Alameda parcel tax ruling prompts fresh suits
A court ruling that struck down portions of a 2008 Alameda school parcel tax has prompted new lawsuits against four school districts that won voter approval of school parcel taxes in November.
Earlier this month, lawsuits were filed against the San Leandro, West Contra Costa and Davis school districts and a group of suburban Los Angeles districts alleging the districts violated state law by imposing taxes that charge different types of property owners different rates. They’re asking the courts to invalidate the taxes.
Attorney David Brillant, who’s representing commercial property owners in the Alameda case and a mix of commercial and residential property owners in the four cases filed in January, said his clients want everyone to be taxed equally.
“They don’t want to be discriminated against because they (own) income-producing properties,” Brillant said.
None of the school districts that are being sued responded to The Alamedan’s requests for comment, so it is not yet clear whether they will impose the new taxes, which are slated to go into effect later this year and in 2014.
A state appellate court ruled in December that Alameda Unified exceeded its taxing authority with the Measure H parcel tax because it charged homeowners and commercial property owners different rates, something the court said state law doesn’t allow. It originally sent the case back to a local court to determine whether the district would have to pay refunds on the tax, which could cost the district an estimated $7.4 million. But the court later agreed to reconsider the ruling, a decision Brillant characterized as a standard step that precedes consideration by the state Supreme Court.
San Leandro’s tax charges residential property owners a flat rate and commercial property owners a per-square-foot charge, while the Los Angeles-area districts’ tax charges different per-square-foot rates and Davis’s charges a flat rate for most property owners and $20 per unit for owners of apartment buildings and other multifamily dwellings. West Contra Costa’s tax charges everyone the same per-square-foot rate except owners of parking lots and other “unimproved” property, who pay a flat charge.
Piedmont’s school board had authorized a March ballot measure that would ask voters to approve an extension of the district’s existing tax, which charges property owners different rates based on the size of their lots. But, based on the Alameda ruling, they are now seeking a flat tax of $2,406 per parcel, a press release on the ruling and the text of the Measure A tax measure show.
A bill authored by state Assemblyman Rob Bonta, D-Oakland, would allow school districts to charge different tax rates on different types of property. Bonta said in an e-mail that providing school districts with flexibility "is an important way to keep them financially stable" and that he wasn't surprised by the suits.
"In light of recent court cases, it’s no surprise to me that these additional lawsuits are surfacing. However, I am very disappointed that the lawsuits will effectively seek to stop much-needed funding to schools - funding that the voters approved by a two-thirds majority," Bonta said.
Brillant agreed with the appellate court’s finding that state Legislature can broaden school districts’ taxing authority, but said the bill’s retroactive coverage for existing taxes and defunct ones like Alameda’s would lead to a federal lawsuit.
“That is going to trigger a massive litigation,” Brillant said. “If they want to have themselves a federal lawsuit, that’s what they need to do.”
Bonta said anyone can file a lawsuit.
"The threat of a lawsuit does not necessarily bring into question the legality of a bill that has yet to be vetted properly through the legislative process," he wrote. "We are committed to promoting a bill that fully complies with the law and supports children and public schools throughout the state. If, in the end, someone wishes to challenge the law on legal grounds, that is their right."
Dozens of school districts have sought parcel taxes in recent years as the state – which is most districts’ primary revenue source – slashed school funding. Davis’s tax proposal contained an additional charge to be levied if Proposition 30, Governor Jerry Brown’s tax hike measure, did not pass, which would have eroded state schools funding further.
Unlike cities and counties, which can raise funds by increasing sales taxes and charging fees for services, parcel taxes are the only avenue school districts have to boost their revenue.
Brillant said school districts, which need two-thirds of voters’ approval to levy the taxes, may turn to a split roll that offers blanket senior exemptions and charges homeowners less in order to make a tax more palatable to those who will determine its fate. Alameda, for example, has about 30,000 residential households, and about 800 commercial properties – many of whose owners don’t live or vote on the Island.
More than two dozen school districts put parcel taxes on the ballot in November in the wake of five years’ worth of funding cuts and deferrals that saw the state hanging on to billions of dollars owed to school districts under the Proposition 98 minimum funding guarantee, money that the state is just beginning to pay back. The districts that are being sued are the only ones that didn’t put a flax tax on the November ballot.
San Leandro’s Measure L is that city’s first school parcel tax, a letter posted online by Superintendent Cindy M. Cathey says, and it passed with 66.75 percent of the vote – barely the amount needed for approval. The tax is expected to generate $2.4 million a year to be used for core programs and to keep class sizes in kindergarten through third grade at 28 students per teacher; they had been slated to rise to 32 students per teacher. The district also sought the tax in order to avoid a midyear budget cut of $3.5 million, Cathey’s letter said.
The Richmond-based West Contra Costa district, which is being sued by the same group of related commercial property owners as San Leandro, emerged from more than two decades of state receivership in 2012. Its superintendent said money collected from Proposition 30 and its Measure G, an extension of an existing tax that is expected to raise $10 a year and was approved with more than 75 percent of the vote, would prevent cuts beyond those that have already been made.
“The passage of Prop 30 and Measure G only provide the resources to prevent even worse budget cuts than the District experienced over the last four years. With no additional revenues, the question before the community and Board is how to set priorities and look for funding sources when state revenues have not yet reached the level of funding the District received in 2005-06,” Superintendent Bruce Harter wrote on that district’s website.
The cases could put the fate of the taxes in limbo for several years. The Measure H cases have been in court for nearly half a decade.
“We’re still a real long way from this being finally resolved,” Brillant said.
PARCEL TAXES UNDER FIRE
Five school districts, including Alameda, have been sued by property owners over “split roll” taxes that charge different types of property owners differently. Here are the districts and the details on the taxes, plus information on the plaintiffs in each case.
Alameda Unified School District: Commercial property owners filed two lawsuits against the district seeking to nix its 2008 Measure H parcel tax, which charged residential property owners $120 each and commercial property owners 15 cents per square foot up to a cap of $9,500. The tax contained a blanket exemption for which seniors and some disabled people could apply. An appellate court determined that the tax, which brought in about $4.5 million for each of the three years it was levied, should have charged everyone the same amount of money. The court has agreed to reconsider the case.
San Leandro Unified School District: San Leandro Unified’s Measure L would raise $2.4 million a year for five years by charging homeowners $39, landlords with five units or more $19 per unit, and commercial property owners two cents per square foot of lot they own. The tax contains a blanket exemption for which seniors and some disabled people could apply. The plaintiffs in this case are Williams Properties and Prudential Properties, a pair of commercial property owners with some common ownership.
West Contra Costa Unified School District: The Richmond-based district’s Measure G, an extension of an existing tax, would raise $10 million a year for five years by charging all property owners 7.2 cents per square foot of total building area except for those with unimproved properties like parking lots; those owners would pay $7.20 per parcel. The tax contains a blanket exemption for which seniors and some disabled people could apply. The plaintiffs in the case are Bypass 93 Properties and American Standard Properties, a pair of commercial property owners with some common ownership between them and also the companies suing San Leandro Unified.
Davis Joint Unified School District: Davis’s four-year Measure E tax, an extension of an existing tax, would raise a little more than $3.2 million a year for four years by charging most property owners $204 per parcel and owners of apartment buildings and other multi-unit residential $20 per unit. The tax also contained an additional $242 a year charge of Governor Jerry Brown’s Proposition 30 tax hikes did not pass. The tax contains a blanket exemption for which seniors and some disabled people could apply. The district is being sued by Jose J. Granda, who owns a rental home, an online listing shows; and the Randall Trust, whose agent, Thomas Randall Jr., had sued prior to the election in an effort to stop the tax from being decided on.
Centinela Valley Union High School District: Measure CL would direct $14 million a year for 10 years toward a group of suburban Los Angeles school districts by charging residential property owners two cents per square foot and commercial property owners 7.5 cents per square foot. The tax contains a blanket exemption for which seniors and some disabled people could apply. The plaintiffs in the case are a pair of homeowners, Sandra Suarez and Mariano Velazquez.
Source: Lawsuit documents, school district websites