Are Split-Roll Taxes Still Alive?
In the wake of Propositions 13 and 62, many local districts have imposed “special taxes” to finance public facility construction and operations. One such special tax is the school district qualified special tax, which was enacted by the Legislature in 1987. (Gov. Code §§ 57009 et seq.) School districts have the authority to impose such special taxes as long as the tax “applies uniformly to all taxpayers or all real property within the school district.” (Gov. Code § 50079(b)(1). New legislation (SB 1021) introduced last month by Senator Lois Wolk (D-Davis) would allow school districts to levy unlimited tax increases on select property owners through non-uniform parcel taxes. This would essentially overturn existing law.
Over the years, school districts have attempted, unsuccessfully, to increase their parcel tax revenues by taxing different parcels differently, often referred to as “split-roll” taxes. One such attempt by the Alameda Unified School District was rejected last year by the First District Court of Appeal. (Borikas v. Alameda Unified School District, 214 Cal.App.4th 135 (2013).) In that case, the overturned tax imposed a $120 yearly tax on residential parcels, while large commercial and industrial parcels were hit with $0.15 per square foot, with a maximum of $9,500 per year.
SB 1021 revives split-roll taxes and would provide numerous ways to vary tax rates. For example, school districts could split parcel tax assessments within a district based on characteristics such as the size of the parcel, the size of improvements to the parcel or the use of a parcel. This means different tax rates could apply to residential parcels than shopping malls, industrial parks, hotels and wineries.
The bill also would allow school districts to impose a different tax rate on unimproved parcels and to treat multiple parcels as one where the parcels are contiguous, under common ownership and constitute one economic unit. They would need to have “the same primary purpose” and not be separate and distinct properties that may be independently developed and sold. We will keep track of this issue and keep you posted.
Sometimes You Can Fight City Hall
Developers in San Francisco are all too aware of the great deference courts accord to local agencies when agencies interpret their own codes. That deference has become such a bedrock of land use jurisprudence that consideration is rarely given, if ever, to legally challenging such local agency interpretations. A ruling last month by the Second District Court of Appeal, resolving a dispute that land use practitioners in San Francisco may find eerily familiar, may change this attitude. (Tower Lane Properties v. City of Los Angeles, 168 Cal.Rptr.3d 258 (2014).)
On May 3, 2011, Tower Lane applied to the City’s Department of Building and Safety for building and grading permits for three residences, a pool and spa, a pool cabana building, a pool service and equipment building, accessory living quarters, and associated parking areas. The Department of Building and Safety forwarded the building plans to the City’s Planning Department for review.
During its review, the Planning Department notified Tower Lane that to obtain a grading permit it must comply with Los Angeles Municipal Code Section 91.7006.8.2, which the Department asserted required approval by that Department of a tentative tract map whenever grading was conducted on a hillside area larger than 60,000 square feet. Tower Lane objected to this requirement, arguing that Section 91.7006.8.2 required a tract map only when a subdivision of land was proposed.
The city argued the court should grant deference to the city’s interpretation of its own code, and uphold its tract map requirement. The court disagreed. While recognizing that a local agency’s interpretation must be given great weight, the level of deference accorded to an agency’s interpretation turns on “whether the agency has a comparative interpretive advantage over the courts, and also whether its interpretation is likely to be correct.” Factors to consider in determining if an agency has a comparative advantage include whether “the legal text to be interpreted is technical, obscure, complex, open-ended, or entwined with issues of fact, policy, and discretion.”
The court ultimately was persuaded that the interpretation of Section 91.7006.8.2 did not require any particular expertise, and that the city over time had inconsistently applied the tract map requirement of Section 91.7006.8.2. The court agreed with Tower Lane, and ruled that a tract map was not required.
Ever since the dissolution of redevelopment agencies in 2012, Governor Brown has contended he would provide a redevelopment replacement tool. Progress in this regard has been spotty. In 2012, he vetoed a bill that would have partially restored tax-increment with no impact on the state general fund – and most likely would have done so again last year if the Legislature had sent him the bill again.
But the Governor may be relenting. In his budget message in January, Brown made it clear that he would sign a bill loosening up the rules on little-used infrastructure financing districts, which allow the use of tax-increment financing without the old find-the-blight requirement from redevelopment days.
Also, Brown seems likely to support a bill Assembly Majority Leader Toni Atkins (D-San Diego) has introduced to smooth recurring problems in the dissolution of local redevelopment agencies (AB 1963). The bill is similar to Atkins’ AB 662 from last year, but drops a provision on amendments to project contracts that led Brown to veto it. The revised bill contains continuity provisions that would allow projects begun under redevelopment agencies to be carried forward. They include infrastructure financing districts, reimbursement of expenses taken on by housing authorities, and authorization to use bond proceeds on already-approved projects. We will continue to track this issue.
The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. Reuben, Junius & Rose LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.