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HomeMy WebLinkAboutMINUTES - 09011998 - C32 TO: BOARD OF SUPERVISORS FROM: 'Victor J.Westman, County Counsel DATE: September 1, 1998 SUBJECT: Settlement of Airlines Tax Litigation; Airline Taxation Cases (Judicial Council Coordination Proceeding No.2414 and United Air Lines,Inc., Co of Alameda (Alameda Sup.Ct.No. 783239-2) SPECIFIC REQUESTS)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION L RE!COMMENDATIONS Approve settlement of the above subject Airlines litigation cases, authorize County Counsel execution of the Settlement Agreement and other appropriate departments to take all action to implement the settlement, and authorize County Counsel to sign a letter allowing Crosby, Heafey, Roach and May to continue their representation of the involved airlines. II. FISCAL IMPACT Minor impact of$200 per year for 5 years. Il. BA 'KGROLTND/REASOlwIS FOR RECOMMENDATIONS Because Contra Costa briefly had commercial air service to Buchanan Field,we have been named in major statewide litigation involving all airlines operating in California and all counties with commercial airports. After protracted negotiations, a settlement has CONTINUED ON ATTACHMENT: _-LYES SIGNATURE I RECOMMENDATION OF COUNTY ADMINISTRATOR_RECOMMENDATION OF BOARD COMMITTEE —APPROVE —OTHER SIGNATURE(S); ACTION OF BOARD ON APPROVED AS RECOMMENDED OTHER— VOTE OF SUPERVISORS I HEREBY CERTIFY THAT TIAs IS A TRUE AND CORRECT COPY OF AN UNANIMOUS(ABSENT ) ACTION TAKEN AND ENTERED ON THE AYES; NOES: MINUTES OF THE BOARD OF ABSENT; ABSTAIN: SUPERVISORS HE DATE SHOWN ATTESTEgggg - PHIL BAT. EOR,CLERK OF HE BOARD OF SUPERVISORS AND COUNTY ADMINISTRATOR 9 DEPUTY Orig: County Counsel ec; County Administrator Clerk,Board of Supervisors Assessor Auditor Controller been reached,with the counties providing$50,000,000 in property tax credits over 5 years. Contra Costa's portion ($1,000) is minuscule,but we must be a part of the settlement unless we are to undertake the burden of attempting to independently resolve this complicated case. The law firm of Crosby,Heafey, Roach and May has for a number of years represented the involved airlines in the above subject litigation. This firm is also being employed to represent the County in an employment dispute. In this office's view, there are no overlapping issues of fact or law concerning the firm's service in both matters. For this reason, the County Counsel recommends that the County waive any potential conflict to allow the firm's continued representation in both matters. H:'DFOTI\BD-ORDER\V3Id,)'\4IRLINE.WPD DEPUTIES MARY M.ASH + JOHN C.BEIERS 4DE ORAH PENNY BENNETT COUNTY COUNSEL J°^` (; BRENDA B.CARLSON STEVEN L.DYLINA THOMAS F.CASEY III ((yy PETER K.FiNCK 0 1998 BETH LABSON FREEMAN CHIEF DEPUTIES COUNTS �,����������� 1 PORTOR i � uti,1Q„{,,;;,+�.�� LEIGH HERMAN CHRISTINE E. MOTLEY >�` "��••.,?^'"� a i� MILTON H.MARES MICHAEL P.MURPHY —. ew ,;;— COUNTY OF SAN MATEO KIMBERLY A.MARLOW HALL OF JUSTICE AND RECORDS•THIRD FLOOR MIGUEL A.MARQUEZ 400 COUNTY CENTER • REDWOOD CITY,CA 94063 JOHN J.McGUIRE TELEPHONE:(650)363-4250• FACSIMILE:(650)363-4034 MARY K.RAfTERY MIRUNI SOOSAIPILLAI CONFIDENTIAL-JOINT DEFENSE PRIVILEGE V.RAYMOND SWOPE III CAROL L.WOOI)WARD Please respond to: (650) 363-4795 August 6, 1998 Victor J. Westman, County Counsel Dennis C. Graves,Deputy Office of the County Counsel Contra Costa County 651 Pine Street, 9th Fl. Martinez, CA 94553 RE: Settlement of the Airline Taxation Cases and other airline appeals and litigation RECOMMENDED ACTION: Approve the attached master settlement agreement and return your county's signed counterpart to the San Mateo County Counsel's office for processing Dear Counsel: Attached is the master settlement agreement for the Airline Taxation Cases and included airline tax litigation and appeals. The agreement was unfortunately delayed due to issues arising from one airline's bankruptcy proceeding. At this point, all issues should be resolved. The master settlement agreement tracks the settlement legislation(Stats. 1998, ch.85, 86 [Rev. & Tax. Code §§ 107.9,401.15 and 5096.3]). There will be one agreement for all counties and all airlines. Each settling county has the option of either entering the master settlement agreement or developing its own form of waivers. Under the terms of the master settlement agreement, it will become operative in each county when that county and the applicable airlines for that county execute the agreement. Once operative, the county will need to process the required credits for the 1998-99 tax bills. (These bills are typically due by August 31.) The amount of credits due to each airline in each county is listed in the airline allocation schedule which is attached as Exhibit B to the agreement. The schedule has been structured so that only a few airlines receive credits in each county. The ....... .. _............ _ __ _ _ ..... .._.............. _....... _. _.. _ _ ..... ....... ..... August 6, 1998 Page 2 RE: Settlement of the Airline Taxation Cases and other airline appeals and litigation county may apply the amount of credits due to an airline to any tax bill or bills for that airline,but the county will need to give notice to the airline as to which bills the creditsare being applied. This is to ensure that the airline will pay the correct amount for each tax bill and not be subject to late penalties or interest if the airline inadvertently pays the wrong amount. A county will have up to 120 days to apply the 1998-99 credits before interest begins to accrue at the county pooled apportioned rate. If a county cannot or does not want to process credits,there is a provision which will allow a county and the applicable airlines to negotiate a different payment plan. In addition to the credits,each county assessor will need to determine whether--revised - assessments for 1998-99 are necessary. The Aircraft Subcommittee of the California Assessor's Association(CAA)is in the process of reviewing and approving revised recommended aircraft values. If your assessor has questions or needs information on airfield possessory interest assessments,we recommend that your assessor call Terry Flinn of the office of the San Mateo County Assessor-County Clerk-Recorder at(650) 599-1271. The airlines will have up to 120 days to dismiss all of their affected lawsuits, claims and assessment appeals in the settling county after execution of the settlement agreement. If your county wishes to enter the master settlement agreement,'please see that the agreement is approved and signed and return the executed original to our office for incorporation into the original master agreement. We would also appreciate it if you would notify us if your county is electing to enter waivers instead of the master agreement. Please do not hesitate to call me at(650) 363-4795 if you have any questions or need further information. Very truly yours, THOMAS F. CASEY, III, COUNTY COUNSEL BY: WARY K. TERY E UTY LZ cc: Ruth Sorensen, County Counsel's Association Warren Slocum, Assessor-County Clerk-Recorder, County of San Mateo Terry Flinn, Deputy Assessor-County Clerk-Recorder, County of San Mateo SETTLEMENT AGREEMENT This Settlement Agreement is made and entered into by and betweenAlaska Airlines, Inc., American Airlines, Inc., America West Airlines, Inc., Continental Airlines, Inc., Delta Air Lines, Inc., Federal Express Corporation,Northwest Airlines, Inc., Trans World Airlines, Inc., Southwest Airlines Co., United Air Lines, Inc., United Parcel Service, Inc., US Airways, Inc., Wings West Airlines, Inc., (hereinafter collectively referred to as"Airlines") in their own right or as successors-in-interest, and4he Counties-of Alameda, Contra Costa, El Dorado,Fresno, Humboldt, Kern, Los Angeles, Monterey, Orange, Riverside, Sacramento, San Bernardino, San Diego, San Joaquin, San Mateo, Santa Barbara, Santa Clara and Solano (hereinafter collectively referred to as the"Counties"). RECITALS WHEREAS, the Airlines, or some of them, have filed various actions, claims for refund and applications for changed assessments against some or all of the Counties over certain property taxes which are further described herein; and WHEREAS, the Counties have denied liability for refunds in these actions, claims for refunds and applications for changed assessments; and WHEREAS, the parties wish to resolve their differences and terminate the certain actions, claims for refund and applications for changed assessment as identified in this Settlement 1 Agreement, according to the terms and conditions hereinafter stated, whichsettlement is without adjudication of any issue of fact or law and without any admission of liability or concession on the part of any party, but is a compromise only; and WHEREAS, no party to this Agreement either by execution of this Agreement or by support of the legislation referred to in this Agreement has made any concession with respect to whether Property Tax Rule 20 is or is not valid, nor with respect to whether the right to use runways and taxiways at publicly ow ed._airpoxts is wismt a-taxable possessory interest; and WHEREAS, all parties agree that section 107.9 of the Revenue and Taxation Code produces values in the reasonable range of value from their respective positions on the taxability of runways and taxiways at publicly owned airports; and WHEREAS, to implement this settlement, the parties agreed to sponsor legislation to add Revenue and Taxation Code sections 107.9, 401.15 and 5096.3, in substantially the form set forth in Exhibit A, which is attached hereto and incorporated by this reference herein, and to use their best efforts to secure the passage and enactment of this legislation. NOW, THEREFORE, the parties agree as follows: I. In consideration of the covenants and releases contained herein, the Counties shall provide tax credits in the total amount of Fifty Million Dollars($50,000,000.00) over five years 2 and credits for certain escape assessments that are described in Revenue and Taxation Code section 5096.3 (hereinafter referred to as"section 5096.3"), which is attached hereto as Exhibit A and incorporated fully herein by this reference. The credits under section 5096.3 (a) and (b) shall be provided subject to the terms and conditions described in section 5096.3 and in accordance with the airline allocation schedule, which is attached as Exhibit B and incorporated fully herein by this reference. The parties agree that this tax credit obligation is contractual and independent of any statutory obligation under section 5096.3 and that for each County this tax credit obligation devolves upon all-tax ipient entities receiving the benefit of this Settlement Agreement — according to their proportional share of revenues derived from property taxes paid by the Airlines in that county. The allocation schedule is an allocation of the total tax credit amount due from each County under section 5096.3(a) and agreed to by the parties. In no event may the credit described in section 5096.3(x) for any County in any year be increased beyond the levels set out in subdivisions (a) and (b) of section 5096.3. 2. Each County providing tax credits pursuant to section 5096.3 (a) and (b) and Exhibit B may apply any such credit against any tax bill or bills for the applicable Airline for the applicable tax year so long as the total amount of credit available to each Airline is as set forth in Exhibit B, or as amended pursuant to paragraph 3 below, and the Airline is notified of the tax bill or bills to which credits will be applied. For fiscal year 1998-99 only, this notice will be given as soon as practicable, and no Airline shall be assessed a late penalty or interest for the non-payment of taxes if the Airline has timely paid the total amount of taxes due to that County less the amount of credits provided to that Airline under Exhibit B for that fiscal year. For all other fiscal years, 3 the notice will be given at least twenty(20) days in advance of the payment due date. 3. During the five year period during which credits are to be made available pursuant to section 5096.3, the Airlines' designated representative, Crosby, Heafey, Roach and May, Professional Corporation, by Sohn E. Carne or his designated successor, may submit revised instructions not later than the May 15 preceding the beginning of the fiscal year in which the credits are to be adjusted, but in no event can the total credit for any�County under section 5095.3 (a) in any year be inermed-bey6nd the-levels set out in section 5096.3 (a) and (b) and Exhibit B for any fiscal year. 4. For fiscal years 1999-2400 through 2002-2003, if any County fails to provide the credit set forth in Exhibit B in the year specked, the amount of that credit shall bear interest at the County pooled apportioned rate from the.time of the tax payment due dates for the year in which the credit was to be provided under Exhibit B until the credit is provided. For fiscal year 1998-99 only, if any County fails to provide the credit set forth in Exhibit B for that year, the amount of that credit shall bear interest at the County pooled apportioned rate from one hundred and twenty (120) days after execution of this Settlement Agreement by the Airlines and that County until the credit is provided in the form of either a credit or a refund. Nothing within this Agreement precludes an individual County and the affected Airlines from entering into a mutually acceptable payment plan provided that any such agreement shall be executed in writing by and between the affected parties and all terms and conditions, other than the payment schedule, shall remain the same as outlined herein; provided however that there is no obligation on the part of any party to 4 enter into such a payment plan. 5. For good and valuable consideration, the Airlines do hereby fully and finally release and discharge the Counties, their officers, agents and employees from and against any and all actions, claims, demands, liabilities, obligations, damages or choses in action, legal or equitable, for all tax years through and including the 1997-98 tax year with respect to(1)the taxability, valuation and equalization of possessory interests covered by section 107.9 and (2)the ._.. ...valuation and equalization of aircraft; provided, however, that this does not release claims.related-- _ to (a) audit adjustments and offsets as set forth in Revenue and Taxation Code section 469 or(b) the correction of reporting errors raised by an Airline or(c)the allocation of aircraft values. The specifically released claims described in the preceding sentence include but are not limited to the Airline Taxation Cases(Judicial Council Coordination Proceeding No. 2414) and United Air Lines, Inc., v. County of"Alameda(Alameda Superior Court No. 783239-2). The Airlines agree that this release and discharge includes their contractual commitment, independent of any statutory obligation, to take all steps necessary to dismiss and withdraw with prejudice all existing legal actions, claims for refunds of taxes and applications for changed assessments which assert the above identified released claims and disputed issues as soon as possible but no later than one hundred and twenty (120) days after the date when both the County and the Airline have executed this Agreement. 5 p 6. For all tax years beginning with the 1998-1999 tax year, and for all escape assessments levied and assessed after April 1, 1998, Airlines agree to assert no claims for tax refunds or applications for changed assessments(1)on the taxability,valuation or equalization of possessory interests covered by section 107.9 if the assessor has valued the subject property in accordance with section 107.9 or(2)on the valuation or equalization of aircraft through tax year 2003-2004 if the assessor has valued the subject property in accordance with section 401.15; provided, however,that this covenant does not apply to claims relating to (a)audit adjustments and offsets as set forth in Revenue and Taxation Code section 469 or(b) the correction of reporting errors raised by an Airline or(c)the allocation of aircraft values. The Airlines further agree that they will not assert in any application for changed assessment or action for refund that (1)the Assessor has violated Property Tax rule 20 or(2)that there is no taxable possessory interest governed by the valuation provisions of section 107.9, provided that the assessor has applied the methodology in that section. 7. The Counties which are parties to this Agreement have already determined that aircraft model 757-200 PF is affected by extraordinary obsolescence within the meaning of section 401.15 (b)(2) and (c)(2), and therefore, the parties agree that the values presumed to be correct under section 401.15 during the six year period for this aircraft model will be the values originally set by the California Assessor's Association for the 1998 lien date and that no further showing of extraordinary obsolescence is required unless any Airline wishes to demonstrate additional obsolescence justifying a lower value. 6 .11 . .._1.1. .. ........ .........._......1.11.1 _ ........ __ _ ..................... ....... ....-... ........_ .......... .11.1...1 ........1 ....... 8. Airlines warrant that they each have the power and authority to enter into this Settlement Agreement on behalf of themselves, any predecessors-in-interest, any successors-in- interest and any person or entity that may have rights to receive the refundsof taxes which are the subject of this Settlement Agreement. Airlines further agree to indemnify and save and hold harmless the Counties from any liability, claims, expenses, demands, damages or causes of action of any kind or character asserted by any person or entity claiming rights inconsistent with the warranty in this paragraph. The obligations undertaken by Airlines in this paragraph are several —and relate only to taxes levied against that particular Airline or its predecessor or successor-in--- interest. 9. The parties hereby authorize their respective counsel to execute whatever form of documentation is necessary or required to terminate the specifically released actions, claims for refund and applications for changed assessments referenced in Paragraph 5. 10. The parties shall bear their own legal fees, court costs and other expenses incurred in connection with the aforementioned litigation, claims for refund and applications for changed assessment, including any legal fees and costs incurred in the finalizing of this Settlement Agreement. Except as expressly provided in paragraph 4 of this Agreement, the parties further agree that the total amount of credits provided herein include satisfaction of any and all of the Airlines' claims for interest. 7 ......... _......_. ....._... ......._... ... . ..... ....... ...... ........... .......... . _........ ......... ......... ......... ... ... ........... 9-/-,P 11. The parties acknowledge that in executing this Settlement Agreement, they are relying solely upon the legal advice of their respective attorneys and that they have not relied on statements of any other attorneys or other persons acting on behalf of the other parties herein. 12. This Settlement Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same Agreement. 13. This Settlement Agreement and sections 107.9, 401.15 and 5096.3 do not. abrogate, rescind, preclude or otherwise affect any separate settlement agreement entered into prior to the effective date of the settlement legislation between a County and an Airline concerning the subject matter of this Settlement Agreement and sections 107.9, 401.15 and 5096.3, with respect to those tax years expressly settled by such prior settlement agreement. The parties agree that no prior settlement agreement may be used to challenge the assessment and valuation provided by sections 107.9 and 401.15 for any tax year after 1997-98 or any tax year not expressly settled by such prior agreement. With respect to America West Airlines, Inc., only, this Settlement Agreement does not include the claims that America West Airlines, Inc., has raised in the adversary proceedings in the bankruptcy proceeding entitled "In Re America West Airlines, Inc.," Case No. 91-07505 PHX-RGM, against the Counties of Alameda, Kern, Orange, Sacramento, San Bernardino, San Diego and San Mateo, which claims shallbe addressed within the context of that proceeding. Any of America West's adversary claims in the bankruptcy proceedings will have no legal effect for any tax year not at issue in such adversary proceedings. Additionally, all parties agree that the resolution of any of America West's adversary claims in the 8 bankruptcy proceedings will have no legal effect on the terms and conditions of this Settlement Agreement, on sections 107.9,401.15 or 5096.3, on the tax years which are expressly resolved as part of this settlement, or on any claims relating to tax years not at issue in the bankruptcy adversary proceedings of America West Airlines, Inc. 14. The following exhibits are attached hereto: Exhibit A -- Enrolled Legislation Enacting Revenue and Taxation Cade sections 107.9, 401.15 and 5095.3 Exhibit B -- Airline Allocation Schedule 15. Except as otherwise expressly provided in this Agreement, the provisions of this Agreement are intended to apply independently and severally as to.each Party hereto. The termination, breach, invalidity or unenforceability of all or any part of this Agreement as to any Airline or County shall not af'f'ect the validity or enforceability of this Agreement as to any other Party. Any failure by an individual Party to perform under the terms of this Agreement shall excuse the reciprocal promised performance by any other Party to that breaching Party only. Any such failure of performance shall not excuse or otherwise impair the obligations of full performance between the other Parties. 16. This Agreement shall be binding on a County and an Airline when both the County and the Airline execute this Agreement. The failure of any County to execute this Agreement shall not invalidate the Agreement as to any other County. 9 17. This Agreement, including Exhibits A(in its attached form and as enacted) and B, constitute the sole agreement of the parties hereto and correctly states the rights, duties, and obligations of each party. Any prior agreement, promises, negotiations or representations between the parties not expressly stated in this document are not binding. Any subsequent modification, amendment, waiver or termination of this Agreement shall be in writing and signed by the Party or Parties to be bound thereby. IN WITNESS WHEREOF, the parties hereby execute this Settlement Agreement and Release as follows: DATED: , 1998 ALASKA AIRLINES, INC. By DATED: , 1998 AMERICAN AIRLINES, INC. By DATED: , 1998 AMERICA WEST AIRLINES , INC. By 10 DATED: 11998 CONTINENTAL AIRLINES, INC. By DATED: . 1998 DELTA AIR LINES, INC. By DATED: , 1998 FEDERAL EXPRESS CORPORATION By DATED: 11998 NORTHWEST AIRLINES, INC. By DATED: , 1998 SOUTHWEST AIRLINES CO. By 11 _ _ _ _. DATED: .-.-----, 1998 TRANS WORLD AIRLINES, INC. By DATED: , 1998 UNITED AIR LINES, INC. By DATED: 51998 UNITED PARCEL SERVICE, INC. By DATED: , 1998 US AIRWAYS, INC. By DATED: _ _ , 1998 WINGS WEST AIRLINES, INC. By 12 DATED: • 1998 COUNTY OF ALAMEDA By DATED: 11998 COUNTY OF CONTRA COSTA By DATED: . 1998 COUNTY OF EL DORADO By DATED: 11998 COUNTY OF FRESNO By DATED: , 1998 COUNTY OF HUMBOLDT By 13 ......... ......... ...._.... ......__. ......_.. _ - -_ _ _ _ ........ ........ ........ ....... ......__. ............ ......_. . ............. _....._.. DATED: , 1998 COUNTY OF KERN By . DATED: 11998 COUNTY OF LOS ANGELES By DATED: , 1998 COUNTY OF MONTEREY By DATED: . , 1998 COUNTY OF ORANGE By DATED: , 1998 COUNTY OF RIVERSIDE By 14 _.. ._.._. ......... _....._.. . --- .... ........ ........._.. _._...._. ..........._. ......... ......... _ _. ......... .... .. ... ......__. .. ... ........... DATED: , 1998 COUNTY OF SACRAMENTO By DATED: , 1998 COUNTY OF SAN BERNADiNO By DATED: , 1998 COUNTY OF SAN DIEGO By DATED: , 1998 COUNTY OF SAN JOAQUIN By DATED: , 1998 COUNTY OF SAN MATEO By 15 ......... ...._.... ......... ......_.. ..._..... ......... ......... ......... ......... ......... _._. ... _ .._ . ........ ....... ........ ....... ........ ......_... ......... ........_. ......................... ........... DATED: , 1998 COUNTY OF SANTA BARBARA By DATED: ' 1998 COUNTY OF SANTA CLARA By DATED: , 1998 COUNTY OF SOLANO By L:li.MGATEW_GASESIAIRTAX1SETAGMT2.WPD August 6,1948 16 9.inv _....... ......... ........_... . ._..._.. ......_...__.. . ....... . .......... ......... ..........._. ._........................-__..__.... .......... ...._....... ......... ......... ..............._.. AB'2318 Assembly Bill-CHAP`T FRED http://www.leginfo.ca.gov/pub/bill...ab_2318-bilt_98063U_chaptered.html BILL NUMBER.: AB 2318 CHAPTERED BILL TEXT CHAPTER 85 FILED WITH SECRETARY OF STATE JUNE 30, 1998 APPROVED BY GOVERNOR JUNE 30, 1998 PASSED THE SENATE JUNE 25, 1998 PASSED THE ASSEMBLY JUNE 25, 1998 AMENDED IN SENATE JUNE 23, 1998 .AMENDED IN SENATE JUNE 11, 1998 AMENDED IN ASSEMBLY APRIL 30, 1998 INTRODUCED BY Assembly Member Knox FEBRUARY 19, 1998 An act to add Section 107.9 to the Revenue and Taxation Code, relating to taxation, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST AB 2318, Knox. Property taxation: airline property and possessory interests. Existing property tax law provides that all property is subject to taxation at its full value, unless that property is otherwise exempted from taxation in whole or in part pursuant to either state or federal law. This bill would specify that a certain, additional taxable possessory interest is conferred upon an operator of certificated aircraft at a publicly owned airport. This bill would also provide, for the 1998-99 fiscal year and each fiscal year thereafter, that all taxable real property rights of an operator of certificated aircraft at a publicly owned airport, except as specified, shall be presumed to be valued and assessed at full cash value only if the assessor follows the applicable, specified income approach in determining the assessed value of that property. This bill would declare that it is to take effect immediately as an urgency statute, but would become operative only if AB 18.07 takes effect on or before January 1, 1999. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 107.9 is added to the Revenue and Taxation Cade, to read: 107.9. (a) In addition to any taxable real property interests that an operator of certificated aircraft has at a publicly owned airport that are interests stated in a written agreement for terminal, cargo, hangar, automobile parking lot, storage and maintenance facilities and other buildings and the land thereunder leased in whole or in part by an airline (hereafter the "excluded possessory interests") , there exists an additional taxable possessory interest conferred upon an operator of certificated aircraft at a publicly owned airport. (b) Notwithstanding any other provision of law relating to valuation, for assessments for the 1998-99 fiscal year, and each fiscal year thereafter, (1) regular assessments of all taxable real property interests of the operator of certificated aircraft at a publicly owned airport, other than the excluded possessory interests, and (2) timely escape assessments upon the real property interests governed by this section issued on or after April 1, 1998, pursuant to Sections 531 and 531.2, shall be presumed to be valued and assessed at full cash value for these interests only if the assessor uses the fallowing direct income approach in capitalizing net 1 of l 7/2/98 10:05F AB 2318 Assembly Bill-CHAPTERED http://www.legisfo.ca.gov/pub/bill.,.ab_2,31 b_b111_Y8UO3U_chaptered.htm economic rent: (1) The economic rent shall be computed by using one-half of the landing fee rate used to calculate the 1996-97 assessment for real property interests, other than excluded possessory interests, multiplied by the aggregate weight of landings by the operator for the airport's fiscal year prior to the 1996 lien date. The one-half of the landing fee rate used to compute the 1996-97 economic rent shall be annually adjusted in accordance with the percentage change, . rounded to the nearest one-thousandth of 1 percent, from October of the prior fiscal year to October of the current fiscal year in the California 'Consumer Price Index for all items, as determined by the California Department of Industrial Relations, except that in no instance shall this adjusted rate exceed one-half of the airport's actual landing fee rate for the last full fiscal year. The economic rent shall also be adjusted in proportion to the increase or decrease in the aggregate weight of landings by the operator for the last full fiscal year at each airport in the taxing county. In the case of a new operator, the economic rent shall be determined by reference to a similarly situated operator. (2) The expense ratio shall be the ratio used by each county for the 1996 lien date. (3) The capitalization rates shall not exceed, or be less than, the rates used by each county for the 1996 lien date, except that they shall be annually adjusted in proportion to the changes in the 'tC3ong-in Cap Rate; All Types" as published by the Real Estate Research Corporation, and, as so adjusted, shall be rounded to the nearest one-half percent. If this information ceases to be published by the Real Estate Research Corporation or the format significantly changes, a publication or adjustment agreed to by the airlines and the taxing counties shall be substituted. (4) The term of possession for each operator shall be the term used by each county to calculate the 1996-97 assessment, but shall not exceed a maximum term of 20 years. Subject to paragraphs (1) to (3) inclusive, of subdivision (b) of Section 61 as applied to interests subject to this subdivision, changes of ownership and term of possessions shall be determined as follows: (A) In the case of the creation, renewal, extension or assignment of an operating agreement or permit, without the concurrent creation, renewal, extension or assignment of a terminal, hangar, or cargo facility agreement, no change in ownership will be presumed to have occurred and the term of possession shall be the term used by each county for their 1996-97 assessments, not to exceed a maximum of 20 years. (R) In the case of the creation, renewal, extension or assignment of a terminal, hangar, or cargo facility agreement, a change in ownership will be presumed to have occurred and the term of possession shall be the actual term stated in the written terminal, hangar, or cargo facility agreement, provided that the term shall not be less than 10 years or exceed 15 years. (C) In the case of any operator without a terminal, hangar, or cargo facility agreement, the actual creation, renewal, extension or assignment of a written operating agreement or permit shall constitute a change in ownership and the actual term of the operating agreement for that carrier will be used, provided that the term shall not be less than 5 years or exceed more than 15 years. (5) Nothing in this subdivision is intended to apply to the determination of a term of possession for a possessory interest in an excluded possessory interest. (c) Notwithstanding subdivision (b) , in a county in which 1995-96 landing fees were not used to calculate the 1996-97 assessment, the county shall benefit from the presumption of correctness set forth in subdivision (b) only if the assessor uses the following direct income approach in capitalizing net economic rent: (1) The calculations required in subdivision (b) are performed using the assessment that would have been derived in the 1996-97 fiscal year had the assessor followed the methodology set forth in subdivision (b) using actual airport data for the 1995-96 fiscal year. (2) If any portion of the airport's landing fee rate for the 2 of 3 7/2/98 10:05p AB 2318 Assembly Bill-CH.A.PTERED http://wvw.leginfc.ca.gov/pub/bill..,ab_231g_bi11 980530_chaptercd.htmI 1995-96 fiscal year was in dispute and resulted in the creation of an escrow account for a portion of the landing fees paid, that portion of the landing fee rate attributable to the escrowed funds shall: not be included in the calculations performed in paragraph (1) . However, if the dispute is resolved, in whole or in part, in favor of the publicly owned airport and all or a portion of the escrowed funds are released to the airport, the assessor shall, without regard to any other statutorily imposed time limitation, be entitled to recalculate the assessments required by this subdivision using an adjusted landing fee rate that reflects a final decision on the disposition of escrowed funds to produce escape assessments for all affected years. (d) value shall be determined as follows: (1) Economic rent shall be calculated by applying the expense ratio described in paragraph (2) of subdivision (b) to reduce gross income determined pursuant to paragraph (1) of subdivision (b) or (c) and paragraph (2) of subdivision (c) to arrive at an amount that shall be deemed to be equivalent to economic rent. (2) Economic rent, as so determined, shall be capitalized for the term provided for in paragraph (4) of subdivision (b) at the capitalization rate determined in accordance with paragraph (3) of subdivision (b) . (e) Assessments under this section shall not exceed the factored - base year value established under Article XIIIA of the California Constitution. However, adjustments made in aggregate landing weights under this section are deemed to be a valid basis for adjusting the base year value to the extent of the percentage change in landed weights for purposes of Article XIIIA of the California Constitution. Pursuant to Section 65.1, adjustments in aggregate landing weights shall not be considered a change in ownership or a basis for applying a new term of possession in the airlines, preexisting real property interest. SEC. 2. This act shall become operative only if Assembly Bill 1807; becomes effective on or before January 1, 1999, and in that event shall become operative on the later of the effective date of this act and the effective date of Assembly Bill 1807. SEC. 3 . This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article Iv of the California Constitution and shall go into immediate effect. The facts constituting the necessity are: This measure is necessary to provide guidance and clarification that is essential to the fair and efficient taxation of airline industry property and possessory interests in publicly owned airports in the current year, and to clarify the status of prior-year property tax payments that have funded essential services provided by local governments and schools. �+ 7/2/98 10:051 ......... ......... ......... ..... ...1.11.1 1.11.1. . __ ........ .................__..... ......... ......_..... ......... ......... .......... ......... ......... ......... ......... .............................. AB 1807 Assembly Bill-CHAPTE,RED http.//www.leginfo.ca.gov/pub/hill. ab_1807_bill_980b3Q_chaptered.htm BILL NUMBER: AE 1807 CHAPTERED BILL TEXT CHAPTER 86 FILED WITH SECRETARY OF STATE JUNE 30, 1998 APPROVED BY GOVERNOR JUNE 30, 1998 PASSED THE SENATE JUNE 25, 1998 PASSED THE ASSEMBLY JUNE 25, 1998 AMENDED IN SENATE JUNE 23, 1998 AMENDED IN SENATE JUNE 11, 1998 AMENDED IN ASSEMBLY APRIL 30, 1998 INTRODUCED BY Assembly Member Takasugi FEBRUARY 10, 1998 An act to add Sections 401.15 and 5095.3 to the Revenue and Taxation Code, relating to taxation, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST AB 1807, Takasugi. Property taxation: airline property and possessory interests. Existing property tax law provides that all property is subject to taxation at its full value, unless that property is otherwise exempted from taxation in whole or in part pursuant to either state or federal law. This bill would, pursuant to legislative findings and declarations, require any of certain counties, if specified airlines execute a written settlement agreement or waiver, as provided, with that county, to issue specified total amounts of credits to those airlines against property taxes from the 1998-99 fiscal year to the 2002-03 fiscal year, inclusive. This bill would also provide, for fiscal years to the 1997-98 fiscal year, inclusive, for the 1993-99 fiscal year to the 2002-03 . fiscal year, inclusive, and for the 2003-04 fiscal year, that the assessed value of certificated aircraft shall be deemed to be the amount entered on the tax roll with respect to those aircraft if certain assessment procedures are followed. This bill would make legislative findings and declarations as to the necessity for a special statute. This bill would declare that it is to take effect immediately as an urgency statute, but would become operative only if AB 2318 takes effect on or before January 1, 1999. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. (a) The Legislature finds and declares all of the following: (1) Two of the most difficult and contentious property tax assessment issues in recent years have concerned the assessment of certificated aircraft and airline possessory interests, other than interests stated in a written agreement for terminal, cargo, hangar, automobile parking lots, storage and maintenance facilities and other buildings and the land thereunder leased in whole or in part by an airline. (2) These issues have given rise to litigation and appeals challenging assessments involving hundreds of millions of dollars of property tax revenues. (3) The uncertainty created by pending litigation and appeals over the assessment of airline property and possessory interests in publicly owned airports is disruptive to both airline industry tax planning and local government and school finance. (b) It is the intent of the Legislature in enacting this act to 1 of 6 7/2/98 10:06 E AB 19,07 Assembly Bill-CHAPTERED http://www.leginfo.ca.gov/pub/bill...ab_1807_bill_980630_chaptered.htin facilitate resolution of the disputes over the assessment of y nl certificated aircraft by codifying recommendations produced by a county and airline industry working group, that do all of the following: (1) Establish valuation methodology for certificated aircraft. (2) Clearly establish a presumption of correctness if county assessors follow the assessment methodology set out in this measure and in Assembly Bill 2318. (3) •Dispose of certain outstanding litigation and appeals over aircraft valuation. (4) Mitigate the financial impact of this statutory change on local governments and schools by establishing a method by which the issuance of any prior year refunds to litigating airlines would be treated as credits against future tax payments. SEC. 2. Section 401.15 is added to the Revenue and Taxation Code, to read: 401.15. (a) Notwithstanding any other provision of law, for any county that makes available the credits provided for in Section 5096.3, the full cash values of certificated aircraft for fiscal years to the 1997--98 fiscal year, inclusive, are presumed to be those values enrolled by the county assessor or, in the case of timely escape assessments upon certificated aircraft issued on or after - April 1, 1998, pursuant to Sections 531, 531.3, and 531.4, the values enrolled upon those escape assessments, provided the escape assessment is made in accordance with the methodology in subdivision (b) . For escape assessments for fiscal years to the 1997-98 fiscal year, inclusive, the assessor shall use the methodology and minimum and market values set by the California Assessors' Association for the applicable fiscal year in lieu of the methodology set forth in subparagraph (C) or (D) of paragraph (1) of subdivision (b) . The assessor is not required to revise or change existing enrolled assessments that are not subject to escape assessment to reflect the methodology in this section. Nothing in this section precludes audit adjustments and offsets as set forth in Section 469 or the correction of reporting errors raised by an airline. Nothing in this section affects any presumption of correctness concerning allocation of aircraft values. (b) (1) For the 1998-99 fiscal year to the 2002-03 fiscal year, inclusive, and including escape assessments levied on or after April 1, 1998, for any fiscal year to the 2002-03 fiscal year, inclusive, except as otherwise provided in subdivision (a) , certificated aircraft shall be presumed to be valued at full market value if all of the following conditions are met: (A) Except as provided in subparagraph (D) , value is derived using original cost. The original cost shall be the greater of the following: (i) Taxpayer's cost for that individual aircraft reported in accordance with generally accepted accounting principles, so long as that produces net acquisition cost, and to the extent not included in the taxpayer's cost, transportation costs and capitalized interest and the cost of any capital addition or modification made before a transaction described in clause (ii) . (ii) The cost established in a sale/leaseback or assignment of purchase rights transaction for that individual aircraft that transfers the benefits and burdens of ownership to the lessor for United States federal income tax purposes. if the original cost for leased aircraft cannot be determined from information reasonably available to the taxpayer, original cost may be determined by reference to the "average new prices" column of the Airliner Price Guide for that model, series, and year of manufacture of aircraft. if information is not available in the "average new prices" column for that model, series, and year, the original cost may be determined using the best indicator of original cost plus all conversion costs incurred for that aircraft. In the event of a merger, bankruptcy, or change in accounting methods by the reporting airline, there shall be a rebuttable presumption that the cost of the individual aircraft and the acquisition date reported by the acquired company if available, or the cost reported prior to the change in accounting method is the original cost and the applicable 2 of 6 7/2/98 10:06 A. ABI 1807 Assembly Bill-CH.APTERED http://www.leginfo.ca.gov/pub/bill. ab_1807_bill_980630_chaptered.htm acquisition date. (B) original cost, plus the cost of any capital additions or ` ' modifications not otherwise included in the original cost, shall be adjusted from the date of the acquisition of the aircraft to the lien date using the producer price index for aircraft and a 16-year straight-line percent good table starting from the delivery date of the aircraft to the current owner or, in the case of a sale/leaseback or assignment of purchase rights transaction, as described in this section, the current operator with a minimum combined factor of 25 percent, unless this adjustment kesults in & value less than the minimum value for that aircraft computed pursuant to subparagraph (C) , in which case the minimum value may be used. If original cost is determined by reference to the Airliner Price Guide "average new prices" column, the adjustments required by this paragraph shall be made by setting the acquisition date of the aircraft to be the date of the aircraft's manufacture. (C) For certificated aircraft of a model and series that has been in revenue service for eight or more years, the minimum value shall not exceed the average of the used aircraft prices shown in columns other than the "average new prices" column for used aircraft of the oldest aircraft for that model and series in the Airliner Price Guide most recently published as of the lien date. Minimum values shell not be utilized for certificated aircraft of a model and series that has been in revenue service for less than eight years. (D) For out-of-production aircraft that were recommended to be valued by a market approach for 1998 by the California Assessors' Association, assessments will be based at the lower of the following: (i) The values established by the Association for the 1998 lien date. (ii) The average of the used aircraft prices shown in the columns other than the "average new prices" column for used aircraft of the five oldest years for the aircraft model and series or that lesser time for which data is available in.the Airliner Price Guide. (2) Notwithstanding paragraph (1) , in computing assessed value, the assessor may allow for extraordinary obsolescence if supported by market evidence and the taxpayer may challenge the assessment for failure to do so. To constitute market evidence of extraordinary obsolescence and to permit an assessment appeal, the evidence must show that the functional and or economic obsolescence is in excess of 10 percent of the value for the aircraft model and series otherwise established pursuant to subparagraph (B) , (C) , or (D) of paragraph (1) . (3) For purposes of paragraph (1) , if the Airliner Price Guide ceases to be published or the format significantly changes, a guide or adjustment agreed to by the airlines and the taxing counties shall be substituted. (c) (1) For the 2003-04 fiscal year, certificated aircraft shall be presumed to be valued at full market value if all of the following conditions are met: (A) Except as provided in subparagraph (D) , value is derived using original cost. The original cost shall be the greater of the following: (i) Taxpayer's cost for that individual aircraft reported in accordance with generally accepted accounting principles, so long as that produces net acquisition cost, and to the extent not included in the taxpayer's cost, transportation costs and capitalized interest and the cost of any capital addition or modification made before a transaction described in clause (ii) . (ii) Taxpayer's cost as established pursuant to this subdivision plus one-half of the incremental difference between taxpayer's cost and the cost established in a sale/leaseback or assignment of purchase rights transaction for individual aircraft that transfers the benefits and burdens of ownership to the lessor for United States federal income tax purposes. If the original cost for leased aircraft cannot be determined from information reasonably available to the taxpayer, original cost may be determined by reference to the "average new prices" column of the Airliner Price Guide for that model, series, and year of manufacture 3 of 6 7/2/98 10:06 ....._... _........ ................. .. ........_. ..._..__. ....._..... ...._........................ _..._. _....._. ......... ...................... AB`1807 Assembly Bill-CHAPTERED http://www.leginfo.ca.gov/pub/biU...ab-I 807-bill-980630-Chaptered.html 6; C..' 4 of aircraft. if information is not available in the "average new prices', column for that model, series, and year, the original cost may be determined using the best indicator of original cost plus all conversion costs incurred for that aircraft. in the event of a merger, bankruptcy, or change in accounting methods by the reporting airline, there shall be a rebuttable presumption that the cost of the individual aircraft and the acquisition date reported by the acquired company if available, or the cost reported prior to the change in accounting method is the original cost and the applicable acquisition date. (B) original cost, plus the cost of any capital additions or modifications not otherwise included in original cost, shall be adjusted from the date of the acquisition of the aircraft to the lien date using the producer price index for aircraft and a 16-year straight-line percent good table starting from the delivery date of the aircraft to the current owner or, in the case of a sale/leaseback or assignment of. purchase rights transaction, as described in this section, the current operator with a minimum combined factor of 25 percent, unless this adjustment results in a value less than the minimum value for that aircraft computed pursuant to subparagraph (C) , in which case the minimum value may be used. If original cost is determined by reference to the Airliner Price Guide "average new prices" column, the adjustments required by this paragraph shall be made by setting the acquisition date of the aircraft to be the date of the aircraft's manufacture. (C) For certificated aircraft of a model and series that has been in revenue service for eight or more years, the minimum value shall not exceed the average of the used aircraft prices shown in columns other than the "average new prices" column for used aircraft of the oldest aircraft for that model and series in the Airliner Price Guide most recently published as of the lien date. Minimum values shall not be utilized for certificated aircraft of a model and series that has been in revenue service for less than eight years. (D) For out-of-production aircraft that were recommended to be valued by a market approach for 1998 by the California Assessors' Association their assessments shall be based at the lower of the following: (i) The values established by the Association for the 1998 lien date. (ii) The average of the used aircraft prices shown in the columns other than the "average new prices" column for used aircraft of the five oldest years for the aircraft model and series or that lesser time for which data is available in the Airliner Price Guide. (2) Notwithstanding paragraph (1) , in computing assessed value, the assessor may allow for extraordinary obsolescence if supported by market evidence and the taxpayer may challenge the assessment for failure to do so. To constitute market evidence of extraordinary obsolescence and to. permit an assessment appeal, the evidence must show that the functional and or economic obsolescence is in excess of 10 percent of the value for the aircraft model and series otherwise established pursuant to subparagraph (B) , (C) , or (D) of paragraph (1) (3) For purposes of paragraph (1) , if the Airliner Price Guide ceases to be published or the format significantly changes, a guide or adjustment agreed to by the airlines and the taxing counties shall be substituted. , (d) in order to calculate the values prescribed in subdivisions (b) and (c) , the taxpayer shall, to the extent that information is reasonably available to the taxpayer, furnish the county assessor with an annual property statement that includes the aircraft original costs as defined in subparagraph (A) of paragraph (1) of subdivision (b) or (c) . in the event an air carrier that has this information reasonably available to it fails to report original cost and additions, as required by Revenue and Taxation Code Sections 441 and 442, an assessor may in that case make an appropriate assessment pursuant to Revenue and Taxation Code Section 5011. SEC. 3 . Section 5096.3 is added to the Revenue and Taxation Code, to read: 5096.3 . (a) To dispose of certain lawsuits and assessment appeals rir A 7/2198 10:06 A . .............................................. - ......... ......... _ .................................. ............................................................. AB 1 X47 Assembly Bill-CHAPT'ERE1D http://wwwleginfo.r-a.gov/pub/bill...ab-1807-bill-980630 chaptered.htn that have been filed, and to preclude the filing of other claims relating to (1) the assessment, equalization, and assessability of �� certain possessory interests in publicly owned airports and (2) aircraft valuation and equalization by Alaska Airlines, Inc. , American Airlines, Inc. , Continental Airlines, Inc. , Delta Air Lines, Inc. , Federal Express Corporation, Northwest Airlines, Inc. , Trans World Airlines, Inc. , United Airlines, Inc. , United Parcel Service, U.S. Airways; Inc. , Wings West; Airlines, Southwest Airlines, America West Airlines, in their own right or as successors in interest, counties shall provide future tax credits in the following amounts: Alameda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,455,110 Contra Costa . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 EIDorado . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 Fresno . . . . . . . . . . . . . 264,630 Humboldt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Soo Kern . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,540 Los Angeles . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,335,720 Monterey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148,550 Orange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,916,995 Riverside . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 435,780 Sacramento . . . . . . . . . . . . . . . . . . . . . . _ _._ 1,070,185 San Bernardino . . . . . . . . . . . . . . . . . . . . . . . . 1,991,405 San Diego . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,262,610 San Joaquin . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,004 San Mateo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,544,005 Santa Barbara . . . . . . . . . . . . . . . . . . . . . . . . . 167,880 Santa Clara . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,369,080 Solano . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 (b) The credits identified in subdivision (a) will be allowed in equal amounts for the 1996-99 fiscal year to the 2002-03 fiscal year, inclusive, and may be credited by the counties against one or more tax bills of the airline entitled to the credit. The credits identified in subdivision (a) shall be allocated among the airlines in accordance with a schedule to be established and agreed upon by the airlines identified in subdivision (a) . The airlines shall, through a designated representative, provide to each county listed _in subdivision (a) , before the effective date of this measure, the detail of the allocation of the credits among the various airlines. In no instance shall a county be required to provide a credit to any airline in any year that exceeds the total tax due from that airline to that county for that year. The airlines, designated representative may submit revised instructions not later than June 30 preceding the beginning of the fiscal year in which the credits are to be adjusted, but in no event may the credit for any county in any year be increased beyond the levels set out in subdivisions (a) and (b) for any fiscal year. (c) In addition to the credits provided in subdivision (a) , each county shall allow a credit against any escape assessment upon certificated aircraft levied on or after April 1, 1998, under subdivision (b) of Section 401.1S for tax years up to and including the 1997-96 fiscal year to the extent the escape assessment is based upon the cost established in sale/leaseback or assignment of purchase rights transaction. The amount of the credit shall be equal to the tax on one-half of the value increase, plus interest and penalties attributable to use of the sale/leaseback or assignment of purchase rights transaction amount to determine value pursuant to subdivision (b) of Section 401.15. (d) Upon enrollment of any escape assessment contemplated in subdivision (a) of Section 401.15, the county assessor shall provide the county auditor with the information necessary to calculate the credit required in subdivision (c) of this section. (e) No county shall be required to provide the credits specified in subdivisions (a) and (b) unless all airlines named in subdivision (a) who also have assessments in that county have entered into a settlement agreement or executed a waiver with that county. No 5 of 6 7/2/98 10:06 1 Ata 1807 Aoembly Bill-CHAPT'ERED http://www.leginfo.ca.gov/pub/bill...ab_1807_bill_980630-chaptered h county shall be required to provide the credits specified in subdivision (c) unless the airline otherwise entitled to that credit has entered into a settlement agreement or executed a waiver with that county. The settlement agreement or waiver shall include a waiver of all statutory and constitutional rights with respect to pending and future challenges to valuation and equalization of certificated aircraft through the 2003-04 fiscal year, provided that the assessments are established in conformance with Section 401.15, and all statutory and constitutional rights to challenge valuation, equalization and assessability of possessory interests in publicly owned airports (other than interests stated in a written agreement for terminal, cargo, hangar, automobile parking lots, storage and maintenance facilities, and other buildings and the land thereunder leased in whole or in part by an airline) , provided that the valuations made for the 1998-99 fiscal year and thereafter are established in conformance with Section 107.9. At the discretion of a county, the airlines may be required to file waivers in that county in lieu of entering into a settlement agreement. Upon the execution of a settlement agreement or waiver by the airlines named in subdivision (a) that also have assessments in a county, that county listed in subdivision (a) shall be required to provide the credits set out in this section. Nothing in this section precludes claims concerning allocation of aircraft values. (f) With respect to America West Airlines only, the waiver or settlement agreement required by subdivision (e) may exclude the claims that America West Airlines has already raised in the adversary proceedings in the bankruptcy proceeding entitled "In Re America West Airlines, Inc. , Case No. 91-07505 PHX-RGM" against the Counties of Orange, San Bernardino, Sacramento, San Mateo, Alameda, and San Diego, provided that the settlement agreements or waivers under subdivision (e) provide that the resolution of any of America West's adversary claims will have no legal effect for any tax year not at issue in those adversary proceedings. This section and sections 107.9 and 401.15 do not abrogate, rescind, preclude, or otherwise affect any separate settlement agreement entered into prior to the effective date of this section between a county and an airline concerning the subject matter of this section and sections 107.9 and 401.15 with respect to those tax years expressly settled by any agreement as so described. However, no settlement agreement as so described may be used to challenge the assessment and valuation provided by these sections for any tax year after the 1997-98 fiscal year or any tax year not expressly settled by that agreement. SEC. 4. The Legislature finds and declares that a special law is necessary and that a general law cannot be made applicable within the meaning of section 16 of Article IV of the California Constitution because of the unique legal, fiscal, and administrative issues faced by the counties specified in this act with respect to unresolved disputes in those counties concerning the proper taxation of certificated aircraft. SEC. 5. This act shall become operative only if Assembly Bill 2318 is enacted and becomes effective on or before January 1, 1999, and in that event shall become operative on the later of the effective date of this act and the effective state of Assembly Bill 233.8. SEC. 6. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity area This measure is necessary to provide guidance and clarification that is essential to the fair and efficient taxation of airline industry property and possessory interests in publicly owned airports in the current year, and to clarify the status of prior-year property tax payments that have funded essential services provided by local governments and schools. 6 of 6 7/2/98 10:06 AP G. 2� ......... ......... ......... . . . .................._..... ......... ._....... ......... ......... ......_.. .........._._...............................................................__. .............................................................. lie V (�f! 4 Y A �QQ� Qb m h3 �! � m i b .a •wi 10 "{ � � b F � � a a Ch i fJi � N ............................... ...... ............................... . ...................... 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