HomeMy WebLinkAbout1981-01-06; City Council; 6441-1; Petition Re: Charges for sewer serviceJanuary 6, 1981
-- City Attorney __-------------.-- * DEPARTMENT
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Sub j ec ts. : . PETITION RE CHARGES FOR SEWER SERVICE
Statement of the Matter
At your December 2, 1980 meeting the City Council directed our office to analyze a petition and legal brief which claims that a portion of the City's sewer service charge, adopted by reso- lution 6244, is a special tax under.ArticLe XI11 A of the
California Constitution which cannot be imposed without a vote of the people. The legal brief is based on an assumption that a portion of the capital surcharge will be used for general revenue purposes. We understand the facts to be that the Sur- charge will be used only to pay the costs of meeting a federal mandated requirement to raise the existing plant to secondary treatment. Since the funds are necessary for and will be used solely to allow the continued provision of the service to exist- ing customers, the charge is not a tax. We find the brief to be based on an erroneous view of the facts and the legal authorities cited inapplicable to our situation. A-memorandum from our office discussing the matter in more detail is attached.
Exhibits
1. Excerpts from a legal brief
2. Memorandum to Mayor and City Council dated December 4, 1980 3. Resolution No. 6244'
4. City Engineer's letter of September 12, 1980
Recommendation
The choice of method to fund the upgrading of the existing sewer facility was a policy question. The new sewer fee is in our
opinion certainly legal and is not a special tax. There is no
legal reason to take any action in response to the petition
beyond a motion to file. The Council fnay wish by motion to reaffirm its intention in the'matter as expressed in the City Engineer's letter of September 12, 1980.
Council Action:
1-6-81 Council received the report and filed the matter.
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MEMORANDUM
TO :
FROM:
DATE :
SUBJECT :
Mayor and City Council
City Attorney
December 4, 1980
Response to Allegations by Association of Carlsbad Taxpayers that the Sewer Service
Surcharge is an Illegal Special Tax
At your December 2, 1980, Council meeting you requested that our office prepare a response to the allegations by the Association of Carlsbad Taxpayers that the $2.00 sewer service surcharge is an illegal special tax. We have taken the oppor- tunity to review the authorities cited by the unnamed attorney for the association and conclude that (1) the $2.00 sewer service surcharge is not an unlawful special tax, (2) has not been levied for unrelated revenue purposes, and (3) is a charge which does
not exceed the reasonable cost of providing sewer service at the level required by the federal government.
As the Council is aware, this office prepared an extensive paper on the issue of special taxes which was presented to the League of California Cities, City Attorney Department at their 1979 spring meeting. Since that time, we have paid close and careful attention to the special tax issue as it has developed in the
courts, Attorney General's opinions and in legislation. The final
complete definition of special taxes under Proposition 13 has not been made. However, it now appears that the courts and the legis- lature have settled on an interpretation that distinguishes fees and charges which do not exceed the reasonable cost of providing a proprietary service or are imposed as part of a regulatory program from special taxes.
The term tax, as noted by the Court of Appeal in the recent __ decision of Mills v. County of Trinity, 166 Cal. Rptr. 678, decided in July of 1980, 'I. . . is a term without a fixed definition."
interpreting the word, a variety of definitions have arisen.
It is important to look at the particular factual circumstance of each case in order to decide whether or not a particular levy is or is not a tax within the scope of the constitutional or statutory language. A tax for purposes of the initiative laws is not the same thing as a special tax.
Depending on the purpose for which the court is
For this reason many of the cases cited by the Association of Carlsbad Taxpayers' attorney are in opposite to this partic- ular situation.
The case of Mills v. County of Trinity held that special taxes
referred to in Section 4 of Article XI11 A:
'I. . . does not embrace fees charged in connection with regulatory activities which fees do not exceed the reasonable cost of providing services necessary to the activity for which the fee is charged and which are not levied for unrelated revenue purposes."
Although the court does not address the issue of fees charged to provide a proprietary service, the court does indicate that reference to contemporaneous legislation is important in inter- preting the meaning of a particular constitutional provision.
The contemporaneous legislation referred to by the court has
been chaptered and added to the Government Code as Section 50076. Section 50076 provides as follows:
"AS used in this article 'special tax' shall not include any fee which does not exceed the reasonable cost of providing the service or
regulatory activity for which the fee is charged
and is not levied for general revenue purposes."
As the court notes, where the Legislature has enacted a law in light of constitutional provisions the Legislature's interpretation of a particular constitutional provision is to be given great deference by the courts. Both the courts and the Legislature have
clearly stated that fees charged for a proprietary service such
as sewers are not special taxes.
The City Engineer's letter of September 12, 1980 states that the $2.00 surcharge is levied in order to allow the City to pay its
share of the cost of meeting federal requirements. If these
federal requirements were not met the City would not be able to provide sewer service to its citizens. The fee is not levied for general revenue purposes or for general plant expansion purposes, but rather is levied simply to recoup the reasonable cost of continuing to provide the required service. After reviewing the evidence developed by the City staff and the calculations used to arrive at the fee, we have concluded that the evidence presented to the Council on the need for this fee more than justifies the levy. The fee is a reasonable charge
to provide sewer service and does not exceed the cost of pro- viding for that service.
There is specific authority in the Health and Safety Code which allows the City to impose fees and charges for the provision of services and facilities furnished by it. (Health and Safety Code Section 5471.) These fees may include the construction and reconstruction of a sewer system as well as "maintenance and operation" charges.
Government Code Sections 54300 et seq. also provide authority for the collection of a sewer charge which includes the entire capital costs of the system. There is also authority for the collection of a sewer fee in
Section 54344.
In our opinion, there is no doubt about the legal ability of
the City to collect a fee for sewer service which includes
depreciation, allowances for repair, construction or recon-
struction of the system, and for other purposes necessary to
keep the system effectively functioning and in good repair.
Since Encina cannot continue to function at all unless the
new federal requirements are met the collection and use of
fees to meet those requirements is authorized by law.
The intentions of the Council in adopting Resolution 6244 as we understand them are contained in the City Engineer's letter of
September 12, 1980 which was sent to all sewer customers. It
clearly states the surcharge will be used to meet the federal
requirement and then will be removed. The resolution itself
is not specific and says only that the surcharge will be placed
in the sewer construction fund for improvements to the system.
In our opinion the surcharge could be used for purposes beyond those in the Engineer's letter and still be legal. However,
the Council may wish to clarify their intent in imposing the
surcharge by a motion approving the letter.
Based upon our review of the applicable cases, statutes, and evidence we conclude that the sewer service surcharge is justi- fied and is not a special tax. Since the question is so straight forward and the answer so clear, we have not undertaken any detailed discussion of the law of special taxes. If any member of Council would like to discuss this issue with us further or would like to review a copy of our League paper or other points and authorities that we have on this issue, please do not hesitate to ask.
. VINCENT F. BIONDO, JR. City Attorney
VFB/jw
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cnyital facilrties surcharge,
+:,I b.lr S=::;er Construction Fun?,
.fornFz Constitution in that
apsrOi.rZ1 of two-tliirds of the
A. Legislativ2 Intent
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In c?at.zrniir,hg whether this svxcharge is a special tax one nwst lcok to the intent. of Section XI11 A. Historically, a
special tax was a tax on all property used for specific purposesp but for which no direct atid Specir'ic benefit to particular pieces
of prc2,erty coulc? be identified (such as with an assessment) and it coai.3 be Imposed., to avoid a general-property tax limitation.
An exzmple of this can bo found. in the case of City of Glendale - v. Trondsen, 48C2cl 93, where the City Charter had imposed a 1%
property tax limitation, "unless a special %ax be authorized as '
provided by the Chapter." Such specinl tax required a two-thirds vote of e1ectorat.e. The city then set a minimum charge for r:ubhj.sh collection without a vo-te of the electorate. This was
challenged as a special tax which required a two-thirds vote.
. The court ruled it wasn't a special tax which reqcired a two- thirds vote becacLsc LCe ordinance applied only to a special tax
increase in the property ______l_.-ll_ tax. it was not a spcial tax restrained by this particular ordinance
and the court ruled that such a tax did not require a two-thirds
vote .
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While it may have been a tax,
.I k Section XI11 A appears to recognize this rul-ing and speci.fic6fly
provides that local. governments cannot impose . - any speciii.2 taxes '- the purpose of which is to avoid the property tax lixitation or
to supply additional funding lost by the Proposition XI11 tax
limitation. It is clear then that the courts should strictly
construe the lin!i-tation against special taxes.
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In interpreting Section XIIX A, the .legislative intent as expressed in the Legislative Counsel's Opinion slsoulii bear .a.
weight. Of spc:cial note is his ,opinion sthat:
"Service or regulations fees limited to the cost
of the service or regulations program will not
be consi.dered a tax and can be validly imposed
without a vote of the peop1.e. Howeverl 'excess'
. fees or charges will be 2'ound to be a tax subject -. to voter control.. "-.mp?hasis added-r-.
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The 'question is whether the $2.00 surcharge is an "excess"
fee and not limited ta the cost of provj-ding existing services.
A strong argument can be made that since the funds will be used for upgrading arid izot supplying service that it is a special tax. This is especially true in light of the Supreme Courts pronouncement in Amador v, State -~ Board of Equilization 22 Cal3d
208, where the court held that Article XI11 A is to be "literally
construed and along broad lines so that it nay accomplish the full measure of the 0bjcct.ive.s that it was intended to carry out."
The court in Amador --____I also read XI11 A to place restrictions upon
imposition of all other .taxes so that the intent of XI11 A could
be realized,.
slio~ld 1-io.t: try to qisg-iiisc. a tax as a fee to avoid the clear
intent of Proposition 13.
-7- Amador's clear message is that local govenments
B. Controlling .Cases --- --
The decision in Dare v. Lakeport Cj.ty ---- Council 12 C, A3d 864;
91 Cal. Rptr. 1.24 appears to sertle the question as to whether a charge imposed by a charter city for sewage service is a "tax".
In -- Dare the city council set a sewage maintenance fee by
ordinance. The citizens of the city proposed an initiative
modifying the ordinance which met all of -the election code re-
..quirer;lents, but the initj-ative was rejected by the citlj as not being a proper subject for initiative because it interfered
with the city's right to tax.
a sewer fee was a tax and therefor not subject to the hitiatice
process. The court in answering this question ruled:
The issue before the court was whether the establishment of,.,- .
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"The imposition and collection of fees for the use of the
facilites of Lakeport Municipal Sewer District No. 1 must reasonably
be considered a taxation function. Taxes arc defined as burdens
imposed by legislativz power on persons or property to raise money
for public purposes (Yosemj.tc! Lumber Corqmny v. 1ndustrj.al Accident _^I
Commission ----_... 18'7 Cal. 774, 785). It has been expressly held that. a monthly sewage rate imposed by a municipa3. ordinance for the
connection and use of sewers is a tax'! (Dare at-. 868).
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The court clearly ruled that the imposition of a monthly sewage fee was a tax inunune from the .~~i~j-ativ~~~~~~~re~d~ process. L
?'his case appears to be fully applicable here since it es-
tablishes that a nonthly sewage fee is in fact, a tax. It is ironic that Proposition 13 requires that before a tax can be imposed a two-thirds majority of the electorate must spprove it, whereas before Proposition 13, the citizens could not vote to set
w tax aside. But the case dces establish that a sewage fee is a tax.
It would appear then that if such 2 surcharge is a tax prior to Proposition 13, and therefore ixnmtine frorn the electoral
process; that after Proposition 13 it is still a tax which must
be approved by ;1 two-thirds vote of the electorate.
Xt should also be pointed out that the term "special tax"
appears to be surplusa.ge because all that really needs to be de- teumined is whether the surcharge qualifies RS a "tax", an
"assessment" or a direct "gee for use". Only the "tax" is subject
to t4ie two-thirds vote. It is my opinion that the term "special"
merely confuses the issue since historically a "special tax" wz:g a tax adding GII tc the property tax and which is now specifically
prohjbitcd by Sectim SI11 A.
The questbn that now mcst be 3ddressed i.s whether this "t.ax"
can somehow be justified as a fee for use and not be a "speck1
taxt' under Proposition 13.
The case t-.hat qpears most directly on point is City of Madera
v. Black 1-81 Cai. 306(X919) (an old case that is st313. good law!)
. In ---- Madern, the city imposed a monthly sewage rate cr charge for the use of and connection with the sewer. The rate was OR~ dollar. (A hefty sum in 1919!).
The fee was challenged as bein.y ekorbitar,t and for the purpose of raising revenue for other purposes '.than supplyir?g
sewage services. The city put the revenue into the "sewer fund" and transferred the excess to the general fund for other purposes.
The issue before the 'court was whether the establishment of &
sewage fee was a tax and if so whether the city exceeded its taxing
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authority - -.
In answer to the first questj-on the court ruled that "The money a . . was charge upon persoiis; it was imposed by the
legislative authority of the city of Madera for public purposes,
and under these definitions it was a tax;. . . It inay also
be considered a charge mad2 for .the use of Lie sewer constructed
and acquired by the city." . ,
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Thi.s seems to raise an unresolved question. The court is
saying that it, may be both, Now GO years later we are presented
with the sams question. b~eriusc the surcharge appears to be either
a tax ohicn must be approved by two-thirds of the electorate or
a charge for use which does not have to be approved.
V.
The court's fur.ther ruling .in Madera helps to resolve this
quandzy .
The comt goes on to say . . "it is obvious that the power
to construct and maintain sewers d02s not include authority to raise revenue foz general purposes by rrteans of a toll or tax for the pr.i.vil.ege or right t-o use the sewer for- the purposes for which it was constructed . . .But the rates hereimposed upon
the sewer users were obviously for purposes additional to that
of paying expenses of repairs and maintenance. If any was --__I used
for extensions to the sewer system, such use was unl.awfu1, for it canxot be cio~5tod that the city has no powcr to lay taxes or - tolls Qn Lhosc who may use the sewer in 'order to obtain money
toXi.16 sewers in other streets for the special beneiit of
~ther purposes. " @nphasis. added)
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The court goes on to discuss that fees above and beyond the
coat of repairs and maintenance are beyond the powers possessed by the city.
This case aFpe2rs to be tota-ly applicable here and actually
gces bejToric? the prohibitions c\f Article XI11 A.
It does establish that a sewage fee is a tax but indicates that j-t may bc considered a charge for service. More importantly, it establishes that any charge above and beyond the cost of repair
and mair-itenance of the present sewage system is in fact a sub-
skitution for general tax and beyond the power possessed by the cLty-
The city of Madera ---- was chastized by the court far trying to
do exactly whai-. the city of Carlsbad is trying to do in in- creasirq it's sewer charge. In Madera the court said that the
city was attempting to accumuiate a fund "for the general benefit o€ th? city and thereby enable it to fix a lower rate or
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r - taxes for general purposes. ,
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It appears that the city of Carlsbad is likewise trying to -
avoid t.he Proposition 13 tax limitation by imposing a higher sewer fee than needed for repair and maintenance.
General Discuss ion
It is my opinion following the intent of Article XI11 A and the. 2 cases cited above, that the surcharge is in fact a "special
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tax" and that SUC,~ tax is prohibited by Sectj-on XI11 A because the fee charged is not for the purposes of operation and main-
-tei-~a~.ce of the sewage system but is i.n fact charged to generate
capits3.. fcjr further Improvements, and for general public pur-
poses. . .
XI11 A specifically enjoins because its purpose is to generate reveaua that prior to Propositi,on 13 were avaiiable through
general revenues which are no longer available.
This surcharge is the special tax that Section
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* 1200 ELM AVENUE
CARLSBAD, CALIFORNIA 92008
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TELEPHONE:
v12) 438-5621
September 12, 1980
Subject: 14onthly Sewer Service Fee
Tha Mayor asked that 1 respond to your letter concerning the recent in-
crease in sewer user charges. The increase was approved by Council only
after considersble del iberation and assurances that funds generated by
the increase would be utilized only for upgrading the existing Encina
Sewage Treat Plant.
The present sewage plant is capable of providing primary treatment for
up to 16 million gallons of sewage each day. Primary tresfnent removes
about 65% of the solids in sewage by allowing them to settle to the bot-
tom of large tanks. The enlarged plant will be able to treat 18 million
gallons of sewage a day to a quality which we call secondary treatrnpt-
Esseniially, secondary treatment removes 90% of the solids from se;Jage.
The Federal Government has mandated that the sewage treatment plant be
able to provide secondary treatment.
As you can see, the sewage treatment plant wilI be enlarged by 2 million
gallons a day capacity and upgraded from primary to secondary treatment.
According to the "Financial Plan and Revenue Program" prepared by Brown
and Cal'dwell Consulting Engineers in September, 1979, Carl sbad's share
of the total project will be $3,167,000. Of this anaunt, about $2.4 mil-
lion is required for the expansion, including the new administration
building and laboratory. The remaining $750,000 is attributable to the
upgrading of the existing faci 1 i ty.
The addition of two dollars each month to the user fee will generate an
additional $25,000 per month or about $750,000 over the next 30 months, At such time as the $j'~O,OOO has been raised the City Council intends io
r-emwe the two dollar surch;irge for upgrading of the sewage treatment
ptant.
I hope this information will assist you in analyzing the increased sewer
user charge. If I can be of furthe-r assistance please call we.
Les Evans
City Engineer
C: Mayor, City Mariagcr
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RESOLUTION NO. 6244
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CARLSBAD, CALIFORNIA, SETTING SEWER SERVICE CHARGES
WHEREAS, Section 13.12.020 of the Carlsbad Municipal Code pro-
irides that all persons served by the City sewer system shall pay a
sewer service charge; and
WHEREAS, the City Council, upon recommendation of the City
ilanager, has determined to add a two-dollar per month capital
facilities surcharge to the sewer service fee;
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City
Df Carlsbad as follows:
1. That the above recitations are true and correct.
2. That the monthly sewer service charge will consist of a
service charge and a capital facilities surcharge which shall be
applicable to all premises in the City hooked up to Encina Water
Pollution Control Facility. u,
3. That the capital facilities surcharge will be effective
beginning September 15, 1980, zs shown on Exhibit "A" attached
hereto and incorporated herein by reference.
4. That the monthly capital facilities surcharge will be
placed in the Sewer Construction Fund and shall be used to pay for
the capital improvements of said system,
PASSED, APPROVED AND ADOPTED at a regular meeting oz the City
Council of the City of Carlsbad held the 15thday of Julv ,1980,
by the following vote, to wit:
AYES: Council Members Packard, Casler, Anear, Lewis and Kulchin
NOES: None
ABSENT: None
RONALD C. PACKARD, Mayor
ATTEST :
AEETJlA L. I!I:U'l'ENKI(ANZ, City Clerk I
rr . EXH I B IT "A" CAPITAL FACILITIES SURCHARGE t 1 Mon t h 1 y Monthly Sewer Service Capital Faci 1 i ties
. Charge Surcharge CLASSIFICATION:
A. Residential
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(1) For each single-family dwelling $3.25 $2.00
(2) For each unit a duplex, flat, apart- ment, court, multiple dwelling, mobile home complex or trailer court $3.25
B. Commercial & Industrial
$2.00
(1 ) For each unit of a motel, hotel, rooming,' lodging or boarding house, ten units or less $1.30
$3.25
mortuaries and restaurants $8.25
not listed above $3.25
-Each additional unit over ten $1 .oo -Each unit with kitchen facilities
(2) Bakeries, markets with disposals,
(3) Schools and all other commercial uses
(4) Car washes, wash racks, laundries and other enterprises where water is $3.25 per EDU + the primary commodity to carry an $0.32 per each said business and said water is dis- 100 cubic feet chisrged into the sanitary sewer system
(5) Each enterprise where water is the primary commodity to carry on said business, said water characteristics $0.32 x ([180+ exceed the sewer service area average S.S.3 f 360) for suspended solids (S.S.)
(6) For each unit of an office of commer- cial building or any establishment having faci 1 i ties for trai 1 ers , campers or boats $3.25
$0.80
$0.60 $2.00
$2.00
$2.00
$2.00 :.per EDU + $0.20 per each
100 cubic feet
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$9.20 x (f180+ S.S.2 + 360)
$2.00