Dear Chief Justice George and Associate Justices of the California Supreme Court:

Transcription

1 California Supreme Court 350 McAllister Street San Francisco, California Re: County of Orange v. Barratt American, Inc. (2007) 150 Cal.App.4th 420 Amicus Curiae Letter In Support of Review (Rule 8.500(g)) Supreme Court Case No. S (Court of Appeal Case No. G035627) Dear Chief Justice George and Associate Justices of the California Supreme Court: The California State Association of Counties (CSAC) 1 and the League of California Cities (League) 2 respectfully request that this Court grant the County of Orange s petition to review the above-referenced published opinion by the Court of Appeal for the Fourth Appellate District, Division Three. (Cal. Rules of Court, rule 8.500(g).) I. The Opinion Substantially Affects The Interests Of CSAC and League Members Counties and cities are responsible for enforcing state building standards pursuant to Health and Safety Code section (Parada v. City of Colton (1994) 24 Cal.App.4th 356, ) The purpose of enforcing these standards is to preserve and protect the public health and safety, and [o]ne of the ways this public policy is accomplished is through the local agency' issuance of building permits. (Id. at p. 364; Baum Electric Co. v. City of Huntington Beach (1973) 33 Cal.App.3d 1 CSAC is a non-profit corporation. CSAC s membership consists of 58 California counties. CSAC sponsors a Litigation Coordination Program, which is administered by the County Counsel s Association of California and is overseen by the Association s Litigation Overview Committee, comprised of county counsels throughout the State. The Litigation Overview Committee monitors litigation of concern to counties statewide and has determined that this case is a matter affecting all counties. 2 The League of California Cities is an association of 478 California cities dedicated to protecting and restoring local control to provide for the public health, safety, and welfare of their residents, and to enhance the quality of life for all Californians. The League is advised by its Legal Advocacy Committee, which is comprised of 24 city attorneys from all regions of the State. The Committee monitors litigation of concern to municipalities, and identifies those cases that are of statewide or nationwide--significance. The Committee has identified this case as being of such significance.

2 Page 2 of , 581 [the paramount policy underlying the building regulations is the protection of public health and safety].) Local governments throughout the State finance the performance of these regulatory services through the imposition of regulatory fees, including fees for zoning variances, zoning changes, use permits, building inspections, and building permits. (See, e.g., Gov. Code, 66014(a) and 66016; and Health & Saf. Code, 17951, and ) The Barratt Opinion warrants review to secure uniformity of decision and to settle important questions of law regarding (1) whether local governments bear the burden of proving the reasonableness and necessity of fee-related expenditures in actions challenging regulatory fees; and (2) whether judicial inquiry into the reasonableness and necessity of a public agency s expenditures is consistent with the separation of powers doctrine. (Cal. Rules of Court, rule 8.500(b).) Government Code section authorizes counties to increase or decrease fees in the amount reasonably necessary to recover the cost of providing any product or service or cost of enforcing any regulation for which the fee or charge is levied. (Gov. Code 54985(a).) Government Code section requires that fees not exceed the estimated reasonable cost of providing the service for which the fee is charged, unless a question regarding the amount of the fee charged in excess of the estimated reasonable cost of providing the services or materials is submitted to, and approved by, a popular vote of two-thirds of those electors voting on the issue. (Gov. Code, 66014(a).) These statutes have a profound statewide impact on the financial ability of counties to meet the regulatory needs of the public. (See Collier v. City and County of San Francisco (June 12, 2007, A113171) Cal.App.4th [p. 23] [2007 Cal.App. Lexis 961] [narrow reading of permissible regulatory fees could hinder a municipality s ability to address burdens placed on the community by the activities of certain classes of individuals].) CSAC supports the grant of review because the Barratt Opinion broadly expands the scope of fee litigation proceedings to encompass judicial review of the reasonableness and necessity of regulatory spending decisions by local governments. The Barratt Opinion allows courts to go far beyond merely analyzing whether fees exceed estimated costs. Rather, it authorizes judicial review of whether spending decisions to enforce building standards designed to protect the health and safety of the public are reasonable and necessary, as determined by a trial court. The Opinion places the burden of justifying such expenditures on local governments, and the failure to produce evidence in support of each regulatory expenditure results in regulatory costs being deemed unnecessary or unreasonable. The Barratt Opinion, therefore, creates a presumption that local government regulatory expenditures are invalid, which local governments must overcome in a fee lawsuit. In

3 Page 3 of 10 creating this presumption, the Opinion fails to reconcile the conflicts it creates with numerous published opinions, including the opinions of this Court. Thus, the Opinion invites a retrospective judicial review of the reasonableness and necessity of county expenditures in violation of the separation of powers doctrine, and places courts in the position of second guessing the policy decisions of local governments on matters involving the health and safety of the public. In the alternative, CSAC and League respectfully request that this Court order that the Barratt Opinion be depublished. (Cal. Rules of Court, rule (a).) The Barratt Opinion represents an extreme position on a continuum of inconsistency that has developed in the Courts of Appeal regarding the appropriate scope of review for trial courts when reviewing the legislative decisions of local governments in setting fees and spending fee revenues. The Opinion conflicts with well established case law holding that legislative acts are presumed to be valid. The Opinion also cannot be reconciled with the provisions of the County Budget Act, Government Code section 29000, et seq., which sets forth a transparent and exclusive process for counties to formulate and adopt budgets in which the wisdom of county expenditures is determined in public hearings, rather than through the narrow lens of a fee lawsuit. II. The Opinion s Conclusion That Public Agencies Bear The Burden of Proving That Their Regulatory Expenditures Are Reasonable and Necessary Cannot Be Reconciled With Existing Law The Opinion references longstanding case law holding that a county s adoption of a budget is clearly a legislative function. (County of Orange v. Barratt American, Inc. (2007) 150 Cal.App.4th 420, 437; see also Cal. Teachers Ass'n v. Ingwerson (1996) 46 Cal.App.4th 860, 866; County of Butte v. Superior Court (1985) 176 Cal.App.3d 693, 698; Hicks v. Board of Supervisors (1977) 69 Cal.App.3d 228, 235.) However, the Opinion then proceeds to require counties to prove that their regulatory expenditures are reasonable and necessary in direct conflict with decades of judicial precedent recognizing that legislative acts are presumed to be valid. (County of Orange v. Barratt American, Inc., supra, 150 Cal.App.4th at pp ) This Court has repeatedly stated the general rule that legislative enactments are presumed to be valid. (Professional Engineers in California Government v. Kempton (2007) 40 Cal.4th 1016, 1042; Voters for Responsible Retirement v. Bd. of Supervisors (1994) 8 Cal.4th 765, 780; Sea & Sage Audubon Society, Inc. v. Planning Commission (1983) 34 Cal.3d 412, 421; County of Plumas v. Wheeler (1906) 149 Cal. 758, 767.) Likewise, courts ordinarily presume that the government will comply with the law. (City of Marina v. Board of Trustees of California State University (2006) 39 Cal.4th 341, 365.)

4 Page 4 of 10 The Opinion stands in direct conflict with case law regarding claims challenging government expenditures as wasteful under Section 526a of the Code of Civil Procedure. California courts have consistently placed a high burden of proof on plaintiffs to demonstrate that governmental expenditures are wasteful. (Herzberg v. County of Plumas (2005) 133 Cal.App.4th 1, [ In order to obtain injunctive relief in an action brought under Code of Civil Procedure section 526a, the taxpayer must establish that the expenditure of public funds which he seeks to enjoin is illegal]; Sagaser v. McCarthy (1986) 176 Cal.App.3d 288, 311 [ Because appellants failed to establish sufficient facts to support a case for waste of public funds, the court did not abuse its discretion in finding there was no such waste. ].) [A]ppellate courts have made clear that, although in general CCP section 526a should be interpreted liberally, it should not be used to invade, supersede, or even intrude upon the discretion invested in the legislative and executive branches of government. (Humane Society of United States v. State Board of Equalization (June 21, 2007, A114590) Cal.App.4 th [p. 9].) Indeed, by requiring counties to establish before a trial court that its regulatory expenditures are reasonable and necessary, the Opinion endorses the very same type of judicial second guessing that this Court condemned in Sundance v. Municipal Court (1986) 42 Cal.3d 1101: [The] term waste as used in section 526a means something more than an alleged mistake by public officials in matters involving the exercise of judgment or wide discretion. To hold otherwise would invite constant harassment of city and county officers by disgruntled citizens and could seriously hamper our representative form of government at the local level. (Id. at pp ) Thus, this Court affirmed the trial court s ruling that waste occurs only where no public benefit can, within the limits of reasonable legislative judgment, be found for the expenditure. If reasonable minds could possibly differ, legislative judgment must prevail and the court may not interfere with it. (Id. at pp. 1137, 1139.) The Barratt Opinion goes beyond merely analyzing whether fees exceed reasonable estimated costs, and authorizes judicial review of whether local government regulatory spending decisions are reasonable and necessary, and places the burden of justifying such expenditures on local governments. By placing such a burden of proof on local governments, the Barratt Opinion requires no judicial deference to the decisions made by local legislative bodies in setting both fees and regulatory expenditures. In short, the Barratt Opinion not only places trial courts in the position of substituting their decisions in place of the legislative discretion of local governments, but the placement of the burden on local governments of producing evidence to establish a

5 Page 5 of 10 negative, i.e., that regulatory expenditures are not unreasonable and unnecessary, invites a proliferation of litigation regarding local fee legislation. The financial uncertainty created by the Barratt Opinion threatens to impair the ability of local governments to pay for regulatory services designed to protect the health and safety of California residents. The Court should grant review of the Opinion so that both courts and local governments will have guidance regarding whether the reasonableness and necessity of regulatory costs can be challenged in lawsuits over fees and, if so, who bears the burden of proof in such disputes. III. The Opinion s Endorsement Of Judicial Review Of The Reasonableness and Necessity Of Fee-Related Expenditures Contradicts Case Law On The Separation of Powers Doctrine California courts have recognized that [t]he budgetary process entails a complex balancing of public needs in many and varied areas with the finite financial resources available for distribution among those demands. (County of Butte v. Superior Court (1985) 176 Cal.App.3d 693, ) The process involves interdependent political, social and economic judgments which cannot be left to individual officers acting in isolation; rather, it is, and indeed must be, the responsibility of the legislative body to weigh those needs and set priorities for the utilization of the limited revenues available. (Ibid.) Indeed, because of their experience in government and knowledge of local conditions and interests, local government officials such as members of a county board of supervisors are particularly well qualified to make budgeting decisions. (Totten v. Board of Supervisors of the County of Ventura (2006) 139 Cal.App.4th 826.) Until the issuance of the Barratt Opinion, California courts consistently held that courts are without power to interfere with purely legislative actions such as the approval of a budget. (See Mandel v. Myers (1981) 29 Cal.3d 531, 540; Cal. Teachers Ass'n v. Ingwerson (1996) 46 Cal.App.4th 860, 866; County of Butte v. Superior Court (1985) 176 Cal.App.3d 693, 698; Hicks v. Board of Supervisors (1977) 69 Cal.App.3d 228, 235.) The court in Hicks v. Board of Supervisors explained: The reason the court may not command specific legislative action is that such interference would violate the basic constitutional concept of separation of powers. (69 Cal.App.3d at p. 235.) This legislative process is governed by the County Budget Act, Government Code sections 29000, et seq., pursuant to which the Legislature expressly delegated authority over county budgets to county boards of supervisors. (Totten v. Board of Supervisors (2006) 139 Cal.App.4th 826, 834.) The court in Totten v. Board of Supervisors recognized that in enacting sections to 29093, the Legislature intended that the authority to adopt budgets for county public safety agencies be exercised specifically and exclusively by the board of supervisors (Id. at p. 839.) Under the Act, the county

6 Page 6 of 10 budget process is conducted in a transparent manner with numerous opportunities for the public to observe and participate in the process. (See id. at p. 834.) Courts exercise limited review [of legislative acts] out of deference to the separation of powers between the Legislature and the judiciary, to the legislative delegation of administrative authority to the agency, and to the presumed expertise of the agency within its scope of authority. (Carrancho v. California Air Resources Board (2003) 111 Cal.App.4th 1255, 1265.) Local government s legislative determinations are reviewed through traditional mandamus under Section 1085 of the Code of Civil Procedure. (See Carrancho, supra, 111 Cal.App.4th at p. 1265; Mike Moore's 24-Hour Towing v. City of San Diego (1996) 45 Cal.App.4th 1294, 1303.) Mandamus will not lie to control an exercise of discretion, i.e., to compel an official to exercise discretion in a particular manner. (Common Cause of Cal. v. Bd. of Supervisors (1989) 49 Cal.3d 432, 442.) Instead, such review is limited to an inquiry of whether the action was arbitrary, capricious or entirely lacking in evidentiary support. (Carrancho, supra, 111 Cal.App.4th at p. 1265; Mike Moore's 24-Hour Towing, supra, 45 Cal.App.4th at p ) The Barratt Opinion creates a conflict with the well-established case law referenced above. Despite its acknowledgement that the adoption of a budget is clearly a legislative function, the court held that judicial inquiry into the reasonableness and necessity of fee expenditures is legislatively sanctioned and does not violate the separation of powers doctrine. (County of Orange v. Barratt American, Inc., supra, 150 Cal.App.4th at p. 437.) The Opinion dramatically expands the scope of Government Code sections 54985, and 66022, which merely require fees not to exceed estimated costs. Instead, the Opinion holds that [a] determination of the reasonableness and necessity of fees must include a determination of the reasonableness and necessity of the costs upon which those fees are based. (County of Orange, supra, 150 Cal.App.4th at p. 428.) By so holding, the Opinion endorses judicial micromanagement of local government spending decisions in a manner that is inconsistent with the separation of powers doctrine. Accordingly, the Court should grant review to address whether courts can evaluate the reasonableness and necessity of local government expenditures in the context of a fee lawsuit. / / / / / /

7 Page 7 of 10 IV. The Opinion Magnifies An Inconsistency In The Case Law That Has Developed In The Courts of Appeal Regarding The Scope and Standard of Review In Regulatory Fee Disputes The Opinion expands upon an inconsistency that has developed between the decisions of this Court and a line of cases in the Courts of Appeal regarding the burden of proof and the standard of review in lawsuits challenging regulatory fees. Over a century ago, in County of Plumas v. Wheeler (1906) 149 Cal. 758, 767, this Court rejected an attack on a county imposed regulatory fee, and held that in view of the purpose of the ordinance, as declared in its title, and the presumption of validity attending such enactments, it should not be held that the ordinance is on its face a revenue measure disguised as a provision for regulation. (Emphasis added.) In Sea & Sage Audubon Society, Inc. v. Planning Commission (1983) 34 Cal.3d 412, 421, the Court again specifically applied the presumption that legislative acts are valid to judicial review of fees adopted by local governments. This Court held that given the presumption of validity traditionally accorded to legislative acts, it is plaintiffs -- rather than the city or Anaheim Hills -- who bore the initial burden of presenting a prima facie evidentiary showing as to the invalidity of the fee. (Ibid.) The Barratt Opinion heavily relies on Oildale Mutual Water Company v. North of the River Municipal Water District (1989) 215 Cal.App.3d 1628 to support its holding that the County properly bore the burden of proving that its fee expenditures were reasonable and necessary. (County of Orange, supra, 150 Cal.App.4th at p. 438) In turn, the Oildale decision represented an expansion of the court of appeal decision in Beaumont Investors v. Beaumont-Cherry Valley Water District (1985) 165 Cal.App.3d 227. (Oildale, supra, 215 Cal.App.3d at pp ) Relying on Beaumont Investors, the Oildale court reasoned that if the plaintiff were required to prove that the fees charged by the District are excessive and therefore proceeds of taxes, it would give the District a litigational advantage to maintain incomplete or misleading records regarding the costs of providing water to Oildale. (Id. at p ) In Knox v. City of Oakland (1992) 4 Cal.4th 132, this Court openly questioned the reasoning of Beaumont Investors when it considered an argument that a city should bear the burden of proving that the amount of an assessment was proportional to the benefits bestowed on the parties through the formation of a special assessment district. The Court held: We are not persuaded by the Beaumont Investors decision [citations] to deviate from the traditional standard of review (Id. at p. 147, fn. 21; accord Brydon v. E. Bay Mun. Util. Dist. (1994) 24 Cal. App. 4th 178, 191 [ the Supreme Court cast substantial doubt about the propriety of shifting the burden of proof to the agency, thus Beaumont Investors provides limited precedential value for the instant case ].)

8 Page 8 of 10 In Sinclair Paint Company v. State Board of Equalization (1997) 15 Cal.4th 866, the Court cited its earlier decision in Sea & Sage Audubon Society, Inc. v. Planning Commission, for the proposition that persons challenging fees have [the] burden of establishing invalidity. (Id. at pp ) The Court concluded that the trial court erred in granting summary judgment to the plaintiff, and held: [The plaintiff] should be permitted to attempt to 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. (Id. at p. 881.) Thus, notwithstanding the court of appeal decisions in Beaumont Investors and Oildale, this Court again reiterated the rule that persons challenging regulatory fees bear the burden of establishing the invalidity of the fee. The Opinion holds that [a] determination of the reasonableness and necessity of fees must include a determination of the reasonableness and necessity of the costs upon which those fees are based. (County of Orange, supra, 150 Cal.App.4th at p. 428 [Emphasis added].) Thus, the Barratt Opinion warrants review because the issues presented therein are recurring, and its holding greatly expands the inconsistency between Beaumont Investors and Oildale and the opinions of this Court in Plumas, Sea & Sage Audubon Society, Knox and Sinclair by transforming statutes designed to control fees into mechanisms for challenging regulatory spending decisions. In the Barratt Opinion, the trial court, through its appointed expert, independently analyzed the reasonableness and necessity of various county expenditures. The court appointed expert considered the county s purchasing decisions, e.g., the purchase of an APPS computer system, hiring decisions, and the County s projections of future economic growth. (Id. at pp , 439.) However, rather than apply any deference to the budgetary decisions made by the County, the court of appeal relied on its ruling regarding the burden of proof, and held that [b]ecause the County failed to provide Holder with adequate evidence to support the increased expenses, Holder concluded they were not reasonably necessary. (Id. at p. 439.) In contrast to the Barratt Opinion, the First Appellate District in Collier v. City and County of San Francisco (June 12, 2007, A113171) Cal.App.4th [p. 23] [2007 Cal.App. Lexis 961] recently approved of the city s use of a surplus of building and inspection fee revenues to fund related planning and fire department regulatory activities. (Id. at pp. 2-3.) The court cautioned against a narrow reading of permissible regulatory fees, which the court explained, could hinder a municipality s ability to address burdens

9 Page 9 of 10 placed on the community by the activities of certain classes of individuals. (Id. p. 23.) A regulatory fee, after all, is enacted for purposes broader than the privilege to use a service or to obtain a permit. Rather, the regulatory program is for the protection of the health and safety of the public. (Ibid.) The Collier court rejected the plaintiff s argument that under Government Code section the city could only use the surplus to reduce fees instead of spending the surplus on related regulatory activities. (Id. at p. 37.) The court, therefore, declined to interfere with the city s judgment, because it is, and indeed must be, the responsibility of the legislative body to weigh [budgetary] needs and set priorities for the utilization of the limited revenues available. (Ibid.) Indeed, the court held to the extent the amounts transferred were not directly correlated to specific, ascertainable costs incurred by the Planning and Fire Departments in connection with the building permit process, they were reasonable estimations of such costs, and thus were sufficient for our purposes. (Id. at p. 45.) Confusion in the law invites litigation. The Barratt Opinion perpetuates and expands an inconsistency in the case law regarding who bears the burden of proof in a lawsuit challenging regulatory fees, as well as the scope and standard of review that should be applied in such cases. The Court should grant review because the Opinion directly affects the ability of local governments to finance the performance of regulatory activities designed to protect the health and safety of the public. Moreover, the proliferation of divergent opinions in the courts below illustrates how the issues presented in the Barratt Opinion are likely to recur. Granting review will facilitate regulatory planning by local governments, as well as provide consistent guidance regarding the role of the judiciary in evaluating regulatory fees and expenditures. V. Alternatively, the Barratt Opinion Should Be Depublished Because Its Holding Conflicts With The Decisions Of This Court If the Court is not inclined to grant review, CSAC and the League respectfully request pursuant to Rule of the California Rules of Court that the case be depublished. The case fails to meet the standards of publication set forth in Rule The Opinion makes a negative contribution to legal literature because it conflicts with well-established decisions by this Court, and it fails to explain or reconcile the conflicts it creates with numerous holdings of this Court and of the various Courts of Appeal. / / / / / / / / /

10 Page 10 of 10 VI. Conclusion For these reasons, CSAC and the League respectfully request that the Court grant review to secure uniformity of decision and to settle these important questions of law, or in the alternative, decertify the decision of the court of appeal from publication. Respectfully submitted, Jennifer B. Henning, SBN Proof of Service Attached Counsel for Amici Curiae California State Association of Counties and League of California Cities