Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Jacks v. City of Santa Barbara

Supreme Court of California

June 29, 2017

ROLLAND JACKS et al., Plaintiffs and Appellants,
v.
CITY OF SANTA BARBARA, Defendant and Respondent.

         Santa Barbara County Superior County No. 1383959, Ct.App. 2/6 B253474, Thomas Pearce Anderle Judge:

          Huskinson, Brown & Heidenreich, David W.T. Brown and Paul E. Heidenreich for Plaintiffs and Appellants.

          Trevor A. Grimm, Jonathan M. Coupal, Timothy A. Bittle and J. Ryan Cogdill for Howard Jarvis Taxpayers Association and California Taxpayers Association as Amici Curiae on behalf of Plaintiffs and Appellants.

          Ariel Pierre Calonne, City Attorney, Tom R. Shapiro, Assistant City Attorney; Colantuono, Highsmith & Whatley, Michael G. Colantuono, Ryan Thomas Dunn, Leonard P. Aslanian; Jarvis, Fay, Doporto & Gibson, Benjamin P. Fay, Rick W. Jarvis and Andrea Saltzman for Defendant and Respondent.

          Hanson Bridgett, Adam W. Hofmann and Caroline E. Lee for League of California Cities as Amicus Curiae on behalf of Defendant and Respondent.

          Cantil-Sakauye, C. J.

         Pursuant to an agreement between Southern California Edison (SCE) and defendant City of Santa Barbara (the City), SCE includes on its electricity bills to customers within the City a separate charge equal to 1 percent of SCE's gross receipts from the sale of electricity within the City, and transfers the revenues to the City. The City contends this separate charge, together with another charge equal to 1 percent of SCE's gross receipts that SCE includes in its electricity rates, is the fee paid by SCE for the privilege of using City property in connection with the delivery of electricity. Plaintiffs Rolland Jacks and Rove Enterprises, Inc., contend the 1 percent charge that is separately stated on electricity bills is not compensation for the privilege of using City property, but is instead a tax imposed without voter approval, in violation of Proposition 218. (Cal. Const., art. XIII C, § 2, added by Prop. 218.)

         As we explain below, the right to use public streets or rights-of-way is a property interest, and Proposition 218 does not limit the authority of government to sell or lease its property and spend the compensation it receives for whatever purposes it chooses. Therefore, charges that constitute compensation for the use of government property are not subject to Proposition 218's voter approval requirements. To constitute compensation for a property interest, however, the amount of the charge must bear a reasonable relationship to the value of the property interest; to the extent the charge exceeds any reasonable value of the interest, it is a tax and therefore requires voter approval.

         The litigation below did not address whether the charges bear a reasonable relationship to the value of the property interests. Therefore, we affirm the judgment of the Court of Appeal to the extent it reversed the trial court's grant of the City's motion for judgment on the pleadings, but we reverse the Court of Appeal's order that the trial court grant summary adjudication to plaintiffs.

         I. FACTS

         The parties stipulated to the following facts in the trial court. Beginning in 1959, the City and SCE entered into a series of franchise agreements granting SCE the privilege to construct and use equipment along, over, and under the City's streets to distribute electricity.[1" name= "ftn.FN1" id="ftn.FN1">1] At issue in this case is an agreement the City and SCE began negotiating in 1994, when their 1984 agreement was about to expire. The 1984 agreement required SCE to pay to the City a fee equal to 1 percent of the gross annual receipts from SCE's sale of electricity within the City in exchange for the franchise granted by the City. During the course of extended negotiations regarding a new agreement, the City and SCE extended the terms of the 1984 agreement five times, from September 1995 to December 1999.

         In the negotiations for a long-term agreement, the City pursued a fee equal to 2 percent of SCE's gross annual receipts from the sale of electricity within the City. At some point in the negotiations, SCE proposed that it would remit to the City as a franchise fee 2 percent of its gross receipts if the Public Utilities Commission (PUC) consented to SCE's inclusion of the additional 1 percent as a surcharge on its bills to customers. Based on SCE's proposal, the City and SCE tentatively agreed to a 30-year agreement that included the provisions for payment of 2 percent of gross receipts. Following notice and a hearing, the City Council of Santa Barbara adopted the agreement as City Ordinance No. 5135 on December 7, 1999, with a term beginning on January 1, 2000 (the 1999 agreement). The ordinance was not submitted to the voters for their approval.

         The 1999 agreement divides its 30-year period into two terms. The first two years were the “initial term, ” during which SCE was required to pay the City an “initial term fee” equal to 1 percent of its gross receipts from the sale of electricity within the City. The subsequent 28 years are the “extension term, ” during which SCE is to pay the additional 1 percent charge on its gross receipts, denominated the “recovery portion, ” for a total “extension term fee” of 2 percent of SCE's gross receipts from the sale of electricity within the City. At issue in this case is the recovery portion, which we, like the parties, refer to as the surcharge.

         The agreement required SCE to apply to the PUC by April 1, 2001, for approval to include the surcharge on its bills to ratepayers within the City, and to use its best efforts to obtain PUC approval by April 1, 2002. Approval was to be sought in accordance with the PUC's “Re Guidelines for the Equitable Treatment of Revenue-Producing Mechanisms Imposed by Local Government Entities on Public Utilities.” (Investigation on the Commission's Own Motion to Establish Guidelines for the Equitable Treatment of Revenue-Producing Mechanisms Imposed by Local Government Entities on Public Utilities (1989) 32 Cal.P.U.C.2d 60, 63 [Cal. P.U.C. Dec. No. 89-05-063] (PUC Investigation).) The agreement further provided that, in the event the PUC did not give its approval by the end of the initial term, either party could terminate the agreement. Thereafter, the City agreed to delay the time within which SCE was required to seek approval from the PUC, but SCE eventually obtained PUC approval, and began billing its customers within the City for the full extension term fee in November 2005.

         The agreement provided that half of the revenues generated by the surcharge were to be allocated to the City's general fund and half to a City undergrounding projects fund. In November 2009, however, the City Council decided to reallocate the revenues from the surcharge, directing that all of the funds be placed in the City's general fund without any limitation on the use of these funds.

         In 2011, plaintiffs filed a class action complaint challenging the surcharge. In their first amended complaint, they alleged the surcharge was an illegal tax under Proposition 218, which requires voter approval for all local taxes. (Cal. Const., art. XIII C.) Plaintiffs sought refunds of the charges collected, as well as declaratory relief and injunctive relief requiring the City to discontinue collection of the surcharge.

         On cross-motions for summary adjudication and the City's motion for summary judgment, the trial court ruled that a franchise fee is not a tax under Proposition 218. Its ruling was based largely on Santa Barbara County Taxpayer Assn., supra, 3d 940');">209 Cal.App.3d 940, which held that franchise fees are not “proceeds of taxes” for purposes of calculating limits on state and local appropriations under article XIII B of the California Constitution. Notwithstanding this ruling, the trial court denied the motions, based on its view that Proposition 26, which was approved by the voters in 2010, retroactively altered the definition of a tax under Proposition 218 to encompass franchise fees. Therefore, the court concluded, the City had failed to establish that the surcharge did not violate Proposition 218 during the period after Proposition 26 was adopted in 2010.

         Thereafter, the City moved for judgment on the pleadings, contending that Proposition 26 does not apply retroactively to the surcharge. The trial court agreed, citing Brooktrails Township Community Services Dist. v. Board of Supervisors of Mendocino County (2013) 18 Cal.App.4th 195');">218 Cal.App.4th 195, which held that Proposition 26 does not apply retroactively. Based on its earlier conclusion that the surcharge, as a franchise fee, was not a tax under Proposition 218 (see Santa Barbara County Taxpayer Assn., supra, 3d 940');">209 Cal.App.3d 940), and its additional conclusion that a franchise fee, as negotiated compensation, need not be based on the government's costs, the trial court ruled that the surcharge was not subject to the voter approval requirements of Proposition 218. Therefore, it granted the City's motion for judgment on the pleadings.

         The Court of Appeal reversed the judgment. It looked to our opinion in Sinclair Paint Co. v. State Bd. of Equalization (1997) 15 Cal.4th 866');">15 Cal.4th 866 (Sinclair Paint), which considered whether a charge imposed by the state on those engaged in the stream of commerce of lead-containing products was a tax or a fee under Proposition 13, an earlier voter initiative that requires voter approval of various taxes. (Cal. Const., art. XIII A.) Noting that our analysis in Sinclair Paint focused on whether the primary purpose of the charge was to raise revenue or to regulate those charged, the Court of Appeal considered whether the primary purpose of the surcharge is to raise revenue or to compensate the City for allowing SCE to use its streets and rights-of-way. Based on its conclusion that the surcharge's “primary purpose is for the City to raise revenue from electricity users for general spending purposes rather than for SCE to obtain the right-of-way to provide electricity, ” the Court of Appeal held that the surcharge is a tax, and therefore requires voter approval under Proposition 218. (Cal. Const., art. XIII C, § 2, subd. (b).)

         We granted review to address whether the surcharge is a tax subject to Proposition 218's voter approval requirement, or a fee that may be imposed by the City without voter consent.

         II. DISCUSSION

         Over the past four decades, California voters have repeatedly expanded voter approval requirements for the imposition of taxes and assessments. These voter initiatives have not, however, required voter approval of certain charges related to a special benefit received by the payor or certain costs associated with an activity of the payor. Whether the surcharge required voter approval hinges on whether it is a valid charge under the principles that exclude certain charges from voter approval requirements. Our evaluation of this issue begins with a review of four voter initiatives that require voter approval of taxes, and the legal principles underlying the exclusion of certain charges from the initiatives' requirements. We then describe the historical characteristics of franchise fees, the Legislature's history of regulating the calculation of franchise fees, and the PUC's requirements concerning the imposition of franchise fees that exceed the average charges imposed by other local governments in the utility's service area. Finally, we analyze whether the surcharge is a valid franchise fee or a tax, and we hold that a charge imposed in exchange for franchise rights is a valid fee rather than a tax only if the amount of the charge is reasonably related to the value of the franchise.

         A. Restrictions on Taxes and Other Charges

         1. Voter Initiatives

         Beginning in 1978, state voters have imposed various limitations upon the authority of state and local governments to impose taxes and fees. Proposition 13, which was adopted that year, set the assessed value of real property as the “full cash value” on the owner's 1975-1976 tax bill, limited increases in the assessed value to 2 percent per year unless there was a change in ownership, and limited the rate of taxation on real property to 1 percent of its assessed value. (Cal. Const., art. XIII A, §§ 1, 2.) In addition, to prevent tax savings related to real property from being offset by increases in state and local taxes, Proposition 13 required approval by two-thirds of the members of the Legislature in order to increase state taxes, and required approval by two-thirds of the local electors of a city, county, or special district in order for such a local entity to impose special taxes. (Cal. Const., art. XIII A, §§ 3, 4; Sinclair Paint, supra, 15 Cal.4th at p. 872; Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization (1978) 3d 208');">22 Cal.3d 208, 231 (Amador Valley).)

         Proposition 13 did not define “special taxes, ” but this court addressed the initiative's restrictions on such taxes in two early cases. In Los Angeles County Transportation Commission v. Richmond (1982) 31 Cal.3d 197, we held that the requirement that “special districts” obtain two-thirds voter approval for special taxes applied only to those special districts empowered to levy property taxes. (Id. at p. 207.) In City and County of San Francisco v. Farrell (1982) 32 Cal.3d 47 (Farrell), “we construe[d] the term ‘special taxes' in section 4 [of article XIII A] to mean taxes which are levied for a specific purpose.” (Id. at p. 57.) In addition, the Legislature provided that “ ‘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.” (Gov. Code, § 50076.)

         Thereafter, in 1986, the voters approved Proposition 62, which “added a new article to the Government Code (§§ 53720-53730) requiring that all new local taxes be approved by a vote of the local electorate.” (Santa Clara County Local Transportation Authority v. Guardino (1995) 11 Cal.4th 220');">11 Cal.4th 220, 231, fn. omitted.) The initiative embraced the definition of special taxes set forth in Farrell, supra, 32 Cal.3d 47');">32 Cal.3d 47 (Gov. Code, § 53721; see Guardino, at p. 232), but applied its voter approval requirements to any district rather than only to special districts, and defined “district” broadly. (Gov. Code, § 53720, subd. (b) [“ ‘district' means an agency of the state, formed... for the local performance of governmental or proprietary functions within limited boundaries”].) By the time Proposition 62 was proposed, courts as well as the Legislature had recognized that various fees were not taxes for purposes of Proposition 13 (see Beaumont Investors v. Beaumont-Cherry Valley Water Dist. (1985) 165 Cal.App.3d 227; Mills v. County of Trinity (1980) 108 Cal.App.3d 656), but Proposition 62 was silent with respect to the imposition of fees.

         Next, in 1996, state voters approved Proposition 218, known as the “Right to Vote on Taxes Act.” (Apartment Assn. of Los Angeles County, Inc. v. City of Los Angeles (2001) 30');">24 Cal.4th 830, 835 (Apartment Assn.).) Proposition 218 addressed two principal concerns. First, it was not clear whether Proposition 62, which enacted statutory provisions, bound charter jurisdictions.[2] (Howard Jarvis Taxpayers Assn. v. City of San Diego (2004) 120 Cal.App.4th 374, 390-391.) Therefore, Proposition 218 amended the Constitution to add voter approval requirements for general and special taxes, thereby binding charter jurisdictions. (Cal. Const., art. XIII C, §§ 1, 2.)

         Second, Proposition 13 was “not intended to limit ‘traditional' benefit assessments.” (Knox v. City of Orland (1992) 132');">4 Cal.4th 132, 141 (Knox) [upholding property-based assessments for public landscaping and lighting improvements].) Proposition 218 was adopted in part to address Knox's holding. (Greene v. Marin County Flood Control & Water Conservation Dist. (2010) 49 Cal.4th 277, 284.) It requires an agency proposing an assessment on property to determine the proportionate special benefit to be derived by each parcel subject to the assessment; to support the assessment with an engineer's report; to give written notice to each parcel owner of the amount of the proposed assessment and the basis of the calculation; and to provide each owner with a ballot to vote in favor of or against the proposed assessment. It also requires the agency to hold a public hearing, and bars imposition of the assessment if a majority of parcel owners within the assessment area submit ballots in opposition to the assessment, with each ballot weighted based on the proposed financial obligation of the affected parcel. In the event legal action is brought contesting an assessment, the agency has the burden to establish that the burdened properties receive a special benefit and the assessment is proportional to the benefits conferred. (Cal. Const., art. XIII D, §§ 2, subd. (b), 4; see Apartment Assn., supra, 24 Cal.4th 830.)[3" name="ftn.FN3" id= "ftn.FN3">3]

         Most recently, in 2010, after the charge at issue in this case was adopted, state voters approved Proposition 26. That measure amended the Constitution to provide that for purposes of article XIII C, which addresses voter approval of local taxes, “ ‘tax' means any levy, charge, or exaction of any kind imposed by a local government” (Cal. Const., art. XIII C, § 1, subd. (e)), except (1) a charge imposed for a specific benefit or privilege received only by those charged, which does not exceed its reasonable cost, (2) a charge for a specific government service or product provided directly to the payor and not provided to those not charged, which does not exceed its reasonable cost, (3) charges for reasonable regulatory costs related to the issuance of licenses, permits, investigations, inspections, and audits, and the enforcement of agricultural marketing orders, (4) charges for access to or use, purchase, rental, or lease of local government property, (5) fines for violations of law, (6) charges imposed as a condition of developing property, and (7) property-related assessments and fees as allowed under article XIII D. The local government bears the burden of establishing the exceptions. (Cal. Const., art. XIII C, § 1, subd. (e).)[4]

         2. Characteristics of Valid Fees

         As noted above, following the enactment of Proposition 13, the Legislature and courts viewed various fees as outside the scope of the initiative. (Gov. Code, § 50076; Evans v. City of San Jose (1992) 3 Cal.App.4th 728');">3 Cal.App.4th 728, 736-737 (Evans), and cases cited therein.) In Sinclair Paint, supra, 15 Cal.4th 866');">15 Cal.4th 866, we summarized three categories of charges that are fees rather than taxes, and therefore are not subject to the voter approval requirements of Proposition 13. First, special assessments may be imposed “in amounts reasonably reflecting the value of the benefits conferred by improvements.” (Sinclair Paint, at p. 874.) Second, development fees, which are charged for building permits and other privileges, are not considered taxes “if the amount of the fees bears a reasonable relation to the development's probable costs to the community and benefits to the developer.” (Id. at p. 875.) Third, regulatory fees are imposed under the police power to pay for the reasonable cost of regulatory activities. (Id. at pp. 875-876.)

         The commonality among these categories of charges is the relationship between the charge imposed and a benefit or cost related to the payor. With respect to charges for benefits received, we explained in Knox, supra, 4 Cal.4th 132, that “if an assessment for... improvements provides a special benefit to the assessed properties, then the assessed property owners should pay for the benefit they receive.” (Id. at p. 142; see Evans, supra, 3 Cal.App.4th at p. 738 [when a “discrete group is specially benefitted... [, t]he public should not be required to finance an expenditure through taxation which benefits only a small segment of the population”].) But “if the assessment exceeds the actual cost of the improvement, the exaction is a tax and not an assessment.” (Knox, at p. 142, fn. 15.) With respect to costs, we explained in Sinclair Paint, supra, 15 Cal.4th 866');">15 Cal.4th 866, 879, that Proposition 13's goal of providing effective property tax relief is promoted rather than subverted by shifting costs to those who generate the costs. (See San Diego Gas & Electric Co. v. San Diego County Air Pollution Control Dist. (1988) 203 Cal.App.3d 1132, 1148.) However, if the charges exceed the reasonable cost of the activity on which they are based, the charges are levied for unrelated revenue purposes, and are therefore taxes. (Sinclair Paint, at pp. 874, 881.)

         In sum, restricting allowable fees to the reasonable cost or value of the activity with which the charges are associated serves Proposition 13's purpose of limiting taxes. (See Amador Valley, supra, 22 Cal.3d at p. 231 [Prop. 13's restrictions on real property taxes “could be withdrawn or depleted by additional or increased state or local levies other than property taxes”].) If a state or local governmental agency were allowed to impose charges in excess of the special benefit received by the payor or the cost associated with the payor's activities, the imposition of fees would become a vehicle for generating revenue independent of the purpose of the fees. Therefore, to the extent charges exceed the rationale underlying the charges, they are taxes.

         Although Sinclair Paint, supra, 15 Cal.4th 866');">15 Cal.4th 866, focused on restrictions imposed by Proposition 13, its analysis of the characteristics of fees that may be imposed without voter approval remains sound. According to Proposition 218's findings and declarations, “Proposition 13 was intended to provide effective tax relief and to require voter approval of tax increases. However, local governments have subjected taxpayers to excessive tax, assessment, fee and charge increases that... frustrate the purposes of voter approval for tax increases....” (Prop. 218, § 2, reprinted at Historical Notes, 2B West's Ann. Cal. Const. (2013) foll. art. XIII C, § 1, p. 363, italics added.) As relevant here, this finding reflects a concern with excessive fees, not fees in general. In addition, although Proposition 218 imposed additional restrictions on the imposition of assessments, that initiative did not impose additional restrictions on other fees. (Cal. Const., arts. XIII C, §§ 1, 2, XIII D, § 4.) Finally, Sinclair Paint's understanding of fees as charges reasonably related to specific costs or benefits is reflected in Proposition 26, which exempted from its expansive definition of tax (1) charges imposed for a specific benefit or privilege which do not exceed its reasonable cost, (2) charges for a specific government service or product provided which do not exceed its reasonable cost, and (3) charges for reasonable regulatory costs related to specified regulatory activities.[5] (Cal. Const., art. XIII C, § 1, subd. (e).)

         To determine how franchise fees fit within these principles, we next consider the nature of franchise fees. We also describe the regulatory framework related to their calculation and imposition.

         B. Franchise Fees

         1. Nature of Franchise Fees

         A franchise to use public streets or rights-of-way is a form of property (Stockton Gas etc. Co. v. San Joaquin Co. (1905) 148 Cal. 313');">148 Cal. 313, 319), and a franchise fee is the purchase price of the franchise. (City & Co. of S. F. v. Market St. Ry. Co. (1937) 3');">9 Cal.2d 743, 749.) Historically, franchise fees have not been considered taxes. (See Tulare County v. City of Dinuba (1922) 188 Cal. 664, 670 [franchise fee based on gross receipts of utility is not a tax]; City and County of San Francisco v. Market St. Ry. Co., supra, 9 Cal.2d at p. 749 [payments for franchises are not taxes]; Santa Barbara County Taxpayer Assn., supra, 3d 940');">209 Cal.App.3d 940, 949-950 [franchise fees are not proceeds of taxes].) Nothing in Proposition 218 reflects an intent to change the historical characterization of franchise fees, or to limit the authority of government to sell or lease its property and spend the compensation received for whatever purposes it chooses. (See Cal. Const., arts. XIII A, § 3, subd. (b)(4), XIII C.)

         This understanding that restrictions on taxation do not encompass amounts paid in exchange for property interests is confirmed by Proposition 26, the purpose of which was to reinforce the voter approval requirements set forth in Propositions 13 and 218. (Prop. 26, § 1, subd. (f), Historical Notes, reprinted at 2B West's Ann. Cal. Const., supra, foll. art. XIII A, § 3, p. 297 [“to ensure the effectiveness of these constitutional limitations, [Proposition 26] defines a ‘tax'... so that neither the Legislature nor local governments can circumvent these restrictions on increasing taxes by simply defining new or expanded taxes as ‘fees' ”].) Although Proposition 26 strengthened restrictions on taxation by expansively defining “tax” as “any levy, charge, or exaction of any kind imposed by a local government” (Cal. Const., art. XIII C, § 1, subd. (e)), it provided an exception for “[a] charge imposed for entrance to or use of local government property, or the purchase, rental, or lease of local government property.” (Id., subd. (e)(4).)[6]

         2. Laws Governing the Calculation of Franchise Fees

         The Legislature has taken several approaches to the issue of the amount of compensation to be paid to local jurisdictions in exchange for rights-of-way over the jurisdictions' land relating to the provision of services such as electricity. As described more fully below, it initially barred the imposition of franchise fees due to perceived abuses by local governments. Thereafter, it authorized local agencies to grant franchises, and established two formulas with which to calculate franchise fees. These formulas do not bind charter jurisdictions, such as the City, but they provide helpful background to the PUC's regulation of charges imposed on ratepayers.

         The California Constitution as adopted in 1879 provided that “[i]n any city where there are no public works owned and controlled by the municipality for the supplying the same with water or artificial light, any individual, or any company duly incorporated for such purpose..., shall... have the privilege of using the public streets and thoroughfares thereof, and of laying down pipes and conduits therein, and connections therewith, so far as may be necessary for introducing into and supplying such city and its inhabitants either with gaslight or other illuminating light, or with fresh water for domestic and all other purposes, upon the condition that the municipal government shall have the right to regulate the charges thereof.” (Cal. Const., former art. XI, § 19.) The provision was intended to prevent a municipality from creating a monopoly within its jurisdiction by imposing burdens on parties who wanted to compete with an existing private utility. Although cities could not impose franchise fees on these “constitutional franchises, ” they were authorized to tax a franchise on the basis that a franchise constitutes real property within the city. (Stockton etc. Co. v. San Joaquin Co., supra, 148 Cal. at pp. 315-321; City of Santa Cruz v. Pacific Gas & Electric Co. (2000) 1167');">82 Cal.App.4th 1167, 1171.) In 1911, this constitutional provision was replaced with a provision that authorized the private establishment of public works for providing services such as light, water, and power “upon such conditions and under such regulations as the municipality may prescribe under its organic law.” (Sen. Const. Amend. No. 49, Stats. 1911 (1911 Reg. Sess.) res. ch. 67, p. 2180.) The constitutional amendment did not impair rights under existing constitutional franchises. (Russell v. Sebastian (1914) 33 U.S. 195');">233 U.S. 195, 210.)

         In the meantime, in 1905, the Legislature enacted the Broughton Act, which authorized cities and counties to enter franchise agreements for the provision of electricity and various other services not encompassed by the constitutional restrictions on franchise fees. (Stats. 1905, ch. 578, p. 777; County of Alameda v. Pacific Gas & Electric Co. (1997) 51 Cal.App.4th 1691, 1694-1695 (County of Alameda).) The legislation provided that when an application for a franchise was received by a city or county, the governing body was to advertise for bids and award the franchise to the highest bidder. The successful bidder was required to pay, in addition to the amount bid, 2 percent of the gross annual receipts from the “use, operation or possession” of the franchise after the first five years of the term of the franchise agreement had passed. (Stats. 1905, ch. 578, §§ 2-3, pp. 777-778.)

         The Broughton Act's provision that the fee be based on the receipts from the use, operation or possession of the franchise results in a complicated calculation of franchise fees. Usually, some portion of a utility's rights-of-way are on private property or property outside the jurisdiction of the city or county granting the franchise, and the utility's gross receipts attributable to a particular franchise must be reduced in proportion to the utility's rights-of-way that are not within the franchise agreement. (Tulare County v. City of Dinuba, supra, 188 Cal. at pp. 673-676.) In addition, because gross receipts arise from all of a utility's operative property, such as equipment and warehouses, the portion of gross receipts attributable to property other than the franchise must be excluded from the calculation of the franchise fee. (County of L. A. v. Southern etc. Gas Co. (1954) 129');">42 Cal.2d 129, 133-134.) Finally, if a utility also provides service under a constitutional franchise - for example, where it provides artificial light under a constitutional franchise in the same area ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.