The California Supreme Court issued a ruling Wednesday letting San Francisco take control of more than $490 million in homelessness funds that have been tied up in legal challenges for more than a year.
The windfall will come from Proposition C, an initiative San Francisco voters passed in 2018 that immediately provoked a lawsuit from an anti-tax group. The measure sought to raise $250 million to $300 million a year for homelessness services ― roughly double the typical funding ― by taxing all businesses in the city that have annual revenues above $50 million.
The policy is widely known as the “tech tax” because of the number of rich tech companies in San Francisco. Those companies have been blamed for helping to fuel growing income inequality in a city that, despite its enormous wealth, has one of the worst homelessness crises in the country.
“We’re pleased that this legal victory will free up millions of dollars to provide services, housing and mental health treatment for those in our City who most desperately need it,” City Attorney Dennis Herrera said in a statement. “That is what the voters wanted when they passed Proposition C in November 2018. That is what this victory secures.”
The Howard Jarvis Taxpayers Association and other business-backed groups that fought the law have argued that, like other increases in taxes, Prop C couldn’t be approved without a two-thirds vote (Prop C passed with 61% support.) The California Supreme Court agreed with several lower courts in its ruling Wednesday that the two-thirds rule only applies to taxes proposed by a government body, not to initiatives proposed by private citizens, as Prop C was.
“From the beginning, this case has been about upholding the will of the voters,” Herrera said. “San Francisco voters have the right to direct democracy and self-government.”
The $492 million raised from several hundred businesses since the tax went into effect has been sitting in reserve throughout the legal challenges. The city will is now free to spend it as Prop C mandates: half toward permanent housing; one-quarter toward mental health and addiction services; 15% toward homelessness prevention programs such as rent assistance and eviction defense; and 10% toward emergency shelters and hygiene programs.