Former San Diego council member challenges ballot language of tax on second homes – San Diego Union-Tribune

A former San Diego city council member is challenging the language used in the ballot materials backing Measure A, the proposed tax on second homes slated for the June 2 primary.

Scott Sherman, a former District 7 council member, filed three petitions in San Diego County Superior Court on Friday and Monday, arguing that the title, description and analysis submitted by the city of San Diego about Measure A for inclusion on the June ballot contain “false and/or misleading statements, all of which should be stricken.”

He is asking the court to require edits to the measure’s language and, if the Friday deadline for making changes isn’t met, to cull Measure A from the ballot.

Councilmember Sean Elo-Rivera, who authored the proposal, did not immediately reply to a request for comment.

The proposed tax calls for an initial annual levy of $8,000 that would rise to $10,000 in subsequent years for thousands of second homes that have been identified as unoccupied for more than 182 days out of the year. For corporate-owned dwellings, there would be a $4,000 surcharge the first year that would jump to $5,000 the following year. It’s estimated that there are a total of 5,140 such homes in the city.

The legal challenges set forth across the three petitions point to multiple aspects of Measure A’s ballot wording.

One is whether the tax will actually impact the housing market by increasing supply or whether it will simply be a tax.

The petition disagrees with the city’s claim that the ordinance will return “vacant homes to the market, increasing supply and relieving pressure on rents and home prices.” It counters that such language is “false and misleading. Measure A imposes a tax and nothing else.”

Sherman’s petition also questions the city’s language about how money raised will be used. The petition cites the city’s argument in support of Measure A that it claims says the tax’s revenue will go toward “affordable housing, homelessness prevention, and essential city services.” But, the petition counters, “Measure A imposes a tax payable into the City’s general fund without restriction on the collected funds uses.”

The city’s March 10 budget analyst report for the measure said all revenue would be “unrestricted and deposited into the City’s General Fund.” It added the measure’s revenue “could be used to support rental assistance, affordable housing development, and infrastructure, but would not be restricted to those purposes” and could also be used for libraries, parks, public safety and other services.

Another point of contention is about whether the revenue from the tax will be subject to audits. The petition cites language by the city, in its discussion of the ballot prepared for voters, that all “proceeds generated by the Empty Homes Tax shall be included in the annual audit of the City’s Annual Comprehensive Financial Report conducted by the City’s outside independent auditor.”

The petition says audits are not built in. “Nowhere in Measure A is this referenced,” the petition says. “It is at least misleading to suggest that Measure A either imposes or requires an annual audit.”

Two other disputes center on definitions and usage of everyday words: empty and intent.

One petition says the “subject homes are not necessarily ’empty;’ rather, Measure A defines ’empty’ by the number of ‘vacant’ days, with ‘vacant’ undefined.” Using “empty” that way, the petition argues, is “artificial” and “inconsistent with the plain meaning” of the word.

There’s also an argument about the law’s actual versus stated goal. Sherman’s legal filing zeroes in on the word “intend” — where the city makes statements including “The Empty Homes Tax is intended”  and “The new tax is also intended.”

In his petition, Sherman argues that “The ‘purpose’ of Measure A is to impose a tax on certain housing. Anything beyond this is speculative and argumentative, which is improper in a ballot summary.”

If Measure A passes, the tax would go into effect Jan. 1, 2027. First payments would be due by April 1.

“Measure A discourages corporations, out-of-state investors, and absentee owners from keeping homes vacant during a housing shortage and encourages vacant homes to be used as homes again,” reads the ballot argument submitted by proponents. “Those who make their homes available for San Diego families to rent or buy pay nothing. Those who keep homes empty pay a tax, with the revenue funding services that benefit all San Diegans.”

Arguments against the measure submitted to the city include a discussion of legal risk: “Measure A is likely also illegal and will be challenged in court, costing hundreds of thousands of your tax dollars in lawyer fees and dragging out for years.” In a fiscal impact statement, a city report says the ordinance could raise $9.2 million to $21.4 million in the first year, destined for the general fund.

Elo-Rivera has been a proponent of finding ways to make San Diego’s housing more affordable, and this tax was conceived as a pathway toward boosting supply.

Elo-Rivera’s broader proposal earlier this year — to tax short-term rentals and second homes — proved divisive and drew hundreds of people on both sides of the issue to a five-hour hearing that focused largely on the short-term rental portion of the proposed ballot measure. When council committee members rejected it, Elo-Rivera sought to salvage his plan by limiting the vacation rental portion of the measure to only those rentals that are corporate-owned. That too failed.

But earlier this month, the San Diego City Council — in a near-unanimous decision — agreed to let voters decide whether a hefty tax should be imposed on thousands of second homes that are sitting empty most of the year.

Staff writer Lori Weisberg contributed to this report.