REDEVELOPMENT AGENCY OF CITY OF SAN BERNARDINO v. COUNTY OF SAN BERNARDINO (1977)

OPINION

The Redevelopment Agency of the City of San Bernardino (‘Redevelopment Agency’) appeals from a judgment denying its petition for a writ of mandate to compel the assessor and auditor-controller of the County of San Bernardino, respectively, to adjust the base assessment roll upon which taxes collected within Redevelopment Project R–79 are allocated between respondent taxing agencies and Redevelopment Agency pursuant to article 16, section 16 of the California Constitution and Health and Safety Code section 33670 and to allocate such tax revenues on the basis of the base assessment roll as adjusted.

At issue is the proper treatment of property which was privately owned and revenue producing prior to redevelopment but which, because of and as an integral part of the redevelopment plan, has now been transferred into public ownership and has thus become tax exempt. Relying on Redevelopment Agency v. Malaki, 216 Cal.App.2d 480, 31 Cal.Rptr. 92, and Redevelopment Agency v. Cooper, 267 Cal.App.2d 70, 72 Cal.Rptr. 557, Redevelopment Agency contends that the base assessment roll upon which the tax allocation is made should be reduced by the assessed value of that property now transferred into public ownership, with the result that respondent taxing agencies would receive an estimated $217,000 a year less and Redevelopment Agency would receive annually that much more until the allocation of tax revenues ceases.¹

We conclude that Cooper is not in point, that Malaki is distinguishable and, therefore, not controlling and that, consonant with the purpose of the tax allocation process authorized by California Constitution, article 16, section 16, and Health and Safety Code section 33670, the base assessment roll should not be reduced by the value of property transferred into public ownership because of and as an integral part of the redevelopment plan. Accordingly, we affirm the judgment of the trial court.

California Constitution, article 16, section 16 [formerly art. 13, § 19] and its identically-phrased implementing statute, Health and Safety Code section 33670, authorize the inclusion in a redevelopment plan of a scheme of tax revenue allocation between the normal taxing agencies and a special fund of the Redevelopment Agency from which the cost of redevelopment, usually financed by the sale of so-called tax allocation bonds, is repaid.² As said by the court in Malaki: ‘Article XIII, section 19 [now art. 16, § 16], was designed to permit the pledge of future increases in property tax revenue within redeveloped areas to pay the principal and interest of bonds issued and sold for the purpose of defraying the cost of redevelopment, which in turn would produce such augmented revenues. The constitutional provision declares that property within a redevelopment project, except publicly owned property not subject to taxation, shall be subject to ad valorem taxes. After the effective date of an ordinance approving a redevelopment plan, the county, the city and other taxing agencies are to receive that part of the revenue produced by applying current tax rates ‘upon the total sum of the assessed value of the taxable property in the redevelopment project as shown upon the assessment roll . . . last equalized prior to the effective date of such ordinance [the base assessment roll or base roll] . . ..’ . . . When augmented property values produce taxes in excess of the amount thus payable to the taxing agencies, then, according to the constitutional provision, the excess is to be allocated to a special fund of the redevelopment agency to pay principal and interest of bonds. Advance pledge of the excess tax revenue as bond security is permitted. After the bond obligation is paid off, the separate allocation of excess revenue ceases, and all the tax income goes to the taxing agencies. . . .' (216 Cal.App.2d at pp. 482–484, 31 Cal.Rptr. at p. 94, fn. omitted.) (Original emphasis.)

The redevelopment plan here involved, Central City Project No. 1, Calif. R–79, which includes a tax allocation provision, was adopted by ordinance of the City of San Bernardino on February 24, 1965, as amended March 1, 1970. On November 15, 1973, Redevelopment Agency authorized the issuance of $14,800,000 of so-called tax allocation bonds. The tax revenues of Redevelopment Agency derived from the tax allocation provision of the redevelopment plan are irrevocably pledged to the payment of principal and interest of these bonds.

Because of and as an integral part of the redevelopment plan, certain property in the project area that was taxable at the time of adoption of the plan was acquired by Redevelopment Agency and thereafter leased by it to the City of San Bernardino for a term of 50 years for use as a pedestrian mall and public parking in conjunction with commercial establishments on property conveyed into private ownership. Other formerly taxable property acquired by Redevelopment Agency was, because of and as an integral part of the redevelopment plan, deeded to the city for streets and public rights-of-way. It is the assessed value of these formerly taxable parcels now transferred into public ownership that Redevelopment Agency urges should be eliminated from the base assessment roll.³

Preliminarily, some of respondent taxing agencies seek to raise the issue whether the property leased to City is truly tax exempt. In view of our disposition in favor of respondents on other grounds, we need not resolve this issue. The property leased by Redevelopment Agency to City is not now being taxed, and we assume for purposes of this opinion that this property is tax exempt pursuant to article 13, section 3(b) of the California Constitution.

Redevelopment Agency relies to a considerable extent upon language of the court in the Malaki decision. The court there concluded: ‘The word ‘taxable,’ then as it appears in subdivisions (a) and (b) of article XIII, section 19 [now art. 16, § 16], is aimed at future exclusion of publicly owned property; thus the total assessed value shown upon the assessment rolls last equalized before the effective date of redevelopment approval [base assessment roll] is to be diminished, from time to time, by the assessed values, as shown upon those rolls, of any properties acquired by tax-exempt public entities.' (216 Cal.App.2d at p. 490, 31 Cal.Rptr. at p. 99.)

We must agree that, on their face, these words would seem to cover the situation at bench. But, as the Malaki court itself stated: ‘Words take color from their context, and language of fairly certain significance becomes equivocal in relation to its surroundings.’ (Redevelopment Agency v. Malaki, supra, 216 Cal.App.2d at p. 488, 31 Cal.Rptr. at p. 98.) Furthermore, the holding of a decision is limited by the facts of the case being decided notwithstanding the use of overly broad language by the court in stating its holding or in its reasoning. (Hart v. Burnett, 15 Cal. 530, 598–599; Achen v. Pepsi-Cola Bottling Co., 105 Cal.App.2d 113, 124–125, 233 P.2d 74; see 6 Witkin, Cal. Procedure (2d ed.) pp. 4589–4591.)

In Malaki, the redevelopment project known as the Capitol Mall Extension covered some 10 1/2 acres of downtown Sacramento. About a year after adoption of the redevelopment plan the Department of Public Works determined to take for freeway purposes some four acres of the total 10 1/2 acres.⁴ The question confronting the redevelopment agency and the taxing agencies was whether the reduction in tax revenue due to this public acquisition should be borne by the redevelopment agency or the taxing agencies. The interested parties determined to enter into an agreement to eliminate from the base assessment roll the assessed value of the four acres, thus thrusting the reduction in current revenue (see fn. 1, ante) upon the taxing agencies. Malaki, chairman of the county board of supervisors refused to sign the agreement on the ground it violated California Constitution article 16, section 16, then article 13, section 19. The redevelopment agency sought from the Court of Appeal a writ of mandate to compel Malaki to execute the agreement. The writ issued.

Thus, the holding in Malaki was that the agreement to eliminate from the base assessment roll the assessed value of the four acres going into public ownership for freeway purposes was not violative of the constitutional provision. Upon considering the constitutional language, the court sought and found ambiguity which permitted construction of the language in accordance with the provision's purpose and objective. The court expressed its conclusion in the above-quoted language upon which Redevelopment Agency here relies.

Aside from the overly broad statement of its purported rule, we have no quarrel with the Malaki decision. The result reached was manifestly in accord with the purpose and objective of article 16, section 16. We aspire to do as much in the case at bench.

The purposes of the constitutional provision were admirably reflected in the description of its impact contained in the summary presented to the voters in the voters' handbook at the time of its adoption in 1952: ‘Authorizes financing cost of redevelopment project from portion of revenue derived from taxes on taxable property within project. Provides that taxing agencies shall continue to receive tax revenues based on assessed value of such property at time of approval of redevelopment plan. Authorizes and validates laws permitting use of additional tax revenue, based on later increases in assessed value, for payment of bonds or other obligations of the redevelopment agency and permitting the agency to pledge such income as security for its obligations.’ (See 56 Ops.Cal.Atty.Gen. 464, 470.)

Thus the ultimate purpose of the constitutional provision is to facilitate redevelopment by providing a means of financing the cost of redevelopment out of increased tax revenues resulting from the redevelopment. (Redevelopment Agency v. Malaki, supra, 216 Cal.App.2d at pp. 486, 490, 31 Cal.Rptr. 92.) To that end are two intermediate objectives: (1) assuring to taxing agencies the tax revenue they would have otherwise received if there were no redevelopment plan (see 35 Ops.Cal.Atty.Gen. 211, 213) and (2) insuring that all increased tax revenues generated as a result of redevelopment accure to the redevelopment agency for repayment of its bonds issued to finance the cost of the redevelopment (see 56 Ops.Cal.Atty.Gen. 464, 470).

Bearing in mind these objectives, it is apparent that fundamental to the Malaki decision was the fact that, if there had been no redevelopment program, the four acres would nevertheless still have been acquired by the Department of Public Works for freeway purposes and the taxing agencies would have lost the tax revenue therefrom and that, therefore, failure to reduce the base assessment roll would result in a tax windfall to the taxing agencies. (216 Cal.App.2d at p. 490, 31 Cal.Rptr. 92.)

Exactly the opposite is true in the case at bench. Here the property leased and owned by the City of San Bernardino was transferred to it because of and as an integral part of the redevelopment plan and, had there been no redevelopment plan, the taxing agencies would have continued to receive tax revenue therefrom. Reducing the base assessment roll would, therefore, allot to Redevelopment Agency a disproportionately and unexpectedly large share of tax revenues. Accordingly, in pursuance of the constitutional purposes and objectives and, in particular, the intermediate objective of assuring to taxing agencies the tax revenue they would have received were it not for the redevelopment plan, we hold the base assessment roll is not to be reduced by the assessed value of the property leased and deeded to the City of San Bernardino because of and pursuant to the redevelopment plan.

In terms of the constitutional language, we need not disagree with the Malaki court that generally the word ‘taxable’ as it was used in the constitutional provision contemplates future exclusion of property acquired by a public agency where that public acquisition would have ensued irrespective of the redevelopment plan. But it is otherwise when the public acquisition is the result of and pursuant to the redevelopment plan. In that situation adherence to the purposes and objectives of the constitutional provision requires that the words of subdivision (a) of article 16, section 16 be interpreted to mean just what they appear to mean. In that situation, ‘. . . taxable property in the redevelopment project as shown upon the assessment roll . . . last equalized prior to the effective date of such ordinance . . .’ means the property that was taxable on the base assessment roll.

Our conclusion is not in the least inconsistent with the opinion of the California Attorney General reported at 35 Opinions of the California Attorney General 211 in which the hypothetical situation considered was substantially the same as the facts in Malaki. Indeed, consistent with what we have said, the Attorney General there concluded: ‘The more reasonable conclusion, however, is that the taxing agencies should receive only the amount of taxes which they would have received had there been no redevelopment project. . . .’ (35 Ops.Cal.Atty.Gen. at p. 213.)

Neither is the result we reach in conflict with Redevelopment Agency v. Cooper, supra, 267 Cal.App.2d 70, 72 Cal.Rptr. 557. Although the court in Cooper repeated much of the language found in Malaki, it expressly recognized: ‘The specific issue in Malaki is, of course, different from that herein.’ (267 Cal.App.2d at p. 75, 72 Cal.Rptr. at p. 560.) Indeed it was. In Cooper the original redevelopment plan did not include a tax allocation provision. About nine years after adoption of the original plan, it was amended to include within the project area a publicly owned subway station and to include in the plan a tax allocation provision. The prime question confronting the court was whether the base assessment roll would be the assessment roll preceding the original plan or that immediately preceding the amendment to the plan. At issue was an increase in assessed value of the subject parcel of land approximately $5,000,000 between the date of the original plan and the date of the amendment. The court held that the base assessment roll was that preceding the original plan, thus allocating tax revenues attributable to the increase in assessment value to the redevelopment agency. This result was fully consonant with the purposes of article 16, section 16, then article 13, section 19, and Health and Safety Code section 33670 that enhanced tax revenue attributable to the redevelopment project go to the special fund of the redevelopment agency, since the increase in assessed value was apparently in large part a result of the redevelopment program. Cooper was correctly decided but is not here in point.

Redevelopment Agency contends that the result we reach immunizes the taxing agencies from the decrease in revenues that normally flows from the acquisition of property by a public entity. It does not. We fully approve the result in Malaki. The result we reach in this case does no more than preserve to the taxing agencies that tax revenue they would have received had there been no redevelopment plan. This, as we have seen, is one of the objectives of the tax allocation arrangement authorized by California Constitution article 16, section 16, and Health and Safety Code section 33670.

Pointing out that participation of a public entity in redevelopment programs as the City of San Bernardino has participated here is specifically contemplated and authorized (see Health & Saf. Code, § 33421), Redevelopment Agency urges that the result we reach will discourage redevelopment agencies from seeking such public participation. We believe not. In our view the result we reach is neutral in its effects on the encouragement or discouragement of public ownership or operation of property in redevelopment projects, for we do no more than affirm the allocation clearly contemplated by California Constitution article 16, section 16, and, according to the evidence, anticipated by all the parties at the time of the adoption of the redevelopment plan here involved. We do believe, however, that a contrary result might prove an inducement to redevelopment agencies unduly to prefer public ownership.

In view of the disposition indicated, we have no need to discuss other issues raised by respondent taxing agencies.

The judgment is affirmed.

FOOTNOTES

1.  As Redevelopment Agency points out, theoretically the loss to taxing agencies is not really a loss but a deferment. The more tax revenue Redevelopment Agency receives, the sooner it will pay off its allocation bonds, whereupon tax allocation will terminate and taxing agencies will again receive all tax revenue.

2.  Article 16, section 16, reads in pertinent part:‘All property in a redevelopment project established under the Community Redevelopment Law Act as now existing or hereafter amended, except publicly owned property not subject to taxation by reason of such ownership, shall be taxed in proportion to its value as provided in Section 1 of this article [sic (art. 13)], and such taxes (the word ‘taxes' as used herein shall include, but shall not be limited to, all levies on an ad valorem basis upon land or real property) shall be levied and collected as other taxes are levied and collected by the respective taxing agencies.‘The Legislature may provide that any redevelopment plan may contain a provision that the taxes, if any, so levied upon such taxable property in a redevelopment project each year by or for the benefit of the State of California, any city, county, city and county, district, or other public corporation (hereinafter sometimes called ‘taxing agencies') after the effective date of the ordinance approving the redevelopment plan, shall be divided as follows:‘(a) That portion of the taxes which would be produced by the rate upon which the tax is levied each year by or for each of said taxing agencies upon the total sum of the assessed value of the taxable property in the redevelopment project as shown upon the assessment roll used in connection with the taxation of such property by such taxing agency, last equalized prior to the effective date of such ordinance, shall be allocated to, and when collected shall be paid into, the funds of the respective taxing agencies as taxes by or for said taxing agencies on all other property are paid (for the purpose of allocating taxes levied by or for any taxing agency or agencies which did not include the territory in a redevelopment project on the effective date of such ordinance but to which such territory has been annexed or otherwise included after such effective date, the assessment roll of the county last equalized on the effective date of said ordinance shall be used in determining the assessed valuation of the taxable property in the project on said effective date); and‘(b) That portion of said levied taxes each year in excess of such amount shall be allocated to and when collected shall be paid into a special fund of the redevelopment agency to pay the principal of and interest on loans, moneys advanced to, or indebtedness (whether funded, refunded, assumed or otherwise) incurred by such redevelopment agency to finance or refinance, in whole or in part, such redevelopment project. Unless and until the total assessed valuation of the taxable property in a redevelopment project exceeds the total assessed value of the taxable property in such project as shown by the last equalized assessment roll referred to in paragraph designated (a) hereof, all of the taxes levied and collected upon the taxable property in such redevelopment project shall be paid into the funds of the respective taxing agencies. When said loans, advances, and indebtedness, if any, and interest thereon, have been paid, then all moneys thereafter received from taxes upon the taxable property in such redevelopment project shall be paid into the funds of the respective taxing agencies as taxes on all other property are paid.’ (Emphasis added.)

3.  Other parcels that had formerly been in public ownership and tax exempt were transferred into private ownership pursuant to the plan and are now revenue producing. If the base assessment roll is reduced as Redevelopment Agency suggests, taxing agencies maintain the base assessment roll must be increased by the assessed value of these parcels.

4.  The redevelopment plan was subsequently amended to accommodate the acquisition of the four acres by the Department of Public Works.

KAUFMAN, Associate Justice.

GARDNER, P. J., and McDANIEL, J., concur.