An appellate court has rejected an appeal by a Sunset Beach residents' group of the coastal area's annexation by Huntington Beach, shooting down the group's argument that Sunset residents should not be forced to pay the same taxes as the rest of the city.

The ruling, signed by three judges from the 4th District Court of Appeal, was issued Friday.

The Citizen's Assn. of Sunset Beach filed a lawsuit in December 2010 demanding that the city and county negate the annexation or hold it until Sunset residents could vote on an added utility tax and retirement property tax. Orange County Superior Court Judge Frederick P. Horn ruled against the lawsuit in August, and Sunset has been part of Huntington ever since.

The citizens association, backed by the Howard Jarvis Taxpayers Assn., appealed Horn's decision. The group argued that Proposition 218, which grants residents the right to vote on new taxes, meant that Sunset residents should be able to vote on whether they would pay the same taxes as other Huntington residents.

The judges, in their ruling Friday, interpreted the law otherwise.

"We conclude Proposition 218 was never intended to require votes incident to annexations of territory by local governments. ... Nor does the text of Proposition 218, even liberally construed, require an election on tax differentials in connection with an annexation," the ruling states.

Jack Markovitz, the president of the citizens association, said he was disappointed by the ruling and would consult with his group about the next steps.

"At this point, I think we need to confer and see which options we want to take," he said. "There is the possibility of continuing it further, and we certainly have the support in the community for that. I'd need to talk to the attorneys and see what their input would be and go from there."

Sunset, which has about 1,200 residents, runs along Pacific Coast Highway between Huntington and Seal Beach. In the months since the judge's ruling, residents have differed on the impacts of the annexation, with some decrying it while others praised the access to city services and said their way of life was mostly unchanged.

Mike Van Voorhis, president of the Sunset Beach Community Assn., shared the latter view. His group, which for years served as the area's de facto governing board, did not back Markovitz's lawsuit.

"The issue about taxation without a vote was a legitimate legal issue, but now that it's been decided, it's time to move forward," Van Voorhis said. "Huntington Beach all along has treated Sunset Beach very fairly, and I think the future looks very good for Sunset Beach."

michael.miller@latimes.com

Twitter: @MichaelMillerHB