BOARD OF SUPERVISORS OF COUNTY OF SAN DIEGO v. James E. Jones, Treasurer-Tax Collector of the County of San Diego, Respondent and Defendant. (1980)

The Board of Supervisors of San Diego County (Board) brought this action seeking declaratory relief, an injunction and a writ of mandate, essentially asking for a determination of the appropriate tax rate for the unsecured tax roll to be applied for the 1978-79 fiscal year after the voters amended the state Constitution with the well-publicized Proposition 13. Joined as parties defendant were Gerald J. Lonergan, San Diego County Auditor and Controller (Controller), and James E. Jones, San Diego County Treasurer and Tax Collector (Tax Collector). The action sought to restrain the Controller and Tax Collector from computing, billing, or collecting taxes on the unsecured tax rolls at a rate or an assessed value in excess of that authorized in California Constitution article III A, sections 1 and 2,¹ (Proposition 13) adopted by the voters on June 6, 1978. The trial court granted the relief prayed and the Controller appeals.

The sole issue in this case is whether Proposition 13 is applicable to property on the unsecured tax rolls for the tax year 1978-79. We hold Proposition 13 applies to such property and affirm the judgment.

Generally, taxable property in California is classified as either real or personal property (Rev. & Tax.Code, ss 104, 106).² The property is then subclassified and placed on an assessment roll, either on the “secured roll” where the assessment can be made a lien on real property, or on the “unsecured roll” where the assessment is free from any security arrangement with realty (s 109). This latter category normally includes possessory interests held by one not the holder of the fee, and improvements on exempt property or property owned by another. The due date of tax on property appearing on the secured roll differs from that on the unsecured tax roll. Tax on property listed on the secured tax roll is paid in two equal installments due November 1 and February 1 (ss 2605 and 2606) and becomes delinquent if not paid before December 10 and April 10 of each year (ss 2617 and 2618). Generally, tax on property listed on the unsecured roll is due March 1 preceding the fiscal years for which the taxes are levied and becomes delinquent August 31 (ss 2901 and 2192).

Under the California Constitution, article XIII, sections 1 and 2, all property is required to be assessed at the same percentage of fair market value; and the tax per dollar of full value shall not be higher on personal property than on real property.³ The board of supervisors of each county must adopt its final budget and fix the tax rate for the secured tax roll on or before September 1 (Gov.Code, s 29100). In earlier years, this caused a problem since the unsecured property roll had to be assessed, billed and collected before the budget was adopted and the tax rate fixed. The solution to this incompatible order of events was resolved with the adoption in 1924 of article XIII, section 9a, of the California Constitution, now section 12,⁴ which provides for the application of the previous year's tax rate to the unsecured tax roll. It seems apparent if the rate is known in advance, it should be applied to both rolls to avoid the necessity of adjusting the rate later to accomplish that equalizing result.

It was in this setting the Auditor and Tax Collector faced the dilemma in billing taxes on the unsecured tax roll for the first year after the passage of Proposition 13 on June 6, 1978. Proposition 13 by its narrow language apparently only applies to real property and is effective for the tax year beginning July 1 following passage of the article.⁵ The Controller announced San Diego County would tax property on the unsecured rolls in the manner followed in previous years under the authority of article XIII, section 12, and use the rate of previous year. The Board contests the propriety of that decision asserting that rate would violate Proposition 13.

This case does not present an issue of ambiguity or vagueness in the language of Proposition 13, for the language of article XIII A expressly makes the tax rate and valuation limitation effective for the tax year beginning July 1, 1978. Rather, it presents an apparent conflict between several equally explicit provisions in the Constitution. The solution may be found in general rules of construction of constitutional language.

In Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization (1978) 22 Cal.3d 208, 149 Cal.Rptr. 239, 583 P.2d 1281, the Supreme Court upheld the validity of article XIII A and noted the rule (at pp. 244-245, 149 Cal.Rptr. at pp. 257, 583 P.2d at p. 1299), “ ‘. . . since a written constitution is intended as and is the mere framework according to whose general outlines specific legislation must be framed and modeled, and is therefore . . . necessarily couched in general terms or language, it is not to be interpreted according to narrow or supertechnical principles, but liberally and on broad general lines, so that it may accomplish in full measure the objects of its establishment and so carry out the great principles of government.’ ”

A most fundamental rule of construction is that the courts will interpret a measure adopted by vote of the people in such a manner as to give effect to the intent of the voters adopting it. The words used in a constitution must be taken in the ordinary and common acceptation, because they are presumed to have been so understood by the framers and by the people who adopted it (Kaiser v. Hopkins, 6 Cal.2d 537, 538-539, 58 P.2d 1278). The constitutional and other enactments must receive a liberal, practical common sense construction which will meet changed conditions and the growing needs of the people (Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization, supra, 22 Cal.3d 208, 245, 149 Cal.Rptr. 239, 583 P.2d 1281).

Article XIII A is broadly stated and limits any ad valorem tax on Real property to one per cent of “the full cash value of such property.” There is no indication of any intent to make the limitation applicable only to property on the secured tax roll. Possessory interests and taxable improvements on property exempt from taxation or taxable to another, for example, are “real property” (Forster Shipbldg. Co. v. County of L. A., 54 Cal.2d 450, 455-456, 6 Cal.Rptr. 24, 353 P.2d 736), although they normally appear on the unsecured tax roll. It follows under Proposition 13 these “real property” interests are entitled to the one percent limit applicable to all other real property.

California Constitution article XIII, section 1, not repealed by the adoption of Proposition 13, reads “. . . (a) All property is taxable and shall be assessed at the same percentage of fair market value,” and article XIII, section 2, says “the tax per dollar of full value shall not be higher on personal property than on real property in the same taxing jurisdiction.” Taken together, these provisions of the Constitution mandate that personal property is entitled to the same limitation which applies to real property. The use of the previous year's tax rate on personal property is for convenience, addressing only the situation where the current tax has not yet been fixed (see Delaney v. Lowery, 25 Cal.2d 561, 567, 154 P.2d 674). However, the preceding year's tax rate cannot be used where it would violate the provisions of article XIII A, sections 1 and 2. After the adoption of Proposition 13 which set a maximum tax rate as well as a valuation limitation, the use of any tax rate or valuation which would impose a tax burden in excess of the one percent limit would be unconstitutional.⁶ We view the provisions of article XIII A, sections 1 and 2, and article XIII, section 12, as being compatible with each other; there is no repeal by implication of the latter section.⁷ The use of the previous year's tax rate here would impose a burden on property subject to the unsecured roll beyond the limitation contained in Proposition 13.

Legislative and administrative interpretation and implementation of the new enactment are traditionally accorded great weight in construing the language of constitutional amendments (Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization, supra, 22 Cal.3d 208, 246, 149 Cal.Rptr. 239, 583 P.2d 1281). Moreover, where more than one reasonable meaning exists as to a constitutional provision, the courts are bound to accept the construction chosen by the Legislature. (Lundberg v. County of Alameda, 46 Cal.2d 644, 652, 298 P.2d 1; and see Methodist Hosp. of Sacramento v. Saylor, 5 Cal.3d 685, 692-693, 97 Cal.Rptr. 1, 488 P.2d 161).

Following the adoption of Proposition 13, the Legislature added section 2237 which reads, in part:

“(b) A county shall levy an ad valorem property tax on taxable assessed value at a rate equal to four dollars ($4) per one hundred dollars ($100) of assessed value. The revenue from such tax shall be distributed, subject to the allocation and payment as provided in subdivision (d) of Section 33675 of the Health and Safety Code, to local agencies, school districts, county superintendents of schools, and community college districts in accordance with the provisions of Section 26912 of the Government Code.” (Stats.1978, ch. 332, eff. 6/30/78; see now s as amended by Stats.1979, ch. 29.)

Since the assessed value is one-fourth of the full cash value, this section mandates an ad valorem tax on all property of one per cent, the limit set out in Proposition 13.⁸ The Legislature sought to equalize the tax burden for both real and personal property.

The Legislature was not alone in its interpretation of the intent of Proposition 13. Two days after the enactment of this amendment, the Chief of the Assessment Standards Division of the Board of Equalization issued a letter on his official stationery to all county tax assessors, which advised them as follows:

“The approval of Proposition 13 does not subject personal property to any value limitations. Therefore, personal property will continue to be appraised annually at its full cash value.

“The tax rate limitation specified in Proposition 13 must be applied to All assessments (both real and personal property) enrolled on the Unsecured and Secured portions of the 1978-79 assessment roll.

“Section 2 of Article XIII of the Constitution provides that the tax per dollar of full value shall not be higher on personal property than on real property in the same taxing jurisdiction. Because the real property assessments enrolled on the secured and unsecured portions of the 1978-79 assessment roll are subject to Proposition 13's tax rate limitation, the tax rate limitation on personal property assessment must be similarly limited.” (Italics in original.)

On the record before us, this position was never overruled by the Board.

The Attorney General took the same position, writing:

“It seems evident that there is no intent to roll back valuations of personal property, whether it is on the secured roll or the unsecured roll. Section 2(a) is quite clear in stating that only real property is to be valued according to the 1975-76 ‘full cash value.’ However, because the Rate applied to the secured roll in each tax code area is applied equally to land, improvements and personal property, the one percent rate limitation imposed by section 1(a) is applicable to all property on the secured roll. This being the case, could it be concluded that personal property on the unsecured roll is not subject to the one percent rate limitation in view of the requirement of section 2, article XIII, of the Constitution that the tax per dollar of full value shall not be higher on personal property than on real property in the same taxing jurisdiction? As noted above, real property on the unsecured roll is subject both to the one percent rate limitation and the roll-back of full cash value. It seems apparent that if the one percent limit is applied to real property on the unsecured roll but not to personal property, a taxpayer who owns personal property assessed on the unsecured roll could successfully argue that section 2, article XIII, has not been complied with because personal property on the unsecured roll would be the only property taxed at a rate exceeding one percent of full value in 1978-79, or in the first year section 1(a) is operative.

“While sections 1(a) and 2(a) of article XIIIA speak in terms of the ‘full cash value’ of real property, it seems clear from the reference in section 2(b) to ‘the fair market value’ that the initiative uses these terms interchangeably, as defined in section 110, Revenue and Taxation Code. Thus, while sections 1 and 2 of article XIII, of the Constitution utilize the term ‘full value,’ section 1 of article XIII makes it clear that ‘full value’ means ‘fair market value’ unless another value standard is prescribed in the Constitution. Thus taxable personal property, possessory interests, and taxable improvements on land exempt from taxation are valued at their fair market value and assessed at 25 percent of their ‘full value’ under section 401, Revenue and Taxation Code. However, ‘full value’ may be determined for the purposes of applying section 2, article XIII, of the Constitution, the provisions of sections 1(a) and 2(a) of article XIIIA are applicable to real property on the unsecured roll, and the requirement of section 2, article XIII, quoted above, mandates that the tax rate for personal property on the unsecured roll be no higher than the tax rate for real property on the unsecured roll. Both are, accordingly, subject to the one percent rate limitation prescribed in section 1(a) of article XIIIA.” (Ops. Cal. Atty. Gen. (Jun. 26, 1978) CV 78-76.)

Relying on that opinion, the California State Controller adopted the same position in a letter to the County Tax Collector dated June 29, 1978.

Our position is further strengthened by the statement of the legislative analyst contained in the California Voters Pamphlet distributed to all voters before the election. Use of that statement in understanding the voters' intent is appropriate in aid of our construction of the amendment to the Constitution (Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization, supra, 22 Cal.3d 208, at 245-246, 149 Cal.Rptr. 239, 583 P.2d 1281). That statement reads:

“The following is a summary of the main provision of this initiative:

“1. Property tax limit. Beginning with the 1978-79 fiscal year, this measure would limit the amount of property taxes that could be collected from an owner of county assessed Real property to 1 percent of the property's full cash value. This measure does not mention county assessed personal property (such as business inventories), or state assessed property (such as public utilities), but the Legislative Counsel advises us that the 1 percent limit would apply to All types of taxable property.” (Italics in original.)

The arguments for and against Proposition 13 did not contradict that statement or otherwise put that point in issue.

The law of California is clear that personal property taxes should not exceed real property taxes and by putting a ceiling on the latter, we have effectively put a ceiling on the former. This was undoubtedly the purpose and objective of the voters in enacting Proposition 13. Since the tax rate for all property taxed after the first year will be one percent of the full cash value, it will be unnecessary to use article XIII, section 12(a) (i. e., apply last year's tax rate) unless the Legislature amends section 2237.⁹

Judgment affirmed.

FOOTNOTES

1.  “Section1. (a) The maximum amount of any ad valorem tax on real property shall not exceed one percent (1%) of the full cash value of such property. The one percent (1%) tax to be collected by the counties and apportioned according to law to the districts within the counties.“(b) The limitation provided for in subdivision (a) shall not apply to ad valorem taxes or special assessments to pay the interest and redemption charges on any indebtedness approved by the voters prior to the time this section becomes effective.“. . .“Sec. 2. (a) The full cash value means the county assessor's valuation of real property as shown on the 1975-76 tax bill under ‘full cash value’ or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment. All real property not already assessed up to the 1975-76 full cash value may be reassessed to reflect that valuation. For purposes of this section, the term ‘newly constructed’ shall not include real property which is reconstructed after a disaster, as declared by the Governor, where the fair market value of such real property, as reconstructed, is comparable to its fair market value prior to the disaster.“(b) The full cash value base may reflect from year to year the inflationary rate not to exceed 2 percent for any given year or reduction as shown in the consumer price index or comparable data for the area under taxing jurisdiction, or may be reduced to reflect substantial damage, destruction or other factors causing a decline in value.”

2.  Unless otherwise specified, all references are to the Revenue and Taxation Code.

3.  In their entirety, sections 1 and 2 of article XIII read:“Sec. 1. Unless otherwise provided by this Constitution or the laws of the United States:“(a) All property is taxable and shall be assessed at the same percentage of fair market value. When a value standard other than fair market value is prescribed by this Constitution or by statute authorized by this Constitution, the same percentage shall be applied to determine the assessed value. The value to which the percentage is applied, whether it be the fair market value or not, shall be known for property tax purposes as the full value.“(b) All property so assessed shall be taxed in proportion to its full value.“Sec. 2. The Legislature may provide for property taxation of all forms of tangible personal property, shares of capital stock, evidences of indebtedness and any legal or equitable interest therein not exempt under any other provision of this article. The Legislature, two-thirds of the membership of each house concurring, may classify such personal property for differential taxation or for exemption. The tax on any interest in notes, debentures, shares of capital stock, bonds, solvent credits, deeds of trust, or mortgages shall not exceed four-tenths of one percent of full value, and the tax per dollar of full value shall not be higher on personal property than on real property in the same taxing jurisdiction.”

4.  “Sec. 12. (a) Except as provided in subdivision (b), taxes on personal property, possessory interests in land, and taxable improvements located on land exempt from taxation which are not a lien upon land sufficient in value to secure their payment shall be levied at the rates for the preceding tax year upon property of the same kind where the taxes were a lien upon land sufficient in value to secure their payment.“(b) In any year in which the assessment ratio is changed, the Legislature shall adjust the rate described in subdivision (a) to maintain equality between property on the secured and unsecured rolls.”

5.  “Section 5. This article shall take effect for the tax year beginning on July 1 following the passage of this Amendment, except Section 3 which shall become effective upon the passage of this article.”

6.  The limitation of tax rate is interrelated to the tax valuation (see Amador Valley etc. v. State Bd. of Equalization, supra, 22 Cal.3d 208, at p. 231, 149 Cal.Rptr. 239, 583 P.2d 1281).

7.  Should the Legislature ever reduce the tax it has imposed on real property, the provisions of article XIII, section 12, could have significance permitting use of the preceding year's tax rate on the unsecured tax roll. In this connection too, section 100, adopted July 24, 1979, as an emergency measure, permits any jurisdiction to request reduction of the amount of property tax computed for it under specified provisions according to a designated formula. The formula divides the taxable assessed value on the secured roll into the amount of property tax revenue to be reduced and multiplies by 100 to arrive at the effective tax rate reduction. The effective tax rate reduction is then applied to the taxable assessed value on each secured roll tax bill and the resulting amount is deducted from the one percent which otherwise applies under section 2237, subdivision (b). In the concluding sentence of section 100, subdivision (a), the Legislature recognizes the effect of article XIII, section 12, by providing: “The same effective tax rate reduction shall be applied in a comparable manner to the taxable assessed value on the next succeeding unsecured roll tax bill for property within the jurisdiction.” (s 100, added by Stats.1979, ch. 282, and amended by Stats.1979, ch. 1161.)Likewise, there is nothing prohibiting the carrying forward of the debt service component of the last preceding year's secured rate in order to comply with the exception to the one per cent limitation contained in section 1(b) of article XIII A for payment of preexisting, voter approved indebtedness. Doing this, of course, gives effect to section 12 of article XIII as well.

8.  It should be noted Proposition 13 speaks in terms of “full cash value” which differs from “assessed value” which is normally 25 per cent of true market value. (See ss 110, 110.1; and Amador Valley etc. v. State Bd. of Equalization, supra, 22 Cal.3d 208, at p. 247, 149 Cal.Rptr. 239, 583 P.2d 1281.)

9.  The judgement here under review also provides for a separate tax rate for the payment of interest and redemption charges on indebtedness approved by the voters before July 1, 1978. This is authorized under section 1(b) of article XIII A. There is no genuine issue on this appeal concerning that portion of the judgement. Accordingly, although we affirm the judgement, this opinion is limited to the provisions of section 1(a) of article XIII A.

COLOGNE, Associate Justice.

GERALD BROWN, P. J., and WIENER, J., concur.