21 Cal.3d 255, 30827, Redevelopment Agency v. County of San Bernardino

• Docket Number: 30827
• Citation: 145 Cal.Rptr. 886,21 Cal.3d 255,578 P.2d 133
• Date: 16 May 1978
• Parties: Redevelopment Agency v. County of San Bernardino
• Court: California Supreme Court

Page 255

21 Cal.3d 255

145 Cal.Rptr. 886, 578 P.2d 133

REDEVELOPMENT AGENCY OF the CITY OF SAN BERNARDINO et al., Plaintiffs and Appellants,

v.

COUNTY OF SAN BERNARDINO et al., Defendants and Respondents.

L.A. 30827.

Supreme Court of California.

May 16, 1978.

Rehearing Denied July 13, 1978.

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[Copyrighted Material Omitted]

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William A. Flory, San Bernardino, McDonough, Holland, Schwartz & Allen, William G. Holliman, Jr., and Richard E. Brandt, Sacramento, for plaintiffs and appellants.

James Warren Beebe and Milton N. Sherman, Los Angeles, as amici curiae for plaintiffs and appellants.

M. Crane Kitchel, County Counsel, Richard Wm. Strong, Deputy County Counsel, San Bernardino, and James W. Dilworth, Riverside, for defendants and respondents.

TOBRINER, Justice.

The present case raises the problem of the treatment for tax purposes of property located in a redevelopment project which, subsequent to the adoption of the redevelopment plan, is transferred for one reason or another into public ownership. Article XVI, section 16 of the California Constitution provides that the basis for calculating taxation of property located in a redevelopment project shall be "the assessment roll used in connection with the taxation of such property by (the local taxing agencies), last equalized prior to the effective date of (the ordinance adopting the redevelopment plan)." ¹ The Constitution also provides that tax revenue collected from property in a redevelopment project may be shared by the local taxing agencies and the redevelopment agency. It is the formula for tax allocation between the taxing agencies and the redevelopment agency which the present case addresses.

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That formula is as follows: "(a) That portion of the taxes which would be produced by the rate upon which the tax is levied each year by . . . (the) taxing agencies upon the total sum of the assessed value of the taxable property in the redevelopment project as shown upon the assessment roll used in connection with the taxation of such property by such taxing

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agenc(ies), last equalized prior to the effective date of such ordinance (adopting the redevelopment plan), shall be allocated to . . . the funds of the respective taxing agencies . . .; and (P) (b) That portion of said levied taxes each year in excess of such amount shall be allocated to . . . a special fund of the redevelopment agency . . . ." (Emphasis added.) (Cal.Const. art. XVI, § 16.)

In essence this section provides that if, after a redevelopment project has been approved, the assessed valuation of taxable property in the project increases, the taxes levied on such property in the project area are divided between the taxing agency and the redevelopment agency. The taxing agency receives the same amount of money it would have realized under the assessed valuation existing at the time the project was approved, while the additional money resulting from the rise in assessed valuation is placed in a special fund for repayment of indebtedness incurred in financing the project.

This case presents a problem, however, which arises from an ambiguity in the constitutional provisions. As the provisions declare, the "assessed value of the taxable property in the redevelopment project as shown upon the assessment roll" governs the calculation and allocation of tax revenues. Yet the meaning of the phrase "taxable property" is unclear: does the language refer to that property in a redevelopment project which is taxable each year at the time taxes are imposed, or do the words refer to that property which was taxable at the time the original base assessment roll was prepared? If subsequent to redevelopment the public agency acquires a portion of the formerly taxable property within the redevelopment area, that property attains tax exempt status. Taxes then derived from that property are no longer available for division between the redevelopment agency and the taxing agencies. Under those circumstances, how should the taxes received from the balance of the project be divided?

A 1960 opinion of California Attorney General Stanley Mosk elucidates the issue. "To illustrate the problem," he explains, "it is helpful to consider a hypothetical situation. Assume there is an area which is to be redeveloped and that there are four parcels of property in this area, A, B, C and D. Each had an assessed value of $100 on the last equalized assessment roll prior to the effective date of the ordinance approving the redevelopment plan (hereinafter referred to as the base roll). After

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redevelopment parcels A, B and C had an assessed value of $200 each and parcel D had an assessed value of $150. Assume also that the rate of tax is a constant 10%. And assume, finally, that parcel A is later acquired by another public agency.

"Prior to redevelopment the total taxes raised in the area are $400 X 10% or $40, and the taxing agencies are entitled to the entire amount. After redevelopment, the total taxes raised are $750 X 10% or $75 and the taxing agencies are entitled to $40 and the redevelopment agency special fund is entitled to $35 . . . .

"After the acquisition of parcel A by another public agency, the total taxes drop to $550 X 10% or $55. How is the $55 divided between the taxing agencies and the redevelopment agency special fund? There are three possible results and an argument to support each. The first is the redevelopm(e)nt agency special fund gets $35 and the taxing agencies get $20 on the theory that the redevelopment agency special fund should continue to receive the amount representing the total increase in assessed value which occurred after redevelopment. The second is that the taxing agencies should continue to receive $40 and the redevelopment agency special fund receives only $15 on the theory that the taxing agencies should continue to receive the full amount that they were entitled to receive when redevelopment was first completed. The third possible result is that the taxing agencies get $30 and the redevelopment agency special fund gets $25 on the theory that each ought to share proportionately in the loss of revenue due to the removal from the tax roll of the specific parcel of property.

"The result turns on the proper interpretation of the phrase 'the total sum of the assessed value of the taxable property in the redevelopment project as shown' upon the base roll which appears in Article (XVI), section (16), subsection (a), supra. Although the first alternative could only be reached by a tortured construction of the above words, the language could support either of the other alternatives. The fact that the 'total sum of the assessed value' is referred to might be used to argue that the amount of taxes due to the taxing agencies should never fall below the amount which they would have received if the total assessed value as carried on the base roll were used in computing the tax. The more reasonable conclusion, however, is that the taxing agencies should receive only the amount of taxes which they would have received had there been no redevelopment project and that this amount is to be computed by

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applying the current rate to the total sum of the assessed value of the remaining taxable property on the base roll. In other words, the 'total sum of the assessed value of the taxable property' must be redetermined whenever any parcel of property ceases to be 'taxable property.' " (35 Ops.Cal.Atty.Gen. 211, 212-213 (1960).)

For reasons which we shall explain, we agree with the Attorney General that the "assessed value of the taxable property" within the redevelopment project must be redetermined whenever project property is acquired by a tax exempt agency, and thus that the loss of tax revenue resulting from that acquisition should be divided proportionately between the redevelopment agency special fund and the taxing agencies. The trial court in the present case arrived at a contrary conclusion; declining to redetermine the assessed value of taxable property, it placed the entire loss of revenue on the redevelopment agency. We therefore reverse the decision of the trial court.

On February 24, 1965, and by amendment on March 17, 1970, the Council of the City of San Bernardino adopted ordinances approving the redevelopment plan for Central City Project No. 1, Calif. R-79. The plan provided that after the effective date of the ordinance approving the plan, any taxes levied upon taxable property within the project would be allocated pursuant to the Community Redevelopment Law. The plan further provided that plaintiff Redevelopment Agency of the City of San Bernardino could issue bonds payable from any source authorized by state law, including tax revenues allocated and paid to the agency's special fund. The redevelopment agency subsequently authorized the issuance of $14,800,000 of bonds secured by an irrevocable pledge of its tax revenues.

After adoption of the plan, the redevelopment agency acquired certain property in the project that had been taxable at the time of the plan's adoption. The agency leased portions of the property to the city for a term of 50 years for use as a pedestrian mall and public parking lot. The agency deeded other formerly taxable property to the city for streets and public rights of way. Defendant County of San Bernardino does not presently tax this city-owned and city-leased property.

On April 24, 1973, the redevelopment agency requested that the county assessor reduce the sum of assessed value shown on the project base assessment roll by the assessed value, as shown on the roll, of the

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property acquired by the city, and reallocate tax revenues for the 1973-1974 tax year received from property within the project on the basis of the requested adjustment. When the county assessor refused to comply, the agency filed the underlying petition for writ of mandate to compel the...