Building Industry Association v. City of San Ramon , 4 Cal. App. 5th 62 ( 2016 )

Filed 10/13/16
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION TWO
BUILDING INDUSTRY ASSOCIATION
OF THE BAY AREA,
Plaintiff and Appellant, A145575
v. (Contra Costa County
CITY OF SAN RAMON et al., Super. Ct. No. MSC1400603)
Defendants and Respondents.
A developer sought approval from the City of San Ramon (City) to build 48
townhouses on two parcels of land. Because an analysis showed that the cost to the City
of providing services to the new development would exceed the revenue generated by the
project, the City conditioned its approval on the developer providing a funding
mechanism to cover the difference. Using California’s Mello-Roos Act, the developer
petitioned the City to create a “community facilities district” and then, as landowner,
voted to approve a tax within the district consistent with the statute to raise the necessary
revenue. Plaintiff Building Industry Association-Bay Area (the Association) filed suit
against the City in superior court challenging the validity of the tax. After the parties
filed cross-motions for summary judgment, the trial court upheld the tax. It is from this
judgment that the Association now appeals on multiple grounds: the tax does not provide
for “additional services” as required by statute; the tax is an unconstitutional general tax;
and the City ordinance authorizing the tax is unconstitutional on its face because it
“retaliates” against property owners by ceasing the provision of services funded by the
tax if property owners in the district repeal the tax in the future.
1
We conclude that the tax will provide “additional services” to meet increased
demand for existing services resulting from the townhouse development and therefore
meets the requirements of the Mello-Roos Act; the tax is a special (and not a general) tax
because it is imposed for specific purposes and not for general governmental purposes,
and therefore meets the requirements of the California Constitution; and the property
owners’ constitutional and statutory rights are not burdened by an ordinance explaining
that the city services funded by a special tax will not be provided by the city if the tax is
repealed. Consequently, we will affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. The Mello-Roos Act
The Legislature intended the Mello-Roos Community Facilities Act of 1982 (Gov.
Code, § 53311 et seq.), commonly known as the Mello-Roos Act, and here sometimes
referred to as “the Act,” to “provide[] an alternative method of financing certain public
capital facilities and services, especially in developing areas and areas undergoing
rehabilitation.” (Gov. Code, § 53311.5.1) “Alternative” methods of financing were
needed because four years earlier, in 1978, the voters approved Proposition 13, which
added article XIII A to the California Constitution and “severely impaired local
governments’ ability to raise money through property taxes.” (Friends of the Library of
Monterey Park v. City of Monterey Park (1989) 211 Cal.App.3d 358, 376 (Monterey
Park).) Among other things, Proposition 13 restricted the imposition of “special taxes”
by local governments. (Cal. Const., art. XIII A, § 4.) Our Supreme Court ruled that the
term “special taxes” in Proposition 13 meant “taxes which are levied for a specific
1
Government Code section 53311.5 states, “This chapter provides an alternative
method of financing certain public capital facilities and services, especially in developing
areas and areas undergoing rehabilitation. The provisions of this chapter shall not affect
or limit any other provisions of law authorizing or providing for the furnishing of
governmental facilities or services or the raising of revenue for these purposes. A local
government may use the provisions of this chapter instead of any other method of
financing part or all of the cost of providing the authorized kinds of capital facilities and
services.” (Emphasis added.)
2
purpose rather than . . . a levy placed in the general fund to be utilized for general
governmental purposes.” (City and County of San Francisco v. Farrell (1982) 32 Cal.3d
47, 57.)
“Before Proposition 13 was adopted, local governments could usually impose
special taxes without any voter approval.” (Curtin, et al., Cal. Subdivision Map Act and
the Development Process (Cont.Ed.Bar 2d ed. 2015) Use of Local Government Districts
to Provide Facilities and Services, § 6A.27, p. 6A-33(Curtin), citing Cal. Const., art. XI,
§ 5, Gov. Code § 37100.5, and Associated Home Builders v. City of Newark (1971) 18
Cal.App.3d 107.) Proposition 13 required that special taxes be approved by a two-thirds
vote of the local voters (Cal. Const., art. XIII A, § 4), and prohibited local governments
from levying special taxes in the absence of state enabling legislation. (California
Building Industry Association v. Governing Board (1988) 206 Cal.App.3d 212, 230.) In
passing the Mello-Roos Act, the Legislature sought to address the limitations on local
governments’ ability to raise money by passing enabling legislation that “authoriz[ed] the
creation of community facilities districts . . . empowered to impose special taxes to pay
for specified services and facilities within the district.” (Monterey Park, supra, 211
Cal.App.3d at p. 376; see also Curtin, supra, § 6A.55, pp. 6A-52 - 6A-54.)
The Act authorizes the creation of community facilities districts by “all local
agencies,” defined to include any city. (Gov. Code, §§ 53316 & 53317, subd. (h).2)
These community facilities districts are commonly known as “Mello-Roos districts.” A
community facilities district may be established to finance one or more types of specified
services (§ 53313) or facilities (§ 53313.5), or both.3 Once a local agency has approved
2
All further unspecified statutory references are to the Government Code.
3
In the Mello-Roos Act, “ ‘Services’ means the provision of categories of services
identified in Section 53313. ‘Services’ includes the performance by employees of
functions, operations, maintenance, and repair activities. ‘Services’ does not include
activities or facilities identified in Section 53313.5. ‘Maintenance’ shall include
replacement, and the creation and funding of a reserve fund to pay for a replacement.”
(§ 53317, subd. (j).) Section 53313 provides that a Mello-Roos district may be created to
finance any one or more of several specified types of services, including police protection
3
the formation of a district, the agency’s legislative body must submit the levy of any
special tax to the voters for approval. (§ 53326, subd. (a).) If there are not at least 12
persons registered to vote in the proposed district on each of the 90 days preceding the
election, the vote is by the landowners of the real property in the district.4 (§§ 53317,
subd. (f) & 53326, subd. (b).) In both types of election, approval of the tax requires
approval by two-thirds of the votes cast. (§ 53328.)
The Act brought about a sea change in local government financing. (See
Monterey Park, supra, 211 Cal.App.3d at pp. 376-377.) “Before enactment of the Mello-
Roos Act in 1982, local governments used assessment districts to finance improvements
(such as sewer, water, streets, and drainage) that directly benefited a particular parcel of
property. Special assessment financing was not disturbed by enactment of Proposition
13, but the use of assessment districts was historically confined to financing local
improvements that conferred a special and direct benefit on the assessed property. The
Mello-Roos Act liberalized the traditional constraints on local improvement financing
and also permitted financing certain facilities and services that benefit the public
generally, such as police and fire protection, recreation programs, library services, flood
and storm protection services, and park maintenance.” (Curtin, supra, § 6A.55, p. 6A-53,
citing Gov. Code, § 53313.) “The main advantage of a Mello-Roos district is that taxes
imposed under the Mello-Roos Act are special taxes, not special assessments. Govt C
§53325.3. A district’s taxes need not, therefore be apportioned on the basis of benefit to
any property. Govt C §53325.3.” (Ibid.)
In particular, the Act has affected the way in which facilities and services are
financed for new developments. (See Monterey Park, supra, 211 Cal.App.3d 358.)
“Typically, when facilities have been financed by imposing fees on the project developer,
services, fire protection services, recreation program services, maintenance and lighting
of parks and streets, removal or cleanup of hazardous substances, and the maintenance
and operation of certain property.
4
Each landowner has “one vote for each acre or portion of an acre of land that he
or she owns within the proposed community facilities district not exempt from the special
tax.” (§ 53326, subd. (b).)
4
those fees are passed on to purchasers or units in the form of higher sale prices. By using
a Mello-Roos district, however, both the local public agency and the developer avoid
incurring any general obligation indebtedness to finance the needed improvements or
services, because the cost is borne solely by residents of the benefited area.”5 (Curtin,
supra, § 6A.55, pp. 6A-53 - 6A-54.)
B. The City Establishes a Community Facilities District and Levies a Tax
In 2013, the City’s Planning Commission and the City Council tentatively
approved the subdivision of two parcels of land to create a 48-unit townhouse project
known as the Acre Development (Acre). The approval process included a fiscal analysis,
which determined that the cost of providing services to Acre would exceed revenue
generated by Acre, thus creating a negative fiscal impact to the City of about $500 per
year for each townhouse. As a condition of approval, the City required Acre’s developer
to provide a funding mechanism to mitigate the negative fiscal impact.
To satisfy the condition, the landowner-developer petitioned the City Council to
initiate proceedings under the Mello-Roos Act to create a community facilities district
consisting of the two parcels to be developed. The City Council began those proceedings
5
This effect has long been understood. Pursuant to Evidence Code sections 452,
subdivision (c) and 459, subdivision (c), we take judicial notice of the legislative history
of Senate Bill 2254 (1987-1988 Reg. Sess.) on our own motion, having previously
notified the parties of our intent to do so. In recommending that Governor Deukmejian
sign S.B. 2254, which among other things revised procedures for notifying land
purchasers of taxes levied under the Act, the Office of Local Government Affairs
reported, “Because [Mello-Roos] districts are often formed in undeveloped areas with
few voters and finance infrastructure or services associated with new construction, the
original landowners effectively use the Mello-Roos Act to shift the costs of new
infrastructure and services to new homeowners. The success of the Mello-Roos Act in
financing the needs of new development has always been tempered by complaints from
new homeowners that they are not being made aware of the existence of special taxes at
the time they buy their house. SB 1115 (Mello) of 1986 addressed this problem by
requiring the recordation of a special tax notice upon formation of a new Mello-Roos
[district]. [¶] SB 2254 would require the recordation of a special tax lien. This would
assist in the disclosure of such taxes to home buyers.” (Office of Local Government
Affairs, Enrolled Bill Rep. on Sen. Bill No. 2254 (1987-1988 Reg. Sess.) Sept. 22, 1988,
p. 3.)
5
by adopting a resolution of intention to establish a community facilities district comprised
of the two parcels designated for Acre and a “future annexation area” that is essentially
co-extensive with the City limits (the District).6
In February 2014, the City conducted a public hearing after which it adopted a
resolution approving the formation of the district, proposing a tax to be levied on parcels
in the district, and describing the facilities and services to be financed. The provision of
facilities is not at issue in this appeal. The services to be financed were described as
follows:
“The Services shown below (‘services’ shall have the meaning given that
term in the Mello-Roos Community Facilities Act of 1982[7]) are proposed to be
financed by the [District], including all related administrative costs, expenses and
related reserves for replacement of vehicles, equipment and facilities:
“• Annual operation, maintenance and servicing, including repair and
replacement, of police, park and recreational facilities, open space facilities,
landscaping facilities, street and street lighting facilities, flood and storm
protection facilities and storm water treatment facilities.
“• To the extent not included in the prior paragraph, police, park and
recreational services (excluding recreation program services), open space services,
landscaping services, street and street lighting services, flood and storm protection
services, and storm water treatment services.
“• Costs associated with the setting, levy, and collection of the Special
Taxes; and
“• Contingency costs, including a contingency and/or reserve for
operating and capital reserves, as required by the City.
6
The future annexation area is not at issue in this appeal.
7
There is no dispute that the services to be funded by the tax are among the types
of services authorized by the Mello-Roos Act. (See §§ 53313 and 53317, subd. (j)
[defining “services” with reference to § 53313].)
6
“The Special Taxes may be collected and set-aside in designated funds,
collected over several years, that may be used by the City to fund future repairs,
services and facilities described above as determined by the City.”
Because there were fewer than 12 registered voters in the territory of the district, a
landowner election was held. The sole landowner and qualified elector (the developer of
Acre) approved the levy of the tax.8
The City then adopted an ordinance providing, among other things, “All of the
collections of the special tax shall be used as provided for in the [Mello-Roos] Act and in
the Resolution of Formation.” As we will see, whether this is a permissible “special tax”
or, as the Association claims, an impermissible “general tax” is a central issue in this
case.
One of the provisions incorporated in the ordinance states that if the tax should be
repealed by action of the voters in the district, the City will stop levying the tax, and will
not be obligated to provide the facilities and services for which the tax was levied, and
the property owners in the district will be responsible for any obligations that had been
funded by the repealed tax.
C. The Association Files Suit
In March 2014, the Association sued the City9 seeking to invalidate and annul the
resolutions and ordinance pertaining to the district and the tax. The Association sought a
declaration of invalidity under Code of Civil Procedure sections 860 and 863 and
Government Code section 53359 or, in the alternative, declaratory relief under Code of
Civil Procedure section 1060 or a writ of mandate under Code of Civil Procedure section
1085. The Association made three contentions: First, the tax did not comply with the
requirement of the Mello-Roos Act that services financed by a landowner-approved
8
The tax is to be imposed on every parcel in the district, with a maximum initial
tax rate for townhouses of $595 per year.
9
The Association sued the City of San Ramon and the Mayor and City Council of
San Ramon in their official capacities. We follow the parties in referring to the
defendants/respondents collectively as “the City.”
7
community facilities district must be “in addition to those provided in the territory of the
district before the district was created” and “may not supplant services already available
within that territory when the district was created.” (§ 53313.) Second, the tax was an
improper general tax, rather than a special tax, and therefore violated section 2,
subdivision (a) of article XIII C of the California Constitution, which prohibits a special
purpose district from levying a general tax. Third, the ordinance retaliated against
landowners in the district who might in the future seek relief from the tax, because the
ordinance improperly burdened their constitutional rights to petition the government and
their statutory rights to seek relief through the courts.
The Association filed a motion for summary judgment and the City filed a cross
motion. The trial court denied the Association’s motion and granted the City’s, ruling
that the tax complies with the Mello-Roos Act because the services it funds will augment,
not supplant, the current services in the territory; that the tax is a special tax, not a general
tax; and that the ordinance is not unconstitutional.10 Final judgment was entered in favor
of the City, and this appeal followed.11
10
In its ruling, the trial court rejected the City’s arguments that the Association
lacked standing and that the Association’s challenge was not ripe with respect to the
district’s future annexation area. Those issues are not before us.
11
We granted the League of California Cities’ (the League’s) application to file an
amicus curiae brief in support of the City; the Association subsequently filed an
answering brief. With its application, the League requested us to take judicial notice,
pursuant to Evidence Code section 452, subdivision (h), of a 600-page September 2014
report by the California Tax Foundation entitled, “Piecing Together California’s Parcel
Taxes: An In-Depth Survey of Local Special Taxes on Property.” The League claims the
report is relevant because, “It demonstrates the widespread use and public approval of
[Mello-Roos] taxes, the many services they fund, and the importance of [Mello-Roos]
revenues to the public fisc.” The Association opposed the request on various grounds.
We took the request under submission to decide with the merits of the appeal and now
deny it.
Evidence Code section 452, subdivision (h) permits the court to “take judicial
notice of ‘[f]acts and propositions’ within the document, not the document as a whole.”
(Jenkins v. JP Morgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 536 [quoting Evid.
Code, § 452, subd. (h)], disapproved on other grounds in Yvanova v. New Century
Mortgage Corporation (2016) 62 Cal.4th 919.) The League has not identified specific
8
DISCUSSION
We review a grant of summary judgment de novo, effectively assuming the role of
a trial court, and applying the rules and standards that govern a trial court’s determination
of a motion for summary judgment. (Lonicki v. Sutter Health Central (2008) 43 Cal.4th
201, 206 (Lonicki).) Code of Civil Procedure section 437c, subdivision (c) provides that
a “motion for summary judgment shall be granted if all the papers submitted show that
there is no triable issue as to any material fact and that the moving party is entitled to
judgment as a matter of law.” Because the material facts here are undisputed, this matter
presents pure questions of law.
A. The Tax Complies with the Mello-Roos Act
Section 53313 provides that a Mello-Roos tax approved by a landowner vote “may
only finance . . . services . . . to the extent that they are in addition to those provided in
the territory of the district before the district was created. The additional services shall
not supplant services already available within that territory when the district was
created.” (§ 53313, subd. (g).) The Association contends that the tax does not meet the
requirements of section 53313 because a tax that pays for increased quantities of existing
services to meet increased demand does not pay for “additional service[s].”12 The City
contends that the services financed by the tax are “post-development additional levels of
service,” which “do not supplant the predevelopment levels of service all of which
continue to be funded with general fund revenue.”
facts and propositions within the report for judicial notice, which is highly problematic
because the report includes opinions and recommendations as well as an appendix of over
550 pages that describes parcel taxes imposed under the authority of a number statutes,
not limited to the Mello-Roos Act. Furthermore, even if we assume that the facts and
propositions included in the report are “capable of immediate and accurate determination
by resort to sources of reasonably indisputable accuracy” (Evid. Code, § 452, subd. (h)),
neither the number of Mello-Roos districts in the state nor the range of services funded
by other such districts are relevant to the dispositive issues in this appeal. (See Jordache
Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 748, fn. 6
[denying request where judicial notice is neither necessary, helpful, or relevant].)
12
The Association does not contend that the tax violates the Mello-Roos Act in
any other respect.
9
The parties rely on the following undisputed facts: The enumerated services that
will be funded by the tax are services currently provided by the City to parcels within the
City limits, including the parcels where Acre will be developed. The City currently
provides these enumerated services at a level that is generally adequate to meet the
existing demand. The City intends to use the tax revenues to meet the increased demand
for the enumerated services expected to result from the development of Acre. Once the
tax is imposed and the district is developed, property in the district (where the tax is
levied) will receive services that are qualitatively no better than the services received by
property outside the district, even though district property owners are paying an
additional tax.
1. Applicable Law
“In interpreting a statute, we begin with its text, as statutory language typically is
the best and most reliable indicator of the Legislature’s intended purpose. (Fitch v. Select
Products Co. (2005) 36 Cal.4th 812, 818; see also Baker v. Workers’ Comp. Appeals Bd.
(2011) 52 Cal.4th 434, 442.) We consider the ordinary meaning of the language in
question as well as the text of related provisions, terms used in other parts of the statute,
and the structure of the statutory scheme. (See Lonicki[, supra,] 43 Cal.4th [at p.] 209;
California Teachers Assn. v. San Diego Community College Dist. (1981) 28 Cal.2d 692,
698; see also Clean Air Constituency v. State Air Resources Bd. (1974) 11 Cal.3d 801,
813-814; People v. Rogers (1971) 5 Cal.3d 129, 142 (conc. & dis. opn. of Mosk, J.) [in
construing a statute, we do not look at each term as if ‘in a vacuum,’ but rather gather
‘the intent of the Legislature . . . from the statute taken as a whole’].)” (Larkin v.
Workers’ Comp. Appeals Bd. (2015) 62 Cal.4th 152, 157-158 (Larkin).)
The role of the court in construing a statute “is simply to ascertain and declare
what is in terms or in substance contained therein, not to insert what has been omitted, or
to omit what has been inserted; and where there are several provisions or particulars, such
a construction is, if possible, to be adopted as will give effect to all.” (Code Civ. Proc.,
§ 1858.) “ ‘ “ ‘Words must be construed in context, and statutes must be harmonized,
both internally and with each other, to the extent possible.’ [Citation.] Interpretations
10
that lead to absurd results or render words surplusage are to be avoided. [Citation.]”
[Citation.]’ (People v. Loeun (1997) 17 Cal.4th 1, 9.)” (Tuolumne Jobs & Small
Business Alliance v. Superior Court (2014) 59 Cal.4th 1029, 1037.)
“If the statutory language in question remains ambiguous after we consider its text
and the statute’s structure, then we may look to various extrinsic sources, such as
legislative history to assist us in gleaning the Legislature’s intended purpose. (Holland v.
Assessment Appeals Bd. No. 1 (2014) 58 Cal.4th 482, 490.)” (Larkin, supra, 62 Cal.4th
at p. 158.)
2. Analysis
For the purposes of this appeal, we consider two requirements imposed by section
53313 on services funded by landowner-approved taxes: the services must be “in
addition to those provided in the territory of the district before the district was created”
and “[t]he additional services shall not supplant services already available within that
territory when the district was created.” The parties cite no decisions that interpret these
requirements of section 53313, and we are aware of none.
a. Interpreting Section 53313
In order to determine whether the requirements of section 53313 are met by
providing services that satisfy an increased demand for existing services, we look at the
language of section 53313 and its place in the Mello-Roos Act. From our understanding
of the ordinary meaning of the language in section 53313, it seems clear from the outset
that the additional services requirement is met by services that meet increased demand for
existing services within the district. Such services would be “in addition to” the services
provided in the area of the district before the district was created. Moreover, services that
meet increased demand do not “supplant” the services available in the area of the district
when the district was created, because they do not replace those services. To the
contrary, they supplement those services.
Our understanding of the statutory language is consistent with the dictionary
definitions of “additional” and “supplant” that were presented by the City to the trial
court, and recognized by the Association as being probative, though not dispositive, of
11
the meaning of the statute. The Oxford Dictionaries define “additional” as “[a]dded,
extra, or supplementary to what is already present or available.”
( [as of
Oct. 13, 2016].) Merriam-Webster defines “supplant” as “to take the place of and serve
as a substitute for especially by reason of superior excellence or power.”
( [as of Oct. 13, 2016].)
Other provisions of the Mello-Roos Act support our analysis. Section 53311.5
explains that the purpose of the Act is to finance the facilities and services in developing
areas and areas undergoing rehabilitation, precisely the situations that would likely lead
to increased demand for the services authorized in section 53313. And section 53326,
subdivision (b), requires that when taxes are approved by landowner vote, “the legislative
body shall determine that any facilities or services financed by the district are necessary
to meet increased demands placed upon local agencies as the result of development or
rehabilitation occurring in the district.” There is no dispute that such a determination was
made in this case.
Section 53313 requires that the services provided by landowner-approved taxes
must not only be necessary to meet increased demands (see § 53326, subd. (b)), but must
also supplement and not replace existing services.13 These requirements are common in
statutes that establish new sources of funding. For example, Penal Code section 1202.5,
which imposes an additional $10 fine on defendants convicted of certain offenses,
specifies that the amounts collected, which are intended for crime prevention programs,
“shall be in addition to and shall not supplant funds received for crime prevention
purposes from other sources.” (Pen. Code, § 1202.5, subd. (b)(2), emphasis added.)
Health and Safety Code section 11372.7, which establishes a drug program fee to be paid
by defendants convicted of certain code violations, requires that the funds “deposited into
13
These section 53313 requirements do not apply to facilities funded by
landowner approved taxes, perhaps because facilities age and decay and may need to be
“supplant[ed],” as we discuss below in connection with the history of the Mello-Roos
Act.
12
a county drug program fund pursuant to this section shall supplement and shall not
supplant” local funds to support those efforts. (Health & Saf. Code, § 11372.7, subd. (d),
emphasis added.)
The text of section 53313 and the structure of the Mello-Roos Act suffice to
support our interpretation: landowner-approved taxes may fund services that meet
increased demand in the district for existing services. The legislative history of the bills
drafting and later amending the statutory language provides further support, because from
the first enactment of the Mello-Roos Act in 1982, the legislature was clear that
landowner-approved Mello-Roos taxes could be used to satisfy an increased demand for
existing services.14
As first enacted, section 53313 pertained to facilities as well as services, and
authorized the creation of a Mello-Roos district to provide the following types of
“additional facilities and services” of the following types within an area: “[p]olice
protection, including criminal justice facilities limited to jails, detention facilities and
juvenile halls,” and “[f]ire protection and suppression, and provision of ambulance and
paramedic facilities and services.” (Former § 53313, added by Stats. 1982, ch. 1439, § 1,
p. 5487, and repealed by Stats. 1984, ch. 269, § 1, p. 1408.) The statute went on to
explain what constituted “additional facilities and services” by requiring that, “A
community facilities district may only provide the specific facilities and levels of services
authorized in this section to the extent that they are in addition to those provided in the
territory of the district before the district was created, and may not supplant specific
facilities of these kinds and levels of these services already available within that
territory.” (Former § 53313, added by Stats. 1982, ch. 1439, § 1, p. 5487, and repealed
by Stats. 1984, ch. 269, § 1, p. 1408 (emphasis added).) These requirements were not
limited to districts approved by landowner vote. (See former § 53325.3, added by Stats.
1982, ch. 1439, § 1, p. 5491 [authorizing landowner votes in certain circumstances], and
14
Pursuant to Evidence Code sections 452, subdivision (c) and 459, subdivision
(c), we take judicial notice of the legislative history on our own motion, having
previously notified the parties of our intent to do so.
13
repealed by Stats. 1984, ch. 269, § 1, p. 1408.) Nothing in the statute suggests that
districts may be formed only where police protection and fire protection services were
previously completely absent, or that the services to be funded by the tax must be
superior to services in areas not subject to the tax.
In 1984, as part of legislation enacted to “clarify and streamline” the Mello-Roos
Act, the Legislature expanded the range of additional services that could be funded by a
Mello-Roos tax, and eliminated the requirement that funded facilities be “additional.”
(Stats. 1984, ch. 269, § 44, p. 1427; Former § 53313, added by Stats. 1984, ch. 269, § 2,
pp. 1408-1409.) A new section was added to the Act that addressed the use of Mello-
Roos taxes for facilities, covering “the purchase, construction, expansion, or
rehabilitation of any real or other tangible property . . . which is necessary to meet
increased demands placed upon local agencies as the result of development or
rehabilitation occurring within the district.” (Former § 53313.5, added by Stats. 1984, ch.
269, § 2.3, p. 1409.) The new version of the Act retained the requirements that services
be “in addition to those provided in the territory of the district before the district was
created, and . . . not supplant those services already available within that territory,” but
did not impose those requirements on facilities. (See Former §§ 53313, 53313.5, added
by Stats. 1984, ch. 269, §§ 2.1, 2.3, pp. 1408-1409.) This appears to reflect recognition
that existing facilities eventually need to be replaced.15
The Mello-Roos Act was further amended in 1986 to clarify that a community
facilities district finances (rather than provides) facilities and services. (See Assem.
Local Government Com., Rep. on 3d reading of Sen. Bill No. 1115 (1985-1986 Reg.
Sess.) as amended Aug. 14, 1986, p. 2.) As part of these amendments, the Legislature
clarified the section 53313 requirements for additional services by placing them in two
15
“I believe these changes [in the Act] will give local governments a more
sophisticated and useful financing mechanism to finance construction and rebuilding of
their capital facilities.” (Governor’s Chaptered Bill File, ch. 269, Sen. Henry J. Mello,
letter to Governor George Deukmejian (June 26, 1984) p. 2, emphasis added.)
14
separate sentences, rather than a single compound sentence.16 Instead of requiring that a
district provide authorized services in addition to those provided and that a district not
supplant services already available, the amended provision stated that a district could
only finance the authorized services if they were in addition to those provided, and that
the services (as opposed to the district) must not supplant already available services.
(Former § 53313, amended by Stats. 1986, ch. 1102, § 3, p. 3847.)
In 1988, section 53313 was amended again so that the requirement that services be
“additional” was limited to services financed by landowner-approved taxes. (Former
§ 53313, amended by Stats. 1988, ch. 1365, § 4, pp. 4564-4565; see also Legis. Counsel’s
Dig., Sen. Bill No. 2254, 4 Stats. 1988 (1987-1988 Reg. Sess.) Summary Dig., p. 467.)
This is the state of the law today. (§ 53313.) Previously a Mello-Roos district could
finance the authorized services only if those services were “beyond the amount of such
services already provided in the area.” (See Office of Local Government Affairs,
Enrolled Bill Rep. on Sen. Bill No. 2254 (1987-1988 Reg. Sess.) Sept. 22, 1988, p. 1.)
With the amendment, thus the range of services that could be financed by voter-approved
districts was expanded to include already-existing services as well as additional services,
while the range of services that could be financed by landowner-approved districts
remained limited to “additional services,” which, as we have discussed, includes services
that meet an increased demand for existing services. (§ 53313.)
These changes in section 53313 show that over time, the Legislature has expanded
the range of services and facilities that can be funded by Mello-Roos districts. From the
16
Compare the earlier version of the statute (“A community facilities district may
only provide the services authorized in this section to the extent that they are in addition
to those provided in the territory of the district before the district was created, and may
not supplant those services already available within that territory” (former § 53313,
added by Stats. 1984, ch. 269, § 2, p. 1409) with the amended version (“A community
facilities district may only finance the services authorized in this section to the extent that
they are in addition to those provided in the territory of the district before the district was
created. The additional services may not supplant services already available within that
territory when the district was created”). (Former § 53313, amended by Stats. 1986, ch.
1102, § 3, p. 3847.)
15
beginning, however, Mello-Roos taxes approved by landowner votes could be used to
fund an increased demand for existing services.
b. The Association’s Arguments Are Not Persuasive
The Association interprets the requirement of additional services (i.e., that services
must be in addition to those provided in the territory of the district before the district was
created) “as pertaining to the quality of service,” and the prohibition against supplanting
services (i.e., the requirement that additional services not supplant services already
available within that territory when the district was created) as pertaining to “the type of
service.” “In other words,” according to the Association, “a landowner-approved tax
may finance services that supplement existing services, but only if the new services
provide homeowner-taxpayers a real and meaningful benefit that is over and above what
non-district property owners receive as part of a standard menu of municipal services.”
We disagree.
i. The Language of Section 53313
The Association’s interpretation is not supported by the language of the statute.
First, the Association inserts language into section 53313, which does not distinguish the
“type” and “quality” of additional services: the statute states only that landowner-
approved taxes may finance services only “to the extent that they are in addition to”
existing services. (§ 53313.) Second, the Association introduces a comparison between
services provided inside and outside the district that is absent from the statutory language.
Third, the Association disregards the statutory language requiring the comparison of
services funded by the tax with services provided in the district’s territory before the
district was created, as well as the statutory language that requires the comparison of
services funded by the tax with services already available in the district’s territory when
the district was created. (§ 53313.)
The Association contends that unless we adopt its interpretation, there is
surplusage in section 53313 because “every service that is not in addition to one already
available must necessarily be a supplanting service.” We see no surplusage in section
53313. The statute requires that a landowner-approved tax may only be used to finance
16
additional services, that is, services that are in addition to the services provided in the
territory before the district was created. For example, police protection services funded
by the tax must be in addition to whatever police services were provided in the district
before the district’s creation. (See § 53313, subd. (a).) The statute also requires that the
additional services not take the place of services that were available when the district was
created. To continue with our example, the police protection services that were available
when the district was created cannot simply disappear. The two requirements
complement one another. The first mandates that the level of services financed by a
landowner-approved tax must be in addition to those already provided; the second
mandates that those financed services supplement, and not supplant, the services
available when the district was created.
ii. The Structure of the Mello-Roos Act
The Association argues that the tax here “cannot be reconciled with the Mello-
Roos Act’s structure,” suggesting that the Act “reveal[s] a legislative concern that
taxpayers should not have to pay more than similarly situated citizens without getting
anything extra in return.” But the Association does not point to any legislative statement
of this concern, nor does the Association explain what would make citizens “similarly
situated,” nor what baseline should be used to determine what is “extra.”
The Association claims that the purported legislative concern is reflected in the
fact that the restrictions of section 53313 apply to services and not facilities, and to taxes
approved by landowners as opposed to registered voters. The Association states that
there is no need for special restrictions on the financing of facilities, contending that
“[u]ndeveloped areas that would be part of a Mello-Roos district are unlikely to have any
capital facilities nearby,” and concluding that “the homeowners paying the facilities tax
will actually get a higher or better level of capital improvement,” all without any
evidentiary support.
The Association also claims that the restrictions on taxes approved by landowner
vote are “protections” that “help prevent local government abuse,” by forcing elected
officials to place tax measures on the ballot and campaign in support of the taxes to
17
residents who may vote them out of office. There can be no dispute that the Mello-Roos
Act imposes limits on the services funded by landowner-approved taxes. But the
Association offers no authority to support its claim about the purpose of those limits. The
Association assumed incorrectly that the Legislature “added limitations” to section 53313
for landowner-approved taxes that finance services and not for voter-approved taxes.
Rather, as we discussed above in connection with the legislative history (and as the
Association conceded at oral argument), these limitations originally applied to all Mello-
Roos taxes, for services and facilities. (Former § 53313, added by Stats. 1982, ch. 1439,
§ 1, p. 5487, and repealed by Stats. 1984, ch. 269, § 1, p. 1408.) The limitations were
first removed from taxes for facilities, (see Former § 53313, added by Stats. 1984, ch.
269, § 2.1, pp. 1408-1409 and Former § 53313.5, added by Stats. 1984, ch. 269, § 2.3, p.
1409) and then from registered-voter approved taxes for services. (Former § 53313,
amended by Stats1988, ch. 1365, § 4, pp. 4564-4565.)
In discussing the structure of the Mello-Roos Act, the Association implies that
Mello-Roos taxes approved by landowner vote are improper under California law. This
suggestion rests entirely on the Association’s citation to City of San Diego v. Shapiro
(2014) 228 Cal.App.4th 756, a case that did not even address the propriety of landowner
votes under the Mello-Roos Act. Shapiro concerned the validity of a city tax that was
approved in a landowner election conducted under a city ordinance that incorporated and
modified certain procedures from the Mello-Roos Act pertaining to landowner elections.
(Id. at p. 762.) The Court of Appeal concluded that the election was invalid under the
California Constitution and the city’s charter, (id. at p. 761) and emphasized that its
opinion did not address the validity of landowner votes under the Mello-Roos Act. (Id. at
pp. 786, fn. 32 & 792, fn. 42.)
iii. The County Service Area Law
The Association argues we should interpret section 53313 “consistent with” a
purportedly similar term in County Service Area Law (§ 25210 et seq.), which the
18
association argues is “in pari materia” with the Mello-Roos Act.17 The Association
claims that the County Service Area Law and the Mello-Roos Act are in pari materia
because they provide for the creation of particular districts (the Mello-Roos Act) or
service areas (the County Service Area Law) and for the financing of services through the
levying of special taxes on property in such districts or service areas. When the Mello-
Roos Act was passed, the version of the County Service Area Law then in effect
authorized the establishment of service areas that would receive and pay for “types of
extended service.” (Former § 25210.4, added by Stats. 1953, ch. 858, § 1, p. 2190,
repealed and replaced by Stats 2008, ch. 158, § 2, p. 487 & § 3, p. 505.) The Association
argues that “additional services” in the Mello-Roos Act, which “shall not supplant
services already available within that territory when the district was created” (§ 53313)
should be understood like the term “extended service[s]” in the former version of the
County Service Area Law. (Former § 25210.4, added by Stats. 1953, ch. 858, § 1, p.
2190, repealed and replaced by Stats. 2008, ch. 158, § 2, p. 487 & § 3, p. 505.)
This argument is not persuasive. The County Service Area Law and the Mello-
Roos Act are not in pari materia. They are located in different portions of the
Government Code. The County Service Area Law is in Title 3, Government of Counties;
the Mello-Roos Act is in Title 5, Local Agencies. They pertain to different entities. The
County Service Area Law pertains specifically to counties, while the Mello-Roos Act
pertains to a wide range of entities, including cities, counties, school districts, joint
powers entities, and redevelopment entities. (§ 53317, subd. (h).) And they serve
17
“Two ‘ “[s]tatutes are considered to be in pari materia when they relate to the
same person or thing, or to the same class of person[s or] things, or have the same
purpose or object.” ’ (Walker v. Superior Court (1988) 47 Cal.3d 112, 124, fn. 4, quoting
2A Sutherland, Statutory Construction (Sands, 4th ed. 1984) § 51.03, p. 467; see also
Altaville Drug Store v. Employment Development Department (1988) 44 Cal.3d 231, 236,
fn. 4 [in pari materia means ‘ “[o]f the same matter” ’ or ‘ “on the same subject,” ’
quoting Black’s Law Dict. (5th ed. 1981) p. 1004.)” (Lexin v. Superior Court (2010) 47
Cal.4th 1050, 1091.) “It is a basic canon of statutory construction that statutes in pari
materia should be construed together so that all parts of the statutory scheme are given
effect.” (Id. at pp. 1090-1091.)
19
different ends. The County Service Area Law, enacted in the early 1950’s, “was a
legislative response to increasing inequities between residents of incorporated and
unincorporated areas respecting the rendition and receipt of various municipal type
services. [Citation.] As an alternative to other methods of obtaining correlation between
cost burdens and service benefits, such as annexation, incorporation or the creation of
special districts, provision was made for county service areas. And, while not requiring
unincorporated territories to otherwise change their status, provision was also made
whereby a consistent state policy against subsidization of one group of taxpayers by
another might be satisfied.” (City of Santa Barbara v. County of Santa Barbara (1979)
94 Cal.App.3d 277, 287 (Santa Barbara).) The inequities addressed by the County
Service Area Law resulted from unprecedented growth in the unincorporated areas of
California counties since 1940. (Former § 25210.1, added by Stats. 1953, ch. 858, § 1, p.
2189, repealed and replaced by Stats. 2008, ch. 158, § 2, p. 485 & § 3, p. 505.) The
Mello-Roos Act, in contrast, was not a response to inequities, but rather a response to the
impaired ability of local governments to raise money after the passage of Proposition 13
in 1978. (Monterey Park, supra, 211 Cal.App.3d at p. 376.)
Even if the two statutes were in pari materia, there is no definitive explication of
the term “extended services” as it was used in the former County Service Area Law.18 In
Santa Barbara, supra, 94 Cal.App.3d 277, on which the Association relies, the Court of
Appeal considered the definitions of “extended services” and “ ‘extended police
protection’ ” proposed by the two parties, a city and a county, in the context of the
county’s denial of the city’s request to establish a county service area to provide sheriff’s
18
The former statute provided that the types of “extended service” for which a
service area may be established are: “(a) Extended police protection. [¶] (b) Structural
fire protection. [¶] (c) Local park, recreation or parkway facilities and services. [¶] (d)
Any other governmental services, hereinafter referred to as miscellaneous extended
services, which the county is authorized by law to perform and which the county does not
also perform on a countywide basis both within and without cities, . . . .” (Former
§ 25210.4, added by Stats. 1953, ch. 858, § 1, p. 2190, repealed and replaced by Stats
2008, ch. 158, § 2, p. 487 & § 3, p. 505.)
20
patrol services. (Id. at pp. 280, 283-284.) The County Service Area Law did not define
either term, and the terms had not previously been defined by the courts. (Id. at p. 283.)
The county maintained that “ ‘extended police protection’ ” meant “that which is in
excess of the level of service normally rendered”; the city maintained that “extended
services” included “ ‘extended police protection’ ” and meant “any service not being
provided to the same extent on a countywide basis both within and without cities.” (Id. at
p. 284.) The Court of Appeal concluded that there was “no inherent incompatibility”
between the proposed definitions, and stated that proper application of the statute would
“depend upon a considered evaluation of the circumstances of any given case, to the end
that fairness may be achieved among taxpayers within the perimeters of the factual
setting associated with such circumstances.” (Id. at p. 286.) The Court of Appeal not
only declined to adopt a definition of “extended services,” but it also made clear that the
phrase was to be interpreted in connection with the statutory purpose. (Ibid.) As we have
explained, the Mello-Roos Act and the County Service Area Law serve different
purposes.
Furthermore, the County Service Area Law was completely revised in 2008 (Stats.
2008, ch. 158, § 2), eliminating the terms “extended service” and “miscellaneous
extended services,” which had engendered “past confusion and controversy.” (Sen.
Local Government Com. (2008) Serving the Public Interest: A Legislative History of SB
1458 and the “County Service Area Law”, p. 50
[as of Oct 13,
2016].) In these circumstances, we decline to interpret the Mello-Roos Act in light of the
former County Service Area Law.
c. Conclusion
We conclude that the tax here was imposed in compliance with section 53313,
which allows landowner-approved district taxes to fund services that meet increased
demand in the district for existing services. We decline to adopt the Association’s
interpretation of section 53313, which would prohibit the tax at issue in this matter. The
Association’s interpretation requires a strained reading of the statute; fails to reflect the
21
intent of the Mello-Roos Act to finance services in developing areas (§ 53311.5) and “to
ameliorate local revenue shortages created by the passage of Proposition 13” (Monterey
Park, supra, 211 Cal.App.3d at p. 378); and ignores the statutory requirement that
landowner-approved taxes fund services and facilities that are necessary to meet
increased demand in the district where the tax is imposed. (§ 53326, subd. (b).) Because
we conclude that the tax was imposed in compliance with section 53313, we turn to the
other issues raised by the Association.
B. The Tax Is a Special Tax under the California Constitution
The Association argues that the tax is an impermissible general tax because it will
finance a wide range of services and facilities and its purpose is to raise revenue to
supplement the City’s general fund. Although the Association does not contend that the
tax revenues anticipated here can literally be used for any and all governmental purposes,
it argues that because tax revenues can be used for “a widely disparate menu of services
and facilities,” the tax is in effect a general tax. The Association concludes that the tax is
therefore improper because the district is a “special purpose district” under Proposition
218, and as such has no power to levy general taxes. (Cal. Const., art. XIII C, § 2, subd.
(a).)
The City argues that because the tax was levied under the Mello-Roos Act, it is by
definition a special tax, since the Act states that “[a] tax imposed pursuant to this chapter
is a special tax.” (§ 53325.3.) The City also argues that the tax is a special tax under
article XIII C, section 1, subdivision (d), of the California Constitution because it is
imposed for specific purposes.
The undisputed facts before the trial court were that tax revenues are to be placed
in a special fund, distinct from the City’s general fund, and that revenue from the tax will
not be available for all governmental purposes, but only for the purposes specified in the
Resolution of Formation, which are included in the services listed in section 53313 of the
Act.
22
1. Applicable Law
In 1996, the voters approved Proposition 218, which added articles XIII C and
XIII D to the California Constitution. (Bay Area Cellular Telephone Co. v. City of Union
City (2008) 162 Cal.App.4th 686, 692 (Bay Area Cellular).)19
The relevant constitutional provision for our purposes is the distinction made in
article XIII C between a “general tax,” defined as “any tax imposed for general
governmental purposes” and a “special tax,” defined as “any tax imposed for specific
purposes, including a tax imposed for specific purposes, which is placed into a general
fund.” (Cal. Const., art. XIII C, § 1, subds. (a) & (d).) A general tax requires approval
by a majority of the electorate. (Cal. Const., art. XIII C, § 2, subd. (b).) A special tax
requires approval by two-thirds of the electorate. (Cal. Const., art. XIII C, § 2, subd. (d).)
Under Proposition 218, all taxes imposed by local governments are either general or
special taxes (Cal. Const., art. XIII C, § 2, subd. (a)), and a “special purpose district” has
no power to levy general taxes.20 (Cal. Const., art. XIII C § 2, subd. (a).) The
Association argues that the district here is a “special purpose district,” and the City does
not dispute this. We will assume, without deciding, that the district at issue here is a
19
“The proposition, entitled the ‘Right to Vote on Taxes Act,’ included this
statement of purpose: ‘ “ ‘The people of the State of California hereby find and declare
that Proposition 13 was intended to provide effective tax relief and to require voter
approval of tax increases. However, local governments have subjected taxpayers to
excessive tax, assessment, fee and charge increases that not only frustrate the purposes of
voter approval for tax increases, but also threaten the economic security of all
Californians and the California economy itself. This measure protects taxpayers by
limiting the methods by which local governments exact revenue from taxpayers without
their consent.’ [Citations.]” [Citations.]’ ” (Bay Area Cellular, supra, 162 Cal.App.4th
at pp. 692-693.)
20
Proposition 218 does not define “special purpose district,” but defines “special
district” as “an agency of the State, formed pursuant to general law or a special act, for
the local performance of governmental or proprietary functions with limited geographic
boundaries including, but not limited to, school districts and redevelopment agencies.”
(Cal. Const., art. XIII C, § 1, subd. (c); see Pajaro Valley Water Management Agency v.
Amrhein (2007) 150 Cal.App.4th 1364, 1378, fn. 10 [noting this discrepancy].)
23
“special purpose district” under Proposition 218, and therefore is prohibited from levying
general taxes.
Courts have analyzed Proposition 218’s distinction between special and general
taxes and concluded that, “[t]he essence of a special tax ‘is that its proceeds are
earmarked or dedicated in some manner to a specific project or projects.’ (Neecke v. City
of Mill Valley (1995) 39 Cal.App.4th 946, 956[.])” (Bay Area Cellular, supra, 162
Cal.App.4th at p. 696.) “[A] tax is special whenever expenditure of its revenues is
limited to specific purposes; this is true even though there may be multiple specific
purposes for which revenues may be spent. (Monterey Peninsula Taxpayers Assn. v.
County of Monterey (1992) 8 Cal.App.4th 1520, 1535.) A tax is general only when its
revenues are placed into the general fund and are available for expenditure for any and all
governmental purposes. (Ibid.)” (Howard Jarvis Taxpayers Assn. v. City of Roseville
(2003) 106 Cal.App.4th 1178, 1185 (City of Roseville).)
2. Analysis
To determine whether the tax is a special tax, we begin with the Mello-Roos Act
itself. By its terms, the Act provides that any tax imposed pursuant to its authority is a
special tax. (§ 53325.3.) And the Act contemplates that a Mello-Roos tax may be used
for multiple purposes without changing its character. For example, section 53313 states
that a Mello-Roos district may finance “any one or more of the following types of
services” (emphasis added), and follows that phrase with seven subdivisions, listing
seven separate categories of services, which are themselves quite broad. (See, e.g.,
§ 53313, subd. (a) [“[p]olice protection services, including but not limited to, criminal
justice services”].21) Section 53313.5 provides that a Mello-Roos district may finance a
range of “facilities” and work related to those facilities. The Act requires that a
Resolution of Formation for a Mello-Roos district must “[i]dentify any facilities or
services proposed to be funded with the special tax.”] (§ 53325.1, subd. (a)(2).) The
21
“However, criminal justice services shall be limited to providing services for
jails, detention facilities, and juvenile halls.” (§ 53313, subd. (a).)
24
City, accordingly, proposed a “special tax” in its Resolution of Formation, and identified
the specific types of facilities and services to be financed by the special tax, all of which
are included in section 53313 of the Act. We recognize that a legislative body’s
designation of the nature of a tax, though entitled to weight, is not dispositive. (Rider v.
County of San Diego (1991) 1 Cal.4th 1, 14-15.)
Proposition 218 and the cases interpreting it are further support for the designation
of this tax as a special tax. Proposition 218 explicitly recognizes that a special tax may
have multiple purposes, and puts no limits on number of purposes permitted. (Cal.
Const., art. XIII C, § 1, subd. (d).) Thus, in City of Roseville, a city tax earmarked “ ‘for
police, fire, parks and recreation or library services’ ” was held to be a special tax under
Proposition 218. (City of Roseville, supra, 106 Cal.App.4th at p. 1186.) The case arose
in the context of a ballot measure placed before voters by the city council (Measure Q)
that proposed to incorporate a pre-existing utility tax into the city’s charter while limiting
the purposes for which tax revenue could be used. (Ibid.) After the measure was
approved by a majority of the voters, it was challenged on the grounds that it was a
special tax that required two-thirds approval. There was no dispute that the pre-existing
utility tax, which was paid into the city’s general fund for the unrestricted use of the city,
was a general tax. (Id. at p. 1181.) The Court of Appeal had no difficulty in concluding
that Measure Q “[o]n its face” proposed a special tax, because the revenues would be
restricted to specific limited purposes. (Id. at p. 1186.) The city argued that the tax was a
general tax because Measure Q did not provide a formula for allocating revenue among
the various purposes. (Id. at p. 1187.) The Court of Appeal disagreed: “Nothing in
Proposition 218 requires or suggests that, to be a special tax, a proposed tax must provide
a detailed formula for allocations of revenues. To the contrary, a special tax is ‘any tax
imposed for specific purposes’ even if revenues are placed into a general fund.” (Ibid.,
quoting Cal. Const., art. XIII C, § 1, subd. (d).) Nor was the Court of Appeal persuaded
by the argument that more than half the city’s general fund was allocated to the same
purposes (police, fire, parks and recreation, and library services) and that revenue from
the Measure Q tax would be sufficient to cover less than 25 percent of these expenditures.
25
(Ibid.) Measure Q still proposed a special tax under Proposition 218, and therefore
required a two-thirds vote.
Neilson v. City of California City (2005) 133 Cal.App.4th 1296 (Neilson) provides
further support for the proposition that a tax dedicated to a wide range of specific
purposes is a special tax. In Neilson, voters approved a city-imposed parcel tax,
characterized as a special tax, to be used “ ‘to pay for police, fire and recreational
services, and to repair streets, parks, water line replacement and repair, and building
maintenance.’ ” (Id. at p. 1302.) A taxpayer sued to invalidate the tax on several
grounds, including that it was a general tax. (Id. at p. 1301.) The trial court sustained the
city’s demurrer without leave to amend. (Ibid.) In affirming, the Court of Appeal
addressed plaintiff’s contention that the tax was really a general tax, which relied on the
argument “that there must be some limit on the specific purposes that can be stacked
together before the line is crossed and the revenues are used for ‘general governmental
services.’ ” (Id. at p. 1311.) The Court of Appeal noted that the argument was
unsupported by authority and contrary to the opinion in City of Roseville and to the
language of Proposition 218, which uses the plural “ ‘specific purposes’ ” in defining a
special tax. (Neilson at p. 1311.)
The Association’s argument here that the tax is designated for so many disparate
purposes that it amounts to a general tax relies entirely on a statement by the court in
Neilson that it could “conceive of a special tax that permits expenditures for so many
specific governmental purposes that the parts might swallow the whole.” (Neilson,
supra, 133 Cal.App.4th at p. 1311.) The Neilson court never reached the issue because
the taxpayer neither “pled sufficient facts to show that the parcel tax [there] is such a
tax,” nor “suggest[ed] how he might cure his defect.” (Ibid.) Neilson does not purport to
define the outer bounds of a special tax, and the Association is therefore incorrect to
claim that the tax here “run[s] afoul” of a standard set in Neilson. In light of the specific
enumerated services for which tax revenue may be used in this case, we cannot say on
this record that the tax is a general tax.
26
We disagree with the Association’s argument that because the tax is intended to
“supplement” the City’s general fund expenditures it tax is a general tax. If the
Association were correct, there could be no special taxes, because any special revenue
will necessarily “supplement” the City’s general fund expenditures. In any event, the
argument is supported solely by glancing citations to Weisblat v. City of San Diego
(2009) 176 Cal.App.4th 1022, 1045 (Weisblat), which held that a purported “fee”
imposed by a city without a vote of the electorate was actually a general tax.
Weisblat concerned a “processing fee” levied by the City of San Diego on
taxpayers who were subject to a rental users business tax, which was part of the city’s
business tax. (Weisblat, supra, 176 Cal.App.4th at pp. 1028-1029.) The fee was
challenged by taxpayers, who claimed it was a tax that required a vote of the electorate.
(Id. at p. 1031.) The Court of Appeal agreed. (Id. at p. 1044.) To determine whether the
levy was a general tax or a special tax, the court looked to Proposition 218 and City of
Roseville. (Weisblat at pp. 1044-1045.) The court “note[d] that the levy appears to be a
hybrid tax,” with characteristics of a general and special tax. (Id. at p. 1044.) Because
the proceeds were to be deposited in the general fund, it appeared to be a general tax.
(Ibid.) But instead of being available for any and all government purposes, as would be
required for a general tax, the funds were to be tracked in special accounts and monitored
to ensure that they did not exceed the cost of collecting and administering the business
tax program.22 (Id. at p. 1045.) The Court of Appeal concluded the levy was a general
tax “[d]espite its dual, hybrid nature” because the tax “indirectly” raised revenue that
would be available for any and all governmental purposes. (Ibid.) Before the levy was
imposed, the costs of administering the business tax, which was a general tax, were taken
from the business tax proceeds. (Ibid.) The imposition of the levy resulted in funds to
pay for the administration of the business tax, which meant that in “practical effect the
22
We presume this is why the “fee,” which was originally $25, was reduced to $15
two years later. (Weisblat, supra, 176 Cal.App.4th at p. 1030.)
27
levy [was] an increase in the Business Tax and therefore an increase in a general tax” that
required voter approval and could not be unilaterally imposed by the city. (Ibid.)
Weisblat is nothing like the matter before us. The tax here was never denominated
a “fee”: it was consistently identified as a special tax under the Mello-Roos Act, and its
specific purposes were spelled out as we have described. Nor does the City’s tax have a
hybrid nature. It will not be deposited in the general fund, and its proceeds will not
indirectly raise revenue that would be available for any and all governmental purposes.
Tax revenue will not cover existing costs that were previously paid from the general
fund: it will, instead, cover new costs resulting from the increased demand for facilities
and additional services that will result from the Acre project.
We conclude that the tax is a special tax, not a general tax, for the purposes of
article XIII C of the California Constitution.
C. The Ordinance Does Not Retaliate Against District Landowners
1. The Effects of a Potential Repeal of the Tax
The City ordinance imposing the tax incorporates the following provision,
referring to the tax as the “Special Tax” and referring to the facilities and services
authorized by the Resolution of Formation as the “Authorized Facilities and Authorized
Services”: “If the levy of the Special Tax is repealed by initiative or any other action
participated in by the owners of parcels in [the district] . . . , the City shall cease to levy
the Special Tax and shall cease to be obligated to provide the Authorized Facilities and
Authorized Services for which the Special Tax was levied. The obligations to provide
the Authorized Facilities and Authorized Services previously funded by the repealed
Special Tax shall become the obligations of any property owners association established
within [the district] . . . , and if there is no such association, they shall become the joint
obligations of the property owners of Parcels within [the district] in proportion to the
number of Parcels within [the district].” We follow the parties in referring to this
provision as “Section H.”
The Association argues that the ordinance is unconstitutional on its face because it
incorporates Section H, which violates the due process rights of landowners within the
28
District “by threatening [them] with loss of municipal services and financial ruin” if they
exercise their rights to challenge the legality of the City’s actions. The Association
maintains that it does not matter whether any property owner has yet suffered retaliation,
claiming that “[i]t is enough that the ordinary [district] property owner will seek to avoid
Section H’s application by refraining to exercise his or her rights.”
The City contends that “Section H simply addresses the contingency that the
special tax may in the future be repealed by the property owners of the district through
the initiative or any other process.” The City also argues that for an ordinance to be
unconstitutional on its face, it must be unconstitutional in all its applications, something
that the Association has not shown, in part because the Association’s argument relies on
speculation about what might happen in future circumstances.
2. Applicable Law
“A facial challenge to the constitutional validity of a statute or ordinance considers
only the text of the measure itself, not its application to the particular circumstances of an
individual. (Dillon v. Municipal Court (1971) 4 Cal.3d 860, 865.) ‘ “To support a
determination of facial unconstitutionality, voiding the statute as a whole, petitioners
cannot prevail by suggesting that in some future hypothetical situation constitutional
problems may possibly arise as to the particular application of the statute . . . . Rather,
petitioners must demonstrate that the act’s provisions inevitably pose a present total and
fatal conflict with applicable constitutional prohibitions.” ’ (Arcadia Unified School Dist.
v. State Dept. of Education (1992) 2 Cal.4th 251, 256, quoting Pacific Legal Foundation
v. Brown (1981) 29 Cal.3d 168, 180-181.)” (Tobe v. City of Santa Ana (1995) 9 Cal.4th
1069, 1084 (Tobe).)
Facial challenges to statutes and ordinances are disfavored. Because they often
rest on speculation, they may lead to interpreting statutes prematurely, on the basis of a
barebones record. (Washington State Grange v. Washington State Republican Party
(2008) 552 U.S. 442, 450.) Also, facial challenges conflict with the fundamental
principle of judicial restraint that courts should not decide questions of constitutional law
29
unless it is necessary to do so, nor should they formulate rules broader than required by
the facts before them. (Ibid.)
Accordingly, we start from “the strong presumption that the ordinance is
constitutionally valid.” (Allen v. City of Sacramento (2015) 234 Cal.App.4th 41, 54
(Allen), citing Tobe, supra, 9 Cal.4th at p. 1084 and City of San Diego v. Boggess (2013)
216 Cal.App.4th 1494, 1503 (City of San Diego).) “We resolve all doubts in favor of the
validity of the ordinance. (City of San Diego, supra, 216 Cal.App.4th at p. 1503.) Unless
conflict with a provision of the state or federal Constitution is clear and unmistakable we
must uphold the ordinance. (Ibid.; Samples v. Brown[ (2007)] 146 Cal.App.4th [787,]
799.) Plaintiffs bear the burden of demonstrating that the ordinance is unconstitutional in
all or most cases. (City of San Diego, supra, 216 Cal.App.4th at p. 1054.)” (Allen, supra,
234 Cal.App.4th at p. 54.)
3. Analysis
Section H states that if the tax is repealed by initiative or other action of the
district taxpayers, the City will stop levying the tax, will no longer be required to provide
the services and facilities funded by the tax, and any obligations undertaken to provide
the services and facilities will become the obligations of the district property owners’
association or the district property owners themselves. It is undisputed that even if the
tax is repealed, and the City ceases to provide the additional services authorized in the
resolution forming the district, the City would still provide the district with “standard
municipal services,” defined as “police, park, recreational, open space, landscaping, street
and street lighting, flood and storm protection, and stormwater treatment facilities.”23
A claim of retaliation in violation of due process requires plaintiff to show “that
(1) he or she was engaged in constitutionally protected activity, (2) the defendant’s
23
The City’s Administrative Services Director testified at her deposition that the
City would still provide standard municipal services even if the tax were repealed. She
did not know whether those services would be provided at the same level as if the tax
were still in place. Nothing in section H or elsewhere in the record suggests that if the
tax is repealed the City would, or could, stop providing services funded from other
sources.
30
retaliatory action caused the plaintiff to suffer an injury that would likely deter a person
of ordinary firmness from engaging in that protected activity, and (3) the retaliatory
action was motivated, at least in part, by the plaintiff’s protected activity.” (Tichinin v.
City of Morgan Hill (2009) 177 Cal.App.4th 1049, 1062-1063 (Tichinin).)
The Association cites no authorities suggesting that a claim of retaliation is
appropriate in a situation like the one here. That is no surprise, because the law of
retaliation has little application to the outcome of a potential lawsuit in which a court
might determine that a tax is invalid, or the outcome of a hypothetical future election in
which voters express their will to repeal a tax. It is not a violation of due process to
recognize that if a tax has been imposed to provide additional services and facilities to a
district, and if that tax is repealed and not collected, there will no longer be funds to
provide the district with those additional services and facilities, and any obligations that
have been incurred to provide those services and facilities will need to be met from other
sources.
There is no retaliation here. There is no injury, penalty or adverse action to
property owners for exercising their rights. There will doubtless be consequences if
district property owners exercise their rights and that exercise results in the repeal of the
tax. Those consequences may be regarded as “adverse” by some, but they may well be
precisely the consequences that are expected and desired by the property owners who
take the actions. Section H explains the consequences of a repeal of the tax. The
consequences are not triggered by the filing of petitions, initiative proceedings, or
lawsuits. Rather, the consequences flow from the absence of the tax revenue that was to
be collected to pay for services and facilities.
The Association’s argument that Section H retaliates against property owners who
exercise their rights is strained, and the cases on which the Association relies are
inapposite. The Association’s primary authorities, Mt. Healthy City School Dist. Board
of Education v. Doyle (1977) 429 U.S. 274; Tichinin, supra, 177 Cal.App.4th 1049; and
Franklin v. Leland Stanford Junior University (1985) 172 Cal.App.3d 322, concern
universities or public entities which took concrete adverse action against individuals who
31
exercised their constitutional rights. Here, however, there is no evidence that the exercise
of constitutional or statutory rights would itself cause adverse action.
The other authorities that the Association cites do not help its case either. For the
uncontroversial proposition that it is a violation of due process to punish a person because
he has done what the law permits him to do, the Association cites United States v.
Goodwin (1982) 457 U.S. 368, 372, which arose from a prosecutor’s decision to add a
felony charge to pending misdemeanor charges when a defendant who had initially
expressed an interest in a plea agreement later decided that he wanted a trial by jury. (Id.
at p. 382.) Section H does not seek to deny district property owners their initiative or
referendum powers, which were at issue in Rubalcava v. Martinez (2007) 158
Cal.App.4th 563, 571, cited for the proposition that cities cannot deny citizens the powers
reserved to citizens in the California Constitution. Nor does Section H run afoul of the
fundamental principle that the right to petition “includes the basic act of filing litigation.”
(Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1115.) And
Section H does not threaten district property owners with criminal prosecution, which
was at issue in Dombrowski v. Pfister (1965) 380 U.S. 479, where appellants successfully
sought declaratory relief and an injunction to restrain prosecution under the Louisiana
Subversive Activities and Communist Control Law and the Communist Propaganda
Control Law. (Id. at pp. 482, 497.)
We conclude that the ordinance does not retaliate against district property owners
for exercising their rights.
DISPOSITION
The judgment is affirmed. The City shall recover its costs on appeal.
32
_________________________
Miller, J.
We concur:
_________________________
Richman, Acting P.J.
_________________________
Stewart, J.
A145575, Building Industry Association – Bay Area v. City of San Ramon, et al.
33
Trial Court: Superior Court of Contra Costa County
Trial Judge: Hon. Jill Fannin
Attorneys for Appellant Paul B. Campos
Building Industry Association Damien M. Schiff
Attorneys for Respondent Allan Robert Saxe
City of San Ramon, et al. Interim City Attorney
Alicia Poon
Deputy City Attorney
Attorneys for Amicus Curiae Michael G. Colantuono
League of California Cities Leonard P. Aslanian
in support of Respondents
A145575, Building Industry Association – Bay Area v. City of San Ramon, et al.
34