                  TO BE PUBLISHED IN THE OFFICIAL REPORTS



                       OFFICE OF THE ATTORNEY GENERAL


                                 State of California



                                JOHN K. VAN DE KAMP


                                   Attorney General



                              _________________________

                                             :
                 OPINION                     :                 No. 86-206
                                             :
                     of                      :              APRIL 15, 1987
                                             :
        JOHN K. VAN DE KAMP                  :
           Attorney General                  :
                                             :
        RODNEY O. LILYQUIST                  :
         Deputy Attorney General             :
                                             :

________________________________________________________________________

        THE HONORABLE L. B. ELAM, COUNTY COUNSEL, COUNTY OF
SACRAMENTO, has requested an opinion on the following question:

               To what extent, if any, are special districts required to contribute to the
Special District Augmentation Fund where two adjoining districts received state
assistance payments for the 1978-1979 fiscal year and (1) in 1980 one of the districts
dissolved after its territory was annexed by the other, (2) in 1983 both districts dissolved
after being consolidated into a new district, (3) in 1985 both districts dissolved after
being consolidated into a new district, which included territory not previously receiving
any district services, and (4) in 1983 portions of their territories were detached to form a
new district?

                                     CONCLUSION

              Special districts are required to contribute to the Special District
Augmentation Fund to the extent that their territories received state assistance payments
for the 1978-1979 fiscal year.

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                                          ANALYSIS



              Special districts in California are authorized under a variety of statutory
schemes to provide such services as police and fire protection, water, sewage disposal,
road maintenance, street lighting, trash collection, ambulance services and mosquito
abatement. They may own and operate bus systems, parks, flood control projects,
cemeteries, airports, libraries, swimming pools and golf courses. (See e.g., Gov. Code,
§ 61600; Health & Saf. Code, § 4113; Pub. Resources Code, § 5782.2; Wat. Code,
§ 35401.)

               Traditionally a district has relied upon its authority to levy a property tax in
order to fund its operations. With the addition of article XIII A to the Constitution in
1978, this source of funding was substantially curtailed. Not only did the constitutional
provision reduce and limit property tax rates in general, it specified that property taxes
were "to be collected by the counties and apportioned according to law to districts within
the counties." (Cal. Const., art. XIII A, subd. (a); see Amador Valley Joint Union High
Sch. Dist. v. State Bd. of Equalization (1978) 22 Cal.3d 208, 218.) No longer would the
districts have the same degree of control over what would now be a reduced source of
revenue.

                To replace the lost property tax revenues, the Legislature has encouraged
the districts to seek other sources of financing. (Marin Hospital Dist. v. Rothman (1983)
139 Cal.App.3d 495, 499-500; see, e.g., Gov. Code, § 16270.) Special districts, as well
as cities and counties, now commonly impose special assessments, special taxes, user
charges and compensatory fees to offset their reductions in property tax revenues. (See
generally San Marcos Water Dist. v. San Marcos Unified School Dist. (1986) 42 Cal.3d
154, 160-165; J.W. Jones Companies v. City of San Diego (1984) 157 Cal.App.3d 745,
752-757; Mills v. County of Trinity (1980) 108 Cal.App.3d 656, 660-662.)

              As for the allocation of property tax funds to special districts, the
Legislature has enacted a detailed statutory scheme in complying with its constitutional
mandate. The question presented for analysis concerns the degree of control the
Legislature has provided county boards of supervisors in allocating property tax revenues
to special districts each year.1 Specifically, we are asked whether changes in the
organizations of districts affect the ability of a board of supervisors to control the
property tax allocation procedure. We conclude that the Legislature's program for

   1
     City councils and the governing bodies of multicounty districts control the allocations with
respect to districts under their jurisdictions. (Gov. Code, § 16271.) We will refer throughout this
opinion, however, only to a county board of supervisors, since it would be the designated body
controlling the funds of the particular districts in question.

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flexibility and supervisorial control over property tax revenues allocated to special
districts is not affected by the district changes in question.

                The basic mechanism for allocating property taxes to special districts is for
the taxes to be collected by the county (Rev. & Tax. Code, § 93),2 the districts are
apportioned an amount based upon a statutory formula (§§ 97, 98), and part of each
district's share is transmitted to the board of supervisors for redistribution to the districts
in a manner deemed appropriate by the board (§ 98.6). (See American Canyon Fire
Protection Dist. v. County of Napa (1983) 141 Cal.App.3d 100, 105-106.)

               In making its redistribution, the board of supervisors must first inform the
districts of the total amount to be reallocated and "hold a public hearing for the purpose
of determining the distribution of funds." (§ 98.6, subd. (c).) The Legislature has given
the supervisors certain matters to consider (§ 98.6, subd. (e), (f), (g), (i), (j)), but
essentially they may exercise their own judgment and discretion in allocating the tax
revenues to the various districts. (American Canyon Fire Protection Dist. v. County of
Napa, supra, 141 Cal.App.3d 100, 106.)

             The board's control over the allocation process is dependent upon the
amount of funds transferred to it by the districts. The key provisions of section 98.6 are:

                "(a) Notwithstanding any other provision of this chapter, the amount
         allocated pursuant to Sections 96 or 97, and 98, to a special district shall be
         reduced by an amount computed as follows:

                "(1) A ratio shall be computed for each of the special districts equal
         to the amount of state assistance payment for the special district for the
         1978-79 fiscal year divided by the sum of the state assistance payment for
         the special district plus the amount of property tax revenue allocated to the
         special district for the 1978-79 fiscal year pursuant to Section 26912 of the
         Government Code.

                "(2) The amount by which the allocation pursuant to Sections 75.70,
         96 or 97, and 98, shall be reduced shall be equal to the allocation multiplied
         by the factor computed for the district pursuant to paragraph (1).

                "(3) For the 1984-85 fiscal year and each fiscal year thereafter, the
         amount computed for each special district pursuant to this subdivision other
         than a special district governed by a county board of supervisors or whose

   2
       All references hereafter to the Revenue and Taxation Code are by section number only.

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       governing board is the same as the county board of supervisors, shall not be
       greater than the amount computed for the 1983-84 fiscal year.

             "(4) The total of all amounts computed for special districts within
       each county shall be deposited in the Special District Augmentation Fund
       which shall specify amounts for each governing body as defined in Section
       16271 of the Government Code and which shall be allocated pursuant to
       subdivision (b).

              "(b) There is hereby created a Special District Augmentation Fund
       in each county to augment the revenues of special districts. . . .

              ". . . . . . . . . . . . . . . . . . . . . . .

              "(d) . . . . The governing body shall disburse the entire amount of the
       fund to special districts during the fiscal year . . . ."

               State assistance payments were made to special districts for the 1978-1979
fiscal year in the total amount of $198 million. (Gov. Code, §§ 16270-16272; Stats.
1979, ch. 12, § 1; Stats. 1978, ch. 332, § 36.) Property tax revenues were allocated to
each special district for the 1978-1979 fiscal year under the provisions of Government
Code section 26912 on essentially a pro rata basis with respect to what had been received
by the district prior to the addition of article XIII A to the Constitution.

              For example, a district received $60,000 in state assistance payments and
$40,000 in property tax revenues for 1978-1979. In 1987 its allocation of property tax
revenues under sections 97 and 98 is $80,000.33 The $80,000 is multiplied by the ratio of
60 percent, resulting in $48,000 being deposited in the Special District Augmentation
Fund ("Fund"). The $32,000 remainder is retained by the district. The board of
supervisors reallocates the $48,000 as it deems appropriate. The district may receive
$20,000, $48,000, $60,000, or some other figure from the supervisors.

            It is evident that the Legislature intended for the Fund to provide flexibility
and a measure of local control in the property tax allocation process. Application of a


   3
     Article XIII A of the Constitution allows for a 2 percent inflationary rate in assessing
property values each year. It also provides, however, for new assessments when property is
"purchased, newly constructed, or a change in ownership has occurred." (Cal. Const., art. XIII
A, § 2, subd. (a).) It would not be unusual for a district's total property tax revenues to have
doubled over the past nine years.

                                                               4

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mechanical formula set by statute cannot address individual district needs. A board of
supervisors is able to consider, evaluate, and give priority to these needs.

              With this background in mind, we turn to the four reorganization changes
presented in the question. In the first situation district A and district B received state
assistance for the 1978-1979 fiscal year; in 1980 district A annexed the territory of
district B and district B was then dissolved. What contribution, if any, must district A
now make to the Fund?

              It should be noted preliminarily that the tax revenues previously given to
the dissolved district B have been transferred to district A under the provisions of section
99. Subdivision (a) of section 99 states in part:

              "For the purposes of the computations required by this chapter:

               "(1) In the case of a jurisdictional change, the auditor shall adjust
       the allocation of property tax revenue determined pursuant to Section 96 or
       97, or the annual tax increment determined pursuant to Section 98, for local
       agencies whose service area or service responsibility would be altered by
       such jurisdictional change. . . ."

              For example, district A received $100,000 in state assistance for 1978-
1979, while district B received $30,000. Tax revenues for that year were allocated to
district A in the amount of $50,000 and to district B in the amount of $10,000. The
$10,000 in revenues plus the taxes based upon yearly increases in property values ( 98)
would now be allocated to district A under the terms of section 99.

                Returning to the provisions of section 98.6, we believe that district A in
our example must now contribute an amount equal to two-thirds of its current tax
allocation resulting from assessments in the area originally served by it and three-fourths
of its current tax allocation resulting from assessments in the area previously served by
district B.4 Even though district B has dissolved, district A should be considered as
succeeding to the former's contribution obligation inasmuch as it succeeds to the tax
revenues of the former district under section 99.

              Clearly district A is not precisely the same district as it existed and received
state assistance payments in 1978-1979. Its territory has increased and other changes
may have occurred as a result thereof. District B has in fact dissolved since receiving the

   4
      Section 98.6, subdivision (a), subsection (3) limits the Fund contributions of a separately
elected district board to its 1983-1984 contribution level.

                                               5

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state assistance payments. A conclusion that an organizational change subsequent to
1978-1979 eliminates a district's Fund contribution would invite districts to reorganize
without legitimate reason. No further contributions would be made but the consequence
would be that the Legislature's program for flexibility and a measure of local control over
the allocation process would be eliminated. A mechanical application of the statutory
formula without consideration of the special needs and requirements of the districts
would instead take place. Such a result would thwart the evident purpose of section 98.6.
We find no indication of legislative intent that the formula in section 98.6 should be
construed so as to substantially reduce or increase the assets of the Fund merely because
of a change of district organization.

              In interpreting statutes, we are directed to "ascertain the intent of the
Legislature so as to effectuate the purpose of the law." (Select Base Materials v. Board of
Equal. (1959) 51 Cal.2d 640, 645; accord People v. Craft (1986) 41 Cal.3d 554, 559.)
"Interpretive constructions which . . . defy common sense, or lead to mischief or
absurdity, are to be avoided." (California Mfrs. Assn. v. Public Utilities Com. (1979) 24
Cal.3d 836, 844; see Fields v. Eu (1976) 18 Cal.3d 322, 328; Sanchez v. South Hoover
Hospital (1976) 18 Cal.3d 93, 98.) Whenever possible, we should "interpret statutes so
as to make them workable and reasonable." (City of Santa Clara v. Von Raesfeld (1970)
3 Cal.3d 239, 248.) We believe that our conclusion with respect to the first situation is
consistent with these principles of law.

              In the second situation presented by the question, district A and district B
received state assistance payments for the 1978-1979 fiscal year, in 1983 the two districts
were consolidated into district C, and districts A and B were dissolved. Does district C
now have an obligation to contribute to the Fund?

              The same principles applied to the first situation appear applicable here.
District C has been allocated the tax revenues of the two former districts under the
provisions of section 99. It should similarly be treated as succeeding to the obligations of
the former districts in making contributions to the Fund. Such construction of section
98.6 leaves the Legislature's program for flexibility and local control intact without doing
violence to the statutory language. District C did receive state assistance payments in
fiscal year 1978-1979 as districts A and B. The payments, ratios, and current allocations
should be calculated for the two areas of the former districts and applied to district C.

               In the third situation presented by the question, district A and district B
received state assistance payments in 1978-1979; in 1985 both districts were consolidated
into district C, districts A and B were dissolved, and district C contains an additional area
not previously receiving any district services. What contribution should district C now
make to the Fund?

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              Consistent with our conclusion with respect to the second situation, we
believe that district C should be treated as the successor to the obligations, as well as the
rights and benefits, of districts A and B. The territories of the former districts should be
considered individually, applying the ratios of each to the property tax revenues now
generated by those areas.

               As for the area in district C that was not receiving any district services prior
to 1985, such area should not be included in the Fund calculations. No state assistance
payments were received for this area for the 1978-1979 fiscal year and no contributions
were made to the Fund for this area prior to its incorporation into district C. Since the
Fund's revenues are to be based upon the state assistance payments received in 1978-
1979, tax revenues resulting from assessments in the annexed territory should not be
subject to redistribution under the formula of section 98.6.

               In the fourth situation presented by the question, districts A and B received
state assistance payments for the 1978-1979 fiscal year, and in 1983 a portion of the
territory of each was detached to form district C. What, if any, should districts A, B, and
C now contribute to the Fund from their property tax allocations?

              Districts A and B are receiving a reduced tax allocation due to the
detachment proceedings (§ 99). They are no longer serving the area in question for
which they received state assistance payments in 1978-1979. This area should therefore
not be included in their calculations for Fund contributions.

              District C, on the other hand, is now receiving property tax revenues
previously allocated to districts A and B. Its area benefited from state assistance
payments in 1978-1979, and contributions to the Fund have been made based upon tax
assessments in its area. We believe that district C has the responsibility to continue the
Fund contributions made by districts A and B for its area. The ratios, state assistance
payments, and current allocations based upon assessments in the two separate territories
should be calculated and applied to district C's total allocation.

               We realize that section 98.6 is complex and that its terms are subject to
varying interpretations. We have sought to construe the statutory language in a
reasonable and common sense manner. The Legislature's program for flexibility and a
measure of local control over the property tax allocations of special districts should not
be unreasonably restricted or expanded due to district reorganizations. Our construction
of section 98.6 is consistent with the limitations and purposes of the Fund as originally
envisioned by the Legislature. Any possible hardships resulting from a district having to
contribute to the Fund may be addressed by the board of supervisors at the time of
redistribution.

                                              7

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               In answer to the question presented, therefore, we conclude that special
districts are required to contribute to the Fund to the extent that their territories received
state assistance payments for the 1978-1979 fiscal year.

                                           *****




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