City of Los Angeles v. County of Mono
| Decision Date | 05 November 1958 |
| Citation | 331 P.2d 421 |
| Court | California Court of Appeals Court of Appeals |
| Parties | The CITY OF LOS ANGELES, a municipal corporation, and Department of Water and Power of the City of Los Angeles, Plaintiffs and Appellants, v. COUNTY OF MONO, Defendant and Respondent, * Civ. 9427. |
Roger Arnebergh, City Atty., Gilmore Tillman, Chief Asst. City Atty. for Dept. of Water & Power, A. H. Driscoll, Asst. City Atty., Los Angeles, for appellants.
N. Edward Denton, Dist. Atty., Bridgeport, Verne Summers, Bishop, McCutchen, Thomas, Matthew, Griffiths & Greene, San Francisco, for respondent.
The City of Los Angeles and the Department of Water and Power of the City of Los Angeles (hereinafter collectively referred to as the 'city') brought two actions to recover taxes paid under protest to the County of Mono. Before paying the taxes the city made appropriate application to the State Board of Equalization for relief from the assessments but the Board denied any relief. The first action was to recover taxes levied against two hydroelectric generating plants and appurtenant works located on the Owens River, a transmission line and a dam on Rush Creek. The second was to recover alleged excessive and discriminatory taxes levied on approximately 20,000 acres of land in Mono County. The actions were consolidated for trial and the court rendered judgment denying any relief to plaintiff, and this appeal is from said judgment.
The Appeal Relating to the Taxation of the Hydroelectric Facilities, the Dam, and the Transmission Line.
In 1933 the city purchased two power plants, with a combined generating capacity of 7,400 kilowatts, known as Adams Main and Adams Auxiliary. The plants were located in the Owens River Gorge in Mono County. They were taxable at the time of acquisition. The plants were 'run of the stream' plants, and until the completion of a dam known as the Long Valley Dam in 1940 could only operate during the part of the year when the natural flow of the Owens River provided enough water. For some years after acquisition the energy generated by the Adams plants was sold to a private power company or connected to the city's system serving the Owens Valley in Inyo County.
Owens River Gorge, referred to above, is approximately 17 miles long and falls about 2,200 feet in this distance. The city owns all of the land in the gorge, but, with the exception of the east one-half of section 16, all lands were acquired from the federal government and were not subject to taxation at the time of acquisition.
At the upstream end of the gorge, the city constructed Long Valley Dam (completed in 1940), which created a reservoir of some 183,465 acre-feet known as Crowley Lake. This reservoir provides regulation for the flow of the Owens River below the dam. The reservoir impounds not only the waters of Owens River but also waters from a foreign watershed--Mono Basin--which are diverted from their natural watershed and conducted to the lake by a system of aqueducts and tunnels.
Mono Basin is a closed basin and all waters originating therein flow naturally into Mono Lake, which has no outlet.
Prior to 1941 the city acquired the right to divert, from Mono Basin, waters from certain of the streams flowing in the basin--Leevining Creek, Parker Creek, Walker Creek and Rush Creek. To put this water to use, the city spent some millinos of dollars in constructing waterways in Mono Basin and in driving a 12-mile tunnel through the mountain range which separates Mono Basin from the Owens River watershed.
Through the addition of this foreign water supply, the average flow available into Crowley Lake at the head of Owens River Gorge was increased from 230 second-feet--the natural flow of the Owens River at that point--to 405 second-feet.
In 1948 the city commenced construction of a three-plant hydroelectric generating system in the gorge. Two of these are located in Mono County. Each unit generates 37,500 kilowatts of power. A transmission line was also constructed to convey the electricity generated to the City of Los Angeles. Two of these plants and a portion of the tunnels, penstocks and transmission line are in Mono County. The third plant, at the foot of the gorge, is in Inyo County. The trial court, in its findings, refers to these three plants and appurtenant works as the Gorge System. The location and relationship of these hydroelectric plants are shown schematically in the diagram below.
After completion of the three new generating plants in the gorge the situation with respect to waters released from Crowley Lake was and is as follows:
At Crowley Lake water may be released into the river channel and thence to the Adams Plants. It may also be released and conveyed by a tunnel and penstock to the uppermost of the three new plants, known as Upper Gorge.
Water may be discharged from the Upper Gorge Plant into the river and thence to the Adams Plants, or it may be conveyed through a tunnel and penstock to the second new plant, known as Middle Gorge. This plant is located on the east one-half of section 16 and between the two Adams Plants. Water may be discharged from the Middle Gorge Plant into the river and thence to the lower of the two Adams Plants, or it may be conveyed through a tunnel and penstock to the lowest of the new plants, known as Control Gorge, in Inyo County. Water that has passed through the upper of the two Adams Plants may be picked up in the river bed and conveyed through the Control Gorge Plant. Water discharged through the lower of the two Adams Plants must be released to the river and cannot reach any other plant.
The Gorge System was designed to take the entire flow of water available from the gorge though the Adams Plants can still be operated by diverting water from the system. On completion of the new plants the city had planned to abandon the Adams Plants and steps were taken to put them out of service and permanently abandon them. However, before these steps were completed efforts were made to rehabilitate them so they could be operated. The trial court found that the rescission of the retirement of the Adams Plants was carried out by the city in the attempt to avoid taxation of the new facilities by Mono County and not because the Adams Plants had any actual or potential utility. The Adams Plants were not operated after the new facilities were completed until this litigation commenced. The plants were operated intermittently during 1955. The electricity generated was nominal. There was testimony of experts to the effect that after the construction of the new facilities the Adams Plants were without value as standby plants or for any other purpose. On their completion the county taxed the new facilities in Mono County.
In 1918 a dam was built at the foot of Grant Lake on Rush Creek. This dam and the water rights in connection therewith were sold to the City of Los Angeles in 1934. This dam impounded waters of Rush Creek and created a reservoir with a capacity of 10,000 acre-feet. It had theretofore been used as a part of a system for supplying water for irrigation. It was purchased by the city from a private corporation and was subject to taxation when acquired. About 1,500 feet downstream from this dam the city, in 1941, constructed a new dam, hereinafter referred to as New Grant Lake Dam, creating a reservoir with a capacity of 47,500 acre-feet. This reservoir impounds not only the waters of Ruch Creek but also the waters of Leevining, Parker and Walker Creeks to the north. The waters of these latter creeks are conveyed to Grant Lake by a conduit constructed by the city; from Grant Lake the waters so impounded are conveyed by a tunnel and conduits to the Owens River and then to the City of Los Angeles. When completed, the old dam was breached and became submerged. The old dam was assessed for tax purposes until the 1954-1955 taxable year. Thereafter, the county taxed the new dam. The trial court found that the new dam replaced the old dam which had no practical value after the completion of the new dam.
As to the taxes on the city's Owens River Gorge plants and the New Grant Lake Dam, the question before the trial court was whether these improvements were tax exempt. The trial court found that the New Grant Lake Dam and the portion of the Gorge System located in Mono County were taxable replacements of previously taxable improvements.
Appellants contended in the trial court and contend upon this appeal that the Owens River Gorge plants and the New Grant Lake Dam are improvements and are therefore exempt from taxation under the provisions of the 1914 amendment to Article XIII, section 1, of the California Constitution, which reads:
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