Opinion ID: 1386094
Heading Depth: 1
Heading Rank: 5

Heading: Special Tax

Text: (4) The conclusion that the Agency is a special district under section 4 does not end our analysis, for by its terms that section is applicable only to special taxes imposed by cities, counties and special districts. The Agency urges us to hold that its sales tax is a general tax because its revenues are not earmarked for any special purposes within the Agency, but are to be placed in the Agency's general fund for the general governmental purposes of the agency.... (See Gov. Code, § 26272.) As we explain, consistent with the trial court's conclusion, we hold that a special tax is indeed involved here: tax revenues are being collected for the special and limited governmental purposes of constructing and operating the County's justice facilities (see id., § 26267 [outlining the Agency's specific duties]). The Court of Appeal did not reach the issue. In City and County of San Francisco v. Farrell, supra, 32 Cal.3d 47 ( Farrell ), we addressed the meaning of the phrase special taxes in section 4. The City and County of San Francisco (the City) had imposed a payroll and general receipts tax, the proceeds of which were to be placed in the City's treasury to be used for general governmental expenditures. Because the tax had been approved by a mere majority of the City's voters, a question arose as to the application of section 4. The Farrell majority observed that special taxes was an ambiguous term that has been given varying interpretations, but that applying settled interpretive principles (including Richmond's rule of strict construction), the term as used in section 4 means taxes which are levied for a specific purpose rather than, as in the present case, a levy placed in the general fund to be utilized for general governmental purposes. (32 Cal.3d at p. 57, italics added.) Because the City's payroll tax revenues were to be used for general City expenses, the tax was deemed a general one beyond the reach of section 4. Justice Richardson again dissented, believing the majority widens still further the hole which they have cut in that protective fence which the people of California thought they had constructed around their collective purse by adopting Proposition 13. ( Farrell, supra, 32 Cal.3d at p. 57 [dis. opn. by Richardson, J.]; see also id. at pp. 58-59 [dis. opn. by Kaus, J., construing special taxes to mean `new,' `additional,' or `supplemental' taxes which are enacted to replace tax revenue lost as a result of Proposition 13's limitation on the property tax].) Justice Richardson observed the Farrell rationale would allow a municipality to recover completely any property tax revenues lost under Proposition 13 merely by enacting an alternative form of taxation, the revenues of which being earmarked for general governmental purposes. ( Id. at p. 58 [dis. opn. by Richardson, J.].) We believe the Farrell, supra, 32 Cal.3d 47, rationale does not extend to limited purpose agencies such as the Agency herein. To hold that a tax cannot be deemed a special tax if revenues thereof are deposited in the taxing agency's general fund pulls any remaining teeth from section 4's restriction on special taxes. As previously indicated, the trial court applied Farrell's test and nonetheless concluded that the Agency's sales tax was indeed a special tax because its revenues were earmarked for the specific purpose of funding the County's justice facilities, and not for general governmental purposes. The Agency and the County argue, however, that because the Legislature expressly designated the Agency's tax as a general tax (Gov. Code, § 26251; see Methodist Hosp. of Sacramento v. Saylor (1971) 5 Cal.3d 685, 692 [97 Cal. Rptr. 1, 488 P.2d 161] [presumption favoring legislative construction of Constitution]), and because the sales tax revenues are to be used for the Agency's general governmental purposes (Gov. Code, § 26272), the tax should be deemed a general tax, exempt from the restrictions of section 4. Again, if we are to preserve the spirit, if not the letter, of Proposition 13, we must disagree. First, with respect to defendants' reliance on the Legislature's designation of the tax as a general tax, such nomenclature is of minor importance in light of the realities underlying its adoption and its probable object and effect. (See Douglas Aircraft Co., Inc. v. Johnson (1939) 13 Cal.2d 545, 550 [90 P.2d 572] [legislative designation of nature of tax entitled to some weight but not conclusive].) The statute at issue was undoubtedly drafted with section 4 and Farrell's ( supra, 32 Cal.3d 47) holding firmly in mind. Nor can we accept defendants' general fund argument. It is undisputed that if the County had directly adopted the tax in question, earmarking its revenues for the special, limited purpose of financing the County's justice facilities, it would have been deemed a special tax under Farrell. As plaintiffs observe, it would be anomalous if the special tax of one agency could so readily become the general one of another. Under defendants' proposed test, the Legislature could readily avoid section 4's supermajority voter approval requirement by simply creating a local taxing agency to accomplish a specific, narrow governmental purpose (e.g., lifeguard towers for county beaches), and provide that tax revenues shall be deposited in the agency's general fund for the general governmental purposes of that agency. A more reasonable interpretation of section 4, consistent with Farrell's ( supra, 32 Cal.3d 47) guidelines, is that a special tax is one levied to fund a specific governmental project or program, such as the construction and financing of the County's justice facilities. It is true that, under the foregoing principle, every tax levied by a special purpose district or agency would be deemed a special tax. But this interpretation seems most consistent with the probable intent of the framers of Proposition 13.