County of Placer v. Corin

CourtCalifornia Court of Appeals
Citation170 Cal.Rptr. 232,113 Cal.App.3d 443
PartiesCOUNTY OF PLACER, A County of the State of California, Petitioner, v. F. Earl CORIN, Treasurer of the County of Placer, Respondent. Civ. 19620.
Decision Date17 December 1980

L. J. Dewald, County Counsel of Placer County, Auburn, Jones, Hall, Hill & White, and Robert G. Auwbrey, San Francisco, for petitioner.

Orrick, Herrington, Rowley & Sutcliffe, John R. Myers, and Carlo S. Fowler, San Francisco, for respondent.

CARR, Associate Justice.

In this mandate proceeding, the issue is whether "proceeds of taxes" as used in Article XIII B of the California Constitution includes 1) special assessments of an assessment district and/or 2) federal grants made directly to a local entity for improvements within the assessment district. Petitioner, the County of Placer, seeks to compel respondent, who is the Placer County Treasurer, to serve notice of assessment on and to collect such assessments from property owners in the Tierra Heights Sewer Assessment District A-79.

In April 1979 petitioner's board of supervisors, pursuant to provisions of the Municipal Improvement Act of 1913 and the Improvement Bond Act of 1915, adopted a resolution entitled: A RESOLUTION OF INTENTION TO MAKE ACQUISITIONS AND IMPROVEMENTS-TIERRA HEIGHTS SEWER ASSESSMENT DISTRICT A-79. Petitioner had previously accepted a federal grant in the sum of $55,000 representing one-half the costs of making the required acquisitions and constructing improvements. On March 4, 1980, petitioner directed respondent to mail and serve appropriate notices to pay assessments to owners of real property within the sewer assessment district. Respondent has refused to serve and collect said assessments, asserting the proceeds thereof must be included within the appropriations limits set forth in Article XIII B, section 1. We issued an alternative writ pursuant to our original authority, finding this question to be one of both first impression and substantial importance. (See California Housing Finance Agency v. Elliott (1976) 17 Cal.3d 575, 580, 131 Cal.Rptr. 361, 551 P.2d 1193; California Educational Facilities Authority v. Priest (1974) 12 Cal.3d 593, 598, 116 Cal.Rptr. 361, 526 P.2d 513; Cal.Civil Writs (Cont.Ed.Bar.1970) §§ 8, 5, p. 154.) Respondent by way of return has generally demurred to the petition contending a writ of mandate will not lie to compel performance of an illegal or unconstitutional act.

In November 1979 Article XIII B was added to the California Constitution through the adoption of Proposition 4, commonly referred to as the "Gann Initiative." Ballot arguments in support of Proposition 4 referred to it as providing "permanent protection for taxpayers from excessive taxation" and "a reasonable way to provide discipline in tax spending at state and local levels."

Article XIII B was adopted less than 18 months after the addition of Article XIII A to the state Constitution, and was billed as "the next logical step to Proposition 13" (Article XIII A). While Article XIII A was generally aimed at controlling ad valorem property taxes and the imposition of new "special taxes" (Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization (1978) 22 Cal.3d 208, 231-232, 149 Cal.Rptr. 239, 583 P.2d 1281; County of Fresno v. Malmstrom (1979) 94 Cal.App.3d 974, 980, mod. 95 Cal.App.3d 1028b, 156 Cal.Rptr. 777 (as modified); see Article XIII A, §§ 1, 4, the thrust of Article XIII B is toward placing certain limitations on the growth of appropriations at both the state and local government level; in particular, Article XIII B places limits on the authorization to expend the "proceeds of taxes." (§ 8, subd. (c).)

Article XIII B provides that beginning with the 1980-1981 fiscal year, "an appropriations limit" will be established for each "local government." 1 (§ 8, subd. (h).) No "appropriations subject to limitation" may be made in excess of this appropriations limit, and revenues received in excess of authorized appropriations must be returned to the taxpayers within the following two fiscal years. (§ 2.)

The appropriations limit for the 1980-1981 fiscal year is equal to the total "appropriations subject to limitations" for that entity in the 1978-1979 fiscal year, with certain adjustments for changes in the cost of living, population and financial responsibility for providing services. (§§ 3, 8, subd. (h); see Ops.Cal.Legis.Counsel, No. 15349 (Aug. 24, 1979) Gann Initiative, p. 4.) In succeeding years, the appropriations limit will be equal to the prior year's appropriations limit, subject to the specified adjustments. Appropriations limits may be changed by the voters, but not to exceed a period longer than four years.

Billed as a flexible way to provide discipline in government spending, Article XIII B does not limit the ability to expend government funds collected from all sources. Rather, the appropriations limit is based on "appropriations subject to limitation," which consists primarily of the authorization to expend during a fiscal year the "proceeds of taxes." (§ 8, subd. (a).) As to local governments, limits are placed only on the authorization to expend the proceeds of taxes levied by that entity, in addition to proceeds of state subventions (§ 8, subd. (c)); no limitation is placed on the expenditure of those revenues that do not constitute "proceeds of taxes." The intended scope of "proceeds of taxes," the source of a local government's "appropriations subject to limitations," is the pivotal issue herein.

Respondent contends the funds derived from the exercise of the power of assessment and from federal grant proceeds used to pay the costs and expenses of acquisitions and improvements, are encompassed within "proceeds of taxes" and must be included in the county's appropriations subject to limitation; that exclusion thereof and the making of other appropriations to the extent of petitioner's appropriations limit without regard to the existence of the authorization to expend these proceeds threatens to impair the validity and enforceability of said assessments and assessment bonds. Petitioner contends the proceeds of the special assessments and and the federal grant do not constitute "proceeds of taxes," and will not be included within its budgeted "appropriations subject to limitation" for fiscal year 1980-1981

This issue is one of substantial importance, involving the continued viability of provisions for initiating and completing special improvements. (See Sts. & Hy. Code, §§ 5000 et seq., 10000 et seq.) "For over 60 years these laws have provided the most widely used procedure in California for the construction of a variety of public improvements including streets, sewers, sidewalks, water systems, lighting and public utility lines; property owners benefited by the improvements pay for these improvements either in cash or, at their option, by installments over a period of time." (County of Fresno v. Malmstrom, supra, 94 Cal.App.3d at p. 978, mod. 95 Cal.App.3d 1028b, 156 Cal.Rptr. 777 (as modified).) If local entities are required to include special assessment and federal grant proceeds within their "appropriations subject to limitation," such entities will have to decide whether to limit or even discontinue the acquisition and improvement of local improvements or to finance such improvements from general tax revenues, i. e., at the expense of all taxpayers. In light of the enormous demands on reduced general tax revenues following adoption of Article XIII A, the latter option appears fiscally unfeasible.

Section 8, subdivision (c) defines "proceeds of taxes" as follows:

"Proceeds of taxes" shall include, but not be restricted to, all tax revenues and the proceeds to an entity of government, from (i) regulatory licenses, user charges, and user fees to the extent that such proceeds exceed the costs reasonably borne by such entity in providing the regulation, product, or service, and (ii) the investment of tax revenues. With respect to any local government, 'proceeds of taxes' shall include subventions received from the state, other than pursuant to Section 6 of this Article and, with respect to the state, proceeds of taxes shall exclude such subventions."

In summary, for local entities, "proceeds of taxes" includes, but is not restricted to: (1) all tax revenues; (2) excessive regulatory license fees and excessive user charges and fees; (3) the investment of tax revenues; and (4) subventions from the state.

Respondent asserts that special assessment and federal grants proceeds, though not included within any of the expressly enumerated categories in section 8, are similar in origin and character to user charges and user fees and are of the same general class; that federal grant proceeds are akin to state subventions: and under the doctrine of ejusdem generis, 2 must be considered "proceeds of taxes," as the latter includes but is not restricted to tax revenues, certain regulatory and user fees and charges, and state subventions.

Further, respondent notes that Article XIII B was intended both to carry out the intent and to extend the scope of Article XIII A. While Article XIII A was aimed at controlling ad valorem property taxes and imposition of new special taxes (see County of Fresno v. Malmstrom, supra, 94 Cal.App.3d at pp. 980-984, mod. 95 Cal.App.3d 1028b, 156 Cal.Rptr. 777 (as modified)), Article XIII B is directed at controlling government spending. (See §§ 1, 8, subds. (a), (b) (c).) The source of revenue to be spent is not limited to property taxes; "all tax revenues" are subject to the limitations of Article XIII B, in addition to certain user and regulatory charges, state subventions, and the investment of tax revenues. (§ 8(c).) Respondent urges it is our duty to give Article XIII B a broad, liberal interpretation in accordance with the will of the People (see Amador Valley Joint Union High Sch. Dist. v. State Bd. of...

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