City of S.F. v. Regents of the Univ. of Cal., S242835

Citation442 P.3d 671,7 Cal.5th 536,248 Cal.Rptr.3d 352
Decision Date20 June 2019
Docket NumberS242835
Parties CITY AND COUNTY OF SAN FRANCISCO, Plaintiff and Appellant, v. The REGENTS OF the UNIVERSITY OF CALIFORNIA et al., Defendants and Respondents.
CourtUnited States State Supreme Court (California)

Dennis J. Herrera, City Attorney, Jean H. Alexander, Chief Tax Attorney, Christine Van Aken, Chief of Appellate Litigation, and Peter J. Keith, Deputy City Attorney, for Plaintiff and Appellant.

Colantuono, Highsmith & Whatley, Michael G. Colantuono, Pasadena, and Aleks R. Giragosian for League of California Cities as Amicus Curiae on behalf of Plaintiff and Appellant.

Jarvis, Fay, Doporto & Gibson, Jarvis, Fay & Gibson, Benjamin P. Fay, Gabriel McWhirter, Oakland; Elise Traynum ; Charles F. Robinson, Karen J. Petrulakis and Margaret L. Wu, Oakland, for Defendant and Respondent Board of Directors of Hastings College of the Law.

Margaret L. Wu, Oakland; Munger, Tolles & Olson, Bradley S. Phillips, Los Angeles, Benjamin J. Horwich, San Francisco, and Dila Mignouna for Defendant and Respondent The Regents of the University of California.

Kamala D. Harris and Xavier Becerra, Attorneys General, Edward C. DuMont, State Solicitor General, Janill L. Richards, Principal Deputy State Solicitor General, Gonzalo C. Martinez, Deputy State Solicitor General, Geoffrey H. Wright, Associate Deputy State Solicitor General, Paul D. Gifford, Assistant Attorney General, Joyce E. Hee, David Lew and Robert E. Asperger, Deputy Attorneys General, for Defendant and Respondent Board of Trustees of the California State University.

David A. Carrillo, Martinez; Benbrook Law Group, Bradley A. Benbrook, Sacramento, and Stephen M. Duvernay for California Constitution Center as Amicus Curiae on behalf of Defendants and Respondents.

Opinion of the Court by Kruger, J.

The City and County of San Francisco (San Francisco) imposes a tax on drivers who park their cars in paid parking lots. To enforce the tax, the city requires parking lot operators to collect the tax from drivers and remit the proceeds to the city. We granted review to consider whether the California Constitution permits San Francisco to apply this tax collection requirement to state universities that operate paid parking lots in the city. We conclude the answer is yes.

I.

San Francisco is a consolidated city and county that has adopted a charter for its own governance under article XI, section 3 of the California Constitution. Exercising its constitutional power to regulate its "municipal affairs" as a charter city ( Cal. Const., art. XI, § 5, subd. (a)), in the early 1970’s San Francisco enacted a tax on the cost of "rent" for any parking space at a parking lot or garage in the city. (S.F. Bus. & Tax Regs. Code, art. 9, § 601.) Since 1980, the parking tax rate has been set at 25%. (Id. , § 602.5.)

The San Francisco parking tax is imposed on drivers. But like many taxes of its kind, the parking tax is not paid directly to the city; drivers instead pay the parking tax to the parking lot operator, along with the parking fee the operator charges. The operator then collects the taxes and remits them to the city. (S.F. Bus. & Tax Regs. Code, art. 9, § 603.) To ensure it receives the proper amounts, San Francisco requires operators to document the taxes they collect and holds them liable for any underpayments.1

By its terms, the ordinance applies to public entities and private ones alike, though it does excuse public entity operators from some of the requirements imposed on private parking operators, such as bonding and permitting requirements (S.F. Bus. & Tax Regs. Code, art. 6, § 6.6-1, subd. (h)(2); S.F. Police Code, art. 17, § 1215, subd. (b)), and requirements for installing devices to properly track parking revenue and taxes (S.F. Bus. & Tax Regs. Code, art. 22, § 2202). But public entities are still required to "collect, report, and remit" the parking tax owed by drivers to the city (S.F. Bus. & Tax Regs. Code, art. 6, § 6.8-1, subd. (b)). It is this requirement that has generated the present controversy.

Defendants are the Regents of the University of California (Regents), which oversees 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 operates San Francisco State University (SFSU) (collectively, the universities). All of the university defendants own and operate private parking facilities in San Francisco in order to serve the needs of their respective campuses. Specifically, the Regents own and operate parking facilities at UCSF’s educational and healthcare facilities for the use of faculty, staff, students, researchers, visitors, and patients who receive care at the clinics and hospitals on campus. UCSF uses its parking fee revenue to fund, among other things, a shuttle bus service between its various locations for students, faculty, and staff. Hastings operates a garage near its law school, which is located in the Tenderloin neighborhood of San Francisco. Hastings explains that it operates the garage at a loss in order to maintain a safe and secure environment for its students. CSU, for its part, operates nine parking lots on SFSU’s campus, which is located in an urban environment where parking is scarce.

In 1983, San Francisco attempted to collect parking lot taxes from UCSF, but the Regents asserted immunity and San Francisco declined to pursue the matter. That was, for quite some time, the end of the controversy. But in 2011, San Francisco reconsidered and directed UCSF, Hastings, and SFSU to begin collecting and remitting the parking tax. The universities refused. In response, San Francisco filed a petition for a writ of mandate in the trial court to compel compliance. San Francisco argued that it would be a minimal burden for the universities to collect the parking tax along with whatever parking fees they charge. San Francisco also offered to reimburse the universities for their administrative costs in collecting and remitting the taxes, as the trial court had ordered in another municipal tax collection case, City of Modesto v. Modesto Irrigation Dist. (1973) 34 Cal.App.3d 504, 508–509, 110 Cal.Rptr. 111 ( City of Modesto ). The trial court denied the writ, concluding that the universities are exempt from compliance with the parking tax ordinance. The trial court reasoned that this result followed from the constitutional principles articulated and applied in In re Means (1939) 14 Cal.2d 254, 93 P.2d 105 ( Means ) and Hall v. City of Taft (1956) 47 Cal.2d 177, 302 P.2d 574 ( Hall ), which hold that a local government may not regulate a state entity in its performance of governmental functions unless the state consents to the regulation.

The Court of Appeal affirmed in a published opinion, agreeing with the trial court that the Means - Hall doctrine exempts the state agencies from collecting and remitting the parking tax. ( City and County of San Francisco v. Regents of University of California (2017) 11 Cal.App.5th 1107, 218 Cal.Rptr.3d 466 ( City and County of San Francisco ).)

Justice Banke dissented. In her view, the state’s sovereignty is "not impinged" ( City and County of San Francisco , supra , 11 Cal.App.5th at p. 1149, 218 Cal.Rptr.3d 466 (dis. opn. of Banke, J.)) by the "minimal burden" ( ibid. ) of "collecting a general local tax imposed on third parties, particularly where the costs of such are reimbursed" ( id. at p. 1146, 218 Cal.Rptr.3d 466 ). She also observed that other authorities have, contrary to the majority’s holding, concluded that a municipality may require a state entity to collect a general tax imposed on third parties doing business with the entity, at least where the municipality reimburses the state entity for the costs of collection. (See City of Modesto , supra , 34 Cal.App.3d 504, 110 Cal.Rptr. 111 [charter city could require state agency operating as utility to collect utility user’s tax]; Eastern Mun. Water Dist. v. City of Moreno Valley (1994) 31 Cal.App.4th 24, 26, 36 Cal.Rptr.2d 823 ( City of Moreno Valley ) [relying on City of Modesto to conclude general law city could require state agency operating as utility to collect utility user’s tax]; accord, 65 Ops.Cal.Atty.Gen. 267 (1982) [relying on City of Modesto to conclude municipality may require state agency to collect local occupancy tax from private users of state conference center].) While the law on the subject "has been far from a paragon of clarity," she argued, the majority’s decision left the law "in some disarray." ( City and County of San Francisco , at p. 1124, 218 Cal.Rptr.3d 466 (dis. opn. of Banke, J.).) She called on this court to "state clearly whether or not a state entity can be asked to collect a local tax imposed on third parties doing business with the entity, particularly where ... the entity will be reimbursed its costs of doing so." (Ibid. )

Hearing the call, we granted review.

II.

The general problem in this case is familiar to any constitutional system in which two governments exercise authority within the same territory. The specific task before us is to determine the proper allocation of authority between a local government and state agencies under a constitution that confers substantial powers on each.

Many of California’s local governments predate California’s statehood, and the framers of the 1879 California Constitution dedicated an entire article to the subject of their powers. From the outset, the 1879 Constitution expressly recognized the police powers of local government, and continues to do so today: As relevant here, any city "may make and enforce within its limits all local, police, sanitary, and other ordinances and regulations not in conflict with general laws." ( Cal. Const., art. XI, § 7.) The 1879 Constitution also permitted cities of a certain size to adopt charters for their own government. ( Weekes v. City of Oakland (1978) 21 Cal.3d 386, 399, 146 Cal.Rptr. 558, 579 P.2d 449 ( We...

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