Associated Homebuilders of Greater East Bay, Inc. v. City of Livermore

• Citation: 11 Cal.Rptr. 485
• Court: California Court of Appeals
• Decision Date: 28 February 1961
• Parties: ASSOCIATED HOMEBUILDERS OF the GREATER EAST BAY, INC., a corporation, Plaintiff and Respondent, v. CITY OF LIVERMORE, a municipal corporation, Defendant and Appellant. Civ. 19265.

Page 485

11 Cal.Rptr. 485

ASSOCIATED HOMEBUILDERS OF the GREATER EAST BAY, INC., a corporation, Plaintiff and Respondent, v. CITY OF LIVERMORE, a municipal corporation, Defendant and Appellant.

Civ. 19265.

District Court of Appeal, First District, Division 2, California.

Feb. 28, 1961.

Hearing Granted April 26, 1961.

Opinion vacated 17 Cal.Rptr. 5.

Richard M. Callaghan, City Atty., Livermore, Sturgis, Den-Dulk, Douglass & Anderson, by Robert T. Anderson, Oakland, for appellant.

Robert J. Foley, Lawrence D. Saler, Richard L. Doutt, Albany, for respondent.

STONE, Justice pro tem.

This is an appeal by the City of Livermore from a judgment declaring invalid two City of Livermore ordinances which provided for the payment of sewer connection charges. The judgment also allowed recovery of residential sewer connection charges by respondent, the assignee of several home builders.

The Livermore City Council by unanimous vote on April 9, 1956, adopted Ordinance No. 332, which provided in Section 2 for a sewer connection charge of $150 per dwelling unit. It also provided that sewer connection charges for commercial, manufacturing plants and other establishments should subsequently be fixed by resolution or ordinance, but none was so fixed and only residence owners paid a charge. Section 3 of the ordinance provided for the establishment of a 'Sanitation Fund' into which all sewer connection charges were to be deposited. This special fund was to be used for 'expanding the sanitary sewer system of the City of Livermore and/or the servicing of any bonded indebtedness of the City of Livermore hereinafter incurred for sanitary sewer purposes.' Section 4 of the ordinance made the payment of the connection charge a prerequisite to the issuance of a building permit. On July 7, 1958, Ordinance No. 382 was unanimously adopted by the Livermore City Council repealing Ordinance No. 332. Like the ordinance which it repealed, Ordinance No. 382 provided for a sewer connection charge of $150 per dwelling unit, but in addition established a schedule of sewer connection charges for commercial, industrial and other type buildings. Section 3 of the ordinance established a 'Sewer Expansion Fund' into which all sewer connection charges were to be deposited. The use of this fund was restricted to 'expanding the sanitary sewer system of the City of Livermore and/or the servicing of any bonded indebtedness of the City of Livermore hereinafter incurred for sanitary sewer purposes.' Section 4 of the ordinance provided that building permits should issue only upon the payment of the sewer connection charge. Other sections of the ordinance provided for reimbursement to subdividers or other property owners who were required to construct sewer mains of a larger capacity than the minimum needed to serve such property, by assessing a prorated charge against other parcels of land benefited by the increased capacity.

Prior to the enactment of the two ordinances in question, the City of Livermore provided by legislation for annexation fees, inspection fees, benefit districts and charges for extension of street or house laterals. General obligation bonds had also been issued to defray the cost of plant construction and trunk and interceptor line installations.

Respondent's assignors paid the sewer connection charges required by Ordinances Nos. 332 and 382; some payments were made under protest, others were not.

The court found that there was no reasonable relation between the amount of the prescribed connection fee and the actual cost incurred by the City of Livermore by reason of the connection to the sewer system and therefore that the ordinances were not police power enactments but were in fact revenue raising measures, made under the guise of the police power. Accordingly, the court held that as a matter of law Ordinances Nos. 332 and 382 were unconstitutional. The court also held that appellant, as a general law city, had no legislative authority to levy the charge which in the opinion of the court constituted a tax and therefore that the ordinances were invalid and void as tax measures. The court also found that the classifications established by the ordinances were discriminatory in nature for the reason that there was no valid distinction between residential buildings, which constituted one class under the ordinances, and other types of buildings which were placed in a separate classification by the ordinances.

Appellant contends that the sewer connection charge imposed pursuant to the two ordinances constitutes a valid exercise of the police power, but if not they are nevertheless valid as revenue measures. Appellant concedes that as a general law city it derives its power to tax from the general laws of the state, but it contends that Health and Safety Code, § 5471, specifically authorizes a municipality to levy a sewer connection charge.

Sewer Connection Charge As An Exercise Of The Police Power.

Every intendment will be indulged which favors the validity of legislation enacted pursuant to the police power, because upon its proper application rests the safety, health and welfare of the community. Yet the police power may not be used as a subterfuge for the enactment of a measure designed for revenue purposes alone. The courts have consistently held that the levy of a sewer connection charge by a municipality is a valid exercise of the police power incident to that entity's burden of constructing, maintaining and improving a sewer system. Harter v. Barkley, 158 Cal. 742, 745-746, 112 P. 556; City of Glendale v. Trondsen, 48 Cal.2d 93, 101-103, 308 P.2d 1; Longridge Estates v. City of Los Angeles, 183 Cal.App.2d 533, 6 Cal.Rptr. 900. See also dissenting opinion City of Los Angeles v. Offner, 55 Cal.2d 103, 10 Cal.Rptr. 470. However, respondent argues that since the cost of the sewer system and of the laterals, as well as inspection fees for making connections, were all provided by ordinance in addition to the sewer connection charge, there is no specific consideration furnished by the city in return for the charge. It follows, respondent argues, that the purpose of the connection charge can only be to raise revenue, which makes it a tax measure. Respondent overlooks the service furnished the building owner, which service is distinguishable from capital outlay or the inspection cost of making the physical connection. The municipality has a continuing burden in the operation and maintenance of its sewer system. Furnishing such service for the protection of the health and safety of the community clearly supports a consideration under the police power. If respondent intends to argue, as its brief implies, that any service furnished under the police power for which a fee is charged must be based upon a specific and ascertainable consideration capable of evaluation, it takes too narrow a view of the police power.

The same is true of respondent's corollary argument, that since the sewer connection fee collected by the municipality was required to be placed in a special fund to be used for 'expanding the sanitary sewer system of the City of Livermore and/or the servicing of any bonded indebtedness of the City of Livermore hereinafter incurred for sanitary sewer purposes,' it therefore bears no relation to the service furnished to the householder. Respondent argues that this use of the revenue deprives the sewer connection charge of its police power attributes. But as we have pointed out, the service furnished by the city is the use of a sewerage system by the householder. In an area of expanding population, the demand upon a sewerage and disposal system is not static. As the population increases the burden on the system increases, making it necessary to continually expand and improve the entire sewage disposal system. It is impossible to tell at which point in the community's development or by which additional connection the need for expansion arises. The significant fact is that each connection adds its burden to the system, and when the burden is sufficiently great, the system must be enlarged and improved. It cannot be said that the connector derives no benefit from the connection fee even though other provision has been made to finance the original capital outlay. The recent case of Longridge Estates v. City of Los Angeles, supra, 183 Cal.App.2d at page 539, 6 Cal.Rptr. at page 905 supports our position. The court held:

'The power to make a reasonable charge for the connection to and use of the sewers was a proper incident to the exercise of police power by defendant to provide them. Harter v. Barkley, supra, 158 Cal. 742, 112 P. 556. There was evidence that sewage from the Longridge subdivision traverses the city sewage system for about 14 miles and from Laurel Hills about 10 miles until it reaches the point of disposal at Hyperion, and that the facilities thus used cost about $106,000,000. Plaintiffs point out that others had already paid for or had assumed the burden of paying for much of this system before the ordinances were passed which are now before us. This in no way suggests that new subdivisions should not be required to pay their fair share of the cost of expansion, repair, and replacement made necessary, in part, by their share in the use of this vitally essential service. * * *

'The money collected from plaintiffs was placed, together with other like payments into a special trust fund of the city for use exclusively for the construction of outlet sewers. (Municipal Code, Sec. 64.19.1.) This was obviously a legal and businesslike procedure directed in part to assist the city in the discharge of the duty required by law to provide for the disposal of sewage arising within the city. People v. City of Los Angeles, 83 Cal.App.2d 627, 189 P.2d 489. This was a public purpose and neither plaintiff can avoid its proper share of responsibility, even though the benefit to that plaintiff from the dollars which it pays into this...