In Rubalcava v. Martinez, (— Cal.Rptr.3d —, 2007 WL 4532669, Cal.App. 2 Dist., Dec. 27, 2007), a California Court of Appeal considered whether a city council of a charter city is subject to the Stratham rule which prohibits a city council from enacting a second ordinance which contains all of the essential features of an ordinance which has been suspended by referendum.
The Court of Appeal held the city council of a charter city is subject to the Stratham rule. However, it found in this case the second ordinance did not violate the Stratham rule because the ordinance was essentially different from the ordinance suspended by referendum.
The City Council of Los Angeles (“City Council”) adopted Ordinance No. 178082 on November 22, 2006. The Ordinance, entitled “Hotel Worker Living Wage Ordinance” (“Wage Ordinance”), sets minimum wage standards for certain hotel workers employed within the “Gateway to Los Angeles (Central Corridor) Property Business Improvement District” (“District”), an area which abuts the Los Angeles International Airport. Under the ordinance, hotels in the District were required to pay workers who received health benefits at least $9.39 per hour, and workers who did not receive health benefits at least $10.64 per hour. A group of hotel operators within the District and others who opposed the Wage Ordinance submitted a referendum petition containing 103,000 signatures. The City Clerk certified the referendum petition satisfied the requirements of the city charter and City Council repealed the Wage Ordinance on January 31, 2007.
On February 21, 2007, City Council passed another ordinance, entitled “Airport Hospitality Enhancement Zone Ordinance” (“Zone Ordinance”), which designated the area bounded by the District as a “Hospitality Enhancement Zone” and obligated City to make numerous improvements within the zone. Under the Zone Ordinance, City committed to spending $1,000,000 for street improvements and $50,000 to conduct a study about ways to attract new businesses. City also promised to create a program to train 120 workers per year for hospitality positions, to investigate ways to reduce business taxes, to create a new recycling and waste diversion program, and to construct a convention center and remote check-in facilities for hotels. The Zone Ordinance, however, also set minimum wage requirements for hotel workers which are identical to those in the repealed Wage Ordinance. The Zone Ordinance does however call for implementation of the minimum wage requirement in phases and allows for a hotel to avoid the requirements by showing they are significantly burdensome or that workers agreed to waive the requirements in collective bargaining agreements.
Hotel operators and others who opposed the Zone Ordinance brought a lawsuit alleging that it “contravened their rights regarding referenda and initiatives under the California Constitution,” and requested that the City Clerk be enjoined from “giving effect to the Zone Ordinance by publishing it.” The trial court agreed with the hotel operators and directed the City Clerk to refrain from publishing the Zone Ordinance.
The issue before the Court of Appeal was whether the City Council could approve the Zone Ordinance after it repealed the Wage Ordinance in response to the referendum petition. The court concluded that the City Council could properly approve the Zone Ordinance.
The referendum provisions of the California Constitution allow electors to approve or reject statutes “except urgency statutes, statutes calling elections, and statutes providing for tax levies or appropriations for usual current expenses of the State.” In 1920, the California Supreme Court held in In re Stratham (1920) US Cal.App. 436, that “when an ordinance which has been suspended by a referendum has been repealed by [a municipal] council, the council cannot enact another ordinance in all essential features like the repealed ordinance.” A council may enact an ordinance dealing with the same subject matter but the new ordinance must be “essentially different from the ordinance protested against.”
Here, city officials first asserted that City was not subject to the Stratham rule because City is a charter city. The court disagreed concluding that the California Constitution subjects the City Council to the Stratham rule, “notwithstanding the absence of an express provision addressing [the] matter.” The court found that the Constitution impliedly imposes the Stratham rule on charter cities. To conclude that the Stratham rule does not apply to charter cities would allow the legislative bodies of charter cities to “wear down opponents of ordinances, who necessarily incur the costs of collecting signatures for referendum petitioners.”
City officials next contended that the Zone Ordinance was not “in all essential features” like the Wage Ordinance and, therefore, the City Council did not violate the rule when it passed the Zone Ordinance. The court agreed with the finding that the Zone Ordinance was essentially different from the Wage Ordinance. The opponents of the Wage Ordinance objected to the economic burden it imposed. The substantive provisions of the Zone Ordinance address the economic burdens imposed both inside and outside its immediate impact area. The Zone Ordinance provides for guaranteed economic enhancements and benefits, for implementation in phases to help lessen the immediate economic burden, and for exemptions where the wage requirements are excessively burdensome. It also prohibits imposition of the wage provisions outside the zone unless comparable benefits are provided.
The court found that because the Zone Ordinance was essentially different and there was no evidence that the City Council acted in bad faith, the City Council did not violate the Stratham rule when it enacted the Zone Ordinance.