On December 6, 2012, a California Court of Appeal issued an important decision regarding school district parcel taxes that may significantly affect the manner in which many school districts levy parcel taxes in the future. The decision could also impact existing parcel tax measures with differentiated residential and commercial property rates.
In Borikas v. Alameda Unified School District, (12/6/12 A129295) the court struck down portions of a parcel tax that imposed different tax rates upon residential parcels and commercial/industrial properties. The tax also had differentiated tax rates within the commercial/industrial category itself, providing for parcels under 2000 square feet to be taxed at $120.00 per parcel and those over 2000 square feet to be taxed at $ .15 per square foot.
The District argued that these differentiations were legal under Government Code section 50079, subdivision (a), since they affected the properties within the residential and commercial/industrial classifications “uniformly” and did not violate equal protection principles or the uniform tax requirement. The District won at the trial court stage.
The Court of Appeal, after a lengthy discussion of the legislative history of section 50079, overturned the lower court’s decision, concluding that section 50079(a) requires that parcel taxes be “uniform” and that this uniformity requirement prohibits a tax from imposing a different rate on different classifications of properties. In reaching this conclusion, the Borikas Court reasoned that the language of 50079 is “intended to be a constraint on the extent of the taxing authority delegated to local government entities.”
The Borikas decision raises serious questions about any existing school district parcel taxes, including those passed on the November 2012 ballot, that impose a different rate on different classifications of properties. Districts considering placing a parcel tax on the ballot for 2013, those that just qualified their measures for the March 2013 election, and those that passed a measure in November are urged to immediately consult with their counsel to ensure the measure complies with the Borikas decision.
The Borikas decision also raises several other important questions such as whether a uniform per square foot rate assessed on all parcels meets the uniformity requirement. In addition, it is important to note that Borikas arose from a validation action, which is required to be filed within sixty days of the passage of a local measure, like a parcel tax, to challenge its validity. Thus, the impact of the decision in other jurisdictions where no validation action was filed is unknown. However, it is clear the Borikas decision would apply to any new measure or renewal of an existing measure with a differentiated rate structure. These and other questions make it imperative that any district with a current parcel tax measure review that measure with its counsel in light of the Borikas decision.
There are a few bright spots in the Borikas decision. Although the Court struck those portions of the tax it found violated the “uniformity” requirement, it permitted the remainder of the parcel tax to stand based on a severability clause in the measure. This prevented the entire measure from being invalidated. The court also upheld the validity of parcel tax exemptions for seniors and disabled persons as they are expressly authorized by statute.
Districts that may have concerns based on this court decision may have time to place new measures on the June 2013 ballot. If you have any questions regarding this matter, please call one of our six offices.
F3 NewsFlash prepared by Roy Combs and Jim Traber.
Roy is a partner in the Sacramento and Oakland offices.
Jim is an associate in the F3 Sacramento office.
This F3 NewsFlash is a summary only and not legal advice. We recommend that you consult with legal counsel to determine how this legal development may apply to your specific facts and circumstances. Information on a free NewsFlash subscription can be found at www.fagenfriedman.com.
As part of the E-ducation™ Professional Development Series hosted by ACSA and F3, we offer webinars on various topics. You can find the information on the ACSA website at www.acsa.org/e-ducation.
Keep up to the minute on the latest updates, NewsFlashes, and legal news by following F3 on Twitter:@F3Law.