HomeMy WebLinkAbout1983-12-06; City Council; 7573; Designation of Agent Tax Refund CasesAB# 7!f
MTG. 12/6/83
DEPT. CA
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CIT,. OF CARLSBAD - AGENDkBILL
TITLE: DESIGNATION OF COUNTY OF SAN DIEGO
AS AGENT FOR SERVICE OF PROCESS IN
TAX REFUND CASES
RECOMMENDED ACTION:
DEPT. HD.` —
CITY ATTY\-I-Ea
CITY MGR. '
That the City Council adopt Resolution No. /S designating
the County of San Diego as its agent for service of process in tax
refund actions.
ITEM EXPLANATION
The County of San Diego collects property taxes on behalf of the
City of Carlsbad. For years, the law provided that along with
assessing and collecting taxes the county would provide an appeals
process and defend any lawsuits seeking tax refunds. That law was
changed in 1981 to provide that the county would only defend these
cases if the City Council had designated them as our agent for
service of process and only if we paid the cost of the defense.
Since that time the San Diego -Imperial County City Attorney's
Association has been negotiating with the county counsel to work
out a mutually satisfactory arrangement to allow the county to
continue to defend the cities in tax refund cases. In the
meantime, our office has been responsible for watching out for the
City's interests in all of these cases. In that regard attached is
a summary prepared by the county counsel of the currently pending
tax cases which all involve claims by railroad companies for
refunds. The total amount at stake in all the cases is
approximately $1 million with Carlsbad's share estimated at
approximately 1 percent.
The county counsel has adopted a policy providing for their defense
of these cases with the costs shared in proportion to the amount of
money the City has at stake. Our association has unanimously
concurred in this policy and we recommend its acceptance to the
City Council. Attached is a letter dated November 3, 1983 from the
assistant county counsel explaining their new policy.
it is our recommendation that the City Council adopt Resolution No.
proc�//SL designating the county as its agent for service of
ess in tax refund actions. Once that resolution is filed with
the county clerk the county counsel will be responsible for the
defense of any cases filed in the future with the cost shared in
accordance with their policy. All of the cases currently pending
are being defended by San Diego County or some other county under
previous arrangements with one exception. In that case, the City
of San Diego has agreed to answer on behalf of all of the
individual cities. Our office will continue to monitor all the
cases and in addition be responsible for the full defense of that
particular one.
EXHIBITS
Letter dated November 3, 1983 from County Counsel
Memorandum dated October 11, 1983 from County Counsel
Resolution No. 7y/sue'
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LWYD M. HMUM, JR.
Co.." Co .N.t• ,
JOSEPH KASE. JR.
A.a1.TANT CaY v, CoY"au
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County of San Dreg®
OFFICE OF
COUNTY COUNSEL
355 COUNTY ADMINISTRATION CENTER
SAN DIEGO. CALIFORNIA 92101.2469
(714) 236.3651
November 3, 1983
San Diego/Imperial County
City Attorneys Association
San Diego, California
Dear Counsel:
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You have asked that County Counsel detail for you the
manner and method by which San Diego County has been applying
Revenue and Taxation Code Section 5149 (as amended effective
January 1, 1982), which requires County Counsel to represent,
for a fee, cities who designate the County as its agent for
service of process in tax refund actions. You have also
asked how this has been applied in the railroad cases
seeking substantial refunds on a state-wide basis naming
many cities.
Application of Revenue and Taxation Code Section 5149.
Revenue and Taxation Code section 5149 authorizes any
city for which the county collects taxes to provide for the
city's defense by the county counsel in any actions brought
against the city under the refund -of -taxes article of that
code. Effective January 1, 1982, Section 5149 was amended
to impose these conditions on such a defense:
(1) The city may provide for
when the city previously
as its agent for service
may be withdrawn at any
a defense by the county
has designated the county
or process (this designation
time);
(2) The city must notify the county of this designation
and also inform the county clerk;
(3) The county clerk shall keep and maintain a public
record of all cities who have designated the
county as agent for service of process, and delete
therefrom the name of any city which has withdrawn
the designation;
2.
City Attorneys Assoc. -2- November 3, 1983
(4) The county thereafter shall notify the city of any
process in a tax refund action served on it naming
the city; and
(5) The county shall impose fees on a city which has
designated the county as it's agent for service of
process which shall cover the costs incurred in
giving the notice and the defense of the suit.
Pursuant to this authorization, County Counsel has -
adopted a policy for the defense of cities in tax refund
actions. This policy requires that the costs of defense of
the lawsuit be borne by the city designating the county as
its agent for service in an amount prorated on the basis of
the amount of tax being challenged. A copy of that policy
is attached.
The initial communications from -County Counsel to the
cities indicated that the costs of defense would be shared
pro-rata based on the number of named defendants represented
by County Counsel. The policy as finally adopted modified
this to reflect, more r�,ali.stically, that the city s obliga-
tion to share in the co_,4s of defense would be based on the
amount of its taxes at stake as compared to the total taxes
at stake in that proceeding for the particular property
located in the city. County Counsel's current billing rate
is $60.00 per hour plus out-of-pocket costs.
The Railroad Cases.
Suits in both federal and state courts individually
brought by AT&SF, Southern Pacific and SD&AE seek refunds of
property taxes from '197A to the present, on a variety of
theories, principally on violation of the Federal 4-R Act
which prohibits states from discriminating against railroad
property in assessing property taxes. Some of these name
cities in which the railroad property is located, some do
not. A lead counsel has undertaken defense of some of these
cases; where there. is no lead counsel, San Diego County
Counsel is provid:.ng the defense. Attached is a list of the
cases.
County Counsel's practice has been:
1. For any suit filed and served on a city before
January 1, 1982: County Counsel or lead counsel engaged
will represent the city upon request, under the provisions
of the prior Section 5149. The cities named (as shown on
the attachment) are being provided a defense either by San
Diego or the lead counsel.
City Attorneys Assoc. -2- November 3, 1983
(4) The county thereafter shall notify the city of any
process in a tax refund action served on it naming
the city; and
(5) The county shall impose fees on a city which has
designated the county as its agent for service of
process which shall cover the costs incurred in
giving the notice and the defense of the suit.
Pursuant to this authorization, County Counsel has
adopted a policy for the defense of cities in tax refund
actions. This policy requires that the costs of defense of
the lawsuit be borne by the city designating the county as
its agent for service in an amount prorated on the basis of
the amount of tax being challenged. A copy of that policy
is attached.
The initial communications•from County Counsel to the
cities indicated that the costs of defense would be shared
pro-rata based on the number of named defendants represented
by County Counsel. The policy as finally adopted modified
this to reflect, more realistically, that the city's obliga-
tion to share in the costs of defense would be based on the
amount of its taxes at stake as compared to the total taxes•
at stake in that proceeding for the particular property
located in the city. County Counsel's current billing rate
Is $60.00 per hour plus out-of-pocket costs.
The Railroad Cases.
Suits in both federal and state courts individually
brought by AT&SF, Southern Pacific and SD&AE seek refunds of
property taxes from '1974 to the present, on a variety of
theories, principally on violation of the Federal 4-R Act
which prohibits states from discriminating against railroad
property in assessing property taxes. Some of these name
cities in which the railroad property is located, some do
not. A lead counsel has undertaken defense of some of these
cases; where there ii no lead counsel, San Diego County
Counsel is providing the defense. Attached is a list of the
cases.
County Counsel's practice has been:
1. For any suit filed and served on a city before
January 1, 1982: County Counsel or lead counsel engaged
will represent the city upon request, under the provisions
of the prior Section 5149. The cities name (as shown on
the attachment) are being provided a defense either by San
Diego or the lead counsel.
City Attorneys Assoc. -3- November 3, 1983
2. For any suit filed before January 1, 1982, but
served on the city after January 1, 1982: County Counsel
will represent the city upon request at no cost provided
that if lead counsel imposes additional costs for such
representation these costs will be passed on to the city.
3. For any suit filed and served on a city. after
January 1, 1982: County. Counsel will represent the city
only when, prior to the service of the suit, the city has
designated the County as its agent for service of process
and has agreed to the fee structure outlined in the County
Counsel policy.
4. For any suit not naming the cities (there are
presently two of these in federal court): If the cities are
later named and served, defense will be provided under the
conditions of 2 or 3 above.
Section 5149 was originally intendeA as a simplified
method for taxpayers seeking refunds to avoid the multiple
service on cities. it began with resolution from the Confer-
ence of Delegates after initial efforts at elimina%.tng the
city as a party to tax refund actions did not receive support.
The section should be examined very carefully. if the
cities wish to continue to be named separately, the cities
should be prepared to accept the consequences of such service.
We find this section awkward to work with inasmuch as
it imposes additional burdens on County Counsel, when the
County has bL.:n designated, to determine if the proper
substituted service has been made upon the County and the
subsequent notice to the city of the action.
Very truly yours,
M. HARMON, JR:, County Counsel
KASE, JR., Assistant
JK:mk
Encs.
3
I COUNTY COUNSEL
ADMINISTRATIVE MANUAL
SUBJECT: Item Page
TAX REFUND ACTIONS: Number
Representation of Cities
Effective Date: May, 10► 1983 XIII-10 1 of, 3
Background
The County of San Diego is required to defend actions for refunds of
taxes collected by the County. While these taxes are collected on
the county tax rolls, they are distributed to various taxing agen-
cies. Some of them are assessments or other collections which, by
law, are authorized to be collected with the regular taxes. The law
presently requires any city to be named in a suit for collection of
taxes. Claims are also required. Generally, other public taxing
agencies included in the general tax collections are not required to
be named. (County of Los Angeles v. Superior Court (19411 17 Cal.2d
707.)
Effective January 1, 1982, the law permits any city for which the
county collects taxes to provide for defense by County Counsel of
any actions brought against the city under the refund article of the
Revenue and Taxation Code or the city may choose to defend such
actions itself. To impose this duty on County Counsel, the city
must designate the County of San Diego as its agent for :service of
process. This designation may be withdrawn at any time. The County
Clerk is required to maintain a current racord of all cities who
have designated the County of San Diego as its agent for service of
process. (Presently the Clerk of the Board of Supervisors keeps
such a list of those of which she is aware.) The County is required
to impose a fee on each city for costs incurred. (Rev. & Tax. Code
S 5149.)
Policy
It is the duty of the County Counsel of San Diego to defend any
action for refund of taxes, except as hereinbelow noted, when that
City has designated the County of San Diego as its agent for service
of process in the manner required by the Revenue and Taxation Code.
This duty will extend only to those cases in which the City is
actually named as a defendant, as long as that requirement remains
in the law.
l
Rev. 12, 5/10/83
COUNTY COUNSEL '
ADMINISTRATIVE MANUAL
_SUBJECT: Item Page
TAX REFUND ACTIONS: Number
Representation of Cities
Effective Date: Mav 10, 1983 XIII-10 2 of 3
Exception: The County Counsel of San Diego will decline
to defend any action to refund a tax, assessment or other
item collected by the County if the defense of that tax,
assessment or item is not a general defense of all
collected twxes which are the subject of that suit. For
example; the County Counsel will not defend a specikl
override tax levied by a city when the issue is the
City's authority to levy that override. However, if the
City,- after notice that the County Counsel will not
defend, insists that the County defend the action, the
City shall be charged the full fee for all services
related to the defense of that item.
Notice to Citv that Suit Has Been Filed
Within 10 days after the summons and complaint is served, County
Counsel is required to notify the city of the title and general
nature of any action naming the city as a defendant. A courtesy
( copy should also be provided to the City Attorney of that: city.
That letter should reference the city's resolution and note that a
fee will be charged for our services defending the action.
Presently, the following cities have designated the County of San
Diego as its agent for service of process:
City of Del Mai- (Res. No. 82-16 adopted March 1, 1982)
City of Poway (Res. No. 212 adopted March 2, 1982)
City of San Marcos (Res. No. 82-1658 adopted February 23, 1982)
These resolutions are on file with the Clerk of the Board of Super-
visors or the County Clerk. The records of these offices should be
checked for subsequent filings and, as appropriate, this policy item
updated.
I£ for any reason, it appears that the County should not defend a
particular action for a city, the attorney assigned to that suit
shall notify the County Counsel and give his/her recommendations
regarding further proceedings.
Rev. 12, 5/10/83
COUNTY COUNSEL
ADMINISTRATIVE MANUAL
Item rage
SUBJECT:-- Number
TA}� REFUND ACTIONS
Representation of Cities XIII-10 2 of 3
Effective Date: May 10, 1983
I Exce tion: The County Counsel of San Diego will decline
action to refund a tax, assessment or other
to le any the, County if the defense of that tax,
item collected byI defense
assessmettaxesitem
which are theesubject.of thatfsunera it. For'
collectedCounsel will not defend a special
example, the County when the issue is the
a city
override tax levied by ide. However, if the
s that overr
City'authority to levy Counsel will not
City, after notice that the County Co'l the action, the
defend, insists that the County
ene
City shall be charged the full fee for all services
related to the defense of that item.
Notice to Cit that Suit Has Been Filed
d to notify the city of the title and general
Within 10 days county
ys after the summons and complaint is served,
Counsel is 1. the city as a defendant. A courtesy
nature of any action naming of that city.
copy should also be provided to the City Attorney
That letter should reference the city's resolutthe actionte that a
fee will be charged for our services defending of San
presently, the following cities have designated the County
Diego as its agent for service of process:
City of Del Mar (Res. No. 82-16 adopted March 1, 1982)
City of Poway (Res. No. 212 adopted March 2, 1982)
City of San Idarcos (Res. No. 82-1658 adopted February 23, 1982)
on fof the Board of Super -
These resolutions treClerkileThetrecordsh the l fkthese offices should
olicy be
em
visors or the county as appropriate, thin n
checked for subsequent filings and,
updated.
should not defend a
If for any reason, it appears that the County
the attorney assigned to that suit
particular action for a city,
county Counsel and give his/her recommendations
the Co
shall notify ntyco
regarding further proceedings.
Rev. 12, 5/10/83
I.-N
COUNTY COUNSEL
ADMINISTRATIVE MANUAL
\ I SUBJECT : TALC REFUND ACTION:
Representation of Cities
li
Effective Date: Aiay 10, 1983
1._
Item J Page
XIII-10 1 3 of 3
Fee
The standard fee charged County Counsel clients shall be charged
each city for the service$ provided. That fee shall be prorated
when the general collection is the subject of the lawsuit, so that
the city's fee is equal to the ratio of the city's taxes at stake to
the total taxes at stake in that lawsuit. For example, if the tax
distribution for the particular parcel was:
County of San Diego
$54,000.00
City of San Diego
42,000.00
School District
140,000.00
Community College
20,000.00
Other Ed. Purposes
4,000.00
Total Taxes
$260,000.00
the City's share of the costs (including court costs and other
expenses) attributable to the defense of that lawsuit, whether or
not it was successful, would be 42000/260000. Any time for services
specifically identified for that City shall be billed at the full
rate (i.e., the letter notifying the district of the suit ana any
other similar items inquiring of the status, and any special tax
imposed by the City which County Counsel is required to defend).
This County notified all cities when the legislation authorized
counties to be designated as the city's agent for service of pro-
cess. (See attached letter dated January 12, 1982 and form of
resolution.) Some of the cities are displeased with this procedure,
inasmuch as prior to the effective date of this legislation, County
Counsel, as a courtesy defended the city without cost.
Authorized:
s-
Rev. 12, 5/10/83
OFFICE OF COUNTY COUNSEL .,
MEM0RAND-"
70
Joseph Kase, Jr. DATE October 11, 1983
FROM Bruce W. Beach
RE Railroad Assessment Cases
You have requested that I advise you regarding the
status of the cities in San Diego County in the various
railroad cases filed in the State and Federal Courts. The
attached outline sets forth the information you requested.
For purposes of explanation, the various cities in the
County of San Diego have only been named in one of the three
Federal District Court actions and in that action they have
not been served. These three Federal District Court actions
have been combined for discovery proceedings and it is in
these actions that all of the recent proceedings have been
occurring. Whatever decision is reached by the Federal
Courts in these actions will, no doubt, control the adjudica-
tion of those actions filed in State Superior Courts.
In those cases where Santa Clara and Sacramento County
are lead counsel, answers on behalf of the County of San
Diego and the cities named have been filed by the lead
County. In those three actions where there are no lead
counsel, we have obtained (1) an open extension to respond
for the County of San Diego as well as the various cities
named, (2) have answered on behalf of the County of San
Diego and the cities named, and in the most recent action,
(3) have answered only on behalf of the County of San Diego,
notifying those cities which have tendered defense to the
County that we will not represent them unless they have
complied with the provisions of Revenue & Taxation Code
Section 5149.
BRUCE W. BEACH
BWB:sc
Enc.
2
t
Amount Claimed
Against County
Lead
Status of
Plaintiff
County
Counsel #
Court
Tax ':ears
Taxing Agencies
Counsel
Cities
ATSF'*
82-91085
U.S.D.C.
1961-82
No ariount
Howard, Rice,
Nemerovski,
Vista
Chula V
Del Mar
Cal.
N.D..D. Cal.
stated
Canady,
Escondido
Robertson &
San Diego
MPH
Falk
San Marcos
Vista
Named --not
served
U.S.D.C.
1981-82
No amount
"
No cities
named
Sn *
82-91134
N.D. Cal
stated
#C-82-6009
SW
82-90047
U.S.D.C.
1979-80
No amount
"
No cities
named
Sp *
N.D. Cal
1980-81
stated
#C-81-4848
1981-82
SW
�ATSF +
81-90179
San Fran.
1978-79
$125,658.10
Santa
CoountyClara Counsel
Chula Vista
S.C. 761819
Del Mar
Escondido
National City,
Oceanside
San Diego
San Marcos
Vista
Defense ten-
dered to
Santa Clara
for County &
Cities
+ These cases consolidated for trial
* combined for
all three cases
and will also
Discovery proceedings
probably be consolidated for trial purposes
-1-
Amount Claimed
County
Against County
Lead
Status of ,
Plaintiff
Counsel #
Court
Tax Years
Taxing Agencies
Counsel
Cities
ATSF +
81-90537
San Fran.
1979-80
$140,366.60
Santa Clara
Counsel
Chula Vista
Escondido
S.C. 778986
County
National City'
Vista
Del Mar
Oceanside
Defense ten-
dered to
Santa Clara
for County
Cities
Sp
79-90461
Sacramento
1977-78
$123,420.00
Sacramento Counsel
County
had
Chula Vista
S.C. 281434
Coronado
E1 Cajon
Imperial Beach
La Mesa
National City
San Diego
Defense ten-
dered to
Sacramento for
County & Citie
81-90421
Sacramento
1974-75
$265,320.00
None
Car
ula Vista
Sp
S.C. 282416
1975-76
Coronado
1976-77
E1 Cajon
Imperial Beach
La Mesa
National City
San Diego,
Open Extension
Motion for
Summary •judgme
filed # 9 /4A?-C
-2-
c
- - -
Amount Claimed
Lead
,
Status of
County
Against County
Taxing Agencies
Counsel
Cities
Plaintiff
Counsel #
Court
Tax Years
81-91300
San Fran.
1980-81
$145,601.15
None
Answer filed•
by San Diego
ATSF +
S.C. 788219
County for:
Chula Vista
Del Mar
Escondido
National City
Oceanside
San Diego
San Marcos
Vista
San,Diego &
81-90567
San Diego
1980
$ 87,424.00
San Diego
County
Chula Vista
Coronado
Arizona
S.C. 475303-
E1 Cajon
Imperial Beach
Eastern RR
La Mesa
Lemon Grove
National City ,
San Diego
Stipulation
between Cities
& Plaintiff'
to be bound
by settlement
with Count
83-90624
San Fran.
1978-79
$117,572.48
None
Carlsbad
C ula Vista
Sp
S.C. 810433
1979-80
$117,572.48
$ 32,322.40
Coronado
1980-81
1981-82
$ 24,897.22
El Cajon
Imperial Beach
La Mesa
Lemon Grove
National City
San Diego
Answer filed
by County --
No defense of
-X)
Cities assumed
S N )
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1 RESOLUTION NO. 7415
2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CARLSBAD, CALIFORNIA DESIGNATING THE COUNTY OF
3 SAN DIEGO AS ITS AGENTS FOR SERVICE OF PROCESS
PURSUANT TO SECTION 5149 OF THE REVENUE AND
4 TAXATION CODE. -
5 WHEREAS, the City Council of the City of Carlsbad,
6 California wishes to provide for the defense by counsel for the
7 County of San Diego of actions brought against the City of
8 Carlsbad for property tax refunds
9 NOW, THEREFORE, BE IT RESOLVED:
10 1. That the above recitiation is true and correct.
11 2. Pursuant to Section 5149 of the Revenue and
12 Taxation Code the City of Carlsbad hereby designates the County
13 of San Diego as its agent for service of process for any and all
14 actions brought against the City of Carlsbad under Article 2,
15 Part 9, Division 1 of the Revenue and Taxation Code of the State
16 of California.
17 PASSED, APPROVED AND ADOPTED at a regular meeting of
18 the City Council of the City of Carlsbad on the 6th day of
19 DecEnJber , 1983, by the following vote, to wit:
20 AYES: Council Manbers Casler, Lewis, Kulchin, Prescott and Chick
21 NOES: None
22 ABSENT: None
23 �
24 MARY H. SLER, Mayor
25
ATTEST:
26
27 -'0-er
ALETHA L. RAUTENKRANZ, City
28