A former El Cerrito mayor’s small claims court action has ended in a ruling that the city has been collecting an illegal tax for the last seven years.
Contra Costa County Superior Court Commissioner Clare M. Maier upheld Kenneth Berndt’s suit to reclaim $191.41 in utility user taxes paid between November 2003 and August 2004.
The ruling was Berndt’s second victory against collection of what he argued was an improperly collected tax. His first victory early last year forced the city to bring the assessment to a popular vote.
“I know the city needs the money,” said the plaintiff, who retired after 21 years with Central Bank in El Cerrito, the last 17 as manager. “All I was looking for was for them to get it legally.”
El Cerrito City Attorney Janet Coleson downplayed the decision, and faulted Maier for “erroneous assumptions” in her decision, including an analysis of “the wrong part of the constitution” and for calling the Utility Users Tax a property-related fee instead of a tax.
“This doesn’t set a precedent for anyone else,” Coleson said, noting that Maier is an attorney in private practice who was serving as a temporary commissioner when she heard the case last November.
What marked the ruling as unusual, Coleson said, was that Maier took three months to reach her decision and then she presented it in the form of an eight-page written opinion.
What the decision means for other El Cerrito tax payers is uncertain, but it’s enough to worry the City Council, which is scheduled to review it in a closed-door executive session Monday night.
“I can’t tell you if an appeal will be considered,” she said. “You have to remember that legal fees are expensive, and we have to weigh that against the $221.41 judgment.”
After his first victory, Berndt said, “I had assumed the city would stop collecting the taxes until the November vote, and when they didn’t I sued again.”
Maier’s decision in his latest case declares illegal a portion of Measure K, passed by voters Nov. 2, that retroactively “legalized” the previous collection of the illegal assessment.
“There had been discussions at City Council meetings last year where they expressed the thought that if it was illegal, they would make it legal in November,” Berndt said.
When the council voted to limit recoveries to a one-year period, he filed another action to recover his taxes collected in the ten months ending in August, 2004.
“I’m not interested in the money,” he said. “I’m interested in my politicians being honest with me.” Berndt gave the money he recovered from his first suit to the city’s Senior Center.
Just what the ruling means to the city remains uncertain. City Manager Scott Hanin was out of town and unavailable for comment Thursday, and Assistant City Manager Karen Pinkos referred calls to Coleson. Mayor Sandi Potter didn’t return a call.
Maier held that the city collected the fees illegally between July 1, 1997, and November 2, 2004.
The first date marked the deadline imposed by Proposition 218, passed by California voters in 1996, for cities, counties and other local government bodies to win voter approvals of most current property-based fees and assessments not previously subjected to a popular vote. It was designed an extension of Proposition 13, the 1978 ballot measure which imposed strict limits on property tax increase.
The measure required local governments to submit to voter approval by July 1, 1997 all taxes that had been previously imposed by legislative bodies rather than by a citizen vote. One such fee, Maier ruled, was El Cerrito’s Utility User Tax, approved by a vote of the City Council effective in 1991, imposing fees for telephone, electricity, gas and cable and video services.
The utility tax wasn’t put to El Cerrito voters until last year, in the form of local ballot Measure K, which not only ratified the tax as required, but also provided that “The voters of the City of El Cerrito hereby ratify and approve the past collection of the Utility Users Tax. . .as it has existed since its effective date of June 24, 1991.”
That measure was forced by Berndt’s victory in an earlier small claims action in which he recovered utility taxes paid in 2002-2003. Maier ruled that the retroactivity section was invalid, a “fiction [that] must not be allowed” because “it attempts to validate a previously illegally imposed tax through ratification, essentially trying to impose an ex post facto law on the citizens of El Cerrito.”
“For Court to accept the City of El Cerrito’s ratification argument,” wrote the commissioner, “would be to allow California’s prohibition on taxes without prior voter approval to fall victim to a municipality’s ‘one-two punch,’ i.e., permitting municipalities to circumvent the clear prohibition of its first low blow as long as it is followed by another.”
Beyond the patent illegality of imposing a tax retroactively, Maier noted that the electorate which voted for the provision can’t have been the same electorate the city began taxing seven years earlier.
The 2000 census noted that of the city’s 23,171 residents that year, only 58.2 percent were living at the same address five years earlier.
Given that Measure K reached back seven years, Maier wrote, “and the population growth of residents of El Cerrito and the more transient population of renters is not accounted for, clearly the voters of 2004 are enormously different from the potential voters (and the actual taxpayers) of 1997, 1998, 1999, etc.”
Berndt said if he were in the city manager’s shoes, he’d blame the council and the city attorney for inserting the retroactivity provisions of the measure.
“I’d say you have lost the faith of the people,” he said. “You should step down.”
Maier’s ruling was the second setback for an El Cerrito city tax. A real estate property transfer tax has been struck down after a similar suit and that case is up for appeal in March, Berndt said