City of El Monte v. Commission
| Decision Date | 27 July 2000 |
| Docket Number | No. C025631.,C025631. |
| Citation | 83 Cal.App.4th 266,99 Cal.Rptr.2d 333 |
| Court | California Court of Appeals Court of Appeals |
| Parties | CITY OF EL MONTE et al., Plaintiffs and Appellants, v. COMMISSION ON STATE MANDATES, Defendant and Respondent; Department of Finance, Real Party in Interest and Respondent. |
v.
COMMISSION ON STATE MANDATES, Defendant and Respondent;
Department of Finance, Real Party in Interest and Respondent.
[99 Cal.Rptr.2d 334]
[83 Cal.App.4th 268]
Law Offices of William D. Ross, William D. Ross, Carol B. Sherman and J. Robert Flandrick, Los Angeles, for Plaintiffs and Appellants.
Gary D. Hori, Legal Counsel, Camille Shelton, Staff Counsel, Commission on State Mandates for Defendant and Respondent.
[83 Cal.App.4th 269]
Daniel E. Lungren and Bill Lockyer, Attorneys General, Linda A. Cabatic and Pete Southworth, Deputy Attorneys General, for Real Party in Interest and Respondent.
SCOTLAND, P.J.
In this appeal from the trial court's denial of a petition for writ of administrative mandate, we are called upon to determine whether legislation requiring local redevelopment agencies to contribute to a local Educational Revenue Augmentation Fund (ERAF) constituted a reimbursable state mandate under article XIII B, section 6 of California's Constitution.
As we shall explain, we agree with the trial court that the legislation did not constitute a reimbursable state mandate and that plaintiffs were accorded a fair hearing before the Commission on State Mandates. Accordingly, we shall affirm the judgment.
The Legislature has "found and declared that there exist in many communities blighted areas which constitute physical and economic liabilities, requiring redevelopment in the interest of the health, safety, and general welfare of the people of these communities and of the state." (Health & Saf.Code, § 33030.) Thus, it is the policy of our state to utilize all appropriate means to promote the sound development and redevelopment of blighted areas. (Health & Saf.Code, § 33037.) To that end, the Legislature enacted the Community Redevelopment Law. (Health & Saf.Code, § 33000 et seq.)
The redevelopment process begins when a community forms a redevelopment agency and, after appropriate proceedings, designates an area as a redevelopment or project area. (See Bell Community Redevelopment Agency v. Woosley (1985) 169 Cal.App.3d 24, 27, 214 Cal.Rptr. 788.) The agency then must formulate a redevelopment plan that is adopted by the local government body. (Ibid.) The agency has broad powers to implement the redevelopment plan, but lacks the authority to impose a tax to finance its efforts. (Ibid.) In this respect, a redevelopment agency is permitted to accept financial or other assistance from any public or private source, may borrow money, and may issue bonds. (Ibid.; Health & Saf.Code, §§ 33600-33602.)
The most important method of financing employed by a redevelopment agency is what is known as tax increment financing. (See Health & Saf.
Code, § 33670 et seq.) This method of financing is explicitly authorized by article XVI, section 16 of our state Constitution. Tax increment financing presupposes that redevelopment will increase property values, and hence increase the tax base, of properties in the project area. Pursuant to a tax increment financing plan, the taxing agencies that are entitled to an allocation of taxes paid upon properties in a redevelopment area continue to receive an allocation based upon the assessment roll last equalized prior to the effective date of the ordinance approving the redevelopment plan. (Cal. Const., art. XVI, § 16, subd. (a).) Tax receipts in excess of that amount are paid into a special fund of the redevelopment agency for the payment of "the principal of and interest on loans, moneys advanced to, or indebtedness (whether funded, refunded, assumed or otherwise) incurred by the redevelopment agency to finance or refinance, in whole or in part, the redevelopment project." (Cal. Const., art. XVI, § 16, subd. (b).) In other words, the taxing agency receives the same amount of money it would have received under the assessed valuation of the project area in
the absence of redevelopment, and the redevelopment agency receives the increment attributable to new construction and revitalization. (Bell Community Redevelopment Agency v. Woosley, supra, 169 Cal. App.3d at p. 27, 214 Cal.Rptr. 788.)
The Community Redevelopment Law and tax increment financing have long been a part of California law. (Brown v. Community Redevelopment Agency (1985) 168 Cal.App.3d 1014, 1017, 214 Cal.Rptr. 626.) However, some uncertainty with respect to redevelopment agencies and tax increment financing arose as the result of the addition of articles XIII A and XIII B to our state Constitution, and their failure to specifically address community redevelopment. (Bell Community Redevelopment Agency v. Woosley, supra, 169 Cal. App.3d at p. 29, 214 Cal.Rptr. 788.)
California Constitution, article XIII A, added in 1978 and familiarly known as Proposition 13, imposes taxing limitations upon local governments. In addition to limiting property taxes to one percent of full market value, "to be collected by the counties and apportioned according to law to the districts within the counties," article XIII A imposes a requirement of a two-thirds majority vote for the imposition of special taxes. (Cal. Const., art. XIII A, § 1, subd. (a), § 4.) Article XIII A does not preclude a local government from imposing or raising special taxes, but the supermajority vote requirement makes it more difficult to do so. (Huntington Park Redevelopment Agency v. Martin (1985) 38 Cal.3d 100, 105, 211 Cal.Rptr. 133, 695 P.2d 220.) This was intended to inhibit a local government from avoiding property tax limitations by shifting the tax burden to other forms of tax. (Ibid.)
California Constitution, article XIII B, added in 1979, imposes government spending limitations upon the state and local governments. With respect to local governments, the limitation is accomplished by restricting total annual appropriations to the appropriations limit for the prior year, adjusted for the change in the cost of living and the change in population, except as otherwise provided in that article. (Cal. Const., art. XIII B, § 1.) The essential thrust of article XIII B is to prohibit a government entity from spending more on programs funded with taxes than it spent in the prior year, adjusted for inflation and population changes. (Huntington Park Redevelopment Agency v. Martin, supra, 38 Cal.3d at p. 107, 211 Cal.Rptr. 133, 695 P.2d 220.) In view of the local tax limitations imposed by article XIII A and the spending limitations imposed upon local governments by article XIII B, article XIII B includes section 6 which, with certain exceptions, requires the state to provide a subvention of funds for the costs of any new program or higher level of service imposed upon local governments by the Legislature or any state agency. (County of Los Angeles v. State of California (1987) 43 Cal.3d 46, 61, 233 Cal.Rptr. 38, 729 P.2d 202.)
In view of the uncertainty with respect to tax increment financing after the addition of articles XIII A and XIII B to our state Constitution, the Legislature enacted Health and Safety Code section 33678 as urgency legislation. (Added by Stats.1980, ch. 1342, § 1, pp. 4750-4751, eff. Sept. 30, 1980; amended by Stats.1993, ch. 942, § 35, pp. 5380-5381.) Subdivision (a) of that section provides: "This section implements and fulfills the intent of this article and of Article XIII B and Section 16 of Article XVI of the California Constitution. The allocation and payment to an agency of the portion of taxes specified in subdivision (b) of Section 33670 [the tax increment] for the purpose of paying principal of, or interest on, loans, advances, or indebtedness incurred for redevelopment activity, as defined in subdivision (b) of this section, shall not be deemed the receipt by an agency of proceeds of taxes levied by or on behalf of the agency within the meaning or for the purposes of Article XIII B of the California Constitution, nor shall such portion of taxes be deemed receipt of proceeds of taxes by, or an appropriation subject to limitation of, any other public body
within the meaning or for purposes of Article XIII B of the California Constitution or any statutory provision enacted in implementation of Article XIII B. The allocation and payment to an agency of this portion of taxes shall not be deemed the appropriation by a redevelopment agency of proceeds of taxes levied by or on behalf of a redevelopment agency within the meaning or for purposes of Article XIII B of the California Constitution."
The constitutional validity of Health and Safety Code section 33678 was considered in Brown v. Community Redevelopment Agency, supra, 168
Cal.App.3d 1014, 214 Cal.Rptr. 626. There, it was contended that funds received by a redevelopment agency pursuant to a tax increment funding plan are "proceeds of taxes" subject to the appropriations limit of article XIII B. (Id, at p. 1018, 214 Cal.Rptr. 626.) The Court of Appeal disagreed, finding article XIII B to be vague and uncertain with respect to tax increment financing, and finding the legislative clarification in Health and Safety Code section 33678 to be neither arbitrary and unreasonable, nor repugnant to the literal language of article XIII B. (Id. at p. 1020, 214 Cal.Rptr. 626.) The same conclusion was reached by another Court of Appeal in a virtually contemporaneous decision. (Bell Community Redevelopment Agency v. Woosley, supra, 169 Cal.App.3d at pp. 33-34, 214 Cal.Rptr. 788; see also Redevelopment Agency v. Commission on State Mandates (1997) 55 Cal.App.4th 976, 987, 64 Cal.Rptr.2d 270.)
It was upon this background that, in 1992, the Legislature enacted what the parties refer to as the ERAF legislation. (Stats.1992, chs. 699, 700.) ERAF stands for...
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