Redevelopment Agency of City of Sacramento v. Malaki

• Decision Date: 21 May 1963
• Citation: 31 Cal.Rptr. 92,216 Cal.App.2d 480
• Parties: REDEVELOPMENT AGENCY OF the CITY OF SACRAMENTO, a public body, corporate and politic, et al., Petitioners, v. Mike MALAKI, as Chairman of the Board of Supervisors of the County of Sacramento, et al., Respondents. Civ. 10668.
• Court: California Court of Appeals Court of Appeals

Page 92

31 Cal.Rptr. 92

216 Cal.App.2d 480

REDEVELOPMENT AGENCY OF the CITY OF SACRAMENTO, a public body, corporate and politic, et al., Petitioners, v. Mike MALAKI, as Chairman of the Board of Supervisors of the County of Sacramento, et al., Respondents.

Civ. 10668.

District Court of Appeal, Third District, California.

May 21, 1963.

Joseph E. Coomes, Jr., Staff Atty., Sacramento, McDonough, Holland, Schwartz, Allen & Wahrhaftig, Sacramento, for Redevelopment Agency of City of Sacramento; Everett M. Glenn, City Atty., Sacramento, for City.

John Heinrich, County Counsel, Sacramento, for Sac-Yolo Port Dist. & American River Flood Control Dist.

John F. Downey, Sacramento, for respondent County Officers.

FRIEDMAN, Justice.

Mandate to compel the chairman of the Sacramento County Board of Supervisors to sign a contract with the Redevelopment Agency of the City of Sacramento and the city itself, as directed by a resolution of the board of supervisors.

The proceeding entails interpretation of certain language in article XIII, section 19 of the state Constitution. The constitutional provision was adopted in 1952 to permit a new source of financing for urban redevelopment projects. The general objectives of urban development in California were discussed in Redevelopment Agency of City and County of San Francisco v. Hayes, 122 Cal.App.2d 777, 266 P.2d 105 (cert. den. Van Hoff v. Redevelopment Agency, 348 U.S. 897, 75 S.Ct. 214, 99 L.Ed. 705). Elimination of blighted areas by redevelopment finds its constitutional basis in protection of public health, morals, safety and general welfare. (Redevelopment Agency of City and County of San Francisco v. Hayes, supra, at pp. 800-802, 266 P.2d at pp. 120-121.) A beneficial by-product is the upgrading of real estate values, thereby increasing assessed values on public tax rolls and augmenting public tax revenues.

Article XIII, section 19 was designed to permit the pledge of future increases in property tax revenue within redeveloped areas to pay the principal and interest of bonds issued and sold for the purpose of defraying the cost of redevelopment, which in turn would produce such augmented revenues. ¹ The constitutional provision declares that property within a redevelopment project, except publicly owned property not subject to taxation, shall be subject to ad valorem taxes. After the effective date of an ordinance approving a redevelopment plan, the county, the city and other taxing agencies are to receive that part of the revenue produced by applying current tax rates 'upon the total sum of the assessed value of the taxable property in the redevelopment project as shown upon the assessment roll * * * last equalized prior to the effective date of such ordinance * * *.' (The quoted language is the hub around which this litigation revolves.) When augmented property values produce taxes in excess of the amount thus payable to the taxing agencies, then, according to the constitutional provision, the excess is to be allocated to a special fund of the redevelopment agency to pay principal and interest of bonds. Advance pledge of the excess tax revenue as bond security is permitted. After the bond obligation is paid off, the separate allocation of excess revenue ceases, and all the tax income goes to the taxing agencies. Provisions of the Community Redevelopment Law (specifically, Health & Safety Code, secs. 33950-33954) supply implementing details.

The convenient label 'tax allocation bonds' is applied to redevelopment bond issues resting on the security of such excess tax revenue.

On June 16, 1960, the Sacramento city council adopted an ordinance approving a redevelopment plan for a 10 1/4-block area in the western part of downtown Sacramento, designating it as Capitol Mall Extension, Project No. 3. The ordinance was immediately effective. At that time the 'last equalized' assessment rolls used by the various public agencies levying property taxes were those for the 1959-1960 fiscal year (Revenue & Taxation Code, secs. 1603, 1614; Bryant v. Board of Supervisors of Orange County, 32 Cal.App. 495, 163 P. 341.) Almost a year after approval of Project No. 3, the State Highway Commission established a route for a northsouth freeway paralleling the Sacramento River. The freeway right-of-way will occupy four of the 10 1/4 blocks within Redevelopment Project No. 3. At the time the State Highway Commission acted, the redevelopment agency was in the process of acquiring land in the four-block freeway path. It has now acquired 75 per cent of the four blocks and has entered into an agreement with the State Department of Public Works to acquire the remainder and to sell the four-block area to the Department for highway purposes. When that event occurs, the four blocks will be exempt from taxation as state-owned highway property. (Cal.Const., art. XIII, sec. 1.) Thus the four-block freeway area will provide no tax revenue either for local taxing agencies or for redevelopment bond servicing.

According to the plan for Project No. 3, as approved by the city council, part of the project cost will be raised by an issue of tax allocation bonds. In view of the fact that the four blocks of freeway will produce no property taxes, the redevelopment agency has prepared an agreement declaring that the four blocks will not be included in the assessment rolls used as the base for computing allocations of future tax income between the public taxing agencies, on the one hand, and payment of the tax allocation bonds, on the other. Proposed parties to the agreement are the County of Sacramento and City of Sacramento, as the taxing agencies whose assessment rolls form the basis of tax levies in the area, and the redevelopment agency. The latter two entities have executed the agreement. The county board of supervisors has approved the agreement and directed its chairman to sign it on behalf of the county. Respondent Malaki, the chairman, refuses to sign, declaring that conformity of the agreement with article XIII, section 19 of the state Constitution is doubtful. The redevelopment agency seeks a writ directing Malaki to sign. Other respondents are the other public districts which levy property taxes within the redevelopment area.

Respondents argue in substance: Although the four-block area to be acquired by the state will be tax exempt and will not produce tax revenue, it was all in private ownership in 1959 and thus appears on the 'assessment roll * * * last equalized' prior to approval of the redevelopment project; a literal reading of article XIII, section 19 unalterably pegs future tax revenue payable to respondents at an amount equal to that to be produced by the total of all assessed values in the project area as shown on the 1959-1960 rolls, including the assessed value of the four blocks in the freeway path; acquisition of the four blocks by a tax-exempt public entity does not alter the palpable presence of these four blocks as taxable property on the 1959-1960 assessment rolls.

Petitioner rejects such a literal reading of the constitutional language. The substance of petitioner's argument is this: If the 1959-1960 assessed valuation of the four-block freeway route remains as part of the base for allocation of tax income, the taxing agencies will receive all the tax income produced by the remaining six blocks, until such time as the six blocks generate more taxes than those produced by the entire 10 1/4 blocks as valued in 1959-1960; unless and until that point is reached, there will be no excess tax revenue available for servicing tax allocation bonds of the redevelopment agency; proper interpretation of article XIII, section 19 requires that property which becomes tax exempt by reason of public acquisition occurring after approval of a redevelopment project must be deducted from the 'last equalized' assessment rolls which provide the base for allocation of income between the taxing agencies and tax allocation bonds; such an interpretation would spread the tax loss among all recipients; the opposite interpretation would confer a windfall on the county, the city and other taxing agencies by immunizing them from the tax loss otherwise caused by public acquisitions. In support of this argument, petitioner cites 35 Ops.Cal.Atty.Gen. 211, in which the Attorney General expressed this view of section 19: '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 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."

Aside from the problems of phraseology, the general objective of article XIII, section 19 is apparent. As stated in the argument to the voters printed in the Secretary of State's 1952 ballot pamphlet: 'It will make possible the passage of laws providing that tax revenues derived from any increase in the assessed value of property within a redevelopment area because of new improvements, shall be placed in a fund to defray all or part of the cost of the redevelopment project that would otherwise have to be advanced from public funds.' Thus the profit from increased valuations is to be available for bonding purposes. The objective is to make interim tax profits available for bonds and to defer the profits of general government until the bonds are paid.

While clarity is usually praised as the summum bonum of statutory draftsmanship, it may not be amiss to extol the virtues of prescience. Quite apparently the present contingency was not foreseen by the draftsmen of section 19. To be sure, the creation of tax exemptions through public acquisition was recognized. Nevertheless, in referring to...