HAMILTON AND HIGH, LLC, et al. v. CITY OF PALO ALTO, et al.
H049425 (Santa Clara County Super. Ct. No. 20CV366967)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SIXTH APPELLATE DISTRICT
Filed 3/20/23
CERTIFIED FOR PUBLICATION
The City counters that the in-lieu parking fee, charged when the developer elects not to provide parking directly, is not a “fee” subject to the Mitigation Fee Act. Consequently, the City contends that the five-year finding and refund
In addition to this principal claim, the City makes a number of alternative arguments. It maintains that, even if the Act does apply, plaintiffs’ claim for relief is barred by the statute of limitations and lacks a statutory basis. The City also contends that it complied with the Act‘s requirements by belatedly adopting five-year findings. Finally, the City asserts that plaintiffs have not satisfied
We conclude that the City‘s imposition of in-lieu parking fees in connection with plaintiffs’ development project is subject to the Mitigation Fee Act, and plaintiffs’ action is not time-barred. We decide that the City‘s failure to timely make five-year findings under
We reverse the judgment of the trial court and remand with directions to enter a new judgment granting the mandate petition directing the refund of plaintiffs’ unexpended fees in accordance with applicable statutory provisions, granting the cause of action for declaratory and injunctive relief, and dismissing the cause of action for equitable relief.
I. FACTS AND PROCEDURAL BACKGROUND2
A. The City of Palo Alto In-Lieu Parking Fees and Parking Fund
In 1985, the Palo Alto City Council (city council) adopted an ordinance which established the “Commercial Downtown (CD)” zoning district and created detailed parking regulations set forth in the Palo Alto Municipal Code (municipal code or code). These regulations included “in-lieu parking provisions” (capitalization omitted). These provisions allowed for “payment of an in-lieu monetary contribution to the city to defray the cost” of new, off-site parking spaces in an assessment district for “sites which would otherwise be precluded from development due to parking constraints.” (Palo Alto Mun. Code, former § 18.48.100(d).)
The municipal code defines “‘[f]ee‘” for purposes of chapter 16.57 as “a payment in lieu of the provision of required parking spaces.” (Palo Alto Mun. Code, ch. 16.57.020(d).) Chapter 16.57 creates a special fund, the “University Avenue parking assessment district in-lieu parking fund . . . into which all fees, and any interest thereon, shall be deposited” (parking fund). (Id., § 16.57.050.) The parking fund must “be maintained as a separated capital facilities account in a manner to avoid any commingling of the fees with other revenues, funds or accounts of the city.” (Ibid.)
The City requires new, nonresidential development to provide off-street parking facilities “for new uses and enlargements of existing uses, proportional to the need created by each use, in order to alleviate traffic congestion.” (Palo Alto Mun. Code, § 18.52.010.) The code establishes minimum off-street parking requirements for the University Avenue parking assessment district. (Id., § 18.52.040) New commercial development in the University Avenue parking assessment district may meet these requirements by providing on-site or off-site parking spaces, or “by payment of an in-lieu monetary contribution to the [C]ity to defray the cost of providing such parking.” (Id., § 18.52.070; see also id.,§ 16.57.010 et seq.) The option to pay the in-lieu parking fee is not available in all development scenarios but only where specified criteria exist due to site or other physical constraints. (Id., § 18.52.070(d).) In those cases, building permit applicants may “pay a fee for each required onsite parking space that they do not provide for their development projects, due to site constraints, in the Commercial Downtown (CD) district.” (City of Palo Alto Office of the City Auditor, Audit of Parking Funds, Dec. 15, 2015.)
The City calculates in-lieu parking fees based on the projected cost of one new parking space, which includes land acquisition, construction, and administrative costs. The municipal code provides for the initial calculation and
The City‘s fiscal year “begin[s] on the first day of July each year and end[s] on the last day of June of the subsequent year.” (Palo Alto Mun. Code, § 2.28.010.) The municipal code provides for annual review by the city council of the “uses proposed for expenditure of the moneys in the [parking] fund.” (Id., § 16.57.070.) City staff has periodically submitted “five-year findings” on the parking fund, consistent with the Mitigation Fee Act‘s reporting requirements for development impact fees. (See generally
Following adoption of Ordinance No. 4256, in the fiscal year that ended on June 30, 1996, the City collected $231,400 in in-lieu parking fees. Between 1995 and 2003, the City collected over $1.6 million in such fees, which largely went toward the construction of two downtown parking garages. From 2003 through May 2012, the City did not collect in-lieu parking fees due to the availability of parking exemptions during that time. Between 2012 and 2015, in-lieu parking fees collected in connection with five development projects were paid into the parking fund. The collected fees totaled $4,455,750 and included plaintiffs’ payment in 2013 of $972,000 (later reduced to $906,900). The parking fund had a positive balance of unexpended fees for the fiscal year that ended on June 30, 2014, through the fiscal year that ended on June 30, 2020. The record shows that the parking fund has continuously had a positive balance of unexpended fees since the fiscal year that ended on June 30, 1996.
B. Plaintiffs’ 2013 Payment of In-Lieu Parking Fees
In 2013, plaintiffs Hamilton and High, LLC, the Keenan Family Trust, and Charles J. Kennan, III (aka Chop Keenan) (collectively, plaintiffs) obtained city approval to develop a mixed-use building at 135 Hamilton Avenue in downtown Palo Alto (the property). The property is located within the City‘s University Avenue parking assessment district.
The City approved the development of the property, subject to numerous conditions of approval. Two of these conditions addressed parking requirements and development impact fees. Condition No. 8 required plaintiffs to
C. Proposed Development of the 375 Hamilton Avenue Downtown Garage
In June 2014, the city council authorized staff to proceed with strategies to improve parking supply for the downtown University Avenue district, including use of the estimated $4 million in the parking fund balance as of the end of the 2014 fiscal year. The city council approved plans to construct a new downtown parking garage at 375 Hamilton Avenue (Hamilton garage), and designated and transferred $1.3 million from the parking fund for that purpose.
In February 2019, following the design review and commission of an environmental impact report (EIR) for the Hamilton garage, staff recommended that the city council adopt a resolution certifying the EIR, approve various related land use actions, and authorize a contract with the selected vendor for design services. The staff proposal budgeted $29.1 million for the garage, which included $6.8 million in in-lieu parking fees. However, the project stalled after a public hearing in February 2019 in which some citizens and councilmembers expressed concerns about the cost, environmental impacts, and need for the proposed garage.
The city council voted at the February 2019 public hearing to certify the EIR and approve the architectural review for the Hamilton garage but did not approve contracts to proceed with its additional design and development. Instead, city council directed city staff to return to the policy and services committee “with a parking management strategy and options to address [d]owntown parking needs.” The council provided no timeline for submission of this information to the council.
The City‘s subsequent annual capital budgets continued to reflect prospective development of the Hamilton garage without a specific timeline. As of the filing of this appeal, the City had not adopted any plan to proceed with the Hamilton garage.
The Mitigation Fee Act imposes certain requirements on cities and other local agencies when they impose fees “as a condition of approval of a development project.” (
Historically, the City treated the in-lieu parking fee as subject to the requirements of the Act. City staff reports, submitted to the city council in 2003, 2009, and 2014, addressed the parking fund in connection with the Mitigation Fee Act‘s annual reporting and five-year reporting requirements. In the 2003 report, city staff explained that the Act applied to the parking fund for the University Avenue parking assessment district but asserted that because all in-lieu parking fees in the fund were received in the prior fiscal year (2002), no findings were required for them.
In the 2009 and 2014 reports, city staff recommended that the city council make findings for the unexpended University Avenue in-lieu parking fees and stated that failure to do so could potentially obligate the City to refund the fees. The city council adopted the recommended five-year findings in January 2009 and January 2014 (for the fiscal years that ended on June 30, 2008, and June 30, 2013, respectively).
The City made its next set of five-year findings in a resolution adopted on January 22, 2019, for the fiscal year that ended on June 30, 2018 (Resolution No. 9816, hereafter January 2019 five-year findings). The January 2019 five-year findings addressed various transportation and traffic impact fees but omitted any mention of the parking fund. Consequently, the City did not make five-year findings for the unexpended fees in the parking fund for the fiscal year that ended on June 30, 2018.
In January 2020, Chop Keenan requested that the City refund the in-lieu parking fees, with interest, that plaintiffs had paid in December 2013 in connection with the development of the property at 135 Hamilton Avenue. Keenan‘s letter stated that a refund was “required under state law” because it had been more than five years since the fees were imposed and collected, and the City had “not used those fees for parking facilities nor provided the findings and public accounting required by Government Code sections 66001 and 66006.”
The City, through its city attorney, denied the request. The City‘s letter, dated February 24, 2020, stated the request for a refund was “untimely” and
Plaintiffs responded in a letter dated April 27, 2020, providing a detailed timeline regarding plaintiffs’ payment of “‘impact fees‘” in December 2013, including those characterized by the City as “‘University In-Lieu Parking Fees,‘” and the legal basis for their claim. Plaintiffs asserted that their refund request was “valid and timely” and requested that the City reconsider its position.
On May 11, 2020, following plaintiffs’ demand for a refund, the city council adopted a resolution making additional five-year findings under
The May 2020 five-year findings included recitals and findings in connection with the parking fund and its anticipated use to construct a garage “pending further discussion by the City Council regarding downtown parking management.” The city council acknowledged that “under Chapters 16.57 and 18.18 of the Palo Alto Municipal Code, the City has collected a fee known as the ‘University Avenue Parking In-Lieu Fee’ for the purpose of constructing public parking spaces within the University Avenue parking assessment district to serve the parking needs of the district created by the developments that paid the fees.” Further, “[t]he sum of $6,117,748 represents the most recent audited total of fees collected pursuant to Chapter 16.57 that remain unexpended, together with accrued interest thereon (‘the unexpended [] University Avenue Parking In-Lieu Fee funds‘).” The May 2020 findings did not distinguish the fees that had been in the parking fund for more than five years from those that had been deposited within the past five years.
E. Plaintiffs’ Action For Refund of the Unexpended In-Lieu Parking Fees
On May 22, 2020, plaintiffs filed this action against the City. The combined petition for writ of mandate and complaint (collectively, petition and
In the mandamus cause of action (
In their points and authorities, plaintiffs asserted that the City failed to provide timely and legally adequate findings under the Mitigation Fee Act justifying the retention of the in-lieu parking fees. In its opposition, the City asserted multiple independent reasons that plaintiffs were not entitled to a refund of the in-lieu parking fees, including, that (1) the in-lieu parking fee is not subject to the Mitigation Fee Act‘s five-year finding requirement; (2) the City‘s five-year findings issued in January 2019 did not include the in-lieu parking fees because those fees had not yet been held for five years; (3) this action was not filed within the one-year statute of limitations applicable to a claim for penalty or forfeiture, under the reasoning set forth in County of El Dorado v. Superior Court (2019) 42 Cal.App.5th 620, 625 (El Dorado); and (4) the City‘s adoption of five-year findings in May 2020 adequately complied with the requirements of
On September 7, 2021, the trial court issued its final statement of decision. The court denied relief as to both the petition for writ of mandate and the complaint for declaratory and other relief. First, the trial court rejected plaintiffs’ argument regarding the applicable statute of limitations under
Next, the trial court found, as “a separate and independent basis” for denying the petition, that the City‘s in-lieu parking fee does not come within
Recognizing that its resolution of the principal issues would be subject to de novo review on appeal, the trial court addressed the merits of the Mitigation Fee Act claim “in the interest of judicial economy in the event of reversal.” The court assumed, for this purpose, both the applicability of
In accordance with the statement of decision, the trial court entered judgment in favor of the City. Plaintiffs timely appealed.
II. DISCUSSION
Plaintiffs contend the trial court erred as a matter of law in deciding three key issues underlying the judgment. First, plaintiffs argue that the court erred in concluding the in-lieu parking fee is exempt from the requirements of the Mitigation Fee Act. Second, plaintiffs assert that the court mischaracterized the gravamen of the action in ascertaining the cause‘s accrual date and relied
The City disagrees with plaintiffs’ legal analysis and urges this court to uphold the judgment in the City‘s favor for the reasons stated in the trial court‘s statement of decision. In the event this court declines to do so, the City disputes the merits of plaintiffs’ refund claim and asserts that plaintiffs have not attempted to show prejudice, as required by the Government Code‘s “harmless error” provision (
This court sought supplemental briefing on whether
We consider each of these arguments below, beginning with the statutory framework for plaintiffs’ claims.
A. Statutory Framework: Mitigation Fee Act
The Mitigation Fee Act applies to a monetary exaction imposed by a local agency as a condition of approval of a development project to defray public facility costs related to the project. (
The Act defines a “‘[f]ee‘” as “a monetary exaction other than a tax or special assessment . . . that is charged by a local agency to the applicant in connection with approval of a development project for the purpose of defraying all or a portion of the cost of public facilities related to the development project.” (
The requirements embodied in the Act apply at various stages of the fee imposition and development process.
Each year, within 180 days of the end of the fiscal year, the local agency must in a regularly scheduled public meeting inform the public about the development fee fund or account. (
In addition to the annual accounting requirement under
These five-year findings under
The trial court decided that plaintiffs are not entitled to relief under
B. Standard of Review
Courts generally review a local agency‘s establishment or imposition of a development fee under the Mitigation Fee Act under the rules of ordinary mandamus review (
C. Applicability of the Mitigation Fee Act
We first consider whether the in-lieu parking fee meets the Act‘s statutory definition of “fees.” Plaintiffs contend that it clearly does so, based on both the plain text of the Act and its legislative history. Furthermore, plaintiffs emphasize that the City itself, prior to 2019, consistently recognized and treated in-lieu fees as subject to the same procedures and requirements as other development impact fees. The City counters that, although it historically “voluntarily adopted” five-year findings for the parking fee fund, it “was not required to do so.” Instead, the City argues that the Mitigation Fee Act does not apply to this type of in-lieu fee, which a developer voluntarily elects to pay in exchange for being relieved of a statutory requirement (here, the requirement to provide on- or off-site parking spaces in connection with new development).
For the reasons explained below, we decide that the in-lieu parking fee—as established in the City‘s municipal code and imposed on plaintiffs to mitigate the impact of their development project on parking congestion in the University Avenue assessment district—is a fee subject to the Mitigation Fee Act.
The construction of a statute and its applicability to a given case are questions of law subject to our independent review. (Sierra Pacific Industries v. Workers’ Comp. Appeals Bd. (2006) 140 Cal.App.4th 1498, 1505 (Sierra Pacific).) We interpret the Act according to established principles of statutory construction. Our primary task in construing the statute “is to ascertain the intent of the Legislature so as to effectuate the purpose of the law.” (Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379, 1386 (Dyna-Med).) We “look first to the words of the statute [], giving to the language its usual, ordinary import and according significance, if possible, to every word, phrase and sentence in pursuance of the legislative purpose.” (Id. at pp. 1386–1387.) If the meaning remains uncertain, we may consider “the consequences that will flow from a particular interpretation.” (Id. at p. 1387; see Mejia v. Reed (2003) 31 Cal.4th 657, 663 (Mejia).)
Applying these principles, we note that the Mitigation Fee Act applies broadly to “any action” in which a “fee” is imposed “as a condition of approval of a development project by a local agency.” (
By its plain terms, the Act applies when “a monetary exaction” (
According to the adopting ordinance and municipal code, the in-lieu parking fee allows certain new, nonresidential developments in the University Avenue parking assessment district to satisfy downtown parking requirements by funding the provision of parking through the in-lieu mechanism. (See Ordinance No. 4256, adopted Jan. 17, 1995, § 1(E); Palo Alto Mun. Code, chs. 16.57.010, 18.18.090, 18.52.070(d).) The resulting parking fund is designated to “be used to finance the construction of new parking facilities to meet the increased parking demand caused by [the] new nonresidential developments.” (Ordinance No. 4256, § 1(F).) The collected fees are limited to use “for construction of public parking spaces within the assessment district to serve the parking needs . . . created by the developments that paid the fees.” (Palo Alto Mun. Code, § 16.57.060.) Further, payment of the fee established by the in-lieu parking fee regulation “shall be a condition of the approval of or permit for any new development.” (Id., § 16.57.010.)
The municipal code provisions and ordinance adopting the in-lieu fee together confirm that the in-lieu parking fee is a type of “monetary exaction . . . charged by a local agency to the applicant in connection with approval of a development project for the purpose of defraying all or a portion of the cost of public facilities related to the development project.”
Further clarifying this application, among other conditions, the City conditioned its approval of the project at 135 Hamilton Avenue on plaintiffs’ compliance with the parking requirements set forth in the City‘s municipal zoning code. Condition No. 8 specifically addressed plaintiffs’ need to comply with the parking requirements, either by paying the in-lieu fee or obtaining approval for off-site or underground parking, or “some combination thereof.”
Our determination based on the plain language of the Act makes it unnecessary to resort to extrinsic interpretive aids such as the legislative history of the statute.4 (See Lungren v. Deukmejian (1988) 45 Cal.3d 727, 735.) Moreover, the option of paying an impact fee “in lieu” of some other form of mitigation of the public impact attributable to new development is unremarkable in the context of development impact fees. As the United States Supreme Court observed, “[s]uch so-called ‘in lieu of’ fees are utterly commonplace [citation], and they are functionally equivalent to other types of land use exactions.” (Koontz v. St. Johns River Water Management Dist. (2013) 570 U.S. 595, 612 (Koontz).)5
Our review of the extensive body of case law concerning these types of fees and similar government exactions has revealed no case in which the “in lieu” or elective aspect of the imposition changes the nature of the fee or
More specifically, the plurality explained that the Act “codifies, as the statutory standard applicable by definition to nonpossessory monetary exactions, the ‘reasonable relationship’ standard employed in California and elsewhere to measure the validity of required dedications of land (or fees imposed in lieu of such dedications) that are challenged under the Fifth and Fourteenth Amendments.” (Ehrlich, supra, 12 Cal.4th at p. 865 (plur. opn. of Arabian, J.), italics added.) The majority in Ehrlich agreed “that to the extent a development mitigation fee is not subject to heightened scrutiny under Nollan and Dolan, there must nonetheless be a ‘reasonable relationship’ between the fee and the deleterious impacts for mitigation of which the fee is collected.” (San Remo Hotel L.P. v. City and County of San Francisco (2002) 27 Cal.4th 643, 667 (San Remo), citing Ehrlich, at pp. 865, 867 (plur. opn. of Arabian, J.); Ehrlich, at p. 897 (conc. opn. of Mosk, J.).)
In subsequent cases, including California Building Industry Assn. v. City of San Jose (2015) 61 Cal.4th 435 (California Building), the California Supreme Court has clarified aspects of its decision in Ehrlich as well as the standards applicable to various types of fees. These cases support our reading of the Mitigation Fee Act that the offering of an election (or in-lieu alternative) does not, as a matter of law, remove the fee from the purview of the Act.
In San Remo, the court upheld the application of the Act to a city ordinance which imposed a “housing replacement” requirement on development seeking to convert residential units to tourist use. (San Remo, supra, 27 Cal.4th at pp. 668-669.) A developer could choose to comply with the ordinance “by constructing or bringing onto the market new units; by sponsoring such construction by a public or nonprofit private housing developer; or by paying, in lieu of such construction, a fee to a designated City housing fund.” (Id. at p. 668.) In rejecting the developer‘s takings challenge, the court noted that under the majority‘s holding in Ehrlich, and pursuant to the Mitigation Fee Act, a mitigation fee that is not subject to the heightened scrutiny of Nollan and Dolan must nonetheless satisfy the generally applicable “reasonable relationship” standard between the fee, its intended use, and the “deleterious public impact of the development.” (San Remo, at p. 671, citing
In Sterling Park, the California Supreme Court considered a developer‘s challenge to the city‘s inclusionary housing program, which required certain developments to provide 20 percent of units below market rate by electing one or more of certain alternatives. (Sterling Park, supra, 57 Cal.4th at p. 1196.) Among the options was “a cash payment to the City‘s housing development fund in lieu of providing below market rate units or land.” (Ibid.) At issue on appeal was the timeliness of the developer‘s legal challenge to the below market housing requirement, which in turn depended on whether the requirements at issue “constitute[d] the imposition of ‘any fees . . . or other exactions’ under
In deciding that
We recognize that in Sterling Park our high court was not asked to consider, and did not decide, whether the below market rate housing program‘s in-lieu fee option was in fact a “fee” imposed as a condition of
The California Supreme Court‘s more recent decision in California Building also supports our reading of the Act. There, the court held that conditions of a City of San Jose inclusionary housing ordinance, which required new residential development projects to sell a percentage of the for-sale units at a price affordable to low- or moderate-income households, did not effect an “exaction” under the takings clause of the federal or state Constitution but rather constituted a constitutionally permissible, legislatively imposed land use regulation related to the public welfare. (California Building, supra, 61 Cal.4th at pp. 442-444, 461.) The court specifically distinguished the type of in-lieu monetary fee at issue in San Remo (where the high court applied the statutory “reasonable relationship” standard) from the restrictions imposed by the San Jose ordinance. (Id. at p. 444.) It explained that whereas the condition in San Remo involved “an lieu monetary fee . . . imposed to mitigate a particular adverse effect of the development proposal under consideration” (id.), the conditions imposed by San Jose‘s inclusionary housing ordinance “do not require a developer to pay a monetary fee but rather place a limit on the way a developer may use its property.” (Ibid.) The high court emphasized that the purpose of a development mitigation fee (such as in San Remo) “is to mitigate the effects or impacts of the developments on which the fee is imposed” (id. at p. 472), consistent with the Mitigation Fee Act‘s statutory definition and use of the term “‘fee‘” in sections
The appellate court‘s decision in 616 Croft Ave., LLC v. City of West Hollywood (2016) 3 Cal.App.5th 621 is consistent with our reading of the Act. Like California Building, 616 Croft involved a challenge to the city‘s inclusionary housing ordinance. Unlike the San Jose
Here, the requirement that new nonresidential development provide off-street parking facilities is “proportional to the need created by each use, in order to alleviate traffic congestion.” (Palo Alto Mun. Code, § 18.52.010.) The in-lieu parking fee serves this purpose for new development that would not otherwise be able to satisfy the parking requirements. (Id., § 18.52.070(d).) The in-lieu fee is directed at “mitigat[ing] a particular adverse effect of the development proposal under consideration” (California Building, supra, 61 Cal.4th at p. 444)—namely, the traffic congestion and parking impacts created by the new downtown development. It is placed into the separate parking fund for that purpose. (See Palo Alto Mun. Code, § 16.57.050.) Therefore, the in-lieu parking fee does not conform to the description in California Building of a “use restriction” imposed for a non-mitigation purpose or directed at improving public welfare. (California Building, at p. 472.)
The reasons advanced by the City in support of its contrary argument are not persuasive. The City argues that unlike the conditions for approval of the project set forth in condition No. 9, which separately required plaintiffs to pay development impact fees of more than half of a million dollars prior to issuance of the project‘s building permits, the in-lieu election provided in condition No. 8 allowed plaintiffs to choose to pay instead of directly providing a certain number of parking spaces. But as we have already concluded based on the Mitigation Fee Act‘s broad coverage when “a monetary exaction” is imposed in connection with and as a condition of approval of a development project for the purpose of defraying the cost of
The City also points to California Building Industry Assn. v. San Joaquin Valley Air Pollution Control Dist. (2009) 178 Cal.App.4th 120 (San Joaquin), as well as to the Supreme Court‘s decision in Ehrlich regarding the in-lieu public art fee, as further support for its contention that an in-lieu fee is not an exaction governed by the Mitigation Fee Act. We disagree that either case dictates that the type of in-lieu fee at issue here is not a monetary exaction subject to the Act.
San Joaquin involved a challenge to a pollution control rule in which developers were required to reduce indirect pollution caused by new development projects “by incorporating pollution-reducing features in the project, or by paying a fee to fund off-site projects that will reduce emissions, or by a combination of the two.” (San Joaquin, supra, 178 Cal.App.4th at pp. 124-125.) Although the appellate court concluded that the emissions reduction requirement (including the in-lieu fee) was neither subject to nor in violation of the Mitigation Fee Act, the in-lieu aspect of the regulation was not relevant to the court‘s determination. Instead, the court relied on the distinction between a development fee subject to the Act, which requires “approval of the development project [to] be conditioned on payment of the fee” (id. at p. 131), and a regulatory fee imposed under the agency‘s police power. Because the pollution reduction regulations did not condition approval of the development on the proposed air quality plan, the court concluded the fee was not a development fee subject to the Act. (Id. at pp. 128, 131.)
Here, unlike in San Joaquin, the City‘s approval of the project at 135 Hamilton Avenue was conditioned on payment of the in-lieu parking fee. Moreover, the “condition of approval” term is expressly written into the municipal code, which provides that payment of the in-lieu parking fee “shall be a condition of the approval of . . . any new [eligible] development.” (Palo Alto Mun. Code, § 16.57.010.) That there are alternative means of complying with the parking condition—whether by directly providing the required number of new parking spaces or by electing to contribute the equivalent cost by paying the in-leu parking fee—is not determinative. When the election applies, it is a condition of approval for the development project. (Cf. San Joaquin, supra, 178 Cal.App.4th at p. 131;
Having decided that the Act governs Palo Alto‘s in-lieu parking fee,6 we consider whether the trial court erred in denying plaintiffs’ refund claim under
D. Statute of Limitations
Plaintiffs challenge the trial court‘s ruling that plaintiffs’ action for a refund under the Act is barred by
In response, the City does not address plaintiffs’ accrual argument. Regarding the proper statute of limitations, the City disagrees with the reasoning in El Dorado (that an action for refund under
The relevant facts are not in dispute; therefore, we decide the application of the statute of limitations as a question of law. (International Engine Parts, Inc. v. Feddersen & Co. (1995) 9 Cal.4th 606, 611; see also Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1191; Blaser v. State Teachers’ Retirement System (2019) 37 Cal.App.5th 349, 364.)
As a rule, a civil action may be brought only within the prescribed statute of limitations period once a cause of action has accrued. (
We agree with plaintiffs that the thrust of their action under
Under these circumstances, only upon the City‘s refusal to issue a refund could plaintiffs maintain a suit based upon a refund demand for alleged noncompliance with the Mitigation Fee Act‘s accounting and findings requirements. (Howard Jarvis, supra, 25 Cal.4th at p. 815 [cause of action accrues ” ‘when a suit may be maintained’ “].) As stated in analogous actions involving tax and other types of refunds, “[t]he cause of action for a refund does not accrue until the claim for refund has been denied or rejected in some manner.” (State of California ex rel. Dept. of Motor Vehicles v. Superior Court (1998) 66 Cal.App.4th 421, 435 (State of California) [concerning timeliness of class claims in action for refund of motor vehicle license fees]; see also Geneva Towers Ltd. Partnership v. City of San Francisco (2003) 29 Cal.4th 769, 772; Miller & Lux v. Batz (1904) 142 Cal. 447, 450-453.)
To summarize the relevant timeline, the City made five-year findings on certain development fee funds in a resolution adopted in January 2019 for the fiscal year that ended on June 30, 2018, but omitted any findings on the parking fund. In January 2020, Chop Keenan requested that the City refund the in-lieu parking fees, with interest, that plaintiffs had paid in December 2013 in connection with the development of the property at 135 Hamilton Avenue. In February 2020, the City issued the letter rejecting Keenan‘s request for a refund under the Mitigation Fee Act. And on May 11, 2020, after rejecting the refund request and about two weeks before plaintiffs filed this action on May 22, 2020, the city council adopted the May 2020 five-year findings under
We decide that, at the earliest, plaintiffs’ action for a refund accrued on February 24, 2020, when the City denied the request for a refund of the
Because plaintiffs’ action is timely under any of the three, possible statute-of-limitations periods discussed by the parties, we need not definitively resolve for purposes of this appeal whether the trial court erred in applying the one-year statute of limitations for an action upon a statute for a penalty or forfeiture. (See
Having decided that plaintiffs’ claim was timely, we turn to the merits of plaintiffs’ refund claim.
E. Merits of Plaintiffs’ Statutory Refund Claim
On May 11, 2020, following plaintiffs’ demand for a refund, the Palo Alto city council adopted a resolution making additional five-year findings under
The City disputes this proposed disposition. The City asserts that even if the five-year findings are deemed deficient, the proper remedy would be a remand with directions to the City to cure any legal defect.
We review de novo the City‘s adoption of the January 2019 five-year findings (omitting any mention of the parking fund) and May 2020 five-year findings (addressing the parking fund) and decide whether the actions are ” ’ “entirely lacking in evidentiary support, or . . . failed to conform to
The relevant dates are not in dispute. The City began collecting in-lieu parking fees and depositing them in the parking fund in the fiscal year that ended on June 30, 1996. The City issued five-year reports under
On December 31, 2013, prior to issuance of the project‘s building permits (in conformity with condition Nos. 8 and 9), plaintiffs paid the City $1,560,475.16 in development impact fees for the property, including $972,000 in in-lieu parking fees (later reduced to $906,900). Under the City‘s municipal code, this payment occurred in the fiscal year that ended on June 30, 2014. (Palo Alto Mun. Code, § 2.28.010.)
On January 13, 2014, the city council adopted five-year findings under
On May 11, 2020, after plaintiffs requested a refund based on the omission of in-lieu parking fees from the January 2019 five-year findings, the city council adopted the May 2020 five-year findings for the fiscal year that ended on June 30, 2019. (Resolution No. 9887.) The May 2020 five-year findings, issued 10 months after the fiscal year that ended on June 30, 2019 (and 22 months after the fiscal year that ended on June 30, 2018), addressed $6,117,748 in unexpended, University Avenue in-lieu parking fees, together with accrued interest.
1. The City was Obligated to Issue Five-Year Findings
The City contends that, under these circumstances, it was not required to adopt five-year findings for the fiscal year that ended on June 30, 2018, because on that date no in-lieu parking fees in the parking fund had been held for more than five years.
The City bases this assertion in part on the timing of its prior findings with respect to the parking fund. The City made substantive five-year findings
In 2016 the City transferred $1.3 million from the parking fund to the capital fund. The City contends this transfer exhausted the balance of fees that had been in the parking fund for five years prior to June 30, 2018. In other words, the City maintains that insofar as the parking fund balance for the fiscal year that ended on June 30, 2013 (five years prior to the June 30, 2018 date) was $657,961, the City‘s transfer of $1.3 million from the fund in fiscal year 2016 for design planning and environmental review related to the new downtown parking garage “expended that entire balance, and significantly more (including much of [plaintiff]s’ $906,900 payment),” even as other in-lieu parking fees (like plaintiffs‘) continued to be deposited into the parking fund.
The City‘s position appears to be that, when making five-year findings under the statute, it must account only for that portion of unexpended fees in the fund that were deposited more than five years earlier. The City argues that, based on the plain language of the statute, the five-year findings apply only to “that portion of the account or fund remaining unexpended” for the fifth fiscal year following the initial deposit into the fund (
The City claims that its reading of the statute is consistent with what it maintains is the “obvious purpose . . . to require local agencies to account for long-held funds it has not yet spent rather than more recently collected funds.” The City further argues that to interpret the five-year findings provision as applicable to all unexpended fees in the fund, including recently collected fees, would be inconsistent with other provisions of the Act. (See, e.g.,
Plaintiffs contend that
We agree with plaintiffs that the City‘s proposed interpretation of
Assigning the language its ordinary meaning (Dyna-Med, supra, 43 Cal.3d at pp. 1386-1387), we decide the phrase “following the first deposit into the account or fund” (
As stated in Walker, “when a local agency has not used all of a development fee within five years of the date it started to collect the fee, the agency must make findings that (1) identify the agency‘s purpose in holding the unexpended balance; (2) demonstrate a reasonable relationship between the unexpended balance and the purpose identified when the agency assessed the fee; (3) identify the sources and funding anticipated to complete any incomplete public improvement identified when the fee was established; and (4) designate the approximate date the agency expects that funding to be deposited in the account holding the unexpended balance.” (Walker, supra, 239 Cal.App.4th at p. 1363, italics added, citing
We do not agree with the City that the requirement to make findings “with respect to that portion of the account or fund remaining unexpended”
Amendments to the Act in 1996 crystallized this distinction by changing the wording of
The Legislative Counsel‘s Digest for the 1996 amendments confirmed that the changes “would revise the local agency‘s duties with respect to these unexpended fees, including requiring the local agency, for the 5th fiscal year following the first deposit into an account or fund, and every 5 years thereafter, to include specified information in findings relating to the funding of a project.” (Legis. Counsel‘s Dig., Sen. Bill No. 1693 (1995-1996 Reg. Sess.) 6 Stats. 1996, ch. 569, italics added.)9
Our reading of the statute—that is, that the five-year finding requirement under
To the extent there is any uncertainty about whether
In summary, we hold that
2. The City‘s Belated Findings Do Not Satisfy the Act
The City contends that even if it were required to make the five-year findings, it in fact satisfied that obligation when the city council adopted the May 2020 five-year findings. The City argues that a strict interpretation of the statutory deadline is not supported by the plain language or intent of the Mitigation Fee Act and is contrary to established case authority interpreting similar statutory deadlines as “directory” rather than “mandatory.” The City further argues that even if the May 2020 five-year findings were legally inadequate, the proper remedy would be to remand the findings to the city council for the opportunity to cure any legal deficiency before imposing the refund remedy.
Plaintiffs counter that the purpose of the statutory deadlines specified in sections
Having considered the statutory language and relevant legal authorities, we agree with Walker that a refund is the statutorily mandated remedy for failing to make required five-year findings under
As a general rule, “a ’ “directory” or “mandatory” designation does not refer to whether a particular statutory requirement is “permissive” or “obligatory,” but instead simply denotes whether the failure to comply with a particular procedural step will or will not have the effect of invalidating the governmental action to which the procedural requirement relates.’ ” (California Correctional Peace Officers Assn. v. State Personnel Bd. (1995) 10 Cal.4th 1133, 1145 (California Correctional).) If noncompliance with a particular procedural step invalidates the governmental action, the requirement will be termed ” ‘mandatory’ “; otherwise, “it is ‘directory’ only.” (Ibid.; see Edwards v. Steele (1979) 25 Cal.3d 406, 410 (Edwards).) As applied to time limits on government action,
“[t]ime limits are usually deemed to be directory unless the Legislature clearly expresses a contrary intent.” (California Correctional, at p. 1145.) One test applied by California courts in ascertaining what effect to give a statute’s timing requirement is whether “ ‘a consequence or penalty is provided for failure to do the act within the time commanded.’ ” (Edwards, at p. 410.) “Under this framework, ‘statutes setting forth time frames for government action that do not include a self-executing consequence are almost universally construed as directory, rather than mandatory or jurisdictional.’ ” (Tran v. County of Los Angeles (2022) 74 Cal.App.5th 154, 166 (Tran).)
Applying those principles here, the Mitigation Fee Act provides that when five-year findings are required by
In the absence of a clear contrary intent, such a statutory time limit would typically be deemed directory. (California Correctional, supra, 10 Cal.4th at p. 1145; Edwards, supra, 25 Cal.3d at p. 410.) However,
This provision unequivocally imposes a direct consequence for an agency’s failure to make five-year findings “as required by this subdivision.”
Nor do the distinguishable facts in Walker render it inapposite to our analysis here. As the City points out, Walker involved a longstanding “beach parking impact fee” (capitalization omitted) which the City of San Clemente continued to collect even after several beach parking studies confirmed that San Clemente had adequate beach parking. (Walker, supra, 239 Cal.App.4th at p. 1361.) The trial court entered judgment against San Clemente after a bench trial on the plaintiffs’ action for declaratory and mandamus relief and ordered the city to refund the unexpended beach parking impact fees based in part on its failure to make the required five-year findings. (Id. at p. 1362.)
On appeal, the Walker court agreed that the five-year findings were inadequate. (Walker, supra, 239 Cal.App.4th at p. 1367.) It furthermore rejected San Clemente’s argument that the trial court should have remanded the matter for the city “to make new findings correcting the ‘technical deficienc[ies]’ in the [] five-year findings rather than requiring the [c]ity to forfeit the unexpended impact fees that [it] properly had collected.” (Ibid.)
The court explained that the language of
We recognize that Walker is factually distinguishable and that the instant situation does not mirror the extreme facts of that case, in which the local agency apparently had no intention of using the fees collected for their
Here, like in Walker, the City has pointed to nothing in the statute’s language or purpose that would negate or mitigate the unambiguous refund provision. The City argues that the Act does not state that the five-year findings required by
It is undisputed that more than 180 days had elapsed between the fiscal year that ended on June 30, 2018, and the City’s May 2020 five-year findings. Therefore, those findings were untimely and noncompliant with the requirements of the subdivision. (
F. Harmless Error
There remains the City’s argument that, notwithstanding any legal deficiency (including untimeliness) in the May 2020 five-year findings, a refund of the in-lieu parking fees is not appropriate under the so-called “harmless error” provision of the Government Code. (
Whether
Turning to the language of the statute,
The City contends that by its express terms,
In evaluating these arguments, we are guided by the standard principles of statutory interpretation. (See ante, pt. II.C.) “ ‘It is axiomatic that in the interpretation of a statute where the language is clear, its plain meaning should be followed.’ ” (Security Pacific National Bank v. Wozab (1990) 51 Cal.3d 991, 998.) Where two statutes are to be construed, “ ‘they “must be read together and so construed as to give effect, when possible, to all the provisions thereof.” ’ ” (Mejia, supra, 31 Cal.4th at p. 663.) “ ‘[E]very statute should be construed with reference to the whole system of law of which it is a part, so that all may be harmonized and have effect.’ ” (Ibid.)
Applying these principles to our review of
Courts have generally described
Those reported cases that have applied
Other cases have declined to apply
Similar reasoning applied in El Dorado—notably, the only reported decision addressing an attempt to invoke
We agree with the court’s reasoning on this issue in El Dorado. It is apparent from
The language of
Furthermore, applying the prejudice standard of
We recognize that the prescribed remedy for an agency that has not made the required five-year findings to “refund the moneys in the account or fund” (
G. Complaint Causes of Action
Having decided that plaintiffs have established a statutory right to relief under the Mitigation Fee Act, we need not address their alternate ground for equitable relief based on principles of equitable restitution as set out in the third cause of action.13 Regarding plaintiffs’ second cause of action for declaratory and injunctive relief, we conclude that plaintiffs have demonstrated an entitlement to declaratory and injunctive relief, with respect to the applicability of the Mitigation Fee Act to plaintiffs’ payment of in-lieu parking fees and to plaintiffs’ entitlement to a refund of those unexpended fees, pursuant to
III. DISPOSITION
The judgment is reversed. On remand, the trial court is directed to enter a new judgment (1) granting the mandate petition directing the City of Palo Alto to comply with the refund requirement as set forth in
(d)(2), (2) granting the declaratory and injunctive relief cause of action regarding the application of
Danner, J.
WE CONCUR:
Bamattre-Manoukian, Acting P.J.
Wilson, J.
H049425
Hamilton and High, LLC et al. v. City of Palo Alto et al.
| Trial Court: | Santa Clara County Superior Court No. 20CV366967 |
| Trial Judge: | Hon. Cynthia C. Lie |
| Counsel for Plaintiffs and Appellants Hamilton and High, LLC, The Keenan Family Trust and Charles J. Keenan: | David P. Lanferman Rutan & Tucker, LLP |
| Counsel for Defendants and Respondents City of Palo Alto and City Council of the City of Palo Alto: | Rick W. Jarvis Jarvis Fay LLP Molly Stump Terence Howzell Office of the City Attorney, City of Palo Alto |
H049425
Hamilton and High, LLC et al. v. City of Palo Alto et al.