Community Dev. Com'n v. County of Ventura

• Decision Date: 05 July 2007
• Docket Number: No. F050180.,F050180.
• Citation: 62 Cal.Rptr.3d 383,152 Cal.App.4th 1470
• Court: California Court of Appeals Court of Appeals
• Parties: COMMUNITY DEVELOPMENT COMMISSION OF the CITY OF OXNARD, Plaintiff and Appellant, v. COUNTY OF VENTURA et al. Defendants and Respondents.

62 Cal.Rptr.3d 383

152 Cal.App.4th 1470

COMMUNITY DEVELOPMENT COMMISSION OF the CITY OF OXNARD, Plaintiff and Appellant, v. COUNTY OF VENTURA et al. Defendants and Respondents.

No. F050180.

Court of Appeal, Fifth District.

July 5, 2007.

Kane, Ballmer & Berkman, Murray O. Kane, Stephanie R. Scher, Los Angeles, Donald P. Johnson; Gary L. Gillig, Oxnard, for Plaintiff and Appellant.

Nordman Cormany Hair & Compton and Meghan B. Clark, Oxnard, for California State University Channel Islands Site Authority as Amicus Curiae on behalf of Plaintiff and Appellant.

Noel A. Klebaum, County Counsel, and Lori A. Nemiroff, Assistant County Counsel, for Defendants and Respondents.

OPINION

CORNELL, J.

We must decide whether escape assessments, an assessment that is made because the property in question was not assessed during the initial assessment period, should be included in computing the tax increment used to determine the funding for redevelopment agencies. This is an issue of first impression.

The California Redevelopment Law (CRL) (Health & Saf.Code, § 33000 et seq.) provides for the formation of redevelopment agencies to help eradicate blight. Typically, a redevelopment agency prepares a redevelopment plan and then borrows money to complete the plan. A redevelopment agency repays its debt using tax increment. Tax increment is based on the theory that property values will increase as a redevelopment occurs. The increase in property values will cause an increase in tax revenue. The tax increment is the tax revenue attributable to the increased property values.

Defendants County of Ventura and Christine L. Cohen (collectively, the County) argue that escape assessments should not be included in computing the tax increment. Plaintiff Community Development Commission of the City of Oxnard (CDC) and amicus curiae California State University Channel Islands Site Authority disagree. We conclude the controlling statutes require inclusion of all tax revenue, including escape assessments, in computing the tax increment.

THE FUNDING PROCESS

We begin with a review of the role of redevelopment agencies in California and their funding. We do so to give meaning to the factual basis of the dispute.

Property Taxation

"All property in this State, not exempt under the laws of the United States or of this State, is subject to taxation under" the Revenue and Taxation Code. (Rev. & Tax. Code, § 201.) The county assessor must assess all property subject to general property taxation at its full value on January 1 of each year. (Id., §§ 117, 128, 401, 401.3, 2192.) The county assessor assesses all real property within the county, while the initial valuation of business personal property is made from a business property statement prepared by the taxpayer. (Cal. Const., art. XIII, § 2; Rev. & Tax.Code, §§ 110, 110.1, 441; Heavenly Valley v. El Dorado County Bd. of Equalization (2000) 84 Cal.App.4th 1323, 1328, 101 Cal.Rptr.2d 591.)

A lien for the yearly assessment attaches to the property "annually as of 12:01 a.m. on the first day of January preceding the fiscal year for which the taxes are levied." (Rev. & Tax.Code, § 2192.) "The subsequent assessment and levy are necessary in order to fix the amount of the tax but they do not result in the creation of a new obligation; they are simply administrative steps necessary to the enforcement of the right which accrued on the lien date. [Citations.] When the amount is ascertained, it relates back to the time the lien became fixed." (California Computer Products, Inc. v. County of Orange (1980) 107 Cal.App.3d 731, 736-737, 166 Cal.Rptr. 68 (California Computer Products).)

Once property is assessed, it is listed on the assessment roll, which must be made available for inspection by the public. (Rev. & Tax.Code, §§ 601, 1602.) A property owner may dispute the assessment of his or her property by appealing to the county board of equalization.¹ (Cal. Const., art. XIII, § 16; Rev. & Tax.Code, §§ 1601, 1603.) An application for equalization (reduction) of an assessment must be filed before September 15.² (Rev. & Tax.Code, § 1603, subd. (b)(1).)

The county board of equalization meets to decide the issues raised in the various equalization applications (Rev. & Tax.Code, § 1604, subds. (a), (b)) and has the authority to "equalize the values of all property on the local assessment roll by adjusting individual assessments." (Cal. Const., art. XIII, § 16.) "Equalization" has been defined as "adjusting the value of property assessed to conform to its real value." (County of Sacramento v. Assessment Appeals Bd. No. 2 (1973) 32 Cal. App.3d 654, 663, 108 Cal.Rptr. 434.) After the completion of the equalization hearing process, required changes are made to the assessment roll, which becomes the equalized assessment roll. (Rev. & Tax.Code, §§ 1614,1646.1.)

Reference is made in various statutes to the phrase "last equalized assessment roll." This phrase, or similar words, "means the entire assessment roll" on August 20, which shall include "any changes made by the county board during the month of July, together with" changes made pursuant to Revenue and Taxation Code sections 755 and 756. (Id., §§ 2051, 2052.) The above provisions, including the right to file an application for equalization of an assessment up to September 14, establish that the last equalized assessment roll may not reflect all changes to initial assessments during any tax year.

Escape Assessments

Another type of assessment that probably will not be reflected in the equalized assessment roll is an escape assessment. If property has been either under-assessed or unassessed, "the assessor shall assess the property ... at its value on the lien date for the year for which it escaped assessment. It shall be subject to the tax rate in effect in the year of its escape." (Rev. & Tax.Code, § 531; see also American Airlines, Inc. v. County of San Mateo (1996) 12 Cal.4th 1110, 1127, 51 Cal. Rptr.2d 251, 912 P.2d 1198.) Section 531 of the Revenue and Taxation Code "simply extends the power and duty of the assessor, enabling and requiring him ... to list and assess property which he had failed to assess, notwithstanding the time for assessment had passed.... And the exercise of this power is directly in accord with the policy and express provisions of the constitution, which requires all property not exempt from taxation to be taxed." (Farmers' etc. Bank v. Board (1893) 97 Cal. 318, 323, 32 P. 312 [discussing former Political Code section 3681].)

Escape assessments are to be treated the same as "property regularly assessed on the roll on which it is entered." (Rev. & Tax.Code, § 534, subd. (a).) "The statutory scheme for escaped assessments thus embodies the principle that the right to the taxes on escaped property accrues on the lien date, not on the date of entry on the tax roll." (California Computer Products, supra, 107 Cal. App.3d at p. 737, 166 Cal.Rptr. 68.)

The CRL

The CRL authorizes the formation of redevelopment agencies and empowers them to adopt redevelopment plans. (Health & Saf.Code, § 33000 et seq.; Community Redevelopment Agency v. County of Los Angeles (2001) 89 Cal.App.4th 719, 722, 107 Cal.Rptr.2d 693.) The purpose of the CRL is to "promote the sound development and redevelopment of blighted areas and the general welfare of the inhabitants of the communities in which they exist by remedying such injurious conditions." (Health & Saf.Code, § 33037, subd. (a); see also Community Redevelopment Agency v. Bloodgood (1986) 182 Cal.App.3d 342, 344, 226 Cal.Rptr. 924.)

The redevelopment agency is "primarily responsible for implementing the Community Redevelopment Law and ... is empowered to prepare and effectuate a redevelopment plan for the elimination of blighted areas in the community. [Citations.]" (Marek v. Napa Community Redevelopment Agency (1988) 46 Cal.3d 1070, 1082, 251 Cal.Rptr. 778, 761 P.2d 701.) To accomplish this goal, "[redevelopment agencies are endowed with broad powers to acquire property through purchase and condemnations ([Health & Saf.Code,] § 33391) and to `[m]ake and execute contracts and other instruments necessary' to complete redevelopment projects ([Health & Saf.Code,] § 33125, subd. (c))." (Ibid.)

Redevelopment agencies, however, do not have the power to assess taxes. (Community Redevelopment Agency v. Bloodgood, supra, 182 Cal.App.3d at p. 344, 226 Cal.Rptr. 924.) Redevelopment agencies have the authority to acquire debt by either borrowing money through loans or the sale of bonds to finance its projects. major source of funds to repay its debts is its share of property taxes levied by other government agencies on property within a redevelopment project area." (Community Redevelopment Agency, at p. 344, 226 Cal.Rptr. 924; see also Health & Saf.Code, § 33670.)

The system devised to divide the tax revenue between the redevelopment agency and other government entities that otherwise would receive the funds, is known as tax increment. Tax increment is based on the theory that the assessed value of the property in the redevelopment district will increase as a result of the redevelopment projects. This increase in assessed value will lead to an increase in tax revenue. The increase in tax revenue is known as the tax increment and is used to pay for the cost of redevelopment. (Rev. & Tax. Code, § 96.1, subd. (a)(2).)

This division of tax revenue is described in Redevelopment Agency v. County of San Bernardino (1978) 21 Cal.3d 255, 259, 145 Cal.Rptr. 886, 578 P.2d 133: "[I]f, 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...