Laws, Regulations & Annotations
Property Taxes Law Guide – Revision 2016
California Constitutional Provisions
Article XIII A Tax Limitation
Sec. 4. Imposition of special taxes. Cities, Counties and special districts, by a two-thirds vote of the qualified electors of such district, may impose special taxes on such district, except ad valorem taxes on real property or a transaction tax or sales tax on the sale of real property within such City, County or special district.
Construction.—This section is not self-executing but requires enabling legislation. California Building Industry Ass'n. v. Governing Board of the Newhall School District, 206 Cal.App.3d 212. An ad valorem tax levied to meet a city's pension obligation, not subject to the 1 percent limitation of Section 1(b), cannot be construed to fall within this section. Carman v. Alvord, 31 Cal.3d 318. A proposed city initiative ordinance defining "special tax" was invalid since "special tax" had already been defined by judicial decision and by statute and was also invalid as an unlawful attempt to impair essential governmental functions through interference with administration of the city's fiscal powers. City of Atascadero v. Daly, 135 Cal.App.3d 466. A county sales tax measure is a general tax as a matter of law and hence, not subject to the voter approval requirements applicable to special taxes under this section. Coleman v. Santa Clara County, 64 Cal.App.4th 662. A redevelopment agency is not a special "district" within the meaning of this section since it does not have the power to levy (impose and collect) taxes. Thus, a sales and use tax ordinance adopted by a redevelopment agency did not violate the section. Huntington Park Redevelopment Agency v. Martin, 38 Cal.3d 100. The supplemental assessment provisions of Revenue and Taxation Code Sections 75.10 and 75.11 only affect the time at which existing real property taxes are calculated and imposed and thus, they do not impose new ad valorem taxes in violation of this section. Shafer v. State Board of Equalization, 174 Cal.App.3d 423. This section was intended to assure effective property tax relief by restricting the taxing power of local governments. This is so because any tax savings resulting from Article XIII A could be withdrawn or depleted by additional or increased state or local levies of taxes other than property taxes. Rider v. San Diego County, 1 Cal.4th 1.
Effective date.—An ordinance imposing a transfer tax which became operative on June 29, 1978, was not affected by this section which became effective on July 1, 1978, and thus, was not invalid under the provisions thereof. Pugh v. City of Sacramento, 119 Cal.App.3d 485; Northgate Partnership v. City of Sacramento, 155 Cal.App.3d 65. An ordinance increasing business license taxes enacted on June 29, 1978, and which became effective immediately was not affected by this section which became effective on July 1, 1978. National Independent Business Alliance v. City of Beverly Hills, 128 Cal.App.3d 13.
Qualified voters.—"Qualified electors" include the registered voters of the city who voted in the election and do not include possible affected non-resident property owners. Neilson v. City of California City, 133 Cal.App.4th 1296.
Special district.—A "special district" includes any local taxing agency created to raise funds for city or county purposes to replace revenues lost because of real property tax restrictions of this Article, even if the agency lacks power to impose property taxes. Thus, a county agency formed to impose a sales tax to finance the construction of county justice facilities, upon the approval of a tax ordinance by a majority of county voters, was a special district within the meaning of this section. Rider v. San Diego County, 1 Cal.4th 1. A special district includes any local taxing agency created to raise funds for city or county purposes to replace revenues lost by the restrictions of Article XIII A. However, it is not necessary that the agency be controlled by the city or county; it need only be controlled by an entity subject to the super-majority requirement of Article XIII A. Thus, the San Francisco Educational Financing Authority, controlled by the city and county unified school district and the community college district, is a special district within the meaning of this section. Hoogasian Flowers, Inc. v. State Board of Equalization, 23 Cal.App.4th 1264. A special library district (Ed. Code § 19600) empowered to levy taxes on property was a "special district" within the meaning of this section and thus subject to the two-thirds' vote requirement thereof, which was not subject to a close scrutiny equal protection analysis. Altadena Library District v. Bloodgood, 192 Cal.App.3d 585. A county repair and projects authority, controlled by the county and created to impose a tax that circumvented this Article, is a "special district", even if it lacks power to levy property taxes. An intent to circumvent may be inferred whenever a new tax agency is essentially controlled by one or more cities or counties that otherwise would have had to comply with the super-majority provisions of this section. Monterey Peninsula Taxpayers Association v. Monterey County, 8 Cal.App.4th 1520. A "special district" includes any local taxing agency created to raise funds for city or county purposes to replace revenues lost by reason of the restrictions of this Article. Thus, under the Orange County Regional Justice Facilities Act and the County Regional Justice Facilities Financing Act, which provide for the adoption and implementation of local sales tax ordinances to fund detention and courthouse facilities upon approval by the voters in specified counties, ordinances not approved by two-thirds of the county's voters are invalid. Howard Jarvis Taxpayers' Assn. v. State Board of Equalization, 20 Cal.App.4th 1598.
A municipal utility district formed prior to the adoption of Article XIII A and not empowered to levy real property taxes is not a special district as defined in Government Code Section 50075 et.seq. Brydon v. East Bay Municipal Utility District, 24 Cal.App.4th 178.
Special taxes.—The term "special taxes" means taxes which are levied for a specific purpose. Thus, a payroll and gross receipts tax, the proceeds of which were placed in the city's general fund for use for general governmental expenditures, is not a "special tax". City and County of San Francisco v. Farrell, 32 Cal.3d 47. A non-ad valorem tax may be imposed upon real property if the tax is a "special" tax dedicated to specific purposes and approved "by a two-thirds vote of the qualified electors of" the city, county, or special district imposing the tax. A special tax can be used for more than one purpose without losing its status as a special tax. Neilson v. City of California City, 133 Cal.App.4th 1296. A special tax is a tax levied for a specific purpose, rather than a levy placed in the general fund to be utilized for general governmental purposes. Thus, a fee imposed upon a developer for the construction of water facilities necessitated by the development of a condominium complex, which fee was not levied for general revenue purposes, was not a special tax. Carlsbad Municipal Water District v. QLC Corporation, 2 Cal.App.4th 479. A special tax is a tax levied to fund a specific governmental project or program, even though, under this definition, every tax levied by a special purpose district or agency would be deemed a special tax. Although City and County of San Francisco v. Farrell, 32 Cal.3d 47, held that the proceeds of a tax placed in a city's treasury for general governmental purposes was not a special tax, that case does not apply to limited purpose agencies. Rider v. San Diego County, 1 Cal.4th 1. A sales tax levied by a county repair and improvement authority was a special tax, even though the tax was intended to fund 27 different projects rather than a specific project. A single tax with specific amounts earmarked for specific projects is different from revenues deposited in the general fund, and the fact that 27 specific taxes are combined in one does not convert the tax into a general tax for general government purposes. Monterey Peninsula Taxpayers Association v. Monterey County, 8 Cal.App.4th 1520.
A "parcel tax", the proceeds of which were to go into the city's general fund for the enhancement and maintenance of municipal services, is not a "special tax". City of Oakland v. Digre, 205 Cal.App.3d 99. A utilities tax, the proceeds of which were placed in the city's general fund for use for general governmental expenditures, including police and fire protection, is not a "special tax". Fenton v. City of Delano, 162 Cal.App.3d 400. A city's tax ordinance providing that the proceeds of the tax were to be paid to the city's general fund to be "used for any and all municipal purposes" was not a special tax, even though most of the proceeds derived from the tax were used for street repairs. Neecke v. City of Mill Valley, 39 Cal.App.4th 946. A facilities fee for connecting an apartment complex to a water system was a "special tax" under this section, requiring a two-thirds vote of the electorate of the district for its enactment. Although the fee, if reasonably related to the cost of the service for which it was imposed, would fall within the scope of the "service" fee defined by Government Code Section 50076, and would thus be outside the definition of "special tax", the district failed to sustain its burden of proving that its fee did not exceed the reasonable cost of providing the service for which it was imposed. Beaumont Investors v. Beaumont-Cherry Valley Water District, 165 Cal.App.3d 227. City's fire hydrant fee ordinances which did not contain language limiting the use of the fees and the fund established by the ordinances solely to those installations and repairs necessitated by new development, as mandated by this section, were constitutionally invalid. Bixel Associates v. City of Los Angeles, 216 Cal.App.3d 1208.
A local school district's levy imposing a "special tax" on all new residential construction in the district to fund new school construction was preempted by the later enacted Government Code Section 65995, part of a larger legislative program for school construction financing. The intent was to make uniform statewide the process of school construction financing and to empower school districts to impose development charges, and allowing the district to collect special taxes to offset development costs in addition to collecting the maximum amount allowed under the statute would upset that intent. Also, a "special tax" is a "charge" that Section 65995 specifically prohibited. Grupe Development Co. v. Superior Court of San Bernardino County, 4 Cal.4th 911.
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. Thus, an ordinance imposing a graduated tax based on the city's zoning and classifications, determined by real property parcel size, was not an ad valorem tax and did not violate Article XIII A but was in accordance with the scheme established in Government Code Section 53978, governing special taxes. Heckendorn v. City of San Marino, 42 Cal.3d 481. "Special tax" as used in this section does not embrace fees charged in connection with regulatory activities when the fees do not exceed the reasonable cost of providing services necessary to the activity for which the fee is charged and are not levied for unrelated revenue purposes. Pennell v. City of San Jose, 42 Cal.3d 365.
Special assessments.—Special assessments charged for improvements to individual properties which do not exceed the benefits the assessed properties receive from the improvements are not special taxes within the meaning of this section. Fresno County v. Malmstrom, 94 Cal.App.3d 974. Special assessments levied for maintaining landscaped median islands on public streets within maintenance district are not special taxes. City Council of the City of San Jose v. South, 146 Cal.App.3d 320. Special assessments levied to finance maintenance for existing parks are not special taxes within the meaning of this section. Public parks confer a special benefit upon property and thus, parks are legitimate subjects for special assessments. Knox v. City of Orland, 4 Cal.4th 132. A special assessment to finance local improvements is not a general or special tax, but the property assessed must receive a special benefit from the improvement funded by the assessment. City of Larkspur v. Marin County Flood Control etc. District, 168 Cal.App.3d 947.
A city ordinance enacted by a charter city that imposed a present lien on undeveloped property to pay in the future an apportioned share of the costs of public facilities required to accommodate the needs of future residents of the property upon development was a special assessment. The ordinance as applied was a valid exercise of the city's power to require undeveloped land to bear the costs of the public facilities necessary for the health and welfare of its future residents. J. W. Jones Companies v. City of San Diego, 157 Cal.App.3d 745. Facilities benefit assessments used to finance public facilities in a new development, including construction of a water line, parks, library, and fire station, conferred a direct benefit on the development properties and were thus special assessments. City of San Diego v. Holodnak, 157 Cal.App.3d 759. County landfill fees imposed by a county to fund landfill improvements pursuant to Health and Safety Code Section 5471 are special assessments. Kern County Farm Bureau v. Kern County, 19 Cal.App.4th 1416.
A sewer capacity fee imposed by a water district to fund capital improvements is a special assessment from which other public entities are exempt (unless there is contrary legislative authority). A state agency such as a school district isresponsible for paying a special assessment such as the capacity fee only when the Legislature authorizes such payment. San Marcos Water District v. San Marcos Unified School District, 42 Cal.3d 154.
Assessments.—Provisions of Streets and Highway Code Section 36500 et seq., and an ordinance authorizing imposition of assessments on businesses for the purposes of general downtown promotions, the furnishing of music, and other expenditures unrelated to capital improvements, did not constitute a special tax under this section, which does not apply to certain revenue-generating procedures employed by local governments or to special assessments. Although the downtown promotion charge was not a true special assessment, that did not necessarily mean it was a special tax. The city and Legislature determined that downtown promotion inures to the benefit of business and landlords within the improvement district because the funds are used to make the downtown area a safer, cleaner, and more economically viable area. Under these circumstances, in which the business license holder who pays the assessment is specially benefitted, the assessment is not a "special tax." Evans v. City of San Jose, 3 Cal.App.4th 728.
Fees.—Fees for county services in processing subdivision, zoning, and other land use applications are not special taxes within the meaning of this section where they do not exceed the reasonable cost of providing services necessary to the regulatory activities for which they are charged and are not levied for unrelated revenue purposes. Mills v. Trinity County, 108 Cal.App.3d 656; California Building Industry Ass'n. v. Governing Board of the Newhall School District, 206 Cal.App.3d 212; Carlsbad Municipal Water District v. QLC Corporation, 2 Cal.App.4th 479. A mitigation fee payable by a developer as a condition of a city's approval of land-use changes allowing building is not a special tax within the meaning of this section. Ehrlich v. City of Culver City, 15 Cal.App.4th 1737. A water rate structure enacted as part of a drought management program is not a special tax within the meaning of this section. Brydon v. East Bay Municipal Utility District, 24 Cal.App.4th 178. Fees charged for the costs of regulatory activities are not special taxes under an Article XIIIA, Section 4 analysis if they do not exceed the reasonable cost of providing services necessary to the activities for which they are charged and they are not levied for unrelated revenue purposes. California Association of Professional Scientists v. Department of Fish & Game, 79 Cal.App.4th 935.
Fees for (or dedication of land to) local school districts to relieve the overcrowding of local school facilities required as a condition of being granted building permits do not violate this section in that they are neither ad valorem taxes on real property nor special taxes within the meaning of the section. Trent Meredith, Inc. v. City of Oxnard, 114 Cal.App.3d 317. Exactions imposed by school districts on developers of new residential housing within the districts, which exactions were proposed to and approved by voters purportedly under the authority of this section, were development fees, not special taxes. While under Government Code Section 50076 a development fee may be treated as a special tax, such will occur only if the fee exceeds the reasonable cost of providing the service for which it is charged and/or if the fee is levied for general revenue purposes, and neither circumstance existed. Being development fees, the fees were preempted by state law because they conflicted with Government Code Sections 53080 and 65995 by taking an amount in excess of the maximum provided for therein. California Building Industry Ass'n. v. Governing Board of the Newhall School District, 206 Cal.App.3d 212. A Fee imposed upon a developer for the construction of water facilities necessitated by the development of a condominium complex, which fee did not exceed the reasonable cost of providing the services, was not levied for general revenue purposes and thus, was not a special tax. Carlsbad Municipal Water District v. QLC Corporation, 2 Cal.App.4th 479. A surcharge on materials deposited in county landfills is not a special tax within the meaning of this section where it does not exceed the reasonably necessary cost of the program it funds and the charges allocated bear a fair or reasonable relationship to the payor's burdens on or benefits from the activity at issue. City of Dublin v. Alameda County, 14 Cal.App.4th 264.
Transit fees imposed on developers of new office buildings as a condition of issuance of certificates of completion and occupancy are not special taxes within the meaning of this section where they are directly related and limited to the cost of increased municipal transportation services engendered by the particular developments. Russ Building Partnership v. San Francisco, 199 Cal.App.3d 1496; Pacific Gateway Assoc. Joint Venture v. San Francisco, 199 Cal.App.3d 1496; Crocker National Bank v. San Francisco, 199 Cal.App.3d 1496. Fees, based on gross receipts, for operation of rental car agencies located off airport premises but serving passengers of county airport are not special taxes within the meaning of this section where the fee was included in the policy considerations adopted when the board was appointed to operate the airport and was merely an authorized fee normally enacted by local governing bodies themselves, not by the voters. Alamo Rent-A-Car, Inc. v. Board of Supervisors, 221 Cal.App.3d 198. Fees based upon square footage, assessed against new developments, and reasonably related to the cost of providing increased services to new developments were not included within the definition of a special tax. Shapell Industries, Inc. v. Governing Board, 1 Cal.App.4th 218.
Tax override elections.—School districts are "special districts" within the meaning of this section, and while school districts were specifically empowered under former Education Code Section 42244 to conduct tax override elections and, if successful, to levy ad valorem property taxes, because the taxes authorized were taxes on real property this section in effect disallowed past and future increases in the revenue limit established by the state pursuant to former Section 42244. Arvin Union School District v. Ross, 176 Cal.App.3d 189.
Documentary transfer tax.—An increase in this tax, which goes into the general fund, is not prohibited by this section because this tax is a general tax. Cohn v. City of Oakland, 223 Cal.App.3d 261. This section does not prohibit the enactment of or increase in a real property transfer tax when the tax is a general, rather than a specific, tax. Furthermore, a transfer tax attaches to the privilege of exercising one of the incidents of property ownership, its conveyance. Such a tax is an excise tax, rather than a property tax, imposed solely on the privilege of disposing of one's property and realizing its actual value. Fielder v. City of Los Angeles, 14 Cal.App.4th 137; Fisher v. Alameda County, 20 Cal.App.4th 120.
Documentary transfer tax revenues.—This section did not prohibit a city incorporated after the effective date thereof and complying with the requirements of Revenue and Taxation Code Section 11911 from sharing in documentary transfer tax revenues collected by the county. The sharing of revenues did not create a new or additional tax in violation of Article XIII A, which did not pertain to the allocation of existing tax revenues. City of Cathedral City v. Riverside County, 163 Cal.App.3d 960.