Summary
The California Court of Appeal held that Riverside County’s $23 annual fee for separately assessing timeshare estates was an unconstitutional tax because the County did not establish that the fee was no more than necessary to cover the reasonable costs of the separate assessment service. The court reversed and remanded, and the order modifying the opinion clarified that certain indirect costs could be included if incurred by the effective date of the fee ordinance and attributable to separate timeshare assessments. The court denied rehearing and stated that there was no change in the judgment.
Topics
Practice areas
Questions Presented
- Whether Riverside County's $23 annual separate-timeshare-assessment fee satisfied an exception to the definition of a tax under article XIII C, section 1, subdivision (e), so that voter approval was unnecessary.
- Whether the County's methodology improperly included costs of assessing timeshare projects as a whole and other property, treated timeshare assessments as costing the same as all property assessments, and allocated the assessor's general operating costs equally among all assessed properties.
- Whether the trial court could rely on assessment-appeal and CREST-related expenses that were not included in the County's fee-setting methodology and were incurred after the fiscal year used to establish the fee.
- What proceedings and cost calculations were required on remand to determine the Owners' refund and possible declaratory, injunctive, and writ relief.
Holdings
- The County failed to prove that the fee fit within the article XIII C exceptions for charges imposed for a specific service or benefit. Because the fee was not shown to be no more than necessary to cover the reasonable costs of the separate-assessment service and was not approved by voters, it was an unconstitutional tax.
- The County could not charge timeshare-estate owners for costs of assessing the timeshare project as a whole or for costs of assessing other types of property, because those services were not provided exclusively to the owners who paid the fee.
- The trial court erred by relying on assessment-appeal and CREST-related expenses that were not included in the County's fee-setting methodology and were incurred after the 2016–2017 fiscal year used to establish the fee.
- The trial court must determine the maximum permissible fee and award the difference between the $23 charged and that amount as a refund, while also exercising discretion concerning requested declaratory, injunctive, and writ relief.
Key quotations
“If a levy, charge, or exaction is imposed by a local government and does not fit within an exception, it is a tax which must be approved by the voters in order to be valid.” (12)
“A fee that is based largely on the costs of services not provided exclusively to the payor (here, running the assessor’s office) or that exceeds the reasonable cost of the service that is exclusively provided (here, doing a separate timeshare assessment) is not excepted from the definition of a tax and must be approved by the voters.” (20)
“If the parties cannot agree on the amount of the refund, the court shall hold a trial on the issue at which the County will bear the burden to prove by a preponderance of the evidence the “reasonable” and “necessary” costs that “bear a fair and reasonable relationship” to the burden on the County of providing a separate assessment to a timeshare estate owner.” (21)
Factual background
Riverside County required timeshare-estate owners who requested separate property-tax assessments to pay an annual $23 fee beginning in fiscal year 2020–2021. The County set the fee by dividing most of the assessor's 2016–2017 budget by the total number of property assessments, rather than by calculating the additional costs of separately assessing timeshare estates. The Owners paid the fees, challenged them after the County denied refund claims, and alleged that the fee exceeded the reasonable cost of the service and therefore was an unapproved tax.
Procedural history
After the County rejected the Owners' claims for refunds, the Owners filed a verified petition and complaint in the Riverside County Superior Court. The parties submitted the matter on stipulated procedures and documentary and deposition evidence. The trial court concluded that CREST-related expenses could be considered and that the $23 fee did not exceed the reasonable cost of a separate assessment, then entered judgment for the County. The Court of Appeal reversed and remanded for further proceedings concerning refunds and discretionary declaratory, injunctive, and writ relief. The opinion was modified on July 23, 2025, and rehearing was denied without a change in judgment.
Remand instructions
The trial court must conduct further proceedings concerning remedies. The parties should attempt to resolve the refund amount; if they cannot, the court must hold a trial at which the County bears the burden of proving the reasonable and necessary costs fairly related to providing separate timeshare assessments. Chargeable costs may include direct and indirect costs incurred on or before September 26, 2019, and incurred in or attributable to separate timeshare assessments, but not costs of valuing the timeshare project as a whole. After determining the maximum permissible fee, the court must deduct it from the $23 fee and award the difference as a refund, and it must exercise discretion concerning requested declaratory, injunctive, and writ relief.