DEPARTMENT OF FINANCE et al. v. COMMISSION ON STATE MANDATES
B292446
In the Court of Appeal of the State of California, Second Appellate District, Division One
Filed 1/4/21
CERTIFIED FOR PUBLICATION; (Los Angeles County Super. Ct. No. BS130730)
Amy Hogue, Judge
COUNTY OF LOS ANGELES et al., Cross-complainants and Appellants, v. COMMISSION ON STATE MANDATES, Cross-defendant and Respondent; DEPARTMENT OF FINANCE et al., Cross-Real Parties in Interest and Respondents.
APPEAL from a judgment of the Superior Court of Los Angeles County, Amy Hogue, Judge. Reversed with directions.
Mary C. Wickham, County Counsel, Robert C. Cartwright, Assistant County Counsel, Michael S. Simon, Deputy County Counsel for Real Party in Interest, Cross-complainant and Appellant County of Los Angeles.
Burhenn & Gest LLP, David Burhenn, and Howard Gest for Real Parties in Interest, Cross-complainants and Appellants County of Los Angeles, City of Bellflower, City of Carson, City of Commerce, City of Downey, and City of Signal Hill.
Karl H. Berger, City Attorney, and Timothy E. Campen, Deputy City Attorney for Real Party in Interest, Cross-complainant and Appellant City of Bellflower.
Best Best & Krieger, Shawn D. Hagerty and Rebecca Andrews for County of San Diego, Cities of Carlsbad, Chula Vista, Coronado, Del Mar, El Cajоn, Encinitas, Escondido, Imperial Beach, La Mesa, Lemon Grove, National City, Oceanside, Poway, San Marcos, Santee, Solana Beach, and Vista as Amici Curiae on behalf of Real Parties in Interest, Cross-complainants and Appellants.
Meyers, Nave, Riback, Silver & Wilson, Gregory J. Newmark and Bryan K. Brown for Alameda Countywide Clean Water Program as Amicus Curiae on behalf of Real Parties in Interest, Cross-complainants and Appellants.
Somach Simmons & Dunn, Theresa A. Dunham and Roberta Larson for California Stormwater Quality Association as Amicus Curiae on behalf of Real Parties in Interest, Cross-complainants and Appellants.
Xavier Becerra, Attorney General, Thomas S. Patterson, Assistant Attorney General, Tamar Pachter, Anthony R. Hakl, Nelson R. Richards, and Ryan A. Hanley, Deputy Attorneys General for Plaintiffs, Cross-Real Parties in Interest and Respondents Department of Finance, State Water Resources Control Board, Regional Water Quality Control Board, Los Angeles Region.
No appearance for Defendant, Cross-defendant and Respondent Commission on State Mandates.
The Regional Water Quality Control Board, Los Angeles Region (the Regional Board) issued a permit authorizing the County of Los Angeles (the County) and certain cities (collectively, the Operators) to operate stormwater drainage systems. The permit requires the Operators (1) to install and maintain trash receptacles at transit stops (the trash receptacle requirement) and (2) periodically inspect commercial facilities, industrial facilities, and construction sites to ensure compliance with various environmental regulatory requirements (the inspection requirements). Some of the Operators filed claims with the Commission on State Mandates (the Commission) seeking a determination that the state must reimburse them for the costs related to the trash receptacle and inspection requirements рursuant to
The Department of Finance, State Water Resources Control Board, and the Regional Board (collectively, the state agencies) filed a petition in the superior court for a writ of administrative mandamus to command the
FACTUAL AND PROCEDURAL SUMMARY
In December 2001, the Regional Board issued its permit No. 01-182 (the permit) concerning waste discharge requirements for municipal stormwater and urban runoff discharges within Los Angeles County and certain cities in the Los Angeles County Flood Control District. The permit includes the trash receptacle requirement2 and inspection requirements.3
In 2003, the local governments, among others, filed test claims4 with the Commission seeking subvention of funds to cover the costs of the trash
In July 2009, the Commission determined that the challenged requirements imposed new programs or higher levels of service within the meaning of section 6. Because no exception applied to the trash receptacle requirement, subvention was required to reimburse the local governments for the cost of complying with the requirement. The Commission determined that subvention was not required for the cost of complying with the inspection requirements, however, because the local governments have the authority to impose fees that could pay for the required inspections. (See
In February 2011, the state agencies filed a petition for writ of administrative mandamus challenging the Commission‘s decision on three grounds: (1) the challenged requirements are mandated by federal law; (2) the challenged requirements do not impose new programs or higher levels of service; and (3) subvention for the costs of complying with the trash receptacle requirement is not required because the local governments have authority to levy fees to cover such costs. The local governments filed a cross-petition challenging the Cоmmission‘s determination that the local governments could levy fees to cover the costs of the required inspections.
In August 2011, the trial court granted the state agencies’ petition on the ground that the challenged conditions impose requirements mandated by federal law and, therefore, the costs of complying with the requirements are not reimbursable. (See
The Supreme Court held that the federal mandate exception did not apply to the challenged requirements. (Department of Finance, supra, 1 Cal.5th at pp. 771–772.) The Court directed the trial court to address the remaining issues raised by the petition and cross-petition. (Id. at p. 772.)
In February 2018, the trial court again granted the state agencies’ petition, this time on the ground that neither the trash receptacle requirement nor the inspection requirements are state mandated programs within the meaning of section 6. The local governments’ cross-petition was therefore moot. The court did not reach the parties’ arguments concerning the local governments’ authority to levy fees to pay for the costs of implementing the requirements.
The local governments timely appealed.
The parties briefed issues arising from the trial court‘s ruling that the trash receptacle requirement and inspection requirements are not state mandates. In June 2020, we requested the parties further brief the questions whether the Commission erred in finding that (1) the costs of the trash receptacle requirement are costs mandated by the state, and (2) the costs of the challenged inspection requirements are not costs mandated by the state. In October 2020, we requested further supplemental briefing to address the questions whether
DISCUSSION
A. Standards of Review
“[T]he Commission, as a quasi-judicial body, has the sole and exclusive authority to adjudicate whether a state mandate exists.” (County of Los Angeles v. Commission on State Mandates (1995) 32 Cal.App.4th 805, 819.) Review of its decisions is by writ of administrative mandamus to the trial court. (
In 1979, the California electorate added
The phrase “higher level of service” in section 6 refers to “state mandated increases in the services provided by local agencies in existing ‘programs.‘” (County of Los Angeles v. State of California, supra, 43 Cal.3d at p. 56.) Whether a program is “new” or provides a “higher level of service” is determined by comparing the legal requirements before and after the issuance of the executive order or the change in law. (See, e.g., San Diego Unified School Dist. v. Commission on State Mandates (2004) 33 Cal.4th 859, 878 (San Diego U.S.D.); Lucia Mar Unified School Dist. v. Honig (1988) 44 Cal.3d 830, 835.)
The term, “program,” is not defined in section 6. Our Supreme Court has established a two-part definition. Programs, for purposes of section 6, are “programs that carry out the governmental function of providing services to the public, or laws which, to implement a state policy, impose unique requirements on local governments and do not apply generally to all residents and
entities in the state.” (County of Los Angeles v. State of California, supra, 43 Cal.3d at p. 56.) The two parts are alternatives; either will trigger the subvention obligation unless an exception applies. (Carmel Valley Fire Protection Dist. v. State of California (1987) 190 Cal.App.3d 521, 537 (Carmel Valley).)
State mandates that satisfy the first part of the definition—i.e., the program carries out a governmental function of providing services to the public—are illustrated in a line of cases that includes San Diego U.S.D., supra, 33 Cal.4th 859, Carmel Valley, supra, 190 Cal.App.3d 521, and Long Beach Unified Sch. Dist. v. State of California (1990) 225 Cal.App.3d 155 (Long Beach).
In San Diego U.S.D., the court considered a state law that required public school principals to suspend immediately any student who possesses a firearm at school and make a recommendation to the school district board that the student be expelled. (San Diego U.S.D., supra, 33 Cal.4th at pp. 867–871.) In that situation, the law further requires that the suspended student be entitled to a hearing and other procedural protections prior to expulsion. (Id. at p. 866.) The San Diego Unified School District contended that the cost associated with such procedural protections were reimbursable under section 6, and the Supreme Court agreed. (Id. at pp. 877–878.) The new law required subvention because “public schooling . . . constitutes a governmental function” (id. at p. 879), and the mandatory suspension of students who possess firearms provided “a ‘higher level of service’ to the public,” specifically, safer schools for other students. (Id. at p. 878.)
In Carmel Valley, the County of Los Angeles sought reimbursement from the state for the increased costs of complying with an executive order that established minimum requirements for protective clothing and equipment for firefighters. (Carmel Valley, supra, 190 Cal.App.3d at pp. 530–531.) The
that firefighting is a “peculiarly governmental function” that provides services to the public and held that the cost of complying with the new requirements required subvention under section 6. (Id. at p. 537.) The Supreme Court later explained the holding in Carmel Valley by stating that subvention was required in that case because the “increased safety equipment apparently was designed to result in more effective fire protection” and thus “intended to produce a higher level of service to the public.” (San Diego U.S.D., supra, 33 Cal.4th at p. 877.)
In Long Beach, a school district sought subvention under section 6 for costs associated with an executive order that required school districts to “‘develop and adopt a reasonably feasible plan for the alleviation and prevention of racial and ethnic segregation of minority students.‘” (Long Beach, supra, 225 Cal.App.3d at p. 165.) Although school districts had an existing “constitutional obligation to alleviate racial segregation,” the “specific actions” required by the executive order constituted a “higher level of service” requiring reimbursement under section 6. (Id. at p. 173.)
Turning to the instant case, there are three pertinent governmental functions implicated by the challenged requirements for purposes of section 6: The operation of stormwater drainage and flood control systems; the installatiоn and maintenance of trash receptacles at transit stops; and the inspection of commercial, industrial, and construction facilities and sites to ensure compliance with environmental laws and regulations. The first existed prior to the Regional Board‘s permit; the other two are new. Each is a governmental function that provides services to the public, and the carrying out of such functions are thus programs under the first part of the Supreme Court‘s definition of that term.
In the case of the provision of stormwater drainage and flood control services, the trash receptacle requirement provides a higher level of service because it, together with other requirements, will reduce pollution entering stormwater drainage systems and receiving waters. In addition, litter will presumably be reduced at transit stops and adjacent streets and sidewalks; as the local governments put it, the “community is cleaner as a result.”
The inspection requirements provide a higher level of service because they promote and enforce third party compliance with environmental regulations limiting the amount of pollutants that enter storm drains and receiving waters.
Alternatively, the trash receptacle services and inspections can be viewed, as the Commission viewed them, as government functions that provide services to the public. That is, even if the installation and maintenance of trash receptacles at transit stops does not result in a higher level of stormwater drainage and flood control services, trash collection is itself a government
The challenged requirements also meet the alternative test of a “program“—i.e., a law or order that “impose[s] unique requirements on local governments” “to implement a state policy.” (County of Los Angeles v. State of California, supra, 43 Cal.3d at p. 56.) This alternative was addressed in County of Los Angeles v. Department of Industrial Relations (1989) 214 Cal.App.3d 1538.
In that case, the California Occupational Safety and Health Administration promulgated new earthquake and fire safety regulations concerning elevators. (Id. at p. 1540.) The County of Los Angeles, which owns buildings with elevators, filed a claim for reimbursement for the cost of complying with the regulations. The Court of Appeal affirmed the trial court‘s rejection of the claim, holding that the regulations did not impose a unique requirement on local governments because the regulations applied “to all elevators, not just those which are publicly owned.” (Id. at p. 1545.)
A similar result was reached in County of Los Angeles v. State of California, supra, 43 Cal.3d 46, where the enactment of laws that increased the amounts that all employers, including local governments, must pay in wоrker‘s compensation benefits, did not impose unique requirements on local governments. (Id. at pp. 57–58.) By contrast, the requirements for protective clothing and equipment for firefighters in Carmel Valley imposed unique requirements on local agencies because they applied “only to those involved in fire fighting” and “fire fighting is overwhelmingly engaged in by local agencies.” (Carmel Valley, supra, 190 Cal.App.3d at p. 538; see also San Diego U.S.D., supra, 33 Cal.4th at p. 877 [law requiring procedural protections prior to student expulsion imposed unique requirements on school districts].)
The pertinent state policy, as expressed in the Regional Board‘s permit, is “to protect the beneficial uses of receiving waters in Los Angeles County” and “reduce the discharge of pollutants in storm water to the maximum extent practicable.” The challenged requirements are unique to local governments in two ways. First, as the Commission found, the Regional Board‘s permit applies by its terms only to the local governmental entities identified in the
The trial court agreed with the state agencies that the trash receptacle and inspection requirements are mere manifestations of policies to prohibit pollution. As the trial court stated, the requirements “enforce a prohibition rather than initiate or upgrade ‘classic’ or ‘peculiarly governmental function[s]’ like the firefighting services affected by the executive order in Carmel Valley. . . . Because the requirements were implemented to prevent pollution (enforce a ban on pollution) rather than to provide a service to the public, it is difficult to regard them as ‘programs that carry out the governmental function of providing services to the public.‘” This view, however, ignores the terms of the Regional Board‘s permit; the challenged requirements are not bans or limits on pollution levels, they are mandates to perform specific actions—installing and maintaining trash receptacles and inspecting business sites—that the local governments were not previously required to perform. Although the purpose of requiring trash collection at transit stops and business site inspections was undoubtedly to reduce pollution in waterways, the state sought to achieve that goal by requiring local governments to undertake new
affirmative steps resulting in costs that must be reimbursed under section 6.
Lastly, the state agencies assert that the challenged requirements are not state mandates because the local governments applied for the permit to operate their stormwater drainage systems and “chose a management permit rather than a numeric end-of-pipe permit.” That is, although the local governments could arguably have applied for a permit that simply mandated particular effluent limits on discharges—a so-called end-of-pipe permit—they elected to apply for a “management permit,” which imposes requirements designed to reduce the discharge of pollutants to the maximum extent practicable. (See City of Abilene v. U.S. E.P.A. (5th Cir. 2003) 325 F.3d 657, 659–660;
The state agencies rely on Department of Finance v. Commission on State Mandates (2003) 30 Cal.4th 727 (
the storm sewer system operator must propose “management practices; control techniques; and system, design, and engineering methods to reduce the discharge of pollutants to the maximum extent practicable,” it is the “permit-issuing agency” that “determine[s] which practices, whether or not proposed by the applicant, will be imposed as conditions.” (Ibid.) Thus, as the Commission concluded, in contrast to the school districts’ participation in educational programs in Kern High School District, the local governments in the instant case “[did] not voluntarily participate” in applying for a permit to operate their stormwater drainage systems; they were required to do so under state аnd federal law and the challenged requirements were mandated by the Regional Board.
C. Whether the Local Government Can Levy Fees or Assessments to Pay for the Programs
Under
Here, the Commission determined that the local governments have the authority to levy service charges, fees, or assessments sufficient to pay for the inspection requirements, but not for the trash receptacle requirement. We agree with the Commission.
1. The Inspection Requirements
Under
The police power also includes the authority to impose a regulatory fee to further the purpose of a valid exercise of that power. (Mills v. County of Trinity (1980) 108 Cal.App.3d 656, 662California Assn. of Prof. Scientists v. Department of Fish & Game (2000) 79 Cal.App.4th 935, 945.)
A regulatory fee is valid “if (1) the amount of the fee does not exceed the reasonable costs of providing the services for which it is charged, (2) the fee is not levied for unrelated revenue purposes, and (3) the amount of the fee bears a reasonable relationship to
the burdens created by the fee payers’ activities or operations” or the benefits the fee payers receive from the regulatory activity. (California Building Industry Assn. v. State Water Resources Control Bd. (2018) 4 Cal.5th 1032, 1046, citing Sinclair Paint Co. v. State Bd. of Equalization (1997) 15 Cal.4th 866, 881.) The third element is a question “of fair allocation” that “considers whether any class of fee payers is shouldering too large a portion of the associated regulatory costs.” (California Building Industry Assn. v. State Water Resources Control Bd., supra, at p. 1052.) “Whether a statute imposes a fee or a tax is a question of law to be decided upon an independent review of the record.” (Id. at p. 1046.)
Here, we are not faced with the question whether any ordinance imposing a fee on businesses to cover the local governments’ inspection costs constitutes a tax or regulatory fee; the issue is whether the local governments have the authority to levy such a fee “sufficiеnt to pay for the mandated program or increased level of service.” (
The local governments contend that they could not impose a fee for the costs of the inspections as to some businesses because the state already imposes a fee for industrial and construction
site inspections, and the local governments are “constitutionally constrained from imposing a second fee for those same inspections.” Specifically, the local governments contend that the owners of some of the sites they must inspect pay fees to the state, a portion of which the Regional Board must spend “solely on stormwater inspection and regulatory compliance issues associated with industrial and construction stormwater programs.” (
the Regional Board can fulfill its expenditure requirements by addressing “stormwater inspection and regulatory compliance issues” in other ways. (
The local governments further argue that, because any regulatory fee they could impose to pay for the required inspections would be duplicative of the
Under the doctrine of preemption, a local ordinance that conflicts with state law is preempted by the state law and void. (O‘Connell v. City of Stockton (2007) 41 Cal.4th 1061, 1067.) Such a “” “conflict exists if the local legislation “duplicates, contradicts, or enters an area fully occupied by general law, either expressly or by legislative imрlication.” ” ” ” (Ibid.) “A local ordinance duplicates state law when it is “coextensive” with state law.” (Ibid.)
The local governments have failed to show how a fee it could impose to pay for the required inspections conflicts with state law, specifically,
The local governments also argue that a fee that must be no more than necessary to cover the reasonable costs of the inspections “would be difficult to accomplish.” They refer to problems that would arise from a general business license fee on all businesses, including those not subject to inspection, and to charging fees for inspections in years in which no inspection would take place. Even if we assume that drafting or enforcing a law that imposes fees to pay for inspections would be difficult, the issue is whether the local gоvernments have the authority to impose such a fee, not how easy it would be to do so. (Connell v. Superior Court (1997) 59 Cal.App.4th 382, 401.) As explained above, the police powers provision
2. The Trash Receptacle Requirement
The Commission determined that the local governments do not have the authority to levy charges, fees, or assessments to cover the costs of the trash receptacle requirement. In part, the Commission reasoned that, “[b]ecause the trash receptacles are required to be placed at transit stops that would typically be on city property (sidewalks) or transit district property (for bus, metro, or subway stations), there are no entities on which the [local governments] would have authority to impose the fees.”9 (Fn. omitted.) The trash receptacle requirement, therefore, requires subvention under section 6. The state аgencies challenge this determination.
In their initial appellate brief addressing this issue, the state agencies asserted that the local governments could have charged a fee to transit agencies or transit riders. They made the assertion, however, without citation to authority or evidence. We requested that the parties brief the question whether the local governments have authority to charge a fee to transit agencies pursuant to
“Any public agency providing public utility service may impose a fee, including a rate, charge, or surcharge, for any product, commodity, or service provided to a public agency, and any public agency receiving service from a public agency providing public utility service shall pay that fee so imposed. Such a fee for public utility service, other than electricity or gas, shall not exceed the reasonable cоst of providing the public utility service.”
We agree with the local governments that their installation and maintenance of trash receptacles at transit stops pursuant to the permit is not a service “provided to a public agency” within the meaning of the statute.
The Legislature enacted
In 1988, the Legislature responded to the San Marcos decision by enacting
Although San Marcos and the legislation it evoked clarified the type of fees a public utility can charge public entities, the legislation contemplates that the public entity to whom the service is provided has generally agreed to
Viewed in this light,
The state agencies focus their argument on the assertion that the local governments could levy a fee on property owners “in accordance with the burdens created and benefits enjoyed by each parcel.” As the state agencies acknowledge, levying a charge, fee, or assessment on property owners implicates article XIII D of our state constitution, enacted in 1996 as Proposition 218. That article places procedural and substantive requirements on charges, fees, and assessments on real property. Procedurally,
Under thе state agencies’ theory, the local governments can charge any property owner “in the vicinity of the trash receptacles” installed at bus stops for the cost of collecting trash at the bus stop. The adjacent property owners, they argue, would benefit by the reduction of trash on the streets and sidewalks next to their properties.
Even if we assume that a fee imposed on adjacent property owners for trash collection at transit stops could overcome the procedural hurdles applicable to most fees, charges, and assessments imposed on property owners (see
The state agencies have not satisfied their burden. Not only have the state agencies failed to cite to the record or authority to support the point that a fee imposed on property owners adjacent to transit stops could satisfy the substantive constitutional requirements, but common sense dictates that the vast majority of persons who would use and benefit from trash receptacles at trаnsit stops are not the owners of adjacent properties but rather pedestrians,
In their briefs in the trial court, the state agencies relied on
The state agencies rely on an opinion of the Attorney General which concludes that “[a] city may impose storm drainage pollution abatement charges with respect to property owned by school districts within the city‘s boundaries to fund the city‘s activities in meeting federal stormwater discharge requirements if the activities do not include the construction of capital improvements.” (84 Ops.Cal.Atty.Gen. 61, 61 (2001).) The Attorney General‘s opinion expressly assumes that a city would create “storm drainage services as a utility enterprise of the city” and pass “a resolution establishing storm drainage pollution abatement charges applicable to all parcels of property in the city, apportioned in accordance with a per-parcel runoff formula.” (Id. at p. 62.) The opinion implies that charges for storm drainage pollution abatement can be constitutionally imposed by allocating the costs of storm drainage services among all parcels of property based on the amount of
Lastly, the state agencies assert that the local governments have authority to levy fees to pay for the trash receptacle requirements based on
DISPOSITION
The judgment is reversed. The court shall vacate its order granting the state agencies’ petition for writ of administrative mandamus and denying the local governments’ cross-petition for writ of administrative mandamus as moot, and enter a new order denying both petitions.
The parties shall bear their own costs on appeal.
CERTIFIED FOR PUBLICATION.
We concur.
ROTHSCHILD, P. J.
CHANEY, J.
BENDIX, J.
Notes
“As to commercial facilities, [the permit] required each Operator to inspect each restaurant, automotive service facility, retail gasoline outlet, and automotive dealership within its jurisdiction, and to confirm that the facility employed best management practices in compliance with state law, county and municipal ordinances, a Regional Board resolution, and the Operators’ stormwater quality management program (SQMP). For each type of facility, the [p]ermit set forth specific inspection tasks.
“[The permit] addressed industrial facilities, requiring the Operators to inspect them and confirm that each complied with county and municipal ordinances, a Regional Board resolution, and the SQMP. The Operators also were required to inspect industrial facilities for violations of the general industrial activity stormwater permit, a statewide permit issued by the State [Water Resources Control] Board that regulates discharges from industrial facilities.” (Department of Finance, supra, 1 Cal.5th at p. 758, fn. 5.)
“[The permit] required inspections for violations of the general construction activity stormwater permit, another statewide permit issued by the State Board.” (Id. at p. 758, fn. 6.)