High Court Declines To Hear Case, Upholding August Appeals Court Ruling
The California State Supreme Court dealt a fatal blow to local resident Leland Traiman’s cause to nullify AUSD’s parcel tax Measure A, by letting stand a California First District, Division 5 Court Of Appeals ruling that the tax did not create “different effective tax rates for different properties.”
Had he prevailed, AUSD General Fund revenues which the district listed as just over $154.5 million for Fiscal Year 2023-4 would have declined by about $10 million or just under 7%.
Another tax measure, B-1 which accounts for an additional $12.5 million revenue stream could have also been in jeopardy.
A hit of 10 million, much less another $12.5 million that could have been challenged had the State’s Top Court heard the case and ruled in Traiman’s favor, would have required massive cuts that could involve teacher pay, benefits, district services, and could have resulted in school closures, increased class sizes and more.
At that point, the AUSD District leadership and Governing Board would have had to determine impacts on the school community and what to put on the chopping block.
Measure A, along with B-1, uses a variable parcel size formula that taxes “improved parcels” at the rate of 26.5 cents per square foot, with a cap of $7,999 for properties that exceed 30, 184.92 square feet.
That aspect became the centerpiece of Traiman’s lawsuit.
The variable size approach is a change from the more traditional method which charges a flat rate per parcel regardless of size and.
In his original action in Alameda County Superior Court in 2020, Tramain argued that owners of properties that exceeded 30,184.91 square feet would end up paying less than the 26.5 cents per square foot amount due to the cap, even though their outlay of dollars would be the same once they hit the cap level of $7,999.
Under his theory, the differentiation of the square foot metric created an inequity that was not lawful, since the law requires that the tax must result in an “identical effective tax rate for every taxpayer and every property,” in the words of the Appeals Court.
The Appeals Court held that, while there might be a diminishing of the 26.5 cents per square foot rate for property over the upper size limit, the cap –not the rate– was the key element in determining tax equity, and that Tramain’s premise had no basis in existing law.
“Neither case law, legislative history, nor public policy supports the conclusion that a school district is powerless to impose a special tax merely because it caps the taxpayers’ liability,” the court ruled.
Specifically, Traimann originally took issue with a provision of State Law that reads that all special taxes (as a school parcel tax) must “apply uniformly to all taxpayers or all real property within the school district.”
Traiman asserted that “the larger the building, the lower the effective tax rate,” in his original, 2020 filing in Superior Court where he sought an “invalidation” of the tax and won the initial round.
The trial court, in April of 2022, awarded Traiman $374,960 in attorney fees as the successful party under Civil Procedure Code and AUSD appealed shortly thereafter, as it faced the prospective loss of $10 million in parcel tax based revenues.
The State Supreme Court’s decision not to hear the appeal means that Tramain will not be awarded attorney fees and that the Parcel Tax remains in effect until it expires in 2027.
At the heart of its ruling, the Appeals Court focused on “the plain meaning” of the two operant words in the law: “apply uniformly.”
The court, in effect, took out the dictionary and asked two questions.
First did the tax “apply?” –meaning to be put into effect— and the court said yes.
Secondly, was it applied “uniformly? ”, the heart of Traiman’s argument.
After citing several definitions from the Oxford English Dictionary, the court ruled that, yes, the tax did apply uniformly because the cap was not subject to any “variation.”
The rate was the rate, and the cap was the cap, and that was that for Traiman’s theory of law related to parcel taxes that differentiate by parcel size.
Meanwhile, Measure B-1 expires at the end of Fiscal Year 24-25, so AUSD’s future revenue stability is still subject to the winds of change.