Special Tax Approved by Landowner Voters Invalidated; Mello-Roos Taxes Implicated

In an opinion filed August 1, 2014, the Court of Appeal for the Fourth Appellate District has invalidated a special tax approved by landowner voters.  The decision was based, in part, on the court's interpretation of the voting requirement of Article XIIIA, section 4, of the California Constitution.  While the tax was not a Mello-Roos special tax, the decision casts doubt on the validity of future Mello-Roos special taxes that are approved by landowner voters rather than registered voters.  (City of San Diego v. Shapiro (August 1, 2014, D063997) — Cal.App. 4th —- [2014 Daily Journal D.A.R. 10,232]).


The City of San Diego ("City") twice tried and twice failed to win the approval of City voters for a transient occupancy (hotel) tax.  The City recast the tax as a special tax to be levied on hotel property within a "Convention Center Facilities District," which would include all the land within the City's boundaries.

The City, using its power as a charter city, adopted an ordinance authorizing the proposed special tax, if approved by the qualified electors.  The ordinance, while modeled on and incorporating various provisions from the Mello Roos Act, departed from its voting provisions.  The City's ordinance provided that only the owners or lessees of land on which hotels were situated could vote in the election on the tax.  The qualified electors, as so defined, approved the tax.


Article XIIIA, section 4, of the California Constitution (adopted as part of Proposition 13), provides that:  “Cities, Counties and special districts, by a two-thirds vote of the qualified electors of such district, may impose special taxes on such district….”

The court interpreted the term 'qualified electors' as meaning only registered voters, not owners of property, and held that the election procedure specified in San Diego's special tax ordinance was unconstitutional and that the tax was invalid.

Consequences for Mello-Roos Taxes

Taxes levied under the Mello-Roos Act are special taxes that are subject to the election requirements of Article XIIIA, section 4.  Enacted in 1982, after the adoption of Proposition 13, the Mello-Roos Act uses the term 'qualified electors' and provides that they are the landowners in the district if there are fewer than twelve persons registered to vote within the district (Government Code section 53326(b)).  In 1986, the Act was amended to also allow a landowner vote if the tax will not be levied on residential property (Government Code section 53326(c)).

The court asserted that it was not opining on the validity of landowner voting under Section 53326(b) to impose special taxes.  Nonetheless, the reasoning of the opinion could be applied to challenge the validity of such landowner elections.

Existing Mello-Roos Taxes.  The Mello-Roos Act requires that any challenge to a special tax be brought within 30 days of the election.  That should protect existing Mello-Roos taxes approved by a landowner vote under either subsection (b) or (c) of Section 53326.

New Mello-Roos Taxes.  Until this opinion is (we hope) de-published or reversed, it may be prudent for local agencies to seek a validation judgment for new Mello-Roos taxes, at least in the case of taxes that will be used to pay debt service on bonds.  Bond counsel and underwriters of Mello-Roos bonds will likely require such a judgment be obtained before the sale of bonds.

It may be possible in such a validation action to successfully distinguish a Mello-Roos landowner election under Government Code section 53326(b) from the San Diego voting scheme.  The court noted that it was not considering "the distinct question of whether landowner voting [under Section 53326(b)] is constitutional … in districts that lack sufficient voters to conduct an election among registered voters." 

Under Section 53326(b), a landowner election is held only if there are no more than eleven registered voters in the district.  The Legislature may have decided, when enacting the Mello-Roos Act, that twelve was the appropriate minimum number for a registered voter election.

The same distinction may not be possible for a landowner election held under the authorization of Section 53326(c).  San Diego's voting scheme was modeled on Section 53326(c), which also permits a landowner election regardless of the number of registered voters in the district.


If you have any questions concerning this Legal Alert, please contact the following from our office, or the attorney with whom you normally consult.

Jonathan P. Cristy, Constantine C. Baranoff or Anthony D. Bento | 916.321.4500