To: Board of Supervisors
From: Thomas L. Geiger, County Counsel
Report Title: Tolling Agreement with SFPP, L.P.
☒Recommendation of the County Administrator ☐ Recommendation of Board Committee
RECOMMENDATIONS:
APPROVE AND AUTHORIZE County Counsel, or designee, on behalf of the Auditor-Controller, to enter into a tolling agreement in SFPP, L.P. v. County of Contra Costa, et al., Contra Costa Superior Court, Case No. C24- 00771, related to SFPP, L.P.’s claim for refund of property taxes for the 2018-2019 fiscal year.
FISCAL IMPACT:
No negative fiscal impact.
BACKGROUND:
Under the California Constitution, certain property owned or used by pipeline 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).
SFPP, L.P. (“Plaintiff”) is a pipeline company that contests the tax rate applied to its unitary property for the 2018-2019 fiscal year. In March 2023, Plaintiff submitted a claim for partial refund of property taxes pursuant to Revenue and Taxation Code section 5097 (“Claim for Refund”). Through the Claim for Refund, Plaintiff requested that the County refund the sum of $316,275.70, plus appropriate interest, in property taxes levied for the fiscal year 2018-2019. After the Claim for Refund was denied, Plaintiff filed a complaint against the County on March 18, 2024, SFPP, L.P. v. County of Contra Costa, Contra Costa Superior Court, Case No. C24-00771 (“Action”).
Plaintiff requests a refund on the asserted basis that the formula used to calculate the tax rate is unconstitutional. 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, a recent decision from the California Court of Appeal in the Sixth Appellate District has affirmed the constitutionality of the rate. (County of Santa Clara v. Sup. Ct. (2023) 87 Cal.App.5th 347.) The following similar lawsuits are currently pending on appeal in all other Appellate Districts within California: First Appellate District, Pacific Bell Telephone Co. et al. v. County of Napa et al. (Case No. A170169); Second Appellate District, Pacific Bell Telephone Co. et al. v. County of Ventura et al. (Case No. B337518); Third Appellate District, Pacific Bell Telephone Co. et al. v. County of Placer et al. (Placer County Superior Court Case No. S-CV0050925); Fourth Appellate District, Pacific Bell Telephone Co. et al. v. County of Riverside et al. (Case No. E083505); and, Fifth Appellate District, Pacific Bell Telephone Co. et al. v. County of Merced et al. (Case No. F087825) (collectively, the “Pacific Bell Actions”).
To provide the parties with sufficient time to await the outcome of the cases in the other Appellate Districts, particularly the First Appellate District which directly impacts Contra Costa Superior Court, and resolve the next steps for handling this claim, Plaintiff has proposed that the parties enter into a tolling agreement. Under the terms of the proposed tolling agreement, (1) the limitations period is tolled beginning March 18, 2024 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 Claim for Refund during the tolling period; (3) Plaintiff agrees to dismiss the Action without prejudice; and (4) Plaintiff waives any claim for the recovery of prejudgment interest from March 18, 2024 onward, including but not limited to interest under Revenue and Taxation Code section 5151. Entering into the tolling agreement would benefit the County because interest on any potential judgment against the County would be waived from the period beginning March 18, 2024.
CONSEQUENCE OF NEGATIVE ACTION:
Failure to take this action may result in the County paying prejudgment interest on the Claim for Refund.