______________________________________ 

______________________________________________________________________________ 

OFFICE OF THE ATTORNEY GENERAL
 State of California
 

JOHN K. VAN DE KAMP
 Attorney General
 

OPINION : 

: No. 90-501 

of : 

: OCTOBER 25, 1990 

JOHN K. VAN DE KAMP : 

Attorney General : 

: 

RODNEY O. LILYQUIST : 

Deputy Attorney General : 

: 

THE HONORABLE MARIAN BERGESON, MEMBER, CALIFORNIA SENATE, 

has requested an opinion on the following question: 

Do in lieu taxes, mitigation revenues, and tax increment funds given by a

redevelopment agency to a school district pursuant to Health and Safety Code sections 33401 and

33676 constitute "property tax revenue" required to be deducted under Education Code section

42238 in computing the amount of a school district's state general aid? 

CONCLUSION 

In lieu taxes, mitigation revenues, and tax increment funds given by a redevelopment

agency to a school district pursuant to Health and Safety Code sections 33401 and 33676 do not

constitute "property tax revenue" required to be deducted under Education Code section 42238 in

computing the amount of a school district's state general aid. 

ANALYSIS 

School districts obtain funds from numerous sources and for various general and

specific purposes. One major source of funds for a district is the state, and under one of the state's

programs, school districts receive general purpose funds pursuant to a complex formula set forth in

Education Code section 42238. (See 72 Ops.Cal.Atty.Gen. 205 (1989).) Part of the calculations in 

arriving at the net amount given by the state under this particular statute involves subtracting money

received by a district from specified sources. Education Code section 42238, subdivision (h)

provides: 

"The Superintendent of Public Instruction shall apportion to each school

district the amount determined in this section less the sum of: 

"(1) The District's property tax revenue received pursuant to Chapter 3

(commencing with Section 75) and Chapter 6 (commencing with Section 95) of Part

0.5 of the Revenue and Taxation Code. 

1. 90-501
 
 

"(2) The amount, if any, received pursuant to Part 18.5 (commencing with

Section 38101) of the Revenue and Taxation Code. 

"(3) The amount, if any, received pursuant to Chapter 3 (commencing with

Section 16140) of the Government Code. 

"(4) Prior years taxes and taxes on the unsecured roll. 

"(5) Fifty percent of the amount received pursuant to Section 41603. 

"(6) The amount of motor vehicle license fees distributed pursuant to Section

11003.4 of the Revenue and Taxation Code." 

The question presented for resolution is whether funds received by a school district

from a redevelopment agency pursuant to the provisions of Health and Safety Code sections 33401

and 33676 constitute "property tax revenue" for purposes of deduction under Education Code section

42238, subdivision (h)(1).1 We conclude that they do not. 

Under the Community Redevelopment Law (Health & Saf. Code, §§ 33000-33855),

redevelopment agencies are formed in communities with the goals of "(1) the creation of physical,

social, economic, and environmental conditions to remove and prevent the recurrence of blight; (2)

the creation of jobs and low-to-moderate income housing; and (3) the attraction of private

investment towards these ends. [Citation.]" (Marek v. Napa Community Redevelopment Agency

(1988) 46 Cal.3d 1070, 1082.) A redevelopment agency prepares a detailed plan for a project area

and is "endowed with broad powers to acquire property through purchase and condemnation (§

33391) and to `[m]ake and execute contracts and other instruments necessary' to complete

redevelopment projects (§ 33125, subd. (c))." (Ibid.) 

As for the financing of a redevelopment agency's projects, the Court of Appeal 

explained in Bell Redevelopment Agency v. Woosley (1985) 169 Cal.App.3d 24, 27: 

"Though an Agency is given broad powers to implement this plan, it does not

have the power nor ability to levy a tax to finance these efforts. (Huntington Park

Redevelopment Agency v. Martin (1985) 38 Cal.3d 100, 106; 56 Ops.Cal.Atty.Gen.

464, 469 (1973).) Instead, the Agency obtains the funds needed to acquire property

and make improvements by accepting financial assistance from any public or private

source, borrowing money, and issuing bonds. Incurrence of debt is by far the most 

common method utilized by an Agency. This is done through the issuance of `tax 

allocation bonds.' The primary source of repayment of this indebtedness is `tax

increments' received by the agency from governmental taxing agencies. The 

mechanics of tax increment financing was described in Redevelopment Agency of 

San Bernardino v. County of San Bernardino (1978) 21 Cal.3d 255, 259. `[I]f, after

a redevelopment project has been approved, the assessed valuation of taxable 

property in the project increases, the taxes levied on such property in the project area

are divided between the taxing agency and the redevelopment agency. The taxing

agency receives the same amount of money it would have realized under the assessed

valuation existing at the time the project was approved, while the additional money 

1

The other deduction provisions concern revenues received under such statutory schemes as the

Timber Yield Tax Law program and Williamson Act open space land subvention program. (See 72

Ops.Cal.Atty.Gen. 205, 207 (1989).) 

2. 90-501
 
 

resulting from the rise in assessed valuation is placed in a special fund for repayment

of indebtedness incurred in financing the project.' (Italics in original.) The increase 

in assessed valuation occurs because of the new construction and revitalization in the 

project area. Once the debt is paid, the additional tax revenues revert back to the

taxing agency. The Legislature devised this financing scheme so that redevelopment

would largely pay for itself." (Fn. omitted.) 

With this redevelopment law background in mind, we look first to whether "in lieu

taxes" are subject to deduction under Education Code section 42238. A redevelopment agency may

give "an amount of money in lieu of taxes" to a school district with respect to property that the

agency owns in a redevelopment project area.2 Health and Safety Code section 33401, subdivision 

(a) provides in part: 

"The agency may in any year during which it owns property in a

redevelopment project pay directly to any city, county, city and county, district,

including, but not limited to, a school district, or other public corporation for whose

benefit a tax would have been levied upon the property had it not been exempt, an

amount of money in lieu of taxes." 

It is apparent that these "in lieu taxes" do not constitute "property tax revenue" levied upon the

subject property, and moreover they are not "received pursuant to . . . the Revenue and Taxation

Code." (Ed. Code, § 42238, subd. (h)(1).) They must come from some other source (since the

property is exempt) and were never derived from or had the character of property taxes collected or

allocated with respect to the redevelopment agency's property. The statutory language for making

the deduction under the Education Code provision is not met by these funds received pursuant to

Health and Safety Code section 33401, subdivision (a). 

It is evident, however, that these funds are intended by the Legislature to replace

property tax revenues that would otherwise be "lost" by the school district due to the redevelopment

agency's ownership of the property. By replacing the tax revenues without making the deduction

under Education Code section 42238, a school district will receive an economic benefit with little 

apparent purpose. Did the Legislature intend to grant a "windfall" to a school district merely

because a parcel of real property is owned by a redevelopment agency? We have found nothing in 

the legislative histories of these statutes to answer this question. 

In these circumstances it is not our function to speculate concerning whether a

legislative oversight has occurred. "If the words of the statute are clear, the court should not add to 

or alter them to accomplish a purpose that does not appear on the face of the statute or from its

legislative history." (People v. Knowles (1950) 35 Cal.2d 175, 183; accord, Schmidt v. Superior

Court (1987) 43 Cal.3d 1060, 1066; California Teachers Assn. v. San Diego Community College 

Dist. (1981) 28 Cal.3d 692, 298.) 

Here the requirements for making a deduction under Education Code section 42238,

subdivision (h) are clear. We have previously observed that the statutory language is narrowly 

drawn. "In this subdivision, not all sources of revenue that a district might receive under various

statutory schemes have been included, for the Legislature has been careful to particularize the types

of revenues which are to be included." (72 Ops.Cal.Atty.Gen. 205, 207-208 (1989).) Funds 

2

Property owned by the state or a local government is exempt from property taxation. (Cal.

Const., art. XIII, § 3, subds. (a), (b).) 

3. 90-501 
received by a school district under the terms of Health and Safety Code section 33401, subdivision

(a) are not "property tax revenue received pursuant to . . . the Revenue and Taxation Code." 

As for "mitigation revenues" received by a school district, Health and Safety Code

section 33401, subdivision (b) states in part: 

"The agency may also pay to any taxing agency with territory located within

a project area other than the community which has adopted the project, any amounts

of money which the agency has found are necessary and appropriate to alleviate any

financial burden or detriment caused to any taxing agency by a redevelopment

project. The payments to a taxing agency in any single year shall not exceed the

amount of property tax revenues which would have been received by that taxing

agency if all the property tax revenues from the project area had been allocated to all

the affected taxing agencies without regard to the division of taxes required by

Section 33670 . . . ." 

Health and Safety Code section 33670 states in turn: 

"Any redevelopment plan may contain a provision that taxes, if any, levied

upon taxable property in a redevelopment project each year by or for the benefit of

the State of California, any city, county, city and county, district, or other public

corporation (hereinafter sometimes called `taxing agencies') after the effective date

of the ordinance approving the redevelopment plan, shall be divided as follows: 

"(a) That portion of the taxes which would be produced by the rate upon

which the tax is levied each year by or for each of the taxing agencies upon the total

sum of the assessed value of the taxable property in the redevelopment project as

shown upon the assessment roll used in connection with the taxation of that property

by the taxing agency, last equalized prior to the effective date of the ordinance, shall

be allocated to and when collected shall be paid to the respective taxing agencies as

taxes by or for the taxing agencies on all other property are paid . . . and 

"(b) . . . that portion of the levied taxes each year in excess of that amount

shall be allocated to and when collected shall be paid into a special fund of the

redevelopment agency to pay the principal of and interest on loans, moneys advanced

to, or indebtedness (whether funded, refunded, assumed, or otherwise) incurred by

the redevelopment agency to finance or refinance, in whole or in part, the 

redevelopment project. . . ." 

While mitigation revenues given to a school district as a "taxing agency" under

Health and Safety Code section 33401 have a "cap" measured by the amount of property taxes levied

against property in the project area, they are not necessarily generated by the levying of property 

taxes. The mitigation revenues may come from any number of other sources available to a

redevelopment agency. 

More importantly, as with the in lieu taxes, mitigation revenues simply are not

"property tax revenue received [by the school district] pursuant to . . . the Revenue and Taxation

Code." (Ed.Code, § 42238, subd. (h)(1).) Even if the revenues were originally generated by the

school district and collected as property taxes, they were initially allocated to the redevelopment 

agency. It is not the redevelopment agency, however, that must "receive" the property tax revenue

in order to qualify for the deduction under the statutory language; rather, it is property tax revenue 

4. 90-501
 
 

 

received by the school district pursuant to the Revenue and Taxation Code that is subject to 

deduction. 

As with the in lieu taxes, we have found nothing in the legislative histories of the

relevant statutes suggesting that the express language of Education Code section 42238 should be

ignored. Requiring the mitigation revenues to be deducted would run counter to their purpose of

alleviating "financial . . . detriment caused . . . by a redevelopment project." (Health & Saf. Code,

§ 33401, subd. (b).) We are constrained to follow the terms of the statutes as they are written and

in light of their purposes. Mitigation revenues received by a school district under the provisions of

Health and Safety Code section 33401, subdivision (b) are not deductible as "property tax revenue

received pursuant to . . . the Revenue and Taxation Code." 

Finally, with respect to "tax increment funds," Health and Safety Code section 33676,

subdivision (a) provides: 

"Prior to the adoption by the legislative body of a redevelopment plan

providing for tax-increment financing pursuant to Section 33670, and unless an

agreement is entered into or payments are otherwise distributed by the agency in

accordance with Section 33401, any affected taxing agency may elect, and every

school and community college district shall elect, to be allocated, in addition to the

portion of taxes allocated to the affected taxing agency pursuant to subdivision (a)

of Section 33670, all or any portion of the tax revenues allocated to the agency

pursuant to subdivision (b) of Section 33670 . . . ."3 

Here, again, the only issue is whether tax increment funds are "received" by a school 

district "pursuant to . . . the Revenue and Taxation Code" within the meaning of the Education Code

provision. Although the school district may be considered to be the levying tax agency (see

Huntington Park Redevelopment Agency v. Martin (1985) 38 Cal.3d 100, 106-107; Bell Community

Redevelopment Agency v. Woosley, supra, 169 Cal.App.3d 24, 32-33), it is the redevelopment

agency that is allocated and "receives" this portion of the property tax funds. We need not decide 

whether these revenues lose their "tax" character when placed in the possession of a redevelopment

agency; it is sufficient to point out that they are not transferred to a school district pursuant to the

Revenue and Taxation Code. It is other statutory authority contained in the Health and Safety Code

that furnishes the basis for the allocation of funds from the redevelopment agency to the school

district. 

In answer to the question presented, therefore, we conclude that in lieu taxes,

mitigation revenues, and tax increment funds given by a redevelopment agency to a school district

pursuant to Health and Safety Code sections 33401 and 33676 do not constitute "property tax

revenue" required to be deducted under Education Code section 42238 in computing the amount of

a school district's state general aid. 

3

A redevelopment agency may also under appropriate circumstances "pay all or part of the value

of the land for and the cost of the installation and construction of any building, facility, structure,

or other improvement which is publicly owned" (Health & Saf. Code, § 33445), and "any school

district may enter into an agreement with an agency under which the agency shall construct, or cause

to be constructed, a building or buildings to be used by the district" (Health & Saf. Code, § 33446).

Health and Safety Code section 33445.5 additionally authorizes the payment of funds by a

redevelopment agency to a school district pursuant to specified conditions for redevelopment plans

adopted prior to January 1, 1984. 

5. 90-501 
* * * * *
 

6. 90-501