Sacramento Judge Rules State Cannot Take Sales Tax From Cities

By Brian Hews and Randy Economy

A Superior Court Judge in Sacramento has ruled that the California Department of Finance along with the Board of Equalization cannot take the sales and use tax from Cerritos and other cities in California because it is unconstitutional.

The 16-page decision, handed down Dec. 9 by Superior Court judge Michael P Kenny, will save Cerritos $10.8 million.

Other local cities including Lakewood, Santa Fe Springs, Lynwood, Montebello, and Compton are equally as ecstatic.

The ruling saved $9.332 million for Lakewood, $9.8 million for Santa Fe Springs, $2.08 million for Lynwood,  $4.298 million for Montebello, and $5.516 million for Compton.

When contacted by HMG-CN Cerritos City Manager Art Gallucci felt vindicated about the decision saying, “we were just about to cut the state a $3 million check but this ruling a stopped that. It is the right ruling, Proposition 22 was very clear in preventing the state taking local dollars.”

The plaintiffs in the case, the League of California Cities, the City of Vallejo, and Christopher McKenzie, argued that the sales and use tax demand violated Article 8 of the California Constitution and also that it represented an unconstitutional delegation of legislative power to the Department of Finance.

The court heard the arguments April 19 of this year and denied relief on July 10 stating that “none of the demand letters to the cities had gone out from the Department of Finance, therefore there was no violation.”

Once the demand letters went out to the affected cities, the plaintiffs re-filed the motion, the court agreed to hear the case, and subsequently made the favorable ruling for the cities.

HD Palmer, spokesperson for the California State Department of Finance told Hews Media Group-Community News in a telephone interview on Wednesday afternoon that, “we have two separate judges looking at the cases and reaching two separate conclusions.”

Palmer said that before the Dec. 9 ruling, there was two previous conflicting rulings at the Superior Court level.  One ruling, which Palmer referred to as the “Bellflower Case” and one that Cerritos was a plantiff in, says that the state does have the authority to withhold sales tax. The other, called the “Brentwood Case” says the California Department of Finance cannot withhold the sales tax and that it violated Prop 22.

Palmer told HMG-CN, “so therefore the Department of Finance thinks it is prudent to put on hold any further actions while we examine these two conflicting rulings.”

He also went on to say that the Department of Finance is currently filing additional motions in the Brentwood case. He also said that the DOF currently reviewing the December 9 ruling.