School Districts’ ‘Special Tax’ Remains Invalid

SAN FRANCISCO —  The state Supreme Court dealt a setback Thursday to school districts in fast-growing communities, limiting their ability to impose special taxes or fees on developers to pay the full costs of educational facilities.

The justices, over one dissent, refused to hear a challenge to a ruling last November by a state Court of Appeal that struck down a voter-approved tax of as much as $6,300 on each new home built within five districts in the Santa Clarita Valley.

The three-judge appeal court held that the tax was invalid either as a “special tax” allowed with two-thirds voter approval under Proposition 13 or as a “development fee” that schools may impose, but only up to $1.50 a square foot of a new residence.

The panel ruled further that the tax was illegal because it was not imposed uniformly on residents and property owners throughout the community, but would be borne only by developers and future residents.

The high court’s action, taken in a brief order issued Thursday, means the appellate ruling becomes binding on trial courts throughout the state. Only Justice Stanley Mosk voted to review the appellate court decision--leaving the matter three votes short of the number required.

The case had drawn wide attention in the wake of a flurry of recent efforts by local governmental agencies to impose fees on developers to provide for schools, roads and other facilities required by rapid population growth.

Orange County school officials, however, said they are not directly affected by the ruling.

None of the Orange County school districts that impose fees attempted the kind of tax vote that the five Santa Clarita school districts did. Rather, they did so under existing legislation that allows them to charge up to $1.50 per square foot for residential construction, sometimes in combination with other agreements with developers to pick up part of the construction costs.

But officials said Thursday’s ruling would make negotiations on the issue of new school funding between schools and developers even more difficult.

“It hasn’t worked out really well,” said Anthony Dalessi, assistant superintendent at the Santa Ana Unified School District. “Developers have never been real crazy about paying.”

Already, developers in Orange County have challenged the use of the state-allowed developers fee.

In November, a Superior Court ruling declared that the Newport-Mesa Unified School District had improperly imposed the maximum state-allowed fee on developers. The court agreed with developers who argued that the school district, which is facing a declining enrollment, was using the revenue from the fees for maintenance and repairs, when the legislation intended it to be used for capital construction.

While Orange County and most school districts in the state had abided by the statutory limit on developer fees, the effort by the districts in the Santa Clarita Valley to impose what they called a “special tax” to obtain far more revenue for long-range educational needs could have led to similar moves throughout California, lawyers and officials said.

William Ingram, president of the California School Boards Assn., said school authorities from across the state had been hopeful that the appellate court ruling would be overturned.

‘Back to Drawing Board’

“That would have given us an out,” he said. “Now, we’re back to the drawing board.”

In Orange County, where school construction is a critical topic among school administrators because of growing population, the case had been studied carefully. School officials here say they do not blame the Santa Clarita schools for trying to find a creative solution to a desperate situation.

“That’s why school districts engage in these games,” said Paul Reed, deputy superintendent of the Irvine Unified School District. “The need is so great, and the number of projects to be funded is so great.”

Reed, whose district has faced an annual growth in enrollment of 2% to 5% in the last few years, said there is a $5-billion backlog of requests in the state school building fund.

“It’s a huge problem,” he said.

On another front, Sonoma County Counsel James P. Botz, representing a coalition of 14 counties that supported the five school districts in the case, voiced concern that the ruling could encourage legal challenges to a wide range of voter-approved, post-Proposition 13 special taxes enacted by cities, counties and special districts.

Botz noted, for example, that under the decision a hotel occupancy tax--borne primarily by visitors and not voters--might face a legal challenge because it was not uniformly imposed.

“It could really narrow the kind of taxes that local governments can impose under Proposition 13,” he said. “Those kind of taxes are difficult enough to obtain because they have to be approved by two-thirds of the voters.”

Minimal Effect

However, Alvin S. Kaufer, a Los Angeles attorney who represented the California Building Industry Assn. in a suit against the tax at issue in the case, said the ruling would have minimal impact, affecting only a relatively small number of school districts that have tried to impose a special revenue measure.

The Court of Appeal opinion, he added, stopped far short of requiring absolute uniformity in the burdens imposed by a special tax--and thus may pose little threat to such measures. There is still room for special taxes to contain reasonable rate differentials, he said.

“The primary effect will be to retain the status quo,” Kaufer said. “If the decision had gone the other way, there would have been chaos. Residents in any school, sewer or mosquito-abatement district in the state could go out and tax new residences in any amount and nothing could be done about it.”

The case arose after voters in the Newhall, William S. Hart, Saugus, Castaic and Sulphur Springs school districts in Los Angeles County approved the special tax by a two-thirds vote in June, 1987.

Times staff writer Steve Padilla contributed to this report.