Friday, March 4, 2016
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State Law Allowing Withholding of Funds From Some Localities Held Unconstitutional
By a MetNews Staff Writer
A state law that allows state and county officials to withhold tax revenues from cities that have not complied with a statute requiring them to turn over funds that were freed up when community redevelopment agencies were abolished is unconstitutional, the Third District Court of Appeal ruled yesterday.
The justices, in consolidated appeals from conflicting trial court rulings, held Assembly Bill No. 1484 to be invalid under Proposition 22, adopted in 2010. The constitutional initiative prohibits the state from reallocating, transferring, or otherwise using revenues from taxes imposed or levied by a local government solely for the local government’s purposes.
The state and many localities have been doing legal battle since lawmakers abolished the CRAs in 2011 in order to capture more revenues for the state. AB 1484, adopted the following year, added Health and Safety Code §34179.6(h), providing two methods by which the state sought to enforce local governments’ obligation to turn over the funds of the abolished agencies, other than those needed to pay off the agencies’ obligations.
The act authorized the Board of Equalization to withhold sales tax moneys, and authorized the county auditors and controllers to withhold property tax revenues.
But Justice George Nicholson, writing for the Court of Appeal yesterday, said the law cannot be squared with Proposition 22, because each of the two methods “is an unconstitutional reallocation, transfer, or other use of local tax revenue.”
He rejected the argument that the state has a right to take the funds by the means stated because they do not rightfully belong to the city after its CRA has been abolished.
He reasoned:
“Proposition 22 broadly prohibits reallocating, transferring, or otherwise using local tax revenue. If the Legislature can take away local tax revenue any time it declares that funds are wrongfully possessed by a local government entity, the Legislature could pass any law declaring that funds in the possession of the local government entity are wrongfully possessed and then withhold local tax revenue at will, defying Proposition 22. That is essentially what the State is trying to do in this case: declare that a sponsoring agency’s funds received from the former redevelopment agency or successor agency are wrongfully possessed then use that declaration to withhold local tax revenues. No valid interpretation of Proposition 22 allows this circumvention of the voters’ prohibition of withholding of local tax revenue.”
The state, he added, has other means of obtaining the revenue, such as by bringing a lawsuit. That such an action would cost more or take more time than those contemplated by AB 1484, he said, makes no difference because there is “no authority for the proposition that the Constitution is to be applied only if application is not too costly or too-time consuming.”
The case is City of Bellflower v. Cohen, 16 S.O.S. 1238.
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