City of San Jose v. Howard Jarvis Taxpayers Assn.

IN THE SUPREME COURT OF
CALIFORNIA
CITY OF SAN JOSÉ,
Plaintiff and Respondent,
v.
HOWARD JARVIS TAXPAYERS ASSOCIATION et al.,
Defendants and Appellants.
S285426
Sixth Appellate District
H050889
Santa Clara County Superior Court
21CV391517
December 18, 2025
Justice Evans authored the opinion of the Court, in which
Chief Justice Guerrero and Justices Corrigan, Liu, Kruger,
Groban, and Jenkins* concurred.
* Retired Associate Justice of the Supreme Court, assigned
by the Chief Justice pursuant to article VI, section 6 of the
California Constitution.

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CITY OF SAN JOSÉ v. HOWARD JARVIS TAXPAYERS
ASSOCIATION
S285426
Opinion of the Court by Evans, J.
The local debt limitation in the California Constitution
prohibits cities and counties from incurring any indebtedness or
liability that exceeds their income and revenue for that year,
unless the indebtedness or liability has first been approved by
two-thirds of the voters. (Cal. Const., art. XVI, § 18, subd. (a).)1
The debt limitation, however, does not apply to indebtedness or
liability a local government may incur to fulfill an obligation
imposed by law. (See Rider v. City of San Diego (1998) 18
Cal.4th 1035, 1046 (Rider).)
In this case, the City of San José (City) seeks to finance
the unfunded liability in its retirement plans by issuing pension
obligation bonds. It instituted this action under Code of Civil
Procedure section 860 et seq. to obtain a declaration that the
proposed bonds were valid and did not violate, in particular, the
local debt limitation. Defendants Howard Jarvis Taxpayers
Association, Citizens for Fiscal Responsibility, and Pat Waite
(collectively, HJTA) contend that the pension obligation bonds
require voter approval because they will create a municipal debt
in excess of the current year’s income.
1 Unspecified references to “article” are to the California
Constitution.

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Opinion of the Court by Evans, J.
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The trial court entered judgment for the City, finding that
the proposed bonds fall within the obligation-imposed-by-law
exception to the local debt limitation. The Court of Appeal
affirmed but framed its conclusion differently: it determined
that the proposed bonds would not cause the City to incur any
new indebtedness or liability because “the debt the [C]ity seeks
to refund already exists.” (City of San José v. Howard Jarvis
Taxpayers Assn. (2024) 101 Cal.App.5th 777, 806 (City of San
José).) We affirm. Even assuming the proposed bonds would
incur new debt, the City has an obligation imposed by law to
address the existing shortfall in its retirement plans. Although
HJTA is correct that no law requires the City to address this
shortfall by issuing bonds for the entire sum, the local debt
limitation does not constrain how local governments choose to
manage obligations that are imposed by law.
I. BACKGROUND
In 1965, the City’s voters enacted a charter that, among
other things, required the city council to “provide, by ordinance
or ordinances, for the creation, establishment and maintenance
of a retirement plan or plans for all officers and employees of the
City” and to fund these plans in an actuarially sound manner.2
(San José City Charter, art. XV, § 1500 [“Duty to Provide
Retirement System”]; see id., §§ 1504, subd. (c), 1508-A, subd.
(a).) By ordinance, both the City and its employees contribute
to the normal costs of the employee retirement plans. (See, e.g.,
2 The California Constitution provides that, “For its own
government, a county or city may adopt a charter by majority
vote of its electors voting on the question. . . . A charter may be
amended, revised, or repealed in the same manner.” (Cal.
Const., art. IX, § 3, subd. (a).)

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San José Mun. Code, tit. 3, pt. 2, ch. 3.28, § 3.28.200; id., ch.
3.36, pt. 10, § 3.36.1520.) The normal cost is the present value
of the future retirement benefits earned during the year by
current employees. The level of contributions is fixed by the
board of administration (board or retirement board) for each
retirement plan based on mortality, service, and other tables;
actuarially assumed annual rate of return; and other actuarial
assumptions as the board may deem reasonably necessary to
provide the benefits under the retirement plans and to make the
system “at all times actuarially sound.” (San José Mun. Code,
tit. 3, pt. 2, ch. 328, § 3.28.200, subd. A.; id., ch. 3.36, pt. 10,
§ 3.36.1520, subd. A.) The contributions are paid as a
percentage of payroll, as determined by the retirement plan’s
actuary.
As in all human endeavors, though, assumptions can be
superseded by actual events. Inflation may be higher or lower
than forecast. The rate of return on the retirement plan’s assets
may exceed or fall short of the projection. Employee tenure may
be longer or shorter than historical trends. And life expectancy,
both for the employees and for their beneficiaries, may not move
at a constant rate. When these or other factors result in a
shortfall between the actuarial value of the retirement plan’s
assets and the present value of the future benefits already
earned by current employees and retirees as of the valuation
date, an unfunded actuarial liability (hereafter sometimes UAL)
arises. The board calculates the unfunded actuarial liability
each year. (City of San José, supra, 101 Cal.App.5th at p. 789.)
If the City chooses to pay down the unfunded liability over time,
the board creates an amortization schedule. The City makes a
lump-sum annual payment towards the unfunded liability at

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Opinion of the Court by Evans, J.
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the beginning of the fiscal year, which offers a discount as
compared to monthly UAL payments.
Despite the discount afforded by these annual
prepayments, the City has expressed concern about the growing
impact of its unfunded actuarial liability in future budget years.
A presentation prepared by City staff in September 2021
cautioned that the projected increase in annual UAL payments
through 2029 threatened to “erod[e] capacity for other City
programs and services.” If, on the other hand, the City were
able to refinance the unfunded liability at a lower rate than the
discount rate3 being charged by the board for the amortization
of the unfunded actuarial liability (which, at the time this
litigation began, was 6.625 percent), the staff presentation
forecast that the savings could be used to accelerate the
amortization of the unfunded actuarial liability and ease the
pressure on current and future budgets.
In October 2021, after much deliberation, the City decided
to refinance its unfunded actuarial liability by issuing pension
obligation bonds in an amount no greater than the lesser of (a)
$3,483,001,000 (which represented the unfunded actuarial
liability in the City’s retirement plans as most recently
calculated by the actuary) or (b) “the sum of the City’s Unfunded
Liability and Current Obligation as calculated by the actuary.”
The city council’s resolution conditioned issuance of the bonds
on “savings to the City in accordance with the City’s then
current Debt Management Policy” and a maturity date no later
“than the last date through which the Retirement Boards
3 The discount rate is the current expected annual rate of
return on investments, as determined by the retirement board.

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determined for the amortization of the Unfunded Liability of the
City, in accordance with current procedures.”
The City instituted the instant litigation under Code of
Civil Procedure section 860 et seq. seeking judicial validation of
its authority to issue the pension obligation bonds. HJTA filed
an answer, seeking a judgment that the city council’s resolution
was invalid. The answer contended that the City could issue
bonds to refinance its unfunded actuarial liability only if the
bonds were first approved by two-thirds of the City’s voters. It
relied on the local debt limitation in article XVI, section 18,
subdivision (a), which requires a vote of the people before a city
or other municipal entity may incur “any indebtedness or
liability in any manner or for any purpose exceeding in any year
the income and revenue provided for such year.”
Following a stipulation to a bench trial on the papers, the
Santa Clara County Superior Court entered judgment for the
City. The court noted that the City “is required under the
Charter to establish, fund and maintain actuarially sound
Retirement Plans” and further found that “[i]n order to
maintain Retirement Plans that are actuarially sound, the City
is required to pay the Unfunded Liability.” The court concluded
that in light of those circumstances, the City’s unfunded liability
qualified as an obligation imposed by law, which is a recognized
exception to the constitutional debt limit provision.
The Court of Appeal likewise found the local debt
limitation did not apply, but relied on different reasoning. (City
of San José, supra, 101 Cal.App.5th 777.) The court held that
the City’s actions “do not trigger the constitutional debt
limitation” because “the debt the [C]ity seeks to refund already
exists, in the form of the unfunded liability.” (Id. at pp. 788,

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806.) The court therefore found it unnecessary to consider the
applicability of any exceptions to the debt limit provision. (Id.
at p. 788.)
We granted HJTA’s petition for review.
II. DISCUSSION
The local debt limitation, which has been part of the
California Constitution in some form since 1879, currently
provides: “No county, city, town, township, board of education,
or school district, shall incur any indebtedness or liability in any
manner or for any purpose exceeding in any year the income and
revenue provided for such year, without the assent of two-thirds
of the voters of the public entity voting at an election to be held
for that purpose . . . .” (Cal. Const., art. XVI, § 18, subd. (a).)
The provision represents a directive for the local government “to
live within its means.” (Gassman v. Governing Board (1976) 18
Cal.3d 137, 148.) The framers intended, “[i]n other words, that
each year’s income and revenue must pay each year’s
indebtedness and liability, and that no indebtedness or liability
incurred in any one year shall be paid out of the income or
revenue of any future year.” (San Francisco Gas Co. v.
Brickwedel (1882) 62 Cal. 641, 642.) This “establish[ed] the ‘pay
as you go’ principle as a cardinal rule of municipal finance.”
(Westbrook v. Mihaly (1970) 2 Cal.3d 765, 776, vacated on other
grounds in Mihaly v. Westbrook (1971) 403 U.S. 915.)
“[A]lmost as old” as the local debt limitation itself,
however, are “[c]ertain exceptions” to the debt limitation.
(Rider, supra, 18 Cal.4th at p. 1046.) We have long understood,
in particular, that “[a]n obligation imposed by law upon a city or
county is not an indebtedness or liability within the meaning of
the debt limitation provision.” (County of Los Angeles v. Byram

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(1951) 36 Cal.2d 694, 698 (Byram).) Rather, the local debt
limitation is “clearly . . . confine[d] . . . to those forms of
indebtedness and liability which may have been created by the
voluntary action of the officials in charge of the affairs of such
city.” (Long Beach v. Lisenby (1919) 180 Cal. 52, 57 (Lisenby).)4
In Lewis v. Widber (1893) 99 Cal. 412, for example, we held
that the City and County of San Francisco’s chief clerk’s salary
for a prior fiscal year could be paid out of the revenues of the
current fiscal year, notwithstanding the local debt limitation.
(Id. at p. 415.) That provision, we reasoned, applied only to
indebtedness or liability which the municipality “has discretion
to incur or not to incur” (id. at p. 413); consequently, it could not
apply to the chief clerk’s salary, “whose office has been created
and salary fixed by [state] law, either statutory or
constitutional.” (Id. at p. 415.) Similarly, in Compton
Community College etc. Teachers v. Compton Community
College Dist. (1985) 165 Cal.App.3d 82 (Compton Community
College), the Court of Appeal concluded that community college
4 In addition to the exception for obligations imposed by law,
we have also recognized that “contingent obligations” do not
implicate the state or local debt limitations because a “sum
payable upon a contingency is not a debt, nor does it become a
debt until the contingency happens.” (Doland v. Clark (1904)
143 Cal. 176, 181 [citing People v. Arguello (1869) 37 Cal. 524,
525]; American Co. v. City of Lakeport (1934) 220 Cal. 548, 557
[applying both the “contingent obligation” and the “obligation
imposed by law” exception to municipal bonds].) Because the
parties do not appear to have relied on the contingent-obligation
exception in this court or the courts below, we do not address it
here. Our focus on the obligation-imposed-by-law exception is
not meant to imply that other exceptions may not be relevant to
future cases.

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teachers whose salaries were unilaterally reduced during a
contract year were entitled to be made whole in subsequent
fiscal years, notwithstanding the local debt limitation. (Id. at p.
84.) State law required the college district to employ the
qualified instructors “needed to provide education to its
citizens”; “to set salary schedules after engaging in good faith
bargaining about ‘wages, hours of employment and other terms
and conditions of employment’ ”; and “not to reduce teacher
salaries during a contract year.” (Id. at pp. 93, 92, 95.) The
backpay owed to the teachers therefore was “not an obligation
voluntarily assumed by local government; it is a duty imposed
by law. As such, the repayments are not subject to the
constitutional debt limitation.” (Id. at p. 96; see id. at pp. 86–87
[backpay was “not a debt voluntarily incurred by the school
district but one ‘imposed by law’ ”].)
And in Byram, supra, 36 Cal.2d 694, we held that the costs
associated with the construction of a court building in Los
Angeles fell within the obligation-imposed-by-law exception to
the local debt limitation. The county board of supervisors was
required by state law “ ‘to provide “suitable quarters” for
superior and municipal courts,’ ” leaving it to counties “ ‘to
determine, in each case, what is required to constitute “suitable
quarters.” ’ ” (Id. at p. 699.)
The City argues that the exception for obligations imposed
by law applies here because the City was obligated by law to
fund its employee pension plans in an actuarially sound
manner. It points to the City’s charter, in which the voters
required the City to create, establish, and maintain a retirement
plan for all officers and employees. (San José City Charter, art.
XV, § 1500; see Cal. Const., art. XI, § 3, subd. (a) [“The provisions
of a charter are the law of the State and have the force and effect

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of legislative enactments”].) Under state law, “[a]ny pension or
retirement system adopted shall be on a sound actuarial basis”
(Gov. Code, § 45342), and contributions by the city and its
employee members must be calculated so as to “accumulate at
retirement a fund sufficient to carry out the promise to pay
benefits . . . , without further contributions from any source”
(id., § 45343). (See Costa Mesa v. McKenzie (1973) 30
Cal.App.3d 763, 773 [“a municipal retirement plan . . . must be
on a sound actuarial basis”].) In the City’s view, it has a legal
obligation to address the shortfall between the actuarial value
of the retirement plan’s current assets and the present value of
the future benefits already earned by current employees and
retirees. That it may have options in how that shortfall should
be addressed — e.g., continue to amortize it over the specified
period by financing it at the retirement system’s discount rate
or, alternatively, issue a pension obligation bond or bonds set at
an interest rate below the discount rate — does not alter the fact
it has an obligation imposed by law to deal with the shortfall.
HJTA concedes that the City is required “to make up any
deficiencies that have developed in the [retirement] funds (i.e.,
unfunded liabilities).” It argues nonetheless that this mandate
does not qualify as an obligation imposed by law within the
meaning of the local debt limitation because the City’s legal
obligation to fund its retirement system was a product of “its
voluntary choice to offer pensions.” For this proposition, HJTA
relies heavily on State ex rel. Pension Obligation Bond Com. v.
All Persons Interested etc. (2007) 152 Cal.App.4th 1386 (Pension
Obligation Bond), which construed the debt limitation provision

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applicable to the Legislature in article XVI, section 1.5 In
Pension Obligation Bond, the State of California, through its
Pension Obligation Bond Committee, brought a validation
action seeking a declaration of the legality of the committee’s
resolution to issue bonds to fund a portion of the State’s
employer contributions to the Public Employees Retirement
System (PERS). (Pension Obligation Bond, supra, 152
Cal.App.4th at p. 1393.) (The committee had been established
by the Legislature for the purpose of issuing and selling these
bonds. (Ibid.)) The trial court ruled that the proposed bonds
violated the state debt limit provision, and the Court of Appeal
affirmed, reasoning that “the State’s obligation to fund PERS is
one the Legislature voluntarily imposed on itself.” (Id. at pp.
1407–1408.)
HJTA reads too much into Pension Obligation Bond. The
court in that case did not find it fatal that the Legislature had
voluntarily created a pension system. What the Pension
Obligation Bond court found determinative was instead the fact
that nothing in the California Constitution created an obligation
to fund retirement benefits “in accordance with the [retirement]
5 That provision reads, in pertinent part: “The Legislature
shall not, in any manner create any debt or debts, liability or
liabilities, which shall, singly or in the aggregate with any
previous debts or liabilities, exceed the sum of three hundred
thousand dollars ($300,000) . . . unless the same shall be
authorized by law for some single object or work to be distinctly
specified therein . . . ; but no such law shall take effect unless it
has been passed by a two-thirds vote of all the members elected
to each house of the Legislature and until, at a general election
or at a direct primary, it shall have been submitted to the people
and shall have received a majority of all the votes cast for and
against it at such election . . . .” (Cal. Const., art. XVI, § 1.)

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board’s calculations.” (Pension Obligation Bond, supra, 152
Cal.App.4th at p. 1405.) That obligation, the court explained,
derived from a statute. (Ibid., citing Gov. Code, § 20790 et seq.)
And because the obligation to pay the amount set by the
retirement board was a statutory obligation, the obligation on
which the State relied was “essentially an obligation imposed by
the Legislature on itself.” (Pension Obligation Bond, at p. 1405.)
The same cannot be said about the significance of state
law on the City’s obligations, however. The City has no ability
to avoid or amend its duty under state law (see Gov. Code,
§§ 45342, 45343), echoed by its own voter-enacted charter (see
San José City Charter, art. XV, §§ 1500, 1504, subd. (c), 1508-A,
subd. (a)), to satisfy the financial obligations calculated by its
retirement boards. (See Pension Obligation Bond, supra, 152
Cal.App.4th at p. 1399.) Because the City’s obligation to fund
its pension in an actuarially sound manner was imposed by state
law, the council’s efforts to grapple with that obligation do not
qualify as voluntary for purposes of the local debt limitation.
HJTA’s reliance on Arthur v. City of Petaluma (1917) 175
Cal. 216 is likewise misplaced. There, the City of Petaluma’s
trustees arranged for the printing in the daily newspaper of the
charter they planned to propose to the voters, as required by
state law, but lacked sufficient funds to pay the printer in the
current fiscal year. (Id. at pp. 217–218, 225.) We held that any
payment to the printer would be subject to the requirements set
forth in the local debt limitation, in that the “indebtedness” was
“the immediate result” of a contract voluntarily entered into by
the municipality as a precondition to submitting a charter to the
voters for their consideration. (Id. at p. 225.) The obligation
here, by contrast, is not a voluntary one, but rather a mandate
imposed by state law and the City’s voter-enacted charter to

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fund the City’s pension in an actuarially sound manner. (See
Gov. Code, §§ 45342, 45343; San José City Charter, art. XV,
§§ 1500, 1504, subd. (c), 1508-A, subd. (a).)
HJTA argues that even if the City’s duty to maintain an
actuarially sound retirement system is involuntary, the pension
obligation bonds fall outside the obligation-imposed-by-law
exception because the City has no “specific” duty (Byram, supra,
36 Cal.2d at p. 699) to prepay its unfunded liability through
issuance of a bond. In HJTA’s view, the pension obligation
bonds must be approved by the voters because the charter did
not “specifically impose prepayment of any year’s unfunded
liability projection,” nor did any statute specifically “require[]
that cities raise all of that money immediately by issuing bonds.”
The City could, HJTA contends, instead amortize the unfunded
portion over the relevant period (as it has been doing) and pay
down that amortized portion of the UAL out of available
revenues each year. While the City is of course free to continue
on its current path, this misconceives the nature of the inquiry
under the local debt limitation provision. The City’s burden is
to demonstrate that the unfunded actuarial liability is an
obligation imposed by law — not that the particular method it
has chosen to fulfill its obligation is mandated by law.
Consider Byram, supra, 36 Cal.2d 694, where we reviewed
Los Angeles’s expenditure of funds to construct a courthouse.
We held that the county’s legal duty to provide “adequate
quarters” for its courts was sufficient to avoid the local debt
limitation where the existing facilities were “not adequate, and
the board of supervisors has determined that the proposed
construction is necessary.” (Id. at pp. 699, 700.) The fact that
the county “had a great deal of discretion in deciding what kind
of courthouse to supply and how much to invest in it” did not

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undermine its status as an obligation imposed by law. (Compton
Community College, supra, 165 Cal.App.3d at p. 91, citing
Byram, at p. 700; see Pension Obligation Bond, supra, 152
Cal.App.4th at p. 1399.) “The nature and cost of these buildings
were issues within the discretion of local government.”
(Compton Community College, at p. 91.)
Similarly, the college district in Compton Community
College, which had wrongfully reduced teachers’ salaries, sought
to invoke the local debt limitation on the ground that it “had no
specific duty to arrive at any particular salary schedule during
collective bargaining negotiations.” (Compton Community
College, supra, 165 Cal.App.3d at p. 93.) Indeed, the district
“had discretion to negotiate whatever compensation levels it
wanted to with the individuals hired to discharge the mandated
function.” (Id. at p. 94.) The court found nonetheless that the
teachers’ claim for the portion of their salary that had been
withheld in the prior fiscal year was not subject to the local debt
limitation. The obligation imposed by law was the “duty to
restore the illegal cuts.” (Id. at p. 96.) There is no requirement
that the law additionally “set the exact amount of that
expenditure.” (Id. at p. 93; see also Wright v. Compton Unified
Sch. Dist. (1975) 46 Cal.App.3d 177, 183.)
Likewise, here, the City has a duty to maintain its
retirement system and to fund it in an actuarially sound
manner. The unfunded actuarial liability therefore represents
an obligation imposed by law, one the City is currently
addressing by making amortized payments using the current
discount rate. Whether to refinance that obligation by issuing
pension obligation bonds at what the City hopes will be a lower
interest rate, in an effort to reduce its total payments, is a
matter generally entrusted to its discretion. (See generally

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Crowley v. Board of Supervisors (1948) 88 Cal.App.2d 988, 999–
1000 (Crowley) [“ultimately the [actuarial] deficit must be borne
by the county, and whether it chooses to do so now or at some
future time is a matter within the discretion of the board of
supervisors with which the court may not interfere, since in
either event the purpose of the retirement law would be carried
out”].)
HJTA objects that the proposed pension obligation bonds
do not fall within the City’s discretion in this instance because
it is the retirement board, not the city council, which has the
fiduciary responsibility under the state Constitution for the
retirement system’s assets and administration. It cites article
XVI, section 17, subdivision (a), which vests the retirement
board of a public pension or retirement system with “the sole
and exclusive fiduciary responsibility over the assets of the
public pension or retirement system” as well as the “sole and
exclusive responsibility to administer the system in a manner
that will assure prompt delivery of benefits and related services
to the participants and their beneficiaries.” HJTA contends that
because the Constitution assigns these roles exclusively to the
retirement board, “the City Council cannot decide that
additional assets must be supplied in the current year, nor can
it perform any ‘actuarial services in order to assure the
competency of the assets.’ ” (Quoting Cal. Const., art. XVI, § 17,
subd. (e).)
We need not decide whether the city council has such
powers because we find that the council did no more than rely
on actuarial services and calculations performed by the
retirement board. The City’s proposal caps the bond’s aggregate
principal amount at $3,483,001,000, which reflects the
retirement board’s calculation of the unfunded liability in the

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City’s retirement plans as of June 30, 2020. (See City of San
José, Off. of Retirement Services, Annual Comprehensive
Financial Report 2020–2021 San José Police & Fire Dept.
Retirement Plan (Nov. 2021) p. 145; City of San José, Off. of
Retirement Services, Annual Comprehensive Financial Report
2020–2021 San José Federated City Employees’ Retirement
System (Nov. 2021) p. 140.) In other words, as amici curiae the
League of California Cities et al. point out, the City did not
calculate the unfunded liability, perform actuarial services, or
independently decide the pension fund required additional
assets: “Actuaries conducted the relevant evaluations; the
retirement board managed the assets of the fund; and both
informed the City that the fund was woefully underfunded.”
The City “then carried out its obligation to maintain . . .
actuarially sound pension plans.” HJTA cites nothing to
indicate the local debt limitation provision constrains the City’s
discretion in managing this obligation — i.e., whether to
amortize the unfunded actuarial liability over a period of years
(as the City has been doing), pay it as a lump sum (as the City
proposes to do in this validation action), attempt to pay it out of
current revenues at the time pension benefits must be paid, or
some combination of these. We conclude the choice among these
options is not affected by the local debt limitation provision.
(See Crowley, supra, 88 Cal.App.2d at pp. 999–1000.)
Finally, HJTA urges us to follow County of Orange v.
Association of Orange County Deputy Sheriffs (2011) 192
Cal.App.4th 21 (County of Orange). But County of Orange
involved a question distinct from the one before us. In County
of Orange, the court was asked to decide whether the unfunded
actuarial liability caused by an increase in pension benefits —
not the local government’s attempt to ameliorate it — violated

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the local debt limitation. (Id. at p. 31.) The court held that the
unfunded liability did not constitute “indebtedness or liability”
within the meaning of article XVI, section 18, subdivision (a)
because it was not an amount “for which the County is
immediately liable.” (County of Orange, at p. 38.) County of
Orange did not consider whether the exception for obligations
imposed by law was applicable. Indeed, it did not even mention
the exception.
The Court of Appeal below distinguished County of Orange
based on its “materially different” facts, noting that in the
instant case, “the city does not seek to increase pension benefits
but instead to issue bonds to provide an income stream for a
liability it has already incurred.” (City of San José, supra, 101
Cal.App.5th at p. 798.) Further, while County of Orange found
persuasive that “[then-]existing accounting standards” did not
require the unfunded liability be reported on the balance sheet
as a liability (County of Orange, supra, 192 Cal.App.4th at p.
39), the Court of Appeal noted that those standards had
undergone a significant change since County of Orange had been
decided: “The current version of the [accounting] standards
requires that the unfunded liability be reported as a current
deficit on the city’s balance sheet.” (City of San José, supra, 101
Cal.App.5th at p. 798, fn. 11.) The court then concluded that
“County of Orange does not control here.” (Id. at p. 798.)
We need not decide whether the Court of Appeal below
correctly distinguished County of Orange. We decide only that
the City’s unfunded liability represents an obligation imposed
by law, and that the local debt limitation does not constrain the
City’s discretion in how to address that obligation.

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CITY OF SAN JOSÉ v. HOWARD JARVIS TAXPAYERS ASSOCIATION
Opinion of the Court by Evans, J.
17
III. DISPOSITION
We hold that the proposed pension obligation bonds, even
if deemed to create a new debt, fall within the exception to the
local debt limitation for obligations imposed by law. The
judgment of the Court of Appeal is affirmed.
EVANS, J.
We Concur:
GUERRERO, C. J.
CORRIGAN, J.
LIU, J.
KRUGER, J.
GROBAN, J.
JENKINS, J.*
* Retired Associate Justice of the Supreme Court, assigned
by the Chief Justice pursuant to article VI, section 6 of the
California Constitution.

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See next page for addresses and telephone numbers for counsel who
argued in Supreme Court.
Name of Opinion City of San José v. Howard Jarvis Taxpayers
Association
__________________________________________________________
Procedural Posture (see XX below)
Original Appeal
Original Proceeding
Review Granted (published) XX 101 Cal.App.5th 777
Review Granted (unpublished)
Rehearing Granted
__________________________________________________________
Opinion No. S285426
Date Filed: December 18, 2025
__________________________________________________________
Court: Superior
County: Santa Clara
Judge: Sunil R. Kulkarni
__________________________________________________________
Counsel:
Jonathan M. Coupal, Timothy A. Bittle, Laura E. Dougherty and Amy
C. Sparrow for Defendants and Appellants.
Stradling Yocca Carlson & Rauth, Allison E. Burns, Brian P. Forbath
and Gregory J. Maestri for Plaintiff and Respondent.
Orrick, Herrington & Sutcliffe, Devin Brennan, Emily Minton Mattson
and Kristopher R. Wood for the League of California Cities and the
California State Association of Counties as Amici Curiae on behalf of
Plaintiff and Respondent.

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Counsel who argued in Supreme Court (not intended for
publication with opinion):
Amy C. Sparrow
Howard Jarvis Taxpayers Foundation
1201 K Street, Suite 1030
Sacramento, CA 95814
(916) 444-9950
Allison E. Burns
Stradling Yocca Carlson & Rauth LLP
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660
(949) 725-4187

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