Trial Court: Alameda County Superior Court Trial Judge: Honorable Kenneth Mark Burr Super. Ct. No. VG08405316
The opinion of the court was delivered by: Banke, J.
CERTIFIED FOR PUBLICATION
This case involves the validity of a parcel tax approved by Alameda Unified School District (District) voters in June 2008 as Measure H. The issue before us is whether the tax violates Government Code section 50079, which authorizes school districts to levy "qualified special taxes." (Gov. Code, § 50079, subd. (a).)*fn1 Such taxes are statutorily defined as "taxes that apply uniformly to all taxpayers or all real property within the school district, except that 'qualified special taxes' may include taxes that provide for an exemption from those taxes for taxpayers 65 years of age or older or for persons receiving Supplemental Security Income for a disability, regardless of age." (§ 50079, subd. (b)(1).) Measure H provides exemptions for some senior and disabled taxpayers. It also imposes different tax rates on residential and commercial/industrial properties, as well as different rates on different sized commercial/industrial properties.
Plaintiffs and appellants contend Measure H's property classifications, differing tax rates and conditional exemptions violate section 50079's definitional language that special taxes apply "uniformly" to all taxpayers or all real property within the district. The District views this statutory language as reflecting long-established equal protection principles which allow a governmental entity to create reasonable tax classifications, so long as all taxpayers within a classification are treated the same.
As we will discuss, section 50079 is one of a number of statutes enacted in the wake of Proposition 62, a statewide initiative approved by California voters in 1986 and aimed at closing perceived loopholes in Proposition 13. In addition to defining the terms "special taxes" and "general taxes" and specifying the voter approval requirements for each, Proposition 62 specified that neither Proposition 13 nor general enabling legislation passed in response to that initiative, invested local governmental entities with the power to levy taxes. The Legislature responded with a host of statutory provisions expressly delegating taxing authority to a panoply of local districts, including school districts. Most of these statutes contain the same language appearing in section 50079 and at issue here--that special taxes are "taxes that apply uniformly to all taxpayers or all real property within the" particular district.
After examining the language of these statutes and their legislative history, we conclude the Legislature did not include this definitional language in order to acknowledge established equal protection principles. Rather, the language at issue was intended to be a constraint on the extent of the taxing authority delegated to local governmental entities. We therefore conclude Measure H's property classifications and differential tax burdens exceed the District's taxing authority under section 50079 and the judgment entered in favor of the District must, in part, be reversed. We also conclude these provisions can be severed from the measure and that Measure H's exemptions for senior and disabled taxpayers are permissible under the statute.
We are well aware that we are being called on to interpret statutory language enacted in a different economic era and in the wake of two of the most far-reaching tax constraining measures ever passed by the state electorate (Propositions 13 and 62), that the state has since faced crippling economic conditions, and that school districts and other local governmental entities are more dependent than ever on the revenues from special taxes. The courts, however, cannot recalibrate the taxing power statutorily delegated to local entities; any adjustment in that regard must be made by the state Legislature.
II. Factual and Procedural Background
The essential facts are limited and undisputed. On March 4, 2008, the District's Board of Education adopted Resolution No. 08-0010. This resolution authorized the Alameda County Superintendent of Schools to call a district-wide election on June 3, 2008, on a measure to impose a qualified special tax on taxable residential, commercial and industrial property for a four-year period, commencing July 1, 2008, and ending June 30, 2012. District voters approved the measure (Measure H) by just over a two-thirds vote.*fn2
Measure H taxes residential and commercial/industrial properties differently. Non-exempt residential parcels are taxed at $120 per year. Commercial and industrial parcels less than 2,000 square feet are also taxed at $120 per year; those greater than 2,000 square feet are taxed at $0.15 per square foot to a maximum of $9,500 per year.
Measure H includes two exemptions. The first is for owners of single family residential units who live on the property as their principle residence and are 65 years of age or older during the assessment year. The second is for owners of single family residential units who live on the property and receive Supplemental Security Income for a disability, regardless of age. If eligible, property owners must apply for the exemptions.
The measure also has a severability clause providing: "If any section, subsection, sentence, phrase, part or clause of this measure is, for any reason, held to be unconstitutional, illegal or invalid, such decision shall not affect or impair the validity of the remaining portions of this measure. It is hereby declared that the intention of the Board of Education of the District and the electorate [is] that this measure would have been adopted had such unconstitutional, illegal or invalid section, subsection, sentence, phrase, part or clause thereof not been included."
On August 21, 2008, George J. Borikas, Trustee of the George J. Borikas 1999 Revocable Trust, filed suit seeking to have the special tax authorized by Measure H declared invalid and not a lien on properties he owns. Specifically, Borikas alleged Measure H exceeded the taxing authority given to school districts under section 50079 because the tax does not apply "uniformly" to all parcels in the district. On November 10, 2008, Borikas filed a first amended complaint, adding as plaintiffs Edward Hirshberg, Trustee of the Hirshberg Trust, Santa Clara Investors II, a general partnership, and Nelco, Inc. The substance of the complaint remained the same.*fn3
After numerous pretrial proceedings, including demurrers, motions to strike, and motions for summary judgment, the case was consolidated with another action challenging the parcel tax. The case was then tried by the court on a stipulated written record consisting of previously submitted separate statements of undisputed facts, responding statements and supporting documentation, exhibits and requests for judicial notice.*fn4 The trial court ruled in favor of the District.
Looking to case law involving tax challenges on equal protection grounds, the court concluded section 50079's definitional language is satisfied if tax classifications bear a rational relationship to a legitimate governmental objective and all taxpayers within the same classification bear the same tax. The court acknowledged the legislative history of section 50079 includes comments to the contrary, but disregarded them as having been made by non-legislators and viewed the legislative history as primarily concerned with allowing an exemption for seniors. The court similarly rejected the plaintiffs' challenge to the restriction of the senior and disabled exemptions to residential property owners.*fn5 Following entry of judgment for the District, plaintiffs timely appealed.*fn6
A. Backdrop: Propositions 13 and 62
In 1978, California voters approved Proposition 13, which added Article XIII A to the state Constitution and dramatically changed state and local tax structures. (Howard Jarvis Taxpayers Assn. v. City of Roseville (2003) 106 Cal.App.4th 1178, 1182 [132 Cal.Rptr.2d 1].) "The general purpose of Proposition 13 . . . was to afford tax relief to California real property owners by imposing (1) limitations upon the tax rate applicable to real property, (2) restrictions on the valuation and assessment of real property, (3) stricter voting requirements for any change by the Legislature in tax rates or methods of computation and (4) elimination of the right of the state and local entities (i.e., cities, counties, and special districts) to impose ad valorum taxes on real property or transaction or sales taxes on the sale of real property." (California Building Industry Assn. v. Governing Board of the Newhall School District of Los Angeles County (1988) 206 Cal.App.3d 212, 219 [253 Cal.Rptr. 497] (CBIA); see also Weisblat v. City of San Diego (2009) 176 Cal.App.4th 1022, 1034 [98 Cal.Rptr.3d 366] (Weisblat).) To prevent local taxing entities from circumventing these tax limitations, Proposition 13 further specified any new or increased special tax proposed by a county, city or special district must be approved by a two-thirds vote of the local electorate. (Cal. Const. Art. XIII A, § 4; Rider v. County of San Diego (1991) 1 Cal.4th 1, 7 [2 Cal.Rptr.2d 490, 820 P.2d 1000] (Rider) ["section 4's restriction on local taxes is part of an 'interlocking "package" deemed necessary by the initiative's framers to assure effective real property tax relief' "], quoting Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization (1978) 22 Cal.3d 208, 231 [149 Cal.Rptr.239, 583 P.2d 1281].)
Proposition 13 also prohibited any county, city or special district from imposing any new special tax unless expressly authorized to do so by the state Legislature. (CBIA, supra, 206 Cal.App.3d at pp. 222-223.) The Legislature promptly responded by enacting general enabling legislation. (§ 50075 et seq.*fn7 ; Weisblat, supra, 176 Cal.App.4th at p. 1035; CBIA, supra, 206 Cal.App.3d at p. 223.)
Numerous legal challenges to Proposition 13 and to newly imposed taxes followed. In several decisions the Supreme Court departed from the liberal approach it initially had taken in construing the proposition, and read its language narrowly. (City and County of San Francisco v. Farrell (1982) 32 Cal.3d 47 [184 Cal.Rptr. 713, 648 P.2d 935] (Farrell)*fn8 [strictly construing section 4 and holding a special tax for purposes of Proposition 13 is a tax that both has a specific purpose and the revenues of which are kept separate from and not placed in the taxing authority's general fund]; Los Angeles County Transportation Com. v. Richmond (1982) 31 Cal.3d 197 [182 Cal.Rptr. 324, 643 P.2d 941] (Richmond)*fn9 [departing from liberal approach it had previously taken and adopting definition of special district for purposes of Proposition 13 narrower than is otherwise provided by statute]; see also Santa Clara County Local Transportation Authority v. Guardino (1995) 11 Cal.4th 220, 233, fn. 7 [45 Cal.Rptr.2d 207, 902 P.2d 225] (Guardino).)
In response to these decisions, the proponents of Proposition 13 successfully placed another proposition on the statewide ballot in 1986, Proposition 62. (See Guardino, supra, 11 Cal.4th at pp. 235, 237 [noting ballot arguments targeting Farrell decision and observing "evident intent of the drafters of Proposition 62 [was] to close by legislation what they perceived were court-made 'loopholes' in Proposition 13"]; Rider, supra, 1 Cal.4th at p. 11 [that after Richmond numerous "special purpose" districts had been created and authorized to impose taxes on a simple majority vote "strongly indicate[d] a large 'hole' ha[d] indeed been created in Proposition 13"].)
Proposition 62 was a statutory, rather than a constitutional, initiative that added a new article to the Government Code. (CBIA, supra, 206 Cal.App.3d at p. 223.) These statutory provisions specify there are two kinds of taxes, "general" and "special," and define "special taxes" as taxes "imposed for a specific purpose," and require that all new local taxes imposed by a "local government or district" be approved by the local electorate. (§§ 53721, 53722; see Guardino, supra, 11 Cal.4th at pp. 231-232.) A general tax must be authorized by a two-thirds vote of the legislative body of the taxing entity, but can be approved by only a majority of local voters. (§§ 53723, 53724, subd. (b).) A special tax may be authorized by a majority vote of the legislative body of the local taxing entity, but must be approved by a two-thirds majority of local voters. (§ 53722.) "The manifest purpose of Proposition 62 as a whole was to increase the control of the citizenry over local taxation by requiring voter approval of all new local taxes imposed by all local governmental entities." (Guardino, at p. 235.)*fn10
Of particular significance to the issue before us, Proposition 62 also specified neither it, nor Proposition 13, "nor Article 3.5 of Division 1 of Title 5 of the Government Code (commencing with Section 50075) shall be construed to authorize any local government or district to impose any general or special tax which it is not otherwise authorized to impose." (§ 53727, subd. (a).) This provision called into question the taxing power of all local districts that looked to the general enabling legislation enacted after Proposition 13 and commencing with section 50075 as the source of their authority. (See CBIA, supra, 206 Cal.App.3d at pp. 224-225.)
A flurry of legislative activity ensued, resulting in a host of statutory provisions expressly authorizing local districts, including school districts, to levy special taxes in accordance with the dictates of Propositions 13 and 62. (See CBIA, supra, 206 Cal.App.3d at pp. 224-225; Ops. Legis. Counsel, No. 3061 (April 17, 1987) Proposition 62: Voter Approval of Special Taxes Levied by School Districts re Assem. Bill No. 1440 (1987-1988 Reg. Sess.).)*fn11
In the meantime, challenges were being mounted to ostensible special taxes imposed by some school districts after Proposition 13, but before the effective date of the special enabling legislation the Legislature had passed for school districts, section 50079. In CBIA, the Building Industry Association challenged taxes being imposed by five different school districts on "persons" receiving new building permits and predicated on taxing authority supposedly provided directly by Proposition 13, section 4.*fn12 (CBIA, supra, 206 Cal.App.3d at pp. 220-221.) Even assuming the revenue measures were special taxes, the Court of Appeal held they were invalid for lack of any specific enabling legislation. (CBIA, supra, 206 Cal.App.3d at pp. 224-233 [Proposition 62 "confirms that section 4 of Article XIII A was not intended as a grant of a new taxing authority; moreover, [Proposition 62] specifically withdrew the enabling legislation contained in section 50075 et seq."].) Nor, said the court, could then newly enacted section 50079 "constitute a post-vote ratification of the exactions." (CBIA, at p. 225, fn. 16.) The court further held the taxes were a "transparent attempt" by ...