William G. ISAAC, et al., Plaintiffs and Respondents, v. CITY OF LOS ANGELES, et al., Defendants and Appellants.
The City of Los Angeles (City) appeals from a judgment entered in favor of plaintiffs William G. Isaac, et al., on their complaints seeking a refund of special assessments levied by the City of Los Angeles against plaintiffs' master-metered real properties on account of delinquent utility bills. The trial court held the ordinance empowering the City to make the assessments and record a super-priority lien on plaintiffs' real properties violated the California and federal constitutions and state statutes governing the priority of liens. On appeal, the City contends the trial court improperly granted summary judgment because the ordinance is constitutional and material issues of fact exist.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
In May 1987, the City Council of the City of Los Angeles adopted an ordinance providing for the imposition of special assessment liens on master-metered apartment buildings for the collection of past due and estimated future billings for water and electric power.1 (L.A. City Admin. Code, § 6.500, et seq., effective July 23, 1987.) 2 The ordinance permits the City to levy the assessments and record a lien securing such assessment against the subject real property. The ordinance also provides such liens have priority over previously recorded deeds of trust and other liens and encumbrances against the property. Essentially, the purpose of the ordinance is to provide a mechanism for collecting unpaid utility bills on master-metered apartment buildings.
The ordinance states it is based upon the City Council's finding the provision of essential public utilities (water and electricity) to residential real properties is essential to the health and welfare of the residents of such properties. The City Council further found the failure to provide such essential utilities jeopardizes the health and welfare of the residents and renders the premises not only uninhabitable as a matter of law (Cal. Civ.Code, § 1941) but creates a public nuisance (L.A. Mun.Code, § 91.8902). The City Council further found the tenants of master-metered apartment buildings pay rent with the expectation the property owner would pay for essential utilities. The ordinance also declares the provision of essential public utilities constituted a “special benefit” to master-metered real properties and the owners thereof. (Ordinance, § 6.500.)
The ordinance provides a lien may be assessed for an unpaid utility service charge that is more than 75 days past due. The ordinance sets forth the procedure by which a lien is assessed: An application for assessment is filed with the city clerk and forwarded to the city engineer, who advises the City Council an application had been made. The city engineer prepares an assessment roll listing. (Ordinance, § 6.503.) A hearing on assessment applications is conducted before an officer or panel of officers selected by the Board of Public Works, and notice of any hearing is given by mail and publication no later than 15 days before the hearing to the property owner, each person last billed for utility services (if different from the owner), and each lender of record.3 (Ordinance, §§6.504, 6.505.)
Upon confirmation of the assessment, the city engineer records a lien with the county recorder “in such forms as to give suitable notice of the assessment lien to any potential buyer.” (Ordinance, §6.507.) The City entered into an agreement with the County of Los Angeles (County) for the collection of this assessment by the recordation of this assessment lien against the subject real properties, which is then collected with the property taxes. The assessment lien thus becomes a lien for real property taxes, and upon collection by the County was turned over to the city engineer for the City. The assessment accrues interest and penalties “to the same extent and on the same conditions as ad valorem taxes bear interest and carry penalties.” (Ordinance, §§ 6.508-6.510.) Finally, the assessment lien is given priority over all other encumbrances and liens on the subject property except for liens of special assessments separately billed, and as to such assessments it enjoys equal parity. The utility lien thus acquires the same priority as a lien for property taxes, and has priority over even previously recorded deeds of trust on the property. (Ordinance, § 6.513.)
Pursuant to the ordinance, the City began to assess the owners of master-metered residential real property in the City the cost of providing essential public utility services when the owners of such properties were either unwilling or unable to pay for such utilities. Some of the liens were for past due or overdue utility charges and sewer costs; some of the liens were for future water and electricity billings.
The plaintiffs in this action were all the owners or lenders of record of master-metered property upon which the City caused an assessment lien to be recorded.4 Due to the recordation of the liens, title to the subject properties was clouded. The plaintiffs were required upon a transfer of the property to pay off the liens in order to remove the cloud on title the liens created. The effect of the ordinance in some cases was to place the burden of paying the utility charges on non-owners of the property or persons who were not responsible for incurring the indebtedness. Pursuant to the terms of the ordinance, holders of deeds of trust, such as plaintiff Great Western Bank, were not given notice of the assessment or recordation of the lien.5
After the plaintiffs were forced to pay off these liens in order to clear up title to their property, they filed claims with the City, which were denied. The plaintiffs then commenced seven separate lawsuits against the City and County of Los Angeles 6 seeking a refund of the payments made and a declaration the ordinance was invalid on state and federal constitutional grounds and on the grounds it impermissibly created a “super-priority” lien. These actions were consolidated and the plaintiffs filed separate motions for summary judgment, arguing the ordinance violated their due process and equal protection rights under the California and United States Constitutions and the ordinance violated California statutory law governing lien priority. The City filed a cross-motion for summary judgment, arguing the statute was valid.
The trial court ruled in favor of the plaintiffs, holding (1) the ordinance, as applied, violated the plaintiffs' due process and equal protection rights because the ordinance failed to achieve a reasonable degree of equality between the plaintiffs and other similarly-situated persons; (2) the ordinance violated Revenue & Taxation Code section 2192.1 because it conferred “super-priority” status to the assessment lien over prior recorded deeds of trust; (3) the ordinance violated the California Constitution because the special assessments constituted a “special property tax” prohibited by article XIII, section 1 and article XIII-A, sections 1, 2 (a); (4) the ordinance violated procedural due process because no prior actual notice was given to the plaintiffs of the imposition of the assessments, and (5) the City wrongfully included in the assessment charges not authorized by the ordinance, such as sewer charges.7 Appellant timely appeals.
At issue in this appeal is whether the trial court improperly granted summary judgment finding the ordinance invalid on the grounds it (1) violated due process and equal protection under both the California and federal constitutions (Cal. Const., art. I, § 19; U.S. Const., Amd. XIV), (2) violated California statutory law establishing the priority of liens (see, e.g., Cal. Rev. & Tax.Code, § 2192.1), and (3) violated the California constitution's prohibition against special taxes (Cal. Const., art. XIIIA, §§ 1, 2(a).) The City also contends factual issues exist with respect to the issue of whether proper notice of the assessment liens was given.
We hold the ordinance is invalid on the grounds it is preempted by the statewide statutory scheme governing the priority of liens upon real property. Because we find the statute invalid on these grounds, we do not address respondents' arguments the ordinance violates due process or equal protection, or appellant's argument that factual issues exist precluding summary judgment.
I. STANDARD OF REVIEW.
A trial court's grant of summary judgment is reviewed de novo for error; we review the trial court's ruling, not its rationale, and will uphold the judgment if it is correct on any theory. (See Code Civ. Proc., § 437c, subd. (g); Sacks v. FSR Brokerage, Inc. (1992) 7 Cal.App.4th 950, 960-961, 9 Cal.Rptr.2d 306.) Thus, in spite of our affirmance, we rely on a different rationale than the trial court in finding the ordinance unconstitutional. (California Aviation, Inc. v. Leeds (1991) 233 Cal.App.3d 724, 730-731, 284 Cal.Rptr. 687.) In addition, although we conduct an independent review, we use the same standard for summary judgment as the trial court. (Szadolci v. Hollywood Park Operating Co. (1993) 14 Cal.App.4th 16, 19, 17 Cal.Rptr.2d 356.)
II. THE LIEN IMPOSED BY THE ORDINANCE IS NEITHER A SPECIAL TAX NOR A SPECIAL ASSESSMENT AND THEREFORE DOES NOT IMPLICATE THE CONCERNS OF ARTICLE XIIIA OF THE CALIFORNIA CONSTITUTION.
The City contends the lien imposed by the ordinance is a valid “special assessment” exempt from the limitation on special taxes. Respondents argue the lien constitutes a “special tax” prohibited by Article XIIIA of the California Constitution because the lien seeks to defray expenses other than those actually incurred in serving utilities to the master-metered apartment buildings.8 We conclude, however, the lien is neither a special assessment nor a special tax and thus Article XIIIA does not govern. Nevertheless, because we conclude the utility lien secures a purely contractual obligation for commodities provided by the DWP acting as a vendor on behalf of the City, the City's actions in imposing a lien are ultra vires and void.
A. The Lien Is Neither a Special Assessment Nor a Special Tax.
A lien is defined as “a charge imposed in some mode other than by a transfer in trust upon specific property which it is made security for the performance of an act.” (Cal. Civ.Code, § 2872.) Liens are created by operation of law or by contract; liens securing taxes and special assessments are created by operation of law. (Cal. Civ.Code § 2881; Rev. & Tax.Code §§ 2187, 2192.) Here, the City seeks to secure by a lien the performance of respondents' obligations to pay for utilities, a commodity.
Governmental levies against real property generally fall into three categories: (1) taxes, (2) special assessments, and (3) developmental and regulatory fees or “user charges.” Each class of charge has particular characteristics, limitations, and purposes. Special assessments are made for the purpose of completing a specific public improvement in a designated district; they are compulsory charges and are placed upon specific real property. They are made under express legislative authority for the purpose of defraying the cost of the proposed local public improvement. (San Marcos Water Dist. v. San Marcos Unified School Dist. (1986) 42 Cal.3d 154, 161, 228 Cal.Rptr. 47, 720 P.2d 935.) Because the local improvement will benefit only certain properties, the general public is not required to subsidize it through a general tax levy. (Solvang Municipal Improvement Dist. v. Board of Supervisors (1980) 112 Cal.App.3d 545, 552-554, 169 Cal.Rptr. 391.) Thus, strictly speaking, a special assessment is not really a tax but a benefit to specific property that is financed through the public credit. (Spring Street Co. v. City of Los Angeles (1915) 170 Cal. 24, 29, 148 P. 217.)
In contrast, although special taxes are also taxes levied for a specific purpose, they need not be earmarked to benefit particular property. (Knox v. City of Orland (1992) 4 Cal.4th 132, 142, 14 Cal.Rptr.2d 159, 841 P.2d 144.) Special taxes are prohibited by Article XIII A, section 4 of the California Constitution unless approved by a two-thirds vote of the qualified electors of the entity (city, county, or special district) seeking to impose the tax.9 (Cal. Const., art. XIII A, § 4.) Special assessments are exempt from limitations on special taxes because Proposition 13 was aimed at general government tax levies and overspending. (Solvang, supra, at p. 556, 169 Cal.Rptr. 391.) The amount of a special assessment may not exceed the benefit accruing to the affected property. Thus, if the property assessed receives no special benefit, the levy is a prohibited special tax. (City of Los Angeles v. Offner (1961) 55 Cal.2d 103, 109, 10 Cal.Rptr. 470, 358 P.2d 926.)
In addition to special assessments, property may be charged with different types of fees. These include: (a) regulatory fees imposed under the government's police power, (b) developmental fees exacted in return for permits or other governmental privileges, and (c) user fees. Development fees are usually imposed in connection with the development of real property and are not considered special taxes if the fee bears a reasonable relation to the development's probable cost to the community and the benefits derived from the community by the development.10 (Sinclair Paint Co. v. State Board of Equalization (1997) 15 Cal.4th 866, 874-875, 64 Cal.Rptr.2d 447, 937 P.2d 1350.) Similarly, regulatory fees must not exceed the reasonable cost of the services necessary for the activity for which the fee is charged and for carrying out the purpose of the regulation; they may not be levied for unrelated purposes. (Id. at p. 876, 64 Cal.Rptr.2d 447, 937 P.2d 1350.)
Finally, user fees are those which are charged only to the person actually using the service; the amount of the charge is generally related to the actual goods or services provided. A user fee for an on-going service is a monthly charge rather than a one-time payment. User fees are thus distinguishable from special assessments as well as special taxes. (San Marcos Water District v. San Marcos Unified School District, supra, 42 Cal.3d 154, 162, 228 Cal.Rptr. 47, 720 P.2d 935.) However, if payments are exacted solely for the purpose of carrying on business with no further conditions, they are taxes. (Sinclair Paint Co. v. State Bd. of Equalization, supra, 15 Cal.4th at p. 877, 64 Cal.Rptr.2d 447, 937 P.2d 1350.) Thus, fees can become special taxes subject to the two-thirds vote requirement of Proposition 13 only if the two conditions set out in Government Code section 50076 exist: (1) the fee exceeds the reasonable cost of providing the service or the regulatory activity, or (2) the fee is levied for general revenue purposes.11 (Carlsbad, supra, at p. 485, 3 Cal.Rptr.2d 318.) Similarly, special assessments may in reality be special taxes if the property assessed receives no special benefit beyond that received by the general public. (Knox, supra, at pp. 142-143, 14 Cal.Rptr.2d 159, 841 P.2d 144.)
The utility lien created by the ordinance is neither a special assessment nor a special tax, nor is it a regulatory or development fee. At most it is a user fee: payment for a specific commodity purchased. The lien is not a special assessment because no special benefit is conferred upon the master-metered properties through a physical improvement to the real property. Utility lines to provide service to real property would be an improvement to the property; however, the utilities themselves are a commodity that are provided to customers and they are ephemeral by nature, resulting in no permanent improvement to the property. There is no evidence in the record that any of the funds collected from the utility customers are directly used for capital improvements. Thus, although utility service may be beneficial to the properties by maintaining their habitability, the provision of utilities is not a special benefit beyond that received by the general public meriting a special assessment.
Indeed, the utility customer's agreement to pay a certain rate for a certain usage of utilities is a contractual obligation, and is far removed from the revenue-raising devices of assessments and taxes. Similarly, the charges levied for utility consumption at the master-metered apartments do not amount to special taxes because there is no evidence in the record that the funds collected are earmarked for a special purpose. The utility charges do not represent fees imposed for a regulatory or developmental purpose. There is no evidence the charges imposed exceeded the customer's actual or expected use of the utility commodity. Rather, at most the lien is based upon user fees, and represents a security interest in the real properties to secure payment for the obligation incurred to pay the DWP for utility charges. Thus, the utility lien does not implicate the special tax limitations of Article XIIIA. We therefore find the City's reliance on Roberts v. City of Los Angeles (1936) 7 Cal.2d 477, 490, 61 P.2d 323 misplaced. The City contends Roberts holds electric utility service constitutes a permanent improvement to the property and supports the imposition of a special assessment. (Ibid.) However, a careful reading of Roberts discloses it holds the costs and expenses of supplying electric utility service would support a special assessment; Roberts does not authorize a special assessment lien for the cost of the commodity itself. (Id. at pp. 490-491, 61 P.2d 323.) Indeed, as discussed post, the City's expansive reading of Roberts would not only give a municipality a means of circumventing the established procedures for obtaining judgments on contract actions, it would disrupt the statewide scheme of lien priority.
B. The City is Not Entitled to Impose a Lien on Respondents' Properties for Unpaid Utility Charges.
Because the utility lien is neither a valid special assessment nor a special tax giving the City authority to impose a lien to secure payment of the lien on that basis, the City cannot impose the utility lien unless there are other legal grounds supporting its imposition. Under the Civil Code, liens are created in two ways: (1) by operation of law, and (2) by contract. (Cal. Civ.Code, § 2881.) Liens arise by operation of law where there is a statute providing for the creation of a lien in a certain situation, as for example tax liens.12 An equitable lien may be imposed upon real property where the parties intend the property operate as security for the obligation. (Jones v. Sacramento Savings & Loan (1967) 248 Cal.App.2d 522, 531, 56 Cal.Rptr. 741; California Bank v. Leahy (1933) 129 Cal.App. 243, 247, 18 P.2d 709 [equitable lien requires a res upon which the obligation can attach itself].) A lien to enforce a simple contractual obligation, however, cannot be created unless the party has reduced the obligation to a judgment and an abstract of judgment is filed in the County Recorder's Office. (See generally Code Civ. Proc., § 697.310, et seq.) As there is no evidence in the record the parties agreed to the imposition of the utility lien in the event of unpaid utility charges, the City can only obtain a lien after it has obtained a judgment on an action to collect the unpaid utility charges. The ordinance, however, attempts to circumvent the statutory provisions providing for the creation of judgment liens by ipso facto declaring the City already has a lien. The ordinance is therefore invalid.
III. THE ORDINANCE VIOLATES CALIFORNIA STATUTORY LAW AND IS NOT EXEMPT UNDER THE MUNICIPAL AFFAIRS DOCTRINE
The City argues because utility service is a municipal affair, it is within the City's exclusive power to legislate with respect to payment of utility charges and the ordinance is well within the police power of the City. Respondents argue the ordinance, by giving the utility lien super-priority over all other recorded liens, is invalid because it violates California statutory law relating to the priority of liens.13 We agree the ordinance is invalid because it disrupts California's statewide statutory scheme of lien priority and is therefore not a valid exercise of municipal authority under California Constitution, article XI, section 5(a).
Every California city may enact and enforce within its limits local ordinances not in conflict with general laws. (Cal. Const. art. XI, § 7.) Chartered cities, such as Los Angeles, are granted exclusive power to legislate their municipal affairs. (Cal. Const. art. XI, § 5; Gov.Code § 34101.) Under home rule, the state Legislature's authority to intrude into matters of local concern is curtailed. The benefits of home rule are numerous, because cities are familiar with their own local problems and can often act more promptly to address problems than the state Legislature. Therefore, cities are only precluded from enacting laws on non-local matters if it is the intent of the Legislature to occupy the field to the exclusion of municipal regulation. (See Bishop v. City of San Jose (1969) 1 Cal.3d 56, 61-62, 81 Cal.Rptr. 465, 460 P.2d 137.)
Whether a city ordinance is valid therefore requires a determination of whether (1) the local regulation or ordinance is a “municipal affair,” upon which the municipality has the exclusive authority to regulate, or (2) whether the subject is a matter of statewide concern such that state legislation preempts any municipal attempt at lawmaking. Because the California Constitution does not define “municipal affairs,” it has become a question to be decided on the facts of each case, as the concept of a municipal affair changes over time as local issues become issues of statewide concern. (Bishop, supra, at p. 62, 81 Cal.Rptr. 465, 460 P.2d 137; Century Plaza Hotel (1970) 7 Cal.App.3d 616, 620, 87 Cal.Rptr. 166.) Although the state Legislature may have attempted to deal with a particular field, this does not automatically ordain preemption. The Legislature may also express its intent to permit local legislation in the field, or the statutory scheme may recognize local regulations. (City of Dublin v. County of Alameda (1993) 14 Cal.App.4th 264, 276, 17 Cal.Rptr.2d 845.)
Whether a particular matter is of “statewide concern” is another way of stating that the matter is preempted and conflicting local legislation is prohibited. Fisher recognized a three-part test to infer a legislative intent to preempt conflicting municipal enactments only where (1) the subject matter has been so fully and completely covered by general law as to clearly indicate it has become exclusively a matter of state concern, (2) the subject matter has been partially covered by general law stated in such terms as to indicate clearly a matter of paramount state concern which will not tolerate further or additional local action, and (3) the subject matter has been partially covered by general law, and the subject is of such a nature that the adverse effect of a local ordinance outweighs the possible benefit of the law to the municipality.14 (Fisher, supra, at p. 708, 209 Cal.Rptr. 682, 693 P.2d 261.)
We find lien priorities on real property a matter of statewide concern because statewide uniformity in lien priority is essential. In determining whether a field is fully occupied (expressly or impliedly) by general law such that a municipality may not enact conflicting laws, we first must determine whether the “field” is sufficiently defined. A “field” of legislation is one which is sufficiently logically related so that a court or a local legislative body could ascertain a cohesive approach to the subject. (Fisher v. City of Berkeley (1984) 37 Cal.3d 644, 707-708, 209 Cal.Rptr. 682, 693 P.2d 261.) Lien priority is a sufficiently defined field for purposes of preemptive analysis as the subject has been extensively covered by legislation. Numerous kinds of liens may be imposed on real property-judgment, assessment, tax, and consensual-and each type of lien's priority in relation to other liens is well defined.
For example, under California's general rule of lien priority, all other things being equal, liens have priority according to the time of their creation. (Cal. Civ.Code § 2897.) Other statutes, including recording statutes, modify this general rule. For example, liens for taxes are paramount to rights created by mortgages and deeds of trust, and liens for special assessments and general taxes stand on equal footing. (Rev. & Tax.Code § 2192.1; San Mateo County Bank v. Dupret (1932) 124 Cal.App. 395, 396, 12 P.2d 669; City of Long Beach v. Aistrup (1958) 164 Cal.App.2d 41, 48, 49, 330 P.2d 282.) The priority of tax liens is a creation of statute, as tax liens are not by their own force superior to private contract and mortgage liens. (Home Owners' Loan Corp. v. Hansen (1940) 38 Cal.App.2d 748, 752, 102 P.2d 417.) Purchase money mortgages are given special priority, having priority over all other liens subject only to the operation of the recording laws. (Cal. Civ.Code, § 2898(a).) Judgment liens are given less priority, such that even a prior recorded judgment lien is subordinate to a previously executed, but unrecorded, purchase money deed of trust. (Walley v. P.M.C. Investment Co., Inc. (1968) 262 Cal.App.2d 218, 219-220, 68 Cal.Rptr. 711.) Consistent with this scheme, Government Code section 53933 accords special assessments liens “first in time priority” among themselves.
In addition, under Public Utilities Code sections 16469 and 16470, a private utility may obtain a lien for unpaid utility bills. This utility lien has the same priority as a judgment lien.15 Although these sections are inapplicable to the City because municipally owned utilities are not regulated by the Public Utilities Commission on the theory the electoral process is a sufficient check on their functioning, sections 16469 and 16470 are instructive, as they demonstrate a legislative intent to accord utility liens a lesser priority than tax liens consistent with the California's statutory scheme. (Los Angeles Met. Transit Authority v. Public Utilities Commission (1959) 52 Cal.2d 655, 661, 343 P.2d 913; County of Inyo v. Public Utilities Commission (1980) 26 Cal.3d 154, 158-159, 161 Cal.Rptr. 172, 604 P.2d 566.) However, we point out that the absence of any specific statewide legislation permitting municipal utilities to impose a lien does not create a statutory loophole inviting local legislation, because of the pervasive statutory scheme already in place governing lien priority.
Because lien priority is a matter of statewide concern, the City may not enact legislation that conflicts or disables the effectiveness of statutory law. The statutory scheme of lien priority giving priority to certain liens, such as tax liens and purchase money mortgages, reflects a legislative intent to favor certain types of charges against real property. The utility lien at issue disrupts this balance by giving what is essentially a judgment lien priority normally accorded only to tax liens. The potential ramifications of this anomalous lien include the reticence of lenders to underwrite master-metered apartment buildings and increased information costs relating to properties in Los Angeles County, as potential lenders or purchasers must undertake additional investigations to determine the existence of such liens.
We sympathize with the City's plight in not being able to effectively use the utility cutoff threat to collect delinquent bills because those using the utilities generally are not the ones failing to pay. The record contains no explanation why the owners of the master-metered apartment buildings routinely failed to pay their utility bills, necessitating the enactment of the ordinance's drastic measures. However, the City will need to find another means by which to recoup payment from these delinquent property owners and at the same time ensure the tenants of the affected properties continue to receive necessary and beneficial utility services.
The judgment of the Superior Court is affirmed. The parties are to bear their own costs on appeal.
LOS ANGELES CITY ADMINISTRATIVE CODEAssessments for Essential Public UtilitiesSec. 6.500. Findings.
(a) The City council of the City of Los Angeles hereby finds that the providing of essential public utilities to residential real properties is essential to the health and welfare of the residents occupying the residential real properties, contributes to the usefulness and value of residential real properties and when such essential public utilities are not provided the health, welfare, and the public safety of the residents are placed at risk due to the fact that the failure to provide essential public utilities causes premises to become uninhabitable by law (Civil Code Section 1941 et seq.) as well as hazardous and substandard, causing the creation of a nuisance pursuant to Los Angeles Municipal Code Section 91.8902.
(b) The City council of the City of Los Angeles further finds that the providing of essential public utilities services to residential real properties constitutes a special benefit to such real properties and to the owners thereof.
(c) The City Council of the City of Los Angeles further finds that tenants of these residential real properties pay rent with the reasonable expectation that the utilities will be paid by the owner and that when an owner or owners of real property are unwilling to pay the costs of providing essential public utilities services to residential real properties the termination of utilities to these properties would create uninhabitable premises and constitute a direct threat to the health and safety of the residents of the properties. Such a threat would in fact be a nuisance placing the health and welfare of the residents of the properties at risk. In such cases, the cost of providing essential public utilities services, as well as the unpaid cost of such services provided to properties in the past, under the same ownership, should be assessed to such real properties, made a lien upon such properties by the City of Los Angeles pursuant to its authority to abate nuisances, and thereafter paid in the same manner as payment is made for other essential public services furnished to and benefiting real properties.
Chapter 8 added by Ord. No. 162,383, Eff. 7-23-87.Amended by: Subsec. (a) and (c), Ord. No. 170,164, Eff. 1-19-95. Sec. 6.501. Definitions.
“Application for assessment” as used in this chapter means the procedure whereby a department of the City of Los Angeles which provides one or more essential public utilities services requests that an assessment be levied for the cost of providing its service.
“Cost of providing essential public utilities service” as used in this chapter means the established rates for furnishing of water and electric power, together with all lawfully established taxes, surcharges, and fees upon such costs or service and other charges generally collected with utility payment. With respect to trash disposal service, the said “cost” shall be that charged to comparable real properties, considering the size of the imrpovement and the number of persons residing thereon, in the vicinity of the real property to be assessed by private trash pick-up and disposal services as determined by informal solicitation of written or oral proposals to furnish such services.
“Essential public utilities or utility service” as used in this chapter means the furnishing of water or electricity, where more than one residential unit is served through a single meter and trash disposal services.
“Overdue” as used in this chapter means that payment for an essential public utility service was not made when payment was due, and said payment is defined to be “due” five days after the placement of the billing for such service in the United States mail. The time periods stated hereafter shall be calculated from said “due” date.
Chapter 8 added by Ord. No. 162,383, Eff. 7-23-87.Sec. 6.502. Alternative Method of Collection and Severability.
(a) The procedures of this chapter provide an alternative means of securing and/or obtaining payment for the costs of providing essential public utilities services to residential real properties. Nothing herein shall preclude a department using other methods of securing the payment or obtaining payment for such services, including any other lawful method of placing liens on real property, civil suit and or discontinuance of service.
(b) If any portion of this chapter is found to be invalid or unconstitutional, whether on its face or as applied, such invalidity or inapplicability shall not affect the remaining portions of this chapter or applicability to other circumstances or persons, it being the intention of the City Council that this chapter be construed and applied to the extent constitutionally permissible notwithstanding it is not fully enforceable.
Chapter 8 added by Ord. No. 162,383, Eff. 7-23-87.Sec. 6.503. Application for Assessment.
(a) The cost of providing an essential public utility service may be assessed upon the benefiting real property only when it appears that the owner or other person in charge of the real property is unable or unwilling to make payments for such services within a reasonable time following the billing for such services. No assessment shall be levied unless, at the time of application for assessment, payment for the essential public utility service for the property is more than seventy five (75) days overdue, whether or not the present customer of record was the owner during all or any portion of said period. Except as provided elsewhere, said assessment lien shall not be made more than six months after the application for assessment was filed. If an assessment was levied upon a real property in the previous year, so that the cost of essential public utility service has been paid through collection of assessments on the property tax bill, an application for assessment may be made notwithstanding that delinquencies did not exist during the previous year.
(b) No assessment lien shall be levied more than six months after the application for assessment was filed, unless the property is the subject of litigation in State or Federal Court.
(c) The City shall mail to the owner or owners of record at their respective address as shown on the last equalized tax roll, as well as any lenders of record at their respective last known address, of the property to be assessed by registered mail return receipt requested, a copy of the application for assessment within 45 days after said application for assessment was filed. Failure to receive said notice does not invalidate the herein proceedings.
(d) The application for assessment shall contain:
(1) A resolution of the governing board of the department providing the essential public utility service requesting that the City Council of the City of Los Angeles levy assessments upon real properties to pay for service provided and to be provided to real properties.
2) A statement (i) that payments are or have been overdue as set forth in Subsection (a) of this Section; (ii) the address, legal description and assessor's parcel number of the real properties proposed to be assessed; (iii) the names of the owner or owners, and their respective addresses as shown on the last equalized assessment roll of the County of Los Angeles; (iv) the names of the recorded lenders at their respective last known addresses; (v) the names of the persons and their respective addressees who were last billed for the public utility service; (vi) an accounting documenting the delinquencies prior to the date of application and the payments and dates of payments made on the account which justifies the application for assessment for each real property; (vii) the amount of past due billings, including all taxes, surcharges, fees, interest and charges thereon, at the time of application; (viii) the estimated total billings for the utility service, including the taxes, surcharges, fees and charges thereon, and including interest which will accrue until payment, during the period of the fiscal year after the date of filing the application, less any amounts not expended from previously made assessments; (ix) the estimated total billings for the utility service, including all taxes, surcharges, fees and charges thereon and including the net amount of interest which will accrue until payment during the next fiscal year, and (x) an estimate of the reasonable additional cost to the department to make the application for the assessment and collect the assessment, which reasonable cost will be included in the amount of the assessment.
(e) Said application for assessment shall be filed with the City Clerk of the City of Los Angeles and the County Recorder of Los Angeles County within 45 days after the property was more than 75 days overdue. Said application may be for assessments to more than one property. When received, the City Clerk shall forward the applications for assessment to the City Engineer. The City Engineer shall advise the City Council of the making of an application.
(f) The City Engineer shall cause the application to be noted on the records utilized in preparing his report for the Report of Residential Property Records and Pending and Recorded Liens issued pursuant to Division D of Chapter 9 of Article 6 of the Los Angeles Municipal Code, commencing with Section 96.300.
(g) The City Engineer shall process said application for assessment received as follows:
(1) Estimate the total amount of proposed assessment for the department making the applications, including all of the items listed in Subsection (b)(2) of this section and including any estimated costs to the city in giving notice, holding hearings, and collecting and distributing the assessment when it is paid.
(2) Prepare an Assessment Roll listing:
(i) Each property to be assessed by address and by legal description;
(ii) The name of the owner or owners and the addresses as shown on the last Equalized Assessment Roll, and the names and the addresses of the persons last billed for the utility service, as such names and addresses have been furnished by the department making the application for assessment; and
(iii) The amount of each proposed assessment and the department and utility service for which it is proposed to be levied.
(h) At the request of the City Engineer, the City Attorney is hereby authorized and directed to prepare a draft of an ordinance declaring the Council's intention to levy assessments pursuant to this chapter and to forward the draft of ordinance to the City Engineer for transmittal with the assessment roll to the City Council.
(i) If the City council in its sole discretion determines to do so, the Council may adopt the ordinance and declare its intention to levy assessments for past due billings for essential utility services and future billings for essential utility services and setting a time, date and place of hearing. The ordinance shall provide that an initial hearing shall be held before a hearing officer or officers designated by the Board of Public Works and that all persons desiring to protest the assessment before the City Council must, prior thereto, appear before the hearing officer or officers.
Chapter 8 added by Ord. No. 162,383, Eff. 7-23-87.Amended by: Subsecs. (d) ,(e), and (g),Ord. No. 165,518, Eff. 4-1-90; Subsec. (a) amended, Subsecs.(b) through (g) relettered (d) through (i), new Subsecs. (b) and (c) added, Subsecs. (d), (e) and first paragraph Subsecs. (g) amended, Ord. No. 170,164, Eff. 1-19-95.Sec. 6.504. Notice
(a) Notice at the time, date and place of hearing before the City council shall be given by the City Clerk as follows, with all of said notices being mailed and published no less than 15 days prior to the date of hearing. If the ordinance provides that there must be an appearance before a hearing officer, hearing commission, or committee of the City council before protest may be made to the Council, the mailing and notice must be completed prior to 10 days before the earliest date for such appearance.
(b) The notice shall be mailed by first class mail to each owner and, if different from the owner, to each person last billed for utility services as their names and addresses were furnished to the City Engineer by the department making the application, as well as tl each lender of record, at their last known address. It shall also state the legal description and address of the property to be assessed, as furnished to the City Engineer, the amount proposed to be assessed, including all costs and expenses of the department furnishing utility services and costs and expenses of making the assessment, that it is proposed to add the assessment to the next county tax bill, and shall also set forth the time, date and place of hearings as well as a short explanation of the hearing procedure. The notice shall also contain one or more telephone numbers of the department which made the application for assessment and a telephone number in the office of the City Engineer, at which information regarding the billings, proposed assessments, or procedures be obtained.
(c) The City Clerk shall keep a record of the notices, the persons to whom such notices were mailed, the date of mailing, and the person responsible for the mailing. A declaration by the person responsible for such mailing that it was made shall be sufficient evidence that notice was given. Failure of an addressee to receive such notice shall not invalidate a good faith attempt to give actual notice of the proposed assessment
Chapter 8 added by Ord. No. 162,383, Eff. 7-23-87.Amended by: Subsec. (b), Ord. No. 170, 164, Eff. 1-19-95.Sec. 6.505 Withdrawal of Application.
(a) At any time before the date set for hearing before the City council, the department applying for assessment may withdraw its application or may reduce, but not increase, the amount it requests to be assessed. Said withdrawal or reduction request shall be in writing signed by an authorized representative of the department furnishing utility services. The withdrawal or reduction request shall be filed with the City Engineer three days or more prior to the date of the City Council hearing. The City Engineer shall modify the assessment roll accordingly. Payment of past due billings shall not prohibit the City from levying assessments for billings to come due for the balance of the fiscal year and for the next fiscal year unless it is clearly established that conditions of ownership or operation have changed so that there are reasonable assurances that future billings will be paid when due.
Chapter 8 added by Ord. No. 162,383, Eff. 7-23-87.Sec. 6.506 Hearing.
(a) Whenever possible, hearings shall be held on a quarterly basis.
(b) At the hearing the application for assessment and the assessment roll shall be prima facie evidence of the matters contained therein. The burden of going forward with the evidence to establish the incorrectness of the application or the assessment roll shall be upon the person opposing the proposed assessment.
(c) If there has been a hearing before a hearing officer, hearing commission, or committee of the City Council its written findings or conclusions may be considered by the City Council.
(d) Any person opposing an assessment upon real property which is owned or controlled by such person may submit his protest either in writing, orally or both. The oral hearing may be continued from time-to-time as schedules require. The time allotted for oral presentation may be reasonably limited by order at the time of the oral presentation.
(e) The City council or the committee of the City Council considering the proposed assessment may refer the matter to the City Engineer for further review prior to making its recommendation or decision. If such referral is made, the City Engineer may consult with whomever he sees fit, and shall make written recommendations and the reasons therefor to the committee or Council. The department[ ]making the application for assessment and the owners and persons billed for the utility service shall be given written notice of the date of the committee or Council consideration of the City Engineer's report and recommendations and shall be permitted to comment thereon in writing or orally.
Chapter 8 added by Ord. No. 162,383, Eff. 7-23-87.Amended by: Subsecs. (a) through (d) relettered (b) through (e) and new Subsecs. (a) added, Ord. No. 170,164, Eff. 1-19-95.Sec. 6.507. Confirmation of Assessment.
A final Assessment roll containing the names of each owner and the descriptions of the real properties to be assessed, the purpose of the assessment, and the amount of the assessment, all as determined by the City Council, must be confirmed by the City Council by a majority vote of all the members of the Council. Upon confirmation, the City Engineer shall record a Notice of Assessment and Lien with the County Recorder in such forms as to give suitable notice of the assessment and lien to any potential buyer. Upon confirmation, the amount of assessments become a lien upon the real property until such time as the first installment of the property tax bill incorporating the assessment becomes payable. At the time the property tax bill, which includes the assessment, becomes payable, the assessment has the same priority as taxes and other assessments on the property tax bill.
Chapter 8 added by Ord. No. 162, 383, Eff. 7-23-87.Amended by: In Entirety, Ord. No. 165,518, Eff. 4-1-90.Sec. 6.508. Collection of Assessment.
The amount of assessment shall be collected upon the County of Los Angeles property tax bill, and the City Engineer is hereby authorized to enter into an agreement with the County of Los Angeles pursuant to Section 51800 of the Government Code of the State of California for the collection and enforcement by the County of Los Angeles of the assessments levied pursuant to the chapter. If the assessments are not paid prior to delinquency, then they shall bear interest and carry penalties to the same extent and on the same conditions as ad valorem taxes bear interest and carry penalties.
Chapter 8 added by Ord. No. 162,383, Eff. 7-23-87.Sec. 6.509. Deposit in Fund.
(a) The amount of assessment and any interest or penalties thereon, less any sums charged by the county of Los Angeles to administer and collect the assessments, shall be credited to a fund in the treasury of the City of Los Angeles to be known as the “Essential Public Utilities Assessment Fund.”
(b) The Fund shall be divided into separate accounts for each department for which assessments are made.
Chapter 8 added by Ord. No. 162,383, Eff. 7-23-87.Sec. 6.510. Payments from Fund.
(a) When payments of assessments are received the Controller, upon the request of the City Engineer, may draw from the Essential Public Utilities Assessment Fund and place in the General Fund such reasonable amounts or percentage of the assessment which were included in the assessments as necessary to reimburse the City for its costs and expenses in levying assessments, holding hearings and otherwise administering the procedure established by this chapter. All other funds shall be paid by the controller, at the request of the City Engineer, to the department which has provided and will provide the essential public utilities service.
(b) The department receiving payment from the Controller shall determine from the records maintained by the County of Los Angeles the real properties for which assessments were made. Such department shall first credit, as of the date of its receipt of payment from the Controller, the unpaid billings, including any interest or penalties thereon, for each real property for which payments were made. Thereafter, it shall deduct from any excess amounts received the billings for services as such billings become payable, until all amounts received from the Controller have been accounted for.
Chapter 8 added by Ord. No. 162,383, Eff. 7-23-87.Sec. 6.511. Conventional Billings for Essential Utilities Services.
Utilization of the procedures set forth in this chapter by a department shall not preclude the department from billing the owner or applicants for services in a conventional manner. If payments are made pursuant to such billings, and at such time as the department is reasonably satisfied that it is no longer necessary that funds be held in order to assure that payments for the utility services shall be made, the department may refund any amounts not yet utilized to pay billings for utilities services to the person or persons entitled thereto.
Chapter 8 added by Ord. No. 162,383, Eff. 7-23-87.Sec. 6.512. Effective Date of Chapter; Prior Overdue and Unpaid billings.
The procedures set forth in this chapter, as amended, shall become effective July 1, 1995. Any overdue and unpaid billings which became “due” after July 1, 1993 and prior to the effective date of this chapter, as amended, may be subject to assessment liens pursuant to this chapter, provided any such assessment lien is assessed within one year after the effective date of his chapter, as amended.
Chapter 8 added by Ord. No. 162,383, Eff. 7-23-87.Amended by: Title and Sec., Ord. No. 170,164, Eff. 1-19-95.Sec. 6.513. Priority of Assessment.
The assessment provided for by this chapter shall have the same priority as the lien for real property taxes and shall be prior to and superior to all other encumbrances and liens upon real property except for liens of special assessments separately billed, and as to such special assessments it shall be a parity therewith.
Chapter 8 added by Ord. No., 162,383, Eff. 7-23-87.Sec. 6.514. Trash Disposal Services.
(a) The provisions of this section shall be applicable to assessments for trash disposal services and shall supersede the procedures set forth in Section 6.503 of this chapter. Only the Board of Public Works of the City of Los Angeles may apply for assessments for trash disposal services.
(b) The provisions of this chapter and section shall not affect the ability of the City to abate a public nuisance resulting from the presence of weeds, rubbish and other materials and to assess the real property on which such nuisance exists for the cost of abatement pursuant to Section 22.325.1 of this Code. This section is intended to supplement Section 22.325.1 and to provide a method for the city to cause collection and removal of trash or rubbish from properties before a nuisance condition exists.
(c) The Board of Public Works at any time may apply to the City Council that an assessment be made for the cost of trash disposal services to residential real properties not eligible for trash pickup by the Bureau of Sanitation. Such application may be made only when the owner or other person in charge of the real property refuses to periodically and as reasonably necessary remove trash and rubbish from trash disposal areas on a real property.
(d) The application for assessment shall contain or incorporate the following data:
(i) The name of the owner or owners and the irrespective [sic] addresses as shown on the last equalized assessment roll of the County of Los Angeles;
(ii) The address, legal description, and assessor's parcel number of the property proposed to be assessed as shown on the last equalized assessment roll of the County of Los Angeles.
iii) The estimated total cost of trash disposal services to remove trash as necessary from the real property for the portion of the fiscal year after the date of filing of the application and the estimated total cost for such services during the next fiscal year and an estimate of the reasonable additional cost to the city to administer the process of the City causing trash to be removed and levying the assessment.
(e) The procedure as specified in Subsections (d) through (f) of Section 6.503 of this chapter shall thereafter be followed.
(f) The procedure of Sections 6.504 through 6.510 and 6.513 shall be applicable to assessments for trash disposal services.
(g) If the assessment is confirmed, the Department of Public Works of the City of Los Angeles shall cause trash disposal services to be furnished either through the facilities of the Bureau of Sanitation of the Department of Public Works or by private trash disposal contractors under contract with the City. If the contract is with a private trash disposal contractor, such contractor shall be selected after request for services and inquiry as to prices have been made to at least three trash disposal services, which inquiries may be made in writing, in person, or by telephone, and a record of such inquiries shall be kept in the Department of Public Works. The contract shall be awarded for a period which will end on June 30 of the next fiscal year to the responsible trash disposal service which has offered to perform such work for the lowest price.
(h) A private trash disposal services contractor shall not be retained to perform such work unless the City council has, at the time of levying the assessment, also appropriated sufficient funds to pay for such trash disposal services, but the cost thereof shall be reimbursed to the City from the Essential Public Utilities Assessment Fund.
(i) If an owner or other person in charge of a real property for which assessment has been made pursuant to this section provides reasonable assurances satisfactory to the Department of Public Works that trash will be disposed of from the real property, the Board shall, as soon as reasonably and legally practical, cause services provided pursuant to Subsection (g) of this section to terminate and shall cause the Controller to refund to the person entitled thereto all funds held for said real property which are in excess of the amounts needed to pay for services which have been provided.
Chapter 8 added by Ord. No. 162,383, Eff. 7-23-87.Sec. 6.515. Time Extension.
Notwithstanding the provisions of Section 6.503(e) during the 1987 calendar year the City Engineer may process applications received during the months of January, February and March, 1987 and may commence the processing specified in Sections 6.503(e) and (f) up to April 30, 1987.
Chapter 8 added by Ord. No. 162,383, Eff. 7-23-87.Sec. 6.515. Clearing Title.
The City Engineer is hereby authorized to execute such documents as may be required to clear the title of assessed properties when an assessment if settled, when an assessment is a lien by virtue of the tax bill having been issued or when otherwise appropriate.
Chapter 8 added by Ord. No. 162,383, Eff. 7-23-87.Amended by: In Entirety, Ord. No. 165,518; Eff. 4-1-90.
1. The water and electricity vendor in the City of Los Angeles is a municipally run entity, the Los Angeles Department of Water and Power (DWP).
2. Los Angeles City Administrative Code, section 6.500, et seq. shall be referred to herein as the Ordinance and references to it shall be denominated “Ordinance, Section _.” A copy of the full text of the current Ordinance is attached as Appendix A.
3. At the time the liens were levied against the respondents herein, the ordinance did not provide for written notice to lenders of record. Paragraph 6.504 of the Ordinance was later amended to provide for such notice.
4. Due to the similarity of the factual scenarios involving each of the seven plaintiffs and the numerous properties involved (some plaintiffs own more than one affected parcel), we will not set forth in detail the allegations of each plaintiff relating to their specific properties. However, the utility charges levied against the properties were substantial sums: for example, on one of the properties on which Great Western had a mortgage, the charges (present and future) totaled in excess of $152,000.
5. Although the ordinance provides lienholders of record would be given notice of the application for assessment and of the hearing, apparently Great Western and other lenders did not receive any notice. (Ordinance, sections 6.503, 6.504.) Furthermore, the ordinance does not provide for notice of the recordation of the lien to be given. (Ordinance, §6.507 [city engineer records notice of assessment lien with county recorder].)
6. Pursuant to stipulation, the parties agreed the County of Los Angeles, insofar as the only relief sought against it was the refund of monies held by it, need not participate in the litigation by filing pleadings and other papers. The County has not filed a brief on appeal.
7. The trial court actually enumerated six grounds, but we do not see how the sixth specified ground materially differs from the first so have not included it here.
8. Respondent Great Western Bank filed the “lead” brief on appeal. The other respondents filed their own briefs and also joined in Great Western's arguments.
9. Article XIIIA, section 4 provides: “Cities, counties, and special districts, by a two-thirds vote of the qualified electors of such district, may impose special taxes on such district, except ad valorem taxes on real property or a transaction tax or sales tax on the sale of real property within such City, County, or special district.”
10. Development fees are sometimes called “user fees.” (See Carlsbad Municipal Water District v. QLC Corporation (1992) 2 Cal.App.4th 479, 481, 3 Cal.Rptr.2d 318.)
11. Government Code section 50076 provides: “As used in this article, ‘special tax’ shall not include any fee which does not exceed the reasonable cost of providing the service or regulatory activity for which the fee is charged and which is not levied for general revenue purposes.”
12. A lien for real property taxes arises and attaches every January 1. (Rev. & Tax.Code §§ 2187; 2192.) The lien is discharged upon payment of the taxes due. (Rev. & Tax.Code § 2194.)
13. The City's brief does not directly address this issue, although plaintiff Great Western Bank raised the issue in its motion for summary judgment.
14. Strictly speaking, the test outlined in Fisher is a not the test applied to municipal affairs under article. XI, section 5, but Fisher expressly condoned its application to laws enacted by charter cities. (Fisher, supra, at p. 708, 209 Cal.Rptr. 682, 693 P.2d 261.)
15. Public Utilities Code section 16469 provides, in relevant part that “․ charges unpaid at the time specified for the fixing of the rate of taxes may be added to and become part of the annual assessment levied upon the land upon which the commodity or service was used if the property was owned, controlled, or in the possession of the same person who owned, controlled, or was in possession of it during the time the service charges were incurred․” Section 16470 provides that “[c]harges added to an assessment are a lien on the land ․”
JOHNSON, Acting Presiding Justice.
WOODS and NEAL, JJ., concur.