On June 20, 2019, the California Supreme Court in City & County of San Francisco v. Regents of the University of California, (2019) 2019 Cal. LEXIS 4048, held state universities are not immune from a charter city’s requirement that they collect, on the city’s behalf, a parking tax imposed on third-party drivers, in addition to the fee paid for parking.
Background
In the 1970s, the City and County of San Francisco (City) adopted an ordinance that required public and private entities alike to “collect, report, and remit” the parking tax owed by drivers to the City. In 1983, the City attempted to collect these taxes from administrators responsible for parking lots on the campuses of University of California at San Francisco, Hastings College of Law, and San Francisco State University (collectively, “the Universities”), all divisions of the state. The Universities asserted immunity and the City declined to pursue the matter. In 2011, the City reconsidered and directed the Universities to collect the parking tax, with the caveat that the City would reimburse the Universities for any administrative costs incurred from the task. The Universities again refused.
Procedural History
The City filed a petition for writ of mandate against the Universities, arguing that it would be a minimal burden to collect the tax and that no quantified expense would come to the Universities. The trial court denied the writ, concluding the Universities are exempt where “a local government may not regulate a state entity in its performance of governmental functions unless the state consents to the regulation.” The City appealed but the First District Court of Appeal affirmed the trial court holding.
Supreme Court Affirms Power to Tax Drivers Using State Parking Lot and Universities’ Responsibility to Collect Fee
The Supreme Court granted review to answer (1) does the City have the power to tax drivers who pay to use a parking lot on state property, and (2) may the City “enlist” a state agency-property owner to help in collecting and remitting the tax?
The Court first emphasized that the tax in question was not imposed on the Universities or the Universities’ property but instead on the drivers’ privilege of using the parking lot. Where the tax was not actually on a state entity or discriminatory against parties who do business with a state entity, “principles of governmental immunity [did] not bar the parking tax.”
Answering the first question, the Court held that a local government may tax private, third-party entities, even where there is an indirect impact on the state. The Court explained, “while local ordinances may not impose a regulatory scheme upon the …state, revenue measures of general application imposing a nondiscriminatory tax upon persons doing business in a state regulated activity, or with the state, do not so impinge.” An economic burden on a “superior government” does not create an immunity from taxation, even when the mission is as critical as, for instance, managing national railroads, locks and damn, army camps, and atomic laboratories, all examples provided by the Court.
The Court then answered the second question by concluding that the City may require the Universities to collect the parking tax where no authority provided that state agencies were categorically beyond the reach of any local law, including one that does no more than require assistance in collecting a concededly valid tax on third parties. Governments and businesses “often” lend assistance to other governments in collecting taxes. Where this is usually by agreement or explicitly provided by statute, the Universities failed to provide any authority showing their immunity.
Recognizing that that “requiring the state entity to collect a local tax brings the respective sovereign spheres of the state and a municipality within harrowingly close proximity,” the Court balanced the City’s interest against the burden on the Universities in being required to collect the tax. The Court found the Universities failed to show any evidence in the record of a burden besides secondary economic effects. The City’s interest was strong where drivers would otherwise avoid paying the City parking tax.
Finding as such, the Supreme Court reversed the Court of Appeal and remanded for further proceedings.
Advisory
It is a valid exercise of a charter city’s power, vis-à-vis its “home rule” authority to tax for local purposes, to require a state entity to collect a city parking fee imposed on third party drivers using a parking lot on state property. The state entity is not immune from the requirement where the burden is minimal and the city interest is weighty.
Questions
If you have any questions concerning this Legal Alert, please contact the following from our office, or the attorney with whom you normally consult.
Mona Ebrahimi
mebrahimi@kmtg.com | 916.321.4597
Olivia Filbrandt
ofilbrandt@kmtg.com | 916.321.4290