Recommendation
APPROVE AND AUTHORIZE County Counsel, or designee, on behalf of the Auditor-Controller, to enter into tolling agreements for three matters: Golden State Water Company v. County of Contra Costa, Contra Costa Superior Court Case No. C23-02606, Golden State Water Company v. County of Contra Costa, Contra Costa Superior Court Case No. C24-01879, and Zayo Group, LLC v. County of Contra Costa, Contra Costa Superior Court Case No. C24-01130, related to Golden State Water Company’s claims for refund of property taxes for the 2018-2019 and 2019-2020 fiscal years, and Zayo Group LLC’s claim for refund of property taxes for the 2019-2020 fiscal year.
Fiscal
No negative fiscal impact.
Background
Under the California Constitution, certain property owned or used by unitary water and telecommunications companies, among others, is annually assessed by the State Board of Equalization (“BOE”). (Cal. Const., article XIII, § 19.) The amount of these "unitary property" assessments attributed to the County by the BOE are then taxed by the County in accordance with a statutory formula. (See Rev. & Tax. Code, § 100.) The Auditor-Controller uses the amount of unitary property assessments annually provided by the BOE to calculate the amount of taxes to be levied on these properties in accordance with a formula mandated by state law. (Rev. & Tax. Code, § 100).
Golden State Water Company and Zayo Group, LLC are water and telecommunications companies, respectively, that contest the tax rates applied to their unitary property for the 2018-2019 and 2019-2020 fiscal years.
In March 2023, Golden State Water Company submitted a claim for partial refund of property taxes for the 2018-2019 fiscal year, pursuant to Revenue and Taxation Code section 5097. Through this claim, Golden State Water Company requested that the County refund the sum of $52,654.67, plus appropriate interest. On October 13, 2023, Golden State Water Company filed a complaint against the County to seek a refund of these property taxes - Golden State Water Company v. County of Contra Costa, Contra Costa Superior Court Case No. C23-02606 (“Action 1”).
In December 2023, Golden State Water Company submitted a claim for partial refund of property taxes for the 2019-2020 fiscal year, pursuant to Revenue and Taxation Code section 5097. Through this claim, Golden State Water Company requested that the County refund the sum of $62,202.25, plus appropriate interest. On July 18, 2024, Golden State Water Company filed a complaint against the County to seek a refund of these property taxes - Golden State Water Company v. County of Contra Costa, Contra Costa Superior Court Case No. C24-01879 (“Action 2”).
In November 2023, Zayo Group, LLC, submitted a claim for partial refund of property taxes for the 2019-2020 fiscal year, pursuant to Revenue and Taxation Code section 5097. Through this claim, Zayo Group, LLC, requested that the County refund the sum of $76,725.18, plus appropriate interest. On April 26, 2024, Zayo Group, LLC, filed a complaint against the County to seek a refund of these property taxes - Zayo Group, LLC v. County of Contra Costa, Contra Costa Superior Court Case No. C24-01130 (“Action 3”).
Golden State Water Company and Zayo Group, LLC, request refunds on the asserted basis that the unitary tax rate applied to compute their property taxes exceeded the rate allowed under the constitution. However, the County is given no discretion in its calculation of the unitary tax rate; it is a mandated formula set by the State. Further, recent decisions from First, Third, Fifth and Sixth Appellate Districts of the Court of Appeal of California have affirmed the constitutionality of the rate. (Pacific Bell Telephone Co. v. County of Napa (2025) 112 Cal.App.5th 952; Pacific Bell Telephone Co. v. County of Placer (2025) 111 Cal.App.5th 634; Pacific Bell Telephone Co. v. County of Merced (2025) 109 Cal.App.5th 844; County of Santa Clara v. Sup. Ct. (2023) 87 Cal.App.5th 347.) Similar lawsuits are currently pending on appeal in the remaining two Appellate Districts within California: Second Appellate District, Pacific Bell Telephone Co. et al. v. County of Ventura et al. (Case No. B337518); and, Fourth Appellate District, Pacific Bell Telephone Co. et al. v. County of Riverside et al. (Case No. E083505) (collectively, the “Pacific Bell Actions”).
To provide the parties with sufficient time to await the outcome of the cases in the other Appellate Districts, and resolve the next steps for handling these claims, the parties have proposed tolling agreements. Under the terms of the proposed tolling agreements, (1) in each Action, the limitations periods are tolled beginning the date when complaints are filed in each Action, until cancelled by one of the parties upon thirty (30) days’ notice; (2) the parties agree not to take any legal action related to the three claims during the tolling period; (3) Golden State Water Company agrees to dismiss Actions 1 and 2, without prejudice; (4) Zayo Group, LLC, agrees to dismiss Action 3, without prejudice; and (5) Golden State Water Company and Zayo Group, LLC, waive any claims for the recovery of prejudgment interest from the date when complaints are filed in each of their respective Actions onward, including but not limited to interest under Revenue and Taxation Code section 5151. Entering into the tolling agreements would benefit the County because interest on any potential judgments against the County would be waived from the period beginning when complaints are filed in each Action.
Consequence of Negative Action
Failure to take this action may result in the County paying prejudgment interest on each of the three claims.