Opinion
In 1991, by simрle majority vote, the Legislature enacted the Childhood Lead Poisoning Prevention Act of 1991 (the Act) (Stats. 1991, ch. 799, § 3, amended Stats. 1995, ch. 415, § 5; see Health & Saf. Code,
Contrary to the trial court and Court of Appeal, we conclude that the Act imposed bona fide regulatory fees, not taxes, because the Legislature imposed the fees to mitigate the actual or anticipated adverse effects of the fee payers’ operations, and under the Act the amount of the fees must bear a reasonable relationship to those adverse effects. Accordingly, the trial court erred in granting summary judgment to award plaintiff Sinclair Paint Company (Sinclair) a refund of the fees it paid under the Act.
We take the following statement of uncontradicted facts largely from the Court of Appeal opinion in this case. Sinclair paid $97,825.26 in fees for 1991. After the Board of Equalization (the Board) denied Sinclair’s administrative claim for refund, Sinclair filed a complaint for refund, alleging the fees assessed under section 105310 were “actually taxes imposed by the California [Legislature in violation of Proposition 13, Article XIIIA, Section 3 of the California Constitution.” The court granted the request of the Department of Health Services (the Dеpartment) for leave to intervene. It also granted a similar request to intervene by Ray Cochenour and Cardaryl Commodore, representatives of a class of children suffering from lead poisoning, and People United for a Better Oakland, an unincorporated association whose members include the Act’s intended beneficiaries (collectively Cochenour).
Sinclair moved for summary judgment, claiming the Act was invalid on its face because it was not passed by the requisite two-thirds majority vote of the Legislature. The court agreed the Act imposed an unconstitutional tax and granted Sinclair’s motion.
The Board, the Department, and Cochenour appealed, contending the Act involves a regulatory fee, not a tax. Appellants also argued the court erred in granting Sinclair summary judgment without compelling it to produce discovery and improperly relied on legislative history in determining the Act’s constitutionality. The Court of Appeal affirmed the judgment, concluding that the Act was unconstitutional on its face and rejecting appellants’ other claims. We reverse the Court of Appeal’s judgment.
I. The Childhood Lead Poisoning Prevention Act of 1991
When the Legislature enacted the Act in 1991, it explained the Act’s background and purpose in findings that described the numerous health hazards children face when exposed to lead toxicity and declared four state “goals,” namely, (1) evaluating, screening, and providing case management for children at risk of lead poisoning, (2) identifying sources of lead contamination responsible for this poisoning, (3) identifying and utilizing programs providing adequate case management for children found to have lead poisoning, and (4) providing education on lead-poisoning detection and case management to state health care providers. (Stats. 1991, ch. 799, § 1.)
The Act directs the Department to adopt regulations establishing a standard of care for evaluation, screening (i.e., measuring lead concentration in blood), and medically necessary follow-up services for children determined to be at risk of lead poisoning. (§ 105285; see § 105280, subd. (e).) If a child is identified as being at risk of lead poisoning, the Department must ensure “appropriate case management,” i.e., “health care referrals, environmental assessments, and educational aсtivities” needed to reduce the child’s exposure to lead and its consequences. (§§ 105280, subd. (a), 105290.) Additionally, the Act requires the Department to collect data and report on the effectiveness of case management efforts. (§ 105295.)
The Department has “broad regulatory authority to fully implement and effectuate the purposes” of the Act. (§ 105300.) This authority “includefs], but is not limited to,” the development of protocols for screening and for appropriate case management; the designation of laboratories qualified to analyze blood specimens for lead concentrations, and the monitoring of those laboratories for accuracy; the development of reporting procedures by laboratories; reimbursement for state-sponsored services related to screening and case management; establishment of lower lead concentrations in whole blood than those specified by the United States Centers for Disease Control for lead poisoning; notification to parents or guardians of the results of blood-lead testing and environmental assessment; and establishment of а periodicity schedule for evaluating childhood lead poisoning. (§ 105300.)
The Act states that its program of evaluation, screening, and follow-up is supported entirely by fees collected under the Act: “Notwithstanding the scope of activity mandated by this chapter, in no event shall this chapter be interpreted to require services necessitating expenditures in any fiscal year in excess of the fees, and earnings therefrom, collected pursuant to Section
Section 105310 imposes the fees at issue here. In pertinent part, that section imposes fees on manufacturers and other persons formerly and/or presently engaged in the stream of commerce of lead or products containing lead, or who are otherwise responsible for identifiable sources of lead, which have significantly contributed and/or currently contribute to environmental lead contamination. (§ 105310, subd. (a).) The Department must determine fees based on the manufaсturer’s or other person’s past and present responsibility for environmental lead contamination, or its “market share” responsibility for this contamination. (§ 105310, subd. (b).)
Those persons able to show that their industry did not contribute to environmental lead contamination, or that their lead-containing product does not and did not “result in quantifiably persistent environmental lead contamination,” are exempt from paying the fees. (§ 105310, subd. (d).)
The Legislature has authorized the Department to adopt regulations establishing the specific fees to be assessed the parties identified in sеction 105310, subdivision (a). (§ 105310, subd. (b).) The formula for calculating fees attributable to leaded architectural coatings, including ordinary house paint, is set forth in California Code of Regulations, title 17, section 33020.
II. Proposition 13
In June 1978, California voters added article XIII A, commonly known as the Jarvis-Gann Property Tax Initiative or Proposition 13 (article XIII A), to the state Constitution. The initiative’s purpose was to assure effective real property tax relief by means of an “interlocking ‘package’ ” consisting of a real property tax rate limitation (art. XIII A, § 1), a real property assessment limitatiоn (art. XIII A, § 2), a restriction on state taxes (art. XIII A, § 3), and a restriction on local taxes (art. XIII A, § 4). (Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization (1978)
Section 3 of article XIII A restricts the enactment of changes in state taxes, as follows: “From and after the effective date of this article, any changes in State taxes enacted for the purpose of increasing revenues collected pursuant thereto whether by increased rates or changes in methods
Section 4 of article XIII A imposes similar restrictions on local entities: “Cities, Counties and special districts, by a two-thirds vote of the qualified electors of such district, may impose special taxes on such district, except ad valorem taxes on real property or a transaction tax or sales tax on the sale of real property within such City, County or special district.” (Italics added.)
As we explained in Amador Valley, “. . . since any tax savings resulting from the operation of sections 1 and 2 [of аrticle XIII A] could be withdrawn or depleted by additional or increased state or local levies of other than property taxes, sections 3 and 4 combine to place restrictions upon the imposition of such taxes.” (Amador Valley, supra,
III. Taxes or Fees?
Are the “fees” section 105310 imposes in legal effect “taxes enacted for the purpose of increasing revenues” under article XIII A, section 3, and therefore subject to a two-thirds majority vote? Although we have found no cases that interpret the language of section 3, several California appellate decisions have considered whether various fees are really “special taxes” under article XIII A, section 4. (See also City and County of San Francisco v. Farrell (1982)
We first consider certain general guidelines used in determining whether “taxes” are involved in particular situations. The cases agree that
The cases recognize that “tax” has no fixed meaning, and that the distinction between taxes and fees is frequently “blurred,” taking on different meanings in different contexts. (Russ Bldg. Partnership v. City and County of San Francisco, supra,
The “special tax” cases have involved three general categories of fees or assessments: (1) special assessments, based on the value of benefits conferred on property; (2) development fees, exacted in return for permits or other government privileges; and (3) regulatory fees, imposed under the police powеr. Although these three categories may overlap in a particular case, we consider them separately.
The cases uniformly hold that special assessments on property or similar business charges, in amounts reasonably reflecting the value of the benefits conferred by improvements, are not “special taxes” under article XIII A, section 4. (Evans v. City of San Jose (1992)
Similarly, development fees exacted in return for building permits or other governmental privileges are not special taxes if the amount of the fees bears a reasonable relation to the development’s probable costs to the community and benefits to the developer. (Shapell Industries, Inc. v. Governing Board, supra,
According to Sinclair, because the present fees have been imposed solely to defray the cost of the state’s program of evaluation, screening, and follow-up services for children determined to be at risk for lead poisoning, they are not analogous to either special assessments or development fees, for they neither reimburse the state for special benefits conferred on manufacturers of lead-based products nor compensate the state for governmental privileges granted to those manufacturers. As the Court of Appeal observed, the fees challenged here “do not constitute payment for a government benefit or service. The program described in the Act bears no resemblance to regulatory schemes involving special assessments, developer fees, or efforts to recoup the cost of processing land use applications where the benefit analysis is typically applied. [Citations.] The face of the Act makes clear the funds collected pursuant to section 105310 are used to benefit children exposed to lead, not Sinclair or other manufacturers in the stream of commerce for products containing lead.”
Appellants argue, however, that the challenged fees fall squarely within a third recognized category not dependent on government-conferred benefits or privileges, namely, regulatory fees imposed under the рolice power, rather than the taxing power. We agree.
Pennell upheld rental unit fees that a city imposed under its rent control ordinance to assure it recovered the actual costs of prоviding and administering a rental dispute hearing process. (Pennell, supra,
We observe that Sinclair, in moving for summary judgment, did not contend that the fees exceed in amount the reasonable cost of providing the protective services for which the fees are charged, or that the fees were levied for any unrelated revenue purposes. (See Pennell, supra,
According to Sinclair, the challenged fees were in effect “taxes” because the compulsory revenue measure that imposed them was not part of a regulatory effort. The Court of Appeal agreed, relying on prior cases indicating that where payments are exacted solely for revenue purposes and give the right to carry on the business with no further conditions, they are taxes. (E.g., United Business, supra,
Contrary to the Court of Appeal, we believe that section 105310 imposes bona fide regulatory fees. It requires manufacturers and other persons whose products have exposed children to lead contamination to bear a fair share of the cost of mitigating the adverse health effects their products created in the сommunity. Viewed as a “mitigating effects” measure, it is comparable in character to similar police power measures imposing fees to defray the actual or anticipated adverse effects of various business operations.
From the viewpoint of general police power authority, we see no reason why statutes or ordinances calling on polluters or producers of contaminating products to help in mitigation or cleanup efforts should be deemed less “regulatory” in nature than the initial permit or licensing programs that аllowed them to operate. Moreover, imposition of “mitigating effects” fees in a substantial amount (Sinclair allegedly paid $97,825.26 in 1991) also “regulates” future conduct by deterring further manufacture, distribution, or sale of dangerous products, and by stimulating research and development efforts to produce safer or alternative products. (Cf. SDG&E, supra,
Sinclair disputes the state’s authority to impose industry-wide “remediation fees” to compensate for the adverse societal effects generated by аn industry’s products. To the contrary, the case law previously cited or discussed clearly indicates that the police power is broad enough to include
SDG&E involved regulatory fees comparable in some respects to the fees challenged here. (SDG&E, supra,
In SDG&E, the amount of the regulatory fees was limited to the reasonable costs of each district’s program, and the allocation of costs based on emissions “fairly relates to the permit holder’s burden on the district’s programs.” (SDG&E, supra,
As the court observed in SDG&E, “Proposition 13’s goal of providing effective property tax relief is not subverted by the increase in fees or the emissions-based apportionment formula. A reasonable way to achieve Proposition 13’s goal of tax relief is to shift the costs of controlling stationary sources of pollution from the tax-paying public to the pollution-causing industries themselves . . . .” (SDG&E, supra,
The fact that the challenged fees were charged after, rather than before, the product’s adverse effects were realized is immaterial to the question whether the measure imposes valid regulatory fees rather than taxes. City of Oakland v. Superior Court seems close on point. There, the court upheld city fees imposed on retailers of alcoholic beverages to defray the cost of providing and administering hearings into nuisance problems associated with the prior sale of those beverages. The court first observed that “If a business imposes an unusual burden on city services, a municipality may properly impose fees pursuant to its police powers” to assure that the persons responsible “pay their fair share of the cost of government.” (City of Oakland v. Superior Court, supra,
The court in United Business applied the “regulation/revenue” distinction to conclude that sign inventory fees adopted to recover the city’s cost of inventorying signs and bringing them into conformance with law were regulatory fees, not revenue-raising taxes. The court observed thаt, under the police power, municipalities may impose fees for the purpose of legitimate regulation, and not mere revenue raising, if the fees do not exceed the reasonably necessary expense of the regulatory effort. (United Business,
The Court of Appeal, citing United Business, stressed that the challenged fees were exacted solely for revenue purposes, and their payment gave Sinclair and others the right to carry on the business without any further conditions. We see two flaws in that analysis. First, all regulatory fees are necessarily aimed at raising “revenue” to defray the cost of the regulatory program in question, but that fact does not automatically render those fees “taxes.” As stated in United Business, if regulation is the primary purpose of the fee measure, the mere fact that the measure also generates revenue does not make the imposition a tax. (United Business, supra,
Second, we find inconclusive the fact that the Act permits Sinclair and other producers to carry on their operations without any further conditions specified in the Act itself. As we have indicated, fees can “regulate” business entities without directly licensing them by mitigating their operations’ adverse effects. Moreover, as appellants observe, the Act is part of a broader regulatory scheme by which, under various state and federal statutes, the state regulates Sinclair and other manufacturers in the stream of commerce for products containing lead. That being so, Sinclair’s payment of the challenged fees did not confer the right to carry on business without any further conditions or regulation.
The Court of Appeаl rejected appellants’ argument invoking other state and federal regulations: “First, there is nothing on the face of the Act or the accompanying statement of legislative purpose which links the Act’s programs for children at risk for lead poisoning with the cited state or federal statutes regulating lead. Second, none of the fees collected pursuant to
Under existing case law, we can reasonably characterize the challenged fees as regulatory fees rather than as taxes. Accordingly, we conclude the trial court erred in granting Sinclair summary judgment on the constitutional issues. Of course, Sinclair should be permitted to attempt tо prove at trial that the amount of fees assessed and paid exceeded the reasonable cost of providing the protective services for which the fees were charged, or that the fees were levied for unrelated revenue purposes. (See Pennell, supra,
Disposition
The judgment of the Court of Appeal, affirming the trial court’s grant of summary judgment in Sinclair’s favor, is reversed.
George, C. J., Mosk, J., Kennard, J., Baxter, J., Werdegar, J., and Armstrong, J.,
Notes
All further statutory references are to the Health and Safety Code unless otherwise noted.
We are not here concerned with issues arising under constitutional amendments effected by a recent initiative measure (Proposition 218) adopted at the November 5, 1996, General Election. That measure contains new restrictions on local agencies’ power to impose fees and assessments.
Associate Justice of the Court of Appeal, Second District, Division Five, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.