Arizona Court of Appeals, Division One determines that ballot language using the word “reduce” was misleading when describing a new tax that would go into effect after expiration of a different tax.

In 1995, the residents of a city enacted a transaction privilege tax increase of 0.20% for 30 years to fund the purchase of land.  That increase was a portion of the city’s total transaction privilege tax rate of 1.75%.

The 0.20% component was set to expire in July 2025.  In April 2024, with expiration on the horizon, the city council approved the referral of a measure that would replace the 0.20% component used for purchasing land with a 0.15% component used to fund recreational facilities and first responder resources.  In doing so, the city attorney drafted two proposals for ballot language describing the effect of a “yes” or “no” vote on the measure.  The city council adopted one of these proposals, which used ballot language describing a “yes” vote as “replac[ing] and reduc[ing] the current 0.20% transaction privilege use and tax rate . . . to 0.15%,” and the effect of a “no” vote as “denying the City the authority to replace and reduce the current 0.20% transaction privilege and use tax rate . . . to 0.15%.”

Residents of the city sued to enjoin the use of the ballot language, arguing that the ballot language was misleading.  The city moved to dismiss.  The superior court granted that motion, relying primarily on the discussion of initiative petition descriptions in Molera v. Hobbs, 250 Ariz. 13 (2020), and holding that the city’s ballot language did not communicate objectively false or misleading information and did not obscure the basic thrust of measure.  The residents appealed, treating the matter as an expedited election matter.

The Arizona Court of Appeals, Division One, reversed the decision of the superior court.  As an initial matter, it treated the case as a special action rather than an election appeal—statutory authority is required for an appeal, but the Court had not been directed to any in this context.  But because the residents lacked an equally plain, speedy, and adequate remedy on appeal, the Court concluded it may treat the matter as a special action.

As to the merits, the Court began by clarifying the relevant legal standards.  Both the superior court and the parties treated the ballot language issue as one controlled by Molera and other cases involving initiative petition descriptions under A.R.S. § 19-102.  The relevant statute here, however, was A.R.S. § 19-125, which governs the drafting of ballot language.  That statute, unlike the statute governing initiative petitions, requires neutrality.  So, Molera and related cases were, at most, instructive.

The Court, applying the standard in § 19-125 and the case law interpreting it, then turned to the residents’ arguments.  The residents first argued that the ballot language’s use of the word “replace” as misleading because the current 0.20% tax would expire before the proposed 0.15% tax would take effect, meaning there was nothing to replace.  But, as the Court explained, “replace” had a broader meaning (including “taking the place of”) than residents attributed to it.  Accordingly, it was not misleading to say the new tax would replace the old tax.

What was misleading, in the Court’s view, was the ballot language’s use of the word “reduce.”  Because the new 0.15% rate would take effect only after the expiration of the 0.20% rate, it ultimately reduced nothing: the 0.20% rate would remain in effect, unmodified, until its own expiration, and the 0.15% rate would then be added to the overall transaction privilege tax, effectively serving as a tax increase over what the residents would otherwise pay.  This was misleading and, as a result, the Court concluded that the city should not be allowed to use the ballot language.

Judge Foster authored the opinion, joined by Judges Thumma and Catlett.  Judge Catlett also specially concurred.  He joined the Court’s opinion in full but wrote separately to expand on a point made in a footnote in that decision: typically, the drafting of ballot language is entitled to “due deference” because it is written by a third party (for example, the Secretary of State drafts ballot language for measures referred to the ballot by the Legislature).  Here, however, the entity referring the measure, the city council, was the same entity that approved and adopted the ballot language.  In Judge Catlett’s view, this meant that no deference was warranted.

Posted by: Joshua J. Messer