Amador County v. State Bd. of Equalization

Decision Date16 February 1966
Citation240 Cal.App.2d 205,49 Cal.Rptr. 448
CourtCalifornia Court of Appeals Court of Appeals
PartiesCOUNTY OF AMADOR and County of Calaveras, Plaintiffs and Appellants, v. STATE BOARD OF EQUALIZATION of the State of California, John Lynch, Paul Leake, George Reilly, Richard Nevins, and Alan Cranston, as Members of said State Board of Equalization, Defendants and Respondents; EAST BAY MUNICIPAL UTILITY DISTRICT, Real Party in Interest. Civ. 10985.

James E. Deasy, Amador County Counsel, Jackson, for Amador County.

George A. Huberty, Calaveras County Counsel, San Andreas, for Calaveras County.

Stanley Mosk and Thomas C. Lynch, Attys. Gen., by Dan Kaufmann, Asst. Atty. Gen., by Edward P. Hollingshead, Deputy Atty. Gen., Sacramento, for State Board of Equalization.

Harold Raines, John B. Reilley, Frank E. Howard, by John B. Reilley, Oakland, for East Bay Dist.

FRIEDMAN, Justice.

The tax assessors of Amador and Calaveras Counties fixed the assessed value of water rights held by East Bay Municipal Utility District at Pardee Dam. The dam is located on the Mokelumne River, which forms the boundary between the two counties. The counties placed an aggregate assessed value of $8,342,000 on these rights, each entering one-half that amount on its assessment roll for 1961-1962. Dissatisfied with these assessments, the utility district invoked the State Board of Equalization's constitutional power of 'review, equalization and adjustment' of assessments on publicy owned property under article XIII, section 1, of the State Constitution. 1 After hearings the Board of Equalization ordered reduction of Amador County's assessments to $275,000 and Calaveras' to $300,000. The two counties then filed mandate proceedings against the board, seeking judicial review under Code of Civil Procedure section 1094.5. By stipulation, the Calaveras action was transferred to Amador County and both cases were heard together. The counties appeal from adverse judgments.

East Bay Municipal Utility District is concededly a 'municipal corporation' for the purpose of article XIII, section 1. (Rock Creek Water Dist. v. County of Calaveras, 29 Cal.2d 7, 172 P.2d 863.) Thus the district is subject to county taxes on land outside its own boundaries if the land was subject to taxation at the time the district acquired it. Water rights, whether appropriative or riparian, are regarded as 'land' for this purpose. (City and County of San Francisco v. County of Alameda, 5 Cal.2d 243, 54 P.2d 462; County of Tuolumne v. State Board of Equalization, 206 Cal.App.2d 352, 358, 24 Cal.Rptr. 113; see Herlick, Water Rights Taxation, 3 Santa Clara Lawyer 153-163.) Assessments on publicly owned property under article XIII, section 1, are subject to 'review, equalization and adjustment' by the State Board of Equalization. The parties do not dispute the taxing agencies' resort to mandate proceedings as a means of judicial review of the board's action. (See County of Tuolumne v. State Board of Equalization, supra, 206 Cal.App.2d at pp. 373-374, 24 Cal.Rptr. 113.)

The history of the Mokelumne River water rights held by East Bay Municipal Utility District is briefly stated: Commencing in 1924 the district filed several applications with the State Division of Water Rights under the Water Commission Act (now Water Code §§ 1000 et seq.), seeking permits to divert and store Mokelumne River water for the proposed water supply and hydroelectric project now known as Pardee Dam and Reservoir. The district's applications for appropriate water had been preceded by competing applications of private persons. One series had been filed in 1919 and 1920 by the J. W. Preston group. Another series had been filed by Stephen E. Kieffer in 1921 and 1923. Hearings on these applications were held during 1925. As a municipal water supplier the district enjoyed a statutory preference without regard to time priorities. (See Wat. Code § 1460.) During 1926 and thereafter the Division of Water Resources issued a group of three permits in response to the applications of the utility district. Action on the competing applications of the Preston group and Kieffer was deferred and no permits were ever issued to these applicants. The district proceeded to acquire the reservoir site and to construct its project. Pardee Dam and Reservoir, with their related diversion, power production and distribution facilities, have been in operation since 1929.

These appropriative rights were subordinate to certain preexisting, downstream riparian rights. One Lloyd Thayer had acquired 207 acres of land with accompanying riparian rights below the site of the project dam. Thayer organized the Colorado Power Company, which in 1929 conveyed the land and riparian rights to the City of Lodi for the limited purpose of establishing a hydroelectric project. In order to make full use of its state-granted appropriative rights and to free it from potential lawsuits, East Bay Municipal Utility District had to acquire superseding interests in the downstream riparian rights of the City of Lodi and Colorado Power Company. This acquisition was accomplished by a condemnation action, which culminated in this court's decision of February, 1932 in East Bay Mun. Util. Dist. v. City of Lodi, 120 Cal.App. 740, 8 P.2d 532.

The counties charge the State Board of Equalization with several errors of law and one error of valuation, contending: (1) That the Board of Equalization had no power to classify the state-issued appropriative rights as exempt and no power to eliminate them from the assessment. (2) In any event the board erred in so classifying these rights. (3) The board acted arbitrarily and without substantial evidence in reducing the counties' valuation of the downstream riparian rights to $275,000 and $300,000, respectively. (4) The board erred when it applied the 'intercounty equalization ratio' to establish the assessed value of the downstream rights. (5) The Board of Equalization erred in failing to make findings of fact.

Appropriative Water Rights Held Under Direct State Permits

The counties' jurisdictional attack is aimed at a closed question. When taxable and nontaxable interests of a public agency are included in a single assessment figure, segregation between exempt and nonexempt values is part of the Board of Equalization's constitutional function of assessment 'adjustment.' Such was the holding in City and County of San Francisco v. County of San Mateo, 36 Cal.2d 196, 201, 222 P.2d 860.

The counties attempt to distinguish San Francisco v. County of San Mateo, suggesting that the segregation there was one between land and improvements, rather than a separation between taxable and exempt interests. The suggestion is negated by the following statement in the opinion in that case: 'An adjustment is sought by virtue of an erroneous inclusion of exempt improvements with taxable lands. * * * We therefore have a problem of 'equalization and adjustment' confided by the constitution to the state board of equalization. It is the province of the board to 'adjust' the assessment so that the exempt and the nonexempt portions of the property be properly segregated.' (San Francisco v. County of San Mateo, supra, 36 Cal.2d at p. 201, 222 P.2d at p. 863.) In view of this rule, the State Board of Equalization had authority to delete any tax-exempt values included in the present assessments. We turn to the substantive question of exemption.

Two pertinent points were established by County of Tuolumne v. State Board of Equalization, supra, 206 Cal.App.2d 352, 24 Cal.Rptr. 113. First, state-granted appropriative water rights in the hands of the taxpaying public entity are exempted by article XIII, section 1, when these rights are based upon applications filed by the public entity itself or its representatives. (206 Cal.App.2d at pp. 357-360, 24 Cal.Rptr. 113, 117.) Second, when these state-issued rights emanate from filings purchased by the public entity from private individuals, they fall within the constitutional description of 'lands * * * subject to taxation at the time of [their] acquisition' by the public taxpayer, hence are taxable. The later holding was based upon the concept of a taxable possessory right in the hands of the private filer, even though he had not actually received an appropriate permit or completed his diversion facilities. (206 Cal.App.2d at pp. 361-364, 24 Cal.Rptr. 113.) No Supreme Court hearing was sought in the Tuolumne case. We concur with the Tuolumne decision.

The counties contend that East Bay's appropriative rights are more comparable to those held taxable in the Tuolumne case than to those exempted. Here--so runs the argument--East Bay's own appropriative filings had been preceded by the competing applications of private persons; the latter, upon filing, had acquired taxable possessory interests; when the state rejected the applications of the private persons and granted those of the utility district, the latter succeeded to the private filers' property interests; these had been taxable at the time of their acquisition, hence are taxable in the district's hands. The counties invoke by analogy the 'replacement' principle applicable to the taxation of publicly owned physical improvements.

Article XIII, section, 1, has been construed to permit taxation not only of physical improvements in existence at the time the public entity acquired ownership, but also replacements and substitutes for those improvements. (City of Los Angeles v. County of Mono, 51 Cal.2d 843, 848, 337 P.2d 465; City and County of San Francisco v. County of San Mateo, 17 Cal.2d 814, 819, 112 P.2d 595.) The taxpayer's unilateral replacement of one physical asset by another bears no analogy to the successive and utterly distinct interests of competing applicants for state-granted water rights. There is no identity nor even privity between the holders of these successive rights. The...

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