Dept. of Finance v. Com. on State Mandates ( 2021 )

Filed 1/4/21
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
DEPARTMENT OF FINANCE et al., B292446
Plaintiffs and Respondents,
(Los Angeles County
v. Super. Ct. No. BS130730)
COMMISSION ON STATE MANDATES,
Defendant and Respondent;
COUNTY OF LOS ANGELES et al.,
Real Parties in Interest and
Appellants.
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 Cajon, 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.
Thomas E. Montgomery, County Counsel (San Diego),
and Christina Snider, Deputy County Counsel, for California
State Association of Counties as Amicus 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,
2
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
pursuant to article XIII B, section 6 of the California Constitution
(section 6). The Commission determined that the trash receptacle
requirement is a reimbursable state mandate and that the
inspection requirements are not.
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 Commission to set aside its decision
3
concerning the trash receptacle requirement. 1 The County and the
Cities of Bellflower, Carson, Commerce, Covina, Downey, Signal
Hill (collectively, the local governments) filed a cross-petition
challenging the Commission’s decision as to the inspection
requirements. The superior court granted the state agencies’
petition and denied the cross-petition as moot. The local
governments appealed. We agree with the Commission that
the trash receptacle requirement requires subvention and the
inspection requirements do not. We therefore reverse the judgment
of the superior court.
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
requirement 2 and inspection requirements. 3
1 The state agencies identified as real parties in interest:
County of Los Angeles and the Cities of Artesia, Azusa, Bellflower,
Beverly Hills, Carson, Commerce, Covina, Downey, Monterey Park,
Norwalk, Rancho Palo Verdes, Signal Hill, Vernon, and Westlake
Village.
2 The trash receptacle requirement is set forth in part 4.f.5.c.3
of the permit, which provides that the Operators shall “[p]lace trash
receptacles at all transit stops within its jurisdiction” and that “[a]ll
trash receptacles shall be maintained as necessary.”
The inspection requirements were summarized by our
3
Supreme Court in Department of Finance v. Commission on State
Mandates (2016) 1 Cal.5th 749 (Department of Finance) as follows:
4
In 2003, the local governments, among others, filed test
claims 4 with the Commission seeking subvention of funds to
cover the costs of the trash receptacle and inspection requirements
pursuant to section 6. 5 That section provides generally that
“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.” (Department of Finance, supra,
1 Cal.5th at p. 758, fn. 6.)
4A “ ‘[t]est claim’ ” is “the first claim filed with the
[C]ommission alleging that a particular statute or executive order
imposes costs mandated by the state.” (Gov. Code, § 17521.) The
Commission’s adjudication of the test claim “governs all subsequent
claims based on the same statute.” (City of San Jose v. State of
California (1996) 45 Cal.App.4th 1802, 1807.)
5Additional procedural and background facts regarding
the permit and the test claims not necessary to our decision
are described in County of Los Angeles v. State Water Resources
5
the state must reimburse local governments for the costs of any
state-mandated “new program or higher level of service.” (Cal.
Const., art. XIII B, § 6, subd. (a).) This general rule does not
apply under certain circumstances, such as when the requirement
is mandated by federal law or the local agency has the authority
to levy fees sufficient to pay for the program or increased level of
service. (Gov. Code, § 17556, subds. (c) & (d).)
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 Gov. Code, § 17556, subd. (d).)
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 Commission’s determination that the local governments could
levy fees to cover the costs of the required inspections.
Control Bd. (2006) 143 Cal.App.4th 985, County of Los Angeles v.
Commission on State Mandates (2007) 150 Cal.App.4th 898, and
Department of Finance, supra, 1 Cal.5th 749.
6
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
Gov. Code, § 17556, subd. (c).) The court did not address the
other arguments by the state agencies or the local governments’
cross-petition. After we affirmed the court’s decision in October
2013, the Supreme Court reversed. (Department of Finance, supra,
1 Cal.5th at p. 772.)
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
7
briefing to address the questions whether Health and Safety Code
section 5471 or Government Code section 54999.7 provide the local
governments with the authority to levy service charges, fees, or
assessments sufficient to pay for the trash receptacle requirement.
We received and have considered the requested supplemental
briefs.
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. (Gov. Code, § 17559,
subd. (b).) On appeal from the trial court’s decision, our review
of disputed factual determinations is the same as “the trial
court, that is, to review the administrative decision to determine
whether it is supported by substantial evidence on the whole
record.” (County of Los Angeles v. Commission on State Mandates,
supra, 32 Cal.App.4th at p. 814; accord, Paradise Irrigation Dist. v.
Commission on State Mandates (2019) 33 Cal.App.5th 174, 185
(Paradise Irrigation).) However, we “independently review[ ]
conclusions as to the meaning and effect of constitutional and
statutory provisions” and, more particularly, the determination that
the permit conditions are state mandates. (Department of Finance,
supra, 1 Cal.5th at p. 762.)
8
B. New Program or Higher Level of Service 6
In 1979, the California electorate added article XIII B to our
state constitution. That article generally “restricts the amounts
state and local governments may appropriate and spend each
year from the ‘proceeds of taxes.’ ” (City of Sacramento v. State
of California (1990) 50 Cal.3d 51, 58–59.) The drafters of the
initiative perceived that the restriction on state government
spending could result in attempts by legislators seeking to
establish or expand a government program to require local
governments implement the desired program, thus effectively
6 In Department of Finance, the Supreme Court noted that
the state agencies and the local governments “d[id] not dispute
here that each challenged requirement is a new program or higher
level of service.” (Department of Finance, supra, 1 Cal.5th at
p. 762.) The local governments contend that this statement
“could be treated as law of the case”; that is, that the Supreme
Court implicitly decided that the trash receptacle and inspection
requirements are new programs or higher levels of service. Under
the law of the case doctrine, “ ‘ “an appellate court, stating a rule
of law necessary to the decision of the case, conclusively establishes
that rule and makes it determinative of the rights of the same
parties in any subsequent retrial or appeal in the same case.”
[Citation.]’ [Citation.] ‘Generally, the doctrine of law of the case
does not extend to points of law which might have been but were
not presented and determined in the prior appeal.’ ” (Leider v.
Lewis (2017) 2 Cal.5th 1121, 1127.) The Supreme Court’s
statement in Department of Finance as to an issue that the parties
did not dispute does not constitute “a rule of law necessary to the
decision of the case.” Although an exception to this rule applies
when a question is implicitly decided because it was essential to
the appellate court’s decision, the general rule and not the exception
apply here. We therefore reject the argument that the Supreme
Court has decided the issues before us.
9
shifting the financial responsibility for the program to the local
governments. (County of Los Angeles v. State of California (1987)
43 Cal.3d 46, 56; County of Fresno v. State of California (1991) 53
Cal.3d 482, 487.) To protect local governments from such attempts,
the drafters included section 6, which provides that “[w]henever the
Legislature or any state agency mandates a new program or higher
level of service on any local government, the [s]tate shall provide
a subvention of funds to reimburse that local government for the
costs of the program or increased level of service.” (Cal. Const., art.
XIII B, § 6, subd. (a); see Department of Finance, supra, 1 Cal.5th
at p. 769.) “As a result, the state . . . , with certain exceptions,
must ‘ “pay for any new governmental programs, or for higher
levels of service under existing programs, that it imposes upon local
governmental agencies.” ’ ” (County of San Diego v. Commission on
State Mandates (2018) 6 Cal.5th 196, 207.)
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
10
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,
11
supra, 190 Cal.App.3d at pp. 530–531.) The Court of Appeal stated
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 installation 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.
12
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 function that
provides a service to the public by producing cleaner transit stops,
sidewalks, streets, and, ultimately, stormwater drainage systems
and receiving waters. Under this view, the mandate to install
and maintain trash receptacles at transit stops is a “new program”
within the meaning of section 6 because it was not required prior
to the Regional Board’s issuance of the permit. Similarly, the
inspection requirements not only increase the level of service
provided by the existing stormwater drainage and flood control
system, but also constitute new programs mandated by the state
to ensure third party compliance with environmental regulations.
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
13
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 worker’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
14
permit; no one else is bound by it. Second, the activities compelled
by the challenged requirements—collecting trash at transit
stops and inspecting businesses and construction sites to ensure
environmental regulatory compliance—are, like the firefighting
services in Carmel Valley, typically within the purview of
government agencies. The requirements therefore constitute
programs within the meaning of both alternative definitions.
By requiring the local governments to comply with the trash
receptacle and inspection requirements, the state agencies have
effectively shifted the financial responsibility for such programs to
the local governments.
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 functions[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
15
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; 33 U.S.C. § 1342(p)(3)(B)(iii).)
“Having elected a management permit that imposes the challenged
conditions in lieu of more rigid requirements,” the state agencies
argue, the local governments “should not be allowed to force the
[s]tate to pay for that choice.”
The state agencies rely on Department of Finance v.
Commission on State Mandates (2003) 30 Cal.4th 727 (Kern
High School District). In that case, the Supreme Court held that
school districts that voluntarily elect to participate in particular
education-related programs were not entitled to subvention for
costs required by such programs. (Id. at p. 743.) This holding does
not apply here, however, because, as our Supreme Court explained,
the local governments are required under federal and state law to
obtain a permit “for any discharge from a municipal storm sewer
system serving a population of 100,000 or more.” (Department of
Finance, supra, 1 Cal.5th at p. 757.) The permit “must effectively
prohibit non-stormwater discharges into the storm sewers, and
must ‘require controls to reduce the discharge of pollutants to the
maximum extent practicable.’ ” (Ibid., italics omitted.) Although
16
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 and
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 Government Code section 17556, subdivision (d),
when, as here, the state imposes on local governments a new
program or higher level of service, the state is not required to
provide subvention to the local government if the local government
“has the authority to levy service charges, fees, or assessments
sufficient to pay for the mandated program or increased level
of service.” (Gov. Code, § 17556, subd. (d).) The state agencies
have the burden of demonstrating the applicability of statutory
exceptions to the subvention requirement. (Department of Finance,
supra, 1 Cal.5th at p. 769.)
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.
17
1. The Inspection Requirements
Under article XI, section 7 of our state constitution, a “county
or city may make and enforce within its limits all local, police,
sanitary, and other ordinances and regulations not in conflict with
general laws.” (Cal. Const., art. XI, § 7.) These powers are known
generally as the police powers of local government. (City and
County of San Francisco v. Regents of University of California
(2019) 7 Cal.5th 536, 544.) The parties do not dispute that the
challenged inspection requirements are within the government’s
police power. (See Freeman v. Contra Costa County Water Dist.
(1971) 18 Cal.App.3d 404, 408 [“prevention of water pollution is a
legitimate governmental objective, in furtherance of which the
police power may be exercised”]; Cowing v. City of Torrance (1976)
60 Cal.App.3d 757, 764 [local government may enter business
property to make reasonable inspection for compliance with public
health and safety regulations]; Sullivan v. City of Los Angeles
(1953) 116 Cal.App.2d 807, 811 [city officials may inspect private
property for compliance with sewage regulations].)
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, 662.)
The services for which a regulatory fee may be charged include
those that are “ ‘incident to the issuance of [a] license or permit,
investigation, inspection, administration, maintenance of a system
of supervision and enforcement.’ ” (California 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
18
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 “sufficient to pay for the mandated program or
increased level of service.” (Gov. Code, § 17556, subd. (d).) We
agree with the Commission that, based upon the local governments’
constitutional police power and their ability to impose a regulatory
fee that (1) does not exceed the reasonable cost of the inspections,
(2) is not levied for unrelated revenue purposes, and (3) is fairly
allocated among the fee payers, the local governments have such
authority. 7
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
7 The state agencies also assert that the local governments
have the authority to levy charges to pay for the inspections under
section 5471 of the Health and Safety Code. Because we hold that
the police power under the constitution provides such authority, we
do not address this issue.
19
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.” (Wat. Code,
§ 13260, subd. (d)(2)(B)(iii).) They argue that any regulatory fee
the local governments impose for their inspections would duplicate
the fees paid to the state and thus (1) exceed the reasonable cost
of providing services for which the fee is charged and (2) not bear
a fair or reasonable relationship to the pertinent burdens or
benefits. 8 This argument assumes that the local government’s
inspection would replace or supplant inspections the Regional
Board is required to conduct. The local governments, however,
do not cite to the record or authority to support that assumption.
Although Water Code section 13260 requires that regional boards
use a portion of the fees they receive from certain waste dischargers
for “stormwater inspection and regulatory compliance issues
associated with industrial and construction stormwater programs”
(Wat. Code, § 13260, subd. (d)(2)(B)(iii)), nothing in the statute
requires a regional board to inspect a fee payer’s site. Thus, the
permit’s inspection requirements and Water Code section 13260
can be applied without duplication or conflict; the local governments
can impose and collect a fee to cover the reasonable costs of
the particular inspections they are required to undertake and
8 We do not express any view as to whether a particular fee a
local government could impose would either exceed the reasonable
cost of providing the services for which the fee is charged or not
bear a fair or reasonable relationship to the payor’s burdens or
benefits from the inspection.
20
the Regional Board can fulfill its expenditure requirements by
addressing “stormwater inspection and regulatory compliance
issues” in other ways. (Wat. Code, § 13260, subd. (d)(2)(B)(iii).)
The local governments further argue that, because any
regulatory fee they could impose to pay for the required inspections
would be duplicative of the fee some businesses are required to pay
to the state under Water Code section 13260, the local government
fee would be void under principles of preemption. We disagree.
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 implication.” ’ ” ’ ” (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, Water Code section 13260. As discussed above, that
statute obligates the waste dischargers described in that statute
to pay annual fees to the state, and requires some of those fees be
used for “stormwater inspection and regulatory compliance issues.”
(Wat. Code, § 13260, subd. (d)(2)(B)(iii).) There is nothing in our
record to indicate that a local government’s inspection fee would
necessarily duplicate the annual fees imposed under Water Code
section 13260; the local government fee would pay for the costs
of the local government’s inspection and the fees paid to the
state could be used for the activities required or permitted under
state law other than the local government’s inspection. Nor does
any provision within Water Code section 13260 imply that the
Legislature intended to “occupy the field” of stormwater program
inspections or inspection fees. Indeed, the Porter-Cologne Water
21
Quality Control Act (Wat. Code, §§ 13000–16104), which includes
Water Code section 13260, provides that its provisions do not limit
“the power of a city or county . . . to adopt and enforce additional
regulations, not in conflict therewith, imposing further conditions,
restrictions, or limitations with respect to the disposal of waste or
any other activity which might degrade the quality of the waters of
the state.” (Wat. Code, § 13002, subd. (a).) We therefore reject the
local government’s preemption arguments.
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 governments 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 of the constitution and the judicial authorities we have
cited provide that authority. Moreover, as the Commission pointed
out, at least one city—Covina—has enacted “stormwater inspection
fees on [commercial establishments] . . . expressly for the purpose of
complying with the permit.”
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
22
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 agencies 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 Government Code section 54999.7. In response the state
agencies argue that this statute provides such authority; the local
governments contend it does not.
Government Code section 54999.7, subdivision (a) provides:
“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
9 It is not clear from our record whether the local
governments have authority to install and maintain trash
receptacles on property they do not own, including property owned
by transit authorities. When counsel for the Regional Board was
asked at a hearing before the Commission about the ability of
the local governments to fulfill the trash receptacle requirement
with respect to transit authority property, counsel suggested that
the local governments could work “cooperatively” with transit
authorities to implement the requirement.
23
reasonable cost 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 Government Code sections 54999
through 54999.7 to address fee disputes among public utilities, such
as water districts, and public agencies that received the services,
such as school districts and state universities. (Assem. Floor
Analysis, Assem. Bill No. 2951 (2005-2006 Reg. Sess.) as amended
Aug. 29, 2006, pp. 3–7.) These disputes and the Legislature’s
responses have been shaped by the Supreme Court’s decision
in San Marcos Water Dist. v. San Marcos Unified School Dist.
(1986) 42 Cal.3d 154 (San Marcos). In that case, a school district
connected its facilities to the water district’s sewer system and paid
monthly service fees, which were not disputed. (Id. at pp. 158, 167.)
The water district, however, also charged a “capacity fee” to pay for
capital improvements to the sewer system, which the school district
challenged. (Id. at pp. 157–158.) The Supreme Court held that the
capacity fee constituted an assessment, which the school district, as
a public agency, was not required to pay. (Id. at pp. 164–165.) The
court rejected the argument that the capacity fee was similar to a
usage fee, which is “ ‘voluntary’—in the sense that it is the payer’s
solicitation and utilization of the [public utility] service which
triggers the charge.” (Id. at p. 161.) A usage fee, the court noted,
“typically is charged only to those who use the goods or services”
and “is related to the actual goods or services provided to the
payer.” (Id. at p. 162.) The capacity fee, by contrast, was an
“involuntary” assessment, which the school district did not agree
to pay and the water district could not lawfully impose on its public
entity customers. (Ibid.)
24
In 1988, the Legislature responded to the San Marcos
decision by enacting Government Code sections 54999 through
54999.6—what courts have referred to as the San Marcos
legislation. (Utility Cost Management v. Indian Wells Valley Water
Dist. (2001) 26 Cal.4th 1185, 1189 (Utility Cost Management);
Regents of University of California v. City and County of
San Francisco (2004) 115 Cal.App.4th 1109, 1111 (Regents).) The
San Marcos legislation authorized public utilities to charge their
public entity customers a “capital facilities fee” and required the
public entities “receiving a public utility’s service” to pay the fee.
(Gov. Code, § 54999.2.) Subsequent litigation among public utilities
and public agencies led the Legislature in 2006 to “fine-tune[ ]”
the statutory scheme by adding section 54999.7. (Assem.
Floor Analysis, Assem. Bill No. 2951 (2005-2006 Reg. Sess.)
as amended Aug. 29, 2006, p. 7.) In addition to subdivision (a)
of section 54999.7, quoted above, subdivision (b) requires the
public utility to determine the amount of the fee for service
provided to a public agency based on “the same objective criteria
and methodology applicable to comparable nonpublic users,
based on customer classes established in consideration of service
characteristics, demand patterns, and other relevant factors.”
(Gov. Code, § 54999.7, subd. (b).)
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 receive the utility’s
services; that is, the public entity is a voluntary customer
of the public utility. (See Assem. Floor Analysis, Assem. Bill
No. 2951 (2005-2006 Reg. Sess.) as amended Aug. 29, 2006, p. 3
[Government Code section 54999.7 “authorizes a public agency
utility to charge public agency customers rates or charges on
25
the same basis as comparable nonpublic users, except for capital
facilities fees”].) Thus, judicial decisions addressing the statutory
scheme have arisen from disputes between public utilities and
their customers. (See Utility Cost Management, supra, 26 Cal.4th
at pp. 1188, 1194 [assignee of Kern Community College District—
a “customer” of the defendant water district—sued to recover
sums allegedly charged in excess of limits under Government
Code section 54999.3]; Regents, supra, 115 Cal.App.4th at p. 1111
[University of California Regents sued provider of water and sewer
services in case that “involves setting and collecting proper charges
for public entities as customers of public utilities”].)
Viewed in this light, Government Code section 54999.7’s
reference to the power of one public agency to impose a fee
for a public utility service “provided to [another] public agency”
contemplates that the receiving public agency is a public utility
customer that solicited and uses the services for which it is charged.
The statute does not permit one public entity to simply install
equipment—such as trash receptacles—on another public entity’s
premises and then charge the other entity for their installation
and ongoing maintenance. We therefore reject the state agencies’
argument that the statute authorizes the local governments to
impose on transit agencies service charges, fees, or assessments to
pay the costs of complying with the trash receptacle requirement.
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,
26
article XIII D of the California Constitution provides generally
for protest procedures and voter approval for fees and charges.
(Cal. Const., art. XIII D, § 6, subds. (a) & (c).) Substantively, a fee
or charge may not be imposed on a parcel or upon a person as an
incident of property ownership unless, among other requirements,
the fee or charge “[does] not exceed the proportional cost of
the service attributable to the parcel,” the fee or charge is for
a service that “is actually used by, or immediately available to,
the owner of the property in question,” and it is not “imposed
for general governmental services.” (Cal. Const., art. XIII D, § 6,
subd. (b)(3)-(5).)
The state agencies discuss at some length how the procedural
requirements under article XIII D of the California Constitution
do not apply to fees for sewer and refuse collection services and, if
they do apply, they do not negate the local government’s authority
to impose fees and charges to pay for the trash receptacle. (See
Cal. Const., art XIII D, § 6, subd. (d); §§ 53750, subd. (k), 53751,
subd. (l); Paradise Irrigation, supra, 33 Cal.App.5th at p. 194)
They address only briefly, and unpersuasively, the substantive
requirements that the trash collection service for which the fee or
charge would be imposed must be used by or immediately available
to the property in question and the fee cannot exceed the cost
attributable to the parcel that is charged.
Under the 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
27
the procedural hurdles applicable to most fees, charges, and
assessments imposed on property owners (see Cal. Const.,
art. XIII D, §§ 4, 6), the proponent of the fee would have to establish
that the fee is for a service that is to some extent “attributable to
the parcel,” that the “service is actually used by, or immediately
available to, the owner of the property,” and that the service is
not “for general governmental services . . . where the service is
available to the public at large in substantially the same manner
as it is to property owners.” (Id., art. XIII D, § 6, subd. (b)(3)–(5).)
In a dispute between the property owner and a local government
that has imposed such a fee, the local government would have
the burden of proof on that issue. (Id., art. XIII D, § 6, subd. (b)(5);
Moore v. City of Lemon Grove (2015) 237 Cal.App.4th 363, 368.)
In the procedural situation in this case, however, it is the state
agencies that are asserting that the local governments have
authority to impose such a fee; they therefore have the burden
of proving that the local governments could satisfy these tests.
(Cf. Department of Finance, supra, 1 Cal.5th at p. 769 [party
claiming the applicability of federal mandate exception to
subvention “bears the burden of demonstrating that it applies”].)
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
transit stops are not the owners of adjacent properties but rather
pedestrians, transit riders, and other members of the general
public; any benefit to property owners in the vicinity of bus stops
would be incidental. Even if the state agencies could establish that
the need for the trash receptacles is in part attributable to adjacent
28
property owners and that the property owners would use the
trash receptacles (see Cal. Const., art. XIII D, § 6, subd. (b)(3)–(4)),
the placement of the receptacles at public transit stops makes
the “service available to the public at large in substantially the
same manner as it is to property owners” (id., art. XIII D, § 6,
subd. (b)(3)). The state agencies, therefore, failed to establish that
the local governments could impose on property owners adjacent
to transit stops a fee that could satisfy these constitutional
requirements.
In their briefs in the trial court, the state agencies relied
on Health and Safety Code section 5471, but did not assert it
in their respondents’ brief or first supplemental brief on appeal.
We requested the parties address the issue in further supplemental
briefs, which we have received. Health and Safety Code
section 5471, subdivision (a) provides that “any entity shall have
power, by an ordinance or resolution approved by a two-thirds vote
of the members of the legislative body thereof, to prescribe, revise
and collect, fees, tolls, rates, rentals, or other charges for services
and facilities furnished by it, either within or without its territorial
limits, in connection with its water, sanitation, storm drainage, or
sewerage system.” The local governments do not dispute that this
statute generally authorizes fees to pay for the costs of complying
with the trash receptacle requirement, but correctly assert the
fee or charge must also comply with constitutional limits on local
government fees. (See generally Cal. Const., art. XIII D.) To the
extent a fee enacted under Health and Safety Code section 5471 is
imposed on transit agencies or property owners, it cannot survive
scrutiny for the reasons explained above; and no cogent argument
has been made as to how a fee could be imposed on pedestrians or
transit riders who would be the primary users and beneficiaries of
the trash receptacles.
29
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 water that runs off each parcel. Without commenting
on the correctness of the opinion, it is inapposite here. The state
agencies are attempting to justify a fee imposed on parcels adjacent
to transit stops to pay for the cost of trash collection at the transit
stops. The Attorney General’s opinion offers no guidance on this
issue.
Lastly, the state agencies assert that the local governments
have authority to levy fees to pay for the trash receptacle
requirements based on Public Resources Code section 40059.
Subdivision (a) of that statute provides: “Notwithstanding
any other provision of law, each county, city, district, or other
local governmental agency may determine all of the following:
[¶] (1) Aspects of solid waste handling which are of local concern,
including, but not limited to, frequency of collection, means of
collection and transportation, level of services, charges and fees,
and nature, location, and extent of providing solid waste handling
30
services.” This statute, enacted as part of the California Integrated
Waste Management Act of 1989, reserves to local governments
decisions concerning waste management that are of local concern.
Although such decisions include “charges and fees,” this statute
does not authorize local governments to impose charges and fees
against persons or property without regard to the constitutional
provisions discussed above.
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.
ROTHSCHILD, P. J.
We concur.
CHANEY, J.
BENDIX, J.
31