Appellate Court Holds That Constitution Overrides Statutory Exemption Related to Proposition 218 Assessments; Reclamation Districts Are Permitted to Assess School Districts

by Downey Brand LLP
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In a reversal of a lower court decision, the Third District Court of Appeal has held that the California Constitution’s provisions related to Proposition 218 override a statutory exemption that a school district argued originally precluded a reclamation district from assessing its property.  Manteca Unified School District v. Reclamation District 17 (Third Appellate District, Case No. C077906). Downey Brand filed an amicus brief in support of Reclamation District 17.

Background

Reclamation District 17 (District) is a flood control and drainage district in San Joaquin County.  It assesses property within its boundaries for the costs associated with a levee seepage project.  Manteca Unified School District (Manteca) owns real property within the district’s boundaries. 

The district is governed by Sections 50000 et seq. of the California Water Code, including section 51200, which provides that assessments levied by reclamation districts include all lands within the district “…other than public roads, highways, and school districts.” (Water Code section 51200)

Proposition 218, which was approved by voters in 1996, added to the California Constitution provisions regarding benefit assessments and property-related fees.  Article XIIID, section 4(a) provides that parcels owned by any agency or the State “shall not be exempt from assessment unless the agency can demonstrate by clean and convincing evidence that those publicly owned parcels in fact receive no special benefit.”  Section 1 of Article XIIID clarifies that it does not “[p]rovide any new authority to any agency to impose a tax, assessment, fee, or charge.”

When the District formed its assessment district, landowners approved the assessment by nearly 70 percent, and Manteca voted “yes.”  Manteca then paid its annual assessment billings for the next three fiscal years.  In 2011, Manteca informed the District that it was not required to pay the assessment because Water Code section 51200 exempts school district property from the levy of assessments, and then brought a declaratory relief claim in court seeking reimbursement of the assessment payments it had made.

Court Decision

The trial court held in favor of Manteca, finding that the District’s assessment was invalid under section 51200, because Prop 218 was not intended to provide new authority to local agencies to impose assessments. 

The Court of Appeal reversed, considering at length the interaction between the statutory provision exempting school districts from assessment and the Constitutional provision providing for no exemption unless there is evidence that a parcel receives no special benefit.  Concluding that the passage of Proposition 218 changed the rules pertaining to exemptions from assessment, the Court noted that the Constitutional provision “supersedes section 51200 in both time and stature.” 

The Court disagreed with Manteca’s argument that the District simply lacked authority to assess it, and Prop 218 by its own language did not add such authority.  Prop 218 was narrowly tailored with respect to exemptions from assessment by “conditioning the continuation of any existing exemption from an existing assessment authority upon a showing of no special benefit.”

The Court treated section 51200’s exemption of school districts as an exemption from the District’s general authority to assess public property, not as stating that there was no authority, and noted that Manteca’s argument that an exemption means no authority would make article XIII D of the Constitution meaningless. 

This case answers an important question about the apparent inconsistency between the Constitution’s provision on Prop 218 and statutory provision exempting certain properties from assessment.  Assessing agencies have legitimate concerns about their Prop 218 liability in the context of a property owner refusing to pay an assessment, because arguably other property owners’ payments would no longer be proportional to their benefit, and this is an important requirement of Prop 218.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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