APARTMENT ASSOCIATION OF LOS ANGELES COUNTY INC v. CITY OF LOS ANGELES (1999)

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

APARTMENT ASSOCIATION OF LOS ANGELES COUNTY, INC., et al., Plaintiffs and Appellants, v. CITY OF LOS ANGELES, Defendant and Respondent.

No. B130243.

Decided: August 26, 1999

California Apartment Law Information Foundation, Trevor Grimm, Los Angeles, and Craig Mordoh, Santa Monica, for Plaintiffs and Appellants. James K. Hahn, City Attorney, Ronald Tuller, Assistant City Attorney, and Miguel A. Dager, Deputy City Attorney, for Defendant and Respondent.

The question before us is whether a fee imposed on residential rental properties to fund a program for the eradication of substandard housing is a charge upon real property within the meaning of Proposition 218.   We conclude that it is, and that the fee is void and unenforceable in light of the City of Los Angeles's failure to follow the constitutionally mandated procedure for the adoption of such fees.

FACTS

Proposition 218.   In 1996, California adopted Proposition 218 (the “Right to Vote on Taxes Act”), thereby adding article XIIID to the California Constitution (1) to limit “the methods by which local governments exact revenue from taxpayers without their consent” and (2) to prevent local governments from “frustrat[ing] the purposes of voter approval for tax increases” as contemplated by Proposition 13.  (Historical Notes, 2A West's Ann. Cal.Codes (1999 pocket supp.)   Constitution, art.   XIIIC, § 1, p. 22; ¹  see also Howard Jarvis Taxpayers Assn. v. City of Riverside (1999) 73 Cal.App.4th 679, 682, 86 Cal.Rptr.2d 592.) ²

Article XIIID, section 1, provides:  “Notwithstanding any other provision of law, the provisions of this article shall apply to all assessments, fees and charges, whether imposed pursuant to state statute or local government charter authority.”  (Italics added.)   Article XIIID, section 2, subdivision (b), defines an “assessment” as “any levy or charge upon real property ․ for a special benefit conferred upon the real property.” ³  (Italics added.)   Article XIIID, section 2, subdivision (e), defines “fee” and “charge” to mean “any levy other than an ad valorem tax, a special tax, or an assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership, including a user fee or charge for a property related service.”  (Emphasis added.)   Article XIIID, section 6, obligates an agency to follow specified procedures before imposing or increasing any covered fee or charge-including notice to identified property owners who would be subject to the proposed new or increased fee or charge, a public hearing on the proposed new or increased fee or charge, and rejection of the proposed new or increased fee or charge if written protests against the proposal are presented by a majority of the identified owners of the affected parcels.

The Los Angeles City Ordinances.   In July 1998, the Los Angeles City Council adopted three related ordinances to establish and fund a program to identify and remedy “substandard housing conditions” (or, as the City puts it on this appeal, to “combat slum housing in the City”).   To that end, Ordinance No. 172108 added section 161.351 to the Los Angeles Municipal Code (LAMC) to provide that “[a]ll residential rental properties with two or more dwellings subject to the provisions of this Code will be subject to regular inspection․” ⁴  To fund this program, LAMC section 161.352 (also added by Ordinance No. 172108) obligates the “[o]wners of all buildings subject to inspection” to “pay a service fee of $12.00 per unit per year” to “finance the cost of inspection and enforcement” of the new program.⁵  By Ordinance No. 172110, the City created an “Enforcement Fee Trust Fund” by adding section 22.617 to the Los Angeles Administrative Code (LAAC), and providing for the deposit of the “service fees” collected pursuant to LAMC section 161.352 into the trust fund, with expenditures from that fund limited to matters “directly related to the administration and enforcement” of the anti-slum ordinances.⁶

This Lawsuit.   In July 1998, the Apartment Association of Los Angeles County, Inc. (joined by other groups with similar interests, all of which are henceforth included in our references to “the Association”) sued the City of Los Angeles for declaratory and injunctive relief, alleging that LAMC section 161.352 is “unconstitutional, unenforceable, void, invalid, violative of [article XIIID] and of no force or effect” because it was enacted without compliance with article XIIID, section 6. The City demurred.   Over the Association's opposition, the trial court sustained the demurrer without leave to amend, finding that the fee imposed by the City was not subject to the requirements of article XIIID, section 6. The Association appeals.

DISCUSSION

The Association contends the fee imposed by the City is invalid because it was not adopted in the manner required by Proposition 218.   We agree.

 The threshold question is whether this fee is subject to the restrictions imposed by Proposition 218.   As viewed by the Association, the fee is imposed “upon a parcel or upon a person as an incident of property ownership ” and is, therefore, subject to the procedural requirements of Proposition 218.   As viewed by the City, the fee is imposed upon a business activity (the rental of residential dwellings), separate and apart from property ownership, and purely for regulatory purposes, and it is therefore not subject to Proposition 218.   The language adopted by the City in LAMC section 161.352 supports the Association's interpretation, not the City's.

LAMC section 161.352 provides:  “Owners of all buildings subject to inspection shall pay a service fee of $12.00 per unit per year.   The fee will be used to finance the cost of inspection and enforcement by the Housing Department [of the City of Los Angeles].   Should the owner fail to pay the required fee, the City of Los Angeles will recover it, plus accrued interest, utilizing any remedies provided by law including nuisance abatement or municipal tax lien procedures established by ordinance or state law.   This fee shall be known as the ‘Systematic Code Enforcement Program Fee.’ ” The trial court found that this language “expressly describes [the City's] assessment as a ‘service fee,’ and the fee appears arguably to fall within the wide range of assessments which Proposition 218 was apparently written to encompass”-but went on to conclude that the fee is nevertheless not one “imposed by virtue of ownership per se ” and, therefore, not one within the reach of Proposition 218-because it is imposed only on the owners of rental units, not on all property owners.   The trial court's distinction finds no support in Proposition 218.

 There is nothing in Proposition 218 that exempts regulatory fees imposed on residential rental properties.   It thus adds nothing to say, as does the City, that the fees are not “imposed upon property owners in general, but only those who voluntarily engage in the business of renting, generate the risks of slum housing, and specially benefit from regular inspections as they contribute to the overall reputability and safety of the housing provided.” ⁷  Quite plainly, Proposition 218 applies to any “fee” or “charge,” both of which are defined to mean “any levy other than an ad valorem tax, a special tax, or an assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership, including a user fee or charge for a property related service.”  (Art. XIIID, § 2, subd. (e), emphasis added.)   However well intentioned the City's program to abolish slum housing may be, we find it impossible to say that a fee imposed upon the owners of rental units so the City can locate and eradicate substandard housing is anything other than a user fee or charge for property related service.  (See also art. XIIID, § 1 [“[n]otwithstanding any other provision of law, the provisions of this article shall apply to all assessments, fees and charges”].) ⁸

The rules we must apply are not subject to debate.   Our task begins and ends with the determination that it is the intent of the voters who adopted this constitutional provision that must control.   Where, as here, that intent is apparent from the words of Proposition 218, there is no need for construction, and no need for further analysis.  (People v. Benson (1998) 18 Cal.4th 24, 30, 74 Cal.Rptr.2d 294, 954 P.2d 557;  People v. Jones (1993) 5 Cal.4th 1142, 1146, 22 Cal.Rptr.2d 753, 857 P.2d 1163.)   By imposing a fee upon all “residential rental properties with two or more dwellings” (LAMC § 161.351), the City has imposed a new fee upon the property or its owner “as an incident of property ownership, [as] a user fee or charge for a property related service.”  (Art. XIIID, § 2, subd. (e).)  It follows that, as drafted, the fee falls squarely within the four corners of Proposition 218.   For this reason, the City's failure to follow the procedure mandated by section 6 of article XIIID means the fee cannot lawfully be imposed, that the judgment based on the order sustaining the City's demurrer must be reversed, and that the Association is entitled to a judgment in its favor.   (Sinclair Paint Co. v. State Bd. of Equalization, supra, 15 Cal.4th at p. 874, 64 Cal.Rptr.2d 447, 937 P.2d 1350 [the construction of “fee” is a question of law for the appellate court to decide on independent review of the facts].) ⁹

DISPOSITION

The judgment is reversed, and the cause is remanded to the trial court with directions to vacate its order sustaining the City's demurrer, to enter a new order overruling the demurrer and directing the City to answer the complaint.   Since no other issues have been raised or preserved below, and since there is nothing in the City's appellate brief to suggest the existence of any remaining issue, judgment shall thereafter be entered in favor of the Association.   The Association is awarded its costs of appeal.

FOOTNOTES

1.   Subsequent references to article XIIID are to the California Constitution.

2.   As explained by Division Two of the Fourth District in Howard Jarvis Taxpayers Assn. v. City of Riverside, supra, 73 Cal.App.4th at pages 681-682, 86 Cal.Rptr.2d 592, where the issue was whether street lighting assessments came within Proposition 218's exemption for assessments imposed exclusively to finance the maintenance and operation of streets and sidewalks:  “Proposition 218 can best be understood against its historical background, which begins in 1978 with the adoption of Proposition 13.  ‘The purpose of Proposition 13 was to cut local property taxes.’  ․ Its principal provisions limited ad valorem property taxes to [one] percent of a property's assessed valuation and limited increases in the assessed valuation to [two] percent per year unless and until the property changed hands.  (Cal. Const., art.   XIIIA, §§ 1, 2.)[¶] To prevent local governments from subverting its limitations, Proposition 13 also prohibited counties, cities, and special districts from enacting any special tax without a two-thirds vote of the electorate.  (Cal. Const., art.   XIIIA, § 4;  Rider v. County of San Diego (1991) 1 Cal.4th 1, 6-7 [2 Cal.Rptr.2d 490, 820 P.2d 1000])  It has been held, however, that a special assessment is not a special tax within the meaning of Proposition 13․  Accordingly, a special assessment could be imposed without a two-thirds vote.  [¶] In November 1996, in part to change this rule, the electorate adopted Proposition 218․”

3.   A “special benefit” is defined as “a particular and distinct benefit over and above general benefits conferred on real property located in the district or to the public at large.   General enhancement of property value does not constitute ‘special benefit.’ ”  (Art. XIIID, § 2(i).)

4.   Dwellings subject to “the requirements of this code” are rooming houses, single room occupancy hotels, certain residential hotels, apartment houses, and “congregate” residences or lodging houses.  (LAMC § 161.103.)

5.   The $12.00 fee is imposed against every residential rental property with two or more rental units, without regard to whether the units are empty or rented, without regard to the amount of rent paid for the unit, without regard to the condition of the unit, and without regard to any other factor.

6.   At the same time, Ordinance No. 172109 created the “Los Angeles Housing Code” (LAMC § 161.101 et seq.) which states the City's findings concerning substandard buildings within the City's borders (LAMC § 161.102), and declares that it is in the public interest of the people of Los Angeles to adopt standards to improve housing conditions (LAMC § 161.102, subd. (1)) and to provide for the enforcement of the new provisions (LAMC § 161.201 et seq.).

7.   We note that this statement by the City is somewhat inconsistent with the findings the City made at the time it adopted the relevant Ordinances.   As noted above, the “Los Angeles Housing Code” (LAMC § 161.101 et seq.) declares that it is in the public interest of the people of Los Angeles-not just the owners of rental units-to adopt standards to improve housing conditions (LAMC § 161.102, subd. (1)) and to provide for the enforcement of the new provisions (LAMC § 161.201 et seq.).   Now, the City says it is the owners of rental units, not the general public, who “specially benefit” from this program.

8.   The cases relied on by the City and the trial court are Proposition 13 cases and they do not address the issue before us in this case.  (E.g., Sinclair Paint Co. v. State Bd. of Equalization (1997) 15 Cal.4th 866, 64 Cal.Rptr.2d 447, 937 P.2d 1350.)   Indeed, Sinclair expressly states that the court was not there “concerned with issues arising under constitutional amendments effected by a recent initiative measure (Proposition 218) adopted at the November 5, 1996, General Election.   That measure contains new restrictions on local agencies' power to impose fees and assessments.”  (Sinclair Paint Co. v. State Bd. of Equalization, supra, 15 Cal.4th at p. 873, fn. 2, 64 Cal.Rptr.2d 447, 937 P.2d 1350.)

9.   The only issue in this lawsuit is the validity of the fee imposed by LAMC section 161.352, not the City's efforts to identify and remedy substandard housing conditions.   Accordingly, our opinion is limited to the imposition of the fee, and we express no view on the validity of any other part of the City's new Housing Regulations.   The next step is the City's, not ours, and we do not address any other issues.

MIRIAM A.VOGEL, J.

ORTEGA, Acting P.J., and MASTERSON, J., concur.