BUILDING INDUSTRY ASSOCIATION OF SOUTHERN CALIFORNIA v. CITY OF OXNARD (1984)

Appeal from summary judgment upholding the validity of ordinance number 1876 adopted by respondent City of Oxnard on June 16, 1981.   The ordinance establishes a “growth requirement capital fee” applicable to new development in the amount of 2.8% of the building valuation of each new development, payable on obtaining a building permit.   It is provided that the fees collected shall be used for capital improvements defined in the ordinance as “costs related to acquisition of land and improvements thereto, construction of buildings and other facilities, equipment, and debt service relating to any of the foregoing.”

The preamble of the ordinance sets forth the city council's conclusions that new residential, commercial and industrial development in the city requires substantial public facilities and capital improvements pursuant to the city's general plan and other similar policies and that the cost for such improvements are escalating and funds diminishing.   The purpose of the ordinance is stated “to provide a predictable and equitable funding method of requiring new development to pay for the costs of future capital improvements which will benefit such development ․ so that the impacts of new growth will be borne equitably by that new development.”   The ordinance defines new development as “all residential, commercial, and industrial construction projects.”

Appellant challenges the validity of the ordinance on its face on the ground that it is a tax and therefore void because there is no legislative authority to impose it (Cal. Const., art. XIII, § 24) and it has not been approved by a two-thirds vote of the electorate.  (Cal. Const., art. XIIIA, § 4.)   Appellant also contends that the Subdivision Map Act (Gov.Code, § 66410 et seq.) preempts the imposition of the growth requirements capital fee.

Respondent contends the fee is not a tax and suggests it is merely a regulatory fee imposing the costs of capital improvements required by new development to future residents and businesses who create the need for such improvements.   We reverse the decision of the trial court upholding the validity of the ordinance.

In Scrutton v. County of Sacramento (1969) 275 Cal.App.2d 412, 421, 79 Cal.Rptr. 872, it was pointed out that in Ayres v. City Council of City of Los Angeles (1949) 34 Cal.2d 31, 207 P.2d 1, the court established a formula for testing the validity of certain regulations that may be generalized by the statement that conditions imposed on the grant of land use applications are valid if reasonably conceived to fill public needs emanating from the landowner's proposed use.

In Birkenfeld v. City of Berkeley (1976) 17 Cal.3d 129, 136, 130 Cal.Rptr. 465, 550 P.2d 1001, the court held a Berkeley Charter Amendment invalid for transgressing the constitutional limits of the police power not because of its objectives but because certain procedures provided for would impose heavy burdens upon landlords not reasonably related to the accomplishment of those objectives.   The Birkenfeld court stated at page 159:  “In determining the validity of a legislative measure under the police power our sole concern is with whether the measure reasonably relates to a legitimate governmental purpose and ‘[w]e must not confuse reasonableness in this context with wisdom.’  (Wilke &. Holzheiser, Inc. v. Dept. of Alcoholic Bev. Control, supra, 65 Cal.2d 349, 359 [55 Cal.Rptr. 23, 420 P.2d 735]․)”

 The City of Oxnard certainly has a legitimate governmental objective in attempting to ameliorate the problems and adverse impacts of new development.   Nevertheless, the growth requirement capital fee enacted by the city does not satisfy the test of a valid police power measure.   The test is stated in Liberty v. California Coastal Com. (1980) 113 Cal.App.3d 491, 502–503, 170 Cal.Rptr. 247, as follows:  [¶] “Whether there has been a reasonable exercise of the police power is a question for the court (State Board v. Thrift-D-Lux Cleaners, Inc. (1953) 40 Cal.2d 436, 440 [254 P.2d 29] ).   Where the conditions imposed are not related to the use being made of the property but are imposed because the entity conceives a means of shifting the burden of providing the cost of a public benefit to another not responsible for or only remotely or speculatively benefiting from it, there is an unreasonable exercise of the police power (see Mid-Way Cabinet etc. Mfg. v. County of San Joaquin (1967) 257 Cal.App.2d 181, 191–192 [65 Cal.Rptr. 37] ).   In Mid-Way, the court stated at page 192:  ‘Various factors are taken into consideration by courts in determining whether in a given situation there is a proper exercise of the police power, in which case, as shown above, the landowner must yield “uncompensated obedience” (Gray v. Reclamation Dist. No. 1500, 174 Cal. 622, 642 [163 P. 1024] ․), or whether a governmental exercise of the power of eminent domain is masquerading in the guise of the police power.   The determining factor, as we have seen, is fairness.’ ”

 The ordinance in question here adopts an unfair method of coping with problems created by growth.   It imposes an exaction of 2.8% of the cost of construction of any new building to pay for, not just improvements whose needs emanate directly or indirectly from each development, but all future capital improvements which will, according to the ordinance, “benefit such development.”   There is no reasonable relationship between each new construction project, whatever its size or cost and the need for or potential utilization of any new public facilities the city determines to build.   As pointed out in Scrutton v. County of Sacramento, supra, 275 Cal.App.2d 412, 79 Cal.Rptr. 872, an arbitrarily conceived exaction will be nullified if it is “a mask for discriminatory taxation.”

The city in its brief suggests the purpose of the growth requirement capital fee is to require new development to pay the cost of additional public facilities the need for which is attributable to such development.   While this is a legitimate and laudable goal, no such relationship or limitation is provided for in the ordinance.   It is illogical to conclude that all future capital improvements relating to the quality of life in Oxnard will result from the influx of population.   It is unfair to impose the same percentage of the cost of construction of new development on all projects without taking into consideration the relative impact each new project has upon the need for additional public facilities.   The growth requirement capital fee as set forth in this ordinance is a discriminatory exaction levied upon developers and builders requiring future owners of homes and buildings to pay for all new capital improvements deemed desirable by the governing board of the city.

In Mills v. Trinity County (1980) 108 Cal.App.3d 656, 166 Cal.Rptr. 674, the court held that regulatory fees are valid only if they do not exceed the reasonable cost of providing services necessary to the activity for which the fee is charged and which are not levied for an unrelated cause.   Appellant has demonstrated that the fees collected will exceed the reasonable cost of providing services necessary to the activity for which the fee is charged and that the growth requirement capital fee is being levied for unrelated revenue purposes.   The absence of any relationship between the amount of the exaction on individual construction projects and the need for or potential use of the public improvements to be financed by the growth requirement capital fee requires a conclusion that the ordinance is an invalid regulatory fee.

The growth requirement capital fee in question here is designed to collect revenue for “general purpose capital needs” benefiting the community as a whole.   The exactions considered in Trent Meredith, Inc. v. City of Oxnard (1981) 114 Cal.App.3d 317, 170 Cal.Rptr. 685;  Associated Home Builders etc., Inc. v. City of Walnut Creek (1971) 4 Cal.3d 633, 94 Cal.Rptr. 630, 484 P.2d 606;  Ayres v. City Council of City of Los Angeles (1949) 34 Cal.2d 31, 207 P.2d 1;  Liberty v. California Coastal Commission (1980) 113 Cal.App.3d 491, 170 Cal.Rptr. 247;  Scrutton v. County of Sacramento (1969) 275 Cal.App.2d 412, 79 Cal.Rptr. 872 and Southern Pac. Co. v. City of Los Angeles (1966) 242 Cal.App.2d 38, 51 Cal.Rptr. 197, were all determined to be valid as a result of a showing of a reasonable relationship between the exaction and the public need for public improvements emanating from those developments.

Our conclusion that the ordinance as written does not create a valid regulatory fee requires a finding it is a tax.   Such a tax is void because it does not have legislative authorization (Cal. Const., art. XIII, § 24) and has not been approved by a two-third vote of the electorate of the city (Cal. Const., art. XIIIA, § 4).

It is unnecessary to rule on appellant's contention that the Subdivision Map Act (Gov.Code, § 66410, et seq.) preempts the imposition of the growth requirement capital.

The judgment is reversed and remanded with directions to enter judgment in favor of appellant holding ordinance 1876 invalid.

ABBE, Associate Justice.

STONE, P.J., and GILBERT, J., concur.