In a major decision on the scope of Proposition 218, the California Supreme Court on July 14 unanimously struck down a property assessment imposed by the Santa Clara County Open Space Authority in 2001.
The court said the county's report on the assessment "fails to identify with sufficient specificity the 'permanent public improvement' that the assessment will finance, fails to estimate or calculate the cost of any such improvement, and fails to directly connect any proportionate costs of and benefits received from the 'permanent public improvement' to the specific assessed properties."
Quoting a dissent from the Fourth District Court of Appeal, the high court stated: "An assessment calculation that works backward by starting with an amount taxpayers are likely to pay, and then determines an annual spending budget based thereon, does not comply with the law governing assessments, either before or after Proposition 218."
The court found that the county also "failed to demonstrate proportionality," and added, "Accordingly, we conclude that the assessment is invalid for failing to meet the requirements of Proposition 218."
According to Proposition 218, an assessment can be imposed only for a "special benefit" conferred on real property (Article XIII D, Section 2(b)), and the assessment on any parcel must be in proportion to the special benefit conferred on the particular parcel (Article XIII D, Section 4(a)).
Such assessments require only a majority vote of the property owners, weighted by the financial interest of the owners. Because of the majority-vote provision, a number of local governments have been looking at assessments to finance general government services and non-specific public improvements, as in this case.
In 2001, the Santa Clara County Open Space Authority imposed an assessment of $20 per single-family home to acquire and maintain open space, and the levy was approved by a 50.9 percent "yes" to a 49.1 percent "no" margin. The plaintiffs in the case, including the Silicon Valley Taxpayers Association and the Howard Jarvis Taxpayers Association, said the $20 levy was really a special tax.
The county's Open Space Authority argued that because a weighted majority of property owners approved the assessments, it furthers Proposition 218's emphasis on voter consent. The court responded that "voter consent cannot convert an unconstitutional legislative assessment into a constitutional one."
The court also opined: "Proposition 218 clearly mandates that a special benefit cannot be synonymous with general enhancement of property value."
In analyzing the Open Space Authority's assessment, the court found: "Here, with a district of 314,000 parcels, OSA shows no distinct benefits to particular properties above those which the general public using and enjoying the open space receive. … For an assessment to be valid, the properties must be assessed in proportion to the special benefits received."
The Open Space Authority has collected $56 million under the illegal assessment. The San Jose Mercury News reported that no decision has been made on whether the money will be returned. Doug McNea, president of the Silicon Valley Taxpayers Association, said he will push for a refund of the illegal tax.
San Jose City Attorney Rick Doyle told the Mercury News that the decision does not bode well for the 911 fee or other "fees" the city might wish to impose. "This one is not so good for local governments," he said.
The case is Silicon Valley Taxpayers Association, Inc. v. Santa Clara County Open Space Authority, No. S 136468 (July 14, 2008).
In related news:
Reacting to Court's Decision, Oakland City Council Strikes Down New Tax. The Oakland City Council voted unanimously July 22 to reject a landscape and lighting tax increase approved by property owners two months ago but challenged over the vote count. The action, which will save taxpayers $12 million, came after the council met behind closed doors with city lawyers. The city would have had a difficult time proving that the benefits, including street lights and medians, would be enjoyed by the homeowners paying the tax, as opposed to the general public, the city's lawyers said.
The Oakland tax hike had been challenged by a resident because of the vote-weighting system that was used. The election was influenced by the heavily weighted vote of the Port of Oakland in support of the tax hike. David Mix, the Montclair resident who challenged the tax, called the council's action "a huge victory." Mr. Mix added: "My anger was not about the extra $72 on my property tax bill. It was about the procedure and the way the city conducts its business." (Source: San Francisco Chronicle, July 23.)
Cal-Taxletter July 25, 2008
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