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City Wins Tax Allocation Argument Over County At State Supreme Court

The City of Dinuba's redevelopment agency is entitled to tax increment that Tulare County erroneously distributed to itself and nine other local government entities, according to a unanimous state Supreme Court ruling.

Tulare County conceded that it made the mistake and agreed to remedy it prospectively. But the county argued the Tort Claims Act (Government Code 810 et seq.) protected the county from having to correct the problem retroactively. Upholding a Fifth District Court of Appeal decision, the state Supreme Court rejected the county's position.

"[T]he immunity provisions of the [Tort Claims] Act are only concerned with shielding public entities from having to pay money damages for torts," Justice Carlos Moreno wrote in a relatively short opinion. "Plaintiffs [Dinuba] do not seek damages; they seek only to compel defendants [the county] to perform their express statutory duty. While compliance with the duty may result in the payment of money, that is distinct from seeking damages.

"For example," Moreno continued, "had plaintiffs sought compensatory damages for a downgraded bond rating or increased interest rates as a result of defendants failure to disburse the funds to which plaintiffs were entitled, such damages would likely be precluded. But plaintiffs do not seek such damages."

A 2002 audit conducted for the Dinuba Redevelopment Agency reported that the Tulare County auditor-controller had miscoded some parcels and that the agency had not received tax increment for those parcels for the 2002-03 fiscal year and the previous four fiscal years. Instead, the county disbursed the increment to itself, a county library fund, and a variety of school and special districts.

When the county refused to pay the increment to the redevelopment agency retroactively, Dinuba sued, seeking underpaid increment from 1997-98 through 2003-04. A Tulare County Superior Court judge ruled for the county, but on appeal the Fifth District determined Dinuba was "entitled to the tax increment revenue by statute."

The case, closely watched by other cities and redevelopment agencies, then went to the state Supreme Court. The county specifically argued that one section of the Tort Claims Act, 860.2, barred the county from having to pay back misallocated revenue.

The court, however, said that 860.2 concerns government liability for an injury, which a different section of the act defines as "death, injury to a person, damages to or loss of property, or any other injury that a person may suffer to his person, reputation, character, feelings or estate, of such nature that it would be actionable if inflicted by a private person."

The county's failure to correctly distribute property tax revenue is not an "injury" within this narrow definition, the court ruled; therefore, the Tort Claims Act does not protect the county from the city's claims.

The Case:
City of Dinuba v. County of Tulare, No S143326, 07 C.D.O.S. 8545. Filed July 19, 2007.
The Lawyers:
For Dinuba: Steven Mayers, Meyers, Nave, Riback, Silver & Wilson, (510) 655-6086.
For the county: Thomas Winfield III, Brown, Winfield & Canzoneri, (213) 687-2100.

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