City of Alhambra v. County of Los Angeles
149 Cal. Rptr. 3d 247
Cal.2012Background
- Counties administer the property tax system and allocate revenues, including ERAF funds for education, with ERAF revenues exempt from the county property tax administration fee (PTAF).
- The 2004 budget measures created the Triple Flip (sales tax diverted to ERAF offset by offsetting funds) and the VLF Swap (vehicle license fee revenue diverted to compensation funds) altering how local taxes are allocated.
- Section 97.75 temporarily prohibited counties from charging cities for PTAF related to these 2004 measures (2004-05 and 2005-06), and allowed fees thereafter but capped at actual costs.
- From 2006-07 onward, Los Angeles County included in each city’s base the revenues diverted by the Triple Flip and VLF Swap, increasing PTAF by millions, which Cities challenged as improper.
- The Supreme Court held that §97.75 does not authorize the disputed fee, and that the ERAF exemption from PTAF remained in effect consistent with a revenue-neutral intent for the 2004 measures.
- Read together, the statutes preserve the AB 8 allocation system and prevent the diverted ERAF money from being reallocated to counties via PTAF; the counties must absorb the costs rather than charge cities more than the actual services.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does §97.75 authorize the disputed PTAF collection? | Cities: §97.75 only allows actual costs for Triple Flip and VLF Swap services. | County: §97.75 permits broader collection under 95.3 due to budgetary measures diverting ERAF funds. | No; §97.75 does not authorize the disputed collection. |
| Did the 2004 budget measures change ERAF PTAF exemptions or the base for PTAF? | ERAF funds diverted remain exempt from PTAF; 2004 measures did not alter the exemption. | Legislature intended to restore prior recoupment levels via §95.3 after diversions. | No fundamental alteration; ERAF remains exempt and the status quo is preserved. |
| What is the proper interpretation of the 2004 budget measures in the AB 8 framework when read with 95.3 and 96.1? | The measures were intended to increase county recoupment via PTAF. | The measures were revenue-neutral and did not modify the AB 8 allocation scheme. | Statutes read together show revenue-neutral intent; PTAF remains aligned with prior allocations. |
| Do the Triple Flip and VLF Swap substantively affect how PTAF should be calculated? | They do not; the ERAF exemption should keep PTAF calculation unchanged for ERAF-related revenues. | Because diverted revenues are no longer in ERAF, they can be included in PTAF. | They do not substantively alter PTAF calculations; ERAF funds remain exempt. |
Key Cases Cited
- City of Scotts Valley v. County of Santa Cruz, 201 Cal.App.4th 1 (Cal.App. 2011) (AB 8 allocation framework described; revenue-neutral considerations)
- Professional Engineers in California Government v. Kempton, 40 Cal.4th 1016 (Cal. 2007) (independent review of statutory interpretation standard)
- Fitch v. Select Products Co., 36 Cal.4th 812 (Cal. 2005) (plain meaning controls if language unambiguous)
- Miklosy v. Regents of University of California, 44 Cal.4th 876 (Cal. 2008) (extrinsic aids used only if language ambiguous)
- City of Huntington Beach v. Board of Administration, 4 Cal.4th 462 (Cal. 1992) (statutory interpretation and unity of related provisions)
- Pineda v. Williams-Sonoma Stores, Inc., 51 Cal.4th 524 (Cal. 2011) (remedial statutes: legislative intent governs)
- People ex rel. Lockyer v. R.J. Reynolds Tobacco Co., 37 Cal.4th 707 (Cal. 2005) (administrative interpretation and legislative intent)
- Latimer v. People, 5 Cal.4th 1203 (Cal. 1993) (context for statutory interpretation principles)