Kahn v. East Bay Mun. Util. Dist.

• Decision Date: 28 August 1974
• Citation: 41 Cal.App.3d 397,116 Cal.Rptr. 333
• Court: California Court of Appeals Court of Appeals
• Parties: Robert KAHN, Plaintiff and Appellant, v. EAST BAY MUNICIPAL UTILITY DISTRICT et al., Defendants and Respondents. Civ. 31355.

Page 333

116 Cal.Rptr. 333

41 Cal.App.3d 397

Robert KAHN, Plaintiff and Appellant, v. EAST BAY MUNICIPAL UTILITY DISTRICT et al., Defendants and Respondents.

Civ. 31355.

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

Aug. 28, 1974.

As Modified on Denial of Rehearing Sept. 23, 1974.

Hearing Denied Oct. 30, 1974.

Paul C. Maier, Herzstein, Maier & Lippett, San Francisco, for plaintiff and appellant; Edward Newman, San Jose, of counsel.

John B. Reilley, Frank E. Howard, Wayne N. Witchez, Robert B. Maddow, Oakland, for defendants and respondents.

SIMS, Associate Justice.

Petitioner and appellant, a property owner within the East Bay Municipal Utility District, has appealed from a judgment which denied him any relief on his petition for a writ of mandate, filed on behalf of himself and all property owners with the district, to secure a writ ordering the district, through its board of directors, to set water rates at levels which would eliminate the need for property tax revenues and to delete from the property tax rolls any property tax levies attributable to the district. The controversy centers on the provisions of section 12809 of the Public Utilities Code which empowers the board of directors to fix rates and charges, ¹ and sections 12891 and 12892 which authorize the levy and collection to taxes. ²

Petitioner contends that the district's directors abused their discretion in setting water rates so low as to require the raising of additional revenues from property taxes. Preliminarily he is faced with findings of the lower court to the effect that he had a plain, speedy and adequate legal remedy available to contest the imposition of the taxes under the Revenue and Taxation Code, and that he failed to avail himself of that remedy. It is also asserted that procedurally he is barred from any relief by way of writ of mandamus because the taxes in question have been levied, collected and turned over to the district for its use with its operating revenues.

It is concluded that although a writ of mandate will not ordinarily issue to control the levy or imposition of a tax, because of the interrelationship between the rate fixing power and the taxing power of the district, the petition was properly entertained to review the action of the directors in fixing the rates, and to control the exercise of their taxing power insofar as it was affected by any abuse of discretion in the former field. It is further determined that the public interest in the interpretation of the provisions of section 12809 of the Public Utilities Code and the ongoing program of the district requires a determination of the merits of the controversy. Finally it is concluded that section 12809 does not require the directors to fix rates and charges which are not lower than prices for water generally before they can resort to the taxing power, and that the action of the trial court in finding that the directors had sufficient evidentiary foundation for their actions in fixing the water rates and in levying taxes was proper. That there was no abuse of discretion in either regard is sustained by the record. The judgment must be affirmed.

The petition was filed September 3, 1970, shortly after the board of directors, on August 25, 1970, adopted a resolution approving a budget and fixing tax rates for the fiscal year 1970--1971. Respondents' demurrer on grounds now urged in support of the judgment was overruled. An answer was filed by respondents denying all the material allegations of the petition, and thereafter their motion for summary judgment was denied. Respondents then moved to have the matter specially set for hearing on the grounds that the sole issue presented by the petitioner's pleadings was whether the water rate schedule as set by the board the preceding fall, on October 14, 1969, was supported by sufficient evidence. Petitioner represented to the court that the only evidence he wished to present was evidence of water rates existing in other Northern California areas, and that if such evidence was inadmissible the matter could be submitted. The matter was accordingly specially set for trial.

Petitioner had attached to the memorandum of points and authorities in support of his petition an exhibit setting forth water rates in some 23 communities. He alleged that they demonstrated, and they do demonstrate, that all of the rates were higher than those fixed by respondent district. At the trial he stated that he was prepared to show that the rates for water charged in substantially all of the other areas in Northern California which sell water, and perhaps most of the districts which sell water in the State of California were higher than the rates fixed by respondents. The trial court found that petitioner was present at the public hearing on respondents' water rates, objected to the rates, but presented no evidence to support his objection. The court concluded that petitioner was not entitled to produce evidence that was not before the board when it evaluated respondents' water rates and when it fixed the tax rate for 1970--1971. ³

In so ruling the trial court was correct. (See Albonico v. Madera Irr. Dist. (1960) 53 Cal.2d 735, 739, 3 Cal.Rptr. 343, 350 P.2d 95 (overruled on other grounds (1958) 357 U.S. 275, 78 S.Ct. 1174, 2 L.Ed.2d 1313); Upton v. Gray (1969) 269 Cal.App.2d 352, 358--359, 74 Cal.Rptr. 783; Porter v. City of Riverside (1968) 261 Cal.App.2d 832, 836--837, 68 Cal.Rptr. 313; and Jenner v. City Council (1958) 164 Cal.App.2d 490, 497--498 and 499--500, 331 P.2d 176. Cf. Lotus Car Ltd. v. Municipal Court (1968) 263 Cal.App.2d 264, 268, 69 Cal.Rptr. 384; and note Strumsky v. San Diego County Employees Retirement Ass'n (1974) 11 Cal.3d 28, 32, 112 Cal.Rptr. 805, 520 P.2d 29 (local administrative agencies).)

The trial court considered the matter on the petition, respondents' answer, and the affidavits which had been filed in connection with respondents' motion for summary judgment. Following briefing the court gave notice of its intended decision denying the petition. After a delayed settlement of findings, judgment was entered. Petitioner's motion for new trial was denied, and this appeal ensued. The record reflects the following facts.

On April 2, 1969, two of the district directors, who constituted the finance committee, filed a memorandum containing a summary of a 'Recommended Financing Plan' for the five-year period from July 1, 1969, through June 30, 1974, which had been prepared by the finance department of the district. The plan recommended: (1) Continuation of the current basic tax rate of 16.3 cents; (2) borrowing for selected projects in an amount then estimated at $21.6 million; and (3) adoption of a new water rate structure to become effective November 1, 1969, to provide an overall 18 percent increase in water revenue.

The plan in its financial forecast for the five-year period noted that there presently existed a $25.1 million dollars surplus at existing water rates, after providing for operations and debt service, and that the total construction program of $66.9 million left the sum of $41.8 million needed to carry out the construction program in full. The plan recommended financing this amount by borrowing $21.6 million, increasing the water revenues by 18 percent to raise $17 million and leaving.$3.2 million unprovided for.

In a section labeled 'Tax Rate' the summary noted: 'At the informal direction of the Board of Directors, the District staff conducted a study of an appropriate relationship between water and tax revenues. Based on the principle that the portion of the total District costs applicable to fire protection should be borne by property owners (taxpayers) rather than water consumers, they determined the percentage of water and tax revenue which should be obtained from each of those sources.' (Emphasis added.)

In a section labeled 'Water Revenue Increase' the plan noted: 'We recommend an 18% Increase in water revenue, which is estimated will provide an additional $17 million during the five-year period. As shown in the financial forecast on the preceding page, this new revenue plus the $21.6 million of borrowed funds should adequately provide the additional financing required. It may be noted that.$3.2 million, which is 10% Of the estimated construction by contract, is not provided. We believe that this is a reasonable approach based on past experience of actual, as compared to programmed, expenditures.'

The finance committee stated, 'We have asked the staff to proceed with the development of a suggested rate structure to accomplish the desired revenue increase, and to indicate how various classes of customers would be affected. We expect to recommend these rates to the Board in September.'

On September 16, 1969, the general manager of respondent utility district filed with the board a report and recommendation for the 1970--1974 fiscal years to the effect that the total financing required was $45.8 million. He recommended that approximately $23.3 million be borrowed and $22.5 million obtained by increased water revenues, and noted this was 24 percent more revenue than would be realized under the existing rates.

The report noted, 'As to increased District water rates, it may be noted that this will be the first instance of an increase in water rates in District history, and the first rate revision of any kind since 1953 when water rates were reduced.' It continued, 'The District Staff has developed a revised water rate structure designed to produce the needed additional revenue of $22.5 5 million during the period ending June 30, 1974. It is recommended that the new rates be made effective with meter reading periods commencing on and after November 1, 1969.

'The recommended rate structure is based on a method currently employed by the California Public Utilities Commission in prescribing rates for water utilities. The basic purpose of this Commission technique is...