LOS ANGELES -- After months of gloomy fiscal developments, California and its localities have received a sliver of good news.
The state Supreme Court on Monday overturned a lower court ruling in class action suit that would have forced California to return an estimated $1.5 billion of fees and use taxes collected on used-car purchases since the mid-1970s.
In deciding Woosley v. California, the high court upheld the use taxes while unanimously agreeing that a policy imposing higher fees on vehicles bought out of state unconstitutionally interfered with interstate commerce.
But, citing arguments of fairness, the ruling limited eligibility for refunds to the motorist who had filed suit and to others who had filed individual claims.
That distinction reduces the claim amount to a few thousand dollars, rather than the $1.5 billion that would have been paid to 17 million motorists, according to an attorney for the state.
Cities and counties closely watched the case because vehicle license and use fees collected by the state are distributed to local governments.
"Fiscally, this is wonderful news for the state, for counties, and for cities," said state Assistant Attorney General Timothy Laddish.
Laddish said the thought relatively few motorists had filed individual claims, so the "1.5 billion number will be reduced to about $10,000."
He predicted it is unlikely the case will be appealed to the U.S. Supreme Court, but said it is possible.
Patrick Woosley, a classic car owner, filed the initial suit on grounds that California overcharged vehicle license fees and use taxes for out-of-state vehicles that were registered in California from 1975 to 1983. He also alleged overcharging of use taxes on all used vehicles registered since 1976.
In 1990, a state Court of Appeal in Los Angeles upheld a trial court ruling, finding that the tax policy on out-of-state car purchases was unconstitutional. It also struck down the policy on use taxes for used car purchases.
Local governments welcomed this week's state Supreme Court ruling, since they would have faced a possible loss of revenues if the court had forced the state to return fees to motorists.
"It's a nice thing, but it's not a big thing, because most of the money is going to cities," said Dan Wall, a lobbyist for the California Association of Counties. "We're not ungrateful, but it's not going to turn the tide for us." Officials at the League of California Cities were not available for comment.
California listed the Woosley suit in the litigation section of recent official statements for note and bond sales.
According to those prospectuses, the state expected that cities and counties would be ultimately liable if an unfavorable outcome had been reached. The state came to that conclusion because "funds that would otherwise have been distributed to the cities and counties [would] have to be withheld to pay refunds," according to a recent bond official statement for the state of California.