January 29, 2015 -- Client Alert
On January 20, 2015, the Third District Court of Appeal issued one of few published decisions interpreting Proposition 26. The Court in Citizens for Fair REU Rates et al. v. City of Redding (Third District Court of Appeals Case No. C071906, decided January 20, 2015), held that the City of Redding’s Electrical Utility’s payment to the City in lieu of taxes (PILOT) is subject to Proposition 26 and that the City did not meet its burden to establish cost of service restrictions mandated by Proposition 26. The Redding decision does not reject PILOTs as a matter of law, but holds that an agency does not meet its burden to establish compliance with the cost restrictions of Proposition 26 by relying solely on a PILOT rate that matches the ad valorem tax rate.