Potential Precedent-Setting Challenge Of Annexation Authority Heard

By Ruth Musser-Lopez and Mark Gutglueck
The battle to unwind the recently concluded annexation of both Upland’ and San Antonio Heights into a county fire protection service area was fully joined this morning when the attorney for the San Antonio Heights residents opposing the annexation and the lawyers for the three county entities seeking to perpetuate it had it out before Judge David Cohn. The matter was not fully resolved this morning and lawyers for the San Antonio Heights Association, the county and its Local Agency Formation Commission and the City of Upland will return to Judge Cohn’s courtroom for a status conference on the litigation on September 19, 2017.
Early in the hearing, Judge David Cohn said his reading of the Sunset Beach v. Orange County LAFCO case led him to conclude it is unlikely that the San Antonio Heights Association will prevail on the merits in the case or that he would be issuing the requested injunction. But as the arguments intensified during the two-hour hearing, Cohn appeared to be moving toward some of the assertions that the plaintiff’s attorney, Cory Briggs, was making, and the packed courtroom filled with Upland and San Antonio Heights residents overflowing into the jury box were observably heartened when the judge concluded the hearing by saying he would take the injunction under consideration and enter his decision regarding it in writing. That decision may come as early as next week.
The recently processed annexation of both Upland and San Antonio Heights into the county fire district and the West Valley Service Zone is controversial due to the concomitant annexation of both Upland and San Antonio Heights into the Helendale area “Fire Protection” service “zone,”known as “FP-5,” which is the subject of the contest and prompted the complaint.
After public officials in the cities of San Bernardino, Needles and Twentynine Palms closed out their municipal or community-based fire departments and “annexed their territory” into the FP-5 Service Zone, imposing a flat taxes in those communities ranging from $130 to $150 per year on every parcel within them, the City of Upland took a leaf from those cities’ playbooks and initiated a similar move last fall.
In March, the San Bernardino County Local Agency Formation Commission followed the recommendation of its executive director, Kathleen Rollings-McDonald, to annex Upland to the neighboring and contiguous West Valley Service Area that includes San Antonio Heights. Pundits say that the purpose of this extra move is a strategy, employed by Rollings-McDonald, to comply with the law that requires a territory to be contiguous or adjacent to the district that it is being annexed into at the the time of the annexation. That annexation into the fire district is not the legal issue at contest in the complaint.
At issue is a maneuver by LAFCO to “annex” both San Antonio Heights and Upland into a discontiguous fire service zone of the county fire district, FP-5. The legally defined “zone” was originally formed by a vote of residents in the unincorporated Helendale region of the desert more than a decade ago. Helendale is 48 miles as the crow flies from Upland and 65 miles driving distance from Upland.
The controversial “annexation” of Upland and San Antonio Heights into FP-5 entailed the imposition of a $148.68 annual assessment with inflation adjustments into perpetuity. The county and city agreed to the option of tacking on the FP-5 service zone tax as part of the agreement to defray the cost of the county fire department providing that service. Plaintiffs however, claim state code prohibits annexation of a territory or municipality into a zone, with Briggs characterizing the maneuver as a “Frankenstein Monster Tax” cobbled together to get around the tax code and California Constitution requiring 2/3 majority on a ballot vote before a special tax can be applied.
Further, the plaintiffs argue that the San Bernardino County Local Agency Formation Commission’s scheduled “protest vote” used legally in the case of valid annexations like annexing territory into a city or a district may not be applied to extend a special zone tax that those to be taxed did not vote on, and that annexation of a larger populated city into a distant tiny service zone is strictly prohibited in the state code.
The protest vote that LAFCO conducted, however, consisted of the San Bernardino County Local Agency Formation Commission’s invitation of property owners and voters within each of the jurisdictions to lodge letters of protest against the mixed bag of annexations all bundled up in one package. Each protest letter received was to be counted as a single vote against all varieties of annexations proposed. Any resident or voter not lodging a letter of protest was presumed to have voted to accept the annexation. If 25 percent of the city’s and San Antonio Heights’ voters or landowners lodged protests, than a straightforward election with regard to the formation of the assessment district was to be held. If a majority protested, than the assessment would have been denied outright. As typical of such “protest votes,” nothing approaching sufficient opposition appeared to be manifesting in Upland or in San Antonio Heights to achieve the 25 percent protest threshold.
In response, the San Antonio Heights Homeowners Association retained attorney Cory Briggs to file suit against the city, the county and the Local Formation Commission in an effort to block the annexation. Briggs filed the suit before the July 12 deadline for the reception of protests of the annexation, pairing with it a petition for a temporary restraining order (TRO) to prevent the implementation of the shuttering of the Upland Fire Department and the imposition of the special tax while the lawsuit was being litigated. At the July 10 TRO hearing, Judge David Cohn denied the request, saying it was premature since the outcome of the protest count was unknown and it was possible that there could be enough objections to prevent the annexation from occurring. He set the matter for a later date, July 28, at which time the outcome of the election would be known but prior to the tax being applied to the parcels by the county assessor’s office and bills going out to the property owners.
On July 12, it was manifest that the protest effort had fallen short and on July 22, a week prior to the scheduled hearing the county and the city began implementing the changeover from the City of Upland’s fire department to the county fire district, including changing the logos on city fire trucks, which passed into the custody of the county, along with the city’s four fire stations.
The proceedings today were to hear arguments for or against a preliminary injunction until the matter can be tried. Briggs and attorney Anthony Kim, were in court to ask that the preliminary junction be granted to enjoin the county from applying the special FP-5 Service zone on the property tax bills of Upland and San Antonio Heights on the grounds that the annexation into FP-5 is illegal and is being engaged in by the defendants as a means to avoid the state constitution-guaranteed right to vote on any new special tax.
To counter Briggs and Kim, the Local Agency Formation Commission, the City of Upland and the County of San Bernardino and its separate agency, the Fire District were represented by attorneys Donald Wagner, Ginetta L. Giovinco, and Laura L. Crane, respectively. The foundation of the defense’s argument is one that was argued by Crane at the hearing that a ballot vote and a protest vote are “not coexistent.” She said the agencies “don’t have to satisfy the right to annex” and that “there is a right to vote if there is sufficient protest against the annexation.”
However Briggs and Kim argued that while it is true that the agency has a right to annex, that the taxing aspect of this annexation is illegal. They maintain that the agency cannot legally annex into a zone. The term “service zone” applies to a special tax area of a “district” or “special district,” all terms which are legally defined in the government code. The linchpin of the plaintiff’s case is that while annexations of any territory, including San Antonio Heights and Upland into a district, special district or city are legal, an annexation of a territory into a service zone such as FP-5 of a district or special district, is illegal. Unlike a city, a district or special district into which a municipality can be annexed into, “service zones,” Brigg and Kim assert, are expressly excluded from the definition of an agency that can be annexed into, as per Government Code Section 56036(b)(10).
The city, county and the Local Agency Formation Commission, however, are relying upon the authority of a case, Sunset Beach vs. Orange County LAFCO, and assessment district code in asserting that the extension of the FP-5 Service Zone tax upon Upland and San Antonio Heights and its annexation into Fire Protection Zone 5 is permitted because a zone’s service tax may be extended into an annexed area just as an assessment district tax is extended when a territory is annexed into a district or city with an assessment district.
Briggs and Kim distinguished the cases by explaining the difference between an assessment district tax and a special “service” tax applied in a fire protection zone. Council for the plaintiffs stated that an “improvement zone can only be formed for the sole purpose of improvements. This annexation is not for improvements. It is for service” and suggested to Judge Cohn that it was up to the defendants to explain how these new special “service” taxes can be construed as “improvement” assessments.
Improvements are for structures and buildings, Briggs explained. Fire protection services are something else and treated differently under the law.
He said that the Sunset Beach case was about paying assessment district taxes because Sunset Beach was benefiting from those improvements but that the taxes being foisted upon the residents of Upland and San Antonio Heights were new service taxes, under a totally different section of the law than assessment district taxes.
Giovinco asserted that under Government Code Section 57330(t) any territory annexed to a district or city is subject to any taxes, fees or assessments previously levied in that district or city.
Briggs seized upon that opportunity to say that the county fire district does not have a tax assessment, and that it is only the fire zones which are taxed, again citing government code that strictly prohibits territories being annexed into a fire protection zone and that State Constitution under Propositions 218 and 26 prohibit special taxes being applied without a vote of the property owners or voters.”When you do an annexation you can continue the tax that was already there in the affected territory,” Briggs asserted. “We don’t have that here. We have a tax in another territory being exported.” Briggs said. “Special tax information went out on the ballot to the Helendale, Silver Lakes territory.” Briggs read from the ballot that the voters approved a special tax area that shall not be expanded, nor shall there be any increase without vote. “Helendale said we won’t make this area bigger without going through the procedures to make the territory bigger,” Briggs said. “We didn’t ask anyone in Helendale to ask them if they now want this tax expanded elsewhere” he said, “This annexation is illegal.”
“The term zone trips up Mr. Briggs,” said Wagner. “It should not trip up the court.” Wagner admitted he wished the county would have called FP-5 by a different name than “zone.”
“The district includes a county service area,” said Wagner. “This is a ‘semantics game’ here. The fire district organizes itself as zones, clearly annexing into the district then specifying the zones is appropriate and provides protection for the people sitting behind us so they can make sure they get their monies worth organized the way it is.”
In response, Briggs said, “Mr. Wagner says he wishes they didn’t use the word ‘zone.’ What he really means is ‘I wish my clients would have followed the law…’ This is a Frankenstein tax monster that has been cobbled together.”
Briggs asserted that the Local Agency Formation Commission had blurred the distinction between assessments in an improvement district and special taxes in a fire service zone He told the court that in a response to a question from a member of the public with regard to the legitimacy of annexing into a service zone, the Local Agency Formation Commission’s executive director, Kathleen Rollings-McDonald, replied in an email that the annexation was being made to an improvement zone.
“We don’t have an improvement zone, we have a service zone” Briggs said. “They call it a service zone [in the agreement] and there are half a dozen references to service zone [in the agreement] and the only time the term ‘improvement’ appears anywhere talks about capital improvements to replace equipment. Ninety five percent of the transfer is for service. An improvement zone can only be formed for the sole purpose of improvements. This annexation is not for improvements. It is for service. You cannot rely on the one thing that the LAFCO executive officer says to try to make this case lawful.”
After reading to the judge the legislation supporting his assertion, Briggs concluded, “you can do annexation, but only within this law. The law says that improvements districts are formed for improvements and any others are service zones.”
“LAFCO’s executive officer used the word zone in the title of the title of the plan. The plan is about the FP-5 zone tax.” Briggs charged. “They have given you the plans and every time the tax is discussed it is levied for the zone, it is not levied by the district. Not a single document says it the tax is levied by the district. The evidence does not support that the tax is levied by the district. The tax is levied on a zone, a non contiguous zone, many miles away.”

The Sunset Beach case involved a small population of residents living on Sunset Beach, an unincorporated county area in Orange County adjoining and partially surrounded by the City of Huntington Beach. Those citizens objected to being annexed to the city with the requirement that they also pay the preexisting Huntington Beach special assessment district taxes Those Sunset Beach residents maintained they had not voted on the assessments and therefore should not be forced to pay them. After the trial court agreed with the plaintiffs on the grounds that Proposition 218 protected them against taxes that they had not voted on, Orange County LAFCO appealed to an appellate court, which ruled that the Sunset Beach residents had to accept the assessments once they were a part of the city.
In the Sunset Beach case, Briggs said, the appellate court held that the Proposition 218 protection does not apply to improvement assessments already in place. “But,” said Briggs, “the Sunset Beach case did not address the issue of the even more comprehensive Proposition 26 protection against any new taxes not approved by a vote.” He said that Proposition 26, which was passed in 2010, the same year that the Sunset Beach case was ruled upon and was not yet in effect, had not been considered in the Sunset Beach decision. Therefore, Brigg said, it will be up to Judge Cohn with regard to how Proposition 26 applies in this case.
“Proposition 26 falls to your Honor,” said Briggs. Sunset Beach dealt with non-constitutional issues, Briggs said, reminding the court that in a conflict between Local Agency Formation Commission policy and the California Constitution, the Constitution prevails. “There is strong authority for issuing an injunction,” Brigg said. “The action is void because the agency is not following a coarse prescribed by law. They can’t do an improvement tax, they can’t do a zone tax. The court in Sunset Beach was not concerned about law change concerning new special taxes. The logic of that case said Proposition 218 does not apply because the statutory scheme provides all of the protections But Sunset Beach did not look at Proposition 26,” Briggs said. “Proposition 26 closes loopholes like this one, so even if there is any doubt regarding Proposition 218 not applying to an annexation, Proposition 26 comes along and says this applies to any new tax unless it is one of the exceptions. The defense doesn’t waste any paper on this because nothing in this case fits into an exception under Proposition 26. Sunset Beach is not the authority for a proposition not considered. We don’t know why Proposition 26 was not mentioned in that case, but we put Proposition 26 right up front in our Constitutional argument in this case. The defense never even argued that Proposition 26 was not to close loopholes, any fee, any extension, any charge. If you want to talk about raw language…the Constitutionality issue takes precedence over everything else.”
Briggs and Kim have asserted that the circumstance involving Upland and San Antonio Heights is significantly different from that in Sunset Beach. Sunset Beach was an unincorporated island type area surrounded by, adjacent and contiguous with Huntington Beach. In the case of Upland, it is not an unincorporated county area but an existing municipality and is nowhere near Helendale and in no way adjacent or contiguous.
As to Briggs’ assertion that having a smaller district in an unincorporated area of the county annexing a larger incorporated or municipal area constituted “the tail wagging the dog,” Giovinco dismissed that assertion as an emotional rather than a factual reading. “There is no authority that supports that position,” Giovinco said, asserting that existing law and legislation does not rule out a smaller area welcoming a larger one into its jurisdiction, even if they are not contiguous. Briggs, she said, was engaging in his own wishful interpretation of a law that does not yet exist. “He is arguing [with regard to something] that the legislature needs to [clarify or set in stone].”
But at the hearing Briggs pressed on stating that Sunset Beach involved a specific type of annexation referred to as “island annexation.”
Briggs further maintained that Government Code Section 56119 requires that “any territory annexed to a district shall be contiguous to the district…”  Government Code Section 56031(a) defines “contiguous” as “territory adjacent to territory within the local agency.”
According to the suit,“Neither the city nor San Antonio Heights is contiguous to the unincorporated community of Helendale, where the Valley Service Zone and Service Zone FP-5 originated.” Besides, Briggs argued, the FP-5 Zone voters specifically voted against “expansion” of their zone.
Briggs said one of the problems with the agencies’ interpretation of the law is that they have confused the meaning of the term “extend” when they say “a zone’s service tax may be extended into an annexed area.” The legislators defined and the courts recognize that the word is “temporal” meaning time or through time not geographically extended, Briggs asserted. “Extend means the duration, the effective date, nothing more,” Briggs said. “Extending to a geographic location is not the same use of the word,” he propounded.
Judge Cohn asked Briggs “why do you believe you will prevail?”
Briggs said he could summarized his argument in three minutes. In sum he said that first it is illegal to annex a territory into a service zone, and second, since a “service zone” falls under a different definition and code than an “assessment district” that unlike an assessment district, LAFCO can’t just export or extend the hand of a tiny service zone in Helendale to reach over for revenue for services in a distant municipality. This is a new source of revenue. Under Prop 26, if its new revenue and is not one of those exceptions then the agency cannot tax without a 2/3 majority vote.
Briggs concluded by saying that the City of Upland’s inability to budget does not allow its officials to conspire with the Local Agency Formation Commission. “It does not give the right to conspire to put a cockamamie square peg into a round hole,” he said. “FP-5 is not an improvement zone by their own admission. FP-5 is excluded by definition from annexing.”
The defendants argued that an injunction was not needed because taxpayers would be refunded their money if the plaintiffs prevailed.
A consensus appeared to form between Briggs, Cohn, Wagner and GioVinco that the San Antonio Heights plaintiffs might best challenge the annexation through a specialized legal challenge known as a reverse validation. Briggs said he was preparing to lodge that challenge next week, but even so that process could take years and in the meantime, his clients would suffer.
Weighing the harm of the application of the taxes against enjoining the county from processing the taxes, early in this morning’s hearing, Judge Cohn indicated his tentative ruling was to deny the motion for a preliminary injunction. Briggs countered that the county would initiate the collecting of taxes and that plaintiffs would take the case up on appeal and upon prevailing the assessments would need to be returned. He said that it would take several years, but there was only a one-year window for residents to make a claim against the county for the return of the money. Moreover he said, each taxpayer will need to make a separate filing to have the money returned, saying the court would be clogged with “50,000 lawsuits and 50,000 claims” for a refund.
The citizens of Upland and San Antonio Heights, Briggs said, “have the right to vote on whether this tax will be applied to them.”
“They [the city, the Local Agency Formation Commission and the county] haven’t proceeded in the manner the law requires. Respecting the public’s right to vote might might be painful but they didn’t follow the rules,” Briggs said. “That’s on them, not on the voting public, not on the taxpaying public.”
Wagner, however, said the right to vote is not unlimited.
“Your honor knows,” Wagner said, “the right to vote is defined. We don’t have the right to vote for the [U.S] Attorney General. The Consititution gives us the right to vote for president. The right to vote can be circumscribed by the government. The right to vote is not absolute in some circumstances. The right to vote doesnt apply to the annexation.”
The residents of San Antonio Heights are demanding more than that to which they are entitled, Wagner suggested.
“What we have are people who haven’t paid for fire service and who have been freeloaders for  so long they would like to continue to have the the right to not pay for their fire service.”
This provoked a groan from many of the more than 50 Upland and San Antonio Heights residents attending the hearing. This was followed by a response from Briggs.
“I don’t appreciate calling them freeloaders,” said Briggs. They have been paying ad valorem [property] taxes for years.
Giovinco asserted that under Government Code Section 57330 any territory annexed to district or city is subject to any taxes, fees or assessments previously levied in that district or city.
Cohn said he was taking all of the arguments under advisement and would issue a written order in the days to come. He set September 19 as the date for another hearing.

Leave a Reply