City of San Jose v. Howard Jarvis Taxpayers Assn.

Opinion of the Court by Evans, J.

The local debt limitation in the California Constitution prohibits cities and counties from incurring any indebtedness or liability that exceeds their income and revenue for that year, unless the indebtedness or liability has first been approved by two-thirds of the voters. (Cal. Const., art. XVI, § 18, subd. (a).)1 The debt limitation, however, does not apply to indebtedness or liability a local government may incur to fulfill an obligation imposed by law. (See Rider v. City of San Diego (1998) 18 Cal.4th 1035, 1046 (Rider).) In this case, the City of San José (City) seeks to finance the unfunded liability in its retirement plans by issuing pension obligation bonds. It instituted this action under Code of Civil Procedure section 860 et seq. to obtain a declaration that the proposed bonds were valid and did not violate, in particular, the local debt limitation. Defendants Howard Jarvis Taxpayers Association, Citizens for Fiscal Responsibility, and Pat Waite (collectively, HJTA) contend that the pension obligation bonds require voter approval because they will create a municipal debt in excess of the current year’s income.

1 Unspecified…