Laws, Regulations & Annotations

Property Taxes Law Guide – Revision 2017

California Constitutional Provisions

ARTICLE XIII Revenue and Taxation

Section 24

Sec. 24. Legislature may not tax for municipal purposes. (a) The Legislature may not impose taxes for local purposes but may authorize local governments to impose them.

(b) The Legislature may not reallocate, transfer, borrow, appropriate, restrict the use of, or otherwise use the proceeds of any tax imposed or levied by a local government solely for the local government's purposes.

(c) Money appropriated from state funds to a local government for its local purposes may be used as provided by law.

(d) Money subvened to a local government under Section 25 may be used for State or local purposes.

History.—The amendment of November 2, 2010 (Proposition 22), lettered the first, second, and third paragraphs as subdivisions (a), (c), and (d), respectively, and added subdivision (b).

Note.—Section 1 of Proposition 22, effective November 3, 2010 provides that this act shall be known and may be cited as the "Local Taxpayer, Public Safety, and Transportation Protection Act of 2010."

Section 2 thereof provided the following:

The people of the State of California find and declare that:

(a) In order to maintain local control over local taxpayer funds and protect vital services like local fire protection and 9-1-1 emergency response, law enforcement, emergency room care, public transit, and transportation improvements, California voters have repeatedly and overwhelmingly voted to restrict state politicians in Sacramento from taking revenues dedicated to funding local government services and dedicated to funding transportation improvement projects and services.

(b) By taking these actions, voters have acknowledged the critical importance of preventing State raids of revenues dedicated to funding vital local government services and transportation improvement projects and services.

(c) Despite the fact that voters have repeatedly passed measures to prevent the State from taking these revenues dedicated to funding local government services and transportation improvement projects and services, state politicians in Sacramento have seized and borrowed billions of dollars in local government and transportation funds.

(d) In recent years, state politicians in Sacramento have specifically:

(1) Borrowed billions of dollars in local property tax revenues that would otherwise be used to fund local police, fire and paramedic response, and other vital local services;

(2) Sought to take and borrow billions of dollars in gas tax revenues that voters have dedicated to on-going transportation projects and tried to use them for non-transportation purposes;

(3) Taken local community redevelopment funds on numerous occasions and used them for unrelated purposes;

(4) Taken billions of dollars from local public transit like bus, shuttle, light rail, and regional commuter rail, and used these funds for unrelated state purposes.

(e) The continued raiding and borrowing of revenues dedicated to funding local government services and dedicated to funding transportation improvement projects can cause severe consequences, such as layoffs of police, fire and paramedic first responders, fire station closures, healthcare cutbacks, delays in road safety improvements, public transit fare increases, and cutbacks in public transit services.

(f) State politicians in Sacramento have continued to ignore the will of the voters, and current law provides no penalties when state politicians take or borrow these dedicated funds.

(g) It is hereby resolved, that with approval of this ballot initiative, state politicians in Sacramento shall be prohibited from seizing, diverting, shifting, borrowing, transferring, suspending, or otherwise taking or interfering with tax revenues dedicated to funding local government services or dedicated to transportation improvement projects and services.

Section 2.5 thereof provided a Statement of Purpose.

The purpose of this measure is to conclusively and completely prohibit state politicians in Sacramento from seizing, diverting, shifting, borrowing, transferring, suspending, or otherwise taking or interfering with revenues that are dedicated to funding services provided by local government or funds dedicated to transportation improvement projects and services.

Section 11 thereof provided the provisions of this act shall be liberally construed in order to effectuate its purposes.

Section 12 thereof provided that any statute passed by the Legislature between October 21, 2009 and the effective date of this measure, that would have been prohibited if this measure were in effect on the date it was enacted, is hereby repealed.

Construction.—This section does not of itself vest a local governing body with inherent taxing power. The power to tax comes from the Legislature through its enactment of general laws that enable the local governing body to collect the taxes specified in those laws. An exception exists with respect to charter cities and counties. California Building Industry Ass'n. v. Governing Board of the Newhall School District, 206 Cal.App.3d 212. Pursuant to this section, the taxing authority of local governments exists only to the extent granted by the Legislature, which may prescribe the terms and conditions under which local governments may exercise that authority. These may include the imposition of a requirement of prior approval by the local electorate. Santa Clara County Local Transportation Authority v. Guardino, 11 Cal.4th 220; McBrearty v. City of Brawley, 59 Cal.App.4th 1441. Government Code Section 26912 and former Revenue and Taxation Code Section 2237, now Revenue and Taxation Code Sections 93 and 95 et seq., which were enacted to implement Article

XIII A of the Constitution and under which counties could levy the 1 percent property tax allowed under Article XIII A and distribute the revenues to local agencies but only to those agencies that levied a property tax during the 1977–78 fiscal year, was not unconstitutional under this section. Revenue and Taxation Code Section 93(b), which provides that a county must levy an ad valorem tax on taxable assessed value, does not itself impose the tax, but properly delegates that function to the counties. The maximum rate of taxes is established in Article XIII A, Section 1 of the Constitution, not in the statute, and this section provides that the Legislature may authorize local governments to impose taxes for local purposes. City of Rancho Cucamonga v. Mackzum, 228 Cal.App.3d 929. This section does not preclude the State from shifting property tax revenues from local governments to schools. Article XIII A, Section 1, Subdivision (a), which provides that property taxes shall be apportioned according to law, removed any doubt concerning the State's power to allocate property tax revenue among entities funded by such revenues. Los Angeles County v. Sasaki, 23 Cal.App.4th 1442.

Decisions Under Former Article XIII, Section 37.

Construction.—This section does not require a city to spend all its tax funds during the year for which they are collected. Consequently, a tax is not invalid by reason of the fact that the tax rate is far in excess of that required to meet estimated expenditures. Rancho Santa Anita, Inc. v. City of Arcadia, 20 Cal.2d 319.

Municipal taxation.—This section delegates the whole subject of county and municipal taxation to the corporate authorities thereof; and the Legislature has no power to impose any tax whatever within those territories for local purposes. San Francisco v. Liverpool etc. Insurance Co., 74 Cal. 113.

The term "corporate authorities" in this section, as applied to municipalities, must be construed as referring to the legislative department of the municipality only. Accordingly, the power to levy a tax cannot be vested in any other authority of the local corporation than the body in which is vested its legislative power. Board of Education v. Board of Trustees, 129 Cal. 599, 604.

The power of a county or other public corporation to impose taxes is only that which is granted by the Legislature. Hughes v. Ewing, 93 Cal. 414.

The Constitution, by prohibiting the Legislature from imposing taxes for municipal purposes and by authorizing cities of sufficient population to adopt freeholder's charters, vests in such cities, by necessary implication, the power of taxation. Security Savings Bank v. Hinton, 97 Cal. 214.

A local board cannot be authorized to impose taxes and assessments for a public (as distinguished from local) purpose People v. Parks, 58 Cal. 624.

The Municipal Investment Bond Act (Stats. 1915, p. 109), which authorizes a municipal corporation to issue bonds to purchase improvement district bonds of the city and requires the Investment Bond Fund to be used for investment and reinvestment only, contravenes this section. The act constitutes an attempt to confer upon municipalities the power and authority to levy taxes for a purpose which in no way benefits the municipality or its taxpayers and which cannot be held to be municipal. City of Redwood City v. Myers, 7 Cal.2d 283.

Public and local purpose.—An act imposing a license fee on the business of motor transportation, the money to be divided between the counties and the State, is not unconstitutional under this section as it carries out a state purpose. Bacon Service Corp. v. Huss, 199 Cal. 21.

The provisions of the Improvement Bond Act of 1915 (now Streets and Highways Code Section 8500, et seq.) providing for the levy of municipal taxes to pay the purchase price of property sold to the city for delinquent assessments on improvement bonds, do not impose a tax upon the property within the city for a municipal purpose in violation of this section. These sections of the Bond Act merely fix the liability of the city to pay for the property purchased when sold because of delinquent assessments, and require the city to levy and collect taxes in an amount suitable for such purpose. American Co. v. City of Lakeport, 220 Cal. 548; Union Safe Deposit Bank v. City of Menlo Park, 3 Cal.2d 264; Thompson v. City of La Mesa, 9 Cal.App.2d 542.

Formation of health districts is a public purpose. Stuckenbruck v. Board of Supervisors, 193 Cal. 506, Semble. Water Storage Districts, Tarpey v. McClure, 190 Cal. 593; Henshaw v. Foster, 176 Cal. 507.

Generally the question of sanitation is a municipal affair. But in many instances it is one of broader scope which cannot be handled adequately by the municipal authorities of a single town. Hence, it falls within the class of public purposes such as irrigation and reclamation, for which the Legislature has the undoubted authority to provide governmental agencies or districts. Pixley v. Saunders, 168 Cal. 152, 160. See also, In re Werner, 129 Cal. 567.

As to how far the Legislature may go in the exercise of its power of providing for the general welfare of the state in requiring acts of counties which involve the assessment and collection of taxes for their fulfillment, see Macmillan Co. v. Clarke, 184 Cal. 491, holding that the Legislature could require the furnishing by counties of free textbooks in high schools. See also, People v. Lodi High School District, 124 Cal. 694; McCabe v. Carpenter, 102 Cal. 469; Boss v. Lewis, 33 Cal.App. 792; Gadd v. McGuire, 69 Cal.App. 347.

The provisions of the Santa Barbara County Water Agency Act giving the agency the power to levy ad valorem taxes on all property in the agency, including all property in the city of Santa Barbara and in four county water districts, do not violate this section, since the purpose served by the agency, the conservation and beneficial use of water resources, is more than a municipal purpose. This section is also not violated by a provision of the act giving the agency the power to levy a special tax solely within a defaulting member unit to cure the defaulted obligation owing to the agency, such levy being a protection for the agency and not local as to the member units. Santa Barbara County Water Agency v. All Persons, 47 Cal.2d 699.

School taxes.—School districts are a part of the county organization. Hence, the Legislature cannot levy a tax upon the property of the inhabitants of a school district for school purposes. Nor can the Legislature prescribe a procedure for the levying of such a tax without leaving some discretion in regard to it to the local authorities. McCabe v. Carpenter, 102 Cal. 469. See also, Hughes v. Ewing, 93 Cal. 414.

License taxes.—License taxes for revenue are within the prohibition of this section. Ex parte Jackson, 143 Cal. 564. Such taxes may be imposed by a municipality. In re Guerrero, 69 Cal. 88. License taxes have been approved in the following instances: sheep business ( El Dorado County v. Meiss, 100 Cal. 268); liquor vending ( Ventura County v. Clay, 112 Cal. 65; Ex parte Mansfield, 106 Cal. 400; Sacramento v. Dillman, 102 Cal. 107; In re Lawrence, 69 Cal. 608; but see, Merced County v. Helm, 102 Cal. 159).

The Legislature cannot impose a license tax for the benefit of the county on those engaged in certain trades within the county, People v. Martin, 60 Cal. 153; San Francisco v. Liverpool etc. Insurance Co., 74 Cal. 113.

But the section does not restrain the Legislature from passing an act prohibiting counties and municipalities from levying license taxes for revenue. Ex parte Pfirrmann, 134 Cal. 143.

Taxes.—The Legislature, in prescribing a minimum wage for state and local public works, is not imposing a tax within the meaning of this section. Metropolitan Water District of Southern California v. Whitsett, 215 Cal. 400.

It is not contrary to the provisions of this section for the Legislature to provide that property remain subject to assessments levied against it by an improvement district until such assessments are paid, even though a city enters and devotes the land to public use, since it is not the imposition of a tax on the city by the Legislature but a provision whereby improvement districts may be created. A city entering upon property within a district created under the Acquisition and Improvement Act of 1925 (Stats. 1925, p. 849) after the imposition of assessments is in the same position that it would occupy if it had owned the property and consented to the obligation at the time it was created. City of Pasadena v. Chamberlain, 1 Cal.App.2d 125.

Tax appropriated to cities and counties for state purposes.—The provision of the Vehicle License Fee Law (Revenue and Taxation Code Section 10701, et seq.) which appropriates a certain percentage of the revenues derived from the tax to cities and cities and counties and expressly provides that the moneys shall be expended for law enforcement and the regulation and control and fire protection of highway traffic, does not violate this section prohibiting the Legislature from taxing the cities or counties, or the inhabitants thereof, for local purposes. The purposes enumerated in the statute are state purposes. This constitutional provision does not prohibit state taxation for state purposes, even though, under some circumstances, the purpose could also be local. City of Los Angeles v. Riley, 6 Cal.2d 621. Section 9(c) of said act, which appropriates a certain percentage of the revenues derived from the tax to counties and cities and counties but fails to define expressly the purposes for which the counties must expend the moneys so allocated to them, does not violate this section. Section 9(c) must be construed together with the limitation found in the Constitution and as so construed the section appropriates money to counties for state purposes. Los Angeles County v. Riley, 6 Cal.2d 625.

Full cash value.—Article XI, Section 12, does not prohibit the assessment of taxable property by a county at a uniform fraction or ratio of its full cash or market value. Michels v. Watson, 229 Cal.App.2d 404. (Section 12 of Article XI was renumbered Section 37 of Article XIII by amendment adopted in 1970.)

The requirement that property shall be assessed "at its full cash value" must be interpreted in the light of the settled meaning of the predecessor statute to authorize assessment at a uniform fraction of full cash value. Sacramento County v. Hickman, 66 Cal.2d 841.

The assessor correctly considered the full economic rental value of real property subject to a lease even though the actual rental income was below the economic rental. Clayton v. Los Angeles County, 26 Cal.App.3d 390.

"Full cash value", as used in this section, requiring that, with certain exceptions, property be taxed at its "full cash value," means market value. Union Oil Co. v. Ventura County, 41 Cal.App.3d 432.

Delegation of taxing power.—The power of a general law city to assess and collect taxes for local and municipal purposes is vested in the city council, which has no authority to delegate or abandon such power to the city electorate. A proposed ordinance providing for the assessment and collection of such taxes submitted by the city council to the electorate through the initiative process is a nullity. Myers v. City Council of Pismo Beach, 241 Cal.App.2d 237.

Vessels.—Unless an ocean-going vessel has an actual situs elsewhere, the county of its home port has the power to assess and collect tax based upon its full cash value, although the vessel may be outside the state for part of the tax year. Star Kist Foods v. Byram, 241 Cal.App.2d 313.