Court Opinion

ID: 6112151
Source: CourtListenerOpinion
Date Created: 2022-01-24 21:04:22.082799+00
Date Added: 2024-06-11T08:54:22.185978
License: Public Domain

Filed 1/24/22
                                CERTIFIED FOR PUBLICATION

                IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
                                THIRD APPELLATE DISTRICT
                                           (Sacramento)
                                               ----

 NORTH SONOMA COAST FIRE PROTECTION                               C090758
 DISTRICT,
                                                           (Super. Ct. No. 34-2017-
                Plaintiff and Appellant,                  80002896-CU-WM-GDS )

          v.

 ERICK ROESER, as Auditor-Controller, etc., et al.,

                Defendants and Respondents;

 DEPARTMENT OF FINANCE,

                Real Party in Interest and Respondent.

             APPEAL from a judgment of the Superior Court of Sacramento County,
Laurie M. Earl, Judge. Affirmed.

             William D. Ross, Kypros G. Hostetter and David P. Schwarz for Plaintiff
and Appellant.

             Holley O. Whatley, Pamela K. Graham and Jeremy M. Fonseca for
Defendants and Respondents

             Rob Bonta, Attorney General, Thomas S. Patterson, Senior Assistant
Attorney General, Anthony R. Hakl, Supervising Deputy Attorney General, Gabrielle D.
Boutin and Seth E. Goldstein, Deputy Attorneys General, for Real Party in Interest and
Respondent.

                                                1
       In 1992 and 1993, California was in the midst of a budget crisis that left it
struggling to adequately fund public schools and community colleges. To help address
the issue, in 1992, the Legislature created an Education Revenue Augmentation Fund (or
an ERAF) in each county and then shifted billions of dollars in property tax revenues
from counties, cities, and special districts to these funds. In 1993, with the state still
struggling to fund education programs, the Legislature shifted billions more in property
tax revenues from counties, cities, and special districts to the ERAFs. In both these
enactments, the Legislature also ensured that a portion of property tax revenues would
continue to be directed toward the ERAFs in future years. Through these changes, the
Legislature permanently changed how public schools and community colleges are funded
in California. It also permanently reduced the amount of property tax revenues that
counties, cities, and special districts receive on an annual basis.
       In this case, a special district called North Sonoma Coast Fire Protection District
(the District) alleges that Sonoma County (the County) and the County Auditor‐
Controller (the County Auditor) misapplied the statutes that created the ERAFs and
consequently caused the District to receive less property tax revenues than it should have
received. The trial court, however, found none of the District’s arguments in favor of its
position persuasive and rejected its claim. Because we too find none of the District’s
arguments persuasive, we affirm the trial court’s decision.
                                      BACKGROUND
                                               I
                                      Legal Background
       The legal context for the District’s claims is long and complicated. It starts, like
many tax cases, with the enactment of Proposition 13 in 1978.
       A. Proposition 13
       For much of California’s history, local governments could levy their own property
taxes to help finance their activities. (California Redevelopment Assn. v. Matosantos

                                                   2
(2011) 53 Cal.4th 231, 243 (Matosantos).) But in 1978, California voters decided that
they levied too much and adopted Proposition 13. Proposition 13 amended the state
constitution to cap real property taxes at one percent of a property’s “full cash value” and
to limit annual assessment increases to two percent a year. (Cal. Const., art. XIII A, §§ 1,
subd. (a), 2, subds. (a)-(b).) It also limited who could collect these taxes. (Cal. Const.,
art. XIII A, § 1, subd. (a).) “In place of multiple property taxes imposed by multiple
political subdivisions, it substituted a single tax to be collected by counties and thereafter
apportioned.” (Matosantos, supra, 53 Cal.4th at p. 244.) Proposition 13 declined,
however, to specify how collected taxes should be apportioned, “leaving the method of
allocation to state law.” (Ibid.)
       Through these changes, Proposition 13 saved property owners billions of dollars in
property taxes in its first year alone. (Nordlinger v. Hahn (1992) 505 U.S. 1, 5 [120 L.Ed
2d 1, 5].) But it also threatened to devastate the financing for many local governments
that relied on property tax revenues. To support these local governments in the wake of
Proposition 13, the Legislature promptly moved to provide state funding to local
governments to replace their lost revenues. (City of Scotts Valley v. County of Santa Cruz
(2011) 201 Cal.App.4th 1, 8 (Scotts Valley).)
       First, as a temporary measure in 1978, the Legislature “provided [billions] of
dollars in state assistance or ‘bailout’ payments to local governments to insure they
would maintain their fiscal positions at a minimum level of 90 percent of their pre-
Proposition 13 budgets.” (American River Fire Protection Dist. v. Board of Supervisors
(1989) 211 Cal.App.3d 1076, 1079 (American River Fire Protection Dist.) [discussing
Senate Bill No. 154]; see also Jarvis v. Cory (1980) 28 Cal.3d 562, 574 [“Senate Bill 154
(the so-called ‘bailout bill’) . . . earmarked $5 billion in state funds for local use”].)
       Later, as a long-term solution in 1979, the Legislature made this “bailout”
permanent “ ‘by means of the permanent shift of the school property tax base to local
agencies and state “buyout” of certain county health and welfare program costs.’

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[Citation.]” (Scotts Valley, supra, 201 Cal.App.4th at p. 8.) The Legislature also, at this
same time, established a general method of allocating property tax revenues to local
governments. (City of Alhambra v. County of Los Angeles (2012) 55 Cal.4th 707, 713
(Alhambra).) The 1979 bailout and allocation method, which we will turn to more later,
are commonly referred to as the A.B. 8 bailout and A.B. 8 allocation system after the
applicable Assembly bill. (Ibid. [referring to “the ‘A.B. 8’ allocation system”]; Scotts
Valley, at p. 8 [referring to “the ‘A.B. 8’ allocation system”]; id. at p. 16 [referring to
“ ‘the A.B. 8 “bailout” legislation’ ”].)
        In the end, “Proposition 13 transformed the government financing landscape in at
least three ways relevant to this case. First, by capping local property tax revenue, it
greatly enhanced the responsibility the state would bear in funding government services,
especially education. [Citations.] Second, by failing to specify a method of allocation,
Proposition 13 largely transferred control over local government finances from the state’s
many political subdivisions to the state, converting the property tax from a nominally
local tax to a de facto state-administered tax subject to a complex system of
intergovernmental grants. [Citations.] Third, by imposing a unified, shared property tax,
Proposition 13 created a zero-sum game in which political subdivisions (cities, counties,
special districts, and school districts) would have to compete against each other for their
slices of a greatly shrunken pie.” (Matosantos, supra, 53 Cal.4th at pp. 244-245, fn.
omitted; see also Rev. & Tax. Code, § 95, subd. (m) [defining “special district”].)1
        B. ERAFs I and II
        In later years, the Legislature continued to modify local government financing as a
result of Proposition 13, particularly in the area of education. Relevant here, in 1992,
while in the midst of a state budget crisis that left the state struggling to adequately fund

1   Undesignated statutory references are to the Revenue and Taxation Code.

                                                   4
public schools and community colleges, “the Legislature enacted legislation creating
ERAF’s in each county and shifted billions of dollars in property tax revenues from
cities, counties, and [special districts] into them.” (Alhambra, supra, 55 Cal.4th at
pp. 713-714.) In 1993, while the budget crisis continued, the Legislature enacted further
legislation that shifted billions more in property tax revenues from cities, counties, and
special districts to the ERAFs. (Id. at p. 714; see also § 97.3, subds. (a)(1), (b)(1), (c)(1).)
       The Legislature accomplished these shifts through two adjustments in the
allocation of property tax revenues to local governments. Under the A.B. 8 allocation
system, the process for allocating these revenues is generally as follows: “[I]n every
current fiscal year, each local entity receives property tax revenues equal to what it
received in the prior year (also referred to as its base) (§ 96.1, subd. (a)(1)), plus its
proportional share of any increase in revenues due to growth in assessed value within its
boundaries, which is defined as the ‘ “annual tax increment” ’ (§ 96.1, subd. (a)(2); see
§§ 96.2, 96.5). The sum of these two amounts—the prior year base plus the current
year’s proportional share of the tax increment—becomes each jurisdiction’s new base
amount for the following year’s calculations. (§§ 96.1, subd. (a)(1), 96.5.)” (Alhambra,
supra, 55 Cal.4th at p. 713.)
       The 1992 legislation, commonly called ERAF I, modified this process for the
1992-1993 fiscal year. Under this legislation, each local entity’s “base” for the 1992-
1993 fiscal year (i.e., the amount of property tax revenues it received for the 1991-1992
fiscal year) was “deemed” to be a lower amount. (§§ 97, subd. (a)(1) [cities and
counties], 97.2, subds. (a)(1) [counties], (b)(1) [cities], (c)(1) [special districts]; see also
§ 97.2, subd. (e) [discussing further shifts in later years for cities and counties].) For each
city, for example, ERAF I generally reduced the city’s base for the 1992-1993 fiscal year
by nine percent. (§ 97.2, subd. (b)(1).) So if, absent ERAF I, a city would have had a
base of $100,000 for the 1992-1993 fiscal year (based on its receiving $100,000 in
property tax revenues for the 1991-1992 fiscal year), it would now be “deemed” to have a

                                                    5
base of $91,000 for the 1992-1993 fiscal year. Counties and special districts faced
different reductions under ERAF I. Relevant here, for each special district, ERAF I
generally reduced the district’s base for the 1992-1993 fiscal year by 35 percent, though
it required a lesser or greater reduction under certain circumstances. (§ 97.2, subd. (c)(1)-
(5).) Under ERAF I, the county’s ERAF would receive all the revenues that the county,
cities, and special districts would have received in the absence of the legislation. (§§ 97,
subd. (a)(2), 97.2, subds. (d), (e)(2).) The county auditor would then distribute the
ERAF’s funds to school districts, county offices of education, and community college
districts. (§ 97.2, subd. (d)(1).)
       The 1993 legislation, commonly called ERAF II, operated in a similar fashion.
Under ERAF II, each local entity’s base for the 1993-1994 fiscal year was “deemed” to
be a lower amount. (§§ 97.1, subd. (a) [cities and counties], 97.3, subds. (a) [counties],
(b) [cities], (c) [special districts].) To calculate this amount for special districts, each
county auditor applied a formula specified in the statute that was intended to capture “the
current amount of special districts’ property tax revenues attributable to [their receipt of
state assistance] under AB 8.” (Sen. Budget & Fiscal Revenue Com., analysis of Sen.
Bill No. 1135 (1993-1994 Reg. Sess.) p. 5; see § 97.3, subd. (c)(3)(A) [the amount of the
reduction for each special district equals, with some “adjust[ments],” “the amount of its
[A.B. 8] allocation . . . for the 1993-94 fiscal year multiplied by the ratio determined
pursuant to paragraph (1) of subdivision (a) of former Section 98.6, as that section read
on June 15, 1993”]; Stats. 1992, ch. 699, § 14 [showing the text of former section 98.6,
which describes a ratio that equaled “the amount of state assistance payment for the
special district for the 1978-79 fiscal year divided by the sum of the state assistance
payment for the special district plus the amount of property tax revenue allocated to the
special district for the 1978-79 fiscal year . . .”].) Counties and cities, facing different
formulas, also had their property tax revenues reduced. (§§ 97.1, subd. (a) [counties and
cities], 97.3, subds. (a) [counties], (b) [cities].) Under ERAF II, as with ERAF I, the

                                                   6
county’s ERAF would receive all the revenues that the county, cities, and special districts
would have received in the absence of the new law. (§§ 97.1, subd. (a)(2), 97.3, subd.
(d).)
        Through these statutes, the Legislature “permanently modified the A.B. 8
allocation system.” (Alhambra, supra, 55 Cal.4th at p. 714.) To demonstrate the effect
of the ERAF statutes, recall that, under our city example, the city would receive $91,000
plus the 1992-1993 tax increment (rather than $100,000 plus this increment) for the 1992-
1993 fiscal year as a result of ERAF I. Consider now the effect of that reduction on
future years (and for the sake of simplicity, ignore the impact of ERAF II). For the next
year, the city would receive $91,000 plus the 1992-1993 and 1993-1994 tax increments
(rather than $100,000 plus these increments); for the year after that, the city would
receive $91,000 plus the 1992-1993, 1993-1994, and 1994-1995 tax increments (rather
than $100,000 plus these increments); and so on. The county’s ERAF, on the other hand,
would “effectively becom[e] another entity receiving its share of local property tax
revenues through the annual A.B. 8 allocation system.” (Alhambra, at p. 714; but see id.
at p. 714, fn. 6.) To continue with our example, for the 1992-1993 fiscal year, the ERAF
would receive $9,000 (plus whatever other money it received from other local agencies)
plus the 1992-1993 tax increment; the next year, it would receive its 1992-1993 allotment
plus the 1993-1994 tax increment; and so on. (See §§ 97.2, subd. (d)(5) [incorporating
each county’s ERAF into the county’s yearly allocation of property taxes under section
96.1], 97.3, subd. (d)(5) [same]; see also Sen. Rules Com., Off. of Sen. Floor Analyses,
3d reading analysis of Assem. Bill. No. 3027, as amended Aug. 10, 1992, p. 3 [explaining
that proposed § 97.03, subd. (d)(4) (now § 97.2, subd. (d)(5)) would give the ERAFs “a
permanent part of the property tax revenue base”]).)
        C. ERAF Accounting Methods
        To determine an ERAF’s share of revenues under the ERAF statutes, county
auditors must use one of two accounting methods. Under the first method, county

                                                 7
auditors allocate property tax revenues to their ERAF on a “tax rate area” basis—which is
the general method for allocating property tax revenues to local agencies. (See, e.g.,
§§ 96, subd. (a), 96.1, subd. (a)(1), 97.4, subd. (a).) Under this method, each county first
assigns every parcel in the county “to a certain tax rate area.” (City of Dinuba v. County
of Tulare (2007) 41 Cal.4th 859, 866.) The county then, after collecting “[p]roperty tax
revenue from parcels assigned to a certain tax rate area,” allocates the revenue “to the
local agencies having jurisdiction in the tax rate area.” (Ibid.) In particular, “[f]or each
tax rate area,” the county auditor allocates to “each jurisdiction [covering that tax rate
area] . . . an amount of property tax revenue equal to” its base for that tax rate area (i.e.,
the amount it received in the prior fiscal year in that area) plus its annual tax increment
for that tax rate area (i.e., its proportional share of any increase in revenues due to growth
in assessed value in that area). (§§ 96.1, subd. (a)(1)-(2), 96.2, 96.5; see Alhambra,
supra, 55 Cal.4th at p. 713.) An entity’s total allocation is then the sum of these “tax rate
area” allocations. So, for example, if an entity covered three tax rate areas, its total
allocation would be the sum of its allocations for these three areas.
       Under the second method, county auditors instead allocate property tax revenues
to their ERAF on a “countywide” basis—though an auditor may follow this approach
only if he or she “ensure[s] adequate recognition of year-to-year revenue growth so that
the results of changes implemented on a countywide basis do not differ materially from
the results which would be obtained from the use of a tax rate area basis.” (§ 97.4, subd.
(a).) The Revenue and Taxation Code does not expressly instruct county auditors on how
to allocate property tax revenues on a “countywide” basis. But according to the County,
the County Auditor, and County Service Area No. 40 (collectively, the County
Respondents) and the District, the “countywide” approach for allocating revenues is not
truly a countywide method. A county auditor, for example, cannot simply allocate to the
ERAF a single countywide base (i.e., the amount the ERAF received in the prior fiscal
year in the entire county) plus a single countywide tax increment (i.e., the ERAF’s

                                                   8
proportional share of any increase in revenues due to growth in assessed value in the
county as a whole). An auditor instead, the County Respondents and the District
conclude, must follow a more complicated approach that accounts for how the ERAF
statutes operate in practice. Under their understanding of the “countywide” method,
which they typically call the “jurisdictional” method, a county auditor first calculates the
county’s, each city’s, and each special district’s entitlement to property tax revenues
using the “tax rate area” method as if the ERAF statutes were never adopted, and he or
she then shifts a portion of each of these jurisdiction’s property tax revenues to the
ERAF.
       The County Respondents and the District generally summarize these two
allocation methods as follows: Under the “tax rate area” method, the county auditor
calculates the ERAF’s percentage share of revenue from each tax rate area in the county,
with the ERAF’s total allocation equaling the sum of its allocations from all tax rate areas
in the county. And under the “countywide” method, in contrast, the auditor calculates the
ERAF’s percentage share of revenue from each local agency in the county, with the
ERAF’s total allocation equaling the sum of its allocations from all local agencies in the
county—that is, the sum of its allocations from the county, each city, and each special
district. In the parties’ view, then, the “tax rate area” method is an area-based approach
for allocating revenues and the “countywide” method is an entity-based approach for
allocating revenues. For purposes here, we accept the County Respondents’ and the
District’s interpretation.2

2 The Department of Finance, one of the real parties in interest in this case, has declined
to express an opinion on the proper application of the “countywide” method.

                                                 9
                                              II
                                    Factual Background
       A. CSA 6, CSA 40, and the District
       In 1973, the County formed County Service Area No. 6 (CSA 6) to provide fire
protection and sewer services in a part of the County known as The Sea Ranch. The
County funded CSA 6, which in turn supported a nonprofit fire department called The
Sea Ranch Volunteer Fire Department Inc. (Sea Ranch Fire), through property taxes
imposed on parcels within CSA 6’s boundaries. Under the A.B. 8 allocation system, the
County initially distributed to CSA 6 about 19 percent of all property tax revenues
collected in CSA 6’s jurisdiction. But following the enactments of ERAFs I and II, the
County reduced CSA 6’s share to about 10 percent of all property tax revenues, a
reduction of about 47 percent. Because CSA 6’s lost revenues would be shifted to the
County’s ERAF, the County has described CSA 6 as having an “ERAF shift” of about 47
percent. (See §§ 97.2, subd. (d)(1); 97.3, subd. (d)(1).)
       In 1993, around the time of ERAF II’s passage, the County formed County
Service Area No. 40 (CSA 40) to replace several smaller CSAs, including CSA 6. Under
the terms of the reorganization, CSA 40 inherited all the property tax revenues that the
CSAs that joined it had previously received for fire protection services. It also, the
County Auditor concluded, inherited the ERAF shifts of these CSAs. According to the
County Auditor, “[i]n counties that implemented ERAF under the jurisdictional
method—like Sonoma County here—the [county auditor] (and potentially the parties to
the jurisdictional change) must determine how properly and best to apply the original
shifts of the affected jurisdictions to the resulting jurisdictions.” Applying that approach
in the case of CSA 40, the County Auditor determined “[t]he ERAF shift of CSA 40
. . . by aggregating the dollar amounts that each entering jurisdiction shifted to [the]
ERAF in the prior year and applying the aggregated current year growth factors of each
entering jurisdiction.” The County Auditor, after aggregating these amounts, found that

                                                   10
CSA 40 had an ERAF shift of about 15 percent—which meant that about 15 percent of
CSA 40’s A.B. 8 allocation of property tax revenues would be shifted to the ERAF.
        In 2016, over two decades after CSA 40’s formation, the County Local Agency
Formation Commission granted Sea Ranch Fire’s request to detach certain areas
(including Sea Ranch) from CSA 40 and to form the District to serve these areas. Sea
Ranch Fire requested the change, in part, because it sought greater local control over fire
protection services and over the use of local tax dollars. As part of the reorganization,
Sea Ranch Fire and the County negotiated an agreement on the allocation of property tax
revenues (the Tax Agreement). Relevant here, the agreement states: “[T]he property tax
revenues of the Subject Territory currently allocated to CSA-40 shall be transferred to the
District, subject to,” among other things, the requirement that the County Auditor “make
any adjustments to the allocations of property tax revenue to the District required by all
applicable state law, which may cause the amount [of] the property tax revenue to be
allocated to the District to be different from that previously allocated to CSA-40. These
adjustments include[] . . . applicable Education Revenue Augmentation Fund calculations
or allocations. . . .”
        B. The County’s Allocation of Revenues and the District’s Suit
        For fiscal year 2017-2018, the first year after the District’s formation, the County
Auditor concluded that the District should have an ERAF shift of 45.85 percent. In
reaching this figure, the County Auditor largely relied on section 97.4, which the auditor
construed to state “that the use of the countywide/jurisdictional method of ERAF
implementation must not produce results materially different from those that would have
been produced under the [tax rate area] method.”
        In the County Auditor’s understanding, calculating the District’s ERAF shift on a
“countywide” basis would result in the District having an ERAF shift of 15 percent—
which takes after the ERAF shift of 15 percent for CSA 40. But, the auditor concluded,
had the County used the “tax rate area” method rather than the “countywide” method at

                                                 11
ERAF implementation in 1992, then the District would instead have had a total ERAF
shift of 45.85 percent—which is an aggregation of the ERAF shifts of the districts
(including CSA 6) that initially served the District’s area before CSA 40. The County
Auditor reasoned that these two approaches resulted in different results because, under
the “tax rate area” approach, the ERAF receives a percentage of the revenues from each
tax rate area in the county, with the percentage for each area remaining the same even if
the local agencies in that area change; but under the “countywide” approach, the ERAF
receives a percentage of the revenues from each local agency in the county, with the
percentage for each agency potentially changing (and in this case, actually changing)
when the agencies themselves change.
       Because of the large difference between 15 percent and 45.85 percent, and because
section 97.4 reflects an intent that “changes implemented on a countywide basis . . . not
differ materially from the results which would be obtained from the use of a tax rate area
basis,” the County Auditor chose to use the 45.85 percent figure for the District’s ERAF
shift. The auditor also found that equitable considerations supported this decision. The
auditor explained that CSA 40’s ERAF shift was initially calculated to be 15 percent,
rather than a lower figure, because CSA 6 contributed a particularly high ERAF shift of
about 47 percent. Now that the CSA 6 area had detached from CSA 40 and joined the
District, the auditor found it would be “inequit[able]” to “leav[e] the rest of CSA 40 with
the higher shift it received solely because of CSA 6’s original membership.”
       To demonstrate the County Auditor’s concerns in a simple example, suppose that
a district (district 1) receives $100 in property tax revenues and contributes $50 to the
ERAF (a shift of 50 percent) and that two other districts (districts 2 and 3) each receive
$100 in property tax revenues and contribute $5 to the ERAF (a shift of 5 percent).
Suppose further that these three districts later combine to form district 4. Under the
County Auditor’s “countywide” approach, district 4 would receive $300 in revenues and
contribute $60 to the ERAF (a shift of 20 percent). But now suppose that district 1

                                                 12
detaches from district 4. Should both districts 1 and 4 now have an ERAF shift of 20
percent? Or should district 1 have an ERAF shift of 50 percent, as it initially had, and
district 4 have an ERAF shift of 5 percent, as districts 2 and 3 initially had? Under these
types of facts, the County Auditor found the latter approach would be most equitable and
most consistent with section 97.4’s requirements.
       The District, however, felt differently. Believing an ERAF shift of 45.85 percent
was too high, it asked the County Auditor to recalculate the ERAF shift. But when that
proved unsuccessful, it filed a petition for writ of mandate against the County and the
County Auditor and named CSA 40 and the Department of Finance as real parties in
interest.3
       The District raised six principal claims in its suit, all of which we will cover in
more detail in the discussion below. It alleged that (1) the County Auditor wrongly
imposed an ERAF shift of over 45 percent because, under the ERAF statutes, a special
district’s ERAF shift cannot exceed 40 percent of the district’s property tax revenue or 10
percent of the district’s total revenue; (2) the auditor should have applied the formulas
described in the ERAF statutes to determine the District’s ERAF shift, rather than apply
the ERAF shifts of the special districts that initially covered the District’s territory;
(3) even if the auditor could have applied the ERAF shift of a former district, that district
should have been CSA 40, not CSA 6 or any other district; (4) even if the auditor could
have applied the ERAF shift of CSA 6, the auditor might have miscalculated its ERAF
shift; (5) the auditor should not have treated the District as a successor to CSA 6, because
the District, unlike CSA 6, is an independent fire district; and (6) the auditor should not

3 The District initially filed its suit in Sonoma County. But a few months later, after it
added the Department of Finance to the case, all parties agreed to transfer the case to
Sacramento County “because of the presence of California Department of Finance.”

                                                  13
have treated the District as a successor to CSA 6, because CSA 6, unlike the District,
provided both fire protection and wastewater services.
       Following a hearing on the District’s petition for writ of mandate, the trial court
rejected all the District’s claims. The District afterward appealed.
                                       DISCUSSION
       On appeal, the District raises the same claims it raised at the trial level, though in a
rearranged order. First, it asserts that the County Auditor wrongly concluded that the
District’s ERAF shift should equal the combined ERAF shifts of the special districts that
initially covered the District’s territory. According to the District, rather than apply the
ERAF shifts of these former districts, the auditor instead should have calculated the
District’s ERAF shift anew using the formulas described in the ERAF statutes. The
District appears to reason that a county auditor has a “mandatory” duty to recalculate
ERAF shifts whenever a new special district forms because section 97.2 of ERAF I and
section 97.3 of ERAF II both use “the mandatory ‘shall’ before the requirement to make
adjustments to the property tax allocations determined in Section 96.1.”
       But the District, in raising this argument, largely ignores the relevant text of
sections 97.2 and 97.3. Both statutes, again, directed county auditors to reduce each
special district’s entitlement to property tax revenues based on a certain formula. And
both statutes, it is true, use the term “shall.” But the relevant obligations they created
were not ongoing ones. Section 97.2, as relevant here, states: A county auditor’s
allocations of property tax revenues under section 96.1 “shall be modified for the 1992-
93 fiscal year” using the formulas provided in the statute. (See also § 97.2, subd. (c)
[providing the formula for special districts].) And section 97.3, similarly, states: A
county auditor’s allocations of property tax revenues under section 96.1 “shall be
modified for the 1993-94 fiscal year” using the formulas provided in the statute. (See
also § 97.3, subd. (c) [providing the formula for special districts].) Both statutes, then,
required county auditors to calculate the applicable ERAF shift for each special district

                                                 14
decades ago—either in 1992 for the 1992-1993 fiscal year or in 1993 for the 1993-1994
fiscal year. Considering the clear statutory text, we cannot say, as the District would
have us, that county auditors must reapply the formulas described in sections 97.2 and
97.3 whenever a new special district forms.
       Seeking a contrary finding, the District notes that the County itself once
contemplated that the District’s ERAF shift could be recalculated. In support, it points to
the parties’ Tax Agreement, which, again, states: “[T]he property tax revenues of the
Subject Territory currently allocated to CSA40 shall be transferred to the District, subject
to,” among other things, the requirement that the County Auditor “make any adjustments
to the allocations of property tax revenue to the District required by all applicable state
law. . . . These Adjustments include . . . applicable Education Revenue Augmentation
Fund calculations or allocations. . . .” But all this only shows that the County agreed to
make adjustments “required by all applicable state law.” As the trial court explained, the
Tax Agreement “neither mandates a recalculation of the ERAF nor precludes one; it
simply directs the County to follow the law.”
       The District adds that a County official, around the time of the Tax Agreement,
said in an email that the District would “not [be] prevented from attempting [to] achieve a
different ERAF shift amount sometime in the future.” But this too is of no help to the
District’s position. As the rest of the cited email shows, the County official was
referencing the District’s ability to “advocat[e] for ERAF shift reductions . . . at the state
level.” The County official, in other words, was acknowledging the District’s ability to
attempt to change the law “at the state level,” not accepting the District’s view of the
current state of the law.
       Second, along the same lines, the District contends that the County Auditor should
have calculated the District’s ERAF II shift anew because, unlike CSA 6, it is an
independent fire district. For similar reasons, however, we reject this argument also.
ERAF II, it is true, treated dependent and independent fire districts differently. (Compare

                                                  15
§ 97.3, subd. (c)(4)(A)(i) [limiting revenue reductions for all fire protection districts] with
§ 97.3, subd. (c)(4)(A)(ii) [further limiting revenue reductions for independent fire
protection districts].) But this distinction was only relevant at the time that ERAF II was
first implemented. Under section 97.3, again, county auditors needed to modify their
allocations to special districts “for the 1993-1994 fiscal year.” So if, for example, a
special district was a dependent fire district in the 1993-1994 fiscal year, but an
independent fire district starting in 2000, that district could not object that the county
auditor wrongly treated it as a dependent fire district “for the 1993-1994 fiscal year”—the
year when ERAF II was implemented for special districts. Nor could it assert that the
county auditor now needs to recalculate the ERAF shift, as discussed above. As the
County Respondents note, “[b]ecause the ERAF shifts are historical figures, calculated in
1992-1993 for ERAF I and 1993-1994 for ERAF II, that the District may be an
independent fire protection district now alters nothing.”
       Third, the District suggests that even if the County Auditor could have applied the
ERAF shift of a prior district, that district should have been CSA 40, not CSA 6 or any
other district. The District basis its argument on a sentence in section 97.3 of the ERAF
II that states: “In the case of a special district that has been consolidated or reorganized,
the auditor shall determine the amount of its current property tax allocation that is
attributable to the prior district’s or districts’ receipt of state assistance payments [under
A.B. 8].” (§ 97.3, subd. (c)(3)(A).) In the District’s view, this language translates as
follows: In the case of a special district that has been consolidated or reorganized, the
auditor shall apply the ERAF shift of the prior district. Based on this reading, the District
then suggests that because the prior district in this case is “undisput[ably]” CSA 40, its
ERAF shift should match CSA 40’s ERAF shift.
       But the context of the District’s cited sentence shows that it only describes certain
actions that county auditors needed to take in 1993—not actions that each county auditor
needs to take whenever a new district consolidates or reorganizes. The opening line of

                                                  16
section 97.3 states: A county auditor’s allocations of property tax revenues under section
96.1 “shall be modified for the 1993-94 fiscal year pursuant to subdivisions (a) to (c).”
(Italics added.) Subdivision (c), the relevant subdivision here, deals with special districts.
In general, as discussed above, it required county auditors to calculate an amount for each
special district using a formula specified in the statute, and to then reduce the district’s
base for the 1993-1994 fiscal year by that amount. (§ 97.3, subd. (c)(1), (3)(A).) In the
part of subdivision (c) describing the formula that county auditors were to use, the part
that includes the District’s quoted language, the statute says, as relevant here: “On or
before September 15, 1993, the county auditor shall determine an amount for each special
district [using a formula intended to equal the amount of the district’s current property tax
allocation that is attributable to its receipt of state assistance under A.B. 8]. . . . In the
case of a special district that has been consolidated or reorganized, the auditor shall
determine the amount of its current property tax allocation that is attributable to the prior
district’s or districts’ receipt of state assistance payments [under A.B. 8]. . . .” (Italics
added; see also Budget & Fiscal Revenue Com., analysis of Sen. Bill No. 1135 (1993-
1994 Reg. Sess.) p. 5 [explaining that, under the proposed bill that would become ERAF
II, “[t]he property tax revenue reduction for special districts is achieved by requiring the
county auditor to determine the current amount of special districts’ property tax revenues
attributable to [their receipt of state assistance] under AB 8”].)4
       All the relevant language in section 97.3, then, only describes certain actions that

4  To determine the amount of a district’s 1993-1994 property tax allocation that was
attributable to its earlier receipt of state assistance, section 97.3 directed county auditors
to apply the following general formula for each district:
          1993-1994 property tax allocation x 1978-1979 state assistance amount
          1978-1979 state assistance amount + 1978-1979 property tax allocation

(See § 97.3, subd. (c)(3)(A); Stats. 1992, ch. 699, § 14 [showing former § 98.6].)

                                                   17
each county auditor needed to take in 1993. In particular, in 1993, the auditor needed to
determine for each district the amount of the district’s current property tax allocation that
was attributable either to (1) its earlier receipt of state assistance or (2) “[i]n the case of a
special district that has been consolidated or reorganized,” its predecessor’s earlier receipt
of state assistance. The auditor then needed (again, in 1993) to reduce the district’s
allocation of property tax revenue by this amount, subject to certain adjustments. (§ 97.3,
subd. (c)(1); see also § 97.3, subd. (c)(3)-(4).) None of these requirements supports the
District’s reading of section 97.3.
       Fourth, the District suggests that even if the County Auditor could have applied
the ERAF shift of CSA 6, the auditor should have applied only part, not all, of its ERAF
shift. The District, in particular, argues that it should have inherited only a portion of
CSA 6’s ERAF shift because CSA 6, unlike the District, was a multi-service district that
provided both fire protection and wastewater services. It reasons that part of CSA 6’s
ERAF shift must have been “attributable to [its] sewer services” and the District, at most,
should only inherit the part of CSA 6’s ERAF shift that was attributable to its fire
protection services.
       We reject the argument. To accept the District’s position, we would have to
conclude that CSA 6 received at least some of its property tax revenues in its capacity as
a sewer district. The ERAF statutes, after all, only apply to local agencies that receive
property tax revenues; and so had CSA 6 not received property tax revenues in its
capacity as a sewer district, then it would not have been subject to the ERAF statutes in
this capacity. The trial court, however, rejected this necessary premise to the District’s
argument. It concluded that CSA 6 only received property tax revenues for its fire
protection services—which meant that it received no property tax revenues for its sewer
services. We find that substantial evidence supports this conclusion. As the District
itself acknowledges in its reply brief, the only apparent evidence in the record on this
topic, an accounting chart dating back to the 1989-1990 fiscal year, “indicat[es] that the

                                                   18
County allocated no [property] tax moneys to the wastewater function of CSA 6.” And if
“the County allocated no [property] tax moneys to the wastewater function of CSA 6,”
then we cannot say that CSA 6 could have contributed any property tax revenues to the
ERAF in this capacity.
       Fifth, the District suggests that even if the County Auditor could have applied the
ERAF shift of CSA 6, the auditor might have miscalculated its ERAF II shift. Before
turning to the substance of the District’s argument, we begin with a little more
background. The amount of the ERAF II shift for any special district, again, depended in
large part on the amount of state assistance that the district received in the 1978-1979
fiscal year. In particular, it depended in large part on a ratio (called the Special District
Augmentation Fund (or SDAF) ratio) that counties first calculated in 1979 and that
equaled, for each special district, “the amount of state assistance payment for the special
district for the 1978-79 fiscal year divided by the sum of the state assistance payment for
the special district plus the amount of property tax revenue allocated to the special district
for the 1978-79 fiscal year. . . .” (§ 97.3, subd. (c)(3)(A) [directing county auditors to
apply a formula that relied in part on the ratio described in former § 98.6]; Stats. 1992,
ch. 699, § 14 [showing the text of former § 98.6]; see also Stats. 1979, ch. 282, § 59
[initial enactment of former § 98.6].)
       According to the District, the County Auditor might have overestimated the
amount of state assistance that CSA 6 received in the 1978-1979 fiscal year and, as a
result, might have overestimated CSA 6’s ERAF II shift. The District’s reasoning is
twofold. In its first argument, it notes that, during discovery in this case, the County
Auditor provided the “end SDAF [ratio]” for CSA 6 but not the inputs that went into
calculating this ratio. Because the auditor’s office has not shown its work from 1979 for
calculating this ratio, the District argues that it is possible that the auditor’s 1979
calculation of CSA 6’s SDAF ratio, and thus the auditor’s later calculation of CSA 6’s
ERAF II shift that relied on this ratio, was wrong. In its second argument, the District

                                                  19
asserts that CSA 6 “may not have received” all the state assistance that it was entitled to
receive in the 1978-1979 fiscal year. It basis its argument on an email purportedly from
someone named Del Walters that states: “The TAX RATE FACTOR for [Sea Ranch] is
19% or 19 cents on the value dollar. This factor was set by the Board of Supervisors at
the time CSA #6 originated. They chuckled when I asked how this 19% was set.
Apparently it’s a political prerogative kind of thing.” Based on this email, the District
argues that CSA 6’s total allocation of property tax revenues may have been based partly
on “an arbitrary, politically based number the County created.”
       Both the District’s arguments, however, are premised on speculation. Because the
County no longer possesses documents showing the County Auditor’s initial work in
calculating CSA 6’s SDAF ratio in 1979, the District speculates that the County Auditor
might have miscalculated both CSA 6’s SDAF ratio and its ERAF II shift. And because
of some alleged chuckling from the County’s Board of Supervisors, the District further
speculates that CSA 6’s total allocation of property tax revenues might have been based
in part on the Board of Supervisors’ selection of “an arbitrary, politically based number.”
But appeals are not won based on speculation of this sort. The District had the burden “to
demonstrate, on the basis of the record presented to the appellate court, that the trial court
committed an error that justifies reversal of the judgment.” (Jameson v. Desta (2018)
5 Cal.5th 594, 609.) It has not met that burden.5
       Finally, the District argues that the County Auditor imposed too high of an ERAF
shift because, under ERAF I, a special district’s “ERAF shift ‘shall not exceed an amount

5 The County Respondents contend the District’s argument also fails for two other
reasons. First, they assert that the District cannot now challenge a calculation that was
“made over 25 years ago and has been us[ed] ever since without challenge.” Second, they
assert that their initial calculations under ERAF II are “presumed correct” because they
were “audited by the [State Controller’s Office].” (See § 96.1, subd. (b).) Because we
agree, however, that the District failed to meet its burden to show that the trial court
erred, we need not address these alternative arguments.

                                                 20
equal to 10 percent of that district’s total annual revenues,’ and may not exceed ‘40
percent of that district’s property tax revenues or 10 percent of that district’s total
revenues, from whatever source’ (the ‘10/40 Rule’).” According to the District, the total
shift imposed under ERAFs I and II of over 45 percent of the District’s property tax
revenues improperly exceeded both 40 percent of the District’s property tax revenues and
10 percent of the District’s total revenues.
       But the language the District cites from ERAF I only limits the amount of the
property tax revenue loss under ERAF I, not the combined loss of revenue under both
ERAFs I and II. In arguing otherwise, the District ignores key parts of the relevant
statutory text. Although it is true, as the District claims, that section 97.2 of ERAF I
includes the words “shall not exceed an amount equal to 10 percent of that district’s total
annual revenues,” the whole of the relevant text states: “No reduction pursuant to
subparagraph (A), in conjunction with a reduction pursuant to paragraphs (1) and (2), for
any special district, other than a countywide water agency that does not sell water at
retail, shall exceed an amount equal to 10 percent of that district’s total annual revenues,
from whatever source. . . .” (§ 97.2, subd. (c)(3)(B).) The sentence as a whole, then,
only places limitations on the “reduction[s] pursuant to subparagraph (A), in conjunction
with a reduction pursuant to paragraphs (1) and (2)”—which are some of the reductions
contemplated in section 97.2 of ERAF I, not the combined reductions in ERAFs I and II.
       Similarly, although it is also true, as the District claims, that section 97.2 of
ERAF I uses the words “shall [not] . . . exceed 40 percent of that district’s property tax
revenues or 10 percent of that district’s total revenues, from whatever source,” the whole
of the relevant text states: “In no event shall the amount of the property tax revenue loss
to a special district derived pursuant to subparagraphs (A) and (B) exceed 40 percent of
that district’s property tax revenues or 10 percent of that district’s total revenues, from
whatever source.” (§ 97.2, subd. (c)(3)(C).) The sentence as a whole thus places
limitations only on the reductions “derived pursuant to subparagraphs (A) and (B)”—

                                                  21
which, again, are some of the reductions contemplated in section 97.2 of ERAF I, not the
combined reductions in ERAFs I and II.
       The District counters that nothing in ERAF II or the legislative history shows that
the Legislature intended to “exempt ERAF II from the 10/40 Rule.” But the District, in
making this argument, supposes that ERAF I purports to restrict all subsequent ERAF
legislation. It suggests that ERAF I states, in effect, the following: “In no event shall the
amount of the property tax revenue loss to a special district derived pursuant to [section
97.2 of ERAF I and section 97.3 of ERAF II] exceed 40 percent of that district’s property
tax revenues or 10 percent of that district’s total revenues, from whatever source.” But
again, that is not what the statute says. The District further suggests that because ERAFs
I and II are related statutes, all provisions in ERAF I should be understood to restrict all
provisions in ERAF II. But endorsing that claim would be inconsistent with the entire
premise of ERAF II, which was that ERAF I’s limitations resulted in too little money
being allocated to the ERAFs. It would also be inconsistent with basic principles of
statutory interpretation. As courts have repeatedly explained, “[i]t is a settled principle of
statutory interpretation that if a statute contains a provision regarding one subject, that
provision's omission in the same or another statute regarding a related subject is evidence
of a different legislative intent.” (See People v. Arriaga (2014) 58 Cal.4th 950, 960.)
       The District lastly, in support of its “10/40 Rule,” asserts that the Legislature
“intended to protect fire protection districts from excessive ERAF I reductions” and “did
not intend ERAF II to lower the property taxes of special districts providing fire
protection services.” But although true that ERAF I has some provisions that limited the
revenue reductions for fire protection districts (see § 97.2, subd. (c)(4)), the District never
argues that the County Auditor misapplied those provisions. And although true that
ERAF II also has some provisions that limited the revenue reductions for fire protection
districts (see § 97.3, subd. (c)(4)), we cannot say that the Legislature intended no revenue
reduction at all for these districts. We find that true, even though, as the District notes, a

                                                  22
senate committee analysis for the bill that became ERAF II stated that “special districts
which perform fire protection activities . . . are not subject to a property tax revenue
reduction under this bill.” (Sen. Budget & Fiscal Revenue Com., analysis of Sen. Bill
No. 1135 (1993-1994 Reg. Sess.) p. 5.) The District argues that, consistent with this
statement of legislative intent, the Legislature enacted section 97.3, subdivision (c)(4)(ii)
of ERAF II to prevent the potential loss of revenues for fire protection districts. But that
provision, for reasons covered already, applied only to fire protection districts that were
independent as of 1993; it did not apply to fire protection districts, like CSA 6, that were
dependent as of that time. For that reason, even if the District’s reading of section 97.3,
subdivision (c)(4)(ii) were correct, it is of no relevance to our case.

                                                  23
                                     DISPOSITION
       The judgment is affirmed. Respondents are entitled to recover their costs on
appeal. (Cal. Rules of Court, rule 8.278(a).)

                                                     \s\                   ,
                                                 BLEASE, J.
       We concur:

           \s\              ,
       RAYE, P. J.

           \s\              ,
       HULL J.

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