Parcel Taxes

Parcel Taxes

Traiman v. Alameda Unified School District – California Court of Appeal, First Appellate District (Case No. A164935)

MEMBER(S) INVOLVED: Alameda Unified School District

IMPORTANCE OF STATEWIDE ISSUE:

This matter involves whether a parcel tax may be enacted by the voters if it contains a cap on the total amount of tax for certain buildings/parcels, where the per-square-foot cost of the parcel tax is the same. Specifically, the plaintiff has argued that the uniformity requirement in Government Code section 50079 does not allow for a parcel tax that has a cap on the tax applied to certain buildings or parcels because, depending on the square footage, larger buildings may be subject to a lower per-square-foot tax when the cap amount is divided by the amount of the square footage. In addition, at issue in this matter is the ability of local educational agencies (LEAs) to rely on prior validation actions when they take a parcel tax to the voters without concern that the tax will be challenged. The Alameda Unified School District previously issued two parcel tax measures that were approved by the voters that contained a cap on the tax for larger buildings/parcels, both of which were validated.

SUMMARY OF THE CASE:

In 2020, voters enacted parcel tax Measure A for Alameda USD. Measure A taxed improved property at the rate of $0.265 per square foot. Measure A put a cap on the tax for buildings over 30,184.91 square feet in the amount of $7,999. Leland Traiman challenged Measure A in court and claimed that Measure A taxed different groups of taxpayers at different rates in violation of Government Code section 50079’s uniformity requirement. Traiman’s argument is that property owners subject to the cap will pay less than $0.265 per square foot when the $7,999 cap is divided by the amount of square feet, which means different taxpayers will pay a different tax. Alameda USD argues that the tax is applied uniformly, in that different taxpayers are not being taxed differently.

Traiman prevailed at the superior court, which invalidated all parts of Measure A, except for a $299 flat tax Measure A imposes on unimproved property. (Alameda USD is currently collecting the taxes for all parts of Measure A, as the superior court’s order was stayed pending the appeal.) The district appealed, and counsel for Alameda USD requested that the ELA file an amicus brief in support of the district. If the superior court decision stood, Alameda USD could have lost $10 million in revenue for the parcel tax.

The superior court relied on the 2013 case of Borikas v. Alameda Unified School District (2013) 214 Cal.App.4th 135, a case for which the ELA previously filed an amicus brief. Alameda USD argued on appeal that Borikas is distinguishable from the current case because, in Borikas, the parcel tax at issue had two different rates (a $120 flat fee for residential parcels and commercial parcels under 2,000 square feet and $0.15 per square foot with a cap of $9,500). Borikas did not specifically hold that a tax rate based on building square footage may not include a maximum rate of tax applicable to all parcels. Rather, later case law has held that “uniformity” required by Government Code 50079 does not apply to the amount of tax paid for each parcel or the effective tax rate based on the arithmetic function of the tax, but whether the tax rate is applied uniformly.

In addition, validation proceedings — actions in courts confirming the legal validity of parcel taxes — were undertaken for two other Alameda USD parcel taxes with the same configuration including a cap on taxes for buildings with larger square footage, and the superior court validated the parcel taxes. Under the law, validation actions bar any challenges to the agency on the parcel tax at issue. There is also some authority for the proposition that they act to bar challenges to similar future actions. The validation actions can provide LEAs with some amount of certainty as to whether a similar parcel tax will be valid. Alameda USD has argued that the validations for the prior parcel taxes bar Traiman’s challenge to Measure A. The district appealed the Superior Court’s decision and CSBA’s ELA filed an amicus brief in the case in support of Alameda USD and the authority of school districts to impose uniform taxes.

CURRENT STATUS AND/OR OUTCOME:

On Aug. 3, 2023, in a victory for the ELA, First District Court of Appeal issued its opinion, reversing the lower court’s decision and validating the tax levied by the school district. As explained, the case relates to Measure A, a qualified special tax voted on and approved by voters in Alameda USD in 2020. Specifically, Measure A authorized a tax on improved parcels at “the rate of $0.265 per building square foot not to exceed $7,999 per parcel.”

The court of appeal found that “the Measure A tax applies uniformly within the meaning of Section 50079 because every nonexempt taxpayer and every improved parcel in the District is taxed using the same formula. Neither the language in the statute, case law, legislative history, nor public policy indicates that a school district cannot base a qualified special tax on building square footage with a maximum tax per parcel.” The court’s decision provides a detailed analysis of Section 50079’s language and legislative history, as well as public policy related to it and case law on the topic of uniformity in tax structures.

Importantly, the court points out that the statutory language of Section 50079 requires “that the same tax be imposed on all taxpayers or properties in the district and not target a particular class of property or taxpayer [however] the statute does not further require that the application of the tax result in identical effective tax rates for every taxpayer and every property.” To support this conclusion, the court analyzes Borikas. In Borikas, the court invalidated parts of a qualified special tax when it held that the tax was not applied uniformly as required by Government Code section 50079, because different tax rates were imposed on different types of property. The Traiman case, the court stated, is distinct from Borikas and therefore deserved different treatment.

To support the necessity for uniform application but not uniform outcome when considering a school district imposed qualified tax, the court also emphasizes the legislative history and underlying public policy of Section 50079. The court concluded that “the overwhelming sentiment in the legislative history is the need to restore school district taxing authority,” and “there is no indication that [Measure A] is anything the Legislature did not want school districts to do.” This analysis and resulting conclusions align with the arguments made in the ELA’s amicus brief.

On Sept. 11, 2023, Traiman filed a Petition for Review with the California Supreme Court. The Supreme Court declined to hear Traiman’s appeal, so the Court of Appeal decision stands.

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