Laws, Regulations & Annotations
Property Taxes Law Guide – Revision 2016
California Constitutional Provisions
Article XIII A Tax Limitation
Section 1. Maximum ad valorem tax on real property. (a) The maximum amount of any ad valorem tax on real property shall not exceed one percent (1%) of the full cash value of such property. The one percent (1%) tax to be collected by the counties and apportioned according to law to the districts within the counties.
(b) The limitation provided for in subdivision (a) shall not apply to ad valorem taxes or special assessments to pay the interest and redemption charges on any of the following:
(1) Indebtedness approved by the voters prior to July 1, 1978.
(2) Bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast by the voters voting on the proposition.
(3) Bonded indebtedness incurred by a school district, community college district, or county office of education for the construction, reconstruction, rehabilitation, or replacement of school facilities, including the furnishing and equipping of school facilities, or the acquisition or lease of real property for school facilities, approved by 55 percent of the voters of the district or county, as appropriate, voting on the proposition on or after the effective date of the measure adding this paragraph. This paragraph shall apply only if the proposition approved by the voters and resulting in the bonded indebtedness includes all of the following accountability requirements:
(A) A requirement that the proceeds from the sale of the bonds be used only for the purposes specified in Article XIIIA, Section 1(b) (3), and not for any other purpose, including teacher and administrator salaries and other school operating expenses.
(B) A list of the specific school facilities projects to be funded and certification that the school district board, community college board, or county office of education has evaluated safety, class size reduction, and information technology needs in developing that list.
(C) A requirement that the school district board, community college board, or county office of education conduct an annual, independent performance audit to ensure that the funds have been expended only on the specific projects listed.
(D) A requirement that the school district board, community college board, or county office of education conduct an annual, independent financial audit of the proceeds from the sale of the bonds until all of those proceeds have been expended for the school facilities projects.
(c) Notwithstanding any other provisions of law or of this Constitution, school districts, community college districts, and county offices of education may levy a 55 percent vote ad valorem tax pursuant to subdivision (b).
History.—The amendment of June 3, 1986, added "(1)" before "any" and substituted "July 1, 1978, or (2) any bonded indebtedness . . . voting on the proposition" for "the time this section becomes effective" after "prior to" in the first sentence of subdivision (b). The amendments of November 8, 2000, (Proposition 39), added "any of the following;" after "redemption charges on" in the first sentence of subdivision (b); substituted a period for ", or" after "prior to July 1, 1978" and deleted "any" before "Indebtedness approved by" in the first sentence of paragraph (1) of subdivision (b); deleted "any" before "Bonded indebtedness for" in the first sentence of paragraph (2) of subdivision (b); added paragraph (3) to subdivision (b); and added subdivision (c).
Notes.—Proposition 39, effective November 8, 2000, provides the following:
SECTION 1. TITLE
This act shall be known as the Smaller Classes, Safer Schools and Financial Accountability Act.
SEC. 2. FINDINGS AND DECLARATIONS
The people of the State of California find and declare as follows:
(a) Investing in education is crucial if we are to prepare our children for the 21st Century.
(b) We need to make sure our children have access to the learning tools of the 21st Century like computers and the Internet, but most California classrooms do not have access to these technologies.
(c) We need to build new classrooms to facilitate class size reduction, so our children can learn basic skills like reading and mathematics in an environment that ensures that California's commitment to class size reduction does not become an empty promise.
(d) We need to repair and rebuild our dilapidated schools to ensure that our children learn in a safe and secure environment.
(e) Students in public charter schools should be entitled to reasonable access to a safe and secure learning environment.
(f) We need to give local citizens and local parents the ability to build those classrooms by a 55 percent vote in local elections so each community can decide what is best for its children.
(g) We need to ensure accountability so that funds are spent prudently and only as directed by citizens of the community.
SEC. 3. PURPOSE AND INTENT
In order to prepare our children for the 21st Century, to implement class size reduction, to ensure that our children learn in a secure and safe environment, and to ensure that school districts are accountable for prudent and responsible spending for school facilities, the people of the State of California do hereby enact the Smaller Classes, Safer Schools and Financial Accountability Act. This measure is intended to accomplish its purposes by amending the California Constitution and the California Education Code:
(a) To provide an exception to the limitation on ad valorem property taxes and the two-thirds vote requirement to allow school districts, community college districts, and county offices of education to equip our schools for the 21st Century, to provide our children with smaller classes, and to ensure our children's safety by repairing, building, furnishing and equipping school facilities;
(b) To require school district boards, community college boards, and county offices of education to evaluate safety, class size reduction, and information technology needs in developing a list of specific projects to present to the voters;
(c) To ensure that before they vote, voters will be given a list of specific projects their bond money will be used for;
(d) To require an annual, independent financial audit of the proceeds from the sale of the school facilities bonds until all of the proceeds have been expended for the specified school facilities projects; and
(e) To ensure that the proceeds from the sale of school facilities bonds are used for specified school facilities projects only, and not for teacher and administrator salaries and other school operating expenses, by requiring an annual, independent performance audit to ensure that the funds have been expended on specific projects only.
SEC. 7. CONFORMITY
The Legislature shall conform all applicable laws to this act. Until the Legislature has done so, any statutes that would be affected by this act shall be deemed to have been conformed with the 55 percent vote requirements of this act.
SEC. 8. SEVERABILITY
If any of the provisions of this measure or the applicability of any provision of this measure to any person or circumstances shall be found to be unconstitutional or otherwise invalid, such finding shall not affect the remaining provisions or applications of this measure to other persons or circumstances, and to that extent the provisions of this measure are deemed to be severable.
SEC. 9. AMENDMENT
Section 6 of this measure may be amended to further its purpose by a bill passed by a majority of the membership of both houses of the Legislature and signed by the Governor, provided that at least 14 days prior to passage in each house, copies of the bill in final form shall be made available by the clerk of each house to the public and the news media.
SEC. 10. LIBERAL CONSTRUCTION
The provisions of this act shall be liberally construed to effectuate its purposes.
Construction.—As used in Article XIII A, an ad valorem tax is any source of revenue derived from applying a property tax rate to the assessed value of property. Heckendorn v. City of San Marino, 42 Cal.3d 481. Subdivision (b) excludes from the operation of subdivision (a) taxes levied to pay any indebtedness approved by the voters, not just taxes levied to pay bonded indebtedness. Shasta County v. Trinity County, 106 Cal.App.3d 30. Real property annexed to a water district after passage of this section is subject to an ad valorem tax in excess of one percent to pay interest and redemption charges on indebtedness of the district approved by the voters prior to that date, despite the fact that the property annexed was not included within the territory served by the district at the time the indebtedness was approved. Metropolitan Water District v. Dorff, 98 Cal.App.3d 109. An assessment on real property in the area served by a water agency to make up a deficiency incurred by the agency as a result of its purchases and resales of water does not violate the maximum tax limitation where the contract between the agency and the seller, approved by county voters, authorized a tax or assessment sufficient to provide for all payments under the contract. Kern County Water Agency v. Board of Supervisors, 96 Cal.App.3d 874. Ad valorem real property taxes levied by a local water agency to help fund the agency's payments on its water supply contract with the Department of Water Resources were levied to pay an indebtedness approved by the state's voters before July 1, 1978, and come within the exception to the restriction of subdivision (b). Goodman v. Riverside County, 140 Cal.App.3d 900. The one percent maximum tax limitation does not apply to special assessments levied pursuant to Streets & Highway Code, sections 5000 et seq. and 10000 et seq. Fresno County v. Malmstrom, 94 Cal.App.3d 974. Streets and Highway Code Section 5302.5 does not authorize a county to impose ad valorem property taxes beyond the one percent limitation of subdivision (a) to pay a special assessment imposed on public property. City of San Marcos v. Board of Supervisors, 159 Cal.App.3d 355.
Nonvoted special assessments for local improvements that directly benefit the property assessed do not come within the 1 percent limitation on the taxation of real property. Solvang Municipal Improvement District v. Board of Supervisors, 112 Cal.App.3d 545. City Council of the City of San Jose v. South, 146 Cal.App.3d 320. Ad valorem special assessments or special benefit assessments levied by a flood control district, Department of Water Resources, or Reclamation Board must be collected by the county either on an equalized ad valorem roll basis or by levy of a proportionate special benefit assessment, and the adoption of Article XIII A did not alter the county's statutory obligation to do so. American River Flood Control District v. Sayre; The People ex rel. Department of Water Resources v. Board of Supervisors, 136 Cal.App.3d 347.
Levy of ad valorem tax to meet city's obligations to the Public Employee's Retirement System is not subject to the 1 percent limitation on the taxation of real property. The term "indebtedness", as traditionally understood, covered the obligations arising under the city's pension plan, and the phrase "interest and redemption charges" denotes no more or less than the sums from time to time necessary to avoid default on obligations to pay money, including those for pensions. Carman v. Alvord, 31 Cal.3d 318. Only "indebtedness", the principal sum of bonds, must have been approved by the voters prior to the passage of this section, not "interest and redemption charges", and water district could issue bonds after passage of the section at an interest rate greater than that approved by the voters prior to passage of the section. Metropolitan Water District v. Dorff, 138 Cal.App.3d 388. A city's obligations arising under pension systems constitute an "indebtedness" and the sums paid by the city to avoid default thereon constitute the payment of "interest and redemption charges", and once indebtedness is found to have had the voters' prior approval, taxes levied to pay the obligations arising thereunder are exempt from the limitation and need not also be approved by the voters. Valentine v. City of Oakland, 148 Cal.App.3d 139. A 1983 ordinance imposing a property tax to meet city's obligations to its retirement system is not subject to the one percent limitation on the taxation of real property where city charter approved by the voters in 1957 provided for retirement benefits being mandated at the level then existing by ordinance and the proceeds from the tax were to be used to fund the level of benefits in existence in 1957. City of Fresno v. Superior Court, 156 Cal.App.3d 1137. A city charter provision, adopted in 1937, requiring the city to provide for a tax of 7 cents on each $100 of assessed valuation for the support of the city's libraries, created an "indebtedness" exempt from the limitation. An "indebtedness" may be created by statute rather than by contract, and the critical consideration in determining whether a city has created an "indebtedness" is whether its voters obligated themselves prior to 1978 to make expenditures in the future for a specified purpose. Patton v. City of Alameda, 40 Cal.3d 41.
City was entitled to receive a proportionate share of delinquent penalties by virtue of its right to share in property taxes collected by County, as provided for in subdivision (a). In the absence of legislative directive providing otherwise, the delinquent penalties followed the taxes. City of Los Angeles v. Los Angeles County, 139 Cal.App.3d 999.
Pension plan contributions made by city to PERS through the imposition of additional property taxes are an obligation constituting an indebtedness approved by the voters within the meaning of Article XIII A, such indebtedness is not limited to an indebtedness that was fixed and certain at the time of voter approval since changes in contributions were envisaged and approved by the voters, and Article XIII A does not prohibit levy and collection of such taxes. City of Watsonville v. Merrill, 137 Cal.App.3d 185. A water district which had authorized, in 1964, $3.2 million in bonds pursuant to former Water Code Section 71931, but which had issued only $1.7 million of the bonds prior to the passage of this section, had the authority to issue the remaining $1.5 million of the bonds. Pursuant to former Section 71931, the bonds were "approved" by district landowners by means of their failure to register disapproval against their issuance, and although the landowners were not necessarily residents of the district, they were, as holders of title, "voters" for purposes of incurring the bonded indebtedness, pursuant to present Section 71931. Thus, the unissued bonds come within the exception to the restriction of subdivision (b). Las Virgenes Municipal Water District v. Dorgelo, 154 Cal.App.3d 481.
As used in subdivision (b), "indebtedness" refers to an actual debt of an amount certain for money already received, such as upon the sale of construction or improvement bonds, and to be repaid in periodic payments in installments upon principal and interest with the intent and purpose of redeeming the original debt, and successful school district tax override measures that antedated Article XIII A do not constitute the kind of "indebtedness" provided for therein so as to allow school districts with existing override tax rates to continue to collect taxes beyond the limits imposed by Article XIIIA. Arvin Union School District v. Ross, 176 Cal.App.3d 189. The passage of a new city charter by the voters of a city in July of 1978 did not constitute prior voter approval of excess taxation for retirement benefits added after 1978. Excess taxation for added retirement benefits violated this article. Howard Jarvis Taxpayers Association v. Orange County, 110 Cal.App.4th 1375.
1978–79 Secured roll.—The Tax Injunction Act, 28 U.S.C. § 1341, barred federal court consideration of plaintiff's action challenging the constitutionality of Article XIII A and seeking refund of property taxes. Marvin F. Poer and Co. v. Alameda County, 725 F.2d 1234.
1978–79 Unsecured roll.—Sections 1(a) and 2(a) were not applicable to property taxed on the unsecured portion of the assessment roll for the tax year 1978–79. Taxes on unsecured property, both real and personal, were to be assessed at the prior year's rate for the secured roll as provided by Article XIII, Section 12 of the Constitution. Board of Supervisors v. Lonergan, 27 Cal.3d 855; R. E. Hanson, Jr. Mfg. v. Los Angeles County, 27 Cal.3d 870. The application of this article to the unsecured tax rolls can be determined in refund actions by individual taxpayers pursuant to Revenue and Taxation Code Section 5140, and plaintiffs were not entitled to preliminary injunctive relief enjoining county officials from spending funds allegedly collected in violation of the one percent limitation on the taxation of real property established by this section. Daar v. Alvord, 101 Cal.App.3d 480.
Apportionment.—This article expressly authorizes the Legislature to apportion property tax revenues. San Miguel Consolidated Fire Protection District v. Davis, 25 Cal.App.4th 134.
Newly constructed property.—The supplemental assessment provisions of Revenue and Taxation Code Section 75.12, which delay the supplemental assessment of newly constructed property held for sale until it changes ownership or is rented, leased, or otherwise used by the owner, do not violate this section. Shafer v. State Board of Equalization, 174 Cal.App.3d 423.
Payment of money judgments.—The initiative limitations on taxing and spending contained in Article XIII A, Article XIII B, and Article XIII C do not preclude judicial enforcement by writ of mandate of a judgment imposing inverse condemnation liability, an obligation imposed by statutory law. Payment of such a judgment does not implement a municipal "purpose" within the meaning of the Articles' provisions; rather, such payment acts solely to vindicate the constitutional rights of the landowner. F & L Farm Co. v. City Council of the City of Lindsay, 65 Cal.App.4th 1345. This article prohibits a county from levying property taxes in excess of 1 percent to pay a money judgment under Harbors and Navigation Code Section 6361 and Government Code Sections 970 through 971. Although Section 6361 authorizes a board of supervisors to levy a special tax sufficient to meet a port district's annual estimate of the amount of money it will need "for all purposes," that statute has been superseded by the statutes implementing Proposition 13 insofar as they are inconsistent. Formulae for the distribution of tax funds to local agencies and districts have been enacted by the Legislature (Rev. & Tax. Code, Sec. 93 et seq.), and a district can no longer expect a county to levy taxes to raise whatever sum the district budget calls for. (Disapproving F & L Farm Co. v. City Council, 65 Cal.App.4th 1345 to the extent it holds to the contrary.) Ventura Group Ventures, Inc. v. Ventura Port District, 24 Cal.4th 1089.
Non-ad valorem general property tax.—A "parcel tax" consisting of an annual flat fee assessed against property holdings in a city, which tax was designed to raise revenue for deposit in the city's general fund for municipal services, is a non-ad valorem general property tax and invalid under this section where it fell due annually at fixed times and it was not apportioned by the type and extent of municipal services used. City of Oakland v. Digre, 205 Cal.App.3d 99.
Change in ownership.—When a sole owner of real property created a joint tenancy with his brother, no change in ownership occurred under Revenue and Taxation Code Section 65, subdivision (b). However, subsequent to the creation of the joint tenancy, when one of the joint tenants terminated the joint tenancy by transferring his joint tenancy interest to himself as a tenant in common, a 50 percent change in ownership occurred. Benson v. Marin County Assessment Appeals Board (2013) 219 Cal.App.4th 1445.