Trumbo v. Crestline-Lake Arrowhead Water Agency

• Decision Date: 21 April 1967
• Docket Number: CRESTLINE-LAKE
• Citation: 58 Cal.Rptr. 538,250 Cal.App.2d 320
• Court: California Court of Appeals Court of Appeals
• Parties: Lola TRUMBO, Golda Moser, and Josephine Titus, on behalf of Themselves Individually, and on behalf of All Other Taxpayers of the Crestline-Lake Arrowhead Water Agency Who are Similarly situated, Petitioners and Appellants. v.ARROWHEAD WATER AGENCY, and Doe One through Doe Twenty, Respondents. Civ. 8324.

Page 538

58 Cal.Rptr. 538

250 Cal.App.2d 320

Lola TRUMBO, Golda Moser, and Josephine Titus, on behalf of Themselves Individually, and on behalf of All Other Taxpayers of the Crestline-Lake Arrowhead Water Agency Who are Similarly situated, Petitioners and Appellants. v. CRESTLINE-LAKE ARROWHEAD WATER AGENCY, and Doe One through Doe Twenty, Respondents.

Civ. 8324.

Court of Appeal, Fourth District, Division 2, California.

April 21, 1967.

[250 Cal.App.2d 321] R. L. Thurmond, Ontario, for petitioners and appellants.

Robert J. Farrell, San Bernardino, Kenneth R. Henry, Del Mar, O'Melveny & Myers and Howard J. Deards, Los Angeles, for respondents.

OPINION

TAMURA, Associate Justice.

The Crestline-Lake Arrowhead Water Agency is a public entity created by a special act of the Legislature (hereinafter referred to as the 'Act'.) ¹ and activated by a vote of the qualified electors. At a bond election held on June 15, 1965, the voters authorized the Agency to issue general obligation bonds totalling 7 1/2 million dollars. Petitioners, who are residents, property owners, and qualified voters within the Agency, sought a writ of mandate in the superior court challenging both the procedural validity of the bond election, as well as the substantive power of the agency to incur a bonded indebtedness in an amount which they allege would require revenues in excess of that which could be raised by the maximum tax rate of $1.00 per $100.00 assessed valuation in order to service the bonds. A general demurrer to the amended petition was sustained without leave to amend, and judgment was entered dismissing the petition. Petitioners appeal from the judgment.

The Act provides for a maximum tax rate of $1.00 per $100.00 assessed valuation subject to an increase by a vote of the electors. ² Originally no provision was made for a standby water charge, but in 1965 the Legislature added section 11.5 to the Act authorizing the Agency to fix such a charge, not exceeding $5.00 per acre per year, 'in any area within the agency boundaries to which water is made available by the agency, whether the water is actually used or not.' ³

On this appeal petitioners have abandoned their procedural attack upon the bond election. The only issue sought to be raised is whether the power of the Agency to incur a bonded indebtedness is limited by the maximum tax rate.

But it is doubtful that the petitioners have alleged sufficient facts to raise that issue. They alleged that the repayment of the bonds 'will impose a total tax burden in excess of the tax rate limit of $1.00 per $100.00 . . . in that repayment of the bond debt will require a tax rate which, when taken together with the additional standby water charge assessment, will exceed $1.00 per $100.00.' The assumption that these allegations raise the issue whether the tax rate constitutes a limitation on the power to incur an indebtedness presupposes (1) that the standby charge is a tax and, (2) if it is a tax, that the Legislature was not empowered to increase the maximum tax rate. Neither presupposition is well founded.

The standby water charge is not a tax. It is a special assessment to be levied upon land according to the availability of water. A levy on all property, both real and personal, without regard to special benefits, is a tax; but a levy made only upon land on the basis of benefits received is a special assessment and not a tax. (Cedars of Lebanon Hosp. v. County of L.A., 35 Cal.2d 729, 747--748, 221 P.2d 31, 15 A.L.R.2d 1045; Northwestern Etc. Co. v. St. Bd. Equal., 73 Cal.App.2d 548, 553, 166 P.2d 917.) Nor is the classification affected by the method provided for the collection of the assessment. (Cedars of Lebanon Hosp., supra, 35 Cal.2d p. 748, 221 P.2d 31.) Thus, the fact that section 11.5 of the Act provides that unpaid standby charges 'shall be added to and become part of the annual tax levied upon the land' and 'shall constitute a lien on that land, and shall be added to and become a part of the first installment of the tax' does not make the standby charge a tax.

Assuming, Arguendo, that the standby charge is a 'tax', the Legislature was empowered to amend the Act to authorize the agency to impose such levies. In the absence of constitutional restrictions, the Legislature has plenary power over the organization, boundaries, powers and liabilities of a special district. (In re Madera Irrigation District, 92 Cal. 296, 28 P. 272, 675, 14 L.R.A. 755; Petition of Sanitary Board of East Fruitvale Sanitary Dist., 158 Cal. 453, 457, 111 P. 368; Galt County Water Dist. v. Evans, 10 Cal.App.2d 116, 118, 51 P.2d 202.) Where vested rights are not impaired, the Legislature may enlarge, restrict, modify or abrogate the powers granted to such districts. (Mulcahy v. Baldwin, 216 Cal. 517, 518, 15 P.2d 738.) Thus, although the rights of bondholders may not be impaired after the issuance of bonds, the Legislature is not precluded from increasing the security, even after bonds are issued, by changing the method of raising revenue. (La. Mesa Etc. Irr. Dist. v. Halley, 197 Cal. 50, 60, 239 P. 719; Palos Verde Irr. Dist. v. Seeley, 198 Cal. 477, 488--489, 245 P. 1092. See Wisconsin & Michigan Railway Co. v. Powers, 191 U.S. 379, 24 S.Ct. 107, 48 L.Ed. 229.) Nor is the original purpose for which a district has been organized altered or affected by a subsequent change in the method by which revenue is to be provided to accomplish its purposes. (Orange County Water Dist. v. Farnsworth, 138 Cal.App.2d 518, 292 P.2d 927.) There is no constitutional right to have a district tax rate remain unchanged. (See Sunset Nut Shell Co. v. Johnson, 49 Cal.App.2d 354, 355, 122 P.2d 849.)

The Legislature being thus empowered to amend the Act to authorize the imposition of the standby water charge whether it be deemed an assessment or a 'tax' and there being no restrictions against the availability of revenue from either or both sources to service the bonds, the allegations of the amended petition, as presently framed, do not reach the basic issue which petitioners assume to be raised.

Assuming, however, that the complaint can be construed to allege that the bonds could not be repaid out of the combined revenue from the standby charge and the $1.00 tax rate, we shall consider the basic issue argued by petitioners--whether the tax rate constitutes a limitations on the Agency's power to incur a bonded indebtedness.

The Agency is not subject to constitutional limitations on indebtedness. The provisions of article XI, section 18 of the Constitution ⁴ against incurring indebtedness in any year in excess of the revenues provided for that year except in the mode provided apply only to counties, cities and school districts. (In re Madera Irrigation District, supra, 92 Cal. 296, 342--344, 28 P. 272, 675, 14 L.R.A. 755; Bliss v. Hamilton, 171 Cal. 123, 124, 152 P. 303; Strain v. East Bay Mun. Util. Dist., 21 Cal.App.2d 281, 284, 69 P.2d 191; Western Engineering Etc. Co. v. East Bay M.U. Dist., 126 Cal.App. 349, 356.)

In addition to the constitutional limitation, the Legislature has in some instances expressly imposed limitations on the amount of bonded indebtedness a public entity may incur measured by such yardsticks as the total tax revenue in a previous year, percentage of assessed value of taxable property, or the percentage of the assessed value of all property. ⁵ (Pac. Gas. & E. Co. v. Shasta Dam Etc., Dist., 135 Cal.App.2d 463, 287 P.2d 841.) Where a limitation on indebtedness is statutory, however, it may be changed or entirely omitted at the will of the Legislature. (General Engineering and Dry Dock Co. v. East Bay M.U. Dist., supra, 126 Cal.App. 349, 356--357, 14 P.2d 828; see In re Madera Irrigation District, supra, 92 Cal. 296, 342, 28 P. 272, 675, 14 L.R.A. 755.)

Significantly, we find no express legislative limitation on the Agency's power to incur an indebtedness, bonded or otherwise.

It is apparent from the foregoing that there is no legal limitation on the amount of bonded indebtedness the Agency may incur. Petitioners cite no cases from this state, and our research fails to disclose any, holding that in the circumstances here presented, the tax rate constitutes an implied limitation on indebtedness.

Petitioners rely upon State ex rel. City of Portsmouth v. Kountz, 129 Ohio 272, 194 N.E. 869, 97 A.L.R. 1099, and the annotation at 97 A.L.R. 1103 reviewing a collection of cases from other states in which the question has been considered. The Portsmouth case is clearly distinguishable. The court referred to the existence of a constitutional provision that no bonded indebtedness shall be incurred unless 'provision is made for levying and collecting annually by taxation an amount sufficient to pay the interest on said bonds, and to provide a sinking fund for their final redemption at maturity,' and reasoned, 'Such provision, however, cannot legally be made if the proposed taxation, when added to the taxation already existing, exceeds 1 percent of the valuation of the taxable property.' Most of the cases cited in the annotation reaching the same result as Portsmouth similarly involved instances in which the entities were subject to both a constitutional or statutory debt limitation and a maximum tax rate. As the annotation points out, in some states under like restrictions, contrary results have been reached, the courts holding that the limitation on indebtedness and the maximum tax rate are separate and distinct and that one should not be construed as circumscribing...