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City of Scotts Valley v. County of Santa Cruz et al

October 26, 2011

CITY OF SCOTTS VALLEY, PLAINTIFF AND RESPONDENT,
v.
COUNTY OF SANTA CRUZ ET AL., DEFENDANTS AND APPELLANTS.



Trial Court: Superior Court of San Mateo County Trial Judge: Honorable Steven L. Dylina (San Mateo County Super. Ct. No. 467230)

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

CERTIFIED FOR PUBLICATION

I. INTRODUCTION

"There is no equitable way to share property tax revenues, only different degrees of inequity." (Sen. Com. on Local Government, Rep. on Sen. Bill No. 407 (1987-1988 Reg. Sess.) Apr. 20, 1987, p. 2.) This observation is as true today as when it was made during the legislative process more than 20 years ago.

In this case, the City of Scotts Valley (City) claims it has not received all the property tax revenues to which it is entitled. Specifically, the City claims the Auditor-Controller of the County of Santa Cruz has not properly applied Revenue and Taxation Code section 98, which entitles "no- and low-property tax cities" to a certain percentage of the property taxes paid by their residents. The trial court agreed with the City and granted its petition for a writ of mandate against the County of Santa Cruz and the Auditor-Controller (collectively the County). The court ordered the County to change its allocation methodology and reallocate approximately $2 million in property tax revenues to the City for past fiscal years. The County appealed, but the trial court's order did not finally dispose of all claims in the case. Accordingly, the parties urge us to deem the County's appeal an original writ proceeding. Given the nature and importance of the property tax allocation issues presented by this case, we conclude it is appropriate to do so. We also conclude the trial court was correct, in part, and incorrect, in part, and therefore grant limited writ relief to the County.

II. BACKGROUND

A. Overview of Relevant Statutes

The factual and procedural background of this case can only be understood with some knowledge of the real property tax system that has given rise to the allocation issues in this case. This system has its roots in the voter's enactment of Proposition 13 in 1978 imposing a 1 percent cap on real property tax rates, their enactment of Proposition 98 in 1988 imposing a state funding mandate for public education, and negative economic conditions that have since periodically pummeled the state's economy. To say this system is dense, prolix and arcane is an understatement.

1. Basic Property Tax Allocation

The passage of Proposition 13 (Cal. Const., art. XIIIA) fundamentally altered the state's property tax system. Whereas local governmental entities had previously imposed their own property tax rates, Proposition 13 set the tax rate for all real property statewide at 1 percent of assessed value. The proposition directed counties to collect the property tax and allocate it among local governmental entities as determined by the Legislature. (Cal. Const., art. XIIIA, § 1, subd. (a).)

The Legislature immediately enacted "bailout" legislation to provide state funding to replace local property tax revenues lost as a result of Proposition 13. (Governor's Off. of Planning & Research, Enrolled Bill Rep. on Sen. Bill No. 1361 (1993-1994 Reg. Sess.) July 20, 1994, p. 1 (hereafter Governor's Enrolled Bill Report on Senate Bill 1361); Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading analysis of Sen. Bill No. 617 (1991-1992 Reg. Sess.) as amended Aug. 22, 1992, p. 7.) It also enacted a temporary allocation system for the next fiscal year (fiscal year 1978-1979). (Stats. 1978, ch. 292, § 24, p. 606.) County auditors were generally directed to allocate property tax revenues among local governmental entities in proportion to their tax rates in the preceding fiscal year (i.e., the year prior to the passage of Proposition 13). (Gov. Code, § 26912, subd. (b).)

The following year, the Legislature enacted what is called the "A.B. 8" allocation system (after the applicable Assembly Bill), now codified as Revenue and Taxation Code sections 96 and 96.5 (originally enacted as § 98 [Stats. 1979, ch. 282, § 59, pp. 1028-1029]).*fn1 "Under AB 8, each fiscal year a local government receives property tax revenues equal to what it received in the prior year (base), plus its share of any increase in revenues due to growth in assessed value within its boundaries. Each year, this increment growth is added to the previous year's base, and together becomes next year's base amount." (Governor's Enrolled Bill Report on Senate Bill 1361, p. 1.) A.B. 8 "did not eliminate the 'bailout' support. 'Bailout' was made a permanent feature of the state-local fiscal relationship by means of the permanent shift of the school property tax base to local agencies and state 'buyout' of certain county health and welfare program costs." (Sen. Rules Com., Off of Sen. Floor Analyses, 3d reading analysis of Sen. Bill No. 617 (1991-1992 Reg. Sess.) as amended Aug. 22, 1992, p. 7.)

Specifically, section 96 directed county auditors to determine the "tax base" for each local taxing entity for the 1979-1980 fiscal year. This was determined by allocating to each entity within a tax rate area,*fn2 the same amount of property taxes it received from that tax rate area in the previous fiscal year. (§ 96, subd. (a).) Then, under section 96.5, the "tax increment"--the increased (or decreased) tax revenues received in the current tax year--was allocated to the local entities in proportion to their "base." (§§ 96, subd. (c), 96.5.) Accordingly, local governmental entities that had higher pre-Proposition 13 tax rates relative to other entities, continued to receive a higher proportion of the property tax revenues generated pursuant to the 1 percent tax rate.

Since the 1980-1981 fiscal year, the A.B. 8 allocation system has been implemented through sections 96.1 (originally enacted as § 97 [stats. 1979, ch. 282, § 59, p. 1028]), 96.2 (originally enacted as § 97.5 [stats. 1980, ch. 801, § 9. p. 2511]) and 96.5. This statutory allocation process is similar to, and based on, the process for the 1979-1980 fiscal year. First, the tax base is determined, i.e., in each tax rate area, each local governmental entity is allocated the same amount of property tax it was allocated the preceding year. (§ 96.1, subd. (a)(1).) Second, the annual tax increment is allocated under section 96.5 in accordance with the same proportions applicable to the base. (§§ 96.1, subd. (a)(2), 96.5.) In this way, the proportional allocations established in the first fiscal year following the passage of Proposition 13, as modified for the following fiscal year, are perpetuated year after year, unless modified by the Legislature.

2. Tax Equity Allocation (TEA)

In 1987, nine years after the passage of Proposition 13, the Legislature addressed what had become a politically charged dispute over a perceived inequity in the A.B. 8 allocation system. Under the A.B. 8 system, cities that had levied no property tax before the passage of Proposition 13 received none of the property tax being paid by their residents, even though their residents were paying the same 1 percent property tax every other property tax payer in the state was paying. (Assem. Com. on Judiciary, Analysis of Assem. Bill No. 1197 (1987-1988 Reg. Sess.) as amended Aug. 31, 1988.) Similarly, some "newly incorporated cities" (i.e., cities incorporated after Proposition 13) received a very small tax base and thus commensurately received a very small percentage of property tax revenues.*fn3 (Joint Conf. Com. Rep. on Assem. Bill No. 1197 (1987-1988 Reg. Sess.) & Sen. Bill No. 612 (1987-1988 Reg. Sess.) p. 26; see Stats. 1988, chs. 944 & 945, pp. 2977-3025 [Brown-Presley Trial Court Funding Act of 1988].) To help alleviate this disparity in the receipt of property tax revenues, the Legislature enacted TEA, now codified as section 98 (originally enacted as § 97.35 [Stats. 1987, ch. 1211, § 47.7 (S.B. 709)]).*fn4

The legislative history reflects the difficulty of the problem: "There is no equitable way to share property tax revenues, only different degrees of inequity. Officials from the no-property-tax cities point out that their constituents pay the same 1% tax rate as everyone else, but their cities receive nothing. County officials note that reallocating revenues benefits the residents of those cities at the expense of countywide health, welfare, and justice programs. . . . The allocation of property tax revenues is a 'zero-sum game,' in which there must be a loser for every winner. . . . Rather than searching for perfect equity, the Committee may need to balance the different forms of inequity."*fn5 (Sen. Com. on Local Government, Rep. on Sen. Bill No. 407 (1987-1988 Reg. Sess.) Apr. 20, 1987, p. 2.) Indeed, in the 1987-1988 legislative session, 10 different bills were introduced to address the tax revenue situation of no- and low-property tax cities. (Joint Conf. Com. Rep. on Assem. Bill No. 1197 (1987-1988 Reg. Sess.) & Sen. Bill No. 612 (1987-1988 Reg. Sess.) pp. 27-28.)

TEA is viewed as "a minimum property tax entitlement for each city incorporated before June 5, 1987." (Joint Conf. Com. Rep. on Assem. Bill No. 1197 (1987-1988 Reg. Sess.) & Sen. Bill No. 612 (1987-1988 Reg. Sess.).) Section 98 thus specifies: "Except as otherwise provided in this section, each qualifying city shall, for the 1989-90 fiscal year and each fiscal year thereafter, be allocated by the auditor an amount determined pursuant to the TEA formula." (§ 98, subd. (b)(1), italics added.) However, only a "qualifying city," now defined as a city that receives less than 7 percent of the property tax revenues generated within its tax rate areas, is entitled to TEA.*fn6 (§ 98, subds. (a), (c), (d).)

TEA is an alternative allocation system. "[T]he auditor in each county with qualifying cities . . . is required to make property tax revenue allocations to those cities in accordance with a specified [TEA] formula and to make corresponding reductions in the county's property tax revenue allocation." (Legis. Counsel's Dig., Assem. Bill No. 1197 (1987-1988 Reg. Sess.) 4 Stats. 1988, Summary Dig., p. 289.) Accordingly, each year there must be a comparison between what a qualifying city would receive under the TEA statute and what it would receive under the A.B. 8 statutes, since revenues will be allocated under the TEA statute only if the amount exceeds what would be allocated to the city under the A.B. 8 statues. (§ 98, subd. (k); Off. of Local Government Affairs, Enrolled Bill Rep. on Assem. Bill No. 1197 (1987-1988 Reg. Sess.) Sept. 9, 1988, p. 2 [receipt of TEA will "only occur if it is no less than what the qualifying cities would have received without the TEA formula"].) What a qualifying city would receive under the TEA statute is determined by the six-step "TEA formula" set forth in the statute. (§ 98, subd. (c)(1)-(6).)

When a qualifying city receives tax revenues under section 98, it is allocated the amount of tax revenues called for by the TEA formula. The A.B. 8 allocation the city would otherwise have received, but for the application of the TEA statute, is allocated to the county. (§ 98, subds. (b)(1)-(2), (j).) Thus, the additional revenues allocated to qualifying cities under the TEA statute are effectively "taken" from the property tax revenues allocated to the counties.*fn7

As initially enacted, the TEA statute did not address the tax revenue generated by property held by local community redevelopment agencies, generally referred to as the "redevelopment agency tax increment." (Off. of Local Government Affairs, Enrolled Bill Rep. on Assem. Bill No. 1197 (1987-1988 Reg. Sess.) Sept. 9, 1988, p. 2 ["SB 709 [passed the preceding year and which established TEA] does not contain provisions for redevelopment agency tax increment financing"].) At the behest of the counties, which complained the failure to take redevelopment tax increment into account resulted in an unfair loss of their tax revenues, the Legislature expanded the TEA formula the following year to do so. (Joint Conf. Com. Rep. on Assem. Bill No. 1197 (1987-1988 Reg. Sess.) & Sen. Bill No. 612 (1987-1988 Reg. Sess.) at pp. 25-26.) The augmented formula now "require[s] county auditors to reduce the tax base, upon which the allocation to qualifying cities is determined, by the amount of property tax revenues received by the cities' redevelopment agencies." (Off. of Local Government Affairs, Enrolled Bill Rep. on Assem. Bill No. 1197 (1987-1988 Reg. Sess.) Sept. 9, 1988, p. 2.) The Legislature also added a provision that similarly requires county auditors to reduce the TEA of qualifying cities with "dependent special districts within their boundaries." (Id. at p. 5 [amendment "revises SB 709 by . . . adjusting the [(property tax)] shift to recognize redevelopment, and by reducing the shift to recognize tax cuts and special districts"].) In short, the 1988 amendments to the TEA statute revised "the property tax allocation provisions of [the preceding year] . . . to provide a more equitable solution to the long standing issue of shifting property tax revenues to no-and-low property tax cities."*fn8 (Off. of Local Government Affairs, Enrolled Bill Rep. on Assem. Bill No. 1197 (1987-1988 Reg. Sess.) Sept. 9, 1988, p. 6.)

3. Educational Revenue Augmentation Funds (ERAFs)

During the same period of time the Legislature was working to establish a more equitable allocation of property tax revenues, the state was also struggling with the complexities of public school funding. The history of this funding challenge is recited in detail in this court's opinion in County of Sonoma v. Commission on State Mandates (2000) 84 Cal.App.4th 1264, 1271-1276 [101 Cal.Rptr.2d 784] (County of Sonoma), and was more recently summarized in Los Angeles Unified School Dist. v. County of Los Angeles (2010) 181 Cal.App.4th 414, 419-422 [104 Cal.Rptr.3d 590] (Los Angeles Unified School Dist.). We cannot improve on the discussion in these cases, from which we quote:

"Since 1971, the division of state and local responsibility for educational funding has 'been in a state of flux.' (City of El Monte v. Commission on State Mandates (2000) 83 Cal.App.4th 266, 278 [99 Cal.Rptr.2d 333].) The state's responsibility for educational funding has increased since 1971 for three primary reasons." (Los Angeles Unified School Dist., supra, 181 Cal.App.4th at p. 419.)

"First, in the 1970's, the California Supreme Court held that the state must ameliorate the disparities in local property tax-based educational funding. (Serrano v. Priest (1971) 5 Cal.3d 584 [96 Cal.Rptr. 601, 487 P.2d 1241]; Serrano v. Priest (1976) 18 Cal.3d 728 [135 Cal.Rptr. 345, 557 P.2d 929].) Second, in 1978, the voters adopted Proposition 13, now article XIII A of the California Constitution, which limited local property taxation. (See, e.g., County of Los Angeles v. Sasaki (1994) 23 Cal.App.4th 1442, 1450-1452 [29 Cal.Rptr.2d 103] . . . .) Finally, in 1988, the voters enacted Proposition 98, which established a minimum guaranteed state funding entitlement for schools. (Cal. Const., art. XVI, § 8, subd. (b) . . . .)" (Los Angeles Unified School Dist., supra, 181 Cal.App.4th at pp. 419-420.)

"The state's ability to meet its increased financial obligation to schools under Proposition 98 was severely tested in fiscal year 1991-1992, when the state 'faced an unprecedented budgetary crisis . . . with expenditures projected to exceed revenues by more than $14 billion.' (Dept. of Personnel Administration v. Superior Court (1992) 5 Cal.App.4th 155, 163 [6 Cal.Rptr.2d 714].) In response to this economic crisis, the Legislature enacted the 1992 ERAF legislation, [former] Revenue and Taxation Code section 97.03 (presently § 97.2). The ERAF legislation lessened the burden imposed by Proposition 98 on the state General Fund by reducing the property tax allocation of cities, counties, and special districts, and shifting the amount of the reduction to ERAF's for distribution to schools." (Los Angeles Unified School Dist., supra, 181 Cal.App.4th at p. 420, fn. omitted.)

"The ERAF reallocation design can be summarized as requiring reduction of property tax revenues previously allocated to counties by use of a specified formula, deposit of the reduced amounts into ERAF's, and distribution of the ERAF funds to schools. Another portion of the same legislation deemed the ERAF revenues to be part of the state General Fund revenues for purposes of calculating the minimum educational funding guarantee under Proposition 98. The overall result of these statutes is that the tax revenues of the counties are decreased, school revenues remain the same, and the minimum school funding guarantee of Proposition 98 is satisfied in part by the ERAF funds. This legislative adroitness fulfilled the funding of Proposition 98 by reallocating available finite funds from one local governmental entity to another. (Legis. Analyst, Rep. to Joint Legis. Budget Com., analysis of 1993-1994 Budget Bill, p. 90.)" (County of Sonoma, supra, 84 Cal.App.4th at pp. 1275-1276, fns. omitted.)

The Legislature, however, did not view the ERAF legislation so much as a reshuffling of tax revenues, but as bringing to an end the state "bailout" of local governmental entities under A.B. 8. (E.g., Governor's Off. of Planning & Research, Enrolled Bill Rep. on Sen. Bill No. 1135 (1993-1994 Reg. Sess.) as amended June 23, 1993, pp. 1-2 ["In order to balance last year's State budget, SB 617 [ERAF I] was enacted to begin the 'undoing' of the SB 154 and AB 8 bailout created in 1978-79."] and p. 3 ["SB 1135 [ERAF II] would complete the repeal of the SB 154 and AB 8 bailout by shifting [additional] . . . property tax revenues from local governments to the ERAF . . . ."].)

a. ERAF I

The first ERAF tax revenue shift (ERAF I), enacted in 1992, was implemented through two different statutory mechanisms, now codified as sections 97 and 97.2 (originally enacted as § 97.03, see Historical and Statutory Notes, 58D West's Ann. Rev. & Tax. Code (2009 ed.) foll. § 97.2, pp. 272-274].).

Section 97.2 effectuated a permanent reallocation of property tax revenues to the ERAF's. From each county, a statutorily specified amount of property tax revenue was reallocated to the ERAF created for that county. (§ 97.2, subd. (a)(1).) From each city, 9 percent of its property tax revenue was reallocated to the local ERAF.*fn9 (§ 97.2, subd. (b)(1).) These reallocations were implemented by modifying the A.B. 8 allocation process. (See § 97.2 ["Notwithstanding any other provision of this chapter, the computations and allocations made . . . pursuant to Section 96.1 or its predecessor section [the A.B. 8 statutes] shall be modified . . . as follows . . . ."].) For each entity subject to the mandated reallocations, the county auditor was directed to deem the property tax revenues allocated to the entity in the previous fiscal year (fiscal year 1991-1992) to have been lower by the amount reallocated to the ERAF. (See § 97.2, subds. (a)(1), (b)(1) & (c)(1).) This reduced each entity's tax base for the 1992-1993 fiscal year. The property tax revenues not allocated to cities and counties through this "reduction" were allocated to the ERAF's. (Former § 97.5, subd. (d)(1), repealed Stats. 1994, ch. 1167, § 2 (A.B. 3347).)

The base "reductions" and reallocations to ERAF's only had to be made once, for the 1992-1993 fiscal year. Thereafter, the impact on cities and counties was self-perpetuating through the A.B. 8 allocation process. (Los Angeles Unified School Dist., supra, 181 Cal.App.4th at p. 425 ["By incorporating the ERAF legislation into section 96.1's yearly allocation of property taxes, the Legislature implemented an annual shift of property taxes to ERAF's for distribution to the schools."].) The ERAF's, in turn, received a tax base through the mandated "reductions" and reallocations, and effectively became another entity receiving a share of the local property tax revenue through the A.B. 8 allocation process.

Section 97.2 specifically refers to the TEA statute. Subdivision (b)(4) states: "In the 1992-93 fiscal year and each fiscal year thereafter, the auditor shall adjust the computations required pursuant to Article 4 (commencing with section 98 [the TEA statute]) so that those computations do not result in the restoration of any reduction required pursuant to this section." (§ 97.2, subd. (b)(4).) This had the effect of making the ERAF tax revenue shift mandated by section 97.2 a deduction from the TEA allocation under section 98, which effectively reduced the amount of the TEA guarantee to qualifying cities to slightly less than 7 percent.

Section 97 employed a somewhat different approach to funding the ERAF's. This reallocation was based on population. Each county reallocated $1.92 per resident to the local ERAF, and each city reallocated $1.65 per resident. (§ 97, subd. (a)(1)-(2).) Like the reallocations under section 97.2, the reallocations required by section 97 were put into effect by deeming the property tax revenue allocations of the previous fiscal year to have been lower by the amounts of the population-based reallocations, thus "reduc[ing]" the tax base. (§ 97, subd. (a).) The funds reallocated to ERAF's in the 1992-1993 fiscal year under section 97, however, were restored to the cities and counties in the 1993-1994 fiscal year. (§ 97, subd. (b).) Unlike section 97.2, section 97 contains no reference to the TEA statute.*fn10

b. ERAF II

The state's budget crisis and difficulty in meeting the school funding mandate of Proposition 98 continued, leading to the enactment of additional ERAF provisions the following year, in 1993 (ERAF II), now codified as sections 97.1 (enacted as § 97.02 [Stats. 1994, ch. 1167, § 3 (A.B. 3347); Stats. 1993, ch. 68, § 9 (S.B. 1135)]) and 97.3 (enacted as § 97.035 [Stats. 1994, ch. 1167, § 3 (A.B. 3347)].)

Section 97.1 required another reallocation of property tax revenues based on population. Each county was deemed for the previous fiscal year (fiscal year 1992-1993) not to have been allocated $0.78 per resident and each city was deemed not to have been allocated $0.99 per resident (§ 97.1, subd. (a)(1)), thereby "reduc[ing]" the tax base for counties and cities for the 1993-1994 fiscal year. The property tax revenues not allocated to the counties and cities because of their "reduc[ed]" tax bases were reallocated to the ERAF's. (§ 97.1, subd. (a)(2).) These reallocations are also perpetuated in future years through the A.B. 8 allocation process. (See § 97.1, subd. (a) ["Notwithstanding any other provision of this chapter, the computations and allocations made . . . pursuant to Section 96.1 or its predecessor section [the A.B. 8 statutes] . . . shall be modified . . . as follows . . . ."].) Section 97.1 contains no reference to the TEA statute.

Section 97.3, the second ERAF II statute, further "reduced" the local tax base for the 1993-1994 fiscal year. (§ 97.3, subds. (a)-(c).) The statute specified amounts certain--$1.998 billion from counties and $288 million from cities--by which the local tax base was to be deemed "reduced." (§ 97.3, subds. (a)(1), (b)(1).) It also directed the Director of Finance to parse these amounts among counties and cities pursuant to complex formulas set forth in the statute. (§ 97.3, subds. (a)(2)(A)-(E), (b)(2)(A)-(E).) The formula applicable to cities specified among other things that "[t]he amount of property tax revenue that is estimated to be attributable in the 1993-94 fiscal year to the amount of the city's state assistance payment received by that city pursuant to Chapter 282 of the Statutes of 1979 [the A.B. 8 'bailout' legislation] shall be determined." (§ 97.3, subd. (b)(2)(A).) The property tax revenues not allocated to the cities and counties because of their further "reduced" tax bases were reallocated to the ERAF's (§ 97.3, subd. (d)), and the effect of these "reductions" are carried forward through the A.B. 8 allocation process.*fn11 (See § 97.3 ["Notwithstanding any other provision of this chapter, the computations and allocations made . . . pursuant to Section 96.1 or its predecessor section [the A.B. 8 statutes] shall be modified . . . as follows . . ."].) Like section 97.1, section 97.3 contains no reference to the TEA statute.*fn12

c. ERAF III

In 2004, 10 years after enactment of the initial ERAF statutes, the Legislature dramatically reduced the amount of vehicle license fees payable to cities and counties from 2 percent to 0.65 percent of a vehicle's assessed value. (§§ 10752, 10752.1; Sen. Rules Com., Off. of Sen. Floor Analyses, Analysis of Sen. Bill No. 1096 (2003-2004 Reg. Sess.) as amended July 27, 2004, p. 1.) To ameliorate the effect of this loss of revenue, the Legislature enacted section 97.70, commonly referred to as the "VLF swap." (§ 97.70.)

Under section 97.70, counties essentially hold back from the allocation to ERAF's an amount of property tax revenues equivalent to the lost vehicle license fee revenue. (§ 97.70, subd. (a)(1)(A).) That property tax revenue is, instead, deposited in a Vehicle License Fee Property Tax Compensation Fund (VLF Fund). (§ 97.70, subd. (a)(2).) Counties then distribute the revenues in this fund to cities in place of lost VLF revenues. (§ 97.70, subd. (b)(1)(A)-(B); Sen. Rules Com., Off. of Sen. Floor Analyses, Analysis of Sen. Bill No. 1096 (2003-2004 Reg. Sess.) as amended July 27, 2004, pp. 2-3.) Section 97.70 specifically refers to the TEA statute and states: "This section shall not be construed to . . . [¶] . . . [¶] [r]educe ad valorem property tax revenue allocations required under Article 4 (commencing with Section 98 [the TEA statute])." (§ 97.70, subd. (f)(4).) This ensures that property tax revenues diverted from an ERAF to the VLF Fund to reimburse a qualifying city for lost vehicle license fee revenue are not construed as property tax receipts, but are instead treated as vehicle license fee revenue. Otherwise, the reimbursement would "increase" a qualifying city's property tax revenues, affecting its entitlement to TEA.

In conjunction with the VLF Swap, the Legislature enacted another ERAF statute, section 97.71 (ERAF III). Unlike ERAF's I and II, which were implemented by modifying the A.B. 8 allocation process--that is, by "reducing" the local tax base by deeming the previous year's property tax allocation to have been smaller--ERAF III was implemented by modifying the VLF swap for fiscal years 2004-2005 and 2005-2006, thereby reducing the amount of VLF reimbursement to cities and counties. (§ 97.71, subds. (a)-(b); Legis. Counsel's Dig., Sen. Bill No. 1096 (2003-2004 Reg. Sess.) 6 Stats. 2004, Summary Dig., p. 82.) Thus, rather than cross-referencing the A.B. 8 allocation statutes (§§ 96.1, 96.5), the prefatory language of ERAF III states: "The total amount of revenue required to be allocated to each city and county under Section 97.70 [the VLF SWAP] shall be reduced by the dollar amount" specified in the statute. (§ 97.71, subd. (a)(1); compare § 97.2 (ERAF I) ["Notwithstanding any other provision of this chapter, the computations and allocations made by each county pursuant to Section 96.1 or its predecessor statute [the A.B. 8 statutes] shall be modified for the 1992-93 fiscal year . . . as follows . . . ."] & § 97.1, subd. (a) (ERAF II) ["Notwithstanding any other provision of this chapter, the computations and allocations made by each county pursuant to Section 96.1 or its predecessor section [the A.B. 8 statutes], as modified by Section 97.2 or its predecessor section for the 1992-93 fiscal year, shall be modified for the 1993-94 fiscal years as follows: . . ."].) In short, ERAF III "took back" some of the reimbursement otherwise provided by way of the VLF swap.*fn13 (See § 97.71, subd. (c) [the "amount of revenue that is not allocated [under section 97.70] . . . shall be deposited in the county" ERAF].)

4. Redevelopment Agencies

This case not only involves the A.B. 8 statutes, the TEA statute and the ERAF statutes, it also touches on redevelopment. Cities and counties can establish a redevelopment agency to promote economic development within a designated area. (Health & Saf. Code, ยงยง 33100, 33101, 33120, 33131.) Once established, a redevelopment agency is a separate legal entity from the city or county that ...


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