Lead Opinion
Opinion
Introduction
In this case we consider, among other issues, a question previously left open (see Los Angeles County Transportation Com. v. Richmond (1982)
In 1987, in express recognition of the County’s need for improved courtrooms and jails, the Legislature passed an act (Gov. Code, §§ 26250-26285) creating the San Diego County Regional Justice Facility Financing Agency (hereafter the Agency) and setting forth the Agency’s obligations. Under the act, the Agency was charged with adopting a tax ordinance imposing a supplemental sales tax of one-half of 1 percent throughout the County for the purpose of financing the construction of justice facilities. (Id., §§ 26267, 26271-26275.) The act provided for a county wide election held for the purpose of approving the tax ordinance by simple majority vote. (Id., §§ 26271, 26273.) The act also provided that the Agency possesses no tax power other than the foregoing sales tax. (Id., § 26283.)
The trial court found in plaintiffs/taxpayers’ favor, concluding the tax constituted a deliberate and unavailing attempt to circumvent section 4 and its requirement of two-thirds voter approval of special taxes imposed by special districts such as the Agency.
The Court of Appeal disagreed and reversed the trial court’s judgment declaring the tax invalid. The appellate court acknowledged that the act creating the Agency “gives the Agency no significant governmental discretion . . . with respect to how the tax revenues will be spent. In this case, it is distressingly clear that the Agency is nothing more than an empty shell through which the Board of Supervisors of the County of San Diego can exercise its discretion.” Nonetheless, deeming itself bound by Richmond, the Court of Appeal reasoned that section 4 is inapplicable to districts such as the Agency which have no power to levy a property tax. The appellate court further concluded that application to the Agency of a similar statutory supermajority voter approval provision in Government Code section 53722 would be improper as an attempted local tax referendum.
As will appear, we conclude (1) the Court of Apрeal erred in holding the provisions of section 4 were inapplicable to the Agency’s tax, (2) the tax was invalid for failure to secure the requisite two-thirds voter approval, and (3) accordingly we need not reach the question of the effect, application, or validity of Government Code section 53722.
Discussion
We have observed that section 4, although written in permissive terms, was intended to circumscribe the taxing power of local government. (See, e.g., Richmond, supra,
In other words, 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.” (Amador, supra,
Richmond, supra,
We focused on the subsidiary issue whether the LACTC was a “special district” within the meaning of section 4. We found that term ambiguous, having been given varying interpretations in prior cases and statutes. Stressing the “fundamentally undemocratic nature” of supermajority vote requirements (
Relying on portions of the voters’ pamphlet, we determined that Proposition 13 was aimed at property tax relief, and that section 4 thereof was intended to restrict the ability of local taxing agencies to impose new taxes to replace the loss of property tax revenue arising from the tax rate and assessment restrictions of that measure. The plurality opinion of Justice Mosk reasoned that “Since only those ‘special districts’ which levied property taxes could ‘replace’ the ‘loss’ of such tаxes, these statements [in the voters’ pamphlet] imply that the ‘special districts’ referred to are those which
In dissent, Justice Richardson observed that the majority’s analysis in Richmond could be used to readily circumvent the supermajority vote requirement of section 4 “by the simple creation of a district which is geographically precisely coterminous with a county, but which lacks its real property taxing power. . . . The majority has cut a hole in the financial fence which the people in their Constitution have erected around their government. Governmental entities may be expected, instinctively, to pour through the opening seeking the creation of similar revenue-generating entities in myriad forms which will be limited only by their ingenuity.” (
The dissent took the position that the phrase “special district” applies to any governmental agency “formed ... for the local performance of governmental or proprietary functions within limited boundaries” (Gov. Code, § 50077, subd. (d) [implementing Prop. 13]). As the dissent observed, LACTC sought to impose a sales tax to generate funds for ordinary public services that could as readily have been funded by a county real property tax, but for the limitations of Proposition 13. (31 Cal.3d at pp. 212-213 [dis. opn. by Richardson, J.].) Consequently, LACTC must be deemed a “special district.”
In response to the dissent’s prediction of future circumvention of section 4, the Richmond plurality stated, “We cannot assume that the Legislature will attempt to avoid the goals of article XIII A by such a device. In any event, that problem can bе dealt with if and when the issue arises. The legislation creating LACTC and granting it the power to levy only a sales tax antedated Proposition 13 by two years. Thus, there can be no claim here that the Legislature was attempting to evade the restrictions imposed by section 4.” (
Unlike the situation in Richmond, supra,
Thereafter, as an alternative method of raising funds for the County’s justice facilities, the board of supervisors directed a local legislator to introduce legislation creating a “limited purpose special district” (the Agency) with limited tax powers, to impose a one-half cent sales tax increase upon approval by the County’s voters. The initial version of the bill named the County’s entire board of supervisors as the Agency’s board of directors. The Legislative Counsel thereafter advised against creating such a close relationship between the Agency and the County, and the final version included only two county supervisors among the seven Agency directors. The County, however, retained substantial control over operations and expenditures, and the act required compliance with the County’s master plan. Territorially, the Agency’s boundaries are coterminous with the County’s. Although the Agency may hold title to land and facilities, it must convey title thereto to the County on request of the County’s board of supervisors.
After the tax scheme had been “approved” in June 1988 by 50.8 percent of the County voters, the Agency began operations, hiring several County employees for its staff and incurring expenses paid from funds advanced by the County. The tax went into effect on January 1, 1989. According to plaintiffs, approximately $200 million has been accumulated to date; it is anticipated that $1.6 billion in revenues will be raised during the Agency’s 10-year term.
Having found that the Agency was created to circumvent Proposition 13, and that the Agency is properly deemed a “special district” under section 4, the trial court further found that the Agency’s proposed sales tax is a “special tax” under that section because the tax proceeds were not to be spent for general County purposes but for the special and limited purposes of constructing and operating the County’s justice facilities. (See City and County of San Francisco v. Farrell (1982)
We conclude that the Agency must be deemed а “special district” under section 4, despite its lack of power to levy a tax on real property. To hold otherwise clearly would create a wide loophole in Proposition 13 as feared by the dissent in Richmond. As we explained in Amador, the evident purpose of section 4 was to “assure effective real property relief” by imposing restrictions on “additional or increased state or local levies other than property taxes . . . .” (
As the Court of Appeal herein acknowledged, plaintiffs/taxpayers are correct in observing an “increase in the number of revenue-generating governmental entities which lack the power to assess property taxes. . . . [T]here are now numerous ‘justice facility financing agencies’ (such as the Agency herein) which have been given life by the state Legislature [citing provisions for creating such facilities in seven other counties]. Further, . . . a generalized provision (Rev. & Tax. Code, § 7285.5) . . . permits ‘rural’ counties ... to establish ‘an authority for specific purposes’ with the power to assess a sales tax (a transaction and use tax) of one-half of one percent (0.5 %).” (We note that in 1990, the procedures authorized by the foregoing section were extended to all counties.)
In addition, plaintiffs/taxpayers note that the Legislature has authorized the counties to create special transportation districts, funding their programs exclusively through increased sales taxes (e.g., Pub. Util. Code, §§ 131000 et seq., 180000 et seq.). But for the potential implications of our holding in Richmond, the counties arguably would be required to obtain two-thirds voter approval to fund such projects.
The Agency and the County cite cases supporting the general rule that the possible improper motivations of the Legislature or its members in passing legislation are immaterial to questions involving the validity of such legislation. (E.g., County of Los Angeles v. Superior Court (1975)
It seems evident that Richmond's limitation of the term “special district” to those districts possessing property tax power is unworkable as applied to districts formed after the adoption of Proposition 13, because to our knowledge no such agencies possess that power. With limited exceptions, only counties are empowered to levy the 1 percent maximum property tax allowed by Proposition 13. (See Rev. & Tax. Code, former § 2237, now § 93, subd. (a); Carman v. Alvord (1982)
As the plurality opinion in Richmond explained, section 4 of Proposition 13 was intended to restrict the ability of local governments to impose new taxes to replace property tax revenues lost under the other provisions of that measure. (See
Thus, we hold that “special district” would include any local taxing agency created to raise funds for city or county purposes to replace revenues lost by reason of the restrictions of Proposition 13.
In the present case, the evidence that the Agency was created to raise funds for county purposes and thereby circumvent Proposition 13 is strong. In future cases, however, marshalling such evidence of intentional circumvention may be difficult. Thus, we believe that courts may infеr such intent whenever the plaintiff has proved the new tax agency is essentially controlled by one or more cities or counties that otherwise would have had to comply with the supermajority provision of section 4. In determining
The “essential control” standard posited above is not necessarily the functional equivalent of the “alter ego” theory used to “pierce the corporate veil” for purposes of imposing liability on the individual shareholders. (See, e.g., Mesler v. Bragg Management Co. (1985)
Vanoni v. County of Sonoma (1974)
As Vanoni concluded, “Although the Sonoma Water District may be performing functions traditionally performed by counties, appellants have offered no evidence, beyond the fact that the same individuals sit on the governing boards of both the county and the water district, that Sonoma County exercises actual control over the actions of the district. The fact that the same individuals are members of both boards is not sufficient to establish that control. [Citation.]” (Vanoni v. County of Sonoma, supra, 40 Cal.App.3d at pp. 750-751, italics added.) We agree with Vanoni that common governing boards do not invariably indicate county control, but certainly that fact is relevant to the inquiry. The determination whether a city or county essentially controls a taxing agency is one that necessarily must be made on a case-by-case basis, using the criteria suggested above.
We likewise leave open the question of a possible prospective application of our holding to agencies other than the Agency involved herein. The issue of prospectivity involves difficult constitutional and policy considerations largely unbriefed in this case. In addition, resolution of the prospectivity issue may depend on a variety of case-specific factors, including the degree of hardship or other adverse consequences that would result from a retroactive application of our holding in a particular setting. Under these circumstances, we believe that any blanket pronouncement on the prospectivity issue at this time would be inappropriate.
2. Special Tax
The conclusion that the Agency is a “special district” under section 4 does not end our analysis, for by its terms that section is applicable only to “special taxes” imposed by cities, counties and special districts. The Agency urges us to hold that its sales tax is a general tax because its revenues are not earmarked for any special purposes within the Agency, but are to be placed in the Agency’s general fund for “the general gоvernmental purposes of the agency . . . .” (See Gov. Code, § 26272.) As we explain, consistent with the trial court’s conclusion, we hold that a special tax is indeed involved here: tax revenues are being collected for the special and limited governmental purposes of constructing and operating the County’s justice facilities (see id., § 26267 [outlining the Agency’s specific duties]). The Court of Appeal did not reach the issue.
In City and County of San Francisco v. Farrell, supra,
The Farrell majority observed that “special taxes” was an ambiguous term that has been given varying interpretations, but that applying settled interpretive principles (including Richmond's rule of strict construction), the term as used in section 4 means “taxes which are levied for a specific purpose rather than, as in the present case, a levy placed in the general fund to be utilized for general governmental purposes." (
Justice Richardson again dissented, believing the majority “widens still further the hole which they have cut in that protective fence which the people of California thought they had constructed around their collective purse” by аdopting Proposition 13. (Farrell, supra,
We believe the Farrell, supra,
The Agency and the County argue, however, that because the Legislature expressly designated the Agency’s tax as a “general tax” (Gov. Code, § 26251; see Methodist Hosp. of Sacramento v. Saylor (1971)
First, with respect to defendants’ reliance on the Legislature’s designation of the tax as a “general tax,” such nomenclature is of minor importance in light of the realities underlying its adoption and its probable object and effect. (See Douglas Aircraft Co., Inc. v. Johnson (1939)
Nor can we accept defendants’ “general fund” argument. It is undisputed that if the County had directly adopted the tax in question, earmarking its revenues for the special, limited purpose of financing the County’s justice facilities, it would have been deemed a “special tax” under Farrell. As plaintiffs observe, it would be anomalous if the “special” tax of one agency could so readily become the “general” one of another. Under defendants’ proposed test, the Legislature could readily avoid section 4’s supermajority voter approval requirement by simply creating a local taxing agency to accomplish a specific, narrow governmental purpose (e.g., lifeguard towers for county beaches), and provide that tax revenues shall be deposited in the agency’s “general fund” for the “general governmental purposes” of that agency.
A more reasonable interpretation of section 4, consistent with Farrell's (supra,
3. Proposition 62
In addition to their arguments under Proposition 13, plaintiffs/taxpayers contended that the Agency’s tax is an invalid “special tax” under the supermajority voter approval provisions of Proposition 62, a statutory initiative measure adopted in 1986. Because we hold that the Agency’s sales tax offends Proposition 13, we (like the trial court herein) need not reach plaintiffs’ alternative arguments under Proposition 62.
4. Subsidiary Objections to Trial Court Order
The Agency, the County, and some amici curiae, including the State Board of Equalization, have raised on appeal several additional issues regarding
Conclusion
We are sympathetic to the plight of local government in attempting to deal with the ever-increasing demands for revenue in the post-Proposition 13 period, and we are especially reluctant to interfere with sorely needed projects for new and improved courtrooms, criminal detention facilities, and other justice facilities. Yet Propоsition 13 and its limitations on local taxation are constitutional mandates of the people which we are sworn to uphold and enforce. Any modification of these mandates must come from the people who, by constitutional amendment, may adopt such changes by a simple majority vote. (Cal. Const., art. XVIII, § 4.)
The judgment of the Court of Appeal validating the Agency’s tax levy is reversed and that court is directed to resolve any remaining appellate contentions of the Agency and the County consistent with our opinion.
Arabian, J., Baxter, J., and George, J., concurred.
Concurrence Opinion
I concur in the majority’s conclusion that the sales tax at issue in this case is a “special tax” that may validly be imposed only if approved by a two-thirds vote of the local electorate. Although I have signed the majority opinion, I write separately to explain why, in my view, the court’s decision in this case should be premised on the statutory provisions of Proposition 62, rather than on the constitutional provisions of Proposition 13. As I explain, basing our decision on nonconstitutional grounds not only would be more consistent with well-established principles of judicial restraint, but would avoid the necessity of placing a new “gloss” on the meaning of the term “special district” as interpreted in prior decisions of this court construing Proposition 13, a gloss that appears likely to engender considerable confusion and litigation and that will cause difficulty in applying the majority’s holding in future cases.
I
In this case, plaintiff taxpayers contend that the sales tax in question is invalid because it was not approved by a two-thirds vote of the local
In my view, the majority’s approach is inconsistent with well-established principles of judicial restraint. In his celebrated concurring opinion in Ashwander v. Valley Authority (1936)
II
Proposition 62, an initiative measure drafted in response to a number of judicial decisions construing the earlier adopted Proposition 13 (see, e.g., City and County of San Francisco v. Farrell (1982)
For the reasons discussed below, I believe that plaintiffs’ contention is well founded. Indeed, in my view, the provisions of Proposition 62 provide a much clearer and more straightforward basis for the decision in this case than the provisions of Proposition 13, on which the majority opinion relies.
To begin with, it is clear beyond dispute that section 53722 applies to the local agency that imposed the tax in this case—the San Diego County Regional Justice Facility Financing Agency (hereafter the Agency). Unlike the comparable provision of Proposition 13 (art. XIII A, § 4), which by its terms applies only to cities, counties and “special districts,” a phrase that has been given a narrow interpretation by prior decisions of this court (see, е.g., Richmond, supra,
Because of the breadth and clarity of the applicable statutory language, there is no question but that the Agency is a “district” subject to the provisions of section 53722. In contrast to the determination whether the Agency is to be considered a “special district” within the meaning of Proposition 13 under the interpretation set forth in the majority opinion (see maj. opn., ante, pp. 10-13), there is no need to inquire into the purpose for which the Agency was established or to determine whether the Agency is “essentially controlled” by another local governmental agency, in order to determine whether the Agency is subject to the limitations of section 53722. Thus, reliance on section 53722 in this case and in future cases would avoid entangling courts in the difficult inquiries that inevitably will follow from the majority opinion’s holding with regard to the meaning of the term “special district” in Proposition 13.
Under this controlling statutory definition, I conclude that the sales tax challenged in this case is a special tax. As the majority opinion explains, the tax was imposed for the specific purpose of financing the construction of justice facilities in the county, and the proceeds from the tax are earmarked for this specific purpose. Although the legislation creating the Agency purported to designate the tax as a “general tax” (see § 26251) which would require only a majority, rather than a two-thirds, approval of the local electorate under Proposition 62 (see § 53723), in light of the very narrow scope of the Agency’s authority—limited to only one specific governmental activity, the construction of justice facilities—this tax cannot, in my view, properly be said to have been imposed for “general governmental purposes” within the meaning of section 53721, notwithstanding the deference that usually is accorded the Legislature’s interpretation of governing provisions.
Accordingly, because the Agency that imposed the tax clearly is subject to the provisions of section 53722, and because equally clearly the tax in question is a special tаx within the meaning of this section, I conclude that under section 53722 the tax was not validly enacted since it was not approved by the requisite two-thirds vote of the local electorate.
Defendant contends, however, that even if the tax at issue is inconsistent with the requirements of section 53722, the inconsistency is of no moment because this statute is itself unconstitutional. Defendant argues that insofar as section 53722 requires a local government to obtain prior approval of the local electorate before imposing a special tax, the statute improperly authorizes a local tax referendum and thereby assertedly violates the provisions of article II, sections 9, subdivision (a) and 11 of the California Constitution (hereafter article II, sections 9(a) and ll).
In Geiger, supra,
The plaintiffs in Geiger contended, however, that even if the constitutionally reserved referendum power did not, of its own force, extend to local tax measures, the Legislature, by several statutory enactments, had granted the local electorate the right to invoke the referendum with regard to tax measures. The Geiger court rejected the contention, finding no indication that the Legislature had intended to subject either local taxes in general, or the specific tax at issue in that case, to the referendum power. (Geiger, supra, 48 Cal.2d at pp. 837-839.)
Although this conclusion completely disposed of the plaintiffs’ contention, the Geiger court, in dictum, went on to address the question whether the Legislature had the constitutional authority to expand the referendum power beyond the scope of the power reserved by the Constitution. The Geiger court indicated that in its view the Legislature did not hаve such power, stating: “The listing of exceptions in the Constitution amounts to a declaration of policy against subjecting legislation concerning the excepted matters to a vote of the people. While section 1 of article IV does not expressly prohibit the Legislature from extending the right of referendum to include a county sales tax ordinance, any holding that such measures are subject to referendum would be contrary to this policy and against the clear implication of the constitutional provision.” (Geiger, supra, 48 Cal.2d at pp. 836-837.)
The Court of Appeal in the present case, relying on this broad language in Geiger, concluded that section 53722 is unconstitutional under article II, sections 9(a) and 11—the successor provisions to the constitutional provision at issue in Geiger—insofar as the statute requires a local government or district to obtain the approval of its electorate before imposing a tax. The Court of Appeal was of the opinion that under Geiger any statute that requires voter approval of a local tax is unconstitutional.
For a number of reasons, I disagree with the Court of Appeal’s conclusion. First, as already noted, the broad language in Geiger on which the Court of
Second, even assuming the dictum in Geiger were correct and should be followed, in my view that language would not apply to a statutory provision like section 53722. Unlike the hypothetical statute to which the Geiger dictum was addressed, section 53722 does not purport to subject local tax measures to the general referendum process, but rather imposes, as part of enabling legislation granting taxing authority to the local governmental entity, a voter-approval precondition that qualifies the local entity’s fundamental authority to impose the tax. In contrast to a referendum, which is initiated by a petition signed by a relatively small percentage of the electorate and operates to suspend the effectiveness of a duly enacted legislative act that would otherwise go into effect of its own accord (see, e.g., Whitmore v. Carr (1934)
As this passage indicates, the Geiger court reasoned that while the constitutional referendum provision generally affords the electorate the authority to call for a referendum on any legislative act, the Constitution withholds the referendum power with regard to tax measures in recognition of the fact that when a legislative body establishes tax levels in connection with the budget process, the governmental entity must be able to rely on the receipt of those tax revenues and cannot have the viability of such measures continually placed in doubt by the possibility that a referendum may be initiated by a relatively small percentage of the electorate. (See also Hunt v. Mayor & Council of Riverside (1948)
To my knowledge, in the many years that have passed since the Geiger decision (supra,
Accordingly, I conclude that section 53722, requiring a local government or district to obtain prior approval by the local electorate before imposing a special tax, is not unconstitutional under article II, sections 9(a) and 11.
IV
Although for the foregoing reasons I believe it appropriate to base the decision in this case on the statutory provisions of section 53722 rather than on the constitutional provisions of Proposition 13, a majority of my colleagues do not share this view. I strongly believe that, whenever possible, we
Finally, although obvious, one additional comment appears appropriate. As judges, we are not free to disregard applicable statutory or constitutional requirements even when they impose formidable obstacles to the government’s financial ability to meet pressing public needs. The provisions of Proposition 62 and Proposition 13 were enacted by the voters of this state, and under our constitutional system the remedy for any untoward consequences that flow from those provisions necessarily lies with the voters, not with the justices of this court.
Panelli, J., concurred.
Notes
Hereafter, all section references are to the Government Code unless otherwise specified.
Contrary to the argument of defendant and its supporting amici curiae, this conclusion does not mean that any tax imposed by any special district or local agency invariably will be a special tax. Some special districts or agencies may have broad enough authority over a sufficient number of different subject areas that a tax whose proceeds are not earmarked for a specific purpose and are to be deposited in the district’s general fund may properly be considered a generаl tax. When such multipurpose local districts are involved, the legislative designation of a tax as a general, rather than a special, tax may be significant.
Given the narrow authority and purpose of the Agency in this case, however, a conclusion that the tax at issue here is a general tax would effectively read the distinction between general and special taxes out of section 53721. Proposition 62 clearly did not intend to give the Legislature the authority to transform what would otherwise clearly be a special tax into a general tax, simply by creating a specialized agency and directing that the proceeds of the tax be paid into that agency’s “general” fund.
Article H, section 9(a), provides in full: “The referendum is the power of the electors to approve or reject statutes or parts of statutes except urgency statutes, statutes calling elections, and statutes providing for tax levies or appropriations for usual current expenses of the State.”
Article II, section 11, provides in full: “Initiative and referendum powers may be exercised by the electors of each city or county under procedures that the Legislature shall provide. This section does not affect a city having a charter.”
At the time Geiger was decided, article IV, section 1, provided in relevant part: “The second power reserved to the people shall be known as the referendum. No act passed by the Legislature shall go into effect until 90 days after the final adjournment of the session of the Legislature which passed such act, except acts calling elections, acts providing for tax levies or appropriations for the usual current expenses of the State, and urgency measures. . . . Upon the presentation to the Secretary of State within 90 days after the final adjournment of the Legislature of a [qualified] petition . . . asking that any act . . . of the Legislature be submitted to the electors for their approval or rejection, the Secretary of State shall submit [the matter] to the electors for their approval or rejection . . . and no such act . . . shall go
In these respects, the voter-approval requirement of section 53722 is similar to the provisions of article XVI, section 18 of the California Constitution, which prohibit local governmental entities from “incurring any indebtedness . . . exceeding in any year the income and revenue provided for such year, without the assent of two-thirds of the qualified electors thereof . . . .”
In contrast, “[t]he referendum process allows the voters to veto statutes and ordinances enacted by their elected legislative bodies before those laws become effective. (American Federation of Labor v. Eu (1984)
In City of Westminster v. County of Orange (1988)
Dissenting Opinion
I
I dissent.
Although the majority opinion purports not to do so, it ignores stare decisis and effectively overrules our decisions in Los Angeles County Transportation Com. v. Richmond (1982)
And, although they claim to abide by the distinction between a general and special tax made in Farrell, supra,
The majority opinion, relying entirely on rejected contentions from two dissenting opinions filed almost 10 years ago, curiously fails to even mention an election held after Richmond and Farrell were decided. The voters
Finally, without a forthright determination that this opinion should apply prospectively only, the effect of the majority holding is likely to be devastating to local government entities and to those with whom they contract.
II
In Richmond, we had before us the question whether the Los Angeles County Transportation Commission may impose a retail and use tax in Los Angeles County with the consent of a majority of the voters. Certain taxpayers claimed that under section 4, the commission was a “special district” that could impose a “special tax” only upon approval of two-thirds of the voters. We observed that section 4 is ambiguous, and stated that we had decided to interpret the term “special district” narrowly. “In view of the fundamentally undemocratic nature of the requirement for an extraordinary majority . . . , the language of section 4 must be strictly construed and ambiguities resolved in favor of permitting voters of cities, counties and ‘special districts’ to enact ‘special taxes’ by a majority rather than a two-thirds vote.” (Richmond, supra,
It is a distortion of Richmond, supra,
The majority opinion repeats, apparently with approval, certain well-established principles that would require a result contrary to its holding, but fails to offer any reason why the principles are not binding. It simply disregards them in reaching its conclusions. For example, the majority recite the holding of Richmond, reiterated without demur in subsequent cases, that the elitist requirement for a supermajority is “fundamentally undemocratic,” and that the language of section 4 must be strictly construed and ambiguities resolved in favor of permitting voters to enact measures by a majority vote. (Richmond, supra, 31 Cal.3d at pp. 202-205; see also Huntington Park Redevelopment Agency v. Martin (1985)
I fail to see how the question whether a governmental body is a “special district” can, as the majority suggest, depend on the intent of the Legislature in its formation, given the general rule that the motivation of the Legislature or its members in passing legislation is immaterial to questions involving the validity of legislation. (California Teachers Assn. v. San Diego Community College Dist. (1981)
The majority opinion acknowledges the rule is uniformly followed in this and other jurisdictions, but immediately thereafter, without any explanation, the opinion declares that the trial court was justified in finding that the Legislature’s motive in creating the district at issue here was to avoid the limitations of section 4. The opinion makes no attempt to challenge the rule or to distinguish any of the applicable cases—it simply ignores the principle, observing that our main purpose should be to determine whether the electorate intended that section 4 should be easy to circumvent.
Indeed, the majority turn the rule on its head by holding that any local taxing agency formed after the adoption of Proposition 13 for the purpose of
In this case, the majority attempt to justify this result on the ground of vague “probable intent” of the framers and electorate that approved Proposition 13. But the opinion omits mention of any evidence proffered by the parties to demonstrate the voters’ intent and relies, instead, on nothing more than a statement expressed in a rejected dissenting opinion signed by a single justice in Richmond, supra,
We have much more direct evidence of the intent of the legislative body than that relied on by the majority. Of great significance is an election that occurred two years after Richmond was decided. In 1984, the voters refused to adopt Proposition 36, which would have repealеd and reenacted section 4 to require that any measure which resulted in increasing taxes levied on a taxpayer must be adopted by a two-thirds vote. If the initiative had been successful, it would have overturned our conclusion in Richmond. The proponents of the measure stated expressly in the ballot pamphlet that it was designed to close loopholes in the law created by the courts and to require courts to “reverse anti-13 rulings.” (Ballot Pamp., Proposed Amends, to Cal. Const, with arguments to voters, Gen. Elec. (Nov. 6, 1984) p. 44.) Thus the voters were given the opportunity to enact a provision that would have accomplished what the majority opinion does today, but they rejected the measure. It is disingenuous to hold that nonetheless those voters who enacted Proposition 13 intended that any district formed thereafter can only tax with the approval of a supermajority of the voters.
Even assuming that a court may undertake a wholesale inquiry into the Legislature’s motives in creating each of the governmental entities formed
Moreover, the fact that the Legislature has created a district with the same boundaries as a county does not, contrary to the majority’s holding, indicate that the county controls the district, thereby evidencing an intent to avoid the limitations of Proposition 13. Such arrangements are commonplace; most water districts and counties, for example, have common boundaries. (See e.g., 72 West’s Wat. Code, Appen., §§ 53-1, 54-1, 55-2, 61-2, 62-1, 63-2.) Yet this circumstance does not demonstrate that the county controls the district. (See, e.g., Vanoni v. County of Sonoma (1974)
Another consideration pointing to circumventive intent, according to the majority, is the “involvement” of the municipality in the formation of the agency. This would frequently be the case, since a major purpose of creating such districts is to respond to local concerns. Vanoni v. County of Sonoma, supra,
The majority’s conclusion regarding special taxes is, if anything, even more egregious. The construction of the term “special taxes’’ as used in section 4 to include all taxes imposed by a special district not only violates our holding in Farrell, supra,
Although the majority purport not to abandon the “general governmental purpose test” laid down in Farrell, they disregard its distinction between taxes imposed for a general governmental purpose and those levied for a specific purpose. They do this by simply reading the term “special” in the phrase “special taxes” out of section 4 and holding, instead, that every tax levied by a special district is a “special tax.” But, as this court has already held, the language of section 4 precludes such a construction. It expressly recognizes that special districts may impose special taxes. The majority, by holding that every tax imposed by a special district is a special tax, disregard the word “special” entirely without explanation or justification.
In Farrell, we rejected the argument that the term “special” has no meaning in section 4. We first stated the established rule of statutory construction that “an interpretation which would render terms surplusage should be avoided, and every word should be given some significance, leaving no part useless or devoid of meaning. [Citations.]” (
We went on to discuss the claim оf the respondent that the term “special taxes” in section 4 means any taxes imposed by a special district: “We are asked to read the word ‘special’ out of the phrase ‘special taxes,’ in violation of settled rules of construction and in the face of the language of section 3 [of article XIII A], which indicates that the drafters knew how to say ‘any’ taxes when that is what they meant. Our choice here is not simply between acceptance of one of a number of different meanings of an ambiguous term in a statute, but between disregarding the word ‘special’ altogether in section 4, or affording it some meaning consistent with the intent of the voters in enacting the provision. Application of the rule of strict construction of provisions which require extraordinary majorities for the enactment of legislation is particularly appropriate in these circumstances.
“In keeping with these principles, we construe the term ‘special taxes’ in section 4 to mean taxes which are levied for a specific purpose rather than, as in the present case, a levy placed in the general fund to be utilized for
The conclusion of the majority not only disregards the holding of Farrell and the language of section 4, but flouts the will of the voters, as expressed in two elections held subsequent to Farrell. As discussed above, the voters in 1984 rejected Proposition 36, which would have required a two-thirds vote for the imposition of any new taxes by a district. Yet this is precisely the effect of the majority’s view that all taxes levied by a special district arе special taxes requiring a two-thirds vote.
Equally important, the holding is in plain conflict with the intent of the voters, as expressed by their adoption in 1986 of Proposition 62, a statutory initiative now codified in section 53720 et seq. of the Government Code. Government Code sections 53722 and 53723 recognize that a district may impose either a general tax, which may be passed by a majority vote, or a special tax, which requires a two-thirds vote. These provisions are obviously contrary to the holding of the majority that any tax imposed by a district is a special tax valid only if adopted by a two-thirds vote of the electorate.
Even if some arguable doubt be raised regarding the constitutionality of Proposition 62, it may be considered in interpreting the intent of the voters. As a leading authority on statutory interpretation declares, “Questions having to do with the meaning of a statute are independent of issues concerning its validity. Therefore, even an unconstitutional statute relating to the same subject matter may be considered in order to determine the legislative intent in enacting a statute.” (2A Sutherland, Statutory Construction, supra, § 51.04, at p. 497.) Here, the voters made it clear by the adoption of Proposition 62 that, contrary to the holding of the majority, a district may impose either a general tax or a special tax, and that only the latter exaction requires a two-thirds vote. Thus, the majority’s conclusion that the voters intended that all taxes imposed by a district would require a two-thirds vote is demonstrably incorrect.
IV
It is difficult to exaggerate the profound and unsettling consequences that the majority’s holding threatens to produce. During the almost 10 years since Richmond, supra,
Although the majority question whether their decision will “necessarily jeopardize all taxing agencies created since 1978,” since they do not declare their holding applies only prospectively, it will obviously threaten the ability of some, and perhaps most of them, to collect or continue to collect the taxes necessary to meet their obligations and to remain solvent. The extent of such jeopardy cannot be known, but it is safe to say that the financial stability of all districts created since 1978 will be severely damaged by the prospect that the validity of sales taxes adopted by less than a supermajority vote can be challenged on the basis of legislative motivation in forming the district. There is no doubt that the majority holding poses a major threat to the very existence of numerous local taxing entities that carry оut essential government functions.
To illustrate: according to amicus curiae Orange County Local Transportation Authority, over the past 15 years more than 20 such transportation authorities have been established, most of them since 1978. Sixteen of these authorities have obtained voter approval for imposition of sales taxes to fund transportation projects. During the 1991-1995 period alone, nearly $6 billion is projected to be raised by these taxes, with billions more in later years. More than $1.5 billion in tax bonds backed by sales tax receipts are currently outstanding. The Orange County agency has raised nearly $50 million from the sale of limited tax bonds and has begun to implement plans to spend $3.1 billion in sales tax revenues to build necessary freeways and transit systems. Forty percent of this revenue will fund improvements to state and interstate highway systems. The availability of sales tax revenues has enabled the transportation authority to qualify for $59 million in additional state matching ftmds for transportation projects in the 1990-1991 fiscal year alone.
To cast doubt on the validity of the sales taxes needed to fund these and similar improvements is likely to cause chaos in the financial markets because the hundreds of millions of dollars in bonds issued by agencies would be rendered worthless if the underlying sales tax is held to be invalid. The ripple effect cannot be exaggerated, since the bonds have been purchased as an investment by countless individuals, corporations, bond funds,
It should be noted that the foregoing projections are limited to only one type of lоcal agency. If the effect on the operations of numerous other types of local agencies created after 1978 is taken into account, the destructive effects of the majority’s holding would be multiplied manyfold.
If ever a case justified application of the doctrine of stare decisis, this is it. Our frequent reiteration of this principle would amount to a hollow pronouncement indeed if we fail to follow it under the circumstances of this case. As recently as last year, we pledged our adherence to the doctrine when we stated that “more than in any other situation, courts are inclined to follow precedent when property rights have been founded and vested in accord with an existing rule.” (Security Pacific National Bank v. Wozab (1990)
V.
Although I am reluctant to offer suggestions to the majority, because their opinion represents a radical volte-face in our jurisprudence at the very least they should have rendered their unprecedented holding prospective only. Their deliberate avoidance of this crucial issue is ominous.
A court may refuse to give retroactive effect to a decision when considerations of fairness or public policy justify prospective operation. (Forster Shipbldg. Co. v. County of L. A. (1960)
It appears that in the case before us, the proceeds of the challenged tax have been set aside pending the determination of this cause. There is no claim that contracts or other obligations have been entered into in reliance on the validity of the tax. Under these circumstances, it is not inappropriate to apply the majority decision to this case. But in many other instances, as pointed out above, the validity of billions of dollars in obligations may be threatened by the new rule adopted today. At stake is not only the interest of private litigants, or even private investors, but the stability of public finance at the local level.
In Neel v. Magana, Olney, Levy, Cathcart & Gelfand (1971)
This chance comment cannot be seized upon to render the wholesale reliance on our holding by local taxing agencies to be unreasonable. In view of the well-established rule that the courts will not inquire into the motivations of the Legislature in enacting statutes, the remark could not reasonably have been interpreted by local taxing authorities as a warning that in the
VI.
The concluding paragraph of the concurring opinion injects a particularly disturbing note. It reveals a callous indifference for the consequences of an opinion of this court—even when the opinion disregards stare decisis; overrules two prior opinions of this court that have guided the bench, bar and public for nearly a decade; and when the consequences are likely to produce a devastating effect on the economy, potentially the existence of numerous public agencies and the well-being of countless individual and corporate investors who relied on our prior decisions. We cannot in good conscience attribute the untoward consequences of this court’s decision to other persons’ actions. The buck stops here.
VII.
The majority opinion cannot withstand analysis under law or case precedent and is likely to wreak untold financial hаvoc on countless local entities. It should be rejected.
We recognize that there is turmoil in the high court on this point. In James B. Beam Distilling Co. v. Georgia (1991)
As our case does not involve any question of federal law, we are not under any obligation to follow the high court’s tortuous path. (James B. Beam Distilling Co. v. Georgia, supra,
Dissenting Opinion
I dissent. I agree with Justice Mosk that the local agency here is not a special district subject to the provisions of section 4 of article XIIIA of the California Constitution and that the majority’s interpretation of the phrase “special taxes” is overbroad. Because the majority has elected to “leave open the question of a possible prospective application” of its holding (maj. opn., ante, at p. 13), I express no view on that issue.
Respondents’ petitions for a rehearing were denied February 13,1992, and the opinion was modified to read as printed above. Mosk, J., and Kennard, J., were of the opinion that the petitions should be granted.