Opinion
F074509
11-02-2018
DELANO GUARDIANS COMMITTEE, Plaintiff and Appellant, v. CITY OF DELANO, Defendant and Respondent.
Brent Newell and Ingrid Brostrom, for Plaintiff and Appellant. Garcia Hernandez Sawhney, and Norma Nava Franklin, for Defendant and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. CV-280116)
OPINION
APPEAL from a judgment of the Superior Court of Kern County. Sidney P. Chapin, Judge. Brent Newell and Ingrid Brostrom, for Plaintiff and Appellant. Garcia Hernandez Sawhney, and Norma Nava Franklin, for Defendant and Respondent.
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The City of Delano (City) resolved to increase its charges for City-provided utility services, after employing the procedures required by the Right to Vote on Taxes Act, known as Proposition 218. (Cal. Const., arts. XIII C, XIII D.) Delano Guardians, an unincorporated association, challenged the decision, filing a petition for a writ of mandate in the superior court that claimed the City failed to comply with some of the provisions of Proposition 218.
All "article" references are to the California Constitution.
The trial court agreed with Delano Guardians on one point, found another moot, and upheld the remainder of the City's action. Increases in charges for water, sewer, and refuse collection services were allowed to remain in effect. Delano Guardians appeals.
We conclude no reversible error has been demonstrated and affirm the judgment.
FACTS AND PROCEDURAL HISTORY
On March 1, 2013, the City sent notices in English and Spanish to all its utility customers, and the owners of all affected parcels of property, stating its intent to raise rates for water, sewer, refuse collection, and street sweeping services. It also published the notice in a local newspaper. These notices were required by Proposition 218. (Art. XIII D, § 6, subd. (a).)
The notices sent to owners and customers stated that the current rates were not fully covering the costs of providing the services, and a study had been done to determine the rates necessary to fully fund them. The new rates would be phased in over five fiscal years, 2014 to 2018. Figures were given for the increases in the rates for each service in the first year for a "typical single family home"; these added up to $15.52 per month. A bar graph showed the increases for all five years. The bar graph did not show figures with precision, but the total increase over the five-year period was about $50 to $60 per month.
The notice explained that utility customers and property owners had a right to submit protests in writing objecting to the proposed rate increases. Protests could be submitted at any time before the close of the public hearing to be held on the issue on April 15, 2013. If protests representing a majority of parcels were received, the notice stated, then the increases would not be implemented. Under Proposition 218, an increase in fees or charges such as these is defeated if, after notice and a hearing, parcel owners (including tenants if directly liable for utility bills) submit protests representing a majority of parcels, counting no more than one protest per parcel. (Art. XIII D, §§ 2, subd. (g), 6, subd. (a)(2); Gov. Code, § 53755, subd. (b).)
At the public hearing on April 15, 2013, 59 members of the public spoke about the rate increases, all in opposition. The mayor announced that 4,643 protests would be a majority, and that over 4,700 protests had already been counted. The matter would have to be taken up again at a later meeting of the city counsel, so staff would have time to review and validate the protests.
The city council met again on April 29, 2013. The city clerk announced that 9,284 parcels had been identified as eligible for submission of a protest, so a majority would be 4,643. Only 4,048 of the protests submitted were determined to be valid. The counsel passed a resolution adopting the rate increases. The resolution declared that the protests received did not constitute a majority. The new rates were to take effect July 1, 2013.
At a city council meeting on July 15, 2013, City staff presented a memorandum discussing the methodology that had been used in counting the protests. The memorandum explained that the lists of eligible parcels and their owners were drawn from the county tax assessor's records, and the list of individuals eligible by virtue of their status as tenants directly responsible for paying utility bills was based on the City's records of utility accounts. It also offered a justification for the use of these sources of information despite their possible inaccuracies:
"The determination as to who the owner(s) of record of such parcels [were] was based on the latest Kern County Tax Assessor data list available to the City as of April 15, 2015. The City is legally entitled to rely on the Kern County Tax Assessor data list because the City did not and does not have the legal obligation, the resources or the practical ability to determine the accuracy or completeness of that list as of April 15, 2013 nor any other time. City guidelines also allow a rate-payer to be eligible to vote. The City is legally entitled to rely on its own records as to the identity of the 'rate-payer of record' as of April 15, 2013 for the purpose of determining who could submit a written protest. The City was not legally obligated and did not have the resources or practical ability to determine who was married to or a member of the household of any rate-payer of record as of April 15, 2013 nor any other time."
According to the memorandum, there were 9,284 eligible parcels, and a total of 5,514 protests were received. Only 4,048 of the protests were found valid, however—less than the 4,643 that would represent a majority of the parcels.
The memorandum listed the criteria by which protests were invalidated. A protest was not counted if another protest for the same parcel had already been counted (as would happen if both a landlord and a rate-paying tenant submitted protests for the same parcel, or multiple rate-paying tenants of the same parcel submitted protests, for example). A protest was not counted if the name on the protest was listed neither as an owner in the tax assessor's data nor as a customer in the City's utility account data, or if the address stated on the protest appeared in neither data set. It was not counted if it was not signed, or not signed by a person eligible to protest, or not signed by the person named on the protest as the protestor.
According to the memorandum, the Center on Race, Poverty and the Environment (the nonprofit law office representing Delano Guardians) asked the City for permission to inspect the protests received and for a recount of the protests. The City obliged, recounting the protests previously found valid and reevaluating those found invalid. It determined that 85 of the protests previously found invalid were in reality valid. The number of valid protests rose to 4,133, still not enough to represent a majority of parcels.
Delano Guardians filed its mandate petition on August 23, 2013, and an amended petition on February 13, 2015. The amended petition alleged four causes of action: (1) The notice of proposed rate increases provided by the City lacked some of the information required by Proposition 218. (2) Increases in fees for water, sewer, and refuse collection services are the only fees Proposition 218 allows to be imposed directly after protests representing a majority of parcels fail to be submitted; all others subsequently also must be affirmatively approved by either a majority of property owners or a two-thirds vote of the electorate. (Art. XIII D, § 6, subd. (c).) The increases adopted by the City included increases in street sweeping fees, and incorporated into the increase for water service an increased fee for fire suppression services. The City never obtained affirmative approval of property owners or the electorate for these increases. (3) According to the City's notice, the increases were to be used in part to fund capital improvements and future capital needs. An exaction imposed for capital improvements is an assessment regulated by article XIII D, section 4, not a fee or charge under article XIII D, section 6. The procedures employed by the City failed to satisfy the requirements for imposition of an assessment. Alternatively, to the extent the capital improvements to be funded would benefit only future owners, the increase violates provisions of article XIII, section 6, that require fees collected to benefit those paying them and to do so immediately. (4) The City deemed some protests invalid based on improper criteria. The petition prayed for an order requiring the rate increases to be revoked and fees already collected pursuant to the increases to be refunded.
The trial court held a hearing on the petition and took the matter under submission on March 2, 2015.
On April 29, 2015, while the case was still under submission, Delano Guardians filed a "notice of new authority," calling the court's attention to Capistrano Taxpayers Assn., Inc. v. City of San Juan Capistrano (2015) 235 Cal.App.4th 1493 (Capristrano Taxpayers), which had been decided on April 20, 2015. In Capistrano Taxpayers, a city had introduced a new rate structure for water service with four tiers of usage with progressively increasing prices for each tier. The Court of Appeal held that Proposition 218 allowed this rate structure only if the city could show that the increasing prices corresponded to increasing costs of delivery as the quantity delivered increased. Without such a showing, the city had failed to demonstrate that the rates did not impose on any parcel a fee or charge that exceeded the "'proportional cost of the service attributable to the parcel,'" as required by article XIII D, section 6, subdivision (b)(3). (Capistrano Taxpayers, supra, at pp. 1504-1506.) Focusing for the first time on the tiered structure of Delano's new rates, Delano Guardians contended that Capistrano Taxpayers was a new precedent establishing an additional reason why the City's rate increases were inconsistent with Proposition 218.
The trial court vacated its prior submission of the case, ordered briefing on Capistrano Taxpayers, and set an additional hearing. The court took the matter under submission again after a hearing on August 7, 2015.
So far as the appellate record reflects, the court never issued any ruling on the issues discussed at this second hearing. Further, Delano Guardians never moved for leave to amend its petition and no party ever moved for a reopening of evidence so evidence from the administrative record on the connection between the rate tiers and the cost of providing service could be presented.
The court vacated submission yet again on November 23, 2015, explaining in its order that it was having difficulty resolving the dispute over the invalidation of some of the protests. It directed the City to prepare an index correlating each disputed protest with the relevant items of data in the assessor's list of parcels and the City's list of utility accounts. The court ultimately determined that 66 additional protests should have been found valid, resulting in a total of 4,199 valid protests, which was still less than a majority.
The court issued a written ruling on May 11, 2016. The court agreed with Delano Guardians that inclusion of fire suppression services in the water rate increase, as alleged in the second cause of action, was a violation of Proposition 218. It found the challenge to the increase in street sweeping fees, also included in the second cause of action, was moot because the City had rescinded that increase. The court found for the City on the first (defective notice), third (capital improvement costs), and fourth (invalidation of protests) causes of action. The issue regarding the tiered structure of the new water rates is not mentioned in the court's order. A writ of mandate was to be issued directing the City to set aside and refund the portion of the increase attributable to fire suppression services.
On appeal, Delano Guardians abandons the claim of defective notice alleged in the first cause of action and does not challenge the mootness finding on the issue of street sweeping fees included in the second cause of action. It challenges the trial court's rulings on the third and fourth causes of action only. Its challenge on the third cause of action includes both the issue of capital improvements pleaded in the petition and the issue of the tiered rate structure it undertook to introduce via its notice of new authority after the petition was heard.
DISCUSSION
I. Legal background
The voters added articles XIII C and XIII D to the California Constitution in 1996 as Proposition 218, the Right to Vote on Taxes Act. (See 2B West's Ann. Cal. Const. (2013 ed.) foll. art. XIII C, § 1, p. 363, XIII D, p. 381.) Proposition 218 added to Proposition 13's limits on local property taxes by placing similar restrictions on assessments, charges, and fees imposed on taxpayers by local governments. (Howard Jarvis Taxpayers Assn. v. City of Riverside (1999) 73 Cal.App.4th 679, 681-683; Prop. 218, § 2, reprinted at Historical Notes, 2B West's Ann. Cal. Const. (2013 ed.) foll. art. XIII C, § 1, p. 363.)
Article XIII D of the California Constitution contains the following definitions:
"(e) 'Fee' or 'charge' means any levy other than an ad valorem tax, a special tax, or an assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership, including a user fee or charge for a property related service. [¶] ... [¶]
"(g) 'Property ownership' shall be deemed to include tenancies of real property where tenants are directly liable to pay the assessment, fee, or charge in question.
"(h) 'Property-related service' means a public service having a direct relationship to property ownership." (Art. XIII D, § 2.)
The parties in this case assume the increases in water, sewer, and refuse collection charges here at issue were each a user fee or charge for a property-related service. Our Supreme Court has held that "a public water agency's charges for ongoing water delivery" are fees or charges for property related services within the meaning of Proposition 218. (Bighorn-Desert View Water Agency v. Verjil (2006) 39 Cal.4th 205, 216; Richmond v. Shasta Community Services Dist. (2004) 32 Cal.4th 409, 426-427.) That court also has observed that the Legislative Analyst's analysis of Proposition 218, which was included in the ballot pamphlet, stated that charges for water, sewer, and refuse collection services "'probably'" satisfy article XIII D's definition of charges or fees for property related services. (Bighorn-Desert View, supra, 39 Cal.4th at p. 214; Richmond, supra, 32 Cal.4th at p. 426.) The Court of Appeal has held that charges for water, sewer, and refuse collection services are charges or fees for property related services. (Howard Jarvis Taxpayers Assn. v. City of Roseville (2002) 97 Cal.App.4th 637, 642-645 (Roseville.) There appears to be no reason not to accept the parties' assumption that the water, sewer, and refuse collection charges satisfy this definition. The increase in street sweeping fees is not at issue on appeal.
Two types of restrictions on local governments' power to increase these charges are at issue. First, there is a set of procedural requirements, including the requirement that owners, including tenants directly liable for the charges, be given notice, a hearing, and an opportunity to defeat the increase by submitting protests:
"Procedures for New or Increased Fees and Charges. An agency shall follow the procedures pursuant to this section in imposing or increasing any fee or charge as defined pursuant to this article, including, but not limited to, the following:
"(1) The parcels upon which a fee or charge is proposed for imposition shall be identified. The amount of the fee or charge proposed to be imposed upon each parcel shall be calculated. The agency shall provide written notice by mail of the proposed fee or charge to the record owner of each identified parcel upon which the fee or charge is proposed for imposition, the amount of the fee or charge proposed to be imposed upon each, the basis upon which the amount of the proposed fee or charge was calculated, the reason for the fee or charge, together with the date, time, and location of a public hearing on the proposed fee or charge.
"(2) The agency shall conduct a public hearing upon the proposed fee or charge not less than 45 days after mailing the notice of the proposed fee or charge to the record owners of each identified parcel upon which the fee or charge is proposed for imposition. At the public hearing, the agency shall consider all protests against the proposed fee or charge. If written protests against the proposed fee or charge are presented by a majority of owners of the identified parcels, the agency shall not impose the fee or charge. (Art. XIII D, § 6, subd. (a).)
According to a list of definitions in article XIII D, "property ownership" is "deemed to include tenancies of real property where tenants are directly liable to pay the assessment, fee, or charge in question." (Art. XIII D, § 2, subd. (g).) By statute, owners and tenants both may submit protests, but only one protest can be counted per parcel. (Gov. Code, § 53755, subd. (b).)
Second, there is a set of substantive requirements that regulate the use of the funds collected and the distribution of the burden:
"Requirements for Existing, New or Increased Fees and Charges. A fee or charge shall not be extended, imposed, or increased by any agency unless it meets all of the following requirements:
"(1) Revenues derived from the fee or charge shall not exceed the funds required to provide the property related service.
"(2) Revenues derived from the fee or charge shall not be used for any purpose other than that for which the fee or charge was imposed.
"(3) The amount of a fee or charge imposed upon any parcel or person as an incident of property ownership shall not exceed the proportional cost of the service attributable to the parcel.
"(4) No fee or charge may be imposed for a service unless that service is actually used by, or immediately available to, the owner of the property in question. Fees or charges based on potential or future use of a service are not permitted. Standby charges, whether characterized as charges or assessments, shall be classified as assessments and shall not be imposed without compliance with Section 4." (Art XIII D, § 6, subd. (b).)
After an agency adopts a fee or charge subject to Proposition 218, taxpayers can challenge it by filing a petition for a writ of mandate in the superior court. (Silicon Valley Taxpayers' Assn., Inc. v. Santa Clara County Open Space Authority (2008) 44 Cal.4th 431, 440 (Silicon Valley Taxpayers).) The proceedings differ in two crucial respects from those upon a typical mandate petition challenging agency action: First, article XIII D states that "[i]n any legal action contesting the validity of a fee or charge, the burden shall be on the agency to demonstrate compliance with this article." (Art. XIII D, § 6, subd. (b)(5).) This contrasts with the usual rule, according to which the burden of proof is on the petitioner. Second, unlike in a typical mandate proceeding—in which the superior court applies a deferential standard of review to the agency's action—here the court exercises its independent judgment in determining whether an exaction is consistent with article XIII D. (Silicon Valley Taxpayers, supra, 44 Cal.4th at pp. 443-450.) A reviewing court also applies its independent judgment to the agency action, deferring to neither the agency nor the superior court. (Id. at p. 450.)
Contrary to Delano Guardians' assertion, for reasons explained later in this opinion, the fact that the City bore the burden of proof does not mean Delano Guardians is entitled to raise on appeal substantive claims it never pleaded in the trial court. It also does not mean Delano Guardians is relieved of any of the other usual requirements imposed on appellants. (See Moore v. City of Lemon Grove (2015) 237 Cal.App.4th 363, 368-369 (Moore).)
Consequently, our review is limited to issues that have been adequately raised and supported in the appellant's brief. (Moore, supra, 237 Cal.App.4th at p. 369.) A claim of error must be preserved for appeal by means of an appropriate objection in the trial court. (In re Marriage of Hinman (1997) 55 Cal.App.4th 988, 1002.) The burden is on the appellant to show affirmatively that an error was committed. (Rossiter v. Benoit (1979) 88 Cal.App.3d 706, 712.) And the appellant must also demonstrate prejudice. (Waller v. TJD, Inc. (1993) 12 Cal.App.4th 830, 833.)
This case requires us to interpret provisions of the California Constitution. The principles of constitutional interpretation are similar to those of statutory interpretation. Our goal is to give effect to the intent of those who enacted the provisions at issue. We begin by examining the constitutional text, giving the words their ordinary meanings. We construe constitutional phrases liberally and practically, avoiding absurd, arbitrary, or unintended effects. (Richmond v. Shasta Community Services Dist. (2004) 32 Cal.4th 409, 418-419 (Richmond).) If the text is ambiguous, we consider extrinsic evidence, including the analysis of the Legislative Analyst and the ballot arguments for and against the initiative. (Silicon Valley Taxpayers, supra, 44 Cal.4th at pp. 444-445.) II. Method of counting parcels eligible to protest
Article XIII D, section 6, provides that an agency undertaking to impose a new or increased fee or charge for a property-related service must begin by identifying the "parcels upon which [the fee or charge] is proposed for imposition." (Art. XIII D, § 6, subd. (a)(1).) If protests "are presented by a majority of owners of the identified parcels" to the agency by the date set forth in the notice, then the increase in fees or charges cannot take effect. (Art. XIII D, § 6, subd. (a)(2).) "Owners" of the parcels includes their tenants if directly liable to pay the fee or charge, but no more than one protest counts per parcel. (Art. XIII D, § 2, subd. (g); Gov. Code, § 53755, subd. (b).)
The City identified the parcels on which the fee increase was "proposed for imposition" by compiling a list of the names of the record owners of all parcels of real property in the City as shown in the county tax assessor's records, plus the names of those with City utility accounts as shown in the City's own records. These were the people or entities to which the City sent notices of the proposed increases, using the addresses shown in these records.
According to declarations by a City employee involved in compiling the lists, the county tax assessor's records showed there were 9,284 parcels within the City, and the City's utility account records had 9,068 entries. Based on its examination of billing data, Willdan Financial Services (a consulting firm retained by the City to calculate the needed increases) found there were 8,747 water accounts, about 8,800 sewer accounts, and 8,807 refuse collection accounts. The trial court stated there were either 8,852 or 8,848 entries in the City's utility account records. It is not clear how the trial court derived these figures, but it appears it may have counted the entries on two lists in the record, one denominated a summary list (8,852) and the other a detailed list from which the summary was made (8,848).
The City used the figure for the number of parcels within the City according to the tax assessor's records to calculate the number of protests needed to defeat the fee increase. Thus, the number was (9,284 ÷ 2) +1 = 4,643. The trial court ruled that this approach was correct.
Delano Guardians now argues that the City should have used a number no greater than the larger of the two figures accepted by the trial court for utility account holders (8,852) to represent the greatest possible number of parcels for purposes of determining how many parcels made a majority. This is the correct figure, according to Delano Guardians, because the number of impacted parcels could be no more than the number receiving at least one of the affected services. The difference between the number of parcels appearing in the county tax assessor's records and the number of account holders must mean some parcels are not receiving any services, and these should not be counted. A majority by this reckoning would be (8,852 ÷ 2) + 1 = 4,427.
In our view, the City was correct to count all parcels in its service area. In the words of article XIII D, section 6, an agency must identify "[t]he parcels upon which a fee or charge is proposed for imposition." (Art. XIII D, § 6, subd. (a)(1).) The fee or charge can be defeated by protests from "a majority of owners of the identified parcels." (Art. XIII D, § 6, subd. (a)(2).) The fee increase at issue here was "proposed for imposition" on every property in the city to which the services were available, not just those receiving services as of the date the lists were compiled. Owners who have stopped receiving services and resume them after adoption of the new rates, or those arranging to receive services for the first time after that point, will have to pay the new rates. It would be unreasonable to suppose they are exempted from the new rates or that there will be another decision point at another time that determines whether the increase will be imposed on them. Will notice, a hearing, and an opportunity to protest be required every time an owner orders new service after the increase was adopted? No, these owners are in the same boat as those receiving services on the date of the decision, and it would make little sense to exclude them from eligibility to protest.
This conclusion is already implicit in the idea, which we discussed above, that water, sewer, and refuse collection services are property-related services. Fees for such services are incidents of property ownership. (Art XIII D, § 2, subd. (e) [fee or charge is levy imposed upon parcel or upon person as incident of property ownership].) If a fee or charge is imposed on an owner as an incident of property ownership, it is such an incident as long as the owner owns the property—not just while he or she is currently receiving services.
Our view is supported also by the language of article XIII D, section 6, subdivision (b)(4): "No fee or charge may be imposed for a service unless that service is actually used by, or immediately available to, the owner of the property in question." (Italics added.) The constitutional text thus envisages a class of situations that includes the one here: When a fee increase is adopted, some of the affected owners will be those to whom service is available on request but who are not current customers by whom the service is "actually used." These will necessarily have to pay the increased rate if they become customers, because the fee is an incident of ownership of the property. Again, it would make little sense to exclude such owners from the right to protest.
Delano Guardians cites Richmond, supra, 32 Cal.4th 409, but that case does not support its position. Our Supreme Court there held that connection fees for water service were not subject to regulation by Proposition 218 at all because actually getting connected to the water system was not an incident of property ownership. (Id. at pp. 425-428.) This analysis had to do with whether connection fees are the sort of fees that are within Proposition 218 in the first place, not whether some kind of distinction could be made between owners who were and were not current users of a service. That question did not arise: The connection fee applied only to those who previously were not users of the service. In the situation in this case, it is undisputed that fees for water, sewer, and refuse collection service are incidents of property ownership and the question is whether some owners of parcels within the service area should be excluded from the right to protest fee increases because they are not current users. Richmond does not provide any support to the proposition that they should.
Delano Guardians next contends that if 9,284 is the correct number of affected parcels, then Willdan Financial Services recommended rate increases that violated Proposition 218 by exceeding the cost of service, since it divided the cost among only about 8,800 accounts. This argument is mistaken because the parcels with no current service at the time of the increase did not, at that time, contribute to the cost of service, as they received none. The number of active accounts was the right number upon which to base the rate calculations, even though parcels without active accounts were entitled to protest.
Finally, Delano Guardians makes an argument based on a typographical error in the trial court's written order. At one point, the order states that there were 9,068 entries in the list of parcels in the city drawn from the county tax assessor's records. This was really the number of entries that City staff counted on the list of utility account customers, as indicated above. At other points, the order uses the figure consistent with the administrative record: 9,284 entries in the list of parcels from the tax assessor's records. Delano Guardians describes the erroneous reference to the smaller figure as the trial court's "recogni[tion]" of that figure as correct. Plainly, this description is incorrect.
In a footnote in its reply brief, Delano Guardians asserts that, in claiming owners of parcels not receiving service had a right to protest, the City contradicts a statement in the notice it distributed. The notice stated: "You may only submit a protest with respect to the rates for a utility if you are a customer of that utility or are the owner of property that is served by that utility." Delano Guardians' suggestion here is that a property is "served by" a utility only if service is currently being received there. But Delano Guardians never attempts to develop this suggestion into an argument about why the judgment should be reversed, so we will not discuss the point further. Points that are not supported by analysis of the facts and citation to legal authority are deemed forfeited. (Nielsen v. Gibson (2009) 178 Cal.App.4th 318, 324.) --------
For all the above reasons, Delano Guardians has demonstrated no error in the City's finding that there were 9,284 parcels on behalf of which protests could be lodged, a majority of which was 4,643 parcels. III. Invalidation of protests
Delano Guardians argues that the City invalidated some protests for improper reasons, and that if it had not done so, the count of valid protests would have exceeded the number required to make a majority. In its briefs, Delano Guardians identifies a set of 509 rejected protests that it says should have been found valid. As we will explain, we have reviewed a small number of these and found them to have been rejected properly. Arithmetic dictates that, given the proper rejection of this small group, valid protests would not have been submitted for a majority of the affected parcels even if Delano Guardians were right as to the remainder.
As indicated above, the City found 4,133 protests valid. The trial court carried out a review of rejected protests claimed to be valid by Delano Guardians. It found 66 more valid protests, for a total of 4,199. A majority would be 4,643.
In this appeal, Delano Guardians refers to 509 protests found invalid by the City, and on which the trial court made findings in response to Delano Guardians' challenges. Some of these are mentioned in Delano Guardians' opening brief, and others in its reply brief. They are the protests listed in the following exhibits to the declaration filed by Delano Guardians on December 1, 2014: Exhibits 2-4, 6-8, and the first two tables in Exhibit 5.
Of the 509 protests Delano Guardians thus places in issue on appeal, the trial court has already found that 64 were valid (a portion of the 66 referred to above), and these are included in the total of 4,199 protests found valid so far. This leaves 445 to be considered now. If all 445 of those here in dispute should have been deemed valid, then there were valid protests for a majority of parcels, with one to spare (4,199 + 445 = 4,644; majority = 4,643).
From the above arithmetic it will be clear that we need not examine all 445 disputed protests. If the trial court was correct in deeming only two of these as invalid, then there was no majority, even if it was wrong on all the rest.
We have drawn a sample of 20 protests from this group of 445. These were listed in the second table in Exhibit 5 to Delano Guardians' declaration filed on December 1, 2014. According to that declaration, the City rejected these protests because the addresses written on them appeared only in the county tax assessor's list of parcels, not in the City's list of utility account holders. This description appears to be based on a similar one set forth in a list of reasons for rejecting protests in the City staff memo dated July 15, 2013.
If the City really did reject these protests just because the addresses on them did not appear in the City's list of utility account holders, the rejection would have been erroneous. If a protestor signed a protest form, and that protestor was listed in the county tax assessor's records as the owner of the property at that address, the protest was valid, even if the address did not appear in the City's utility account records.
Our examination of the sample of 20 protests, however, reveals the root of the problem: The descriptions given by both the City and Delano Guardians of the reason why these protests were rejected is garbled or incomplete. The protests were not rejected merely because the address given did not appear in the City's utility account records. They were rejected because the address was missing from the City records or a different name was listed for the address in the City records, and the name stated on the protest form was not the name of an owner of property at that address according to the county tax assessor's records. The protestor thus was neither an owner of the property at that address nor a customer responsible for paying the bill for utility service at that address, according to these records. We hold that by producing the documents from which these conclusions were derived, the City bore its burden of proving these protests were invalid.
Below are the results of our examination of the 20 protests. Some of these listed multiple addresses.
| Admin.Rec.page | Name and address(es) onprotest form | Name in county records foraddress | Name in City recordsfor address |
|---|---|---|---|
| 5479 | Armando Banuelos601 Jefferson326 Madison618 Austin | Richard & Christine BeyerCharlene E. Wyle Rev. TrustPascual & Otilia Banuelos | DMB Invest.address not listedPascual Banuelos |
| 5492 | Juan Macias341 Balboa | Graciela Pimentel Larios | address not listed |
| 5536 | Daisy Gonzalez219 Calle Pinuelas | Maria L. & Francisco Galvan | address not listed |
| 5555 | Damaris Trujillo126 Cecil | Ramona Felix Zamudio | address not listed |
| 5556 | Maria C. Campos215 Cecil | Alicia Cervantes Trust | address not listed |
| 5586 | Isabel Samora801 Clinton109 8th Ave.115 8th Ave. | address not listedLuis P & Frances C. Leonaddress not listed | Luis P. Leonaddress not listedaddress not listed |
| 5600 | Gloria Vasquez1713 Clinton | Blanca R. Rosas | address not listed |
| 5605 | Carmen Ayon1836 Clinton | Adrian Guzman | address not listed |
| 5623 | Kenneth Jao ChicoManasan2325 Corte Sanchez | Stuart Thomas Inc. | address not listed |
| 5645 | Jose Gutierrez314 Dover Pl. | Moses & Lillian Uriaz Trust | Moses Uriaz |
| 5655 | Juana V. Gonzalez105 Dover St. | Luis & Teresa Medina | Teresa Medina |
| 5671 | Veronica Zaragoza306 El Capitan | Eduardo & Erica M. Hernandez | address not listed |
| 5672 | Ana L. Cruz434 El Capitan | Eduardo Ambriz | address not listed |
| 5693 | Ramon Martinez1208 Fremont | Naresh Parmar & Kusumlata Patel | entries for threeapartments at thisaddress: M. De Rivera,P. Parmar A. Pimentel |
| 5694 | Joel Loya1326 Fremont | Maria Elena Rodriguez Viera | address not listed |
| 5848 | Gloria Ontiveros322 Madison | Ebaristo & Maria L. Guillen | address not listed |
| 5885 | Jose Lopez764 Princeton | Dora & Ramon Guillen | address not listed |
| 5927 | Cristina M. Gonzalez2227 San Felice | Angelina Mendez | address not listed |
| 5861 | Norma Anoyo2156 Oleander | Flip LLC | address not listed |
| 5822 | Garrett Lane1025 Main | Nick C. Dailey Indiv. Trust | Dailey's Studio |
With these 20 protests removed from contention, there remain 425 in dispute. If these were assumed to be valid protests erroneously rejected, then the total number of valid protests would be 4,199 + 425 = 4,624, which is short of a majority of the identified parcels.
For the above reasons, we conclude that Delano Guardians has not demonstrated that the City erroneously rejected a sufficient number of protests to reduce the number of protests found valid from a majority to less than a majority. IV. Capital improvements including added capacity for future development
The figures for the new utility rates were developed in rate studies carried out by the consulting firm, Willdan Financial Services. According to the sewer service rate study, the most significant contributor to the increased costs that necessitated the rate increase was the expansion of the City's wastewater treatment plant, where all the City's sewage was processed. The expansion, which had already been completed when the rate increases were proposed, was mandated by state regulators, as the flow capacity of the existing plant was inadequate for current needs. It increased the plant's capacity by 83 percent and cost $31.4 million, financed by a state loan. The expanded plant would allow the City to "accept new developments," according to a report by City staff, but the Willdan study nevertheless assumed "conservative" growth in proposing new rates (i.e., recommended larger increases than it would if growth were projected to be more robust) in order to ensure that revenue would be adequate.
Based on a statement in a City staff report, Delano Guardians asserts that 74 percent of the increased capacity was for future development, and only 26 percent for existing customers. The staff report stated: "74% of the plant expansion cost is eligible for sewer impact fees (new development), and as long as the City experiences growth the sewer fund should pay only 26% of the loan debt service." The City denies that these figures represent the portions of the expansion needed by the current population and the residents of future developments, and the trial court did not think so either. The City concedes, however, that part of the purpose of the plant expansion was to ensure that it will be able to accommodate potential future development.
Delano Guardians argues that a capital improvement like this one—intended in part to benefit future occupants of developments not yet built—is barred by Proposition 218 from being fully funded by a fee or charge imposed on current residents and owners. Delano Guardians relies on section 6, subdivision (b)(3) of article XIII D: "The amount of a fee or charge imposed upon any parcel or person as an incident of property ownership shall not exceed the proportional cost of the service attributable to the parcel."
As the trial court pointed out, it has been held that there is nothing special about the cost of capital improvements in general that prevents them from being funded by new or increased fees or charges under article XIII D, section 6. (Capistrano Taxpayers, supra, 235 Cal.App.4th at p. 1497; Roseville, supra, 97 Cal.App.4th at p. 647 [under Prop. 218, fees for services can be used to fund "all the required costs of providing service, short-term and long-term, including operation, maintenance, financial, and capital expenditures"].) But Delano Guardians argues, in effect, that the improvement here at issue is special because it was made not just to continue service to the City's currently existing stock of housing and commercial buildings, but also to ensure sufficient capacity for new houses and other buildings that might be built in the future. Further, because the sewer fee increase was calculated on the basis of a conservative growth projection (making the increase greater than it would be on a more optimistic projection), current residents and businesses might end up paying more than their share. The whole cost of the improvement could be recovered through fees collected from occupants of existing development plus the projected small margin of new development, even if the amount of new development using the expanded plant turns out to be greater than projected. In other words, occupants of existing buildings and a fraction of occupants of new ones could bear the whole cost of the improved plant even though they would not use all of its capacity. Those occupants would thus pay more than "the proportional cost of the service attributable to" their parcels. (Art. XIII D, § 6, subd. (b)(3).)
This argument may be superficially appealing, but it does not withstand analysis. As we will explain, its refutation is already implicit in the holding that increased fees and charges can fund the capital costs necessary to operate systems being used by those paying the fees and charges. (Capistrano Taxpayers, supra, 235 Cal.App.4th at p. 1497; Roseville, supra, 97 Cal.App.4th at p. 648.)
Growth has been a constant in California throughout its existence as a state, and capital improvements by their nature are long-term investments. Such improvements thus will normally benefit not just existing occupants and owners, but also will support some margin of expected future development; and the cost of this is a normal cost of providing service in the first place. It is a normal situation for occupants of current development to be benefitting from infrastructure built and paid for at least in part in the past, before their arrival—and at the same time to be funding, through their rate payments, infrastructure that in part will support future growth. In general, it is inevitable that current ratepayers are using infrastructure funded by others in the past and funding infrastructure that will be used by others in the future. And it would be impractical to mandate a quantitative equality between the benefits received from the past and those conferred upon the future.
Further, occupants and owners of currently developed land do receive a direct benefit from the creation of excess capacity, for it is not in their interest to have a system always operating at its limit, as this would likely involve ongoing problems. And it would be impractical to require agencies to make sure they are recovering no more in fees than the amount that would cover the capital costs of a hypothetical system with capacity exactly equal to current usage, instead of those of their actual system, excess capacity and all.
We might face a different problem if the City increased rates paid by current users to fund the construction of facilities for which current users had no foreseeable need and by which they would not be served at all. Suppose, for instance, that a city has a sewage treatment plant that will be adequate to serve current development and expected development within the existing city limits for the foreseeable future. This hypothetical city wants to build a second plant to serve an area presently undeveloped and outside the city limits, where future development and annexation are expected, and proposes to increase rates paid by current users to fund it—perhaps with an eye to enticing developers with already-funded infrastructure. That increase would perhaps be more likely to be deemed an assessment requiring approval via the more onerous procedures for assessments in article XIII D, section 4, rather than the procedures for fees and charges in article XIII D, section 6. But the increase at issue here is not similar to this.
For these reasons, we reject Delano Guardians' argument that the sewer rate increase imposed fees or charges on any parcel exceeding the proportional cost of the sewer service attributable to the parcel. V. Tiered rate structure
Delano Guardians argues that the trial court erred by not ruling on its claim that the tiered rate structure for water service violated the requirements of Proposition 218. It maintains that we, carrying out de novo review, should decide the issue in the first instance and should conclude that the water rates adopted are invalid. As we will explain, Delano Guardians forfeited this issue in the trial court, and we would not find in its favor even if it had not done so.
In raising the issue when it did, Delano Guardians was attempting to introduce into the case a claim it had not pled in its petition, and to have that claim adjudicated after the trial was over and the presentation of evidence had closed. Before it can litigate an issue that it did not plead, a litigant must obtain leave of the trial court to amend its pleading. "The pleadings establish the scope of an action and, absent an amendment to the pleadings, parties cannot introduce evidence about issues outside the pleadings." (Emerald Bay Community Assn. v. Golden Eagle Ins. Corp. (2005) 130 Cal.App.4th 1078, 1091.)
A party is permitted to amend its pleading without leave of the court at certain points during the demurrer stage, and thereafter must obtain leave of the court, after giving notice to the adverse party. (Code Civ. Proc., §§ 472, 473.) Delano Guardians never gave notice to the City or obtained leave of the court to amend its petition to add the claim based on tiered water rates. At the hearing on August 7, 2015, counsel for Delano Guardians made reference to amendment of pleadings and said, "If the court would like Delano Guardians to amend its complaint to specifically include the water rate tiering, we're happy to do so." But the court never expressed what it would "like," and Delano Guardians never followed up.
Reopening of evidence also would have been necessary. The decision on a request to reopen evidence after it has closed is committed to the sound discretion of the trial court. (Horning v. Shilberg (2005) 130 Cal.App.4th 197, 208-209.) Ordinarily, it is up to the party desiring to present more evidence to make a request to reopen, and to make a showing that its failure to present that evidence before was not caused by its lack of diligence (Id. at p. 209). The burden of proof was on the City in this case (Art. XIII D, § 6, subd. (b)(5)), but we do not think the City was responsible for moving to reopen under these circumstances, since it was Delano Guardians that sought to introduce a new claim without ever requesting leave to amend its petition. The facts regarding the tiered water rates were not discussed or examined during the hearing on the petition, and Delano Guardians' new claim could not properly have been adjudicated unless the City was given an opportunity to rebut the claim with evidence from the administrative record. Since it was Delano Guardians' claim, we think it was up to Delano Guardians to ask the court to proceed in this way. It did not. (During the hearing on August 7, 2015, counsel for Delano Guardians said "the court reopened the case," apparently referring to the fact that the court was conducting a hearing on that date in response to Delano Guardians' notice of new authority, after vacating its prior submittal order. But the court had already made clear that it had not decided to reopen evidence that day. At the beginning of the hearing, the court observed there was "nothing before the court with regard to an application to reopen.")
Having failed to seek leave to amend or to request to reopen evidence, Delano Guardians also never pressed for a ruling on the merits of its claim regarding tiered water rates. In its brief filed on July 30, 2015, Delano Guardians argued that it was entitled to have the court decide the merits of this claim because the purportedly new rule in Capistrano Taxpayers, having been announced while the present case was pending, was applicable in the present case. At the hearing a week later, the problems of amending the petition and reopening evidence were mentioned—problems distinct from the question of whether the rule in Capistrano Taxpayers was applicable—but Delano Guardians never asked for leave to amend and never asked the court to reopen. The trial court was justified in taking no action on the merits while these problems were outstanding, and it was incumbent on Delano Guardians to expressly ask for a ruling on the merits if its view was that the court should reach the merits without amendment of the petition and reopening of evidence first taking place. In the eight months between that hearing and the issuance of the court's written order, it did not ask.
Because it did not request leave to amend its petition, or move to reopen evidence, or ask for a ruling on the merits despite its failure to do those things, Delano Guardians never properly presented its claim regarding the tiered water rates to the trial court. Consequently, the trial court was under no obligation to rule on Delano Guardians' claim regarding tiered water rates, and that claim has not been preserved for appeal.
Delano Guardians has an interesting argument about why it is entitled to advance the claim here in spite of all this. It says that a special feature of Proposition 218 litigation is that a petitioner is entitled to raise any issue at any time, because of the provision allocating the burden of proof to the agency. This provision, according to Delano Guardians, means the agency must disprove every conceivable violation regardless of what the petitioner pleads or what issues the petitioner at any stage raises. If, at trial, the agency fails to disprove any violation the petitioner thinks of after trial, the petitioner is entitled to raise and obtain judgment on that issue in post-trial proceedings—without amending its petition and without the reopening of evidence—or on appeal.
For support, Delano Guardians cites Beutz v. County of Riverside (2010) 184 Cal.App.4th 1516 (Beutz), which does provide some aid. Beutz involved a challenge to an assessment under article XIII D, section 4 (as opposed to a fee or charge under article XIII D, section 6, the provision at issue in this case). In Beutz, the Court of Appeal held that a Riverside County assessment violated the rule that "[n]o assessment shall be imposed on any parcel which exceeds the reasonable cost of the proportional special benefit conferred on that parcel." (Art. XIII D, § 4, subd. (a).) At oral argument, counsel for the county pointed out that in a tentative opinion, the Court of Appeal had proposed to hold that the assessment violated this rule on grounds the petitioner had never raised either in the trial court or on appeal, those grounds never having been pleaded by the petitioner. (Beutz, supra, 184 Cal.App.4th at p. 1534.) The Court of Appeal concluded that this did not matter, holding that if an assessment is invalid because it exceeds the reasonable cost of the proportional special benefit, a challenger has a right to obtain invalidation of the assessment on that ground in any proceeding challenging the assessment, regardless of whether the challenger ever asserts that ground at any stage. (Id. at pp. 1534-1535.)
This conclusion in Beutz is based on article XIII D, section 4, subdivision (f), which provides:
"In any legal action contesting the validity of any assessment, the burden shall be on the agency to demonstrate that the property or properties in question receive a special benefit over and above the benefits conferred on the public at large and that the amount of any contested assessment is proportional to, and no greater than, the benefits conferred on the property or properties in question."
Emphasizing the word "any" in "any legal action," the Beutz court interpreted this provision as follows:
"By its plain terms, section 4, subdivision (f) means that, regardless of the ground or grounds a plaintiff pleads in challenging the validity of an assessment, the burden of proof at trial, including summary judgment, is on the agency to demonstrate that the assessment meets the special benefit and proportionality requirements of article XIII D." (Beutz, supra, 184 Cal.App.4th at p. 1535.)
The appellate court took the constitutional provision to mean that the agency has the burden of proving the special benefit and proportionality elements in any action challenging the assessment "on any ground" (Beutz, supra, 184 Cal.App.4th at p. 1535). It did not analyze the possibility that the language means the agency has the burden of proving those elements in response to specific claims about why they have not been met.
"Simply put, it is not for a plaintiff challenging the validity of an assessment to place the special benefit and proportionality requirements in issue. These requirements are always in issue in any legal action challenging the validity of an assessment and the burden of demonstrating they have been met is always on the agency. (Art. XIII D, § 4, subd. (f).)" (Beutz, 184 Cal.App.4th at p. 1535.)
We need not criticize Beutz to show that its holding does not imply what Delano Guardians claims in this case. Article XIII D, section 6, regarding fees and charges, has a burden of proof provision different from the one in article XIII D, section 4 on assessments. This provision states:
"In any legal action contesting the validity of a fee or charge, the burden shall be on the agency to demonstrate compliance with this article." (Art. XIII D, § 6, subd. (b)(5).)
Unlike the burden of proof provision on assessments in article XIII D, section 4, this provision allocates the burden of proof to the agency for all aspects of compliance with Proposition 218's requirements for fees and charges, not just compliance with a single specific legal standard, like the standard requiring a special benefit and proportionality for assessments. If this meant that it does not matter what a petitioner pleads—if it did not have the natural meaning that the agency has, in any legal proceeding, the burden of proving that which is necessary to overcome the claims pleaded by the petitioner—the consequences would be absurd. A mandate petition could say, in its entirety: "Respondent's fee or charge violates article XIII D of the California Constitution." This pleading would trigger a requirement that the agency present evidence from the administrative record to disprove every conceivable violation of article XIII D. If, after the agency rests (the petitioner having been required to make no argument or evidentiary presentation), opposing counsel thinks of another possible violation and mentions it to the trial court or a reviewing court, the agency would have to overcome that claim as well, even though it would not necessarily be entitled to litigate it fully at that late stage. Just as "it is not for a plaintiff challenging the validity of an assessment to place the special benefit and proportionality requirements in issue" (Beutz, supra, 180 Cal.App.4th at p. 1535), a plaintiff challenging a fee or charge would never be required to specify which requirements the agency failed to satisfy or how it failed to satisfy them. All possible claims would be deemed pleaded without any need to describe them, and an agency's failure to overcome any of them could be held against it at any point in the litigation.
This cannot be correct. If the voters had intended to create such a thoroughgoing exception to the most basic features of our adversary system of justice, they would have said so explicitly, instead of simply saying the burden of proving compliance is on the agency.
We do not mean to suggest it is never appropriate to consider for the first time on appeal an issue that was not timely raised in, and not decided by, the trial court. But such consideration is exceptional, and is a matter of the appellate court's discretion. (Woodward Park Homeowners Assn., Inc. v. City of Fresno (2007) 150 Cal.App.4th 683, 713-714.) Delano Guardians contends, in essence, that it should be the rule in fee and charge cases under Proposition 218 rather than an exception, and is a matter of an appellant's rights rather than the court's discretion. This is not correct.
For these reasons, the issue of the tiered water rates has been forfeited and we need not address its merits.
Even if we exercised our discretion to address the merits, we would reject the argument, as it is the City's position that the record supports. The Capistrano Taxpayers court was anxious to make it clear that tiered rates could be consistent with article XIII D, section 6, if the tiers were based on increased costs arising from a need to supply more water because of high-volume users, without whom the increased costs would not arise. (Capistrano Taxpayers, supra, 235 Cal.App.4th at pp. 1510-1511, 1516.) The trouble in that case was not that tiered rates as such violated article XIII D, section 6, but that the tiers were not based on cost: The City "never attempted to justify its price points as based on costs of service for those tiers." (Capistrano Taxpayers, supra, at p. 1507.) In this case, there is evidence in the administrative record that the City designed its rate tiers to reflect the higher incremental cost of securing a water supply sufficient to satisfy the needs of high-volume users.
The water rate study produced by Willdan Financial Services explained that while article X, section 2 , of the California Constitution, and statutes related to it, call for water conservation and authorize the use of price structures to encourage conservation, article XIII D, section 6, requires rates charged to each user or parcel to be based on the cost of providing service to that user or parcel. The study described how the rates it recommended were designed to reconcile the conservation benefits of a tiered rate structure with the cost-basis requirement of Proposition 218. In fact, the discussion in the study anticipated the demands of Capistrano Taxpayers to an impressive degree:
"Although incentives to conserve water could be provided by implementing a higher rate for water as consumption increases, a nexus between rates and cost incurred to provide water at those rates must be developed to achieve compliance with Proposition 218. Therefore, in our analysis, when developing a tiered rate structure, we analyzed the consumption and peaking characteristics of each defined tier to determine the proportional share of cost incurred by each tier. The cost is then divided by consumption to derive a rate per unit of water for each tier. Doing so synchronizes the objectives of Article X [section 2] and Article XIIID [section 6] in developing a cost of service tiered rate structure.
"Besides ensuring compliance with State law, another key principle for a comprehensive rate study is found in economic theory, which suggests that the price of a commodity must roughly equal its cost or value if equity among customers is to be maintained—i.e. cost-based. For example, capacity-related costs are usually incurred by a water utility to meet peak use requirements. Consequently, the customers causing peak demand should pay for the demand-related facilities in proportion to their contribution to maximum demands.
"Through refinement of costing and pricing techniques, consumers of a product are given a more accurate price point, representative of what the commodity costs to produce and deliver, to meet their needs, in this case, for water use. The above fundamentals have considerable foundation in economic literature and correlate to the cost of service principles of Proposition 218. This 'price-equals-cost' theory provides the basis for much of the subsequent analysis and comment. This theory is particularly important as the proposed rate structure has been developed to encourage the efficient use of water while maintaining economic and cost of service principles."
If credited, this account of how the tiers were derived satisfies the requirements of Capistrano Taxpayers and carries the City's burden of proving that the rate structure does not violate the cost-basis principle of article XIII D, section 6, subdivision (b)(3). Delano Guardians proposes no reason why it should not be credited. Thus it has not demonstrated prejudicial error.
DISPOSITION
The judgment is affirmed. Respondent City of Delano is awarded costs on appeal.
/s/_________
SMITH, J. WE CONCUR: /s/_________
DETJEN, Acting P.J. /s/_________
FRANSON, J.