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In City of Palmdale, et al. v. State Board of Equalization, __Cal. Rptr. 3d__, 2012 WL 1861121 (May 23, 2012), California’s Second District Court of Appeal took to task the State Board of Equalization (BOE) for its adjudicatory process in a sales tax reallocation matter involving the City of Pomona. In 1994, the City of Pomona petitioned for reallocation of sales tax revenues that had been allocated to a countywide pool because a retailer’s Pomona warehouse did not have a resale permit. Both BOE staff and the BOE denied the petition in 2000.
Eight years later, the City of Pomona requested that the BOE reconsider its denial of the 2000 appeal, and the BOE granted a partial reallocation, declining to state a basis for its decision. Several cities petitioned for a writ of mandate in the trial court to overturn the BOE’s decision. The trial court granted the petition, stating that the BOE “‘does not even hint at the reasons for the decision and does nothing more than compute the amount of sales tax revenue to be reallocated.’” Id. The trial court also suggested that the cities’ due process rights may have been violated when they were deprived of revenue that previously had been allocated to them more than eight years earlier.
The court of appeal viewed the trial court’s ruling as “tantamount to a public reproval and … an embarrassment to an agency charged with functions vital to the financial stability of California and its subdivisions and the finances of state taxpayers.” Id. In denying a motion by the petitioner cities to settle the case and vacate the trial court’s judgment, the court of appeal concluded that the public interest would be adversely impacted. The court stated: “This appeal deserves particular attention because according to the judgment, the Board displayed a repeated lack of concern for the statutory and constitutional procedures that restrict its decision-making authority. If the Board ignores applicable legal principles, an erroneous decision is more likely.” Id.