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City of Alhambra v. County of Los Angeles

July 7, 2010


APPEAL from a judgment of the Superior Court of Los Angeles County, James Chalfant, Judge. Reversed and remanded with directions. (Los Angeles County Super. Ct. No. BS116375).

The opinion of the court was delivered by: Aldrich, J.



This appeal involves a question of first impression. We are asked to determine the proper calculation under Revenue and Taxation Code section 97.75 of the fee a county may charge local governmental entities within its jurisdiction for the services counties perform under two specifically designated tax statutes, the so-called Triple Flip (§ 97.68) and the VLF Swap (§ 97.70). Appellants (plaintiffs below), 47*fn1 of the 88 general law or charter cities in the County of Los Angeles, petitioned the trial court for a writ of administrative mandamus contending that defendants, the County of Los Angeles and Wendy Watanabe in her official capacity as the County's Auditor-Controller (together the County), failed to follow the law and violated a clear and plain duty in calculating the section 97.75 service fee. A referee found that the County was faithfully following the law. Petitioners appeal from the judgment adopting the referee's ruling. We conclude the statute is clear on its face and hold that the County's method of calculating its fee under section 97.75 was unlawful. Accordingly, we reverse the judgment and remand for further proceedings.


The parties stipulated to the following pertinent facts:

1. One Effect Of Proposition 13 On Counties

Counties are responsible for, among other things, assessing and collecting ad valorem property tax revenues from assessed property within their borders. As part of their administration of the property tax system, the counties calculate and distribute to the various local governmental entities (including cities, redevelopment agencies, special districts, and counties themselves; hereinafter cities) within their jurisdiction each city's share of the property tax revenue.

Before passage of Proposition 13 (Cal. Const., art XIIIA, § 1) in 1978, counties set their property tax rates at a level that enabled them to recoup the cost to them of property tax administration. With limited exceptions not relevant here, Proposition 13 capped property tax rates to one percent of assessed value. After Proposition 13, counties continued to bear the burden of assessing, collecting, and allocating property tax revenues, but lacked a means of recovering their costs for this administration.

In 1990, the Legislature passed the first of several measures that addressed reimbursement to the counties of cities' proportionate share of the cost of property tax administration.

In fiscal year 1992-1993, the Legislature created an Educational Revenue Augmentation Fund (ERAF) in each county. The ERAF is a fund into which property tax revenue is shifted to pay for the State's constitutional responsibility to fund public education. The property taxes paid to both local schools and the ERAF are exempt from having to pay this property tax administration fee, or PTAF.

In 1994, the Legislature enacted Revenue and Taxation Code section 95.3 that, with the exception of schools and funds schools receive from ERAFs, permits counties to fairly apportion the burden of collecting property tax revenues by recovering from each city within its borders a PTAF that correlates to the property tax revenues allocated to that city. (§§ 95.3, subd. (b)(1), 97.1.)*fn2 Section 95.3 provides the method for calculating an "administrative cost apportionment factor."

Generally speaking, the PTAF for a given city is computed as follows:

a. The County calculates the prior year property tax administration costs of the assessor, tax collector, assessment appeals board, and the auditor-controller. Such costs include the direct costs, all activities directly involved in assessing, collecting, and processing property taxes, and overhead costs established in accordance with Federal Budget Circular A-87.

b. The County calculates each city's proportionate share of such costs by calculating an apportionment factor from the ratio of the property tax revenue received by each city ...

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