256	                   April 24, 2014	                 No. 23

           IN THE SUPREME COURT OF THE
                 STATE OF OREGON

                    Elspeth McCANN,
                         Petitioner,
                              v.
                   Ellen ROSENBLUM,
             Attorney General, State of Oregon,
                        Respondent.
                      Paul ROMAIN
                   and Ronald R. Dodge,
                        Petitioners,
                             v.
                   Ellen ROSENBLUM,
             Attorney General, State of Oregon,
                        Respondent.
                 Lauren G. R. JOHNSON
                    and Lynn T. Gust,
                       Petitioners,
                            v.
                  Ellen ROSENBLUM,
            Attorney General, State of Oregon,
                       Respondent.
        (SC S062082 (Control), S062083, S062084)


   En Banc
   On petitions to review ballot title filed March 3, 2014;
considered and under advisement on April 8, 2014.
   Steven C. Berman, Stoll Stoll Berne Lokting & Shlachter,
PC, Portland, filed the petition for review on behalf of peti-
tioner McCann.
   Paul R. Romain, The Romain Group, LLC, Portland, filed
the petition for review on behalf of petitioners Romain and
Dodge. With him on the petition was Margaret E. Schroeder,
Black Helterline, LLP, Portland.
Cite as 355 Or 256 (2014)	257

   John A. DiLorenzo, Jr., Davis Wright Tremaine LLP,
Portland, filed the petition for review on behalf of petitioners
Johnson and Gust.
   Matthew J. Lysne, Senior Assistant Attorney General,
Salem, filed the answering memorandum. With him on the
memorandum were Ellen F. Rosenblum, Attorney General,
and Anna M. Joyce, Solicitor General.
    KISTLER, J.
    Ballot title referred to the Attorney General for modi-
fication.
     Initiative Petition IP (2014) would change the way that liquor is sold in
Oregon by allowing wholesalers to distribute liquor to “qualified retailers” who
would, in turn, sell the liquor to the public. The measure would also change the
way that the state raises revenue from liquor sales by instituting a new “revenue
replacement fee” in place of the current markup system. Petitioners challenged
the caption, the “yes” and “no” result statements, and the summary in the certi-
fied ballot title. Held: (1) the Attorney General did not fail to substantially comply
with statutory requirements where she used the word “taxes” to describe the
revenue replacement fee; (2) the word “taxes,” without any modification, could
be misleading because it failed to identify that wholesalers would be initially
responsible for paying the tax; and (3) the words “similarly to” in the caption and
“roughly comparable to” in the “yes” vote result statement were misleading in
describing the relationship between the proposed “revenue replacement fee” and
the old markup system and therefore must be modified.
    The ballot title is referred to the Attorney General for modification.
258	                                            McCann v. Rosenblum

	          KISTLER, J.
	        In this consolidated ballot title case, three sets
of petitioners have asked us to review the ballot title for
Initiative Petition 47 (2014). See ORS 250.085(2) (specify-
ing who may petition for review of certified ballot titles).1
We review ballot titles for substantial compliance with ORS
250.035(2). See ORS 250.085(5) (stating standard of review).
For the reasons explained below, we refer the ballot title to
the Attorney General for modification.
	        Initiative Petition 47 (IP 47), if enacted, would change
the way that liquor is sold in Oregon. Currently, the Oregon
Liquor Control Commission (OLCC) governs the retail sale
of liquor for off-premises consumption. ORS 471.730; ORS
471.750. The OLCC appoints private business owners as
agents to operate state-licensed retail liquor stores. ORS
471.750. The OLCC essentially acts as a middleman between
wholesale liquor distributors and retail OLCC liquor stores;
specifically, the OLCC purchases liquor from wholesale dis-
tributors, marks up the wholesale price, and then sells the
liquor at the marked-up price to the OLCC retail stores. ORS
471.730; ORS 471.745; ORS 471.750. The revenue that the
OLCC collects as a result of that markup, less administra-
tive costs, is distributed to the state general fund and also to
counties and cities. ORS 471.805; ORS 471.810.
	        IP 47 would eliminate the current system of state-
licensed liquor stores and allow “holders of distilled liquor
self-distribution permits” (essentially wholesalers) to dis-
tribute liquor to “qualified retailers,” who would, in turn,
sell the liquor to the public. Those retailers would include
private stores with at least 10,000 square feet of store space
as well as smaller private stores that meet certain other
requirements. Among other changes, IP 47 would create
a new administrative agency, the Oregon Distilled Liquor
Board (ODLB), establish regulatory requirements for whole-
salers and qualified retailers, dispose of OLCC property,
and wind down contracts and agreements between OLCC-
licensed liquor stores and the OLCC.
	1
       McCann filed the petition in S062082; Romain and Dodge, the petition in
S062083; and Johnson and Gust, the petition in S062084. We refer to each set of
petitioners respectively as McCann, Romain, and Johnson.
Cite as 355 Or 256 (2014)	259

	        IP 47 also would replace the current markup system
with a “revenue replacement fee” on wholesalers. IP 47, § 16.
As noted, the OLCC sells liquor it purchases from wholesalers
to state-licensed liquor stores at a marked-up price. See ORS
471.745; ORS 471.750(2). Currently, the marked-up price is
roughly 180 percent of the wholesale cost plus certain admin-
istrative costs. See ORS 471.730; OAR 845-015-0138.2 If
IP 47 became law, wholesalers would sell directly to retailers,
eliminating the OLCC markup. To replace the revenue from
the markup, wholesalers would pay the OLCC a “revenue
replacement fee” equal to 71.7% of the wholesale price of the
liquor, plus a small fee per container. IP 47, § 16(1). Those
fees would not be imposed directly on the retailer or the
consumer, although the wholesaler could pass some or all of
those fees on to the retailer who, in turn, could pass them on
to the consumer.

	       The goal of IP 47’s “revenue replacement fee” is to
maintain roughly the same level of revenue for the state’s
general fund, counties, and cities that the current markup
system provides.3 IP 47 implicitly recognizes, however, that
it may be difficult to predict whether the revenue generated
by the new “revenue replacement fee” will match the reve-
nue generated by the current markup system. Specifically,
IP 47 provides for a one-time adjustment to the 71.7% fee.
See IP 47, §§ 73, 80. IP 47 provides that, if the proposed
measure becomes law, a “Legislative Revenue Officer” will
determine in 2016 whether the amount of revenue generated
by the revenue replacement fee between July 1, 2015 and
June 30, 2016 (the “2015 tax year”) falls within an accept-
able range. Id. § 73. If the amount of revenue generated
by the revenue replacement fee during the 2015 tax year

	2
       According to OLCC documentation that McCann attached to her petition,
the marked-up price for a bottle of liquor is calculated as follows: If a case of
liquor costs more than $78, the OLCC adds $14.45 to the wholesale cost of the
case, multiplies the sum by 1.798, adds an outbound freight cost of $1.40 to that
product, and divides the total by the number of bottles in the container, rounding
up to the nearest nickel.
	3
      Most of the revenue generated by the revenue replacement fee would be
available for the same general government uses that revenue from the current
markup is; IP 47, however, dedicates small amounts of revenue from the sale
of each container to a few specified funds, such as funds to pay the costs of the
ODLB and to support law enforcement. See IP 47, §§ 26-28.
260	                                     McCann v. Rosenblum

is less than $190,791,582 or more than $194,645,958, then
IP 47 directs the legislative revenue officer to determine
in 2016 the rate that, if applied to wholesale sales in the
2015 tax year, would have generated a revenue replacement
fee of $192,718,770. Id. That adjusted rate will apply to all
future wholesale sales; the section of IP 47 that authorizes
a rate adjustment in 2016 will be automatically repealed on
January 1, 2017. Id. § 80.
	        The Attorney General certified the following ballot
title:
   “Allows qualified retail stores to sell liquor; imposes
        taxes similar to current state price markup
   “Result of ‘Yes’ Vote:  ‘Yes’ vote expands retail sales of
   liquor by qualified retailers; imposes taxes roughly com-
   parable to current state markup; establishes regulatory
   requirements for sales and distribution.
   “Result of ‘No’ Vote:  ‘No’ vote retains the current sys-
   tem of retail sales of liquor exclusively through Oregon
   Liquor Control Commission agents, retains state markup
   for costs and taxes.
   “Summary:  Under current law, retail sales of liquor by
   the bottle are made exclusively by retail sale agents of the
   Oregon Liquor Control Commission (OLCC). Price deter-
   mined by multiplying cost/case by 1.798, adding opera-
   tion and other costs. Measure would expand the number
   of retailers; current agreements with retail sales agents
   would be terminated, subject to a right to continue to oper-
   ate. Current beer/wine retailers over 10,000 square feet
   would qualify as liquor retailers, provided they are in com-
   pliance with all liquor laws and have successfully completed
   the responsible vendor program. Current markup of prices
   replaced by 71.7% tax, plus per bottle tax; taxes adjusted in
   2017; establishes minimum price. Creates Oregon Distilled
   Liquor Board to encourage industry; OLCC retains regula-
   tory functions. Other provisions.”
	        Petitioners McCann, Romain, and Johnson have
raised various challenges to the caption, results statements,
and summary. We write to address two of those challenges,
both of which concern the ballot title’s description of the
“revenue replacement fee.” The first challenge concerns the
use of the word “tax” rather than “fee” throughout the ballot
Cite as 355 Or 256 (2014)	261

title to describe the revenue replacement fee. The second
challenge concerns the use of the phrases “similar to” and
“roughly comparable to” in, respectively, the caption and the
“yes” vote result statement.
	        We begin with the Attorney General’s decision to
use the word “tax” rather than the word “fee” to describe
the “revenue replacement fee” that IP 47 would impose on
wholesalers. Relying on Bernard v. Keisling, 317 Or 591, 858
P2d 1309 (1993), petitioner Johnson argues that the ballot
title should use the same term that the ballot measure does,
unless compelling reasons exist to use a different term. In
Bernard, the court upheld the Attorney General’s use of the
term “fee” rather than “tax” because the ballot measure had
used that term and because the Attorney General’s use of
that term “substantially complied” with his obligation to
describe the subject matter and major effect of the proposed
measure. Id. at 596-97. The court explained, however, that
the Attorney General could use a different term than the
measure did if doing so were necessary to describe the mea-
sure accurately. Id. at 597. Since Bernard, we have consid-
ered on more than one occasion when the Attorney General
may or must go beyond the words of a measure to describe
either its subject matter or its effects. See, e.g., Caruthers
v. Myers, 344 Or 596, 602-03, 189 P3d 1 (2008) (consider-
ing the appropriate ballot title when federal law clearly pre-
empted part of the measure but did not clearly preempt the
remainder); Wolf v. Myers, 343 Or 494, 500-01, 173 P3d 812
(2007) (recognizing that drafting a ballot title can require
some level of interpretation of the measure).
	        In this case, if the Attorney General had used the
word “fee” to describe the “revenue replacement fee,” her
use of that word would have raised substantial questions.
The money that wholesalers must remit to the OLCC has
more attributes of a tax than a fee. A tax is “any contribu-
tion imposed by government upon individuals, for the use
and service of the state.” Automobile Club v. State of Oregon,
314 Or 479, 485-86, 840 P2d 674 (1992). A fee, by contrast,
is imposed on persons who apply for or receive a government
service that directly benefits them. Id.; see Qwest Corp. v.
City of Surprise, 434 F3d 1176, 1182 (9th Cir 2006) (explain-
ing that the distinction between a tax and a fee is whether
262	                                    McCann v. Rosenblum

the “charge is expended for general public purposes, or used
for the regulation or benefit of the parties upon whom the
assessment is imposed”).
	        It does not appear that much, if any, of the “rev-
enue replacement fee” that wholesalers would pay under
IP 47 would be used to provide services that directly ben-
efit wholesalers. See id. Rather, under IP 47, much of the
money that wholesalers would pay the state would be dis-
tributed, as it currently is, to the state’s general fund, cities,
and counties and would be available for general government
use. That distribution scheme has more attributes of a tax
than a fee. See Automobile Club, 314 Or at 485-86 (defining
the attributes of a tax). Indeed, describing the money paid to
the state by wholesalers as a “fee” would imply inaccurately
that the uses to which that money could be put are far more
limited than IP 47 contemplates.
	        We recognize that a ballot title challenge ordinarily
is not the appropriate forum for deciding legal issues that
require interpretation of a proposed measure. See Bernard,
317 Or at 595 (stating rule). For that reason, we need not
determine conclusively the character of the revenue at issue
here. Rather, the question is whether the Attorney General’s
use of the word “taxes” to describe the charge that whole-
salers would pay under IP 47 “substantially complies” with
her obligation to describe the measure accurately. It does.
Indeed, the use of the word “taxes” is more defensible than
the use of the word “fees” to describe that aspect of IP 47.
	        Johnson raises a related but separate concern. She
reasons that the use of the word “taxes” in the caption is
confusing because it may cause voters to think that consum-
ers will have to pay a sales tax on liquor when, in fact, the
tax will fall on wholesalers. Johnson’s point is an interest-
ing one. We agree with Johnson that the tax (or fee) that
IP 47 imposes is not a “sales tax,” as that term is ordinarily
understood. It is not a tax that consumers are responsible
for paying. We recognize, however, that a tax on wholesalers
may be passed on, in whole or in part, to retailers who, in
turn, may pass it on to consumers. In that respect, although
responsibility for paying the tax falls on wholesalers, the tax
burden ultimately may fall on consumers.
Cite as 355 Or 256 (2014)	263

	        Although one might question, as an economic mat-
ter, who will ultimately bear the tax burden, we agree with
Johnson that the word “taxes,” without more, is misleading
because it does not identify who is responsible initially for
paying the tax. See McCann / Harmon v. Rosenblum, 354 Or
701, 706-07, 320 P3d 548 (2014) (holding that a caption may
be misleading where its description of a tax is unnecessar-
ily generalized). Because wholesalers are required to pay
IP 47’s “revenue replacement” tax initially, the word “taxes”
should be modified to indicate that fact. One way of doing so
would be to describe it as a “wholesale tax.”4
	        We turn now to the second objection, which petition-
ers McCann and Romain raise to the caption and the “yes”
vote result statement. They argue that the taxes that IP 47
would impose are not “similar to” or “roughly comparable to”
the current state price markup. We begin with the caption,
which states: “Allows qualified retail stores to sell liquor;
imposes taxes similar to current state price markup.”
	        Petitioner McCann argues that the phrase “similar
to” promises too much. She reasons that, even if the drafters
of IP 47 sought to generate an amount of revenue similar
to the amount the current markup system generates, the
proposed tax will not necessarily accomplish that goal. She
reasons that whether a tax (or fee) on wholesale sales will
generate equivalent revenue will depend on the volume of
wholesale sales and the wholesale sale prices in a particular
year. Although the measure provides for a one-time adjust-
ment to the wholesale tax rate, and thus seeks to achieve
equivalent revenue that way, she contends that a one-time
rate adjustment based on wholesale sales in the 2015 tax
year does not ensure that the revenue generated in later
years will be the same. McCann reasons that, if wholesale
liquor sales and prices in later tax years vary substantially
from those in the 2015 tax year, then the adjusted rate will
produce substantially more or substantially less revenue
than the adjusted rate would have produced in the 2015 tax
year (and than the markup system currently produces).
	4
       We note that a pending ballot title for Initiative Petition 58 (2014) uses sim-
ilar wording to indicate that wholesalers will pay the tax. Care should be taken,
however, to avoid suggesting that the wholesale tax is a sales tax that would fall
initially on consumers.
264	                                  McCann v. Rosenblum

	       Petitioner Romain argues that “similar to” is inac-
curate for a different reason. He contends that the sections
of IP 47 permitting a “legislative revenue officer” to adjust
the tax rate and exempting in-state liquor distillers from
taxes imposed on out-of-state distillers are unconstitutional
and not severable. It follows, he argues, that the “revenue
replacement fee” will generate no revenue for the state. For
that reason, he contends, the revenue generated by the new
system will not be “similar to” the revenue generated by the
current markup system.

	        The Attorney General responds that the caption
does not state that IP 47 will be revenue neutral, as the pro-
ponents of the measure have argued. Rather, the caption
states only that IP 47 “imposes taxes similar to current state
price markup.” The Attorney General reasons that “similar
to” is close enough, given the rate adjustment mechanism
that IP 47 provides. She also argues that a ballot title should
not speculate on whether a proposed measure will be held
unconstitutional, if the measure passes.

	         We agree with the Attorney General that it would
not be appropriate for her to opine, at this stage of the pro-
cess, whether the two sections of the ballot measure that
Romain identifies are unconstitutional and, if so, whether
they are severable. To be sure, a tax exemption for in-state
distillers might be difficult to defend against a Commerce
Clause challenge. See Bacchus Imports, LTD. v. Dias, 468
US 263, 104 S Ct 3049, 82 L Ed 2d 200 (1984). However, the
other constitutional issue that Romain raises is less certain,
and Romain’s argument ultimately depends not only on
whether the two provisions would be held unconstitutional
but also on whether they would be severable. In this pos-
ture, we cannot fault the Attorney General for declining to
factor those complex legal determinations into her descrip-
tion of the measure’s effects. Compare Sizemore v. Myers,
326 Or 220, 231, 953 P2d 360 (1997) (declining to engage in
“extensive legal interpretation” of the relationship between
the proposed ballot measure and other constitutional pro-
visions), with Caruthers, 344 Or at 601 (referring the ballot
title for modification when the legal effect of the measure
was undisputed).
Cite as 355 Or 256 (2014)	265

	         The issue that McCann raises is more problematic.
The phrase “imposes taxes similar to current state price
markup” implies that the revenue generated by IP 47 will
be “similar to” the revenue generated by the current system.
We assume that the revenue identified in section 73 of IP 47
reflects the annual revenue produced under the current sys-
tem; that is, we assume that the current system generates
revenue ranging from $190,791,582 to $194,645,958 per
year. See IP 47, § 73 (stating that range as the “target” that
the revenue generated by IP 47 should meet).5 The difficulty,
however, lies in predicting whether the new system will
generate similar amounts of revenue annually. As McCann
notes, the prediction that it will do so rests on an assumption
about the volume of wholesale sales that will occur under
the new system as well as the wholesale prices that will be
charged under that system. However, unless and until IP 47
goes into effect, those assumptions are just that.
	        It is true, as the Attorney General notes, that IP 47
provides for a one-time adjustment to the wholesale tax rate.
If the voters approve IP 47 and if the revenue produced by the
measure during the 2015 tax year falls below $190,791,582
or exceeds $194,645,958, IP 47 provides that the legislative
revenue officer will determine in 2016 the wholesale tax
rate that would have generated $192,718,770 in revenue for
the 2015 tax year. That adjusted tax rate will then apply
to all future tax years. However, whether that adjusted tax
rate will generate similar revenue in future years turns on
whether wholesale sales and wholesale prices remain con-
stant. If wholesale sales or wholesale prices for the 2015 tax
year are atypical, then the one-time adjustment that IP 47
provides could result in greater discrepancies between the
revenue generated by the “revenue replacement fee” and the
current markup system.
	        A hypothetical will illustrate the problem. Suppose
that IP 47 passes and that wholesale liquor sales increase
exponentially during the 2015 tax year as new retail sales
outlets stock their shelves for the first time. Suppose also
	5
       Petitioner Johnson represents that those figures reflect the “approximate
total current revenues raised by the Oregon Liquor Control Commission from the
sale of alcohol under the status quo.” No party disputes that representation.
266	                                  McCann v. Rosenblum

that wholesale prices remain constant, even though expe-
rience teaches that prices often rise as demand increases.
Substantially increased wholesale sales could lead to reve-
nue for the 2015 tax year that greatly exceeds $194,645,958
and thus could lead to a corresponding reduction in the
wholesale tax rate. Even though wholesale sales for the
2015 tax year might be atypically high, the reduced tax rate
would continue to apply to wholesale sales in all future tax
years, thereby reducing the revenue the state receives below
that generated by the current markup system. Instead of
correcting any discrepancy in the revenue generated by the
two systems, the one-time adjustment that IP 47 provides
could instead exacerbate it.
	        For that reason, we agree with McCann that the
phrase “similar to” in the caption is not accurate. The phrase
“similar to” promises more than IP 47 may be able to deliver.
For the same reason, we agree with McCann that the phrase
“roughly comparable to” in the “yes” vote result statement is
not accurate. We accordingly refer the caption and the “yes”
vote result statement to the Attorney General for modifica-
tion. We have considered the other challenges that McCann,
Romain, and Johnson raise to the certified ballot title. In
light of the difficulties that the Attorney General faced in
trying to describe accurately and succinctly the extensive
changes that IP 47 would effect, we cannot say that the
remainder of the ballot title does not substantially comply
with her statutory obligations.
	         Ballot title referred to Attorney General for modi-
fication.
