City and County of San Francisco v. County of San Mateo

MOSK, J., Concurring.

I agree with the majority’s conclusion in part III that article XIII A of the California Constitution applies to property owned by a local government outside its boundaries. Having so concluded, I would not contort our interpretation of article XIII, section 11 (hereafter section 11), in an attempt to reconcile it with article XIII A. I would instead recognize frankly that article XIII A has effected at least a partial repeal of section 11.

The majority state: “On their faces, article XIII A and section 11 do not present any irreconcilable conflict. Section 11 only sets an upper limit on the valuation for tax purposes of property owned by local governments. . . . Article XIII A, too, only sets an upper limit on the valuation ... of real property ....’’ (Maj. opn., ante, at p. 567.) Yet section 11 undoubtedly does more than set an upper limit on the valuation for tax purposes of extraterritorial local government property. It also authorizes the taxing jurisdiction to tax that property up to that upper limit. As such, section 11 directly conflicts with article XIII A.

Section 11, the predecessor of which was approved by the voters in 1968, limits the maximum assessment of extraterritorial property outside of Mono and Inyo Counties by an amount that “does not exceed” the lower of (1) its *575 fair market value times the prevailing percentage of fair market value at which other lands are assessed or (2) a figure derived by multiplying the property’s 1967 assessed value by the so-called “Phillips factor.” The Phillips factor is intended to reflect the statewide inflation in the assessed value of land, and, according to testimony at trial, averaged an annual 8.37 percent from 1975 to 1988. The majority take the position that the ceiling on the assessment of such property set forth in section 11 is nothing more than a ceiling, and that a constitutional amendment which provides for a lower assessment ceiling is consistent with section 11.

I disagree. The only plausible reading of section 11 is that it mandates a cap on local government taxation of extraterritorial property and grants local governments the authority to tax up to that cap. The phrase “does not exceed” refers to the local government’s capacity to value property at a lower rate than that provided by the two formulae, not the capacity of the Legislature, or of the people acting legislatively, to mandate a lower rate.

Any ambiguity on this point is resolved by examination of the ballot arguments to the predecessor of section 11. (See Voters for Responsible Retirement v. Board of Supervisors (1994) 8 Cal.4th 765, 772 [ 35 Cal.Rptr.2d 814 , 884 P.2d 645 ] [courts may consult ballot arguments of constitutional amendments for indicia of voter intent].) The purpose of this predecessor provision was to establish “a state-wide formula so [the] assessed valuation [of extraterritorial property] will increase at a similar rate to the general increase in property values throughout the State—an estimated 5 per cent each year. [¶] This measure will assure continuance of an adequate tax base related to these lands. It will also assure public agencies owning the property that their citizens will not bear more than an equitable share of taxes levied in the taxing counties.” (See Ballot Pamp., Proposed Amends, to Cal. Const, with arguments to the voters, Gen. Elec. (Nov. 5, 1968) [hereafter Ballot Pamphlet], argument of Sen. Moscone in favor of Prop. 2, p. 7, italics added.)

As the language of the ballot argument suggests, section 11 represents an effort to reconcile the competing needs of taxed and taxing local jurisdictions. But how can section 11 “assure continuance of an adequate tax base” (Ballot Pamp., supra, argument of Sen. Moscone in favor of Prop. 2, p. 7) for the government entities levying taxes if it was not meant as a floor as well as a ceiling, precluding subsequent state legislation that would dictate either a higher or a lower valuation of extraterritorial property?

Article XIII A, passed as Proposition 13 in 1978, adopts a different method of valuing real property. Section 2 of that article establishes a base *576 year of 1975-1976, and provides for a 2 percent maximum increase per year, until the property is sold and a new base year is established. The 2 percent inflation allowance is considerably less than the inflation allowance permitted by the Phillips factor under section 11, which is tied to the statewide average per capita assessed value of land. To state the obvious, section 11 and article XIII A set forth alternative, conflicting, methods of assessing the value of real property. There is little doubt that if article XIII A had been passed as a statute rather than a constitutional amendment, it would have been construed as being more restrictive of local government taxing power than section 11, and therefore inapplicable to the assessment of property governed by section 11. The fact that article XIII A is in constitutional rather than statutory form does not alter the fact that the two provisions are in conflict, and that courts must choose between them to determine the proper method of assessing extraterritorial property.

The choice of which constitutional amendment prevails becomes clear once the purpose of section 11 is recalled. That purpose, as alluded to above, was to ensure “[e]quity in taxation” by tying the valuation of extraterritorial local government property, which is often difficult to assess, to the valuation of private property. (Ballot Pamp., supra, argument of Sen. Moscone in favor of Prop. 2, at p. 7.) Section 11 represents a constitutional compromise based on the then-existent property tax scheme; it was, in effect, a form of tax relief for local government entities that owned extraterritorial property. (See Ballot Pamp., supra, argument of Sen. Dolwig and Assem. Ryan against Prop. 2, p. 8.) But article XIII A, passed a few years later, provided much more comprehensive, and extensive, property tax relief. If article XIII A, which purports to encompass virtually all real property, did not repeal section 11, then the employment of the latter’s valuation method would result in a substantially faster rate of tax increase for local government property than for similarly situated private property—precisely the disparity that section 11 was originally designed to correct. Thus, an examination of the evident aim of section 11 itself leads to the conclusion that its own property tax reform provisions were rendered obsolete by the passage of the more sweeping property tax reform found in article XIII A.

The implied repeal of a constitutional provision is disfavored. (Board of Supervisors v. Lonergan (1980) 27 Cal.3d 855, 868 [ 167 Cal.Rptr. 820 , 616 P.2d 802 ].) We have held that article XIII A did not represent a comprehensive revision of state taxation, and therefore did not, as a rule, impliedly repeal the special property tax provisions found in article XIII that predated its passage. (27 Cal.3d at pp. 868-869; see also ITT World Communications, Inc. v. City and County of San Francisco (1985) 37 Cal.3d 859 [ 210 Cal.Rptr. *577 226 , 693 P.2d 811 ].) Yet it is also a fundamental maxim of constitutional law that a provision or provisions should not be interpreted so as to produce an unreasonable result. (See Pollack v. Hamm (1970) 3 Cal.3d 264, 273 [ 90 Cal.Rptr. 181 , 475 P.2d 213 ].) If there ever was an exception to the rule against implied repeal it is in this unusual situation in which, because of the changed circumstance of a new constitutional amendment, the purpose behind the provision being repealed would actually be thwarted if that provision were allowed to stand.

Because I find that article XIII A impliedly repealed section 11, at least that portion of section 11 pertaining to land outside of Mono and Inyo Counties, I concur in the holding of the majority that article XIII A governs the valuation of extraterritorial local government property in Alameda and San Mateo Counties, and therefore concur in the majority’s judgment.