Opinion
11-5-1958
The CITY OF LOS ANGELES, a municipal corporation, and Department of Water and Power of the City of Los Angeles, Plaintiffs and Appellants, v. COUNTY OF MONO, Defendant and Respondent, * Civ. 9427.
Roger Arnebergh, City Atty., Gilmore Tillman, Chief Asst. City Atty. for Dept. of Water & Power, A. H. Driscoll, Asst. City Atty., Los Angeles, for appellants. N. Edward Denton, Dist. Atty., Bridgeport, Verne Summers, Bishop, McCutchen, Thomas, Matthew, Griffiths & Greene, San Francisco, for respondent.
The CITY OF LOS ANGELES, a municipal corporation, and Department of Water and Power of the City of Los Angeles, Plaintiffs and Appellants,
v.
COUNTY OF MONO, Defendant and Respondent, *
Nov. 5, 1958.
Rehearing Denied Dec. 1, 1958.
Hearing Granted Dec. 30, 1958.
Roger Arnebergh, City Atty., Gilmore Tillman, Chief Asst. City Atty. for Dept. of Water & Power, A. H. Driscoll, Asst. City Atty., Los Angeles, for appellants.
N. Edward Denton, Dist. Atty., Bridgeport, Verne Summers, Bishop, McCutchen, Thomas, Matthew, Griffiths & Greene, San Francisco, for respondent.
SCHOTTKY, Justice.
The City of Los Angeles and the Department of Water and Power of the City of Los Angeles (hereinafter collectively referred to as the 'city') brought two actions to recover taxes paid under protest to the County of Mono. Before paying the taxes the city made appropriate application to the State Board of Equalization for relief from the assessments but the Board denied any relief. The first action was to recover taxes levied against two hydroelectric generating plants and appurtenant works located on the Owens River, a transmission line and a dam on Rush Creek. The second was to recover alleged excessive and discriminatory taxes levied on approximately 20,000 acres of land in Mono County. The actions were consolidated for trial and the court rendered judgment denying any relief to plaintiff, and this appeal is from said judgment. The Appeal Relating to the Taxation of the Hydroelectric Facilities, the Dam, and the Transmission Line.
In 1933 the city purchased two power plants, with a combined generating capacity of 7,400 kilowatts, known as Adams Main and Adams Auxiliary. The plants were located in the Owens River Gorge in Mono County. They were taxable at the time of acquisition. The plants were 'run of the stream' plants, and until the completion of a dam known as the Long Valley Dam in 1940 could only operate during the part of the year when the natural flow of the Owens River provided enough water. For some years after acquisition the energy generated by the Adams plants was sold to a private power company or connected to the city's system serving the Owens Valley in Inyo County.
Owens River Gorge, referred to above, is approximately 17 miles long and falls about 2,200 feet in this distance. The city owns all of the land in the gorge, but, with the exception of the east one-half of section 16, all lands were acquired from the federal government and were not subject to taxation at the time of acquisition.
At the upstream end of the gorge, the city constructed Long Valley Dam (completed in 1940), which created a reservoir of some 183,465 acre-feet known as Crowley Lake. This reservoir provides regulation for the flow of the Owens River below the dam. The reservoir impounds not only the waters of Owens River but also waters from a foreign watershed--Mono Basin--which are diverted from their natural watershed and conducted to the lake by a system of aqueducts and tunnels.
Mono Basin is a closed basin and all waters originating therein flow naturally into Mono Lake, which has no outlet.
Prior to 1941 the city acquired the right to divert, from Mono Basin, waters from certain of the streams flowing in the basin--Leevining Creek, Parker Creek, Walker Creek and Rush Creek. To put this water to use, the city spent some millinos of dollars in constructing waterways in Mono Basin and in driving a 12-mile tunnel through the mountain range which separates Mono Basin from the Owens River watershed.
Through the addition of this foreign water supply, the average flow available into Crowley Lake at the head of Owens River Gorge was increased from 230 second-feet--the natural flow of the Owens River at that point--to 405 second-feet.
In 1948 the city commenced construction of a three-plant hydroelectric generating system in the gorge. Two of these are located in Mono County. Each unit generates 37,500 kilowatts of power. A transmission line was also constructed to convey the electricity generated to the City of Los Angeles. Two of these plants and a portion of the tunnels, penstocks and transmission line are in Mono County. The third plant, at the foot of the gorge, is in Inyo County. The trial court, in its findings, refers to these three plants and appurtenant works as the Gorge System. The location and relationship of these hydroelectric plants are shown schematically in the diagram below. NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE
After completion of the three new generating plants in the gorge the situation with respect to waters released from Crowley Lake was and is as follows:
At Crowley Lake water may be released into the river channel and thence to the Adams Plants. It may also be released and conveyed by a tunnel and penstock to the uppermost of the three new plants, known as Upper Gorge.
Water may be discharged from the Upper Gorge Plant into the river and thence to the Adams Plants, or it may be conveyed through a tunnel and penstock to the second new plant, known as Middle Gorge. This plant is located on the east one-half of section 16 and between the two Adams Plants. Water may be discharged from the Middle Gorge Plant into the river and thence to the lower of the two Adams Plants, or it may be conveyed through a tunnel and penstock to the lowest of the new plants, known as Control Gorge, in Inyo County. Water that has passed through the upper of the two Adams Plants may be picked up in the river bed and conveyed through the Control Gorge Plant. Water discharged through the lower of the two Adams Plants must be released to the river and cannot reach any other plant.
The Gorge System was designed to take the entire flow of water available from the gorge though the Adams Plants can still be operated by diverting water from the system. On completion of the new plants the city had planned to abandon the Adams Plants and steps were taken to put them out of service and permanently abandon them. However, before these steps were completed efforts were made to rehabilitate them so they could be operated. The trial court found that the rescission of the retirement of the Adams Plants was carried out by the city in the attempt to avoid taxation of the new facilities by Mono County and not because the Adams Plants had any actual or potential utility. The Adams Plants were not operated after the new facilities were completed until this litigation commenced. The plants were operated intermittently during 1955. The electricity generated was nominal. There was testimony of experts to the effect that after the construction of the new facilities the Adams Plants were without value as standby plants or for any other purpose. On their completion the county taxed the new facilities in Mono County.
In 1918 a dam was built at the foot of Grant Lake on Rush Creek. This dam and the water rights in connection therewith were sold to the City of Los Angeles in 1934. This dam impounded waters of Rush Creek and created a reservoir with a capacity of 10,000 acre-feet. It had theretofore been used as a part of a system for supplying water for irrigation. It was purchased by the city from a private corporation and was subject to taxation when acquired. About 1,500 feet downstream from this dam the city, in 1941, constructed a new dam, hereinafter referred to as New Grant Lake Dam, creating a reservoir with a capacity of 47,500 acre-feet. This reservoir impounds not only the waters of Ruch Creek but also the waters of Leevining, Parker and Walker Creeks to the north. The waters of these latter creeks are conveyed to Grant Lake by a conduit constructed by the city; from Grant Lake the waters so impounded are conveyed by a tunnel and conduits to the Owens River and then to the City of Los Angeles. When completed, the old dam was breached and became submerged. The old dam was assessed for tax purposes until the 1954-1955 taxable year. Thereafter, the county taxed the new dam. The trial court found that the new dam replaced the old dam which had no practical value after the completion of the new dam.
As to the taxes on the city's Owens River Gorge plants and the New Grant Lake Dam, the question before the trial court was whether these improvements were tax exempt. The trial court found that the New Grant Lake Dam and the portion of the Gorge System located in Mono County were taxable replacements of previously taxable improvements.
Appellants contended in the trial court and contend upon this appeal that the Owens River Gorge plants and the New Grant Lake Dam are improvements and are therefore exempt from taxation under the provisions of the 1914 amendment to Article XIII, section 1, of the California Constitution, which reads: 'All property in the State except as otherwise in this Constitution provided, * * * shall be taxed in proportion to its value, to be ascertained as provided by law, or as hereinafter provided * * * and further provided, that property * * * such as may belong * * * to any county, city and county, or municipal corporation within this State shall be exempt from taxation, except such lands and the improvements thereon located outside of the county, city and county or municipal corporation owning the same as were subject to taxation at the time of the acquisition of the same by said county, city and county, or municipal corporation; provided, that no improvements of any character whatever constructed by any county, city and county or municipal corporation shall be subject to taxation. All lands or improvements thereon, belonging to any * * * city and county * * *, not exempt from taxation, shall be assessed by the assessor of the county, * * * in which said lands or improvements are located, * * *'
The question which we must determine upon this appeal is whether the new power plants and dam fall within that class of improvements designated in the Constitution as 'of any character whatever constructed by * * * any city and county.'
Appellants contend most earnestly that under the above quoted 1914 amendment it is clear that the only municipally owned property which is taxable is 'lands and the improvements' which 'were subject to taxation at the time of the acquisition' by the municipality. They point out that prior to the 1914 amendment to section 1 of Article XIII, the California Constitution exempted from taxation all property owned by a municipality. They argue that the intent of the electorate in enacting 1914 amendment was to restore to counties the tax sources of which they had theretofore been deprived through the purchase of property by certain tax-exempt public agencies, but that the constitutional provision clearly expresses an intent to preserve to municipalities the preexisting tax exemption as to all 'improvements of any character whatever constructed' by the municipality. They quote from the official argument presented to the voters prior to the 1914 election as follows: 'This amendment does not seek to hinder in any way the development of enterprises by and for the benefit of counties or municipalities, in any part of the state, but to protect from loss those counties into which they may enter for such purposes. * * * 'The proposed amendment does not penalize improvements that the invading corporation may make. On the contrary, it expressly limits taxation to the property as acquired and excludes any improvements thereafter made.' (Emphasis added.)
Appellants point out further that the city has spent many millions of dollars in the 'development of enterprises' to provide water and electric energy for its inhabitants and that the money has been spent in the construction of facilities other than and in addition to the taxable facilities which it acquired through purchase. They argue that within the spirit and intent of the constitutional amendment, as explained to the voters, the assessment of these newly constructed improvements in a sum exceeding $7,000,000 will obviously 'hinder' this development and 'penalize' these improvements, and that, as explained to the voters, the constitutional amendment 'expressly limits taxation to the property as acquired.'
Not only is it established that the court may look to the argument presented to the voters in determining the intention of the framers of the measure (Carter v. Comm. on Qualifications, etc., 14 Cal.2d 179, 185, 93 P.2d 140; Abrams v. San Francisco, 48 Cal.App.2d 1, 7, 119 P.2d 197; Ducey v. Dambacher, 27 Cal.App.2d 658, 662, 81 P.2d 597), but it is significant that the courts have frequently resorted to the argument presented to the voters in construing the very amendment here under consideration. Turlock Irr. Dist. v. White, 186 Cal. 183, 184, 198 P. 1060, 17 A.L.R. 72; San Francisco v. County of Alameda, 5 Cal.2d 243, 246, 54 P.2d 462; City and County of San Francisco v. San Mateo County, 17 Cal.2d 814, 818, 112 P.2d 595.
Interpreting the very constitutional section before us, the Supreme Court of this state has said: 'It is fundamental that the objective sought to be achieved by a statute as well as the evil to be prevented is of prime consideration in its interpretation.' (Rock Creek Water Dist. v. County of Calaveras, 29 Cal.2d 7, 9, 172 P.2d 863, 865.)
Respondent county in reply states that the Adams Plants were 'run of the stream units,' designed to use the entire flow of Owens River and that the Gorge System was designed and constructed to utilize the entire flow of water available to the Gorge. Respondent states further that upon completion of the Gorge System the Adams Plants were formally retired from service and that steps were taken to dismantle and permanently abandon them; that thereafter, appellants decided to change their plans with respect to the Adams Plants in the hope of avoiding taxation; that on completion of the Gorge System the Adams Plants were rendered useless and had no market value.
Respondent then proceeds to argue that the Gorge System and New Grant Lake Dam constitute replacements of the former Adams Plants and Old Grant Lake Dam and were and are taxable to appellants at the full fair market value. Respondent relies most strongly on the case of City and County of San Francisco v. San Mateo County, 17 Cal.2d 814, 112 P.2d 595. In that case San Francisco had acquired from Spring Valley Water Company two reservoirs, and a redwood flume connecting them, in San Mateo County. This property had been taxable when acquired and thus remained taxable to San Francisco. Subsequent to the acquisition a new and larger concrete lined canal was constructed along substantially the same course as the old flume. The trial court held that the new canal was taxable. San Francisco contended that the canal was not taxable as it constituted a new improvement within the meaning of the constitutional section. In holding against this contention of San Francisco our Supreme Court, after considering the purpose of the 1914 constitutional amendment, stated at page 819 of 17 Cal.2d, at page 597 of 112 P.2d:
'In furtherance of that purpose the intent of the amendment must have been to preserve for taxation not only the identical improvements existing on the property at the time of the acquisition of the property by the municipality, but also substitutes for the same and replacements thereof. The improvements constructed on the property by the municipality which are exempt are only such as are of an entirely new character and not theretofore existing in any form. In this connection it may be noted the words 'construct, constructed and construction' generally import the creation of something new and original that did not exist before rather than replacement, repair or improvement. Platt v. San Francisco, 158 Cal. 74, 92, 110 P. 304; Cabell v. City of Portland, 153 Or. 528, 57 P.2d 1292, 1297; Board of Supervisors of Covington County v. State Highway Comm., 188 Miss. 274, 194 So. 743, 748; Carlson v. Kitsap County, 124 Wash. 155, 213 P. 930. Otherwise by merely repairing, enlarging or replacing existing improvements, the county in which the property was located would lose the tax revenues formerly received from such improvements, while the municipality would be enjoying the same use and benefits from the improvement as it did prior to the replacement, at least to the extent of the value of the improvement as it originally existed. While the concrete canal in this case is of larger dimensions and has a greater capacity than the wooden flume, it is substantially the same improvement. It is used for the same purpose and is a part of the same water works system. Both are used as conduits for transporting water. It cannot fairly be said that the concrete canal is different in character from the wooden flume. For these reasons it must be concluded not only that the concrete canal is not an improvement constructed by the plaintiff and exempt from taxation within the meaning of the Constitution, but also that the improvement taxed was in existence when the tax was levied. The improvement was in existence at the time the water works system was acquired by plaintiff, but it is a concrete canal now instead of a wooden flume.'
Respondent also relies upon the case of City of Pasadena v. County of Los Angeles, 37 Cal.2d 129, 230 P.2d 801. In that case the facts as stated in the opinion of the court at page 131 of 37 Cal.2d at page 801, of 230 P.2d were as follows:
'* * * That plaintiff owns property and improvements thereon consisting of a water system located outside its city limits, but within defendant county which were subject to taxation at the time of their acquisition; that defendant's assessor assessed for taxation those improvements at $56,310 for the first year and at $51,640 for the second year; that certain of said improvements were constructed by plaintiff since acquisition of the property by it 'to replace' improvements that were subject to taxation at the time of acquisition; that the assessor placed a value on the 'replaced improvements' on the basis of the value thereof as they existed on the first Monday of March of the respective years, although the 'replaced improvements' were larger and more substantially constructed, and of greater value than the improvements they replaced; and that they were constructed to serve a different purpose in that they were larger and would serve more parts of the water system.
'Plaintiff contends that the assessor should have fixed the value of such 'replaced improvements' at the value the original improvements would have had as of the first Monday in March of the respective tax years, rather than the value at that time of the 'replaced improvements' which is a much higher figure. In other words, it says that when improvements are replaced, the replacements should not be taxed at their current value, but at the current value of the improvements originally on the property when acquired, because the increased value, by reason of the replacing of the original improvements, is, in effect, a new improvement which is not covered by the exception to the exemption in the constitutional provision above quoted. We cannot agree.'
In rejecting the county's contention that the new improvements should be taxed at the value of the replaced improvements, the Supreme Court reaffirmed what it had held in City and County of San Francisco v. San Mateo County, 17 Cal.2d 814, 112 P.2d 595, and stated at page 133 of 37 Cal.2d, at page 803, of 230 P.2d:
'It argues that the purpose of the constitutional provision is to keep on the tax rolls improvements 'as were subject to taxation at the time of the acquisition of the same' and that where improvements are replaced they are not such as were subject to taxation at that time. But the constitutional provision goes on to say specifically what improvements are exempt from taxation; namely, those which were constructed by the city, and we held in the first San Francisco case, supra, that to be such improvements, they must be wholly new structures, that replacements of existing improvements were simply not improvements of the exempt class. As seen, the issue is not one of valuation. This should be clear, for if the replacement eliminates the old improvement, there is no longer any improvement to tax, unless we look to the replacement. When we do that we have something to tax, and the question is, what is that something, not what is its value. If we tax it by the current value of the old improvement, we are not taxing an article of property; we are taxing a fiction. The difference in value does not make two separate articles of property. If the fiction is to be employed as the basis for fixing value, it would violate the spirit of the forepart of the above quoted constitutional provision that all property shall be taxed according to its value, for the replaced improvement would not be taxed according to that value.'
In answer to respondent's reliance upon the two cases next hereinbefore cited, appellants contend that both cases are clearly distinguishable on their facts from the instant case. With this contention we agree.
In City and County of San Francisco v. San Mateo County, supra, it was held that where San Francisco replaced a wooden flume, which had been in existence at the time of the acquisition of the land, with a concrete lined canal, and San Francisco claimed that the canal was not taxable as it constituted a new improvement within the meaning of the constitutional amendment, San Mateo County could properly assess the value of the canal but 'the assessed valuation upon which the tax levy was based was the same as that fixed when the Spring Valley Water Company owned the wooden flume.'
In City of Pasadena v. County of Los Angeles, 37 Cal.2d 129, 230 P.2d 801, Pasadena alleged that it had installed new pipe in the street to 'replace' water pipe which was taxable when acquired by Pasadena, and sought to have the assessment on the new pipe, which was larger and more substantially constructed, reduced to the assessed value previously placed by the county on the old pipe. The case went upon demurrer and the Supreme Court sustained the new valuation. Replacement was conceded by Pasadena in its complaint and was never an issue in the case. The sole issue was the valuation to be placed on the new pipe, and the court held that replacements of improvements existing on property outside of the corporate limits of a municipality at the time of its acquisition by the city are taxable according to the current value of the 'replaced improvements' and not according to the value of the original improvements. Said the court, 37 Cal.2d at page 133, 230 P.2d at page 803: 'We held in the first San Francisco case [17 Cal.2d 814, 112 P.2d 595, supra] that to be such improvements, they must be wholly new structures, that replacements of existing improvements were simply not improvements of the exempt class.'
We are unable to agree with respondent's contention that the Upper Gorge Plant and the Middle Gorge Plant are replacements of the two Adams Plants. For it is clear from the facts hereinbefore set forth and from the schematic diagram that the two Gorge Plants are entirely new structures constructed as a part of a system to bring additional power and water to the City of Los Angeles, said system consisting of the construction of Long Valley Dam which created Crowley Lake, providing regulation of Owens River below the dam and impounding not only the waters of Owens River but also water brought from the Mono Basin by a 12-mile tunnel through the mountain range which separates Mono Basin from the Owens River watershed. The Adams Plants are still in existence even though it is undoubtedly true that they may not be of any great practical value to appellants.
Even if it be a fact, as the trial court found, that appellants had planned to abandon the Adams Plants upon the completion of the new plants and thereafter in an effort to avoid taxation of the new facilities had decided to rehabilitate them so that they could be operated, this would not be sufficient to make the new power plants subject to taxation. For as stated in Edison California Stores v. McColgan, 30 Cal.2d 472, at page 476, 183 P.2d 16, at page 18: 'Persons may adopt any lawful means for the lessening of the burden of taxes which in one form or another may be laid upon properties or profits. Pioneer Express Co. v. Riley, 208 Cal. 677, 687, 284 P. 663.' Furthermore, the intent or motive of appellants in keeping the Adams Plants in operation could not change the fact that they are still in existence.
While some of the broad language in City and County of San Francisco v. San Mateo County, supra, and City of Pasadena v. County of Los Angeles, supra, may seem to lend support to the conclusion that the new Gorge Plants are not exempt from taxation under the constitutional provision, we do not believe that when what is said in those cases is weighed and analyzed in the light of the facts of the cases, the said cases can be held to support the position of respondent.
The question of what improvements are taxable under the 1914 amendment to our state Constitution was before the Supreme Court in City and County of San Francisco v. County of San Mateo, 36 Cal.2d 196, 222 P.2d 860. The City of San Francisco, beginning in 1930, acquired large tracts of marsh, tide and submerged lands in San Mateo County for the purpose of utilizing the site as an airport, and after acquisition expended several million dollars in raising the level of the land by dredging and filling operations. The question before the Supreme Court was whether a fill made after acquisition was an improvement and thus exempt from taxation. The Supreme Court held that it was exempt, pointing out that the test was whether the fill constituted an improvement, stating at page 198, of 36 Cal.2d at page 861, of 222 P.2d: '* * * If the fill constitutes an improvement as contemplated by the constitutional amendment, it is to that extent exempt, and the county had no power to take it into consideration in making the assessment. * * * 'The history and purpose of the amendment have heretofore been considered by this court. City of Pasadena v. County of Los Angeles, 182 Cal. 171, 187 P. 418; Turlock Irr. Dist. v. White, 186 Cal. 183, 198 P. 1060, ; San Francisco v. County of Alameda, 5 Cal.2d 243, 54 P.2d 462; City and County of San Francisco v. San Mateo County, 17 Cal.2d 814, 112 P.2d 595; Rock Creek Water Dist. v. County of Calaveras, supra, 29 Cal.2d 7, 172 P.2d 863. Prior to the amendment property acquired by outside municipalities had no place on the tax rolls of the county in which it was situated. It was readily appreciated that a continuation of the policy of complete exemption might impoverish counties extensively invaded by outside municipalities seeking acquisition of property for public use. A partial retention of the taxing power of the county as to such acquired property was therefore devised. The county was empowered to assess 'such lands and the improvements thereon' 'as were subject to taxation at the time of the acquisition' of the same by the city. Retained within the exemption provision were 'improvements of any character whatever constructed' by the city. 'Construction' or 'constructed' means the creation of something that did not exist before as distinguished from replacement or repair. City and County of San Francisco v. San Mateo County, supra, 17 Cal.2d at page 819, 112 P.2d at page 596, citing cases. The obvious purpose was to permit the assessment of the property which was in existence at the time it was acquired by the city.
The assessment in successive years of that much of the municipally owned property was made subject to review, equalization and adjustment. The phrase 'improvements of any character whatever' must be held to include any addition (i. e., excluding matters of repair and replacement) to the property as it was when acquired. The amendment does not define 'improvements' beyond the descriptive language 'improvements of any character whatever'. It is difficult to perceive what more inclusive language could have been employed to express the intent to preserve to the county a continuation of the property on the tax rolls as a source of revenue restricted, however, in each successive year to an equalized valuation of the property before the addition of any construction. The manifest intention in adopting the amendment was that if any such addition or improvement was not there at the time of acquisition, it was not taxable thereafter. To restrict the meaning of 'improvements' to that defined elsewhere than in the constitution would be to defeat that purpose. If the invoked restricted meaning was intended the broader language of inclusion need not have been employed. The taxing power may not be extended to cover property under the exception to the exemption clause beyond that expressly included. City of Pasadena v. County of Los Angeles, supra, 182 Cal. at page 174, 187 P. at page 418. It is clear that the fill was a constructed addition to land and not merely repair or replacement. A contrary holding would permit a county to tax an outside municipality for substantial construction confined to raising the land level by fill and other means at a cost of millions of dollars, a result which, if language means anything, was intended to be avoided by the 1914 amendment.' (Emphasis added.)
We believe that the case just quoted from (City and County of San Francisco v. County of San Mateo, 36 Cal.2d 196, 222 P.2d 860) supports the position of appellants. As stated therein, the constitutional amendment empowered the county to assess "such lands and the improvements thereon' 'as were subject to taxation at the time of acquisition." The court states further that 'the phrase 'improvements of any character whatever' must be held to include any addition (i. e., excluding matters of repair and replacement) to the property as it was when acquired.' The court stated further that 'the manifest intention in adopting the amendment was that if any such addition or improvement was not there at the time of acquisition, it was not taxable thereafter. To restrict the meaning of 'improvements' to that defined elsewhere than in the constitution would be to defeat that purpose.'
Notwithstanding the able and earnest argument of respondent we are able to reach no other conclusion than that the Upper Gorge Plant and the Middle Gorge Plant are improvements which were not in existence at the time the property was acquired by the city and were such improvements as were clearly intended to be exempt from taxation. To hold otherwise would in our opinion not only be contrary to the express language of the constitutional amendment but to the 'manifest intention in adopting the amendment.'
What we have said with reference to the Gorge Power Plants applies with equal force to Owens Gorge Transmission Line which was a transmission line constructed by the city from its Gorge Plants to its Los Angeles system. This transmission line was an entirely new line and did not repair or replace any pre-existing line. It was clearly such an improvement as was exempt from taxation under the constitutional amendment. The New Grant Lake Dam
The next question that we must consider is appellants' contention that the new Grant Lake Dam is an improvement which is exempt from taxation under the provision of the 1914 amendment to Article XIII, section 1, of the California Constitution.
As hereinbefore set forth, in 1918 a dam was built at the foot of Grant Lake on Rush Creek. This dam and the water rights in connection therewith were sold to the City of Los Angeles in 1934. This dam impounded waters of Rush Creek and created a reservoir with a capacity of 10,000 acre-feet. It had theretofore been used as a part of a system for supplying water for irrigation. It was purchased by the city from a private corporation and was subject to taxation when acquired. About 1,500 feet downstream from this dam the city, in 1941, constructed a new dam, hereinafter referred to as New Grant Lake Dam, creating a reservoir with a capacity of 47,500 acre-feet. This reservoir impounds not only the waters of Ruch Creek but also the waters of Leevining, Parker and Walker Creeks to the north. The waters of these latter creeks are conveyed to Grant Lake by a conduit constructed by the city. From Grant Lake the waters so impounded are conveyed by a tunnel and conduits to the Owens River and then to the City of Los Angeles. When completed the old dam was breached and became submerged. The old dam was assessed for tax purposes until the 1954-1955 taxable year. Thereafter, the county taxed the new dam.
The trial court found as follows: '(22) As of the first Monday of March 1955 the function and utility of Old Grant Lake Dam had passed to New Grant Lake Dam. '(23) Although of larger capacity and greater value, New Grant Lake Dam serves substantially the same function and purpose as did Old Grant Lake Dam, viz., the impounding of water in Grant Lake. '(24) As of the first Monday of March 1955 as a direct and proximate result of the construction of New Grant Lake Dam, Old Grant Lake Dam had no useful or practical function or market value. '(25) Prior to the first Monday of March 1955 Old Grant Lake Dam was replaced by New Grant Lake Dam for all practical and useful purposes.'
In arguing that the New Grant Lake Dam is an improvement which is exempt from taxation, appellants rely strongly on the case of City and County of San Francisco v. County of San Mateo, 36 Cal.2d 196, 222 P.2d 860, 862, hereinbefore discussed and analyzed. They state that the Supreme Court held in that case that an earth fill superimposed upon marsh, tide and submerged lands was exempt from taxation as a 'constructed addition to land and not merely repair or replacement.'
Respondent in reply contends that the trial court properly held that the New Grant Lake Dam is a taxable replacement of Old Grant Lake Dam and taxable at fair market value. They rely upon City and County of San Francisco v. San Mateo County, 17 Cal.2d 814, 112 P.2d 595, and City of Pasadena v. County of Los Angeles, 37 Cal.2d 129, 230 P.2d 801 both of which cases have hereinbefore been discussed and analyzed. In the first case it was held that a concrete lined canal which San Francisco constructed to replace a wooden flume which had been in existence at the time of the acquisition of the land was taxable even though the concrete canal was 'of larger dimensions and of greater capacity than the wooden flume.'
In the second case the City of Pasadena had installed new pipe in the street to 'replace' water pipe which was taxable when acquired by Pasadena. The fact of replacement was conceded by Pasadena and was not an issue in the case, the sole issue being the valuation to be placed on the new pipe, and the court held that replacements of improvements existing on property outside of the corporate limits of a municipality at the time of its acquisition by the city are taxable according to the current value of the 'replaced improvements' and not according to the value of the original improvements. Said the court, 37 Cal.2d at page 133, 230 P.2d at page 803: 'We held in the first San Francisco case (17 Cal.2d 819, 112 P.2d 597, supra,) that to be such improvements, they must be wholly new structures, that replacements of existing improvements were simply not improvements of the exempt class.'
In City and County of San Francisco v. San Mateo County, supra, the court said, 17 Cal.2d at page 819, 112 P.2d at page 597: 'In furtherance of that purpose the intent of the amendment must have been to preserve for taxation not only the identical improvements existing on the property at the time of the acquisition of the property by the municipality, but also substitutes for the same and replacements thereof. The improvements constructed on the property by the municipality which are exempt are only such as are of an entirely new character and not theretofore existing in any form.'
And in City and County of San Francisco v. County of San Mateo, 36 Cal.2d 196, at page 200, 222 P.2d 860, at page 862, supra, the court said: 'The phrase 'improvements of any character whatever' must be held to include any addition (i. e., excluding matters of repair and replacement) to the property as it was when acquired.'
While the question must be considered a close one, we are of the opinion that the New Grant Lake Dam is not exempt from taxation. Old Grant Lake Dam was an earth and rock fill dam constructed to contain the waters of Grant Lake reservoir. New Grant Lake Dam likewise is an earth and rock fill dam constructed to contain the waters of Grant Lake. Obviously the new dam and the old dam are not identical. The new dam is higher and of greater capacity and consequently has enlarged the area of the reservoir. But similarly, in City and County of San Francisco v. County of San Mateo, supra, the new canal was 'of larger dimensions and has a greater capacity than the wooden flume.' In City of Pasadena v. County of Los Angeles, supra, the new pipes were more substantially constructed and of greater value and 'were constructed to serve a different purpose in that they were larger and would serve more parts of the water system.'
We believe that under the factual situation as shown by the record, the New Grant Lake Dam must be held to be a substitute for and a replacement of the Old Grant Lake Dam. Therefore, under the decisions hereinbefore cited it is not exempt from taxation. The Appeal Relating to the Assessment of Certain Lands Owned by the City.
The city owns approximately 62,000 acres of land in Mono County that was taxable when acquired and is now taxable. Appellants contend that respondent county over-assessed about 20,000 acres of this land referred to as 'grazing land,' and also over-assessed the East one-half of section 16, the site of the Adams Plants and the new Middle Gorge Plant. It is appellants' contention that 'The assessments upon the city's land were so excessive as to place such a discriminatory tax burden upon the city as to produce an illegal tax; the State Board of Equalization, in approving such assessments, acted fraudulently, capriciously, arbitrarily, and contrary to law; and there is no substantial evidence to justify such assessments.'
After the assessments were made on their lands appellants availed themselves of the administrative remedy provided by the Constitution, and applied to the State Board of Equalization for 'review, equalization and adjustment' of the assessments. California Constitution, Art. 13, sec. 1. The State Board of Equalization granted appellants an extended hearing both in 1954 and 1955 and denied relief.
Inasmuch as boards of equalization in California have been entrusted with quasi-judicial powers in tax matters, only a very limited review of their decisions is available. The Supreme Court recently has defined the effect to be given the decision of a county board of equalization as follows: 'The duty of determining the value of the property and the fairness of the assessment is confided to the appropriate county board of equalization. Furthermore, in discharging this duty, the board's determination upon the merits of the controversy is conclusive; the taxpayer has no right to a trial de novo in the superior court to resolve conflicting issues of fact as to the taxable value of his property.' Bank of America Nat. Trust & Savings Ass'n v. Mundo, 37 Cal.2d 1, 5, 229 P.2d 345, 347.
Similarly, in Hammond Lumber Co. v. County of Los Angeles, 104 Cal.App. 235, 241, 285 P. 896, 899, the court stated: 'The decision of the board constitutes an independent and conclusive judgment which abrogates and takes the place of the judgment of the assessor, and even though there be mistake or error, the decision of the board will not be rejected upon review by the court, unless there is proof of actual fraud, or such arbitrary, unreasonable, or grossly oppressive action, in willful disregard of the law, as amounts to constructive fraud.' Emphasis added.
Under Article 13, section 1, of the Constitution, similar effect is to be given to decisions of the State Board of Equalization with respect to the validity of assessments on property owned by municipalities or other public agencies. (Alpaugh Irr. Dist. v. County of Kern, 113 Cal.App.2d 286, 290, 248 P.2d 117. Petition for hearing denied.)
The city contends that the assessments were so excessive as to place a discriminatory tax burden on the city. The city further contends that there is no substantial evidence to support the assessment. The city introduced evidence tending to show that the city's land was assessed at a higher rate than other allegedly comparable land in the county. The city did this by determining the value according to the number of cattle that could be grazed on the city's land and the comparable land. The city contends that its evidence demonstrated that its land was over-assessed.
The city also contends that the assessment placed on the east one-half of a section of land in the Owens River Gorge was excessive. This property was assessed at $3,750 until the 1953-1954 taxable year when it was assessed at $14,930, and then it was assessed at $93,300 in the 1954-1955 year. The city in this regard contends that the county's witness relied in part on the special value to the city. The city contends that the county's witness Brothers valued the half section as part of the entire project and that it was erroneous for the witness to rely on prior sales and to rely on the special value of the property to the city because it owns all of the gorge.
We deem it unnecessary to discuss in detail appeallant's analysis of the evidence before the State Board of Equalization, because as we view it it is merely an able argument as to the weight of the evidence. We have read the transcript of the testimony before the Board, consisting of more than 325 pages, and we are convinced that there is a conflict in the evidence and that the record supports the trial court's finding that the Board's decisions to the assessment on appellants' land were supported by substantial evidence and did not constitute an abuse of discretion. It is only necessary to refer to the testimony of the county's witness, Ralph Goodall, who had assisted the Mono County assessor in 1954. Mr. Goodall is employed by the State Board of Equalization, has worked as an appraiser since 1926 and primarily appraises rural land. He testified that he had appraised appellants' lands and was of the opinion that the value placed upon the lands by the Mono County assessor represented the fair market value of the lands as grazing lands. He further testified that when a body of water is assembled (for instance such as Crowley Lake) and gives the underlying land a higher value than for grazing.
As to the assessment on the east half of section 16, Mr. Oscar C. Brothers, assistant chief of the Division of Assessment Standards of the State Board of Equalization, was a witness called by respondent county. Mr. Brothers valued the land at a market value of $400,000 on the basis of its usability as a power site, including the riparian water rights attached to the land.
Appellants endeavor to discredit Mr. Brothers' testimony because he considered prior sales of the property, including its purchase by appellants in 1933 for approximately $1,000,000. However, it is clear from his testimony that these sales were but one of several factors considered by him. The appraisal value he placed on the property bears no direct mathematical relationship to the purchase prices paid in these sales. It is well established that prior sales may be used as a starting point in appraising property. Rancho Santa Margarita v County of San Diego, 135 Cal.App. 134, 141, 26 P.2d 716.
Appellants also attack Mr. Brothers' testimony because among numerous other factors he considered the value of the east half of section 16 as part of appellants' water and power system in the gorge. Yet it is obvious that in valuing property an appraiser hardly can ignore its existing development and the development of property in the surrounding area, for the location of property bears on its value. Mahoney v. City of San Diego, 198 Cal. 388, 401-402, 245 P. 189.
While appellants have made a persuasive argument in support of their contention that their lands were over-assessed, we believe they have fallen far short of establishing 'proof of actual fraud, or such arbitrary, unreasonable, or grossly oppressive action, in wilful disregard of the law, as amounts to constructive fraud.' It must be borne in mind that these assessments were reviewed by the State Board of Equalization, the members of which are experienced in tax matters, and that numerous witnesses for both appellants and respondent testified at the hearing before the Board. As stated in Utah Construction Co. v. Richardson, 187 Cal. 649, 203 P. 401, 403: 'It is a rule applicable to assessors and to boards having assessing powers that it is presumed that the assessing officers have properly performed the duties entrusted to them, and, consequently, that their assessments are both regularly and correctly made.' Conclusion
For the reasons hereinbefore set forth the judgment is reversed in so far as it determines that the Upper Gorge Plant, the Middle Gorge Plant and the Transmission Line are not exempt from taxation by respondent county. In all other respects the judgment is affirmed. Each party to pay its own costs on appeal.
VAN DYKE, P. J., and WARNE, J. pro tem., concur. --------------- * Opinion vacated 337 P.2d 465.