The California Constitution requires cities, counties and special districts imposing a special tax to obtain a two-thirds vote of the “qualified electors” of such entity. The Mello-Roos Community Facilities Act of 1982 states that, where there are fewer than 12 registered voters within the boundaries of a community facilities district, the “qualified electors” are landowners within such district.
Citing previous case law, a court invalidated a special tax established by the City of Sacramento, determining that the “qualified electors” of the CFD are the registered voters of the entity imposing the special tax — not the landowners within the CFD.
The decision was handed down on May 6 in Sacramento Superior Court in Horizon Capital Investments, LLC v. City of Sacramento. Superior Court decisions solely decide issues before the court and are not binding on any other matters or public agencies. However, public agencies should be cognizant of this decision when forming a CFD.
In 2015, the City initially formed a CFD to finance a streetcar line between the City’s downtown area and its western portion. The district’s boundaries were limited to a portion of the City that included both residential and commercial properties. The Mello-Roos Act states that special taxes levied for a CFD must be approved by two-thirds of the “qualified electors” of the district. “Qualified electors” are defined under the Mello-Roos Act as the registered voters within the boundaries of the CFD if there are 12 or more registered voters within the boundaries or the landowners within the district if there are less than 12 registered voters within the boundaries. As there were more than 12 registered voters within the boundaries of the CFD, the City held a registered voter election. The City did not receive the requisite two-thirds vote approval to levy the special taxes.
In 2017, the City formed another CFD to finance the streetcar line. This time, the district boundaries were in the same general vicinity as the previous community facilities district, but excluded all residential properties and certain other small commercial properties. With these exclusions, there were no registered voters within the boundaries of the community facilities district. Therefore, the City determined that the “qualified electors” for the approval of the special tax levy within the CFD were the landowners within its boundaries.
A commercial property owner within the CFD and a registered voter outside of its boundaries challenged, among other things, the City’s determination that the “qualified electors” were the landowners of the CFD. The Petitioners claimed that, under the 2014 California Appellate Court case City of San Diego v. Shapiro, the “qualified electors” were the City’s registered voters. The court agreed. The court stated that section 4 of Article XIII A of the California Constitution requires cities, counties and special districts imposing a special tax to obtain a two-thirds vote of the “qualified electors of such district.” Citing to Shapiro, the court determined that “qualified electors of such district” means the registered voters of the entity imposing such special tax, which, in this case, was the City — not the CFD.
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