Barratt American v. Rancho Cucamonga

• Decision Date: 22 December 2005
• Docket Number: No. S117590.,S117590.
• Citation: 37 Cal.4th 685,37 Cal.Rptr.3d 149,124 P.3d 719
• Court: California Supreme Court
• Parties: BARRATT AMERICAN, INCORPORATED, Plaintiff and Appellant, v. CITY OF RANCHO CUCAMONGA, Defendant and Respondent.

37 Cal.Rptr.3d 149

37 Cal.4th 685

124 P.3d 719

BARRATT AMERICAN, INCORPORATED, Plaintiff and Appellant, v. CITY OF RANCHO CUCAMONGA, Defendant and Respondent.

No. S117590.

Supreme Court of California

December 22, 2005.

Law Offices of Walter P. McNeill, Walter P. McNeill, Redding; Law Offices of Richard D. Gann and Richard D. Gann, for Plaintiff and Appellant.

Sheppard, Mullin, Richter & Hampton and David P. Lanferman, San Francisco, for California Building Industry Association as Amicus Curiae on behalf of Plaintiff and Appellant.

Jonathan M. Coupal and Timothy A. Bittle, Sacramento, for Howard Jarvis Taxpayers Association as Amicus Curiae on behalf of Plaintiff and Appellant.

Law Office of Brent & Klein and Jason G. Brent, Tehachapi, for George C. Jenkins as Amicus Curiae on behalf of Plaintiff and Appellant.

James S. Burling and Meriem L. Hubbard, Sacramento, for Pacific Legal Foundation as Amicus Curiae on behalf of Plaintiff and Appellant.

Richards, Watson & Gershon, James L. Markman, Brea, B. Tilden Kim Los Angeles, and Juliet E. Cox, for Defendant and Respondent.

Best, Best & Krieger, Jeffrey V. Dunn, Irvine, and Mark D. Servin, for League of California Cities and California State Association of Counties as Amici Curiae on behalf of Defendant and Respondent.

CHIN, J.

The Mitigation Fee Act (Gov.Code, §§ 66000-66025)¹ (the Act) was passed by the Legislature "`in response to concerns among developers that local agencies were imposing development fees for purposes unrelated to development projects.'" (Ehrlich v. City of Culver City (1996) 12 Cal.4th 854, 864, 50 Cal.Rptr.2d 242, 911 P.2d 429.) Although most of the Act is concerned with development fees, it also addresses fees or charges that do not necessarily relate to a development project. (Utility Cost Management v. Indian Wells Valley Water Dist. (2001) 26 Cal.4th 1185, 1191, 114 Cal.Rptr.2d 459, 36 P.3d 2 (Utility Cost Management).) The various sections of the Act cover fees for development projects (§§ 66000-66011), water or sewer connections (§ 66013), and zoning and building permits (§ 66014). This case involves legal challenges to building inspection and permit fees and appropriate remedies when excessive fees are imposed.

Section 66014, subdivision (a), provides that local agency fees for building inspections and permits may not exceed the estimated reasonable cost of providing the service for which the fee is charged unless the excess amounts are submitted to and approved by a two-thirds vote of the electorate. Section 66016, subdivision (a), provides a prospective fee reduction remedy when fees or service charges exceed actual costs and create excess revenues. Both sections specify that any judicial challenge to a fee thereunder is subject to the requirements of section 66022, which states that the action or proceeding "shall be commenced within 120 days of the effective date of the ordinance, resolution, or motion." (§ 66022, subd. (a); see also §§ 66014, subd. (c), 66016, subd. (e).)

Sections 66020 and 66021, which authorize a refund of any unlawful part of the fees imposed on a development project, are subject to a different statute of limitations period. Local agencies must give project applicants written notice of the fee amount, indicating that they have 90 days to protest it. (§ 66020, subd. (d)(1).) Any party who files a protest may then file an action attacking the imposition of the fees within 180 days after delivery of the local agency's notice. (§ 66020, subd. (d)(2).)

In this case, we determine: (1) whether a party who challenges a local agency's fees for building inspections and permits under section 66014 can state a claim for remedies under both section 66016 (prospective fee reduction) and section 66020 (refund); (2) whether the limitations period of section 66020 or section 66022 applies to a claim that the local agency's building permit fees are excessive; and (3) whether a local agency's reenactment of the same building permit and inspection fees is subject to challenge under section 66022. In addition, we decide other issues: (4) whether local agencies that charge excessive building permit and plan review fees are subject to a penalty for collecting and retaining "special taxes" without voter approval within the meaning of section 53728; and (5) whether local agencies are constitutionally required to conduct annual financial audits to assess whether their fees create excess revenues. We conclude that building permit fees are not fees imposed on a development project. Therefore, the applicable remedy and limitations period for excessive building fees claims under section 66014 are found in sections 66016 and 66022, not in sections 66020 and 66021. Also, we conclude that a reenactment of the same building permit fee is a modification or amendment of an existing fee or service charge under section 66022, which triggers a new limitations period; that local agencies that charge excessive building permit fees are not subject to a section 53728 penalty; and that local agencies are not constitutionally required to conduct annual financial audits.

I. FACTUAL AND PROCEDURAL HISTORY

Because this case comes to us on a demurrer for failure to state a cause of action, we accept as true the facts alleged in plaintiff Barratt American, Inc. (Barratt)'s complaint. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58.)

In July 1999, the City of Rancho Cucamonga (City) adopted resolution No. 99-146, setting forth a comprehensive fee schedule for various services the City provides. It included a fee schedule for building permits and plan reviews based on the "total valuation of work." The charges for building permit fees started at $25 for work valued up to $1,000 and ended at $555 for work valued up to $100,000. Each additional $1,000 in value incurred a fee of $2.50. Plan review fees were a percentage of the building permit fees. The City building official was authorized to determine the "total valuation of work." In December 2000, the City adopted resolution No. 00-268, which modified certain fees set in 1999. The 2000 resolution slightly increased, by 50 cents, the building permit fee from $555 for work valued at $100,000 to $555.50. The resolution explained that the new fee was a correction of a previous typographical error. In January 2002, the City adopted resolution No. 02-023, which modified certain fees set in 2000. However, the building permit fee was not changed, except to the extent it was reset at $555 for work valued at $100,000. The 2002 ordinance apparently reintroduced the typographical error that the 2000 ordinance had corrected.

In June 2000, Barratt, a real estate developer, began to construct a 123-unit residential subdivision in the City. In May 2002, Barratt sued the City, alleging that the City's building permit and plan review fees were excessive that the City's method of establishing those fees was arbitrary and unrelated to the actual cost of the service provided, that the fees were based improperly on the monetary value of the work, and that the building officials had unfettered authority to determine the final valuation component of the fee. The complaint further alleged that, beginning in June 2000, Barratt had paid more than $143,000 in building permit and plan review fees for at least 83 building permits for the construction of single-family homes in the 123-unit subdivision, that it intended to continue construction until it completed the project, and that the City collectively received more than $1 million per year (and more than $3 million total) in excess building permit and plan review fees. Barratt sought: (1) a refund of $143,000 for the allegedly excessive fees already paid (§ 66020) or in the alternative, a refund in excess of $110,000, after crediting the City with the reasonable value of services it rendered in issuing the building permits and reviewing Barratt's plans; (2) a writ of mandate compelling the City to apply the excess fee revenues to reduce future fees (§ 66016, subd. (a)) and to perform an annual audit to identify excess fee revenues (Cal. Const., art. XIII B, §§ 1.5, 8, subd. (b)); (3) a declaration that the fees imposed were invalid "special taxes," resulting in the reduction or forfeiture of property tax revenues (§§ 53722, 53728); and (4) the invalidation of resolution No. 02-023 (§§ 66016, subd. (e), 66022, subd. (b)). When it filed the action, Barratt was midway through the development and sales of the homes in the subdivision.

The City demurred to Barrett's complaint. The trial court sustained its demurrer without leave to amend, ruling that: (1) Barratt could not obtain a refund under section 66020 because building permit and plan review fees are not development fees within the meaning of that section; (2) a writ of mandamus to compel the City to comply with section 66016 and to perform an annual audit and fee adjustment was an inappropriate remedy because the timing of any fee review and adjustment is a matter of legislative discretion; and (3) declaratory relief under sections 53722 and 53728 was not an appropriate remedy. Instead, the court found that the appropriate remedy for excessively high building permit fees was to challenge the ordinance in a validation action and obtain a prospective fee reduction, as specified in section 66016. That remedy was unavailable to Barratt, however, because the statute of limitations period had expired. In addition, the court determined that Barratt could not attack the validity of resolution No. 02-023 because the 2002 resolution only reenacted the fee previously set forth in the 2000 resolution and was not a new or increased fee under section 66016.

The Court of Appeal agreed with the trial court's reasoning and result and affirmed the judgment. We granted Barratt's petition for review.

II. DISCUSSION

Barratt contends that payers of excess building permit fees in violation of sections...