PALM SPRINGS PROMENADE, LLC, Plаintiff and Appellant, v. DEPARTMENT OF INDUSTRIAL RELATIONS, Defendant and Respondent.
D083069
COURT OF APPEAL, FOURTH APPELLATE DISTRICT DIVISION ONE STATE OF CALIFORNIA
June 13, 2025
CERTIFIED FOR PUBLICATION; (Super. Ct. No. CVPS2202816)
Buchalter, Vincent Whittaker, Efrat M. Cogan, Skye Daley, and Chandra Roam for Plaintiff and Appellant.
Molteni Employment Law and Maria Cristina Molteni for amicus curiae on behalf of United Union of Roofers, Waterproofers, and Allied Workers, Local 81.
Ken Lau, Chief Counsel and Mirna Solis, Staff Counsel for Defendant and Respondent.
Palm Springs (City), a resort city in southern California’s Coachella Valley in the County of Riverside, is a charter city under the state’s Constitution. (
Real party in interest Palm Springs Plaza (PSP) purchased an almost vacant mall comprising 13 acres in the City’s downtown tourist area (Subject Property).2 In 2010, almost 10 years after the purchase, PSP and the City entered into an agreement allowing PSP to renovate the dilapidated shopping center into a new multipurpose development, called Desert Fashion Plaza, which would bring much-needed vitality to the area. Relying on the City’s municipal code, PSP paid employees building the Subject Property lower wages than the PWL required.
As an issue of first impression, we must decide whether a construction project is a “municipal affair” of a charter city pursuant to Section 5(a) if the
FACTUAL AND PROCEDURAL BACKGROUND
A. PSP Acquires the Subject Property
In 2001, PSP purchased for about $17 million the 13-acre, multi-block, then “largely vacant” Subject Property located in the downtown area of the City. Over the next 10 years, the City, the City of Palm Springs Community Redevelopment Agency (Redevelopment Agency),3 and PSP engaged in a “number of joint efforts” to develop the Subject Property.
Various proposals were unsuccessful until 2011, when the parties executed the Project Financing Agreement (Agreement). The Agreement implemented a revitalization plan that involved “a mix of retail[,] commercial, resort hotel, and residential uses” (Project). A City staff report stated that “[i]n addition to facilitating the private development of the Project,” the Agreement would reenergize the downtown area and create value “for all concerned.” (Italics added.)
B. The Agreement
The Agreement recited that redevelopment of the Subject Property was “critical to restoring economic vitality to downtown Palm Springs, and that successful redevelopment” would, “as is almost always the case with downtown areas, require public-private participation and funding.”
Although the Agreement recognized the parties’ “public-private” participation, it speсifically acknowledged that the parties’ legal relationship was “neither that of a partnership nor that of a joint venture and that neither the City nor the Developer shall be deemed or construed for any purpose to be the agent of the other Party, and neither Party shall have the power or the authority to speak on behalf of the other Party or to bind the other Party to any contractual or other obligations.”
Attached as an exhibit to the Agreement was the project site plan. Under the project site plan, the Subject Property was divided into various “block units” to avoid a “monolithic development,” аnd new streets were added to improve circulation, enhance mountain views, and provide vehicle access to the nearby Palm Springs Art Museum. Once completed, the Project would transform the “blighted” Subject Property into a multi-block, pedestrian-friendly “urban village” comprised of residential, retail, and
The Project was slated to be completed in phases. In phase I, “public investment [would] be used to reopen public streets and refurbish an underutilized parking garage.” Additional phases included the development of residential units and office space, which would “begin to shape Downtown into a true 24-hour community.” Unlike phase I, no “public participation” was contemplated for the “later phases” of the Project, and PSP was under no obligation to develop any future phase.
The Agreement required the City to purchase about five acres of the Subject Property from PSP, consisting of: (1) the previously described multi-level parking structure with over 1,000 above and below ground parking spaces to be refurbished and used for free public parking; (2) land for new public streets; and (3) a large area permanently dedicated for public use. The City agreed to pay PSP (1) $32 million to acquire these assets “and fund project incentives for the completion of the Project”4; and (2) $11 million for PSP to construct the new streets and refurbish the existing parking facilities (Public Improvements). The City would obtain the $43 million by issuing lease revenue bonds through the City of Palm Springs Financing Authority (Financing Authority).5
Also under the Agreement, PSP agreed to (1) upgrade the facades of one of the buildings on the Subject Property; (2) demolish certain designated buildings; and (3) in their place construct new buildings, including a “ ‘state
In late 2014, the City used local funds to purchase another unfinished block within the Subject Property for $5.3 million. PSP agreed to use those funds to construct additional underground parking within the Subject Property and to deliver to the City a graded pad within the Project ready for development. The City, “at its cost,” would “scope, design, bid, and contract for the construction” of a public event center on the new pad.
As the Project progressed, the City paid PSP about $3.06 million for change orders the City requested for upgrades to parking structures and imprоvements to the “event center park site.” These expenditures were for items “outside of the scope of the Public Improvements” identified in the Agreement.
In addition to receiving about $51.36 million of funds from the City ($32 million + $11 million6 + $5.3 million + $3.06 million),7 PSP contributed
The City neither selected the preconstruction and/or the construction contractors nor entered into any of the contracts. To secure PSP’s performance, the Agreement required PSP to encumber the Subject Property with a Performance Trust Deed in the City’s favor. The Performance Trust Deed “ensure[d] that the City’s investment in the property result[ed] in the completion of the . . . project,” allowing the City “to control the ultimate disposition of the property and the project” in the event PSP defaulted. Once the Private and Public Improvements were “substantially completed,” the Agreement required the City to release and reconvey the Performance Trust Deed “in full.”
PSP, through separately created LLCs, executed the third-party construction contracts to build the Private Improvements. The Agreement encouraged PSP to “us[e] businesses and contractors whose work force resides in the Coachella Vаlley,” but provided “in no case or event will [PSP] have any legal obligation to do so.”
The Agreement required the $32 million payment from the City to be deposited into an acquisition escrow account. After the acquisition escrow closed following the satisfaction of various contingencies, the money would be transferred into a private improvement escrow account, managed by an Independent Fund Control (IFC) agent, for PSP to use to construct the
Pursuant to former section 7.06.0309 of the City’s Municipal Code, which excluded public projects from the PWL, PSP paid the workers constructing the Project less than the prevailing wage.
C. The DIR Determines the PWL Applies and the Trial Court Affirms
In 2017, as construction of Project’s phase I continued, the Center for Contract Compliance10 requested the DIR to make a coverage determination about whether the Project was subject to the City’s PWL exemption ordinance. In August 2018, the DIR determined the Project “constitute[d] a
In July 2022, PSP filed a writ of mandate petition in the superior court pursuant to
DISCUSSION
A. Standard of Review
The application of the home rule doctrine is a question of law we review independently. (State Building & Construction Trades Council of California v. City of Vista (2012) 54 Cal.4th 547, 558 (City of Vista).)
B. The PWL
The overarching purpose of the PWL is to “protect and benefit employees on public works projects. This general objective subsumes within it a number of specific goals: to protect employees from substandard wages that might be paid if contractors could recruit labor from distant cheap-labor areas; to permit union contractors to compete with nonunion contractors; to benefit the public through the superior efficiency of well-paid employees; and to compensate nonpublic employees with higher wages for the absence of job security and еmployment benefits enjoyed by public employees.” (Lusardi Construction Co. v. Aubry (1992) 1 Cal.4th 976, 987 (Lusardi Construction Co.).)
C. The Home Rule Provision
The home rule provision provides that charter cities “may make and enforce all ordinances and regulations in respect to municipal affairs, subject only to restrictions and limitations provided in their several charters and in respect to other matters they shall be subject to general laws.” (Section 5(a).) Pursuant to Section 5(a), city charters enacted “with respect to municipal affairs . . . supersede all laws inconsistent therewith.” (
The Supreme Court in City of Vista applied a four-part “analytical framework for resolving whether or not a matter falls within the home rule authority of charter cities.” (City of Vista, supra, 54 Cal.4th at p. 556.) The
“No exact definition of the term ‘municipal affairs’ can be formulated, and the courts have made no attempt to do so, but instead have indicated that judicial interpretation is necessary to give it meaning in each controverted case.” (California Fed. Savings & Loan Assn. v. City of Los Angeles (1991) 54 Cal.3d 1, 16.) Nonetheless, the Supreme Court has offered some guidance in what constitutes a “municipal affair,” explaining that the phrase “refer[s] to the internal business affairs of a municipality.” (City of Walnut Creek v. Silveira (1957) 47 Cal.2d 804, 811 (City of Walnut Creek).)
City of Vista concluded “[t]he wage levels of contract workers constructing locally funded public works are certainly a ‘municipal affair.’ ” (City of Vista, supra, 54 Cal.4th at p. 558.) For support, the Supreme Court relied on its decision in City of Pasadena v. Charleville (1932) 215 Cal. 384 (Charleville), which, in its time, was a “test case” to decide whether the Legislature’s enactment of the PWL applied to charter cities. (City of Vista, at pp. 558–559.)
Charleville involved a writ of mandate action brought to compel a charter city’s manager to sign a contract to build a fence around a city-owned reservoir, after the city manager refused to sign the contract because it did not comply with the then newly enacted PWL. (Charleville, supra, 215 Cal. at p. 387.) Charleville held “the issue of wage levels of contract workers improving a city-owned reservoir was, as a matter of law, a ‘municipal affair.’ ” (City of Vista, supra, 54 Cal.4th at p. 559.)
In analyzing Charleville, the Supreme Court in City of Vista explained, “ ‘[t]he sole purpose of the contract [in Charleville] is the construction of a wire fence around a reservoir which is a part of the city’s municipal water system. The supplying of water by a city to its inhabitants is a municipal
Applying the holding and reasoning in Charleville, City of Vista concluded “the construction of a city-operated facility for the benefit of a city’s inhabitants is quintessentially a municipal affair, as is the control over the expenditure of a city’s own funds. Here, the two fire stations in the [c]ity of Vista, like the municipal water system in Charleville . . . are facilities operated by the city for the benefit of the city inhabitants, and they are financed from the city’s own funds. We conclude therefore that the matter at issue here involves a ‘municipal affair.’ ” (City of Vista, supra, 54 Cal.4th at p. 559.)
D. Analysis
Both parties primarily rely on City of Vista for support. PSP argues that former section 7.06.030 of the Palm Springs Municipal Code, and not the PWL, applies to the third-party construction contracts it executed. PSP reasons that undеr City of Vista, the construction was a municipal affair because the City “contributed City tax dollars and retained fiscal control over how all construction monies were spent,” ensuring that its contribution
The DIR and Local 81 argue that the construction was not a municipal affair because unlike the facts in City of Vista, the Project did not involve “construction of a city-operated facility, using the city’s own funds.” Instead, they argue the contract workers’ wages were for a “cоmmercial project by a private developer, built on privately-owned land, constructed primarily to profit a private party, with minimal municipal funding,” under circumstances where the municipality exercised little control over the construction or disbursement of funds. We conclude the DIR and Local 81 have the better argument.
To start, we agree with the parties that construction of the Project’s phase I satisfies the definition of “public works” under
We do not agree, however, that the City “retained fiscal control over how all construction monies were spent,” as PSP posits. (Italics added.) Although the City’s contribution of funds for the Project was not insignificant (i.e., about $51.36 million, including funds for public infrastructure
The facts of this case are thus readily distinguishable from those in City of Vista. Unlike the City here, the charter city in City of Vista itself entered the construction contracts for the public buildings, oversaw that construction, and alone paid for it out of local funds. (City of Vista, supra, 54 Cal.4th at p. 559.) As a result of the City of Vista engaging in the procurement process, the municipality was able to take advantage of a local ordinance and save taxpayers money by entering contracts in which workers received less than prеvailing wages.
Our facts are also distinguishable from those in Charleville. Like the charter city in City of Vista and unlike the City here, the municipality in Charleville itself engaged in the procurement process, agreeing to a contract for the construction of a fence around a reservoir it owned, which paid the contract workers less than prevailing wages pursuant to the charter city’s local ordinance. (Charleville, supra, 215 Cal. at p. 387.)
Another material difference between the instant case and City of Vista or Charleville is the purpose of, and ends to be achieved by, the construction. Unlike the projects in City of Vista and Charleville that were solely for a public purpose that benefitted the charter cities’ inhabitants (i.e., fire
Indeed, for years PSP sought to redevelop the Subject Property, refusing to enter into an agreement with the City until it received a certain rate of a return on its private investment. Although the City also received a benefit—eliminating blight in the downtown area and increasing the City’s sales and property tax revenues—the facts do not support PSP’s contention that “the entire project was built as to enhance the value of the City’s public improvements and its public investment in the project.” (Italics added.) Rather, we find the facts demonstrate the converse is true: the Project was primarily built to enhance the value of PSP’s Private Improvements (it owned and managed postconstructiоn concerns, including retail shops, restaurants, cafes, and public gathering spaces) and its private investment.
In sum, we conclude City of Vista and Charleville are distinguishable from the case before us.
PSP also relies on our decision in Vial, supra, 122 Cal.App.3d 346, arguing Vial provides “a clear resolution” of the present issue because it “squarely decided that a charter city resolution exempting public works projects from prevailing wages constituted a municipal concern.” We are not persuaded.
Vial involved an appeal from an order denying the petition of the DIR for a writ of mandate compelling the city of San Diego to comply with the PWL, after the city council had adopted a resolution “declaring payment of prevailing wages to be apprоpriate only when required by Federal or State grants and on other jobs considered to be of State concern.’ ” (Vial, supra,
In so doing, we recognized a charter city “enjoys autonomy over its ‘municipal affairs’ ” under the home rule provision, and that “a charter city’s ordinances which deal with purely municipal affairs are valid even if they conflict with general laws,” unless the general laws involve subject matters of statewide concern. (Vial, supra, 122 Cal.App.3d at p. 348.) Relying on Charleville, we concluded the PWL is “a general law” and “does not apply to the public works projects of a chartered city, as long as the projects in question are within the realm of ‘municipal affаirs’ ” (
Vial does not present a “clear resolution” of the “present issue,” as PSP contends, because that case involved only the DIR’s blanket challenge to a charter city’s resolution made pursuant to its home rule authority. (Vial, supra, 122 Cal.App.3d at p. 348.) Unlike the present case, Vial did not examine a specific public works project and whether it qualified as a municipal affair under the home rule doctrine, exempting the charter city from paying prevailing wages to workers under the PWL. Vial thus does not inform our analysis here.
PSP relies on other cases to assert a projеct funded by a charter city that also benefits a private party “can appropriately be said to serve a public purpose and constitute a municipal affair”; the focus centering on benefits to the charter city and not to the private party.
One such case is City of Los Angeles v. Superior Court of County of Los Angeles (1959) 51 Cal.2d 423 (City of Los Angeles). City of Los Angeles is
PSP also relies on City and County of San Francisco v. Patterson (1988) 202 Cal.App.3d 95 (City and County of San Francisco). There, the Court of Appeal invalidated an initiative petition that restricted the ability of the city, county, or school district, individually or collectively, to lease or sell its property. As to the city and county, the court held that any restriction on the board of supervisor’s charter-based discretionary authority had to be accomplished by charter amendment and not by initiative. (Id. at pp. 102–104.)
As to the school district, the court held that, as an agency of the state, “the school system is a matter of general state concern and is not a municipal affair. [citation].” (City and County of San Francisco, supra, 202 Cal.App.3d at p. 101.) That court concluded, “[t]he Education Code represents the Legislature’s comprehensive enactment of laws regulating public schools and school districts on a statewide basis, and from which the power of the local
Finally, PSP argues the home rule cases “distinguish between state laws that set procedural requirements (. . . where courts are more likely to find the matter to be of statewide concern) and state laws that set substantive limits on local legislative bodies (as in Vista, where no such deference is given).” However, whether a state law is procedural or substantive is relevant to part three of the four-part analytical framework, as described in City of Vista. (City of Vista, supra, 54 Cal.4th at pp. 563-564.) Because we conclude the construction of the Project was not a municipal affair, we need not reach the remaining factors in the City of Vista’s “analytical framework.”17
In this matter, PSP owned the Subject Property to be redeveloped and for years sought to commercially develop it by making various proposals to the City that would yield to PSP a certain rate of return on its investment. PSP also was solely responsible for selecting the contractors to build the project and entering into agreements with them that set the wages of the contract workers; PSP contributed about three-quarters of the funds needed to complete the project; and PSP owned and managed the private improvements after the development was completed. This comprised a
Based on the totality of the record, we independently conclude PSP’s project was not a municipal affair which would allow PSP to “step into the shoes” of the City to take advantage of the home rule doctrine and the City’s anti-PWL ordinance. To hold otherwise would unnecessarily expand the concept of “municipal affairs” to include the “internal business affairs” of a privаte party (see City of Walnut Creek, supra, 47 Cal.2d at p. 811 [“municipal affairs” refers a charter city’s “internal business affairs”]); and undermine the important goals of the PWL (Lusardi Construction Co., supra, 1 Cal.4th at p. 987).
DISPOSITION
The judgment is affirmed. The DIR to recover its costs on appeal. (
RUBIN, J.
WE CONCUR:
McCONNELL, P. J.
CASTILLO, J.