Court Opinion

ID: 9387340
Source: CourtListenerOpinion
Date Created: 2023-04-17 18:02:07.768642+00
Date Added: 2024-06-11T17:16:06.205717
License: Public Domain

Filed 4/17/23

                             CERTIFIED FOR PUBLICATION

                IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                              FOURTH APPELLATE DISTRICT

                                      DIVISION THREE

 ASHLEE ELIZABETH PALMER,

      Plaintiff and Appellant,                        G060880

          v.                                          (Super. Ct. No. 30-2017-00938646)

 CITY OF ANAHEIM,                                     OPINION

      Defendant and Respondent.

                  Appeal from a judgment of the Superior Court of Orange County, Randall
J. Sherman, Judge. Affirmed.
                  Benink & Slavens, Vincent D. Slavens and Eric J. Benink; Kearney
Littlefield, Thomas A. Kearney and Prescott W. Littlefield for Plaintiff and Appellant.
                  Alison M. Kott, City Attorney; Jarvis Fay, Benjamin P. Fay and Gabriel
McWhirter for Defendant and Respondent.
                  Hanson Bridgett, Adam W. Hofmann and Sean G. Herman for The League
of California Cities as Amicus Curiae on behalf of Defendant and Respondent.
                                    INTRODUCTION
              Article XIIIC was added to the California Constitution in 1996 after the
passage of the Right to Vote on Taxes Act, or Proposition 218. “Generally speaking,
Proposition 218 enacted procedures to be followed by a local government wishing to
adopt or increase taxes, assessments, fees or charges.” (Keller v. Chowchilla Water Dist.
(2000) 80 Cal.App.4th 1006, 1008-1009.) Article XIIIC requires that any new tax or
increase in tax be approved by the voters. In 2010, article XIIIC was amended when
Proposition 26 passed. Since then, “‘“tax” has been broadly defined to encompass “any
levy, charge, or exaction of any kind imposed by a local government.” [Citations.]’
[Citation.]” (City of San Buenaventura v. United Water Conservation Dist. (2022) 79
Cal.App.5th 110, 114.) Several charges are expressly excluded from this definition, but
today we focus on charges “imposed for a specific government service or product
provided directly to the payor that is not provided to those not charged, and which does
not exceed the reasonable costs to the local government of providing the service or
product.” (Cal. Const., art. XIIIC, §1, subd. (e)(2).)
              In this case, the government service or product at issue is electricity.
Appellant is an individual residing in the City of Anaheim (the City) who claims her local
public electric utility has approved rates which exceed the cost of providing electricity.
She claims the City has been transferring utility revenues to its general fund and
recouping these amounts from ratepayers without obtaining voter approval. But because
voters approved the practice through an amendment to the City’s charter, we conclude the
City has not violated article XIIIC, and we affirm the trial court’s grant of summary
judgment to the City on this basis. Though a localized issue, we publish because we
think the case may be The Ghost of Christmas Future.

                                              2
                                                      FACTS
                  The City of Anaheim adopted its charter in June of 1964. Since that time, it
has owned and operated its own public electric utility, the Anaheim Public Utilities
Department (the Electric Utility).
                  In 1975, a proposal emerged to amend the City charter to add a section
limiting the transfer of the Electric Utility revenue to the City’s general fund. In prior
years, there had been no such restriction, which meant the City could allocate anywhere
between six and twenty-four percent of the Electric Utility revenues to help fund general
services.
                  Proposition E, passed by the City’s voters in 1976, put a cap on these
general fund transfers by adding a section 1221 to article XII of the City Charter
(hereinafter, “section 1221”). Section 1221 required the Anaheim City Council to
establish electric rates “sufficient to pay” for amongst other things, “operations and
maintenance of the system,” and “payments to the general fund of the City . . . in each
fiscal year in an amount equal to, or less than,” a step-down percentage1 “of the gross
revenue earned by the utility during the previous fiscal year.” In 1990, the electorate
amended section 1221 to remove this step-down percentage, and today, the maximum
general fund transfer allowable stands at four percent.2
                  In June of 1994, the city council voted to impose an additional right-of-way
fee on the Electric Utility for its use of publicly owned rights of way. This fee is 1.5
percent of the prior year’s audited gross sales receipts, and is paid on a yearly basis.3 The

         1
                   For the first year after section 1221’s adoption, the general fund transfer would be capped at eight
percent of gross revenues. For the second year, it would be capped at six percent and for the third year onward, it
would be capped at four percent.
         2
                   After another ratepayer lawsuit was filed under Proposition 218 in 2012, the City agreed to
voluntarily cease the transfers if the voters disapproved them in an election scheduled for 2014. We presume, but
are not certain, that those transfers have resumed since the trial court granted the City summary judgment in this
case.
         3
                   According to surveys of similar municipalities, 1.5 percent was within “the average range of
franchise fees being charged to private gas and electric utilities in the area.”

                                                           3
city council had surmised private utilities operating on public rights of way should have
to pay for them as part of their operating costs. The right-of-way fee was thus intended to
compensate the City for the loss of that potential revenue.
              Electric Utility rates are designed by its staff and ultimately approved by
the city council. The rate structure has three base components: (1) a fixed charge for
accessing the electric system, called a “‘customer’ charge,” (2) a variable “‘energy’
charge” which fluctuates based on the amount of electricity consumed, and (3) a
“‘demand’ charge,” for non-residential customers, which varies based on maximum
energy consumption during a particular time. On top of the base charge is a rate
stabilization adjustment called an RSA. This charge funds a reserve for expenses
incurred to mitigate the electrical system’s environmental impacts and a reserve to fund
the procurement and generation of energy.
              Appellant Ashlee Palmer brought a class action complaint against the City
in late 2017 after the city council adopted certain modifications to the electric rate
schedule. According to one of the Electric Utility’s assistant general managers, electric
rates have not undergone significant changes since 2015, when the RSA was reduced and
base charges were correspondingly increased. But he admits there were some slight
modifications, such as an adjustment to demand charges to make them consistent across
customer classes. Appellant attacked the new rate schedule not based on these
modifications, but on the premise that the rates overall encompassed an unconstitutional
surcharge comprised of the general fund transfer under section 1221 and the annual right-
of-way fee.
              Both appellant and the City ultimately decided to file for summary
judgment, and, in anticipation of cross-motions, they stipulated as to their scope. Two
elements of the stipulation are paramount in our analysis. First, the parties agreed that,
for purposes of the cross-motions, the trial court would not need to resolve whether the
right-of-way fee is an operations cost of the Electric Utility or whether the fee was

                                              4
“‘grandfathered’” in and exempt from voter approval under article XIIIC. This was
because the parties were willing to stipulate that the Electric Utility took in enough non-
rate revenue during the applicable timeframe to cover the cost of the fee, and thus, it was
not being recouped from customers. Second, the parties agreed the trial court should
grant summary judgment to the City if it found either one of two things to be true. First,
that “Anaheim voters’ approval of section 1221 . . . satisfies article XIIC’s voter-approval
requirements[.]” Second, that “the portion, if any, of the City’s electric rates that funds
the general fund transfer is a ‘grandfathered’ charge exempt from the voter-approval
requirements of article XIIIC[.]” The trial court found section 1221 satisfied article
XIIIC voter approval requirements, and granted summary judgment to the City.
                                      DISCUSSION
              Our review of the trial court’s grant of summary judgment is de novo. (See
Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 334.) But appellant’s briefing seems
to suggest, incorrectly, that we conduct this review independent of the parameters of the
parties’ stipulation. For example, she encourages us to decide “whether the imposition of
the right-of-way fee supersedes voter approval of Section 1221 in 1976.”
              We decline the invitation. “Parties may, as here, agree by stipulation to
limit the issues presented to the trial court” on summary judgment “and the court will
respect such stipulation. (Title Ins. Co. v. State Bd. of Equalization (1992) 4 Cal.4th 715,
733.)” (See Vulk v. State Farm General Ins. Co. (2021) 69 Cal.App.5th 243, 263.) The
court is not required to accept any conclusions of law in a stipulation (see Oakland
Raiders v. City of Berkeley (1976) 65 Cal.App.3d 623, 629), but in general, a party is
bound by its own agreement as to what is material. “‘Unless the trial court, in its
discretion, permits a party to withdraw from a stipulation [citations], it is conclusive upon
the parties, and the truth of the facts contained therein cannot be contradicted.
[Citations.]’ (Palmer v. City of Long Beach (1948) 33 Cal.2d 134, 141–142.)”

                                              5
(Robinson v. Workers’ Comp. Appeals Bd. (1987) 194 Cal.App.3d 784, 790.) Appellant
                                                                                                     4

seems to think the City and the trial court misconstrued or misunderstood the language of
the stipulation. Not so. The trial court rightly assumed the parties meant what they said
in their stipulation and acted accordingly. We think it appropriate for us to follow the
same protocol.
                  As we previously stated, appellant has pointed to two potentially
problematic elements of the Electric Utility’s budget – the 1.5 percent right-of-way fee
and the 4 percent general fund transfer. She repeatedly reminds us that her challenge is
not to these items standing alone, but to the rate increases which potentially stem from
them. Nevertheless, the only way to determine whether the rates were unconstitutionally
impacted by them is to consider each item separately.
I.                Right-of-Way Fee
                  The parties agreed for purposes of the cross-motions that the Electric
Utility took in sufficient non-rate revenue to “fully offset the impact, if any, of the” right-
of-way fee on the rates. To our mind (and it seems, to the trial court’s as well), this
effectively eliminates the right-of-way fee as a point of challenge. As our Supreme Court
has concluded, if a specific cost in an agency budget is not actually passed along to the
taxpayer, it does not require voter approval under article XIIIC. (See Citizens for Fair
REU Rates v. City of Redding (2018) 6 Cal.5th 1, 17.) Thus, where the utility has “more
than enough nonrate revenue to cover” the questionable cost, it is not a tax. (Id. at p. 15.)
Since appellant admits the Electric Utility had enough nonrate revenue to cover the right-
of-way fee, it is not a tax.
                  Appellant believes the trial court erred when it disregarded the right-of-way
fee completely; she says she never intended to stipulate the entire issue away. She argues

         4
                  Based on our review of the record, appellant has never sought to invalidate or withdraw from the
stipulation and even after receiving the trial court’s tentative ruling on the cross-motions for summary judgment (in
which the trial court explicitly referred to it), appellant’s counsel did not argue the court was misinterpreting the
stipulation.

                                                          6
the stipulated fact pertains only to the right-of-way fee when considered on its own, not
the surcharge when the general fund transfer and right-of-way fee are combined. We fail
to see any meaningful distinction between the two. For one thing, the parties stipulated
nonrate revenue was sufficient to fully offset “any” impact the right-of-way fee had on
rates. We interpret the phrase “any impact” to mean “any impact,” – either when the fee
is considered alone or when it is combined with other budget items. Additionally, the
stipulated fact is not conditioned on the right of way fee being considered separate from
or together with the general fund transfer. We cannot read a term into the stipulation that
isn’t there.
II.            General Fund Transfer and Section 1221
               On this topic, we feel it important at the outset to set forth verbatim the text
of section 1221, the language at issue here:
               “Section 1221. UTILITY RATES. [¶] The City Council shall establish
rates, rules and regulations for the water and electrical utilities. The rates shall be
sufficient with respect to each utility to pay:
               “(a) For operations and maintenance of the system.
               “(b) For payment of principal and interest on debt.
               “(c) For creation and maintenance of financial reserves adequate to assure
debt service on bonds outstanding.
               “(d) For capital construction of new facilities and improvements of existing
facilities, or maintenance of a reserve fund for that purpose.
               “(e) For payments to the general fund of the City (exclusive of those
amounts paid pursuant to subsection (a) of this Section 1221) in each fiscal year, in an
amount equal to, or less than, four percent (4%) of the gross revenue earned by the utility
during the previous fiscal year.
               “Rates shall be reviewed by the City Council periodically to insure that
financial goals are being accomplished.

                                                  7
                  “Rates shall be uniform for all consumers within the same class and shall
be based on the cost of service revenue requirement for the class; but different rate
schedules may be applied to different classes of consumers. Notwithstanding the
foregoing, the City Council may establish, and revise from time to time, ratepayer
discount and other programs to assist residential customers in the payment of their utility
bills and the costs of such discount and other programs may be paid from utility
revenues.”
                  “‘In construing a provision adopted by the voters our task is to ascertain
their intent. (Lungren v. Deukmejian (1988) 45 Cal.3d 727, 735 (Lungren).) We look
first to the words themselves, which should be given the meaning they bear in ordinary
use. (Id. at p. 735; Killian v. City and County of San Francisco (1978) 77 Cal.App.3d 1,
7.) If the language is clear and unambiguous there is no need for construction and courts
should not indulge in it. (Delaney v. Superior Court (1990) 50 Cal.3d 785, 800.)
However, this plain meaning rule does not prohibit a court from determining whether the
literal meaning of a charter provision comports with its purpose, or whether construction
of one charter provision is consistent with the charter’s other provisions. (See Lungren,
supra, at p. 735.) Literal construction should not prevail if it is contrary to the voters’
intent apparent in the provision. (See California School Employees Assn. v. Governing
Board (1994) 8 Cal.4th 333, 340.) “An interpretation that renders related provisions
nugatory must be avoided . . . ., [and] each sentence must be read . . . in the light of the
[charter’s overall] scheme . . . .” (Lungren, supra, at p. 735.) Provisions relating to the
same subject matter must be harmonized to the extent possible. (Schmidt v. Retirement
Board (1995) 37 Cal.App.4th 1204, 1210.)’” (White v. City of Stockton (2016) 244
Cal.App.4th 754, 759.)5

         5
                   Because we can construe the charter provision based on its plain language, we need only grant
appellant’s request for judicial notice as to the charter and its amendments. Judicial notice is also granted as to the
city council resolution approving the right-of-way fee. We deny judicial notice of all ballot materials submitted by
appellant, either for Proposition E or Proposition 218.

                                                           8
                  We think appellant’s approach would require us to eschew these principles
in construing section 1221. She circumlocutes subdivision (e) of section 1221, not
acknowledging its plain meaning – to wit, voters agreed a four percent transfer could be
built into their rates. She also chooses to construe the various aspects of section 1221 in a
way that would essentially nullify certain parts.
                  Appellant first tries to convince us the voters, in adopting section 1221
(and, in particular, subdivision (e) thereof), were not approving a tax. Instead, she says,
voters were requiring the city council to set rates based upon cost of service, and
restricting the City’s ability to transfer utility revenues to the general fund. In the end,
though, what real difference is there between the two? Appellant’s concerns are
semantical; she wants us to call this horse an ungulate rather than a mammal. But
whatever characterization or label appellant accords the transfer, the point she cannot
escape is this: the voters approved it: Not only the transfer itself, but the transfer being
folded into their rates. The language of section 1221 is unambiguous: “The rates shall be
sufficient with respect to each utility to pay . . .” the transfer, amongst other costs.6
                  Appellant then seizes upon section 1221’s cost of service requirement
language to argue the provision “does not permit the City to overcharge ratepayers to
fund the transfer[.]” We disagree. The provision absolutely allows the City to charge
ratepayers to fund the four percent transfer, and as a matter of law, any such voter-
approved charge cannot be an overcharge. Neither do we think the transfer conflicts with
section 1221’s cost of service requirement. The best way to harmonize subdivision (e)
with the cost of service requirement is to deem the transfer a cost of service. Appellant
argues “there is no evidence to support” this interpretation, but again, we see it
differently. The evidence is the text itself. If rates are to be based on costs of service and
the voters agreed that all items listed in subdivisions (a) through (e) of section 1221

         6
                  For this reason, we reject appellant’s contention that voters approved the transfer being funded
through nonrate revenue only. They explicitly did the opposite; they approved it being funded through their rates.

                                                         9
should be built into the rates, the only rational construction is that subdivisions (a)
through (e) are agreed-upon costs of service.
                 Appellant believes construing the transfer as a cost of service dooms the
City’s argument that the rate structure was approved as a tax. But in reality, she is
between a rock and a hard place herself. If the rate structure was a tax, it was approved
by the voters, and is compliant with article XIIIC. And if the rate structure incorporates
only costs of service, there is no need to comply with article XIIIC in the first place.
                 Because the transfer was approved by the voters, we see no article XIIIC
violation. When considered with appellant’s admission that the right-of-way fee has no
            7

impact on rates, we conclude the trial court correctly granted the City’s motion for
summary judgment.
                                               DISPOSITION
                 The judgment is affirmed. The City shall recover its costs on appeal.

                                                              BEDSWORTH, ACTING P. J.

WE CONCUR:

MOORE, J.

MOTOIKE, J.

        7
                   This is true even though the voters rejected a 2014 ballot measure which would have removed the
cost of service language and made the transfer four percent of gross “retail” revenue as opposed to gross revenue.
The 2014 ballot measure did not propose eliminating the transfer altogether. And as our amicus points out, laws that
fail to pass do not provide interpretive clues, as voters can have many reasons to vote a measure down.

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