Court of Appeal Upholds Invalidation of Parcel Tax That Differentially Taxes Commercial and Residential Property; Legislature Introduces SCA 3 To Ease Parcel Tax Restrictions

The court of appeal recently upheld its previous ruling that a parcel tax approved by Alameda Unified School District (“District”) voters violates the Government Code’s restriction that special taxes apply “uniformly to all taxpayers or all real property within the” district.  On rehearing, the court of appeal upheld its previous ruling that the property classifications and differential tax burdens imposed pursuant to the voter-approved measure exceed the taxing authority of the District under section 50079 of the Government Code.  The court held that the special tax imposed by the measure is invalid to the extent it imposes a different tax rate on commercial property versus residential property.  (Borikas v. Alameda Unified School District (--- Cal.Rptr.3d ----, Cal.App. 1 Dist., March 6, 2013).

In response to the restrictive court of appeal decision in Borikas, legislators have introduced a bill that would ease the requirements for a school district seeking to pass a parcel tax.  SCA 3 seeks to amend the California Constitution relating to taxation by amending Section 4 of Article XIIIA, adding Section 4.5 to Article XIIIA, amending Section 2 of Article XIIIC, and amending Section 3 of Article XIIID, and would reduce the voted approval needed for parcel taxes from the current two-thirds to 55 percent.  The Constitutional amendment would help school districts that have been subjected to years of continued funding cuts. 


Read KMTG's Legal Alert on Borikas v. Alameda Unified School District here.

Read KMTG's Legal Alert on SCA 3 here.

Meghan Covert Russell

Court of Appeal Grants Petition for Rehearing in School District Parcel Tax Case

The court of appeal in Borikas v. Alameda Unified School District (--- Cal.Rptr.3d ----, Cal.App. 1 Dist., December 6, 2012; re-hearing granted January 7, 2013) held that the school district did not have the authority to impose a special tax (a parcel tax in this case) that classifies and differentially taxes property within the district.

This initial appellate decision held that a special tax is invalid where it imposes differential tax rates based on the taxpayer or parcel.  In this case, the court initially found that the District had violated Government Code section 50079 where the District’s Measure H taxed residential taxpayers at $120 per parcel per year and commercial and industrial parcels on a per square foot basis (not to exceed $9,500 per year).  According to the court, treating residential and commercial parcels differently when applying a qualified special tax violates the provision that taxes apply uniformly to all taxpayers or all real property within the school district, except where exempted.

However, the court of appeal has granted the District’s petition for rehearing.  KMTG will follow this case and provide an update to our Legal Alerts as this case proceeds in the appellate process.

To read more, please see KMTG's full legal alert on Borikas here.

Meghan Covert Russell