City of San Ramon service tax may head to California Supreme Court

By Chandra Lye | Nov 3, 2016

SAN RAMON, CALIFORNIA — A decision by a state appeals court that upheld a tax on new development within City of San Ramon may be heading to the California Supreme Court.

SAN RAMON, CALIFORNIA — A decision by a state appeals court that upheld a tax on new development within City of San Ramon may be heading to the California Supreme Court.

Lawyers for the Building Industry Association (BIA), who challenged the tax, said they were disappointed with the decision by the First Appellate District Court of Appeal for the State of California.

"We do believe that the court is wrong. In particular we think that the court's decision interpreting the Mello-Roos Act essentially eliminates any protections that the legislature afforded residents of Mello-Roos districts that are approved by landowner vote,” Damien Schiff from the Pacific Legal Foundation told the Northern California Record.

Schiff said the decision was precedent-setting, “but we also think it is a bad precedent.”

According to court documents, the tax applies to townhouses built on two parcels of land, where the city felt the need to raise money to cover the cost of providing services to the 48 homes.

Following the decision, the BIA sued the city and claimed the tax was not valid. However, the trial court upheld the tax and the BIA appealed.

It said the tax does not cover the costs of providing services to the homes but has instead been an “unconstitutional general tax.”

In their claim, the BIA alleged that the tax violated the statutory requirement that the tax cover only services that were in addition to those available before the tax was issued. They also argued that the tax violated the California Constitution's prohibition on general taxation.

The BIA also alleged the city enforces the tax by threatening to take away the municipal services the tax was meant to cover.

The court did not agree, writing: "We conclude that the tax will provide 'additional services' to meet increased demand for existing services resulting from the townhouse development and therefore meets the requirement of the Mello-Roos Act; the tax is a special (and not a general) tax because it is imposed for specific purposes and not for general governmental purposes, and therefore meets the requirements of the California Constitution."

Yet, Schiff said the decision does not uphold the Mello-Roos Act, which came into effect in 1982 and provided a way for government to get financing.

"Because the court's decision, in our view, essentially renders the particular protections in the Mello-Roos Act meaningless. We think that is a really important reason for the California Supreme Court to want to take up the case."

He said the BIA expected to file with the California Supreme Court in a few weeks and hoped to have a decision about whether the court will take up the case by early next year.

Yet, Schiff added that even if the court refuses the case it would not prevent other citizens in a similar situation from seeking legal action.

"If the supreme court says no to our petition then it will be the end of the case for the San Ramon community facilities district but it does not preclude similar lawsuits in other parts of the state."

The Pacific Legal Foundation was established in 1973 as a nonprofit organization. 

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