Azusa Land Partners v. Dep't of Indus. Relations
| Decision Date | 02 March 2011 |
| Docket Number | No. B218275.,B218275. |
| Citation | 120 Cal.Rptr.3d 27,191 Cal.App.4th 1 |
| Court | California Court of Appeals Court of Appeals |
| Parties | AZUSA LAND PARTNERS, Plaintiff and Appellant, v. DEPARTMENT OF INDUSTRIAL RELATIONS, Defendant and Respondent. |
Allen Matkins Leck Gamble Mallory & Natsis, Patrick A. Perry and Nancy S. Fong, Los Angeles, for Plaintiff and Appellant.
Paskerian Block Martindale & Brinton, Aliso Viejo, Robin C. Martindale and Caleb J. Brinton IV for Rancho Mission Viejo as Amicus Curiae on behalf of Plaintiff and Appellant.
Cox, Castle & Nicholson, John S. Miller, Jr. and Dwayne P. McKenzie, Los Angeles, for California Building Industry Association as Amicus Curiae on behalf of Plaintiff and Appellant.
Vanessa L. Holton, Anthony Mischel, San Francisco, and Christopher Jagard for Defendant and Respondent.
Azusa Land Partners (ALP) appeals from a judgment denying its petition for writ of mandate. (Code Civ. Proc., § 1085.) ALP seeks to vacate a determination by respondent Department of Industrial Relations (Department) that a planned community project is a "public work," as definedby Labor Code section 1720,1 and subject to prevailing wage laws applicable to public improvement work performed by private contractors as a condition of regulatory approval for their construction projects. We affirm.
Factual background
Petitioner and appellant ALP is the owner and developer of a master planned community known as the Rosedale Project (Project). The Project is located on over 500 acres of land in the City of Azusa (City) previously owned by the Monrovia Nursery Company (Monrovia Nursery), ALP's predecessor-in-interest. The Project involves the potential development of over 1,200 homes, about 50,000 square feet of commercial construction, and public infrastructure and improvement work. To obtain approval for the Project, Monrovia Nursery agreed to conditions imposed by the City to perform certain public infrastructure and improvement work, including the construction of a public school and adjoining park, freight under-crossings, sanitation district facilities, and backbone and in-tract street, bridge, storm drain, sewer, water/reservoir, dry utilities, park and landscaping improvements for the cities of Glendora and Azusa. These conditions are memorialized in a May 27, 2004 Development Agreement between the City and Monrovia Nursery.
In August 2005, the City and ALP entered into a Funding and Acquisition Agreement (Acquisition Agreement), to provide for partial funding of required public facilities through Mello-Roos bonds. Pursuant to the Acquisition Agreement, the City agreed to establish a (Community Facilities District) to sell special (Mello-Roos) tax bonds to be used to pay for the design, planning, engineering, installation and construction of certain facilities eligible for public financing (the Eligible Facilities). ALP was to construct the Eligible Facilities, which would be owned, operated and maintained by the cities of Azusa or Glendora, the Azusa Unified School District or theMetropolitan Transit Authority, pursuant to a series of agreements (the Funding Agreements) between ALP and these public entities.2 The Eligible Facilitiesare identified in "Exhibit A" to the Acquisition Agreement.
The Funding Agreements refer to "Publicly Financed Facilities," as the subset of Eligible Facilities which will actually be built using proceeds of Mello-Roos bonds. According to ALP, the Publicly Financed Facilities were not identified in the Acquisition Agreement because it was not known at the time that agreement was executed specifically which Eligible Facilities would be constructed using Mello-Roos bonds. The Publicly Financed Facilities were subsequently identified in a modification to the Acquisition Agreement (Exhibit B), executed between the City and ALP in 2007, after the Mello-Roos bonds were issued.
On June 5, 2006, after consolidated special elections, the City authorized the creation of Community Facilities District No. 2005-1, Rosedale (CFD), approved a bond indebtedness of up to $120 million to be incurred by the CFD, and authorized the City Clerk to record a notice of a special tax lien on real property located within the CFD.3 The county collects special taxes in the same manner as ad valorem property taxes, and the proceeds are transferred to CFD's fiscal agent, Wells Fargo Bank. All public infrastructure and facilities required as a condition of approval of the Project (the Eligible Facilities) were eligible for CFD funds. The fiscal agent distributes the funds. The City manager and finance director must approve payment to ALP of any Mello-Roos bond proceeds.
Under the Acquisition and Funding Agreements, ALP is obligated to perform the public improvement work required by the City as a condition of approval of the Project even if the actual cost of that infrastructure construction exceeds the amount of bond funds authorized to pay for the public improvement work performed. That scenario has been borne out. The total cost of construction of all the Eligible Facilities is approximately $146 million. The CFD issued approximately $71 million in Mello-Roos bonds, the proceeds of which were used to fund construction of the Publicly Financed Facilities. The remaining $76 million in required public improvements must be constructed at private expense.
Administrative proceeding
In October 2005, an administrative inquiry was filed requesting the Department investigate and issue a determination as to whether the entire Rosedale Project constituted a "public work" under section 1720, subject to the prevailing wage mandates of section 1771.4 In response, ALP argued the Project was not a public work, but simply a private development project as to which the City lacked a proprietary interest, but as to which it required construction of certain public improvements as a condition of approval. ALP also asserted that although it was obligated and intended to pay prevailing wages for the public improvements actually financed with the proceeds of Mello-Roos bonds, itwas not required to do so for the construction of any infrastructure improvement for which it did not receive Mello-Roos financing.
In October 2007, the Department issued a public works coverage determination (Determination). The Determination found that the entire Project constituted a public work within the meaning of section 1720, subdivision (a)(1). According to the Determination, payment of Mello-Roos bond proceeds to ALP, a private developer, for the construction of public facilities and infrastructure improvements constituted a payment of public funds. (§ 1720, subd. (b)(1).) Because the Project was funded, in part, through public funds, it satisfied the definition of a "public work" under subdivision (a)(1). However, the Determination also found the Project satisfied the exemption of subdivision (c)(2), which provides that only those public infrastructure improvements required as a condition of regulatory approval are subject to the prevailing wage requirements, so long as the public funds contributed to the Project do not exceed the cost of construction of the required public improvements. Accordingly, the Determination held that ALP was required to comply with prevailing wage laws only as to that portion of the Project involving construction of public improvements required as a condition of the City's approval of the Project.
ALP filed an administrative appeal as to the portion of the Determination that held that all public infrastructure improvements required as a condition of approval are subject to prevailing wage requirements, even if those improvements are not funded through the proceeds of Mello-Roos bonds.
In July 2008, the Department affirmed its initial Determination by a Decision on Administrative Appeal. The Decision held that (1) the proceeds ofthe Mello-Roos bonds are public funds for purposes of the prevailing wage law; (2) because the Project is partially funded using proceeds of Mello-Roos bonds, the entire Project is a public work; (3) the cost of the portion of the Project funded by proceeds from the Mello-Roos bonds did not exceed the cost of construction of all public infrastructure improvements required as a condition of regulatory approval of the Project; and (4) all public infrastructure improvements are subject to the requirement of payment of prevailing wages, whether or not constructed using public funds.
Proceedings in the trial court
In October 2008, ALP filed the instant petition seeking a writ of mandate (Petition).5 ( Code Civ. Proc., § 1085.) Following substantial briefing and two lengthy hearings, the trial court denied the Petition. The court agreed with the Department's Decision. It found that: (1) Mello-Roos bond proceeds are public funds; (2) the Project is a "public work" within the meaning of subdivision (a)(1); and (3) under subdivision (c)(2), all public improvement work required as a condition of regulatory approval is subject to the prevailing wage law, not merely those discrete portions of public improvement work performed on the Project actually paid for with public funds. The court rejected ALP's assertion that subdivisions (a)(1) and (c)(2) need not even be analyzed because subdivision (a)(2), which appliesto public work performed for an "improvement district" (i.e., the CFD), is more specific and on point and, under that subdivision, only those public improvements actually funded by the proceeds of Mello-Roos bonds are public works.
Judgment was entered in favor of the Department. ALP appeals.6
This appeal raises three questions. We must determine whether: (1) the trial court erred by conducting its analysis under section 1720, subdivision (a)(1), rather than subdivision (a)(2); (2) the proceeds of Mello-Roos bonds are "public funds," under section 1720; and (3) if Mello-Roos bonds are "public funds," all construction of...
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