CITY COUNTY OF SAN FRANCISCO v. ROSS

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

CITY & COUNTY OF SAN FRANCISCO v. ROSS.*

Civ. 16105.

Decided: May 20, 1954

Dion R. Holm, City Atty., John Elmer Barricklo, Deputy City Atty., San Francisco, for petitioner. Jesse H. Steinhart, B. J. Feigenbaum and John H. Steinhart, San Francisco, for respondent.

By this proceeding in mandamus the City and County of San Francisco seeks to compel Harry D. Ross, the Controller, to certify to the availability of funds from the 1947 Off-street Parking Bond Fund to be used by the petitioner for the acquisition by eminent domain of a proposed public off-street parking garage site at Ellis and O'Farrell Streets in San Francisco. The site is now privately owned. The City intends to lease it to a private operator who will construct and operate a parking garage thereon. By the terms of the proposed lease the City will not retain any control over the rates to be charged by the lessee. The Controller, on many grounds, has refused to make the requested certification. His most important objection is that the proposed use is not a ‘public use’ within the meaning of Article I, section 14, of the Constitution, relating to eminent domain. We agree with this contention.

The background leading up to this controversy is not in dispute. On November 4, 1947, the electorate of San Francisco approved a parking bond proposition in the amount of $5,000,000. The precise proposition submitted to the voters was worded as follows: ‘$5,000,000 to pay the cost of public parking lots, storage space, garages, single or multi level structures, and other off-street parking facilities on, under or above the surface of any property, including public parks, squares, lands, easements or rights of way to be acquired by purchase or condemnation, together with buildings, structures, equipment, approach roads, entrances, exits, fencing, off-street parking meters, and other words, property or structures for the accommodation of automotive vehicles, and necessary or convenient for adequate parking facilities, to relieve the congestion and to facilitate traffic in the metropolitan district of the City and County of San Francisco, provided that all lands and sites so acquired be subject to the approval of the Planning Commission of the City and County of San Francisco.’

There still remains in this fund, unappropriated and unallocated, approximately $4,000,000 available to be used for the purposes for which the bonds were authorized. On October 3, 1949, purporting to act under the Parking Law of 1949, Sts. & Hy. Code, §§ 32500–33552, the Board of Supervisors took the necessary steps to create a Parking Authority in this area. This Authority, by formal resolution, approved the ‘Ellis-O'Farrell Midblock Site’ as a site needed for off-street parking purposes, after first securing the determination of the City Planning Commission that such project would not conflict with the master plan of the Commission. The resolution requested the Board to designate the site as one needed for public parking purposes and to appropriate the $1,750,000 estimated as necessary to acquire it. The Board of Supervisors, by resolution, determined that the site was necessary and convenient as an off-street parking site, and requested the Parking Authority to submit to it a proposed joint working agreement between the City and the Authority by which the site was to be acquired and a public garage constructed and operated thereon. The Parking Authority and the City executed such a joint working agreement. The Authority thereupon recommended to the Board the acquisition of the site in question under the San Francisco charter and the general eminent domain statutes. It also recommended that the Board request the Controller to certify the availability of $1,750,000 for such acquisition, and requested the Board to submit an appropriation ordinance therefor. The Board, by appropriate resolution, concurred in the recommendation of the Parking Authority and directed the clerk of the Board to request an appropriation of the $1,750,000 for the purposes involved. The clerk of the Board submitted to the Controller a request for an appropriation from the bond fund, and an appropriation ordinance of the Board, requesting him to certify the availability of funds in that fund for the disired purpose. The Controller refused to comply, contending that the money in the fund could not be used for the proposed expenditure. His approval is necessary before such money can be lawfully appropriated from the fund. § 86, par. 1, of the Charter of San Francisco. This refusal by the Controller resulted in the filing of this petition aimed at compelling the Controller to act.

The plan of the City is to acquire, by condemnation, a portion of the Ellis-O'Farrell midblock between Powell and Stockton Streets, and to lease that site to a private operator who will agree to construct and operate thereon an off-street parking garage, with a capacity of not less than 900 cars, and a number of retail commercial stores. The resolution of the Board recommends the acquisition of the site ‘for the purpose of a public off-street parking garage and uses necessary or incidental thereto and that the inclusion of retail commercial stores be permitted in said structure.’ The major portion of the site is presently occupied by a privately-owned parking facility with ability to accommodate not over 225 automobiles. The plan provides that the City will own the condemned site but will lease it for not less than twenty-five years and not more than fifty years for a rental based on a percentage of the gross income, and with a minimum fixed flat rental. The lessee must build according to the specifications of the City as lessor. The completed structure will face on both Ellis and O'Farrell Streets. It is provided that the lessee will construct on the ground floor of such frontages some retail stores, not exceeding twenty-five per cent of the total area of the structure, and will be permitted to lease these to private persons for commercial purposes. The City estimates that not more than four per cent of total area of the garage will be devoted to this purpose. The lease intentionally omits any provision conferring on the City the right to control or restrict, in any way, the rates exacted by its lessee from the public for parking privileges. The City expressly disavows any intention to exercise such control.

There are various state statutes authorizing, by alternative means, the acquisition by eminent domain of property by a city that may be leased by it for purposes of off-street parking. These statutes will be referred to later in this opinion. In the instant case the City and County of San Francisco has elected not to proceed under any of these alternative statutes, apparently because most of them expressly require as a condition to the exercise of the conferred power that the City retain control over rates. In the instant case the City, admittedly, is purporting to act under the authority of its charter and the general law of eminent domain.

The city charter, § 2, par. 1, authorizes the City ‘subject to the restrictions contained in this charter’ to ‘lease and convey real and personal property.’ For possible ‘restrictions contained in this charter’ see §§ 91 and 93. The City argues that as a chartered city it has full control over its municipal affairs, possesses all powers not specifically denied to it, and that, since it has power to lease its property, the terms contained in such lease are solely within its control. As general propositions these contentions are not challenged by respondent. The City next argues that section 1238.1 of the Code of Civil Procedure declares the use of land acquired by eminent domain for off-street motor vehicle parking is a public use. Putting the two arguments together, it is contended that the City may acquire off-street parking premises by eminent domain, and, once acquired, may operate such premises itself or lease them, subject to whatever terms it may determine.

These arguments are predicated on three basic premises:

1. That the use of property for the construction of parking facilities by a city is a public use;

2. That the city possesses the power to lease its properties; and

3. That, since San Francisco is a chartered city, possessing local autonomy with full control over municipal affairs, the terms of such leases are mere procedural matters resting entirely within the power of the city.

The first of these arguments is undoubtedly sound. Although there are a few early cases in other states holding that the acquisition of property by a city for the operation by it of a public parking lot or garage is not a public use, in the year 1954 there can be no doubt but that the use of public property for parking purposes is a public use, and that eminent domain may be used to acquire such property for such use. See Wayne Village President v. Wayne Village Clerk, 323 Mich. 592, 36 N.W.2d 157, 8 A.L.R.2d 373 for a collection of the earlier cases; for later cases directly or indirectly involving the question see Barnes v. City of New Haven, 140 Conn. 8, 98 A.2d 523; Denihan Enterprises v. O'Dwyer, 302 N.Y. 451, 99 N.E.2d 235; Bowman v. Kansas City, Mo.Sup., 233 S.W.2d 26; Brodhead v. City & County of Denver, 126 Colo. 119, 247 P.2d 140; City of Richmond v. Dervishian, 190 Va. 398, 57 S.E.2d 120; Cleveland v. City of Detroit, 324 Mich. 527, 37 N.W.2d 625, 11 A.L.R.2d 171; De Lorenzo v. City of Hackensack, 9 N.J. 379, 88 A.2d 511; Lenzner v. City of Trenton, 22 N.J.Super. 415, 91 A.2d 896; Lowell v. City of Boston, 322 Mass. 709, 79 N.E.2d 713; McSorley v. Fitzgerald, 359 Pa. 264, 59 A.2d 142; Poole v. City of Kankakee, 406 Ill. 521, 94 N.E.2d 416; Parr v. Ladd, 323 Mich. 592, 36 N.W.2d 157, 8 A.L.R.2d 357; State ex rel. Gordon v. Rhodes, 158 Ohio St. 129, 107 N.E.2d 206; for two California cases generally discussing the problem see Alexander v. Mitchell, 119 Cal.App.2d 816, 260 P.2d 261; City of Whittier v. Dixon, 24 Cal.2d 664, 151 P.2d 5, 153 A.L.R. 956. Respondent does not challenge this premise.

The second premise, that the City possesses the power to lease its properties, as a general proposition is also sound, and unchallenged by respondent. Such power to lease, however, by section 2 of paragraph 1 of the San Francisco charter, is limited ‘to the restrictions contained in this charter.’ Section 91 of the charter places the power to lease city property in the hands of the Director of Property. There is no showing in the present record that the City has violated or intends to violate this provision. Section 93 of the charter contains a more important limitation. It provides: ‘When the head of any department in charge of real property shall report to the board of supervisors that certain land is not required for purposes of the department, the board of supervisors, by ordinance, may authorize the lease of such property. The director of property shall arrange for such lease for a period not to exceed twenty years, to the highest responsible bidder, at the highest monthly rent. The director of property shall collect rents due under such lease.’ This section limits leases executed under it to a term of twenty years, while the proposed lease here involved is for not less than twenty-five nor more than fifty years. Respondent argues that under this section the City may lease only that city property that has been reported by a department head to be not required by his department, and that the City cannot acquire property by eminent domain for the purpose of immediately declaring it to be surplus property and then leasing it. Petitioner argues that state law permits a lease for fifty years, Gov.Code, § 37394, for parking purposes, that section 93 only applies to ‘surplus' property, and that as to property that is not surplus, the charter contains no limitations. This is an interesting problem of interpretation. It is not controlled by the case of City and County of San Francisco v. Linares, 16 Cal.2d 441, 106 P.2d 369, which involved the lease for fifty years for parking purposes of the subsurface beneath Union Square in San Francisco, because that was city-owned park land which was covered by old section 41, now section 42, of the charter, authorizing the City to lease park lands for fifty years.

We do not find it necessary to pass on this question of interpretation because we are of the opinion that, regardless of the applicability of section 93 of the charter, the use here contemplated is not a public use, and that, therefore, the power of eminent domain may not be used to acquire the land. This involves the third premise advanced by petitioners. This is the basic question involved.

Inasmuch as the use of property for public parking is a public use, and, assuming the City may lease its properties for fifty years, it may be conceded that the acquisition of property for the purpose of leasing it to a private operator for fifty years for the construction and operation of a public garage, where the city retains supervisory control over the rates to be charged, is also a public use. See, generally, Paso Robles War Memorial Hospital Dist. v. Negley, 29 Cal.2d 203, 173 P.2d 813; City of Oakland v. Williams, 206 Cal. 315, 274 P. 328; see also Barnes v. City of New Haven, 140 Conn. 8, 98 A.2d 523. In other words, leasing to a private operator does not per se determine that the proposed use is not a public one. But respondent argues that where the proposed lease of a parking facility intentionally fails to provide for control over rates, a different legal proposition is presented. It is urged that while a chartered city possesses complete control over procedural matters, and while many of the terms of any lease are procedural in nature and therefore within the control of a city (Laurent v. City & County of S. F., 99 Cal.App.2d 707, 222 P.2d 274), the failure to retain control over rates to be charged by a parking facility results in the project becoming primarily for the benefit of the private operator and the use no longer is public. If this argument is sound, and we think that it is, then this is not a matter of procedure but is one of substance controlled by state constitutional provision.

In arguing this question both parties refer to the recent decision of this court in Redevelopment Agency of City and County of San Francisco v. Hayes, 122 Cal.App.2d 777, 266 P.2d 105. There we upheld a state statute permitting a city to condemn land, not necessarily a slum area, but which constituted a social and economic liability to the city because of unsound planning, and which authorized the city to work out a master plan based on sound planning, and then to sell the land into private ownership, the owners agreeing to use the property in accordance with the master plan. This was upheld as a public use although the condemnation contemplated the sale of the condemned property to private owners. In so holding this court, in discussing the meaning of ‘public use’ stated, 122 Cal.App.2d at page 803, 266 P.2d at page 122: ‘In California our courts have followed the broader definition of ‘public use’ and the cases hereinbefore cited have held that if property is taken for a public use, the fact that it is later to be returned to private ownership subject to restrictions protecting the public use, does not make it any the less a public use.' (Italics added.)

That language supports respondent. There the public use was to take the area involved, abolish conditions such as poor street planning, lack of public areas, etc., replan the area on a sound economic and social basis, and then sell the remainder of the land to private owners ‘subject to restrictions protecting the public use.’ With the replanning of the area the main public use was ended as long as the new owners agreed to comply with such new plan. Thus, selling into private ownership, subject to such restrictions, did not destroy but, in fact, carried out, the public use. But in the instant case the intent is to condemn the land and then to lease it to a private operator who will construct and operate a parking facility thereon without ‘restrictions protecting the public use,’ i. e., the control of rates. When land is acquired for parking purposes the public use which gives validity to the condemnation necessarily looks forward to the continuing operation of furnishing the public service involved. Such continuing operation ceases to be primarily a public use when the parking garage is operated for the benefit of a private operator who is permitted to charge the public what the traffic will bear.

The right of a citizen to own private property is a most important constitutional right. That right is subject, among other things, to the right of governmental bodies to seize and condemn the property against the will of the owner when the seized property is to be devoted to a public use. But to justify the exercise of this impairment of the right, the use intended must be clearly and definitely a public one. If the use is predominantly private in nature, the fact that some members of the public will be benefited by such use, in other words, that a public use is incidentally involved, will not justify the impairment of the private owner's rights. That is this case.

The fallacy in petitioner's position is in its failure to analyze the nature of the need of the public for parking facilities, and the nature of the need that makes the use of property for such purposes predominantly a public one. With the increased use of motion cars and the failure of public transportation in many areas to meet the needs of the citizens, more and more persons drive their cars into the central district for the purpose of shopping or to work. In San Francisco, present parking facilities, privately operated, at the rates now charged, many of them requiring the purchase of other services before a car can be parked, have not met the needs of the great majority of motorists. Until the problem of traffic congestion and its related problem of cheaply parking automobiles in the downtown area are solved, there is constant pressure for decentralization. This affects not only the operators of downtown stores, whose customers go elsewhere for service, but government itself is directly affected, not only by the lowering of the tax base in the downtown areas, but by the increasing frustration of its citizens that business or pleasure has brought downtown but who are delayed or prevented from accomplishing their objectives by inability to park their automobiles at a rate they can afford.

The need to be satisfied is not solely the need for more parking space per se. The primary need is to supply parking at a rate that the people who want short time parking while they shop or transact their business, can afford, or all day cheap parking for the worker in the downtown areas. If the automobile driver can only secure parking space in a garage at a rate a private operator sees fit to charge and in an amount the traffic will bear, the public use nature of the enterprise becomes extremely remote and private benefit to the operator the dominant factor. Many cities have solved this problem by furnishing the public with cheap parking in publicly-operated facilities. Others do so through facilities leased to private operators but with some government agency controlling rates. In such cases the use is a public one. But when the City seeks to condemn property for the purpose of leasing it to a private operator for garage purposes and no control of rates is retained, the enterprise is not being operated for the general public good but for the benefit of a privileged few and primarily for private gain. The use then becomes a private one.

A problem somewhat analogous to the instant one was presented when San Francisco contemplated purchasing Angel Island for use as a public recreation area to be operated by a private individual under a lease from the City. Under date of May 9, 1949, the City Attorney advised the government agencies involved that such lease could not be executed lawfully unless the City retained control over the enterprise. In the course of this opinion the City Attorney stated: ‘If in their [board of supervisors'] further judgment and discretion, they determine that the most efficient, economical, and desirable method of effectuation of the public purpose of the acquisition is through the medium of a lease to private operators it is my further opinion that they may validly and legally execute such a lease therefor but that under such lease or agreement they must retain or delegate to other city officials supervisory control of the manner and method of the operation of the island under reasonable rules and regulations to be adopted so that at all times there will be insurance that the island will be operated for the general public good and not primarily for private gain or for the benefit of a privileged few.’ That reasoning is equally applicable to the instant case.

A similar holding is to be found in Opinion to the Governor, 76 R.I. 365, 70 A.2d 817. There the court held unconstitutional a statute authorizing a development authority to acquire land by eminent domain for a marina and auditorium to be operated by a private individual under a lease from the authority. Invalidity was adjudged because the provisions of the lease ‘in substance it would permit the spending of public money and the exercise of the right of eminent domain to acquire private property ostensibly for a public purpose but actually for profit in the operation of the marina as a private enterprise.’ 70 A.2d at page 820. This would have involved permitting a private person to ‘operate it for his own profit by fixing the fees and charges for its use and for services rendered, without regulation in the public interest as a public utility * * * and would remove the element of primary public use or purpose * * *.’ 70 A.2d at page 820.

This reasoning is equally applicable to the operation of a parking garage by a private operator proceeding under a lease with no limitation or control over rates. Petitioner seeks to distinguish these opinions by pointing out that the enterprises there involved, by their very nature, were monopolies, while a parking garage exercises no such exclusive right. It is argued that ‘the economic law of supply and demand will govern a reasonable operation of the proposed project insofar as public rates and charges are concerned.’ (Pet.Rep.Br., p. 17.) The so-called ‘law of supply and demand’ means nothing more than that the operator will charge what the traffic will bear. That is no real protection to the parking public. Once the enterprise is turned over to a private operator who can and obviously will charge what the traffic will bear, the public use involved becomes remote and the benefit to the private operator becomes the predominant factor.

Petitioner argues that it will cost the private operator some $2,000,000 to construct the garage, and that no business man would invest that sum under a fifty-year lease if the lessor, the City, had control over rates. This is, in effect, a concession that cheap parking is not intended. The argument has no connection at all to the problem of whether the proposed use is public or private. It is simply a contention that the end justifies the means, that is, that the claimed practical aspects of the problem should control. This is not only unsound law, but it is contrary to settled state policy.

As already pointed out, there are several alternative procedures in the state law under which the City could have proceeded had it so desired, and under which eminent domain could have been employed and the project operated by a private operator under lease. But these statutes would have required that the City maintain control over rates. If the practical argument now advanced by the City is sound it means that the state Legislature in passing these alternative procedures was authorizing methods of operation that never could become practical or operative. Such cannot be presumed.

A brief reference to several of these alternative procedures authorized by state law may be helpful in understanding the public policy involved.

One such procedure is set forth in Vehicle Parking District Law of 1943. Sts. & Hy. Code, §§ 31500–31907. This statute permits the formation of a vehicle parking district which is authorized to acquire land by condemnation and to construct garages thereon for parking purposes. The Board of the district is authorized to operate such projects directly or by means of a lease to a private operator. But as to operation under a lease, section 31788 of the Streets and Highways Code provides: ‘The maximum rentals, fees, and charges to be collected by the operator shall be fixed by the board after public hearing following such notice as the board prescribes, and shall be recited in the lease or franchise. No higher rentals, fees, or charges shall be collected by the operator without amendment of the lease or franchise agreed to by the board after like public hearing.’

The Parking District Law of 1951, Sts. & Hy. Code, §§ 35100–35705, provides for the creation of a parking district, authorizes acquisition of land by eminent domain, and authorizes direct operation or operation by a lease, but, if operated by a lessee, section 35569, in language almost identical with section 31788 above quoted, requires that the rates to be charged be controlled, regulated and fixed by the governing body.

The act under which the petitioner here created its Parking Authority is Parking Law of 1949. Sts. & Hy. Code, §§ 32500–33552. Under section 33116 the Authority is given authority to control rates to be charged by a private operator operating under a lease where the revenues from such operation are to be used to pay a bond issue. Similarly, the Municipal Parking Revenue Bond Law of 1949, Sts. & Hy. Code, §§ 33800–34859, provides a method of financing public parking projects by means of revenue bonds, which projects may be directly operated by the City, or leased. Section 34400 provides: ‘The legislative body shall fix the rates, fees, and other charges for all projects, services, or facilities furnished, acquired, constructed, or completed pursuant to this part for their use by any person, or public or private agency.’

The Sanitation, Sewer and Water Revenue Bond Law of 1941, Gov.Code, §§ 54300–54672, provides for a method of financing various enterprises, including, as amended in 1953, parking lots, garages or other automotive parking facilities. § 54309(d). Eminent domain and leasing are authorized, and, although the City is empowered to contract upon any terms it may desire, it may not restrict its power to fix rates, fees or tolls.

It is worthy of note that other statutes providing for the furnishing of facilities other than parking, and for the use of eminent domain and the leasing of the property so acquired, generally require the governmental agency to maintain control over rates. See, for example, Local Hospital District Law, Health & Saf. Code, §§ 32000–32313, particularly § 32125; The Community Redevelopment Law, Health & Saf. Code, §§ 33000–33954, particularly section 33272.

These statutes are important because they disclose a general state public policy to require control over rates as a condition precedent to leasing projects constructed on property acquired by eminent domain, and an awareness on the part of the Legislature that such control is indispensable under constitutional limitations on the power of eminent domain.

Many other points are raised by the parties. It is not necessary to discuss them. The power of eminent domain may be exercised only where the land condemned is to be devoted to a public use. If the public use is intermingled with a private one, the power may not be exercised unless the private use is merely incidental to the public one. In the instant case we are of the opinion that property leased by a city to a private person for garage purposes without the city retaining control over the rates is not being devoted primarily to a public use, but that such use is predominantly private. For this reason the power of eminent domain may not be exercised to acquire the property. The Controller properly refused the requested certification.

The alternative writ is discharged, and the application for the peremptory writ is denied.

PETERS, Presiding Justice.

BRAY and FRED B. WOOD, JJ., concur.

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