City & Cnty. of S.F. v. Regents of the Univ. of Cal.

• Citation: 11 Cal.App.5th 1107,218 Cal.Rptr.3d 466
• Decision Date: 25 May 2017
• Docket Number: A144500
• Parties: CITY AND COUNTY OF SAN FRANCISCO, Plaintiff and Appellant, v. REGENTS OF the UNIVERSITY OF CALIFORNIA et al., Defendants and Respondents.
• Court: California Court of Appeals

11 Cal.App.5th 1107

218 Cal.Rptr.3d 466

CITY AND COUNTY OF SAN FRANCISCO, Plaintiff and Appellant,

v.REGENTS OF the UNIVERSITY OF CALIFORNIA et al., Defendants and Respondents.

A144500

Court of Appeal, First District, Division 1, California.

Filed May 25, 2017

Counsel for Plaintiff and Appellant: Dennis J. Herrera ; City Attorney, Jean H. Alexander; Chief Tax Attorney, Peter J. Keith; Deputy City Attorney.

Counsel for Defendant and Respondent: Kamala D. Harris ; Attorney General of California, Paul D. Gifford ; Senior Assistant Attorney General, Joyce E. Hee ; Supervising Deputy Attorney General, David Lew ; Deputy Attorney General, Robert E. Asperger ; Deputy Attorney General, Benjamin P. Fay, Gabriel McWhirter, Oakland; Jarvis, Fay, Doporto & Gibson, LLP, Elise Traynum, General Council; UC Hastings College of the Law, Charles F. Robinson, Karen J. Petrulakis, Margaret L. Wu, Oakland; The Regents of the University of California Office of the General Counsel.

Humes, P.J.

This case asks us to decide whether the City and County of San Francisco can compel state universities that operate parking lots in the city to collect city taxes from parking users and remit them to San Francisco. The answer turns on whether the California Constitution's "home-rule provision"—which grants charter cities broad powers, including the power to tax—creates an exception to the long-recognized doctrine that exempts state entities from local regulation when they are performing governmental functions. We conclude that it does not. As a result, we affirm the trial court's denial of San Francisco's petition for writ of mandate.

I. BACKGROUND

For over 40 years, San Francisco has had an ordinance that imposes a tax on parking lot users for the "rent" paid to occupy private parking spaces in the city. (S.F. Bus. & Tax Regs. Code, art. 9, §§ 602, 606; see City and County of San Francisco v. Flying Dutchman Park, Inc. (2004) 122 Cal.App.4th 74, 80, 18 Cal.Rptr.3d 532.) Since 1980, the amount of the tax has been 25 percent of the rent. (S.F. Bus. & Tax Regs. Code, art. 9, §§ 602, 602.5.) Under the ordinance, parking lot users owe the tax, but parking lot operators are required to collect the tax when the users pay to park. (Id. , art. 9, §§ 603, 604, subd. (a).) The operator is required to hold the collected taxes in trust for, and periodically remit them to, San Francisco. (Id ., art. 6, §§ 6.7-1, 6.7-2.) If an operator fails to collect a parking tax from a user, the operator is liable for it. (Id ., art. 6, § 6.7-1, subd. (d); id. , art. 9, § 604, subd. (a).)

The ordinance states it is not to be construed as imposing a tax on the state or its political subdivisions. (S.F. Bus. & Tax Regs. Code, art. 6, § 6.8-1, subd. (a)(2).) Still, these "exempt" entities must "collect, report, and remit" the tax (id. , art. 6, § 6.8-1, subd. (b); id ., art. 9, § 601, subd. (a)), pay any taxes that they fail to collect (see id ., art. 9, § 604, subd. (a)), and comply with various administrative obligations, such as obtaining a certificate of authority to operate a parking lot; maintaining a log of, and bearing the burden of explaining, all lost parking tickets and cancelled transactions (id. , art. 9, § 604, subd. (c)); and filing monthly parking tax returns (id. , art. 6, § 6.7-2, subds. (b) & (c)).

The defendants, which we will refer to as the universities, are the Regents of the University of California (Regents), which is responsible for the operation of the University of California at San Francisco (UCSF); the Board of Directors of Hastings College of the Law (Hastings); and the Board of Trustees of the California State University (CSU), which is responsible for the operation of San Francisco State University (SFSU). The universities operate parking lots within San Francisco on property that is mostly owned by the state. All of these lots are in close proximity to other university facilities. Students, faculty, administrators, guests, patients at certain medical facilities, and with a few exceptions, members of the general public may pay to park in them.

The universities have never collected or remitted city parking taxes. In 1983, San Francisco tried to recover an alleged parking-tax deficiency from UCSF, but the Regents claimed immunity and San Francisco dropped the matter. The current controversy was prompted almost 30 years later, when in 2011 San Francisco directed the universities to start collecting and remitting the parking tax. After the universities refused, San Francisco petitioned the trial court for a writ of mandate to force compliance. The court denied the writ, ruling that the universities are immune from complying with the ordinance because they have not expressly consented to collecting and remitting the tax and their parking-lot operations are a governmental, not a proprietary, function.

II. DISCUSSION

A. The Standard of Review.

" ‘In reviewing a trial court's judgment on a petition for writ of ordinary mandate [brought under Code Civ. Proc., § 1085 ], we apply the substantial evidence test to the trial court's factual findings. However, we exercise our independent judgment on legal issues....' " (City of Oakland v. Oakland Police and Fire Retirement System (2014) 224 Cal.App.4th 210, 226, 169 Cal.Rptr.3d 51.) Where, as here, the facts are undisputed, the issue whether a state entity is exempt from complying with a local ordinance presents a question of law that we review de novo. (Bame v. City of Del Mar (2001) 86 Cal.App.4th 1346, 1354, 104 Cal.Rptr.2d 183 (Bame ); see also California Public Records Research, Inc. v. County of Stanislaus (2016) 246 Cal.App.4th 1432, 1443, 201 Cal.Rptr.3d 745.)

B. The Parties' Constitutional Powers.

San Francisco is a charter city, and as such it has broad powers by virtue of the California Constitution's home-rule provision. (Cal. Const., art. XI, § 5, subd. (a).) These powers include the authority to "make and enforce all ordinances and regulations in respect to municipal affairs, subject only to restrictions and limitations provided in [its] several charters." (Ibid. ) The "power to tax for local purposes clearly is one of the privileges accorded chartered cities by [the home-rule provision]." (Weekes v. City of Oakland (1978) 21 Cal.3d 386, 392, 146 Cal.Rptr. 558, 579 P.2d 449 (Weekes ).)

The universities' constitutional powers are similarly substantial. The Regents governs a statewide system of campuses, including UCSF, and is vested with "full powers of organization and government" and has "all the powers necessary or convenient for the effective administration of [the University of California's] trust," including "the management and disposition of the property of the university." (Cal. Const., art. IX, § 9, subds. (a) & (f).) " Article IX, section 9, grants the [R]egents broad powers to organize and govern the university and limits the Legislature's power to regulate either the university or the [R]egents. This contrasts with the comprehensive power of regulation the Legislature possesses over other state agencies." (San Francisco Labor Council v. Regents of University of California (1980) 26 Cal.3d 785, 788, 163 Cal.Rptr. 460, 608 P.2d 277.)

Hastings is "affiliated with the University of California and is the law department thereof," and it is governed by a Board of Directors appointed by the Governor and approved by the Senate. (Ed. Code, §§ 92201, 92206.) Its mission is to "afford facilities for the acquisition of legal learning in all branches of the law." (Id. , § 92202.)

Lastly, CSU is a constitutionally authorized "state agency created by the Legislature in the field of public higher education which is charged with the management, administration, and control of the State College System of California." (Cal. Const., art. XX, § 23 ; Ed. Code, §§ 66600 et seq., 89000 et seq. ) The CSU system is governed by a board of trustees. (Ed. Code, § 66600.) SFSU is part of this system, and its structure and mission are set forth in state statutes. (Id. , § 89001 et seq.)

C. The Doctrine Exempting State Entities from Local Regulation.

Over 60 years ago, our state Supreme Court held that when the state "engages in such sovereign activities as the construction and maintenance of its buildings, as differentiated from enacting laws for the conduct of the public at large, it is not subject to local regulation unless the Constitution says it is or the Legislature has consented to such regulation." (Hall v. City of Taft (1956) 47 Cal.2d 177, 183, 302 P.2d 574 (Hall ).) Under this doctrine, courts evaluate whether the endeavor in which a state entity is engaged is a "sovereign activit[y]." (Ibid . ) If it is, the state entity is exempt from complying with local regulation unless constitutional or statutory provisions provide otherwise.¹ (Hall , at p. 183, 302 P.2d 574.)

In the decades since Hall , courts have applied the doctrine to bar attempts by local jurisdictions to regulate state entities engaged in governmental activities. (See, e.g., Bame, supra , 86 Cal.App.4th at p. 1357, 104 Cal.Rptr.2d 183 [state agricultural district's operation of fairground governmental activity and therefore operators contracting with district exempt from local regulation]; Laidlaw Waste Systems, Inc. v. Bay Cities Services, Inc. (1996) 43 Cal.App.4th 630, 637-639, 50 Cal.Rptr.2d 824 (Laidlaw ) [school district is state agency exempt from city regulations involving trash collection]; Del Norte Disposal, Inc. v. Department of Corrections (1994) 26 Cal.App.4th 1009, 1015, 31 Cal.Rptr.2d 746 ["state prisons are matters of state, not local, concern" and their operations therefore exempt from local ordinance giving exclusive franchise to certain trash hauler]; City of Santa Ana v. Board of Education (1967) 255 Cal.App.2d 178, 180, 62 Cal.Rptr. 863 [same as Laidlaw ].)

The doctrine has specifically been applied to bar a charter city's attempt to regulate the construction of a university building by the Regents. In Regents of University of...