Professional Engineers v. Department of Transportation

• Decision Date: 17 February 1993
• Docket Number: No. A057897,A057897
• Citation: 13 Cal.App.4th 585,16 Cal.Rptr.2d 599
• Court: California Court of Appeals Court of Appeals
• Parties: PROFESSIONAL ENGINEERS IN CALIFORNIA GOVERNMENT et al., Plaintiffs and Appellants, v. DEPARTMENT OF TRANSPORTATION et al., Defendants and Respondents; CALIFORNIA TRANSPORTATION VENTURES, INC., et al., Real Parties in Interest.

Page 599

16 Cal.Rptr.2d 599

13 Cal.App.4th 585

PROFESSIONAL ENGINEERS IN CALIFORNIA GOVERNMENT et al., Plaintiffs and Appellants, v. DEPARTMENT OF TRANSPORTATION et al., Defendants and Respondents CALIFORNIA TRANSPORTATION VENTURES, INC., et al., Real Parties in Interest.

No. A057897.

Court of Appeal, First District, Division 4, California.

Feb. 17, 1993.

Review Denied May 13, 1993.

Dennis F. Moss, Glendale, for plaintiffs and appellants.

William M. McMillan, Chief Counsel, Charles E. Spencer, Deputy Chief Counsel, Joel G. Philipp, Bruce A. Behrens, Sacramento, for defendants and respondents.

O'Melveny & Myers, Ralph W. Dau, Peter B. Ackerman, Robert L. Soza, Los Angeles, Nossaman, Guthner, Knox & Elliott, Stephen N. Roberts, Geoffrey S. Yarema, Alan D. Miller, Joseph M. Keene, San Francisco, for real parties in interest.

ANDERSON, Presiding Justice.

In 1989 our Legislature enacted an urgency measure empowering the California Department of Transportation (Caltrans) to contract with private developers to construct and operate tollway facilities under lease agreements with the state. (Assem. Bill No. 680 (1989-1990 Reg.Sess.), Stats.1989, ch. 107, pp. 1017-1019, eff. July 10, 1989.) ¹ This legislation arose from a legislative determination that "[p]ublic sources of revenues to provide an efficient transportation system have not kept pace with California's growing transportation needs, and alternative funding sources should be developed to augment or supplement available public sources of revenue." (Stats.1989, ch. 107, § 1(b), p. 1018.) The Legislature envisioned that privately financed projects could "[t]ake advantage of private sector efficiencies" and "[m]ore quickly bring reductions in congestion in existing transportation corridors." (Stats.1989, ch. 107, § 1(e), p. 1018.) Finally, through authorized demonstration projects, Caltrans could test the feasibility and efficiency of the private financing and construction model. (Stats.1989, ch. 107, § 1(f), p. 1018.)

Pursuant to the enabling legislation, in 1990 Caltrans entered into contracts with four entities for development and construction of the four demonstration projects. Appellants ² sought extraordinary, injunctive and declaratory relief in a multi-faceted challenge to Caltrans' constitutional and statutory authority to enter into these agreements. The trial court analyzed each challenge in a thorough statement of decision and entered judgment denying the requested relief; this appeal followed. We have looked anew at the perceived illegalities and find no defect in either the agreements or the enabling statute. Accordingly, we affirm the judgment in its entirety.

I. BACKGROUND

A. Statutory Scheme

Section 143 specifically authorizes Caltrans to "solicit proposals and enter into agreements with private entities, or consortia thereof, for the construction by, and lease to, private entities of four public transportation demonstration projects, at least one of which shall be in northern California and one in southern California." (§ 143, subd. (a).) Facilities constructed pursuant to the agreements would at all times be owned by the state and the state in turn would lease them to the private developers for up to 35 years. (§ 143, subd. (b).) During the lease term the developer would operate the facility and collect tolls to be applied to payment of its capital outlay, costs, and a reasonable rate of return on investment. (§ 143, subd. (d).) The facility would revert to the state upon expiration of the lease. In order to implement the statutory directives, Caltrans is authorized to "exercise any power possessed by it with respect to the development and construction of state transportation projects." (§ 143, subd. (c).)

B. The Agreements

In response to its mandate, Caltrans solicited proposals for the demonstration projects, selected four entities, and entered into contracts with each. They are: California Toll Road Company (CTRC), for an 85-mile expressway between Sunol and Vacaville; National Toll Road Authority Corporation, for an 11-mile extension of Route 57 in Orange County utilizing the Santa Ana River Flood Control Channel; California Private Transportation Corporation for a 10-mile, 4-lane road in the median of Route 91 from the Riverside County line to Route 55 in Orange County; and California Transportation Ventures, Inc., for a 10-mile limited access highway in San Diego County.

Each contracting party modified its initial agreement after the trial court announced its tentative decision finding the agreements legally sound except for certain "provisions interfering with the future independent judgment and recommendations of Caltrans." These the court determined were unauthorized and contrary to public policy The court then determined that the amendments cured the objectionable provisions.

II. DISCUSSION

A. The Agreements Do Not Represent an Unconstitutional Abdication by the State of its Police Powers

Each agreement designates a "franchise zone," "absolute protection zone" or "non-competition zone" along corridors of the proposed facilities. Within these zones, Caltrans grants certain exclusive development rights to the project sponsors. In particular, Caltrans agrees not to issue any competing franchise or open or operate any competitive transportation facility within the special zone for the term of the lease or agreement.

Appellants object that these noncompetition provisions amount to a contracting away, for some 35-plus years, of the state's police powers to determine how land should be used to serve the health and general welfare of the community within the franchise zones.

Without question, "the government may not contract away its right to exercise the police power in the future" and an agreement attempting to do so is "invalid and unenforceable as contrary to public policy." (Avco Community Developers, Inc. v. South Coast Regional Com. (1976) 17 Cal.3d 785, 800, 132 Cal.Rptr. 386, 553 P.2d 546.)

A turn of the century case involving a cemetery association's continued right to make interments on certain property is instructive. There the plaintiff association argued that since the city and county had granted land to it for purposes of a cemetery, and knew of and acquiesced in the cemetery's establishment and existence for many years, the city was estopped to enforce an ordinance preventing the interment of dead bodies within its borders. (Laurel Hill Cemetery v. City and County (1907) 152 Cal. 464, 475, 93 P. 70.) To this the court said: "Even if the city and county had made an express contract granting to the plaintiff the right to make interments in this ground in perpetuity, such contract would have no force as against a future exercise by the legislative branch of the government of its police power. [Citation.] This power cannot be bargained or contracted away, and all rights and property are held subject to it. [Citations.] The alleged estoppel relied on can have no greater force than would a contract such as the one supposed." (Id., at pp. 475-476, 93 P. 70.)

The agreements here do not expressly bargain away the state's police power to legislate for the welfare and safety of its people. Instead, Caltrans has granted real parties in interest certain exclusive development rights within certain franchise zones. We will not read into the contracts an abrogation of the potential future exercise of the sovereign police power. However, we emphasize, as did the trial court below, that the reservation of this power is implicit in all government contracts and private parties take their rights subject to it. Thus, within constitutional boundaries of procedural due process, just compensation for the taking of private property and the like, all private contractual rights must give way to compelling state necessity. For instance, were a legitimate, compelling public need to arise for a transportation facility within a franchise zone that would compete with one of the demonstration projects, the Legislature, acting to attain this public welfare object, could use its power of eminent domain to condemn the franchise. (Code Civ.Proc., § 1230.010 et seq.; City of Oakland v. Oakland Raiders (1982) 32 Cal.3d 60, 64-68, 183 Cal.Rptr. 673, 646 P.2d 835.) The trial court recognized this, as do real parties in interest. The agreements do not attempt to abrogate the police power.

Finally, were we to follow appellants' argument to its logical conclusion, all exclusive franchises would be void because any granting of exclusive rights inherently precludes other approaches to the problem. When granted explicitly, the validity of exclusive franchises for provision of public services and benefits is well settled. (See, e.g., cases concerning refuse removal and waste handling: Gurtz v. City of San Bruno (1935) 8 Cal.App.2d 399, 400-401, 48 P.2d 142; Tom Hudson & Associates v. City of Chula Vista (9th Cir.1984) 746 F.2d 1370, 1375; G. Fruge Junk Co. v. City of Oakland (N.D.Cal.1986) 637 F.Supp. 422, 424.)

B. California's Civil Service Laws Do Not Preclude the State From Contracting Out to Private Parties the Design and Operation of Toll Roads

Article VII of the California Constitution establishes a system of civil service employment for state government: "The civil service includes every officer and employee of the State except as otherwise provided in this Constitution." (CAL. CONST., ART. VII, § 1³, subd. (a).) The hallmark of our civil service system is that appointments and promotions are based on merit ascertained by competitive examination. (Art. VII, § 1, subd. (b).)

The purposes of article VII as disclosed in the ballot argument of its predecessor provision are twofold: (1) to encourage efficiency and economy in state government, and (2) to eliminate the "spoils system" of political patronage by ensuring that demonstrated fitness--rather than political considerations--spurs all appointments to public service. (California State...