Untitled California Attorney General Opinion ( 1990 )

OFFICE OF THE ATTORNEY GENERAL
State of California
JOHN K. VAN DE KAMP
Attorney General
______________________________________
OPINION :
: No. 90-501
of :
: OCTOBER 25, 1990
JOHN K. VAN DE KAMP :
Attorney General :
:
RODNEY O. LILYQUIST :
Deputy Attorney General :
:
______________________________________________________________________________
THE HONORABLE MARIAN BERGESON, MEMBER, CALIFORNIA SENATE,
has requested an opinion on the following question:
Do in lieu taxes, mitigation revenues, and tax increment funds given by a
redevelopment agency to a school district pursuant to Health and Safety Code sections 33401 and
33676 constitute "property tax revenue" required to be deducted under Education Code section
42238 in computing the amount of a school district's state general aid?
CONCLUSION
In lieu taxes, mitigation revenues, and tax increment funds given by a redevelopment
agency to a school district pursuant to Health and Safety Code sections 33401 and 33676 do not
constitute "property tax revenue" required to be deducted under Education Code section 42238 in
computing the amount of a school district's state general aid.
ANALYSIS
School districts obtain funds from numerous sources and for various general and
specific purposes. One major source of funds for a district is the state, and under one of the state's
programs, school districts receive general purpose funds pursuant to a complex formula set forth in
Education Code section 42238. (See 72 Ops.Cal.Atty.Gen. 205 (1989).) Part of the calculations in
arriving at the net amount given by the state under this particular statute involves subtracting money
received by a district from specified sources. Education Code section 42238, subdivision (h)
provides:
"The Superintendent of Public Instruction shall apportion to each school
district the amount determined in this section less the sum of:
"(1) The District's property tax revenue received pursuant to Chapter 3
(commencing with Section 75) and Chapter 6 (commencing with Section 95) of Part
0.5 of the Revenue and Taxation Code.
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"(2) The amount, if any, received pursuant to Part 18.5 (commencing with
Section 38101) of the Revenue and Taxation Code.
"(3) The amount, if any, received pursuant to Chapter 3 (commencing with
Section 16140) of the Government Code.
"(4) Prior years taxes and taxes on the unsecured roll.
"(5) Fifty percent of the amount received pursuant to Section 41603.
"(6) The amount of motor vehicle license fees distributed pursuant to Section
11003.4 of the Revenue and Taxation Code."
The question presented for resolution is whether funds received by a school district
from a redevelopment agency pursuant to the provisions of Health and Safety Code sections 33401
and 33676 constitute "property tax revenue" for purposes of deduction under Education Code section
42238, subdivision (h)(1).1 We conclude that they do not.
Under the Community Redevelopment Law (Health & Saf. Code, §§ 33000-33855),
redevelopment agencies are formed in communities with the goals of "(1) the creation of physical,
social, economic, and environmental conditions to remove and prevent the recurrence of blight; (2)
the creation of jobs and low-to-moderate income housing; and (3) the attraction of private
investment towards these ends. [Citation.]" (Marek v. Napa Community Redevelopment Agency
(1988) 46 Cal. 3d 1070, 1082.) A redevelopment agency prepares a detailed plan for a project area
and is "endowed with broad powers to acquire property through purchase and condemnation (§
33391) and to `[m]ake and execute contracts and other instruments necessary' to complete
redevelopment projects (§ 33125, subd. (c))." (Ibid.)
As for the financing of a redevelopment agency's projects, the Court of Appeal
explained in Bell Redevelopment Agency v. Woosley (1985) 169 Cal. App. 3d 24, 27:
"Though an Agency is given broad powers to implement this plan, it does not
have the power nor ability to levy a tax to finance these efforts. (Huntington Park
Redevelopment Agency v. Martin (1985) 38 Cal. 3d 100, 106; 56 Ops.Cal.Atty.Gen.
464, 469 (1973).) Instead, the Agency obtains the funds needed to acquire property
and make improvements by accepting financial assistance from any public or private
source, borrowing money, and issuing bonds. Incurrence of debt is by far the most
common method utilized by an Agency. This is done through the issuance of `tax
allocation bonds.' The primary source of repayment of this indebtedness is `tax
increments' received by the agency from governmental taxing agencies. The
mechanics of tax increment financing was described in Redevelopment Agency of
San Bernardino v. County of San Bernardino (1978) 21 Cal. 3d 255, 259. `[I]f, after
a redevelopment project has been approved, the assessed valuation of taxable
property in the project increases, the taxes levied on such property in the project area
are divided between the taxing agency and the redevelopment agency. The taxing
agency receives the same amount of money it would have realized under the assessed
valuation existing at the time the project was approved, while the additional money
1
The other deduction provisions concern revenues received under such statutory schemes as the
Timber Yield Tax Law program and Williamson Act open space land subvention program. (See 72
Ops.Cal.Atty.Gen. 205, 207 (1989).)
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resulting from the rise in assessed valuation is placed in a special fund for repayment
of indebtedness incurred in financing the project.' (Italics in original.) The increase
in assessed valuation occurs because of the new construction and revitalization in the
project area. Once the debt is paid, the additional tax revenues revert back to the
taxing agency. The Legislature devised this financing scheme so that redevelopment
would largely pay for itself." (Fn. omitted.)
With this redevelopment law background in mind, we look first to whether "in lieu
taxes" are subject to deduction under Education Code section 42238. A redevelopment agency may
give "an amount of money in lieu of taxes" to a school district with respect to property that the
agency owns in a redevelopment project area.2 Health and Safety Code section 33401, subdivision
(a) provides in part:
"The agency may in any year during which it owns property in a
redevelopment project pay directly to any city, county, city and county, district,
including, but not limited to, a school district, or other public corporation for whose
benefit a tax would have been levied upon the property had it not been exempt, an
amount of money in lieu of taxes."
It is apparent that these "in lieu taxes" do not constitute "property tax revenue" levied upon the
subject property, and moreover they are not "received pursuant to . . . the Revenue and Taxation
Code." (Ed. Code, § 42238, subd. (h)(1).) They must come from some other source (since the
property is exempt) and were never derived from or had the character of property taxes collected or
allocated with respect to the redevelopment agency's property. The statutory language for making
the deduction under the Education Code provision is not met by these funds received pursuant to
Health and Safety Code section 33401, subdivision (a).
It is evident, however, that these funds are intended by the Legislature to replace
property tax revenues that would otherwise be "lost" by the school district due to the redevelopment
agency's ownership of the property. By replacing the tax revenues without making the deduction
under Education Code section 42238, a school district will receive an economic benefit with little
apparent purpose. Did the Legislature intend to grant a "windfall" to a school district merely
because a parcel of real property is owned by a redevelopment agency? We have found nothing in
the legislative histories of these statutes to answer this question.
In these circumstances it is not our function to speculate concerning whether a
legislative oversight has occurred. "If the words of the statute are clear, the court should not add to
or alter them to accomplish a purpose that does not appear on the face of the statute or from its
legislative history." (People v. Knowles (1950) 35 Cal. 2d 175, 183; accord, Schmidt v. Superior
Court (1987) 43 Cal. 3d 1060, 1066; California Teachers Assn. v. San Diego Community College
Dist. (1981) 28 Cal. 3d 692, 298.)
Here the requirements for making a deduction under Education Code section 42238,
subdivision (h) are clear. We have previously observed that the statutory language is narrowly
drawn. "In this subdivision, not all sources of revenue that a district might receive under various
statutory schemes have been included, for the Legislature has been careful to particularize the types
of revenues which are to be included." (72 Ops.Cal.Atty.Gen. 205, 207-208 (1989).) Funds
2
Property owned by the state or a local government is exempt from property taxation. (Cal.
Const., art. XIII, § 3, subds. (a), (b).)
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received by a school district under the terms of Health and Safety Code section 33401, subdivision
(a) are not "property tax revenue received pursuant to . . . the Revenue and Taxation Code."
As for "mitigation revenues" received by a school district, Health and Safety Code
section 33401, subdivision (b) states in part:
"The agency may also pay to any taxing agency with territory located within
a project area other than the community which has adopted the project, any amounts
of money which the agency has found are necessary and appropriate to alleviate any
financial burden or detriment caused to any taxing agency by a redevelopment
project. The payments to a taxing agency in any single year shall not exceed the
amount of property tax revenues which would have been received by that taxing
agency if all the property tax revenues from the project area had been allocated to all
the affected taxing agencies without regard to the division of taxes required by
Section 33670 . . . ."
Health and Safety Code section 33670 states in turn:
"Any redevelopment plan may contain a provision that taxes, if any, levied
upon 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 the 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 that property
by the taxing agency, last equalized prior to the effective date of the ordinance, shall
be allocated to and when collected shall be paid to the respective taxing agencies as
taxes by or for the taxing agencies on all other property are paid . . . and
"(b) . . . that portion of the levied taxes each year in excess of that 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
the redevelopment agency to finance or refinance, in whole or in part, the
redevelopment project. . . ."
While mitigation revenues given to a school district as a "taxing agency" under
Health and Safety Code section 33401 have a "cap" measured by the amount of property taxes levied
against property in the project area, they are not necessarily generated by the levying of property
taxes. The mitigation revenues may come from any number of other sources available to a
redevelopment agency.
More importantly, as with the in lieu taxes, mitigation revenues simply are not
"property tax revenue received [by the school district] pursuant to . . . the Revenue and Taxation
Code." (Ed.Code, § 42238, subd. (h)(1).) Even if the revenues were originally generated by the
school district and collected as property taxes, they were initially allocated to the redevelopment
agency. It is not the redevelopment agency, however, that must "receive" the property tax revenue
in order to qualify for the deduction under the statutory language; rather, it is property tax revenue
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received by the school district pursuant to the Revenue and Taxation Code that is subject to
deduction.
As with the in lieu taxes, we have found nothing in the legislative histories of the
relevant statutes suggesting that the express language of Education Code section 42238 should be
ignored. Requiring the mitigation revenues to be deducted would run counter to their purpose of
alleviating "financial . . . detriment caused . . . by a redevelopment project." (Health & Saf. Code,
§ 33401, subd. (b).) We are constrained to follow the terms of the statutes as they are written and
in light of their purposes. Mitigation revenues received by a school district under the provisions of
Health and Safety Code section 33401, subdivision (b) are not deductible as "property tax revenue
received pursuant to . . . the Revenue and Taxation Code."
Finally, with respect to "tax increment funds," Health and Safety Code section 33676,
subdivision (a) provides:
"Prior to the adoption by the legislative body of a redevelopment plan
providing for tax-increment financing pursuant to Section 33670, and unless an
agreement is entered into or payments are otherwise distributed by the agency in
accordance with Section 33401, any affected taxing agency may elect, and every
school and community college district shall elect, to be allocated, in addition to the
portion of taxes allocated to the affected taxing agency pursuant to subdivision (a)
of Section 33670, all or any portion of the tax revenues allocated to the agency
pursuant to subdivision (b) of Section 33670 . . . ."3
Here, again, the only issue is whether tax increment funds are "received" by a school
district "pursuant to . . . the Revenue and Taxation Code" within the meaning of the Education Code
provision. Although the school district may be considered to be the levying tax agency (see
Huntington Park Redevelopment Agency v. Martin (1985) 38 Cal. 3d 100, 106-107; Bell Community
Redevelopment Agency v. Woosley, supra, 169 Cal. App. 3d 24, 32-33), it is the redevelopment
agency that is allocated and "receives" this portion of the property tax funds. We need not decide
whether these revenues lose their "tax" character when placed in the possession of a redevelopment
agency; it is sufficient to point out that they are not transferred to a school district pursuant to the
Revenue and Taxation Code. It is other statutory authority contained in the Health and Safety Code
that furnishes the basis for the allocation of funds from the redevelopment agency to the school
district.
In answer to the question presented, therefore, we conclude that in lieu taxes,
mitigation revenues, and tax increment funds given by a redevelopment agency to a school district
pursuant to Health and Safety Code sections 33401 and 33676 do not constitute "property tax
revenue" required to be deducted under Education Code section 42238 in computing the amount of
a school district's state general aid.
3
A redevelopment agency may also under appropriate circumstances "pay all or part of the value
of the land for and the cost of the installation and construction of any building, facility, structure,
or other improvement which is publicly owned" (Health & Saf. Code, § 33445), and "any school
district may enter into an agreement with an agency under which the agency shall construct, or cause
to be constructed, a building or buildings to be used by the district" (Health & Saf. Code, § 33446).
Health and Safety Code section 33445.5 additionally authorizes the payment of funds by a
redevelopment agency to a school district pursuant to specified conditions for redevelopment plans
adopted prior to January 1, 1984.
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