LOS ANGELES -- A group of special districts in Ventura County was expected yesterday to file a case asking the California Supreme Court to strike down recent state budget action that diverted district property taxes to education purposes.
The lawsuit was planned to be filed with the high court for original jurisdiction because the issue has statewide importance and immediacy, said Thomas Anderle, legal counsel for the Calleguas Municipal Water District, Ventura County's largest water wholesaler and a plaintiff in the suit.
The suit challenges the tax diversion on various principles relating to equal protection and tax limitations imbedded in either the U.S. or California constitutions.
Other special districts in Ventura County, such as those providing recreation and port services, joined the Calleguas district in the suit. The suit was targeted for filing yesterday afternoon, Anderle noted.
The action is expected to be followed closely because it marks the first legal challenge to California's diversion of local property taxes, a move that recently helped close the state's $8 billion budget shortfall for fiscal 1993.
Special districts are expected to lose $375 million because of the property tax shift. The moneys will be deposited in an education fund to relieve the state's general fund of providing an equivalent amount to schools.
A copy of the lawsuit was not available yesterday, but a background paper prepared by the Caleguas district outlined the anticipated constitutional arguments against the property tax diversion.
The law firm of McCormick, Kidman & Behrens helped prepare the report and is the special counsel handling the suit.
According to the background paper, local property taxes are being "converted to state general fund revenues and used for state purposes unrelated to the purposes for which they were levied and not necessarily benefiting the local property taxpayers who voted to pay them."
That action thwarts the intention of voters who formed the Calleguas district 40 years ago because they never expected "that the district's property taxes would be confiscated in the future to pay for state programs having nothing to do with providing a reliable water supply" in southeastern Ventura County, the report continued.
The lawsuit charges that the property tax diversion violates state and federal constitutional principles providing for equal protection under the law.
Regarding the equal protection argument, the background paper argued that the tax shift legislation lacked a rational basis in the way it created distinctions between taxpayers, resulting in a scheme that "is palpably arbitrary, resulting in invidious discrimination against taxpayers" in affected districts.
The lawsuit also alleges the property tax diversion improperly undermines the intent of Proposition 13, the state's tax limitation initiative passed by voters in 1978.
Among other things, Proposition 13 was supposed to give property owners certainty as to their future tax liability, the background paper said.
However, "the tax shift legislation creates uncertainty because it frustrates the reasonable expectations of the taxpayer that the property tax will fund the municipal services for which [it] was levied," the report argues, adding that taxpayers will face additional user fees, special assessments, and other charges to maintain the same level of services.
Finally, the lawsuit alleges that the tax diversion violates state constitutional prohibitions against gifts of public funds, including instances in which appropriations by one public entity do not further the specific purposes of the agency whose funds were transferred.
Donald Kendall, general manager of the Calleguas district, said this year's tax diversion equaled about 10% of his agency's $14 million operating budget. He said local officials want a quick hearing on their suit because they fear the state might go after a larger chunk of district property taxes in the next budget cycle.
The uncertainty "really ties my hands in what I can plan for," Kendall said.
The state's property tax diversions also shifted $200 million from cities, $525 million from counties, and $200 million from re-development agencies to the augmentation fund for schools. Some of those entities also have studied legal challenges, but they may seek relief instead by using legislative channels in an attempt to deter similar diversions in the future.
Kendall said the districts should have a stronger legal case because the property taxes at issue were not allocated to them as "bailout money," which helped cities and counties in the wake of Proposition 13.
Anderle said the high court has 60 days to decide whether to hear the case.
"It's difficult to get on their calendar," he said, adding that he hopes this case stands "a reasonably good chance" for review because of its timeliness and statewide implications.
The districts' suit names Ventura County's auditor as a defendant because that office carries out the local tax shift, but the "real party in interest" as a defendant is the state, Anderle said.
A taxpayers group in Ventura County also is representing property owners as a plaintiff.