Cities’ Challenge of Tax Allocation Under Prop. 13 Dismissed by Judge

A lawsuit challenging property tax distribution to cities in the wake of Proposition 13 has been dismissed by a Riverside Superior Court judge.

The suit, filed last April by Temple City, Compton, El Segundo, Carson and Rancho Cucamonga, challenged the constitutionality of the current system, in which cities’ shares of property tax revenues are determined by pre-Proposition 13 rates.

The petitioners charged that some cities unfairly benefit from the system because they had high tax rates on the books before Proposition 13 was passed in 1978, whereas cities that levied low property taxes, or none at all, lose out.

An attorney for the cities said they would file a request for reconsideration.

Judge John H. Barnard said in an opinion Jan. 17 that the laws being attacked are constitutional and that the cities’ “contention that the allocation scheme is unfair must be addressed to the (state) Legislature.”

Councilman Ken Gillanders of Temple City, which initiated the suit, said he wasn’t surprised by the judgment.

“This is what we expected in the preliminary stages,” he said. “This is ultimately going to be decided in (state) Supreme Court.

“There’s no point attempting to resolve it with legislation,” he added. “The big spenders are going to protect their sources of revenue. Let’s face it, they’ve got more representatives in Sacramento.”

Named in the suit are the counties of Los Angeles and San Bernardino, which have the responsibility for collecting and distributing the tax money to cities. Also named are the cities of Los Angeles and Redlands, which the petitioners charge are unfairly benefiting from the system.

Cities with low or non-existent property taxes lose out as a result of this “completely arbitrary” formula, said John Sturgeon, attorney for the petitioners.

“It’s a gross inequity,” said City Manager Karl Koski of Temple City, which has never levied a property tax. “Our residents receive no benefit.”

The petitioners suggest that a fairer allocation method would rely on the total value of properties in a city to determine what proportion of tax revenue the city would receive. Temple City, which did not receive any of the $7.5 million collected by county assessors from residents in 1986-87, would have been entitled to $1.46 million that year under the proposed system. El Segundo would have netted $7 million more than it received.

About 33 of Los Angeles County’s 85 cities either did not have a property tax or were not yet incorporated when Proposition 13 was passed, said Sam Olivito, executive director of the California Contract Cities Assn., which is supporting the suit.

The state Supreme Court declined to hear the case without comment last March, and the suit was filed with the San Bernardino Superior Court in April.

That court was selected because Rancho Cucamonga is the biggest loser in the current system. The case was transferred to Riverside after Redlands requested a change of venue to a neutral court.