Opinion ID: 1386094
Heading Depth: 1
Heading Rank: 4

Heading: Special District

Text: (2) We conclude that the Agency must be deemed a special district under section 4, despite its lack of power to levy a tax on real property. To hold otherwise clearly would create a wide loophole in Proposition 13 as feared by the dissent in Richmond. As we explained in Amador, the evident purpose of section 4 was to assure effective real property relief by imposing restrictions on additional or increased state or local levies other than property taxes.... (22 Cal.3d at p. 231.) Richmond, supra, 31 Cal.3d 197, 205-206, makes section 4 inapplicable to special taxes levied by local districts which, prior to the passage of Proposition 13, lacked the power to levy real property taxes. The Court of Appeal decision herein would extend Richmond to any local district or agency, whenever created, which lacks such power, even if purposefully formed for the sole purpose of circumventing section 4. We are convinced the framers of, and voters for, Proposition 13 did not intend that section 4 be construed in such a manner. As the Court of Appeal herein acknowledged, plaintiffs/taxpayers are correct in observing an increase in the number of revenue-generating governmental entities which lack the power to assess property taxes.... [T]here are now numerous `justice facility financing agencies' (such as the Agency herein) which have been given life by the state Legislature [citing provisions for creating such facilities in seven other counties]. Further, ... a generalized provision (Rev. & Tax. Code, § 7285.5) ... permits `rural' counties ... to establish `an authority for specific purposes' with the power to assess a sales tax (a transaction and use tax) of one-half of one percent (0.5 %). (We note that in 1990, the procedures authorized by the foregoing section were extended to all counties.) In addition, plaintiffs/taxpayers note that the Legislature has authorized the counties to create special transportation districts, funding their programs exclusively through increased sales taxes (e.g., Pub. Util. Code, §§ 131000 et seq., 180000 et seq.). But for the potential implications of our holding in Richmond, the counties arguably would be required to obtain two-thirds voter approval to fund such projects. The Agency and the County cite cases supporting the general rule that the possible improper motivations of the Legislature or its members in passing legislation are immaterial to questions involving the validity of such legislation. (E.g., County of Los Angeles v. Superior Court (1975) 13 Cal.3d 721, 726-727 [119 Cal. Rptr. 631, 532 P.2d 495].) They further doubt that plaintiffs/taxpayers have demonstrated any improper legislative intent in creating the Agency, and they dispute plaintiffs' suggestion that the Agency is merely the alter ego of the County. As previously indicated, the record amply supports the trial court's finding of purposeful circumvention. But we are less concerned here with the factual support for the trial court's finding than with the probable intent of the framers of section 4 of Proposition 13. We must attempt to determine whether the framers, in using the term special district, intended to adopt a definition that could so readily permit circumvention of section 4. The fact that, following Richmond, supra, 31 Cal.3d 197, numerous special purpose districts were created to accomplish aims comparable to LACTC strongly indicates a large hole has indeed been created in Proposition 13, confirming Justice Richardson's prediction. In our view, the framers of Proposition 13, and the voters who adopted it, would not have intended that result. It seems evident that Richmond's limitation of the term special district to those districts possessing property tax power is unworkable as applied to districts formed after the adoption of Proposition 13, because to our knowledge no such agencies possess that power. With limited exceptions, only counties are empowered to levy the 1 percent maximum property tax allowed by Proposition 13. (See Rev. & Tax. Code, former § 2237, now § 93, subd. (a); Carman v. Alvord (1982) 31 Cal.3d 318, 331 [182 Cal. Rptr. 506, 644 P.2d 192].) In other words, as a practical matter, the proposed extension of Richmond to all districts, whenever created, which lack property tax power would read section 4's reference to special districts out of existence as applied to districts formed after 1978. As the plurality opinion in Richmond explained, section 4 of Proposition 13 was intended to restrict the ability of local governments to impose new taxes to replace property tax revenues lost under the other provisions of that measure. (See 31 Cal.3d at p. 206.) This intent would be frustrated if cities and counties were nonetheless permitted to arrange for the formation of local taxing districts to finance municipal functions without securing the requisite two-thirds voter approval. Thus, we hold that special district would include any local taxing agency created to raise funds for city or county purposes to replace revenues lost by reason of the restrictions of Proposition 13. In the present case, the evidence that the Agency was created to raise funds for county purposes and thereby circumvent Proposition 13 is strong. (3) In future cases, however, marshalling such evidence of intentional circumvention may be difficult. Thus, we believe that courts may infer such intent whenever the plaintiff has proved the new tax agency is essentially controlled by one or more cities or counties that otherwise would have had to comply with the supermajority provision of section 4. In determining whether such control exists, a variety of considerations may be relevant, including the presence or absence of (1) substantial municipal control over agency operations, revenues or expenditures, (2) municipal ownership or control over agency property or facilities, (3) coterminous physical boundaries, (4) common or overlapping governing boards, (5) municipal involvement in the creation or formation of the agency, and (6) agency performance of functions customarily or historically performed by municipalities and financed through levies of property taxes. The essential control standard posited above is not necessarily the functional equivalent of the alter ego theory used to pierce the corporate veil for purposes of imposing liability on the individual shareholders. (See, e.g., Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 300-301 [216 Cal. Rptr. 443, 702 P.2d 601].) Rather than attempting to demonstrate that the subject agency and county are identical entities, application of the essential control test simply affords ground for reasonably inferring an intent to circumvent Proposition 13. Vanoni v. County of Sonoma (1974) 40 Cal. App.3d 743, 748-751 [115 Cal. Rptr. 485], serves as an instructive analogous precedent. There, the appellate court considered whether a water district should be deemed the alter ego of a county for purposes of applying the constitutional debt limitation applicable to cities, counties and school districts, but not to water districts. (Cal. Const., former art. XIII, § 40; see id., art. XVI, § 18.) The court observed that although the county and water district shared common boundaries, governing boards, citizens and taxable property, and the district was performing functions traditionally performed by counties (40 Cal. App.3d at pp. 748-749), the district remained a separate legal entity not subject to the debt limitation in the absence of a showing the entity subject to the limitation [i.e., the county] controlled the decision to incur the debt or levy the tax. ( Id. at p. 750, italics added.) As Vanoni concluded, Although the Sonoma Water District may be performing functions traditionally performed by counties, appellants have offered no evidence, beyond the fact that the same individuals sit on the governing boards of both the county and the water district, that Sonoma County exercises actual control over the actions of the district. The fact that the same individuals are members of both boards is not sufficient to establish that control. [Citation.] ( Vanoni v. County of Sonoma, supra, 40 Cal. App.3d at pp. 750-751, italics added.) We agree with Vanoni that common governing boards do not invariably indicate county control, but certainly that fact is relevant to the inquiry. The determination whether a city or county essentially controls a taxing agency is one that necessarily must be made on a case-by-case basis, using the criteria suggested above. We are unconvinced that application of the essential control standard would necessarily jeopardize all taxing agencies created since 1978. As plaintiffs observe, the statutes establishing such agencies and providing for the adoption of tax ordinances typically contain strict time limitations governing commencement of litigation challenging their validity. (See, e.g., Gov. Code, § 26282 [pertaining to the San Diego County agency involved herein]; Code Civ. Proc., §§ 860 [in rem validation procedure], 863 [60-day statute of limitations for challenging validity of agency action].) Unlike curative acts, which generally are unable to cure constitutional defects (see Hoffman v. City of Red Bluff (1965) 63 Cal.2d 584, 592 [47 Cal. Rptr. 553, 407 P.2d 857]; Aughenbaugh v. Board of Supervisors (1983) 139 Cal. App.3d 83, 90-91 [188 Cal. Rptr. 523]), such statutes of limitations are deemed within legislative power to provide a prompt validating procedure for asserting such challenges (see Rand v. Bossen (1945) 27 Cal.2d 61, 64-67 [162 P.2d 457]; Graydon v. Pasadena Redevelopment Agency (1980) 104 Cal. App.3d 631, 645-646 [164 Cal. Rptr. 56]). Thus, although we do not decide the point here, some tax districts, and the taxes they have collected, may be unaffected by our holding. We likewise leave open the question of a possible prospective application of our holding to agencies other than the Agency involved herein. The issue of prospectivity involves difficult constitutional and policy considerations largely unbriefed in this case. In addition, resolution of the prospectivity issue may depend on a variety of case-specific factors, including the degree of hardship or other adverse consequences that would result from a retroactive application of our holding in a particular setting. Under these circumstances, we believe that any blanket pronouncement on the prospectivity issue at this time would be inappropriate.