BREAKING: School district could owe refunds on 2008 parcel tax

BREAKING: School district could owe refunds on 2008 parcel tax

Michele Ellson

Updated at 1:19 p.m. Friday, December 7

A state appeals court has ruled the school district exceeded its taxing authority when it imposed a parcel tax that required some property owners to pay more than others, a decision that could ultimately force the school district to pay back millions of dollars in taxes it collected and spent and that may have implications for other school and special districts that tax some property owners differently than others.

In a ruling issued Thursday, a three-judge panel with the First District Court of Appeal unanimously ruled that state law didn’t allow the district to charge some commercial property owners as much as $9,500 per parcel when other property owners paid less under the Measure H tax. The panel sent the case back to the local trial court that handled it for a determination about whether refunds must be issued.

The judges ruled that the district did have the right to grant exemptions to seniors and disabled people and said that the district – if Measure H were still in effect – could charge all property owners the same $120 per parcel that homeowners and commercial property owners with 2,000 square feet or less had paid. Commercial property owners with more paid 15 cents per square foot up to a cap of $9,500.

More than half of the $4.5 a year the measure was expected to bring in was paid by commercial property owners. If the trial court orders the district to pay refunds to commercial property owners who paid more than $120 per parcel, the district could owe close to $2.5 million for each of the three years the tax was in effect, based on 2009-2010 tax data, though those numbers were likely to be different each year the tax was collected.

David Brillant, the attorney who handled the case, said he was pleased with the judges' decision.

"From the outset of this case, we have approached this problem with a common-sense approach and we always believed that a tax to be ‘applied uniformly’ as the law requires, had to be just that – uniformly applied to all taxpayers, regardless of the type of property they owned," Brillant was quoted as saying in a press release. "Districts, including the Alameda Unified School District, which have enacted or proposed taxes that classify taxpayers into categories with different rates are now on notice that those structures are illegal under California law."

But Superintendent Kirsten Vital said the decision could lead to serious budget impacts to Alameda's schools

"If the trial court orders refunds of tax revenues already collected and spent, this decision has the potential to be a significant blow to our budget with many negative consequences for our students, teachers and staff," Vital was quoted as saying in a press release. "The decision also has significant public policy and budget implications for school districts across the state. Accordingly, we are carefully evaluating all of our options in the courts and the Legislature."

She said the district's current parcel tax, Measure A, was validated by a court and that the businesses who sued over it haven't appealed, so it will remain in place.

Alameda's Board of Education put Measure H on the June 2008 ballot to help the school district weather state funding cuts, and after voters narrowly approved it, a group of commercial property owners sued. A county judge ruled the tax was legal in 2010, and the property owners appealed.

The school board asked voters to approve a different but similarly structured parcel tax, Measure E, in 2010 as state funding continued to decline. But that tax was narrowly defeated. Less than a year later voters approved Measure A, which replaced Measure H and another existing parcel tax. Under measure A, both commercial and residential property owners pay 32 cents per square foot on their property up to a cap of $7,999, while owners of parking lots and other properties with no buildings on them pay $299 per parcel.

The property owners, which included George Borikas and Ed Hirshberg, said the Measure H tax violated state law requiring special taxes to be imposed uniformly. The school district argued state law gave them the right to charge different classes of property owners different tax rates.

The court determined that the state Legislature’s intent in drafting rules allowing school and other special districts to impose special taxes like Measure H was to have them applied uniformly, unless they outlined specific exceptions. The judges said state law did not expressly allow school districts to charge property owners differing tax rates.

Some other school districts have adopted parcel taxes that charge homeowners and commercial property owners differing tax rates, and it wasn’t immediately clear what if any impact the ruling could have on those districts.

Comments

Submitted by Trish Spencer on Fri, Dec 7, 2012

Thank you, Michele. The Appellate Court's decision, which was Certified for Publication, is available online, in its entirety, at http://www.courts.ca.gov/opinions/documents/A129295.PDF

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