School Districts’ ‘Special Tax’ Remains Invalid

The state Supreme Court dealt a setback Thursday to school districts in fast-growing communities, limiting their ability to impose special taxes or fees on developers to pay the full costs of educational facilities.

The justices, over one dissent, refused to hear a challenge to a ruling last November by a state Court of Appeal that struck down a voter-approved tax of as much as $6,300 on each new home built within five districts in the Santa Clarita Valley.

The three-judge appeal court held that the tax was invalid either as a “special tax” allowed with two-thirds voter approval under Proposition 13 or as a “development fee” that schools may impose, but only up to $1.50 a square foot of a new residence.

The panel ruled further that the tax was illegal because it was not imposed uniformly on residents and property owners throughout the community, but would be borne only by developers and future residents.

The high court’s action, taken in a brief order issued Thursday, means the appellate ruling becomes binding on trial courts throughout the state. Only Justice Stanley Mosk voted to review the appellate court decision--leaving the matter three votes short of the number required.

The case had drawn wide attention in the wake of a flurry of recent efforts by local governmental agencies to impose fees on developers to provide for schools, roads and other facilities required by rapid population growth.

While most school districts in the state had abided by the statutory limit on developer fees, the effort by the districts in the Santa Clarita Valley to impose what they called a “special tax” to obtain far more revenue for long-range educational needs could have led to similar moves throughout California, lawyers and officials said.

School authorities expressed dismay with the decision, saying it would eliminate a once-promising avenue of support for districts hard-pressed to meet growing demands. They noted that the $1.50-a-square-foot limitation on fees ordinarily would pay only about one-third of the cost of new facilities.

“We are deeply disappointed,” said Clayton H. Parker of Santa Ana, one of the attorneys for the five districts in the case. “If you can’t get local funds with a special tax, there will be no place else to turn to but the state.”

William Ingram, president of the California School Boards Assn., said school authorities from across the state had been hopeful that the appellate court ruling would be overturned.

‘Back to Drawing Board’

“That would have given us an out,” he said. “Now, we’re back to the drawing board.”

On another front, Sonoma County Counsel James P. Botz, representing a coalition of 14 counties that supported the five school districts in the case, voiced concern that the ruling could encourage legal challenges to a wide range of voter-approved, post-Proposition 13 special taxes enacted by cities, counties and special districts.

Botz noted, for example, that under the decision a hotel occupancy tax--borne primarily by visitors and not voters--might face a legal challenge because it was not uniformly imposed.

“It could really narrow the kind of taxes that local governments can impose under Proposition 13,” he said. “Those kind of taxes are difficult enough to obtain because they have to be approved by two-thirds of the voters.”

Minimal Effect

However, Alvin S. Kaufer, a Los Angeles attorney who represented the California Building Industry Assn. in a suit against the tax at issue in the case, said the ruling would have minimal impact, affecting only a relatively small number of school districts that have tried to impose a special revenue measure.

The Court of Appeal opinion, he added, stopped far short of requiring absolute uniformity in the burdens imposed by a special tax--and thus may pose little threat to such measures. There is still room for special taxes to contain reasonable rate differentials, he said.

“The primary effect will be to retain the status quo,” Kaufer said. “If the decision had gone the other way, there would have been chaos. Residents in any school, sewer or mosquito-abatement district in the state could go out and tax new residences in any amount and nothing could be done about it.”

The case arose after voters in the Newhall, William S. Hart, Saugus, Castaic and Sulphur Springs school districts in Los Angeles County approved the special tax by a two-thirds vote in June, 1987.

Raise Costs

Developers filed suit against the tax, voicing fears that the measure would prohibitively raise costs of new housing. A Los Angeles Superior Court judge upheld the tax, but last Nov. 29 a state Court of Appeal ruled it was unconstitutional on several grounds, finding it could not stand either as a special tax or development fee.

Appellate Justice H. Walter Croskey, joined by Appellate Justices Joan Dempsey Klein and Armand Arabian, said that without specific legislative authorization, school districts had no authority to impose special taxes--and that the tax at issue was actually a development fee that exceeded allowable limits.

“The characterization of these exactions as special taxes, and their submission to voters who would not be called upon to pay them, was a poorly disguised and ineffectual attempt to avoid the statutory limitations to which development fees are subject,” Croskey wrote.

Croskey, one of four appellate justices now under consideration by Gov. George Deukmejian for appointment to the state Supreme Court, said further that because the tax was not imposed uniformly on residents, it failed to meet the requirements of Proposition 13, the property tax reform initiative passed in 1978.

Croskey noted that shortly after the voters in the Santa Clarita Valley approved the tax on developers, a state law went into effect that allowed school districts to impose special taxes, but only if they were uniformly applied.

This year, another law went into effect that places procedural restrictions on developer fees and requires that their amount be proportional to the effect of new development.

Times staff writer Steve Padilla contributed to this report.