Park ' Fly of San Francisco, Inc. v. City of South San Francisco

• Decision Date: 26 January 1987
• Citation: 234 Cal.Rptr. 23,188 Cal.App.3d 1201
• Court: California Court of Appeals Court of Appeals
• Parties: PARK 'N FLY OF SAN FRANCISCO, INC. et al., Plaintiffs and Appellants, v. CITY OF SOUTH SAN FRANCISCO et al., Defendants and Respondents. A029879.

Page 23

234 Cal.Rptr. 23

188 Cal.App.3d 1201

PARK 'N FLY OF SAN FRANCISCO, INC. et al., Plaintiffs and Appellants, v. CITY OF SOUTH SAN FRANCISCO et al., Defendants and Respondents.

A029879.

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

Jan. 26, 1987.

Review Denied April 15, 1987.

Jonathan R. Bass, Edward M. Chen, Coblentz, Cahen, McCabe & Breyer, San Francisco, and Alan E. Popkin, Michael H. Wetmore, Popkin, Stern, Heifetz, Lurie Sheehan, Reby & Chervitz, St. Louis, Mo., for plaintiffs and appellants.

Robert K. Rogers, Jr., Robert J. Kasper, Jr., Office of the City Atty., South San Francisco, for defendants and respondents.

NEWSOM, Associate Justice.

Appellant ¹ brought an action for declaratory and injunctive relief challenging the validity and application of an ordinance enacted by the City of South San Francisco (hereafter referred to as 'respondent' or 'the City') imposing a business license tax upon operators of commercial parking facilities. (Ordinance No. 904-82, hereafter referred to as the 'ordinance. ') After a court trial the ordinance was found 'constitutional, valid and enforceable and ... applicable' to appellant.

The ordinance was enacted as a revenue measure in September of 1982, and became effective January 1, 1983. As originally adopted, it provided: 'A. Commercial Parking Facility Defined. Commercial Parking Facility' means any privately owned or operated facility which provides, for any form of consideration, parking or storage for motor vehicles, motorcycles, trailers, bicycles or other similar means of conveyance for passengers or property. [p] B. Operator' means any person who, as owner, lessee, employee, agent, or otherwise operates, maintains, manages, keeps, permits or allows to be operated, maintained, managed or kept any commercial parking facility in or upon any premises owned, leased, managed, operated or controlled by such person within the City. [p] C. The license tax payable by operator shall be four percent (4%) of the gross receipts without deduction therefrom. [p] D. This section shall become operative and the tax set forth herein shall be imposed on January 1, 1983." (§ 6.16.047 of the City of South San Francisco Municipal Code.) The definition of 'commercial parking facility' was subsequently amended to exclude providers of parking spaces 'rented appurtenant to the rental of residential dwelling units.'

Prior to the enactment of the ordinance, appellant was first classified in 1977 by respondent under its business license tax scheme as an 'airport parking and shuttle' service, and licensed as an 'Automobile Parking' business beginning in 1980. Between 1977 and 1982, appellant paid yearly business taxes in amounts ranging from $540 to $700, or an average of $618 per year.

Appellant commenced operations in the City of San Francisco in 1969, listing its primary business in its Articles of Incorporation as 'the construction, maintenance and operation of commercial parking lots, and in connection therewith to operate pick up and delivery services.' Appellant owns a parking facility located in South San Francisco. For a fee, appellant's customers are permitted to park their cars in the parking facility and are escorted by way of appellant's 'courtesy shuttle' to San Francisco International Airport. Appellant also provides a free shuttle service from the airport back to its parking facility. Fees are assessed according to the length of time the customer's car has been left with appellant. No separate fee is charged by appellant for the shuttle service, although after this suit commenced, appellant posted a sign stating that ' [e]ach dollar of parking charge is broken down as follows [p] Transportation service .65 [p] Parking service .35 [p] Total 1.00.'

While appellant's parking facility is located in South San Francisco, 4.6 miles of the 6.9 mile round-trip from there to San Francisco International Airport takes place outside the city limits of respondent. Appellant also introduced evidence showing that nearly 63 percent of its business expenses are incurred for the transportation service it provides.

According to the ordinance, appellant is classified as a 'commercial parking facility,' and subjected to a tax of four percent of its gross receipts. For the calendar year 1983, appellant was assessed a tax of $78,988.67 under the ordinance. Only one other business in the City, Parking Company of America, was initially similarly classified under the ordinance. A third business was subsequently included by respondent within the classification 'commercial parking facility' and taxed accordingly.

The evidence shows that respondent adopted the ordinance to increase its business tax revenue. Rather than exacting needed additional revenues from all businesses in the city, it was considered politically expedient to direct the tax only at commercial parking facilities such as that operated by appellant. The ordinance was intended as a 'revenue equalizing' measure justified on the theory that commercial parking operations involve unimproved land which generates comparatively little property tax. According to City Manager C. Walter Birkelo, even after enactment of the ordinance, many other businesses located in the city pay greater taxes per acre than appellant. Mr. Birkelo testified: 'My prime motivation was based on the fact that the Park 'N Fly type of operation yields significantly lower municipal revenues per acre for the type of zone property they occupy.' As a result of the adoption of the ordinance, however, appellant has the highest business license tax assessment in the city, paying to the City approximately 16 percent of the total municipal business license tax revenues in 1983.

In October of 1982, appellant objected to its classification as a commercial parking facility and sought an exemption from the tax imposed under the ordinance, raising many of the arguments presented in this appeal. Barry Lipton, respondent's director of finance, rejected appellant's objections to the ordinance, and this action ensued.

Appellant argues that the ordinance is constitutionally flawed, and also claims that it was incorrectly classified thereunder as a 'commercial parking facility.' Respondent submits that by failing to exhaust administrative remedies appellant is precluded from challenging its classification in this court. Respondent relies upon the well established rule that 'the courts of the state are not available to a taxpayer prior to the exhaustion of administrative remedies before the administrative tribunals responsible for the administration of the tax...." (Aronoff v. Franchise Tax Board (1963) 60 Cal.2d 177, 181, 32 Cal.Rptr. 1, 383 P.2d 409; see also United States Steel Corp. v. Franchise Tax Board (1983) 144 Cal.App.3d 473, 479-480, 192 Cal.Rptr. 677.) Failure to exhaust administrative remedies is a jurisdictional procedural defect which bars court action. (Id., at p. 480, 192 Cal.Rptr. 677; Barnes v. State Bd. of Equalization (1981) 118 Cal.App.3d 994, 1001, 173 Cal.Rptr. 742.)

Appellant seeks to avoid application of the exhaustion of administrative remedies doctrine by arguing that respondent has not provided an administrative mechanism for raising constitutional challenges to the ordinance. The ordinance states that 'a licensee or an applicant for a license' aggrieved by a classification assignment 'may apply to the collector for reclassification.' (Ord., § 6.04.110.) The collector then must investigate the application for reclassification and thereafter 'notify the applicant of the action taken on the [such] application....' (Ibid.) An appellate process is also provided: the applicant may, within 15 days, request a hearing on the collector's decision before the city manager. (Ord., § 6.04.120.)

It is clear to us that appellant failed to take advantage of the administrative procedure provided by the ordinance. While appellant sent a letter to respondent objecting to its reclassification as a commercial parking facility and raising the constitutional issues presented to this court, it neither filed a formal application for reclassification nor availed itself of the right to appeal to the city manager.

The doctrine of exhaustion of administrative remedies requires a party to use all available administrative procedures for relief and to proceed to a final decision on the merits before the appropriate agency before resorting to the courts. (People v. West Publishing Co. (1950) 35 Cal.2d 80, 88, 216 P.2d 441; Barnes v. State Bd. of Equalization, supra, 118 Cal.App.3d 994, 1001, 173 Cal.Rptr. 742.) If provided, appellate procedures must be pursued or court action will be barred. (Patane v. Kiddoo (1985) 167 Cal.App.3d 1207, 1212-1213, 214 Cal.Rptr. 9; McHugh v. County of Santa Cruz (1973) 33 Cal.App.3d 533, 538-539, 109 Cal.Rptr. 149.) Such a rule seeks to relieve overburdened courts from the obligation of considering cases where effective administrative remedies are provided. (Atari Inc. v. State Bd. of Equalization (1985) 170 Cal.App.3d 665, 673, 216 Cal.Rptr. 267; Patane v. Kiddoo, supra, 167 Cal.App.3d at p. 1214, 214 Cal.Rptr. 9.)

It is the taxpayer's burden to establish that administrative remedies have been exhausted, or that facts exist which excuse that requirement. (Westinghouse Elec. Corp. v. County of Los Angeles (1974) 42 Cal.App.3d 32, 37, 116 Cal.Rptr. 742.) As to the reclassification issue, we conclude that appellant has failed to satisfy its burden of proof. Appellant elected to file a court action without first seeking reclassification according to the procedure provided by the ordinance. That administrative procedures may or even probably would have been unavailing does not excuse appellant's obligation to pursue them. (Westinghouse Elect. Corp., supra, at p. 41, 116 Cal.Rptr. 742.) Had appellant pursued its administrative hearing and appeal rights, this action may have been unnecessary. For such reasons, appellant cannot...