imposed a penalty. Specifically, it directed the California Department of Tax and Fee Administration to stop collecting that city’s sales and use taxes, effectively depriving the city of all sales and use tax revenue.

The appellate court affirmed a lower court ruling finding the penalty unconstitutional. The court reasoned, in relevant part, that the penalty had no purpose other than to threaten charter cities against exercising their home rule authority to levy a tax for local purposes. According to California Supreme Court precedent, this was “patently unconstitutional.”

The state has a limited amount of time within which it can appeal the ruling to the California Supreme Court. Cal Cities will continue to report on further developments in the case. In the meantime, cities with questions about the impact of the ruling should consult their city attorney.