Legal Alerts Jun 16, 2017

Non-Property Owners in Cities and Counties May Now Sue for Wasteful Government Spending

California Supreme Court Decision Widens Potential Claimant Pool

Non-Property Owners in Cities and Counties May Now Sue for Wasteful Government Spending

Residents need not pay property taxes in their city or county to have standing to sue the entity for wasteful or illegal expenditures, the California Supreme Court said recently in an opinion that overturned lower court decisions. Rather, payment of other taxes assessed by the city or county may provide the resident with standing to sue. Prior to this decision, residents seeking to stop a city or county from making wasteful or illegal expenditures had to demonstrate that they owned property and paid property taxes in that city or county to have standing to sue. This decision, therefore, opens up a much larger class of plaintiffs with the ability to challenge city and county outlays.
 
Looking forward, government spending by cities and counties may be subject to challenge for waste or illegality not only by property owners in the city or county under section 526a, but also any resident who pays other taxes assessed by the city or county. Until further clarification is provided by courts or legislation, it may be safest to assume that such challenges may come from residents paying sales and gasoline taxes, utility users taxes, property-related fees or charges, and other taxes, fees or charges levied by a city or county.
 
In Weatherford v. City of San Rafael et al., Cherrity Weatherford sued the City of San Rafael for wasteful and/or illegal expenditures under Code of Civil Procedure section 526a. Weatherford was challenging what she alleged were unconstitutional practices relating to impounding vehicles without providing adequate notice. Weatherford resided in the City, but did not own any real property within it. However, as Weatherford pointed out, she was subject to numerous routine municipal taxes assessed by the City, including sales tax, gasoline tax, water and sewage fees, and “other taxes, charges and fees routinely imposed” in the City.
 
Section 526a authorizes taxpayer lawsuits to stop governmental entities from the illegal or wasteful expenditure of public funds. The section provides, in relevant part, that an action against certain government entities, including cities and counties, may be maintained by “either a citizen resident therein, or by a corporation, who is assessed for and is liable to pay…or has paid, a tax therein.” The Court concluded that section 526a should not be interpreted to limit “citizen residents” with standing to only those who pay property taxes, as there is nothing in the language of the statute that would limit consideration of other taxpayers. Unfortunately, the Court stopped short of making a determination as to which taxes are sufficient to establish standing under section 526a. As a result, while we know that property taxes are sufficient and additional taxes may provide standing, we cannot know definitively which additional taxes will be sufficient.
 
If you have any questions about this opinion or how it may impact your agency, please contact the authors of this Legal Alert listed to the right in the firm’s Municipal or Public Finance practice groups, or your BB&K attorney.
 
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Disclaimer: BB&K Legal Alerts are not intended as legal advice. Additional facts or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information in this communiqué.

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