HomeMy WebLinkAboutCity Council - 2001-55 RESOLUTION NO. 2001-55
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF HUNTINGTON BEACH
SUSPENDING FOR FISCAL YEAR 2001/2002
THE PROPERTY TAX OVERRIDE
TO PAY FOR EMPLOYEE RETIREMENT BENEFITS
WHEREAS, the City of Huntington Beach will be receiving a pro-rata portion of the one
dollar($1.00)Basic Property Tax Rate levied by the County Board of Supervisors as a means of
providing revenue for the operation and support of various City departments, offices and
activities; and
In 1966, and again in 1978, the electorate of the City of Huntington Beach approved a
City Charter revision authorizing the City to provide retirement benefits to its employees, and
further directing the City to levy a property tax in excess of 1% of the full cash value of property
"sufficient to meet all obligations of the City for the retirement system in which the City
participates"; and
In Carman v. Alvord(1982) 31 Cal.3d 318, the California Supreme Court held that a tax
such as that authorized by the City Charter to fund a city's employee retirement obligations is
exempt from Proposition 13 (Article XIIIA of the California Constitution) as voter-approved
prior indebtedness; and
Since 1983-84, Revenue and Taxation Code Section 96.31(b) has limited the City to
levying a maximum property tax override at Zero and 0.04930/100t'' Dollars ($0.04930)per $100
of assessed value to pay for pension programs; and
The City currently provides retirement benefits through a contract with the Public
Employees Retirement System (PERS). In addition, the City provides a Supplemental
Retirement Program offering survivor's benefits that replace certain PERS benefits and a Retiree
Medical Plan subsidizing the cost for retirees to participate in the City Health Plan; and
Although the City has participated in PERS since 1945, it has modified its retirement
programs since July 1, 1978. For example, after July 1, 1978, the City began reimbursing
employees for their contribution to PERS, as well as offering the Supplemental Retirement
Program and the Retiree Medical Plan; and
In December 1999, the Howard Jarvis Taxpayers Association("HJTA") and a single
taxpayer filed suit challenging whether the City's property tax override violates Proposition 13,
in a case entitled Howard Jarvis Taxpayers Association, et al., v. County of Orange, and City of
Huntington Beach as Real Party in Interest, Orange County Superior Court Case No. 81-87-80
("Case No. 818780"), At issue was whether the override is limited to only those retirement
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benefits the City paid for as of July 1, 1978, or for all City-paid retirement benefits, including
those benefits authorized after July 1, 1978; and
Case No. 818780 was tried on February 26-27, 2001 in the Orange County Superior
Court. On April 2, 2001, the Court issued a final judgment. The Court held that under
Proposition 13, the property tax override is unconstitutional "to the extent it exceeds the City's
employer contribution for PERS retirement benefits that were in existence prior to July 1, 1978."
At a minimum, this means that the property tax override can only be used to pay the employer's
contribution to PERS, and cannot be used to fund the City's payment of the employees' member
contributions,the Survivor's Continuance Program or the Retiree Medical Program; and
The City Council has authorized an appeal in Case No. 818780. It will take
approximately three years to complete an appeal; longer still if Supreme Court review is sought;
and
Absent any appeal, the City would be prohibited from levying a property tax levy for
Fiscal Year 2001/2002 because the City's cost to PERS for the employer's contribution is $0 for
Fiscal Year 2001/2002; and
Pursuant to Resolution No. 2001-19, the City Council declared its intent that should a
remittitur by an appellate court either affirm or modify the April 2, 2001 judgment in Case No.
818780, declaring that a portion of the property tax override violates Proposition 13, the City
shall refund within a reasonable time all property taxes paid from July 1, 1997 to the present
consistent with the remittitur upon presentation of a refund claim in compliance with the
California Revenue and Taxation Code. As a result, while the City may levy a property tax
override for Fiscal Year 2001/2002, the City is committed to reimbursing the tax consistent with
any final appellate decision. Consequently, the City has three options: (1) collect the tax, and
then use the money for employee benefits subject to refunding it pursuant to any remittitur; (2)
collect the tax, impound the proceeds, and then spend or reimburse the revenue consistent with
the remittitur; or(3) suspend the tax until its constitutionality can be resolved; and
While the City is suspending the Property Tax Override for Fiscal Year 2001/2002, the
City still retains the right to levy the tax up to the amount of 0.0493% of assessed value. Under
the Proposition 218 Omnibus Implementation Act, specifically Government Code
Section 53750(h)(2)(B), there is no requirement of further voter approval under Proposition 218
to "implement or collect a previously approved tax, or fee or charge, so long as the rate is not
increased beyond the level previously approved by the Agency, and the methodology previously
approved by the Agency is not revised so as to result in an increase in the amount being levied
on any person or parcel." Consequently, once the suspension ends, the property tax override
may be reinstated without a vote of the electorate.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Huntington
Beach that the property tax override for employee retirement costs for Fiscal Year 2001/2002 is
suspended and that no property tax override shall be levied during said Fiscal Year.
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BE IT FURTHER RESOLVED that the City Council declares that although it is
suspending the Property Tax Override for Fiscal Year 2001/2002, it retains the authority to levy
the tax in future years up to the rate of 0.0493% of assessed value.
PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a
regular meeting thereof held on the 20th day of 4 August y 2001.
61 Mayor
ATT ST: APPROVED AS TO FORM:
City Clerk at-Z gam/ �� City Attorney
REVIEWED AND APPROVED: INITIATED APPRO
Ci Administrator Director Administrative Services
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STATE OF CALIFORNIA
COUNTY OF ORANGE ss:
CITY OF HUNTINGTON BEACH )
I, CONNIE BROCKWAY, the duly elected, qualified City Clerk of
the City of Huntington Beach, and ex-officio Clerk of the City Council of said
City, do hereby certify that the whole number of members of the City Council
of the City of Huntington Beach is seven; that the foregoing resolution was
passed and adopted by the affirmative vote of at least a majority of all the
members of said City Council at a regular meeting thereof held on the 20th
day of August, 2001 by the following vote:
AYES: Boardman, Cook, Julien Houchen, Garofalo
NOES: Green, Dettloff, Bauer
ABSENT: None
ABSTAIN: None
qW.
City Clerk and ex-officio 61erk of the
City Council of the City of
Huntington Beach, California