Opinion ID: 2599701
Heading Depth: 2
Heading Rank: 2

Heading: Tax Increment Financing and County's Obligations

Text: As defendants acknowledge, counties have a mandatory duty to collect property taxes, then allocate and distribute the appropriate amounts to various taxing entities pursuant to a complex statutory scheme. (Rev. & Tax.Code, § 95 et seq.) Allocation and distribution of property tax revenue is further subject to the Community Redevelopment Law (CRL). (Health & Saf.Code, § 33000 et seq.) The CRL sets forth the procedures for financing redevelopment projects. (Health & Saf. Code, § 33670.) Under the CRL, such projects are financed by `tax increment financing.' ( Redevelopment Agency v. County of Los Angeles (1999) 75 Cal. App.4th 68, 71, 89 Cal.Rptr.2d 10.) [7] Under tax increment financing, [a]ll taxable property within the area to be redeveloped is subject to ad valorem property taxes. The properties lying within a redevelopment area have a certain assessed value as of the date a redevelopment plan ordinance is adopted. A local taxing agency, such as a city or county, continues in future years to receive property taxes on the redevelopment area properties, but may only claim the taxes allocable to the base year value. If the taxable properties within the redevelopment area increase in value after the base year, the taxes on the increment of value over and above the base year value are assigned to a special fund for the redevelopment agency. Once the redevelopment plan is adopted, the redevelopment agency may issue bonds to raise funds for the project. As the renewal and redevelopment is completed, the property values in the redevelopment area are expected to rise. The taxes attributable to the increase in assessed value above the base year value are assigned to the redevelopment agency, which then uses the funds to retire the bonds. The local taxing agencies still receive taxes attributable to the base year assessed value of the properties within the redevelopment area. This way, the redevelopment project in effect pays for itself. ( Redevelopment Agency v. County of Los Angeles, supra, 75 Cal.App.4th at p. 71, 89 Cal.Rptr.2d 10; Redevelopment Agency v. County of San Bernardino (1978) 21 Cal.3d 255, 259, 145 Cal.Rptr. 886, 578 P.2d 133; Health & Saf.Code, § 33670 et seq.) To determine which local entities are entitled to the tax revenue collected from any given parcel of property, the county assigns each parcel to a certain tax rate area. (Cal.Code Regs., tit. 18, § 252.) A tax rate area is a specific geographic area all of which is within the jurisdiction of the same combination of local agencies and school entities for the current fiscal year. (Rev. & Tax.Code, § 95, subd. (g).) Property tax revenue from parcels assigned to a certain tax rate area is allocated by the county to the local agencies having jurisdiction in the tax rate area. (See id., § 96.1, subd. (a)(1).) Thus, if a particular parcel of property is assigned to a tax rate area that does not include a particular entity, no allocation is made for that entity and it will not receive any of the tax revenue collected from that parcel. With the statutory scheme in mind, we consider the scope of governmental immunity under the Act and whether relief is available.
Defendants argue plaintiffs' action to recover misallocated tax revenue is barred by the Act. (§ 810 et seq.) Specifically, defendants contend section 860.2, which states, Neither a public entity nor a public employee is liable for an injury caused by: [¶] ... [¶] (b) An act or omission in the interpretation or application of any law relating to a tax, immunizes County from having to pay defendants previously misallocated revenue. We disagree. First, section 860.2 is concerned with limiting governmental liability for an injury, which is defined in section 810.8 as death, injury to a person, damage to or loss of property, or any other injury that a person may suffer to his person, reputation, character, feelings or estate, of such nature that it would be actionable if inflicted by a private person. Defendants' failure to comply with their statutory duty to correctly allocate and distribute tax revenue to other public entities does not constitute an injury within the narrow meaning of sections 810.8 and 860.2. ( Aubry, supra, 2 Cal.4th at pp. 968-970, 9 Cal. Rptr.2d 92, 831 P.2d 317; see Forbes v. County of San Bernardino (2002) 101 Cal. App.4th 48, 55, 123 Cal.Rptr.2d 721.) The wrong plaintiffs complain of is one which by its very nature could not exist in an action between private persons .... [a]s a result, the injury alleged in this case is not included within the Tort Claims Act's definition of injury. ( Aubry, supra, 2 Cal.4th at p. 968, 9 Cal.Rptr.2d 92, 831 P.2d 317.) Accordingly, section 860.2, which only provides immunity from liability for an injury as defined by the Act, does not apply here. Second, the immunity provisions of the Act are only concerned with shielding public entities from having to pay money damages for torts. ( Schooler v. State of California (2000) 85 Cal.App.4th 1004, 1013, 102 Cal.Rptr.2d 343.) Section 814 explicitly provides that liability based on contract or the right to obtain relief other than money damages is unaffected by the Act. Plaintiffs do not seek damages; they seek only to compel defendants to perform their express statutory duty. While compliance with the duty may result in the payment of money, that is distinct from seeking damages. ( Board of Administration v. Wilson (1997) 52 Cal.App.4th 1109, 1125-1126, 61 Cal.Rptr.2d 207 [mandamus to compel transfer of payments is not equivalent to seeking money damages].) For example, had plaintiffs sought compensatory damages for a downgraded bond rating or increased interest rates as a result of defendants' failure to disburse the funds to which plaintiffs were entitled, such damages would likely be precluded. But plaintiffs do not seek such damages and thus section 860.2 does not bar their action. [8]
A party may seek a writ of mandate to compel the performance of an act which the law specially enjoins, as a duty resulting from an office, trust or station.... (Code Civ. Proa, § 1085, subd. (a).) In order to obtain writ relief, a party must establish `(1) A clear, present and usually ministerial duty on the part of the respondent ...; and (2) a clear, present and beneficial right in the petitioner to the performance of that duty....' ( Santa Clara County Counsel Attys. Assn. v. Woodside (1994) 7 Cal.4th 525, 539-540, 28 Cal.Rptr.2d 617, 869 P.2d 1142 ( Woodside ).) It is undisputed that defendants had a duty to correctly calculate and distribute the tax revenue. Nor can it be disputed that plaintiffs had a beneficial right in defendants doing so. It follows then that mandamus provides an appropriate remedy for defendants' failure to comply with their statutory duty. Courts have frequently found mandamus to be available in cases similar to the one at bar, where one public entity seeks to force another to release funds in accordance with a statutory duty. In Lackner, the county sued the director of the state agency administering the Medi-Cal program seeking to force the release of reimbursement monies allegedly withheld in violation of statute. The state agency argued that the county's failure to properly present a tort claim for damages prevented the trial court from awarding payment of the funds. ( Lackner, supra, 97 Cal. App.3d at pp. 586-587, 159 Cal.Rptr. 1.) Rejecting the state agency's contention, the Court of Appeal explained that [a]n action in traditional mandamus, which seeks an order compelling an official to perform a mandatory duty, is not an action against the state for money, even though the result compels the public official to release money wrongfully detained. ( Id. at p. 587, 159 Cal.Rptr. 1; accord, County of Los Angeles v. Riley (1942) 20 Cal.2d 652, 128 P.2d 537 [mandamus appropriate to force state to recalculate credit for aid payments]; County of L.A. v. State Dept. Pub. Health (1958) 158 Cal.App.2d 425, 322 P.2d 968 [mandamus appropriate to force state agency to release tuberculosis subsidies].) [9] Defendants argue that being forced to correct their mistake and pay plaintiffs misallocated revenue would inject uncertainty in the public fisc and have a detrimental impact. It appears elementary that courts may not frustrate the creation of a statutory duty by refusing to enforce it through the normal judicial means. What public policy reasons there are against enforcement of a statutory duty are reasons against the creation of the duty ab initio, and should be addressed to the Legislature. ( Woodside, supra, 7 Cal.4th at p. 540, 28 Cal.Rptr.2d 617, 869 P.2d 1142.) Indeed, as both parties note, the Legislature has on occasion enacted statutes forgiving counties' misallocations in exchange for prospective compliance. (E.g., Rev. & Tax.Code, §§ 96.18, 96.19, 96.27.) Defendants may similarly seek the Legislature's intervention here; courts, however, cannot refuse to enforce the statutory duty simply because of an alleged hardship it would pose to a county. Additionally, several provisions of the Revenue and Taxation Code appear to limit any hardship. Revenue and Taxation Code section 96.1, subdivision (c)(3), curtails the amount County would have to pay in a single year by providing that if it is determined that ... a reallocation is required for previous fiscal years, the cumulative reallocation or adjustment may not exceed 1 percent of the total amount levied at a 1 percent rate of the current year's original secured tax roll. The reallocation shall be completed in equal increments within the following three fiscal years. . . . [10] Revenue and Taxation Code section 4831, subdivision (a), contains a four-year statute of limitations for the correction of the rolls. Defendants also have available to them any appropriate defenses such as laches and unclean hands. (8 Witkin, Cal. Procedure, supra, Extraordinary Writs, §§ 148, 153, pp. 943-946, 950-951.) We also note plaintiffs added as named defendants the taxing entities that received misallocated revenue and which continue to be parties in this action. Should plaintiffs succeed, County's obligation may be offset by voluntary repayment by the taxing entities or by direct recourse against them by plaintiffs or by County itself. [11] Alternatively, as suggested during oral argument, County may correct the tax rolls that resulted in overpayments to the entities and explore offsetting future payments to recover any amounts now owed to plaintiffs. (See Rev. & Tax. Code, § 4831; Health & Saf.Code, § 33677.) Whatever County does, it is clear that what it may not do is refuse to comply with its statutory duty to correctly allocate and distribute revenue owed to plaintiffs. Accordingly, we conclude mandamus may issue to compel a county to comply with its duty to calculate and distribute tax revenue. In light of our holding, we need not resolve whether plaintiffs could have maintained claims for quasi-contract or constructive trust had mandamus not been available.