Best Best & Krieger News Feed

Court Strikes Down Surcharge on Utility Users Imposed Under a Franchise Agreement

03 Mar 2015 00:00:00 -0800

A surcharge on electric utility bills collected by a power company pursuant to a franchise agreement and remitted to the city for general revenue purposes is a tax, a California Appellate Court has found. Because the city did not receive voter approval for the surcharge, it is an illegal tax, the court found.

The opinion in Jacks v. The City of Santa Barbara analyzes the validity of a 1 percent surcharge on customer bills collected by Southern California Edison and used by the City of Santa Barbara for general revenue use. In 1994 SCE and the City entered into negotiations to renew SCE’s franchise agreement to provide electric utility services within the City. The expiring agreement and subsequent extensions required SCE to pay the City a franchise fee of one percent of SCE’s gross annual receipts for electricity sold within the City. The proposed new franchise agreement required SCE to pay a franchise fee of 2 percent. One percent of the franchise fee revenue was proposed to be deposited into two City funds: half of the 1 percent to the City’s undergrounding utility projects fund and the remaining half to the City’s general fund.

In responding to the proposed increase in the franchise fee, SCE requested, and the City agreed, that imposition of the additional one percent would be contingent on the Public Utilities Commission authorizing it as a “surcharge.” The City agreed and the new franchise agreement was approved by both parties in 1999. In 2005, the PUC approved the surcharge and SCE began to collect it on customers’ electric bills. In 2009, the City reallocated the entire surcharge revenue to its general fund.

The surcharge was never submitted to the voters of the City for approval. The plaintiff challenged the surcharge as an invalid tax. The City asserted that the surcharge is part of the franchise fee paid by SCE and, as such, is not a tax.

The trial court considered whether the surcharge was a tax in accordance with Proposition 218 and Proposition 26. Proposition 218 was approved by the voters in 1996 and amended the California Constitution to require that any general tax be approved by a majority of the qualified voters participating in the election, and any special tax be approved by a two-thirds vote of the qualified electors voting in the election. Proposition 26, passed in 2010, amended the law to provide a new definition of the term “tax.” Under this new definition, a tax means any fee or charge imposed by a local government agency unless it qualifies as one of seven exceptions. The trial court concluded that the surcharge is part of the franchise fee and is not a tax under Proposition 218. The court further found, however, that the fee was a tax under Proposition 26, but that the definition of tax under Proposition 26 was not retrospective to the 1999 franchise agreement in which surcharge was approved.

The Court of Appeal held that the sole issue is whether the 1 percent surcharge is a tax subject to Proposition 218’s voter approval requirement or a franchise fee that may be imposed by the City without voter consent. The court noted that its inquiry begins with a determination of what the primary purpose of the fee is. If revenue is the primary purpose, and compensation for the franchise is merely incidental, the imposition is a tax. Here, the franchise agreement treats the 1 percent surcharge differently than the 1 percent franchise fee. The 1 percent franchise fee is for the purpose of compensating the City for allowing SCE a right of way to purvey electricity. The 1 percent surcharge is, in effect, a utility user tax imposed to generate revenue for general purposes of the City. As such, it is a tax under Proposition 218 and is subject to voter approval.

If you have any questions about this case or how it may impact your agency, please contact the attorney author of this legal alert listed to the right in the firm’s Public Finance practice group, or your BB&K attorney.

Disclaimer: BB&K legal alerts are not intended as legal advice. Additional facts or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information in this communiqué.

BB&K Named Town Attorney of Apple Valley

24 Jul 2008 00:00:00 -0800

The Apple Valley Town Council announced last week that it has selected the law firm of Best Best & Krieger LLP (BB&K) to serve as town attorney, effective July 15, 2008, replacing longtime town attorney Neal Singer who recently retired from full time practice. John E. Brown, a partner with the firm’s Ontario office, will act as town attorney. Haviva Shane, an associate in the firm’s Ontario office, will act as assistant town attorney.

Recently, the Apple Valley Town Council directed staff to solicit proposals to provide town attorney legal services. A request for proposals was sent to local and interested law firms, and the Town received approximately twelve responses. The Town Council evaluated the proposals and invited five of the law firms to interview with the Council.

At the conclusion of the interviews and after evaluating the merits of each law firm, the Town Council decided that BB&K best fit the needs of the Town. According to Mayor Tim Jasper, “After reviewing all of the firms, it was apparent that the needs of the Town would be well served by BB&K, and especially by John Brown.”

As town attorney, BB&K will provide legal services at Town Council and other meetings as deemed necessary by the Town Council and Manager. General legal services will also include Town ordinances, resolutions, agreements, deeds, and other legal documents, and legal advice on Town business to the Town Council and Manager.

"The Town has been able to negotiate a contract with BB&K that will allow the Town to more closely budget it's legal costs in advance, which allows the Town greater control over it's financial well-being in the future," added Council Member Peter Allan.

With the addition of Apple Valley, BB&K now represents 32 towns/cities throughout California as contract town/city attorney. The firm’s 82 municipal attorneys practice from eight California offices -- more statewide offices than any other California municipal law firm.

John E. Brown chairs BB&K’s municipal and redevelopment law practice group. He is a public lawyer specializing in municipal, redevelopment and school law. He currently serves as city attorney of the City of Ontario. He also previously served as city attorney of Desert Hot Springs (1976-1987), Perris (1981-1993), San Jacinto (1996-1998 and 1999-2005), and Lafayette (2002-2004).

“Best Best & Krieger is excited to join newly appointed town manager Frank Robinson as part of the Town’s administrative team,” says Brown. “We are looking forward to assisting the Town in dealing with challenging issues of growth and development in the years to come.”

For more information about the Town of Apple Valley, visit www.AppleValley.org.

BB&K Named City Attorney of Coachella

01 Mar 2007 00:00:00 -0800

The Coachella City Council announced last week that it has selected the law firm of Best Best & Krieger LLP (BB&K) to serve as city attorney, effective March 15, 2007. Carlos L. Campos, an attorney with the firm’s Indian Wells office and a Coachella Valley native, will act as city attorney. Marco A. Martinez, a partner in the firm’s Irvine and Riverside offices, will act as assistant city attorney.

Recently, the Coachella City Council directed staff to solicit proposals to provide city attorney services to the City and the Redevelopment Agency. A request for proposals was sent to local and interested law firms, and staff received approximately twelve responses. Staff evaluated the proposals and subsequently invited six of the law firms to interview with the City Council and staff.

At the conclusion of the interviews and after evaluating the merits of each law firm, it was the consensus of the City Council and the Committee-at-Large made up of City staff members that Best Best & Krieger LLP best fit the needs of the City of Coachella. According to City Manager, Jerry Santillan, “In BB&K we get the counsel of a highly respected, full-service law firm that serves a very large number of cities throughout the state of California. The firm, represented by Coachella native Carlos Campos, has expertise in every conceivable aspect of municipal operations and public law, including special counsel skills that will be much needed as we continue our rapid growth pattern. At the same time, we will save close to $20,000 in monthly retainer fees compared to the fees of the prior city attorney that can be put to use in serving our residents and businesses.”

With the addition of Coachella, BB&K now serves as city attorney to more California cities than any other law firm in the state.¹ BB&K represents 30 cities throughout the state as contract city attorney. In addition, the firm’s 110 municipal attorneys practice from eight California offices -- more statewide offices than any other California municipal law firm.

“This is a new milestone in Best Best & Krieger’s long history as a public law firm,” says John Brown, chair of the firm’s municipal and redevelopment law practice group. “Our law firm now serves as general and special counsel to more cities - large and small - throughout the state than any competing municipal law firm.”

Campos’ practice focuses primarily on local government law. He serves as the assistant city attorney for Needles and deputy city attorney for Palm Desert and Indian Wells. Campos’ clients also include special districts such as the Salton Community Services District and College of the Desert.

Campos was born and raised in and around the City of Coachella. He attended middle school in the City and graduated (third in his class) from Coachella Valley High School. He is a member of the State Bar of California, the Desert Bar Association and the Inland Empire Latino Lawyers Association. Campos is also a member of the board of directors of the Coachella Chamber of Commerce and the Dr. Carreon Foundation. He is a former board member of the Coachella Valley Mexican American Chamber of Commerce and a former chair of the Coachella Valley City Attorney Association. Campos earned his Juris Doctorate degree from the University of California, Hastings College of the Law. He graduated with honors from Pitzer College with a double major in Political and Labor Studies.

Martinez is a partner in the firm’s municipal and redevelopment law practice group. He currently serves as assistant city attorney for Colton, Azusa and Ontario. He previously served as city attorney for Montebello and is currently general counsel to the California Chapter of the American Planning Association.

Martinez is a member of the American Institute of Certified Planners (AICP), the American Planning Association, and the Riverside and Orange County Bar Associations. He received his Juris Doctorate degree from Loyola Law School and a Bachelor of Science in Urban Planning from California State Polytechnic University Pomona. Prior to joining BB&K, Martinez was a planner with the City of Downey and the County of Los Angeles, Department of Regional Planning.

¹ League of California Cities City Attorney Roster, www.cacities.org, February 2007