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HomeMy WebLinkAboutCC 13 RAILROAD CASES 08-15-88 ': NO.~ 13 OAT[. July 29, 1988 ~'"~ONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: $ USJ [CT: CIT]~ ATTORNEY RAILROAD CASES Attached is a letter from the County Counsel of .the County of Orange regarding a number of cases which have been pending relative to assessments and taxes collected on railroads, a portion of which taxes are allocable to the City of Tustin. I have reviewed and considered the proposed action of the County Counsel and I believe it to be in the best interest of the City of Tustin and, accordingly, I recommend that the Council by its Minute Order agree to the proposed ' e County Counsel. City Attorney JGR: se :D: 7/19/88 (964.) 1. Letter from County Counsel dated 7/14/88 2. Letter to County Counsel from City Attorney dated 7/29/88 cc: WH RN JAMES THOMAS i. WOODRUFF ALAN R. WATTS K[NNARD R. SMART. JR. DANIEL K. SI='RADLIN LYDIA S. LEVIN SUZANNE D. ATKIN5 LOIS E. JEFFREY THOMAS F. NIXON CRAIG G. FARRINGTON CLARK MAG DALENA LONA-WIANT LAW OFFICES OF II o., h,- & o ,i ... ff A P~O~ESSlON~L CO~O~ATION SUITE 7000 nEXUS ~INAnCIAL CENTER 701 SOUTH PA~KE~ STREET o~AnGE, CALIFOrNia TELEPHONE {714) August 4, 1988 TELECOPlE~ i7I4~ 83=~-7787 CABLE A{:::)D~ESS ~O~WOOD TELEX. BC-4294 County Counsel County of Orange PO Box 1379 Santa Ana, California 92702-1379 ATTN: David R. Chafee, Esq. Deputy County Counsel RE: Southern Pacific Transportation Co., et al. v. Board of Equalization, et al.; No. 281434 Atchison, Topeka & Santa Fe Railways Co., et al. v. Board of Equalization, et al.; No. 778986 Atchison, Topeka & Santa Fe Railways Co., et al. v. Board of Equalization, et al.; No. 855589 Southern Pacific Transportation Co., et al. v. Board of Equalization, et al.; No. 810433 Southern Pacific Transportation Co., et al. v. Board of Equalization, et al.; No. 877359 Dear Mr. Chaffee: Your letter of July 14 has been received and reviewed. I intend to advise the Tustin City Council that the action proposed in your letter be acquiesced in by Tustin and I have no reason to believe that the Council will not so agree. However, the next meeting of the Tustin City Council is not until August 15 and the matter will be presented to the Council for its consideration at that time. If you have any questions, pleas~e~%e. . "" City Attorney - City of Tustin JGR: se :D: 7/19/88 (962) cc: WH Writer's Direct Oial Number 834-4379 City Council City of Tustin OFFICES OF THE COUNTY COUNSEL COUNTY OF ORANGE 10 CIVIC CENTER PLAZA MAILING ADORESS: P.O. BOX 1379 SANTA ANA, CALIFORNIA 92702-1379 7141834-3300 ADRIAN KUYPER J~'~ COUNTY COUNSEL / WILLIAM J. McCOURT CHIEF ASSISTANT ARTHUR C. WAHLSTEDT, JR. LAURENCE M. WATSON ASSISTANTS July 14, 1988' VICTOR T. BELLERUE DAVID BEALES JOHN R GRISET TERRY C. ANORUS EDWARD N DURAN CLAUDIA L. COWAN IRYN6 C. BLACK JAMES L. TURNER RICHARD D. OVlEDO PETER L. COHON BENJAMIN P. DE MAYO NICHOLAS S. CHRISOS HOWARD SERBIN DAVID G. EPSTEIN DANIEL J. DIDIER THOMAS F MORSE GENE AXELROD WANDA S. FLORENCE ROBERT L. AUSTIN HOPE E. SNYDER DONALD H RUBIN THOMAS C AGIN DAVID R. CHAFFEE SHERLE A. CHRISTENSEN CAROL D. BROWN SUSAN M NILSEN BARBARA L. STOCKER SARA L. PARKER JAMES F. MEADE ADRIENNE K SAURO STEFEN H. WEISS KARYN J DRIESSEN SUSAN STROM Re: Southern Pacific Transportation Co., et al. v. Board of Equalization, et al.; No. 281434 DEPUTIES Atchison, Topeka & Santa Fe Railways Co., et al. v. Board of Equalization, et al.; No. 778986 Atchison, Topeka & Santa Fe Railways Co., et al. v. Board of Equalization, et al.; No. 855589 Southern Pacific Transportation Co., et al. v. Board of Equalization, et al.; 810433 Southern Pacific Transportation Co., et al. v. Board of Equalizatio. n, et al.; 877359 Dear Council Members: Pursuant to your designation and request for representation (under the provisions of former Revenue and Taxation Code Section 5149), this office has represented your City, as well as the County of Orange, as parties defendant in one or more of the above- en- titled actions. As these cases represent similar and/or identical legal and factual issues, they are commonly referred to as the "Railroad Cases." For convenience of communication, we have listed all of the cases generically called Railroad Cases without indicat- ing if your City is a party thereto. Your City Attorney should confirm which cases are applicable to your City. By this letter we wish to update you on the status of these cases, and to apprise you of impending actions and stipulations which we anticipate entering shortly. The Railroad Cases currently include seven separate state court cases (six of which are pending in San Francisco County Supe- rior Court; three of which have been consolidated; and the seventh is pending in Sacramento County Superior Court) and four federal court cases (all of which have been consolidated for hearing in the U.S. District Court in San Francisco). Plaintiffs in these cases chaffee/037 Ci.~y Council July 14, 1988 Page 2 represent more than 20 railroads. The defendants include the State Board of Equalization, represented by the California Attorney Gen- eral, 51 counties, including the County of Orange, and most of the cities located within those counties. - Under the California Constitution, the State Board of Equaliz~ation is responsible for assessing all railroad property. The State Board then allocates the assessment between the counties which levy taxes at the local rate. Collectively, the cases seek recovery of a portion of taxes levied for fiscal years 1978-79 through 1985-86. State Court Cases Ail of the railroads' state court actions claim that the State Board improperly valued and assessed their properties throughout the state. Of these cases, one has gone to trial in San Francisco County Superior Court, and Judgment was granted in favor of plain- tiffs and against all defendants. The court determined that, of the total Judgment of $1,864,153.43, the County-wide liability, in- cluding all taxing entities who take a proportionate share of the taxes collected in Orange County, is $115,860.73. It is an- ticipated that the.Attorney General will appeal this judgment, and that the counties and cities will join in the appeal. Depending on the outcome of the appeal, it can be expected that a similar determination will be made in each of the remaining six sta~te court cases. While we can only approximate, it is not unlikely that the County-wide liability will be roughly the same $115,000 for each of the remaining cases. Federal Court Cases These actions arise under the Railroad Revitalization and Regulatory Reform Act of 1976, commonly know as the "4-R" Act. The Act makes it unlawful for an assessing authority to assess railroad transportation property at a value which bears a higher ratio to the true market value of such property than the ratio which the as- sessed value of other commercial industrial property in the assess- ing jurisdiction bears to the true market value of such commercial industrial property. All of the plaintiffs contend that due to Proposition 13, their railroad transportation property is assessed at a higher assessment to market value ratio than the assessment to' market value ratio of other commercial and industrial property as- sessed under Proposition 13. Plaintiffs also contend that their property has improperly been overvalued by the State Board, the same issue raised in the state court cases. chaffee/037 City Council July 14, 1988 Page 3 ' Because these actions involve issues relating to local assess- ment, rather than just state-wide assessment by the State Board, the various county defendants have heretofore taken an active role in these actions through outside counsel, Howard, Rice, Nemerovski, Canady, Robertson & Falk. The Orange County Board of Supervisors has authorized such representation. Since 1982 the court has enjoined the counties from. collecting approximately 40% of the taxes levied on the State Board assess- ments. The court ultimately made a determination that the rail- roads' property was impermissibly assessed at a market value ratio approximately 40% higher than that of other commercial and indus- trial property assessed under Proposition 13. Because of the court's injunction prohibiting collection of 40% of the taxes lev- ied since 1982, the County of Orange and its co-defendant cities have little, if any, liability for those years. Still pending is the County and City liability for tax years 1978-79 through 1981- 82. Pursuant to a ruling of the Ninth Circuit Court of Appeal, the Federal District Court may still consider whether the State Board has also improperly overvalued the railroads' property. HoWever, it appears that the federal court will abstain from that determina- tiu~, fending determination of the state court cases. ADDearances in Future Proceedinqs As previously mentioned, the State Board of Equalization per- formed all of the assessment work related to plaintiffs' properties. The State Board has been, and will continue defending those assessments through the office of the Attorney General. That portion of the federal cases relating to local assess- ments has now been resolved, and it is unlikely that the plaintiffs' will be granted much more relief, as the federal court has chosen to abstain from hearing the valuation issues pending resolution of the state court cases. In view of the fact that virtually all of the remaining issues in all of these cases relate to the State Board's valuation of the railroads' property, it is clear that the State Board and its coun- sel, the Attorney General, must carry the burden of defense. Therefore, we have proposed, and the Orange County Board of Supervisors has approved, entering the following stipulations to be filed in the various courts where the Railroad Cases are pending: chaffee/037 City Council July 14, 1988 Page 4 1. The plaintiffs shall not be required to serve any further Pleadings on Orange County defendants, and service on the Attorney General is sufficient; 2. The Orange County defendants shall not be required to make any further appearances or submit any further Pleadings in the action; and 3. The Orange County defendants agree to be bound by any fi- nal judgment ordered and approved by the court including, if appli- cable, the payment of refunds in proportion to the tax-=s allocated to the County. In entering these stipulations, it is our understanding that the State Board and the Attorney General will continue their de- fense of the assessments to, and including, appeal from the re- cently entered Judgment in the first state court case in San Fran- cisco. As a practical matter, Orange County's interests, and the interests of.the cities located therein, will be defended by the Attorney General. However, the Attorney General will not spe- cifically appear for, or represent, the County or the Cities. In view of the foregoing, it is our intention to'prepare and enter the foregoing stipulations pursuant to our prior authoriza- tion from the Orange County Board of Supervisors. However, prior to entering, such stipulations, as a matter of professional responsibility, we wish to notify you ~f this proposed action. In view' of the short time remaining in which to file the pro- posed stipulations, we must request that any objection to the pro- posed action be received by this office prior to August 1, 1988. If you have not responded by that date, we will assume your City's approval of this action. In the event of objection, or if there are any questions, we will be happy to discuss the matter with your City Attorney. Very trulyyours, ADRIAN KUYPER, COUNTY COUNSEL David R. Chaffee, Deput~ DRC:rer chaffee/037