California Court of Appeals Addresses Municipality Competition Ban.

In a recent decision by the Second Appellate District California Court of Appeals, it was found that an agreement between an office products retailer and a city was in violation of the municipality competition legislation. In an effort to negotiate financial incentives for a proposed expansion, the office products retailer contacted the City of La Mirada in regards to its interest in relocating to the city, the retailer also notified its current location, Carson. Both cities’ redevelopment agencies competed for the business expansion to occur in their areas due to the sales tax revenue that would be generated. La Mirada offered the most beneficial package to the retailer and as such the retailer decided to expand in La Mirada. However, since the retailer was classified as a “big box retailer” La Mirada was in violation of the legislation associated with the municipality competition ban. Such legislation prohibits a redevelopment agency from providing financial assistance to such “big box retailers” who are defined as such based on their physical size and ability to generate retail sales taxes under the Revenue and Taxation Code. Since the case was previously tried before a trial court and dismissed, the Court of Appeals overturned the decision in denying Carson’s countersuit writ petition, which included such mandates as sales tax revenue sharing provisions and dismissal of the financial incentive agreement. Carson v. La Mirada, California Court of Appeals, Second Appellate District, No. B168849, December 30, 2004)

Posted on January 15, 2005