Court Opinion

ID: 4127421
Source: CourtListenerOpinion
Date Created: 2017-02-18 00:27:10.630059+00
Date Added: 2024-06-11T14:31:32.960926
License: Public Domain

TO BE PUBLISHED IN THE OFFICIAL REPORTS

                             OFFICE OF THE ATTORNEY GENERAL

                                       State of California

                                       JOHN K. VAN DE KAMP

                                          Attorney General

                                        ------------------------------

                          OPINION                      :
                                                      :
                              of                      :
                                                      :
                 JOHN K. VAN DE KAMP                   :       No. 88-501
                    Attorney General                  :
                                                      :       DECEMBER 7, 1988
                  RODNEY O. LILYQUIST                   :
                  Deputy Attorney General                :

                       -----------------------------------------------------------------

              THE HONORABLE MICHAEL H. KRAUSNICK, COUNTY COUNSEL,
STANISLAUS COUNTY, has requested an opinion on the following questions with respect to a city
annexation proceeding:

               1. Are the city and the county required to reach an agreement for the transfer of
property tax revenues?

                2. Is a property tax transfer agreement void if it is reached by the city and the county
after expiration of the 30-day negotiation period?

               3. Is a certificate of filing void that is issued with respect to a petition presented more
than 60 days after the last signature was affixed?

                                             CONCLUSIONS

              1. In a city annexation proceeding, the city and the county are not required to reach
an agreement for the transfer of property tax revenues.

               2. In a city annexation proceeding, a property tax transfer agreement is void if
reached by the city and the county after expiration of the 30-day negotiation period.

                3. In a city annexation proceeding, a certificate of filing is void that is issued with
respect to a petition presented more than 60 days after the last signature was affixed.
                                            ANALYSIS

                The Legislature has recently enacted a comprehensive statutory scheme known as the
Cortese-Knox Local Government Reorganization Act of 1985 (Gov. Code, §§ 56000-57550; "Act"),1
which consolidates and simplifies the procedures to be followed by cities, counties, and special
districts in changing their boundaries.

                The three questions presented for resolution concern a proposed annexation of
territory by a city. Such proceedings may be initiated by the filing of a petition signed by the
requisite number of persons in the area or by the filing of a resolution of the city council proposing
the annexation. The petition or resolution is part of an application submitted to the local agency
formation commission ("LAFCO") established in the county. (§§ 56650-56653, 56700, 56800,
56828.) When the application is filed with LAFCO it is referred to the county assessor and auditor
who provide estimates of the property tax changes the annexation would cause. The city and county
have 30 days from receipt of these estimates to negotiate the actual change in property taxes which
will result from the annexation. Once these changes are negotiated LAFCO holds a public hearing
and either approves or disapproves the proposal. (§§ 56828, 56840, 56851.)

               If LAFCO approves the proposal, the city council commences its proceedings, holds
a public hearing, and either approves or disapproves the proposal. (§§ 57000, 57002, 57050, 57075,
57080.) If the city council gives its approval, the voters of the area are given an opportunity, with
certain exceptions, to vote on the proposal. (§§ 56112, 56375, 57100.) If the voters approve,
LAFCO files a certificate of completion, establishing the effective date of the annexation. (§§
57200-57203.)

               1. Negotiating a Property Tax Transfer

                Property tax revenues received by cities, counties, and special districts are subject
to and controlled by an allocation formula devised by the Legislature. (See Rev. & Tax. Code, §§
93-100; Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization (1978) 22 Cal. 3d
208, 218; American Canyon Fire Protection Dist. v. County of Napa (1983) 141 Cal. App. 3d 100,
105-106; 70 Ops.Cal.Atty.Gen. 87, 88 (1987).) When a city annexes unincorporated territory, a
portion of the property taxes generated by the area is shifted under the statutory formula to reflect
the change in jurisdiction from the county to the city. Since the county will continue to provide
various services to the newly incorporated area, it will continue to receive some of the property taxes
collected from the area. How much of the revenue is to be transferred is subject to negotiation and
agreement between the city and the county. Revenue and Taxation Code section 99, subdivision (b)
states in part:

             "Upon the filing of an application or resolution pursuant to . . . the [Cortese-
       Knox Local Government] District Reorganization Act of 1965 . . . , but prior to the

   1
    All references hereafter to the Government Code are by section number only.

                                                  2.                                            88-501

issuance of a certificate of filing, the executive officer shall give notice of such filing
to the assessor and auditor of each county within which the territory subject to the
jurisdictional change is located. Such notice shall specify each local agency whose
service area or responsibility will be altered by the jurisdictional change.

        "(1) (A) The county assessor shall provide to the county auditor, within 30
days of the notice of filing, a report which identifies the assessed valuations for the
territory subject to the jurisdictional change and the tax rate area or areas in which
the territory exists.

        "(B) The auditor shall estimate the amount of property tax revenue generated
within the territory which is the subject of the jurisdictional change during the
current fiscal year.

       "(2) The auditor shall estimate what proportion of the property tax revenue
determined pursuant to paragraph (1) is attributable to each local agency pursuant to
Section 96 or 97, and Section 98, notwithstanding the provisions of Section 98.6.

        "(3) Within 45 days of notice of the filing of an application or resolution, the
auditor shall notify the governing body of each local agency whose service area or
service responsibility will be altered by the amount of, and allocation factors with
respect to, property tax revenue estimated pursuant to paragraph (2) which is subject
to a negotiated exchange.

       "(4) Upon receipt of the estimates pursuant to paragraph (3) the local
agencies shall commence negotiations to determine the amount of property tax
revenues to be exchanged between and among such local agencies. Such negotiation
period shall not exceed 30 days.

        "Such exchange may be limited to an exchange of property tax revenues from
the annual tax increment generated in the area subject to the jurisdictional change
and attributable to the local agencies whose service area or service responsibilities
will be altered by the proposed jurisdictional change. The final exchange resolution
shall specify how the annual tax increment shall be allocated in future years.

         "(5) In the event that a jurisdictional change would affect the service area or
service responsibility of one or more special districts, the board of supervisors of the
county or counties in which the districts are located shall, on behalf of the district or
districts, negotiate any exchange of property tax revenues.

        "(6) Notwithstanding any other provision of law, the executive officer shall
not issue a certificate of filing pursuant to Sections 35152, 54791, or 56198 of the
Government Code until such local agencies included in the property tax revenue
exchange negotiation, within the 30-day negotiation period, present resolutions

                                            3.                                                88-501

       adopted by each such county and city whereby each such county and city agrees to
       accept the exchange of property tax revenues.

                "(7) In the event that the commission modifies the proposal or its resolution
       of determination, any local agency whose service area or service responsibility
       would be altered by the proposed jurisdictional change may request, and the
       executive officer shall grant, 15 days for the affected agencies, pursuant to paragraph
       (4) to renegotiate an exchange of property tax revenues. Notwithstanding the time
       period specified in paragraph (4), if the resolutions required pursuant to paragraph
       (6) are not presented to the executive officer within the 15-day period, all
       proceedings of the jurisdictional change shall automatically be terminated."
       (Emphases added.)2

               The first question focuses on the obligation of a city and a county to negotiate a
property tax transfer agreement in a city annexation proceeding. Are they required to reach an
agreement? We conclude that they are not so required.

                 Revenue and Taxation Code section 99, subdivision (b)(4) states that the city and
county "shall commence negotiations to determine the amount of property tax revenues to be
exchanged . . . ." Use of the term "shall" indicates that the two local governments have a mandatory
duty to negotiate. (See Rev. & Tax. Code, § 16; West v. State of California (1986) 181 Cal. App. 3d
753, 760; State of California v. Superior Court (1984) 150 Cal. App. 3d 848, 855; Camp v. Board of
Supervisors (1981) 123 Cal. App. 3d 334, 348.)

                The Legislature did not, however, use the phrase: "shall reach an agreement
concerning the amount of property tax revenues to be exchanged . . . ." Rather, it used the term
"negotiations." The duty to negotiate does not include the duty to agree. (See Carl Joseph Maggio,
Inc. v. Agricultural Labor Relations Bd. (1984) 154 Cal. App. 3d 40, 58-59; Placentia Fire Fighters
v. City of Placentia (1976) 57 Cal. App. 3d 9, 25-26; Los Angeles County Employees Assn. v. County
of Los Angeles (1973) 33 Cal. App. 3d 1, 7; N.L.R.B. v. Tomco Communications, Inc. (9th Cir. 1978)
567 F.2d 871, 881; N.L.R.B. v. Herman Sausage Co. (5th Cir. 1960) 275 F.2d 229, 231-232.)

   2
    While Revenue and Taxation Code section 99 refers to "Sections 35152, 54791, or 56198 of
the Government Code," we note that the referenced statutes have been repealed and incorporated
into the Act as section 56828. We substitute section 56828 for the referenced statutes under the
applicable rule of statutory construction. (See § 9604; People v. Richerson (1985) 169
Cal. App. 3d 1006, 1008-1009; People v. Oliver (1985) 168 Cal. App. 3d 920, 926.)

   The reference to "certificate of filing" in the statute concerns a document issued by LAFCO
with respect to the initial application proposing the jurisdictional change. No hearing is held by
LAFCO until the certificate is issued. (§ 56828.)

                                                 4.                                              88-501

                Indeed, when the Legislature amended Revenue and Taxation Code section 99 in
1980, it rejected a proposal to force an agreement upon cities and counties. The report of the
Assembly Revenue and Taxation Committee (April 14, 1980) stated in part:

                "One of the problems with the transfer of property tax revenue due to
        jurisdictional [change] through negotiations is that, in many cases, there have been
        protracted struggles among the participants and no agreements. Therefore, many
        worthwhile jurisdictional changes are being held up. This bill does not address this
        impasse issue."

                 "Perhaps the committee may wish to consider some type of arbitration where
        the last best offer of each party is submitted to a neutral, unbiased third party, who
        must choose one or the other of the offers."

While the Legislature ultimately amended the statute to include a "neutral, unbiased third party"
arbitration procedure, it did so only for school districts negotiating property tax transfers (see Stats.
1980, ch. 801, § 11) and not for transfers between cities and counties. The difference in the
language of the statutory provisions with respect to similar situations demonstrates different
legislative purposes. (See Committee of Seven Thousand v. Superior Court (1988) 45 Cal. 3d 491,
507; Safer v. Superior Court (1975) 15 Cal. 3d 230, 237-238; City of Hueneme v. City of Oxnard
(1959) 52 Cal. 2d 285, 295; Santa Fe Transp. v. State Board of Equal. (1959) 51 Cal. 2d 531, 538-
539.)

               In answer to the first question, therefore, we conclude that a city and a county are not
required to reach a property tax transfer agreement in a city annexation proceeding.

                2. 30-day Negotiation Period

                The city and county are given 30 days in which to negotiate a property tax transfer
agreement. The second question posed is whether this statutory time limitation has the effect of
prohibiting a city and a county from reaching an agreement after the 30-day period has expired. We
conclude that if agreement is not reached within the thirty day negotiation period the annexation
fails and that an agreement reached after the 30-day period would be void.

                  Revenue and Taxation Code section 99, subdivision (b)(4) provides in part: "Such
negotiation period shall not exceed 30 days." Subdivision (b)(6) of the same statute additionally
provides: ". . . the executive officer shall not issue a certificate of filing . . . until such local agencies
. . . within the 30-day negotiation period . . . agree[] to accept the exchange of property tax
revenues."

                When the language in question was added to the statute in 1980 (Stats. 1980, ch. 801,
§ 11), the purpose of the amendment was stated in the report of the Assembly Revenue and Taxation
Committee (April 14, 1980) as follows:

                                                     5.                                              88-501

               "Under present law, negotiations can drag on indefinitely. There is some
       feeling that such negotiations should be done timely, so all parties can know where
       they stand."

                Use of the term "shall" again demonstrates a mandatory duty on the part of the city,
county, and LAFCO to follow the statutory limitation. (See Rev. & Tax Code, § 16; West v. State
of California, supra, 181 Cal. App. 3d 753, 760; State of California v. Superior Court, supra, 150
Cal. App. 3d 848, 855; Camp v. Board of Supervisors, supra, 123 Cal. App. 3d 334, 348.) It is a
mandatory duty rather than a permissive or discretionary one.

              It does not necessarily follow, however, that the expiration of the 30-day period
removes the power and jurisdiction of a city and a county to further negotiate and reach an
agreement. Whether an agreement reached subsequent to the 30th day is valid and lawful or illegal
and void depends upon the intent of the Legislature in fixing the particular time limitation.

                For example, a failure to comply with a mandatory duty did not bar further action in
Edwards v. Steele (1979) 25 Cal. 3d 406, 409-413 [administrative decision valid although hearing
held and decision rendered after deadlines specified in city charter], City and County of San
Francisco v. Cooper (1975) 13 Cal. 3d 898, 931 [wage resolution valid though enacted prior to the
date designated in city charter], Garrison v. Rourke (1948) 32 Cal. 2d 430, 434-436 [judicial decision
valid though rendered after statutorily prescribed period], Cake v. City of Los Angeles (1913) 164
Cal. 705, 709-710 [tax assessment valid although not adopted within time limit prescribed by
statute], People v. Curtis (1986) 177 Cal. App. 3d 982, 987-989 [judicial order valid although hearing
held after statutory deadline] and Castorena v. City of Los Angeles (1973) 34 Cal. App. 3d 901, 908
[reapportionment ordinance valid though enacted subsequent to charter designated deadline].

               As indicated by the above cases, the expiration of various statutory time limitations
has not been found to invalidate subsequent governmental action. In Edwards v. Steele, supra, 25
Cal. 3d 406, 410, the Supreme Court declared:

               "We have held that, generally, requirements relating to the time within which
       an act must be done are directory rather than mandatory or jurisdictional, unless a
       contrary intent is clearly expressed. (See, e.g., Garrison v. Rourke (1948) 32 Cal. 2d
258, 262, Francis v. Superior Court (1935) 3 Cal. 2d 19, 27; see also Radovich v.
       Agricultural Labor Relations Bd. (1977) 72 Cal. App. 3d 36, 47; Anderson v.
       Pittenger (1961) 197 Cal. App. 2d 188, 194; cf. City and County of San Francisco v.
       Cooper (1975) 13 Cal. 3d 898, 931.) In ascertaining probable intent, California
       courts have expressed a variety of tests. In some cases focus has been directed at the
       likely consequences of holding a particular time limitation mandatory, in an attempt
       to ascertain whether those consequences would defeat or promote the purpose of the
       enactment. (Morris, supra, at pp. 909-910; Pulcifer, supra, at p. 262; Francis, supra,
       at pp. 28-29.) Other cases have suggested that a time limitation is deemed merely
       directory 'unless a consequence or penalty is provided for failure to do the act within
       the time commanded.' (Garrison, supra, at pp. 435-436; see McDonald's Systems of

                                                 6.                                              88-501

       California, Inc. v. Board of Permit Appeals (1975) 44 Cal. App. 3d 525, 544-545, fn.
       15, and cases cited.)"

               Edwards was followed in People v. Curtis, supra, 177 Cal. App. 3d 982, 988, where
the court focused "on the likely consequences of holding a particular time limitation mandatory, in
an attempt to ascertain whether those consequences would defeat or promote the purpose of the
enactment." The Curtis court also relied on language in French v. Edwards (1872) 80 U.S. (13
Wall.) 506, 511 [20 L. Ed. 702, 703], quoted with approval in People v. McGee (1977) 19 Cal. 3d
948, 961. In French v. Edwards, Justice Fields stated:

               "There are, undoubtedly, many statutory requisitions intended for the guide
       of officers in the conduct of business devolved upon them, which do not limit their
       power or render its exercise in disregard of the requisitions ineffectual. Such,
       generally, are regulations designed to secure order, system and dispatch in
       proceedings, and by a disregard to which the rights of parties interested cannot be
       injuriously affected. Provisions of this character are not usually regarded as
       mandatory unless accompanied by negative words importing that the acts required
       shall not be done in any other manner or time than that designated." (80 U.S. at p.
       511.)

                On the other hand, in Palmer v. City of Ojai (1986) 178 Cal. App. 3d 280, the court
concluded that the particular time limitation at issue was intended by the Legislature to be
jurisdictional and to void all further proceedings. The court stated:

               "We are aware that our Supreme Court has stated, in Edwards v. Steele
       (1979) 25 Cal. 3d 406, 410, that time limitations in and of themselves are normally
       viewed as 'directory' rather than 'mandatory.' (See also 2A Sutherland, Statutory
       Construction, supra, Mandatory and Directory Construction, § 57.19, p. 682.) Two
       factors may, however, persuade to the contrary: (1) Where 'time is of the essence' in
       the legislation and (2) where the penalty for noncompliance, i.e., the consequences,
       has been specified in the legislation itself. The legislative materials all support the
       view that the intent of the Legislature was to place reasonable but firm time
       limitations on the deliberations of public agencies concerning land use decisions.
       The penalty was specified." (Id., at p. 293, fn. omitted.)

                 We believe that the 30-day statutory period set by the Legislature for negotiating a
property tax transfer agreement was intended to limit the power of a city, a county, and LAFCO to
further act in the proceedings. The legislative history discloses that its purpose was to prevent the
negotiations from "drag[ging] on indefinitely . . . so all parties can know where they stand." A
contrary conclusion would thwart this singular purpose of the Legislature.

                Moreover, we find the same legislative intent of providing certainty for public
agencies in both subdivisions (b)(4) and (b)(7) of the statute, with the latter unmistakably specifying
that "all proceedings of the jurisdictional change shall automatically be terminated" at the end of the

                                                  7.                                             88-501

limitations period. No meaningful distinction may be drawn between the two provisions with
respect to the consequences of a failure to reach an agreement in a timely manner. "A statute must
be construed 'in the context of the entire statutory system of which it is a part, in order to achieve
harmony among the parts.'" (People v. Woodhead (1987) 43 Cal. 3d 1002, 1009.)

                As in Palmer v. City of Ojai, supra, 178 Cal. App. 3d 280, 293, we find that "[t]he
legislative materials all support the view that the intent of the Legislature was to place reasonable
but firm time limitations" upon the negotiations for the exchange of property tax revenues in a city
annexation proceeding.

                 Under the statutory directive of Revenue and Taxation Code section 99, subdivision
(b)(4), a city and a county have an obligation to terminate their negotiations by the end of the 30-day
period. If they continue to negotiate and reach an agreement, noncompliance with the time
limitation will invalidate the agreement subsequently reached. The power and jurisdiction of the
city, county, and LAFCO are removed by the limitation; the agreement and the certificate of filing
issued by LAFCO would be unlawful. By so construing the statutory provision, we effectuate the
Legislature's intent to prevent the negotiations from "dragging on indefinitely" so that "all parties
can know where they stand."

               In answer to the second question, therefore, we conclude that a property tax transfer
agreement is void if reached by a city and a county after expiration of the 30-day negotiation period
in a city annexation proceeding.

               3. 60-Day Petition Period

               One of the requirements for submitting a petition to LAFCO proposing the
annexation of territory by a city is that it be presented "within 60 days after the last signature is
affixed." Subdivision (a) of section 56705 states:

                "Except as otherwise provided in subdivision (b), no petition shall be
       accepted for filing unless the signatures on the petition are secured within six months
       of the date on which the first signature on the petition was affixed and the petition
       is submitted to the executive officer for filing within 60 days after the last signature
       is affixed. If the elapsed time between the date on which the last signature is affixed
       and the date on which the petition is submitted for filing is more than 60 days, the
       executive officer shall file the petition in accordance with Section 56709."3

   3
    Subdivision (b) of section 56705 applies to certain large cities; it contains the same language
as set forth in subdivision (a) with respect to petitions submitted for filing more than 60 days
from the date of the last signature.

      Sections 56750-56762 govern the signature requirements for petitions, with section 56753
specifically governing a proposed annexation of territory to a city.

                                                  8.                                              88-501

Section 56709 in turn provides:

                "If the petition, including any supplemental petition, is certified to be
        insufficient, it shall be filed with the executive officer as a public record, without
        prejudice to the filing of a new petition. The executive officer shall give mailed
        notice to the chief petitioners, if any, stating that the petition has been found to be
        insufficient."

               The third question posed is whether a certificate of filing would be void that is issued
with respect to a petition presented more than 60 days after the last signature was affixed. We
conclude that it would be void.

                Sections 56705 and 56709 prescribe a mandatory duty, not a permissive or
discretionary one, for the petitioners to submit their petition to LAFCO within the 60-day period.
(See §§ 5, 14; West v. State of California, supra, 181 Cal. App. 3d 753, 760; State of California v.
Superior Court, supra, 123 Cal. App. 3d 334, 348.) While the various references to "filing" in the two
statutes may appear to be confusing, reading sections 56705 and 56709 together and in the context
of the Act as a whole discloses that if a petition is submitted after the 60-day period, LAFCO has
a mandatory duty to (1) certify the petition as insufficient, (2) mail notice to the petitioners that the
petition has been found to be insufficient, (3) treat the petition as not initiating the proceedings, and
(4) retain the petition as a public record available for public inspection but having no other
significance. In so interpreting sections 56705 and 56709, we apply the rule that "every statute
should be construed with reference to the whole system of law of which it is a part, so that all may
be harmonized and have effect." (Moore v. Panish (1982) 32 Cal. 3d 535, 541; see People v.
Woodhead, supra, 43 Cal. 3d 1002, 1009; People v. Craft (1986) 41 Cal. 3d 554, 560.)

               Nevertheless, as previously discussed, noncompliance with a statutory time limitation
does not necessarily invalidate all subsequent governmental actions. Similar to the duty at issue in
the second question, we find here that noncompliance with the 60-day statutory limitation removes
the power and jurisdiction of LAFCO to initiate the proceedings.

                Of persuasive significance is the language in Palmer v. City of Ojai, supra, 178
Cal. App. 3d 280, 293, that the Legislature intended a time limitation to be jurisdictional "where the
penalty for noncompliance, i.e., the consequences, has been specified in the legislation itself." As
in Palmer, section 56705 specifies a "consequence" for the failure to submit a petition within 60 days
of the last signature. The petition is to be certified as insufficient for purposes of initiating the
proceedings but kept as a public record. No prejudice, however, is to attach to the filing of a new
petition as a result of the prior insufficiency.

                We believe that these express consequences contained in sections 56705 and 56709
demonstrate a mandatory legislative intent with respect to the effect of the time limitation upon
subsequent governmental actions. By reference to the filing of a new petition, the Legislature has
indicated the jurisdictional nature of a failure to meet the statutory deadline. (See Edwards v. Steele,
supra, 25 Cal. 3d 406, 410.)

                                                   9.                                             88-501

                Treating the time limitation as jurisdictional promotes the legislative purpose of
protecting the public from "stale" petitions and requires the initiation of proceedings based solely
upon the signatures of those currently residing in the area. (See Morris v. County of Marin (1977)
18 Cal. 3d 901, 909-910.) Because a new petition may be filed without any prejudice attaching, the
rights of interested parties are appropriately safeguarded. (See People v. McGee, supra, 19 Cal. 3d
948, 962-963.)

               Finally, we examine the language of section 56106, which states:

               "Any provisions in this division governing the time within which an official,
       a conducting authority, or the commission is to act shall in all instances, except for
       notice requirements, be deemed directory, rather than mandatory."

This statutory directive is inapplicable with respect to the time limitation of section 56705 since the
latter limits petitioners (persons attempting to initiate the proceedings) rather than "an official, a
conducting authority, or the commission." (See §§ 56022, 56068, 56079, 56700.)4 Such
construction of section 56106 harmonizes its language with the provisions of sections 56705 and
56709 that clearly demonstrate the jurisdictional effect of the 60-day time limitation specified
therein. Statutory provisions are to be harmonized whenever possible. (People v. Woodhead, supra,
43 Cal. 3d 1002, 1009; People v. Craft, supra, 41 Cal. 3d 554, 560; Moore v. Panish, supra, 32 Cal. 3d
535, 541.)

                Accordingly LAFCO is without power and jurisdiction to accept a petition submitted
to it more than 60 days after the last signature has been affixed. If LAFCO were to issue a certificate
of filing and treat the petition as sufficient for purposes of initiating the proceedings even though
received after the expiration of the 60-day period, the certificate would be unlawful and without
effect.

                 In answer to the third question, therefore, we conclude that a certificate of filing is
void that is issued with respect to a petition presented more than 60 days after the last signature was
affixed.

                                               *****

   4
   It may also be observed that courts have not always followed legislative declarations
concerning the effect of a particular time limitation. (See, e.g., Liberty Mut. Ins. Co. v. Ind. Acc.
Com. (1964) 231 Cal. App. 2d 501, 509-510.)

                                                  10.                                           88-501