Opinion
A113357
12-12-2006
PAUL D. STUTRUD, Plaintiff and Appellant, v. CITY OF ROHNERT PARK, Defendant and Respondent.
Plaintiff Paul D. Stutrud believed the City of Rohnert Park (City) had enacted an increase in sewer service charges in a way that did not comply with article XIII D of the California Constitution (Article XIII D). Plaintiffs complaint to roll back the increases was dismissed after the trial court sustained the Citys general demurrer without leave to amend. During the pendency of plaintiffs appeal, the California Supreme Court issued a decision that provides a definitive answer, demonstrating that plaintiffs complaint does state a cause of action. We thus reverse.
BACKGROUND
Plaintiff, "individually and on behalf of all others similarly situated," filed a "Complaint For Refund Of Unlawful Fee for Property Related Service" against the City. He alleged that he is a residential homeowner, and required by City ordinances to connect his property to the municipal sewer system. City ordinances also require that "unpaid sewer charges become a lien on the real property." In February 2005, over his written protest, the city council adopted an increase in sewer service charges. After plaintiff paid the first bill for the increased charges, he demanded a refund from the City on the ground that the "sewer . . . rate increases are in violation of Article XIII D, section 6 of the California Constitution." After the City denied a refund, plaintiff commenced this action.
The increases were in two parts. The monthly "service charge" would be raised from $1.03 to $1.08 for the period from April 1, 2005, until March 30, 2006; to $1.35 from April 1, 2006, until March 30, 2007; and to $1.55 after April 1, 2007. The monthly "flow charge" would vary depending on the type of user (e.g., residential, industrial, restaurant, school). For residential users such as plaintiff, the flow charge would increase from $ 5.70 per 1000 gallons to $7.30, effective April 1, 2005. The charge would rise to $9.15 starting April 1, 2006, and to $10.50 beginning April 1, 2007.
Plaintiff alleged that "City violated Article XIII D of the California Constitution in the manner set forth in the written objections submitted by Plaintiff to wit: [¶] (a) The City failed to notify the record holder of parcels to be affected by the proposed sewer rate increases of the public hearing by mail as required by Article XIII D of the California Constitution, section 6(a)(1). [¶] (b) The Notice of Public Hearing . . . fail[ed] to set forth the basis on which the proposed sewer rate increase was calculated as required by Article XIII D of the California Constitution, section 6(a)(1). [¶] (c) The City failed to give 45 days notice of the public hearing by mail to owners of the [affected] parcels as required by Article XIII D of the California Constitution, section 6(a)(2)."
Plaintiff requested "that this Court issue a declaratory judgment that the City sewer service is a property related service within the meaning of Article XIII D of the California Constitution and is subject to all of the limitations and requirements for the fee or charges for property related services as set forth in Article XIII D of the California Constitution except for the requirements that fee increases be approved by the voters." He also prayed for refund of "all sewer service charges unlawfully exacted," and a permanent injunction prohibiting the City from "requesting, demanding or in any way enforcing the increases in sewer charges."
The City filed a general demurrer on the ground the complaint did not state facts sufficient to state a cause of action (Code Civ. Proc., § 430.10, subd. (e)) because "the challenged fees are not subject to Proposition 218," the 1996 initiative measure that enacted Article XIII D, "and even if they were, the City did not violate Proposition 218 by adopting the challenged fees." The City argued that Article XIII D applied to fees or charges for property related services, but the sewer service increases were not related to ownership of real property: "Here, not all property owners pay the subject charges. Rather, only owners or occupants who use the sewer system pay the charges. Specifically, property owners do not need to connect to the sewer system if the subject property is located more than 300 feet away from a sewer line. (Rohnert Park Municipal Code, § 13.16.030.) Further, any user of the system may be billed for the service, whether or not they are property owners. (Rohnert Park Municipal Code, §§ 13.40.040 and 13.44.020.) Thus, the subject fees are not imposed "as an incident of property ownership. (Cal. Const., art. XIII D, § 2. subd. (e).) Rather, they are imposed on the basis of the use (i.e., whether a person generates sewage which flows into the Citys system, and if so, how much). Therefore, the sewer use fees are excluded from the definition of `fee or `charge used in Proposition 218." The City further argued that the Court of Appeal in Howard Jarvis Taxpayers Assn. v. City of Los Angeles (2000) 85 Cal.App.4th 79, had recognized this distinction by holding that municipal water service charges which were based on the amount of water consumed were not covered by Proposition 218.
Plaintiff responded that the Citys reasoning was faulty. He argued that "Rohnert Park Municipal Code section 13.44.030 provides: `A sewer service charge . . . is hereby levied and assessed upon each lot, parcel of land, building or premises connected to the city sewerage system. [¶] . . . [¶] By virtue of ownership of a house connected to the sewer, Plaintiff is liable to pay the fee at issue. There is no escape for property owners. Rohnert Park Municipal Code section 13.44.010 provides in relevant part: `All owners are liable for the fees prescribed by this chapter, regardless of whether the owner uses the service or not. " Plaintiff submitted that the controlling authority was Howard Jarvis Taxpayers Assn. v. City of Fresno (2005) 127 Cal.App.4th 914, where the Court of Appeal "held that water, garbage, and sewer services were property related because use of these services is normal to the ordinary ownership and use of property."
The trial court agreed with the City and sustained its demurrer without leave to amend. The courts reasoning was that "the sewer fees at issue are not property-related fees or charges within the meaning of Proposition 218 but rather are fees imposed only upon those who make use of the Citys sewer system, and the costs are related to the service provided. The controlling precedent is Howard Jarvis Taxpayers Assn. v. City of Los Angeles (2000) 85 Cal.App.4th 81 [sic: 79]. That case compels the conclusion that the sewer fees are not subject to Proposition 218 and is distinguishable from the other authorities cited by Plaintiff."
Following entry of the judgment of dismissal, plaintiff commenced this timely appeal.
DISCUSSION
At the November election of 1996, California voters passed Proposition 218, which added articles XIII C and XIII D. Article XIII C requires voter approval for any general or special tax imposed by a local governmental entity. Article XIII D is addressed to "Assessment and Property-Related Fee Reform." The general purpose of the measure, as pertinent here, is that "No tax, assessment, fee, or charge shall be assessed by any agency upon any parcel of property or upon any person as an incident of property ownership except: [¶] . . . [¶] Fees or charges for property-related services as provided by this article." (Article XIII D, § 3, subd. (a).) Detailed procedures are specified for imposing new or increased fees or charges. (Id., § 6, subds. (a) & (b).) Voter approval is required, "Except for fees or charges for sewer, water, and refuse collection services . . . ." (Id., § 6, subd. (c).)
Article XIII D has generated a fair amount of litigation concerning whether its provisions apply to given fees or charges imposed by local government for water or water-related services. As may be gathered from the parties arguments on the demurrer, the decisions have not been uniform. (E.g., Richmond v. Shasta Community Services Dist. (2004) 32 Cal.4th 409, 426-427 (Richmond) ["capacity charge" imposed only on applicants for new water service connection "is not imposed simply by virtue of property ownership, but . . . as an incident of the voluntary act of the property owner in applying for a service connection"; but once connection is made, "supplying water is a `property-related service within the meaning of article XIII Ds definition of a fee or charge"]; Howard Jarvis Taxpayers Assn. v. City of Fresno, supra, 127 Cal.App.4th 914 [municipal exaction passed along in municipal water, sewer, and refuse collection fees subject to Article XIII D]; Howard Jarvis Taxpayers Assn. v. City of Salinas (2002) 98 Cal.App.4th 1351, 1355 [municipal storm drainage fee is directly related to ownership of developed property and thus subject to Article XIII D]; Howard Jarvis Taxpayers Assn. v. City of Roseville (2002) 97 Cal.App.4th 637, 647 ["in lieu" fees for municipal water, sewer, and refuse collection "are necessarily tied to property ownership" and thus subject to Article XIII D]; Howard Jarvis Taxpayers Assn. v. City of Los Angeles, supra, 85 Cal.App.4th 79, 83 [municipal water usage rates "based primarily on the amount consumed . . . are not incident to or directly related to property ownership" but are "basically commodity charges which do not fall within the scope of Proposition 218"].)
After briefing on this appeal was completed, our Supreme Court decided Bighorn-Desert View Water Agency v. Verjil (2006) 39 Cal.4th 205 (Bighorn). The parties filed supplemental briefs on the impact of this decision. Having considered them, we agree with plaintiff that Bighorn is dispositive and requires reversal.
The major discussion in Bighorn concerned the election provision of article XIII C and how it interacted with the voters power of direct legislation by initiative preserved by Proposition 218 for "reducing or repealing any local tax, assessment, fee or charge" (Cal. Const., art. XIII C, § 3). The court concluded that this language authorized an initiative measure intended to roll back the water agencys existing rates. Citing the distinction drawn in Howard Jarvis Taxpayers Assn. v. City of Los Angeles, supra, 85 Cal.App.4th 79, the agency tried to persuade the court that a volume of consumption charge did not qualify as a fee or charge within the meaning of Article XIII D. The court did not find this argument convincing:
"The Agency urges us to draw a distinction between water delivery charges that are `consumption based (calculated according to the quantity of water delivered) and charges that are imposed regardless of water usage. . . . The Agency argues that consumption-based water charges are not fees or charges within the meaning of article XIII D because they are not imposed `as an incident of property ownership (Cal. Const., art. XIII D, § 2, subd. (e)), but instead as a result of the voluntary decisions of each water customer as to how much water to use. We are not persuaded.
"Article XIII D defines `fee or `charge as `including a user fee or charge for a property related service. (Cal. Const., art. XIII D, § 2, subd. (e), italics added.) . . . As we explained in Richmond, supra, 32 Cal.4th 409, domestic water delivery through a pipeline is a property-related service within the meaning of this definition. (Id. at pp. 426-427.) Accordingly, once a property owner or resident has paid the connection charges and has become a customer of a public water agency, all charges for water delivery incurred thereafter are charges for a property-related service, whether the charge is calculated on the basis of consumption or is imposed as a fixed monthly fee.[ ] Consumption-based water delivery charges also fall within the definition of user fees, which are `amounts charged to a person using a service where the amount of the charge is generally related to the value of the services provided. [Citation.] Because it is imposed for a property-related service of water delivery, the Agencys water rate, as well as its fixed monthly charges, are fees or charges within the meaning of article XIII D, and thus . . . are also fees or charges within the meaning of section 3 of article XIII C. Under the constitutional grant of power in section 3 of article XIII C, the initiative may be used to reduce each of those water delivery charges." (Bighorn, supra, 39 Cal.4th 205, 216-217.)
At this point in its opinion the Court dropped a footnote that "Howard Jarvis Taxpayers Assn. v. City of Los Angeles (2000) 85 Cal.App.4th 79 . . . is disapproved insofar as it is inconsistent with this conclusion."
The sewer service charges imposed here by the City cannot be distinguished from the water rates considered in Bighorn. The point is best made by the City itself, which by relying on Howard Jarvis Taxpayers Assn. v. City of Los Angeles, supra, 85 Cal.App.4th 79, only underscored that the new charges are pegged to the amount of water used by the individual customer. We are not dealing with a charge for commencing sewer service that might be similar to the connection fee that was held not subject to Article XIII D in Richmond, supra, 32 Cal.4th 409. The Bighorn court held that "once a property owner or resident has paid" a charge to initiate service, "all charges for water delivery incurred thereafter are charges for a property-related service." (Bighorn, supra, 39 Cal.4th 205, 217.) And the court left no doubt that when it said "all charges" it meant both fixed and variable parts billed to property owners or residents; both are "imposed for the property-related service of water delivery" and are thus "fees or charges within the meaning of article XIII D." (Ibid.) The relation of the charges to a specific parcel of real property is confirmed by the fact that the City is, as alleged by plaintiff in his complaint, statutorily authorized to obtain a lien to ensure payment for sewer services provided to that parcel. (See Richmond, supra, at pp. 426-427 [ballot analysis of Article XIII D "concluded that water service has a direct relationship to property ownership . . . because a water provider may . . . obtain a lien on the property for the amount of any delinquent service charges"], 430 [noting there that "neither fee can ever become a charge on the property itself"].) The relation to a parcel is further demonstrated by the fact that the charges are based on the existence of an underground pipe that is physically connected to the property. (See Bighorn, supra, at pp. 214, 217; Richmond, supra, at p. 426.) Finally, by expressly holding that "[c]onsumption-based water delivery charges" are subject to Article XIII D, and by disapproving Howard Jarvis Taxpayers Assn. v. City of Los Angeles, the Bighorn court obliterated the basis for the Citys demurrer to plaintiffs complaint.
The City concedes in its supplemental brief that Bighorn disallowed the consumption-based argument on which it had successfully relied. It asserts that "at first blush, Bighorn appears on point. However, a closer analysis . . . reveals that Bighorn is not dispositive, and that it should not be extended to the case at bar." The City now argues that the new fees are not covered by Article XIII D because they were not "imposed . . . as an incident of property ownership." The City argues the Supreme Court in Apartment Assn. of Los Angeles County, Inc. v. City of Los Angeles (2001) 24 Cal.4th 830, 841-842 (Apartment Assn.), held that to be subject to a "tax, assessment, fee, or charge . . . as an incident of property ownership" a levy must be "imposed on a person or on property strictly as an incident of property ownership," or "solely by virtue of property ownership."
Even so, the City cannot forebear from reiterating that the sewer charge increases "are not a tax, but rates upon amounts consumed by those voluntarily connected" to the City sewer system.
Apartment Assn. involved a municipal inspection fee imposed on residential rental properties. The Supreme Court held that compliance with Article XIII D was not required because "the fee is imposed on landlords not in their capacity as landowners, but in their capacity as business owners. The exaction at issue here is more in the nature of a fee for a business license than a charge against property. It is imposed only on those landowners who choose to engage in the residential rental business, and only while they are operating the business." (Apartment Assn., supra, 24 Cal.4th 830, 840.) Thus, the court concluded, the inspection fee was not one imposed "as an incident of property ownership" within the meaning of Article XIII D: "In other words, taxes, assessments, fees, and charges are subject to the constitutional strictures when they burden landowners as landowners. The ordinance does not do so: it imposes a fee on its subjects by virtue of their ownership of a business—i.e., because they are landlords." (Id. at p. 842.)
Based on Apartment Assn., the City discerns the principle that Article XIII D does not apply to exactions based not on property ownership per se, but on an aspect of what the property owner voluntarily elects to do with the property. This principle, the City submits, is unaffected by Bighorn. Thus, according to the City, Bighorn is not dispositive because it "does not address rates which a property owner can avoid while continuing to use his or her property, such as the sewer rates at issue here." This is not a new approach for the City.
In the trial court, and in its original brief to this court, the City placed great emphasis on the idea that property owners do not necessarily have to be connected to the Citys sewer system. It continues doing so in its supplemental brief, arguing that "the Rohnert Park Municipal Code grants sewer customers opportunities (1) to disconnect (or remain disconnected) from the sewer system and to use a private disposal system[, or] (2) to suspend service and payment if the property is unoccupied. (Rohnert Park Municipal Code, §§ 13.16.020, [13.16.]030 and 13.44.020. respectively."
It is open to question whether the cited ordinances actually support the Citys characterizations.
Section 13.16.020 makes it "unlawful to construct, reconstruct, relocate or alter any privy, privy vault, cesspool, septic tank or any other facility intended or used for the disposal of sanitary sewage within the city without the express written permission of the city engineer and the county health officer of Sonoma County."
Section 13.16.030 provides in pertinent part: "The owner of any premises used for human occupancy, employment, recreation or other human purposes situated within the city in which there is a sanitary sewer within three hundred feet of the property line and designed to serve such premises is hereby required to install, at his own expense, a connection with the city sewer . . . within ninety days of official notice to do so . . . ."
Section 13.44.020 provides: "In the case of premises that are occupied by someone other than the owner, such fees may be charged to the occupant of such premises. If the occupant fails to pay such fees the owner shall be liable to the city for such fee." (Italics added.) This ordinance immediately follows section 13.44.010, which, as noted in plaintiffs opposition to the Citys demurrer, states: "All owners are liable for the fees prescribed by this chapter [i.e., chapter 13.44 "Billing and Payment of Sewer Service Charges"] regardless of whether the owners use the services herein provided." (Italics added.)
For present purposes, which we note is still at the pleading stage, we are willing to assume the theoretical possibility that the increased fees may be avoided, and are not inevitably paid by every property owner. (See Rohnert Park Municipal Code, § 13.44.020 quoted at fn. 4, post.) But because this litigation is still at the pleading stage, we have to also assume the truth of plaintiffs express and implied allegations that he owns the "single family home" in which he resides, and that his home was connected to the Citys sewer system prior to the charge increases. (Evans v. City of Berkeley (2006) 38 Cal.4th 1, 6; Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.) Plaintiff thus brings his complaint squarely within the Bighorn courts conclusion that "once a property owner or resident has paid the connection charges and has become a customer of a public water agency, all charges for water delivery incurred thereafter are charges for a property-related service . . . ." (Bighorn, supra, 39 Cal.4th 205, 217, italics added.)
We are dealing with residences, not businesses, as was the case in Apartment Assn., supra, 24 Cal.4th 830. It is illogical to treat plaintiff—and thus presumably the class of "all others similarly situated" he would represent—as voluntarily choosing to continue being connected to the Citys sewer system when municipal law (1) requires maintenance of that connection on penalty of having a lien slapped on the property and (2) makes the owner the ultimate guarantor of any unpaid fees. Article XIII D, section 6, subdivision (b) expressly extends to increases in existing fees or charges.
We are also under the voters command that Article XIII D is to "be liberally construed to effectuate its purposes," one of which is "limiting the methods by which local governments exact revenue from taxpayers without their consent." (Proposition 218, §§ 5, 2, reprinted at Historical Notes, 2A Wests Ann. Cal. Const. (2006 supp.) foll. Art. XIII C, p. 73.) We would not be faithful to that command if we acceded to the Citys arguments that compliance with Article XIII D is not obligatory if there may be homeowners who end up not having to pay for fee or charge increases. Article XIII D was enacted for the benefit of property owners, and it should not be up to property owners to take affirmative steps that will excuse municipal compliance with Article XIII D. We therefore hold that the increased sewer charges challenged by plaintiffs complaint "burden landowners as landowners" and are "exactions levied solely by virtue of property ownership." (Apartment Assn., supra, 24 Cal.4th 830, 842.)
Section 6, subdivision (c) of Article XIII D does not require that the increased charges be put to a vote of the citizens of Rohnert Park, but subdivisions (a) and (b) do require that the charges cannot be implemented unless the City complies with specified notice and hearing procedures. The conclusion is inescapable that plaintiffs complaint does state a cause of action for the Citys failure to comply with the procedures of section 6 of Article XIII D. In accordance with this conclusion, we hold that the Citys demurrer should not have been sustained.
DISPOSITION
The judgment of dismissal is reversed.
We concur:
HAERLE, Acting P.J.
LAMBDEN, J.