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Government and People
OFFICE OF THE GENERAL COUNSEL
Council of the District of Columbia
1350 Pennsylvania Avenue, N.W. - Suite 4
Washington, D.C. 20004
April 4, 2006
Kenneth J. McGhie, General Counsel
Dear Mr. McGhie:
Section 16(c)(3) of the District of Columbia Election Code of 1955, effective June 7, 1979 (D.C. Law 3-1; D.C. Official Code § 1-1001.16(c)(3)), allows the Board of Elections to consult with this office to ensure that initiatives are in the proper legislative form. In addition, you have asked if the proposed initiative is the proper subject for an initiative. This office previously reviewed a substantially similar proposal and opined, based on its requirement that certain funds be dedicated to specific purposes, that it was not the proper subject of an initiative. The proposal was subsequently resubmitted without comment from our office. Our comments, which are relevant to both proposals, focus only on three specific issues and do not constitute an endorsement of the propriety or legality of any remaining provisions of the initiatives.
Based on my review, it is my opinion that as currently drafted, the proposals are not the proper subject for an initiative under District law because the limitation on revenue collection would amount to an appropriation of funds as that term has been construed by the D.C. Court of Appeals, and two of its provisions conflict with or exceed the Council's authority granted in the District of Columbia Home Rule Act, approved December 24, 1973 (87 Stat. 813; D.C. Official Code § 1-204.01 et seq.) - dictating the use of a specific parcel of land, and the requirement that the Council exercise authority by a two-thirds vote. Because this proposal is legally objectionable, it should be revised before it is certified as the proper subject for an initiative.1
The proposed Video Lottery Initiative of 2006, according to the summary submitted with the legislative text would amend the Lottery and Charitable Games Control Act to expand the lottery by allowing Video Lottery Terminals ("VLTs"), provide a fee of 25% of the net revenue from each VLT to the District, establish the initial VLT facility at a small site in Ward Eight, and depending on the version, permit one licensee to operate VLT's for the first 10 years.
1. The 25% fee limitation on net revenue constitutes a law appropriating funds.
The power of initiative is co-existent with the power of the legislative branch to enact legislative acts except that it is not as extensive, because it cannot involve a law appropriating funds. The Initiative, Referendum, and Recall Charter Amendments Act of 1977, effective March 10, 1978 (D.C. Law 2-46; D.C. Official Code § 1-204.101 et seq.), defines an initiative as:
In Convention Center Referendum Comm. v. District of Columbia Bd. of Elections & Ethics, 441 A.2d 889, 917 (D.C. 1981), the court states that "(a)ll seven judges (indeed, all nine) do agree that the Charter Amendments' exception barring initiatives for "laws appropriating funds" prohibits the electorate from attempting to fund an authorized program." Ten years after the Convention Center case, an en banc Court of Appeals, in Hessey v. District of Columbia Bd. of Elections & Ethics, 601 A.2d 3 (D.C. 1991), further clarified that the "laws appropriating funds" exception to the right of initiative also prohibited "acts allocating funds", including measures to establish new funds, or restrict the "discretion of the District government's elected officials to allocate revenues . . ." Id. at 18. See also District of Columbia Bd. of Elections & Ethics v. Jones, 481 A.2d 456 (D.C. 1984)(Board of Elections and Ethics properly rejected the proposed District of Columbia Unemployment Compensation Initiative of 1984 because it would have violated the laws appropriating funds exception and would have negated or limited a budget act of the Council by forcing the District into making interest payments and seeking additional appropriations for employer contributions to the unemployment compensation fund after the Council had passed laws to prevent such appropriations and expenditures.).
Section 3-1351 of the proposed initiative provides that all VLT usage fees collected under the act "shall be accounted for and managed in accordance with the applicable laws and regulations of the District of Columbia." In the findings and purposes section of the proposed initiative (section 2(7)), it is stated that "it is the strong recommendation" that the VLT fee revenue be allocated between the public schools, senior citizen prescription drug relief, and the balance to the general fund. The D.C. Court of Appeals has sanctioned this approach.3
Going further however, section 1358 of both proposed initiatives require the Board to collect an annual VLT Usage Fee of 25% of the net VLT proceeds. This provision unlawfully caps the amount of revenues that may be collected, and amounts to allocating revenues in a manner that is not permissible. Here, an entity is proposing how much it will tax itself, or is an exercise of the electorate deciding what the tax rate on a business will be. This may not be done by initiative. Dorsey v. District of Columbia Bd. of Elections & Ethics, 648 A.2d 675, 677 (D.C. 1994) (the electorate may no more eliminate [booting fines] by initiative than it could abolish or lower the sales tax or local income tax - matters integral to the "power of the purse" which Congress and the Council reserved exclusively to the elected government. (Citing Hessey v. District of Columbia Bd. of Elections & Ethics, 601 A.2d,3, 9,15 (D.C. 1991) (en banc)).4
The Home Rule Act defines revenues to mean "all funds received from taxes, fees, charges, and miscellaneous receipts...." D.C. Official Code § 1-201.03(10). The initiative would require the Lottery Board to spend additional funds to administer the measure, and there is no estimate of what the necessary additional resources would be.5 It is not known how much money will be needed from the new revenues to fund the Board's operations, and this is a determination that is vested by the Charter in the Council and the Mayor. The District of Columbia Court of Appeals has interpreted the "laws appropriating funds" limitation "very broadly, holding that it "extend[s] ... to the full measure of the Council's role in the District's budget process ..." Dorsey v. District of Columbia Board of Elections and Ethics, 648 A.2d 675, 677 (D.C. 1994) (quoting Hessey, 601 A.2d at 20). The word `appropriations' when used in connection with the functions of the Mayor and the Council in the District's budget process refers to the discretionary process by which revenues are identified and allocated among competing programs and activities. Id. at 677.
In the past, the Council has used a taxing structure unique to the type of franchise or license that is being granted, usually requiring an set annual fee to be paid to cover start up costs, while in addition the operation is subject to other normal District of Columbia franchise and income taxes. See, e.g. Comcast cable franchise; D.C. Official Code § 34-1254.05 (A cable operator shall pay to the District a franchise fee of at least 5% of its annual gross revenues, contribute 1 % to public access corporation; provide at least 1 % of gross revenues to support public, educational and government channels). That agreement specifically provides that the amount of the franchise fee shall be set forth in the franchise agreement and that the "franchise fee shall not be deemed a tax or payment in lieu of taxes or fees of general applicability imposed by the District". A similar allocation was imposed upon an open video system franchise (payments made pursuant to this section are in addition to (and not in lieu of) any other commitments, fees or taxes owed by the Company to the District)6; and the bus shelter franchise (Mayor is directed, and based upon an evaluation of the proposals received following an open request for proposals, to enter into a franchise agreement for the installation and maintenance of bus shelters on public space). D.C. Official Code § 9-1152.
The Video Lottery Initiative of 2006(B) restricts the location of VLT operations to one site and provides that no additional VLT facilities may be authorized until ten years after the grant of the first license. (Section 2(5); 3-3153(e); 3-1354(b) and (h); 3-1355(a)). This grant of authority is more in the nature of a franchise than a license. See e.g. International Telemeter of Columbia Corp. v. Columbia, 478 S.W.2d 391, 393 (Mo. 1972), where the court found that, under the city charter, grant of a franchise is not properly the subject of an initiative petition. Neils v. Seattle, 185 Wash. 269, 277 (Wash. 1936) (the power to grant franchises was directly and specifically vested in the legislative authority of the city, that is, the mayor and city council, and could not be delegated to the voters or others).
2. The measure conflicts with section 492 of the District of Columbia Home Rule Act.
The United States Court of Appeals in Marijuana Policy Project v. United States, 353 U.S. App. D.C. 267 (D.C. Cir. 2002), stated that the Board of Elections may not accept initiatives that "conflict with powers granted to the D.C. Council in the Home Rule Act. .." The proposal exceeds the power granted to the Council under section 492 of the Home Rule Act to the extent that it dictates a specific use for a specific parcel of land. See, e.g., American University Park Citizens Assoc. v. Burka, 400 A.2d 737, 747 (D.C. 1979) ("Congress granted the Zoning Commission authority to regulate the use, area, and height of buildings; the BZA authority to grant variances and special exceptions; and the Board of Commissioners (and later the District of Columbia Council) authority to close streets and alleys.").
The initial designated VLT site is described as the "approximately 9,000 square foot area consisting of [lots and squares) ... targeted for redevelopment by the Anacostia Economic Development Corporation . . .". To the extent that it is not currently zoned for the proposed activity, a hearing would have to be held by the Zoning Commission prior to a zoning change or the grant of a variance. Courts have found the existence of such conditions to remove the subject from the initiative process.
Two cases are Baum v. City of St. Louis, 123 S.W.2d 48 (Mo. 1938) (If it, would not be valid if adopted by the council, its infirmities cannot be cured by an affirmative vote of the electors), and State ex rel. Powers v. Donohue,, 368 S.W.2d 432 (Mo. 1963) (en banc) (referendum procedure to amend the county zoning ordinance invalid because such power was specifically reserved by charter to the planning commission and county council. The court ruled that any purported enactment of an amendment to the comprehensive zoning ordinance without compliance with the county's charter would be unlawful and void). The Baum case was cited and followed in Dewey v. Doxey-Layton Realty Co., 277 P.2d 805, 807-808 (Utah 1954), in which the court held in part as follows:
Although one version of the proposal does permit the Board to consider additional sites, it is difficult to understand how more than one applicant would be eligible when an applicant is required to demonstrate that they own or have the right to possess more than 50% of "property that is eligible to become a designated VLT site" when that site is defined by specific lot and square as one that is controlled by the Anacostia Economic Development Corporation.' (See § 31354(aXl) (50% of property eligible to become initial designated VLT site); § 3-1355(c)(1) (50% of property eligible to become designated VLT site under expansion proposal)). If that site is unavailable for VLT use, it is unclear under one of the proposals what would happen, while under the other proposal (the "B" Initiative), a two-thirds vote of the Council would be required to use an alternate site.
3. The two-thirds vote requirement conflicts with the Council's authority under the Home Rule Act to act by simple majority.
The proposed initiative would require a 2/3rd vote of the Council to approve a proposal to authorize additional sites for VLT operations. See § 1355(b). I believe this is unenforceable and inconsistent with the Home Rule Act that requires only a majority vote for the Council to act. See section 412 (a) of the Home Rule Act (D.C. Official Code §1-204.12 (a) ("The Council, to discharge the powers and duties imposed herein, shall pass acts and adopt resolutions, upon a vote of a majority of the members of the Council present and voting, unless otherwise provided in this Act or by the Council."). (emphasis added). Moreover, the Council's authority the change the provisions of initiative measures is unrestricted, and the requirement of a super-majority vote restricts that ability.
This office is aware of concerns raised that the proposal may violate federal gambling prohibitions applicable to the District of Columbia. See, e.g., 15 U.S.C. §§ 1171 - 1178, ("Johnson Act") which prohibits the possession and operation of certain "gambling devices" as defined in the act, in certain jurisdictions, including the District of Columbia. Given that the Court of Appeals has cautioned that courts should decline to consider pre-election challenges to the constitutionality or legality of an initiative in all but the most extreme cases, it is doubtful that the Board of Elections could reject the initiative on this basis. Committee for Voluntary Prayer v. Wimberly, 704 A.2d 1199, 1202 (D.C. 1997); citing Hessey v. Burden, 615 A.2d 562, 574 (D.C. 1992), although this approach may be subject to a different interpretation in light of the decision in Marijuana Policy Project v. United States, 353 U.S. App. D.C. 267 (D.C. Cir. 2002) that the Board may not approve a measure that conflicts with federal law. Thus, no opinion is expressed as to whether the proposed initiative would violate the Johnson Act, or any other provision of federal law.
Because this initiative interferes with the appropriation power to identify revenues and allocate them among competing programs and activities, it violates the appropriation limitation on initiatives under D.C. Official Code § 1-204.101(a), conflicts with section 412 and 492 of the Charter, and therefore is not a proper subject for an initiative. See, Hessey v. District of Columbia Board of Elections and Ethics, 601 A.2d 3, 18 (D.C. 1991) (en banc). This proposal is legally objectionable and should be revised before being submitted to the voters.
cc: Honorable Linda W. Cropp, Chairman
Members of the Council
1. As with the previous proposals, the numbering scheme is not consistent with that used for District of Columbia laws, although these inconsistencies do not affect the validity of the initiative. It is noted that the organic act, the Law to Legalize Lotteries, Daily Numbers Games, and Bingo and Raffles for Charitable Purposes in the District of Columbia, effective March 10, 1981 (D.C. Law 3-172; D.C. Official Code §§ 3-1301 et seq., and 22-1716 et seq.) ("Lottery and Charitable Games Control Act ") was an Initiative act that was approved by voters on November 21, 1980. The numbering-scheme in the organic Lottery and Charitable Games Control Act was inconsistent with the style and numbering of Council acts when it was approved.
2. See also section 2(a) of the Initiative, Referendum, and Recall Procedures Act of 1979, effective June 7, 1979 (D.C. Law 3-1; D.C. Official Code § 1-1001.02), which contains the same definition for an initiative.
3. See D. C. Board of Elections and Ethics v. District of Columbia, 866 A.2d 788, 795 (D.C. 2005) (Initiatives can "propose authorizing legislation that the Council could enact," raise revenues without directing their allocation, or "contain a 'non-binding policy statement' that revenues should be allocated for specified purposes."), quoting Hessey v. D. C. Board of Elections and Ethics, 601 A.2d 3, at 19 (D.C. 1991).
4. See also, Restaurant Assoc. of Metropolitan Washington v. D.C. BOEE, C.A. No. 041783 (D.C. Super. Ct. May 21, 2004) (Opinion of Judge Mary A. Terrell) (this Court must adhere to the broad interpretation of the "law appropriating funds" limitation stated in Hessey, which is that the limitation extends to the full measure of the Council's role in the District's budget process.)
5. This analysis does not consider whether the fiscal impact statement requirements imposed by section 602(c)(3) of the District of Columbia Home Rule Act, approved December 24, 1973 (87 Stat. 813; D.C. Official Code § 1-206.02(c)(3)), applies to initiatives, or if the requirement applies, the timing of the submission of the statement. Section 602(c)(3) requires that the Council "submit with each Act transmitted ... an estimate of the costs which will be incurred by the District as a result of the enactment of the act ..." for each of the first four years the act is in effect.
6. That act also provided that the company shall provide, on an annual basis over the course of each year of the term of the Franchise, Ten Thousand Dollars ($ 10,000) to be used by OCTT to fund the District's efforts relating to technology training, including, but not limited to, OCTT's hiring of students to teach on-the-job skills relating to the operation and management of the city's municipal cable television channels; an aggregate commitment of $ 50,000; $ 10,000) at the Closing of this Agreement and additional payments of $ 10,000) on the anniversary date the succeeding years of the Franchise. See, the Approval of Starpower Communications, LLC's Open Video System Franchise Act of 2004, effective March 17, 2005 (51 DCR 11431).
7. The Chief Financial Officer's real property tax database lists the owner of the state lot and squares as Tomorrow's Hope LLC RELCO Corp.; 2245 N Green Valley Pkwy # 424; Henderson NV 89014-5024.
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