The Protect Our Communities Foundation v. City of San Deigo CA4/1

Filed 5/26/26 The Protect Our Communities Foundation v. City of San Deigo CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for

publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication

or ordered published for purposes of rule 8.1115.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

THE PROTECT OUR COMMUNITIES D083588

FOUNDATION,

Plaintiff and Appellant,

(Super. Ct. No. 37-2021-

v. 00029833-CU-WM-CTL)

CITY OF SAN DIEGO,

Defendant and Appellant;

SAN DIEGO GAS & ELECTRIC

COMPANY,

Real Party in Interest and

Appellant.

APPEAL from orders of the Superior Court of San Diego County,

Katherine A. Bacal, Judge. Affirmed.

Shute, Mihaly & Weinberger, Winter King; Malinda R. Dickenson for

Plaintiff and Appellant The Protect Our Communities Foundation.

Mara W. Elliott and Heather Ferbert, City Attorneys, M. Travis

Phelps, Assistant City Attorney, and Matthew Zollman, Deputy City

Attorney, for Defendant and Appellant City of San Diego.

Gibson, Dunn & Crutcher, David A. Battaglia, Maurice Suh, James L.

Zelenay, Jr., Peter S. Modlin, Blaine H. Evanson and Zachary C. Freund for

Real Party in Interest and Appellant.

I. INTRODUCTION

The Protect Our Communities Foundation (POCF)1 challenges the City

of San Diego’s (the City) award of gas and electric franchises (the franchises)

to real party in interest San Diego Gas & Electric Company (SDG&E). POCF

contends the City’s approval of the franchises and associated agreements

violated the Constitution of the State of California, the San Diego City

Charter (the Charter), and the California Environmental Quality Act (CEQA,

Pub. Resources Code, § 21000 et seq.). Specifically, it argues the trial court

erred: (1) by rejecting POCF’s claims that the City’s invitation to bid process

violated the Charter’s requirements for open competition and public bidding;

(2) in ruling that certain surcharges were not “taxes” subject to

Proposition 26; and (3) by rejecting POCF’s claim that the City was required

to conduct an environmental review under CEQA.

The City and SDG&E cross-appeal the trial court’s grant of a writ of

mandate severing from the franchise agreements provisions requiring that

any decision to void the franchises before the end of their term be approved

by a two-thirds majority of the San Diego City Council (City Council), instead

of a bare majority.

As we explain below, we first conclude that POCF did not meet its

burden to prove that the City violated the Charter’s requirements for

1 According to its petition, POCF is a nonprofit public benefit corporation

and “represents the interests of San Diego and Southern California

residential ratepayers in proceedings before the California Public Utilities

Commission and other California agencies and in the courts.”

2

competitive bidding for the franchises. Accordingly, the trial court properly

denied POCF’s third cause of action for a writ of mandate directing the City

to void its approvals of the franchise ordinances. We further hold that the

four challenged surcharges that are embedded in the franchise ordinances

fall within an exemption to the requirements of Proposition 26 and are

therefore not unconstitutional taxes; that the plain language of the Charter

precludes the franchise ordinances’ requirement that a two-thirds vote of the

City Council would be necessary to terminate the franchises; and that the

award of the franchises did not constitute a project for purposes of CEQA,

and therefore the City properly concluded that CEQA did not apply to the

award of these franchises. The orders are affirmed.

II. FACTUAL AND PROCEDURAL BACKGROUND2

In 1920, SDG&E entered gas and electric franchise agreements with

the City and became the City’s provider of gas and electricity for a 50-year

term. In 1970, SDG&E entered new agreements with the City for another

50-year term, ending in 2020. In September 2020, in anticipation of the

expiration of those franchise agreements, then-Mayor Kevin Faulconer issued

an invitation to bid for new gas and electric franchise agreements, inviting

any qualified company to bid. In December 2020, the City Council opened the

bids and SDG&E was revealed to be the sole bidder. The City’s new mayor,

Todd Gloria, reviewed SDG&E’s bids, declared them nonresponsive “based on

the exceptions contained to the material terms,” and cancelled the initial

bidding process. The City extended the then-existing franchises for 135 days.

In March 2021, Mayor Gloria issued new invitations for any qualified

company to bid on the gas and electric franchises. These invitations to bid

2 This section provides a general background regarding the litigation.

The facts related to the specific claims at issue in this appeal will be

discussed in section III, post.

3

provided 20-year terms for both the gas and electric franchises but divided

those terms into an initial term of ten years followed by a ten-year

conditional extension. In April 2021, the City Council unsealed the bids and

SDG&E was once again the sole bidder for both franchises. After

negotiations, the City and SDG&E agreed on the terms of the franchise

agreements, which were then put before the City Council for approval. The

City and SDG&E also reached agreement on the terms of an energy

cooperation agreement, an administrative memorandum of understanding

(MOU), and an undergrounding MOU.

Thereafter, the City concluded that awarding the franchises to SDG&E

constituted “a fiscal and administrative activity of a government that will not

result in a direct or indirect physical change in the environment,” and thus

“is not subject to CEQA pursuant to CEQA Guidelines Section 15060(c)(3).”3

Alternatively, it found the franchise agreements were exempt from CEQA

under CEQA Guidelines section 15301, subdivision (b), which exempts

existing utility facilities.

In May 2021, the City Council voted and approved the proposed

franchise agreements between the City and SDG&E. In June 2021, the City

Council formally approved two resolutions that had been voted on at the May

meeting.4 The City Council adopted the franchise agreements—ordinance

3 “CEQA is implemented by an extensive series of administrative

regulations promulgated by the Secretary of the Natural Resources Agency,

ordinarily referred to as the ‘CEQA Guidelines.’ ” (Union of Medical

Marijuana Patients, Inc. v. City of San Diego (2019) 7 Cal.5th 1171, 1184

(UMMP).) The CEQA Guidelines are codified at title 14 of the California

Code of Regulations section 15000 et seq.

4 The first resolution, resolution No. 313554, included findings that the

City Council had determined the franchise agreements and energy

4

Nos. 21327 and 21328—and awarded SDG&E the electric and gas franchises

with the City.

In November 2021, acting pursuant to express authority granted to the

mayor by the City Council, the City and SDG&E executed the administrative

MOU which established the general work requirements for SDG&E

activities, including a requirement that SDG&E and its contractors comply

with all applicable laws and City requirements. In March 2022, the City

Council adopted by ordinance the undergrounding MOU between the City

and SDG&E which established a protocol for the design, procurement, and

construction necessary to convert SDG&E’s electrical facilities to

underground facilities.

In July 2021, POCF filed a verified petition for writ of mandate

asserting four causes of action for alleged: (1) unlawful imposition of a

special tax; (2) violations of competitive bidding mandates; (3) CEQA

violations; and (4) impermissible delegation of police power. POCF requested

an order voiding the City’s approval of the franchises and related

agreements. The trial court bifurcated the first cause of action for alleged

CEQA violations and issued an order on December 23, 2022 (the December

Order), denying the petition as to POCF’s first cause of action. After a second

hearing addressing the remaining causes of action, the trial court issued an

order on October 10, 2023 (the October Order), denying the petition except

with respect to one argument raised in support of POCF’s second cause of

cooperation agreement were not subject to CEQA. The second resolution,

resolution No. 313555, authorized the mayor to execute the energy

cooperation agreement with SDG&E.

5

action (i.e., severing from the ordinances a two-thirds voting requirement).

All parties appealed.5

III. DISCUSSION

A. THE CITY DID NOT VIOLATE ITS CHARTER’S COMPETITIVE

BIDDING MANDATES

1. Additional Background

In 2020, the City issued invitations to bid for new gas and electric

franchises. SDG&E bid on both franchises. In December 2020, Mayor Gloria

determined SDG&E’s bid to be unresponsive based on the exceptions to the

material terms of the advertised franchises. Mayor Gloria canceled the then-

pending invitations to bid and the City Council later entered into an

agreement with SDG&E to extend the existing franchises to June 1, 2021.

In March 2021, Mayor Gloria issued new invitations to bid for the gas

and electric franchises. The solicitations stated that “[t]he franchise may be

awarded by introduction and adoption of an ordinance substantially in the

form specified as either Exhibit A or Exhibit B attached hereto.” The

Exhibit A draft ordinance expressly stated that the grantee possessed a

“certain franchise . . . acquired pursuant to section 19 of article XI of the

Constitution of the State of California, as the section existed prior to its

amendment on October 10, 1911.” As we discuss below, such a “certain

franchise” is known as a “constitutional franchise.” The Exhibit B draft

5 We ordered the parties to submit briefing on whether the October

Order was an appealable order. We later directed the appeal to proceed and

allowed the parties to address appealability in their appellate briefing. All

parties contend the October Order is appealable. We agree that the October

Order, together with the December Order, are appealable as a final

determination of the parties’ rights which left no issue for future

consideration except the fact of compliance or noncompliance with the terms

of the orders. (Dhillon v. John Muir Health (2017) 2 Cal.5th 1109, 1115.)

6

ordinance was “for bidders who do not possess such a ‘constitutional

franchise’ for lighting.”6

In its third cause of action, POCF sought mandamus relief under Code

of Civil Procedure section 1085, alleging the City violated competitive bidding

mandates. POCF asserted the City had a ministerial duty under its charter

to ensure all contracts were competitively bid. It argued that the City’s

invitations to bid violated public bidding requirements by adopting a two-

tiered system—one ordinance for companies with a “constitutional franchise,”

and a separate ordinance for bidders lacking such a franchise. As a

secondary argument, POCF also alleged that the invitations to bid violated

public bidding requirements because, after the bids were unsealed, the

ordinances adopted by the City modified the applicable criteria from those set

forth in the ordinances attached as exhibits to the invitations to bid.

POCF claimed the invitations to bid contravened Charter section 94,

which requires that contracts for the “ ‘construction, reconstruction or

repair’ ” of public infrastructure—including roads, buildings, and utilities—

must follow competitive bidding procedures established by ordinance.

Contracts not complying with this provision are deemed void and

unenforceable against the City. (Charter, art. VII, § 94.) POCF also cited

section 100 of the Charter which prohibits any City officer or employee from

giving preferential treatment to a bidder by providing selective information

or withholding it, or from misleading bidders regarding the required

materials or supplies; and Charter section 103, which requires that the City

Council’s grant of a franchise must be preceded by “ ‘an opportunity for free

and open competition.’ ”

6 For ease of reference, we refer to Exhibit A bidders with a

constitutional franchise as proceeding under “option A” and Exhibit B bidders

as proceeding under “option B.”

7

POCF maintained that “[c]ompanies with a constitutional franchise

would start out with a competitive advantage to those who do not possess a

constitutional franchise, because a city can neither charge money for a

constitutional franchise nor may it terminate a constitutional franchise

without compensation by granting an exclusive franchise to a different

entity.” It alleged that SDG&E did not in fact possess a constitutional

franchise. Accordingly, it argued to the trial court that the City’s references

to a constitutional franchise improperly favored SDG&E and discouraged

other entities from bidding because it signaled to possible bidders that

SDG&E held property rights that could not be extinguished except through

eminent domain proceedings.

POCF also argued that the City impermissibly provided SDG&E with

veto authority over City policy. POCF claimed the City changed the

structure of the administrative and undergrounding MOUs to give SDG&E

veto power over the terms of agreements that had not yet been negotiated at

the time the City approved the ordinances. POCF also noted SDG&E vetoed

certain items in the invitations to bid, requiring that SDG&E: (1) comply

with the City’s objective to reduce greenhouse gas emissions to the fullest

extent practical, eliminating the word “fullest”; (2) implement the “City’s

desire to accomplish the goals set forth in its Climate Action Plan dated

December 2015, and any revised or successive climate plan,” eliminating the

term “and any revised or successive climate plan”; (3) expand distributed

energy resources; and (4) replace terms reflecting the City’s regulatory

authority with an agreement “that a Superior Court judge or appellate court,

not the City, will determine the contract terms for cost responsibility of all

relocations of Grantee facilities necessitated by all City water projects from

now until 2041.”

8

In response, SDG&E claimed it possessed a constitutional franchise

because it had provided utility services in the City since before October 10,

1911. It argued there was no favoritism; the ordinances merely reflected the

reality that SDG&E held a constitutional franchise in San Diego, whereas

other potential bidders did not. It did not address POCF’s argument that the

City impermissibly provided SDG&E with veto authority over City policy.

The trial court acknowledged the parties’ dispute over whether SDG&E

had a constitutional franchise but did not decide the issue. It concluded the

City did not “tilt the playing field” in SDG&E’s favor by acknowledging that

SDG&E may be differently situated if it had a constitutional franchise. It

also rejected the argument that requiring non-SDG&E bidders to either pay

to acquire SDG&E’s infrastructure or litigate with SDG&E created an

uneven playing field. The court did not separately address each of POCF’s

arguments claiming the City improperly changed requirements established in

the invitations to bid after bids were submitted. But the court indicated it

had fully considered the written and oral arguments of all parties and the

evidence presented. Finding no evidence that any bidder was deterred from

submitting a bid because of anti-competitive procedures, the court denied the

petition for writ of mandate.

9

2. Analysis7

POCF contends the City’s invitations to bid violated public bidding

requirements because the City (1) improperly changed the requirements

established in the invitations to bid after bids were submitted and

(2) adopted a two-tiered system—one ordinance for companies with a

constitutional franchise, and a separate ordinance for bidders lacking such a

franchise. We provide the standards governing such claims, then address

each in turn.

A writ of mandate compels a government official or agency to perform a

legally required duty. (Code Civ. Proc., § 1085.) Courts may use this remedy

not only for ministerial actions, but also for legislative or quasi-legislative

acts. (County of Los Angeles v. City of Los Angeles (2013) 214 Cal.App.4th

643, 653.) In considering whether to issue the writ, a trial court must

determine whether the agency had a mandatory duty that can be directly

enforced or a policy-based duty subject to judicial deference. (Ibid.) This

determination is typically reviewed independently by the court because it

involves interpreting the law. (Ibid.) A ministerial act is one the law

specifically requires an official to perform in a prescribed manner, without

discretion. (Ibid.) In contrast, discretionary acts involve judgment or choice.

(Id. at pp. 653–654.) Ordinarily, a writ of mandate cannot control how

discretion is exercised, but it may issue to correct an abuse of discretion. (Id.

7 After reviewing the record, we requested supplemental briefing from

the parties regarding who had the burden of proving SDG&E had a

constitutional franchise and whether the City had a good faith basis for

believing SDG&E possessed a constitutional franchise. Assuming SDG&E

did not have a constitutional franchise, we inquired whether the City acted

arbitrarily and capriciously in setting up a bidding solicitation scheme that

relied on that assumption and whether, to the extent the invitations to bid

implied that some entity held a constitutional franchise, it was reasonable to

assume this information would deter bidders.

10

at p. 654.) Courts do not substitute their judgment for that of the agency.

(Ibid.) If reasonable people could differ about whether the agency’s decision

was wise, the agency’s choice must stand. (Ibid.)

A petitioner seeking mandate relief under Code of Civil Procedure

section 1085 bears the burden of pleading and proving the facts establishing

entitlement to relief. (California Correctional Peace Officers Assn. v. State

Personnel Bd. (1995) 10 Cal.4th 1133, 1153 (Cal. Correctional Peace Officers);

Evid. Code, § 500 [“a party has the burden of proof as to each fact the

existence or nonexistence of which is essential to the claim for relief or

defense that he is asserting”].) The definitional elements of a cause of action

describe the minimum showing a petitioner must make to support a favorable

judgment. (Beck Development Co. v. Southern Pacific Transportation Co.

(1996) 44 Cal.App.4th 1160, 1205.) Accordingly, the petitioner must

demonstrate the agency’s decision was legally unreasonable or invalid as a

matter of law. (Mike Moore’s 24-Hour Towing v. City of San Diego (1996)

45 Cal.App.4th 1294, 1306 (Mike Moore’s).)

Competitive bidding requires that bids conform to the stated

specifications, and bids that fail to do so are ordinarily ineligible for

acceptance. (Ghilotti Construction Co. v. City of Richmond (1996)

45 Cal.App.4th 897, 904 (Ghilotti).) However, courts have long recognized

that a bid may still be accepted if it substantially complies with the bidding

requirements, even if it is not strictly responsive, so long as the deviation is

inconsequential—that is, it did not affect the bid price or give the bidder an

unfair advantage over others. (Ibid.) Whether a bid materially deviates from

the specifications is a question of fact. (Id. at p. 906.)

“A public entity’s ‘award of a contract, and all the acts leading up to the

award, are legislative in character.’ ” (Mike Moore’s, supra, 45 Cal.App.4th at

11

p. 1303.) Judicial review under Code of Civil Procedure section 1085 is

limited to whether the agency acted arbitrarily, capriciously, without

evidentiary support, or in violation of public policy or procedural fairness.

(Mike Moore’s, at p. 1303.) These are legal questions, reviewed de novo on

appeal unless factual disputes are involved. In that case, findings supported

by substantial evidence will be upheld. (Ibid.)

a. Changed Bid Requirements

POCF contends that the invitations to bid violated competitive bidding

requirements because the ordinances ultimately adopted by the City differed

from the draft ordinances attached as exhibits to the invitations to bid. It

reprises its arguments concerning alleged post-bid changes to the MOUs, the

Climate Action Plan, and distributed energy resources. We reject the City

and SDG&E’s contention that POCF forfeited these arguments by not raising

them in the trial court but agree the arguments lack merit.8

With respect to the MOUs, POCF argues the City impermissibly

allowed post-bid changes that converted the administrative MOU into a

negotiated document and limited the City’s authority under the

undergrounding MOU. POCF further asserts the City adopted ordinances

that eliminated requirements contained in the exemplar ordinances attached

to the invitations to bid, thereby misleading potential bidders and materially

8 POCF also argues on appeal that the renegotiated agreements changed:

(1) the payment terms making it more difficult for the City to terminate the

franchises; and (2) costs for liquidated damages and funding of employee

bonuses favorable to SDG&E. POCF forfeited these arguments by failing to

make them in the trial court. (Hewlett-Packard Co. v. Oracle Corp. (2021)

65 Cal.App.5th 506, 548.)

12

altering the competitive landscape after bids were unsealed.9 POCF also

claims the trial court failed to rule on these issues and requests we direct

entry of judgment in its favor on this cause of action.

The record does not support POCF’s assertion that the trial court failed

to address these claims. The court expressly denied mandate relief on the

third cause of action after stating it had “fully considered” all written and

oral arguments. Under the doctrine of implied findings, we presume the trial

court made all factual determinations necessary to support its ruling, so long

as substantial evidence supports those determinations. (Brewer v. Carter

(2013) 218 Cal.App.4th 1312, 1320.) Accordingly, we presume the court

found that the post-bid changes were not material, did not mislead bidders,

did not confer an unfair advantage, and did not violate competitive bidding

requirements or the City Charter.

POCF’s substantive argument—that the adopted ordinances materially

deviated from the bid specifications—fails on the merits. The invitations to

bid expressly stated that the franchises “may be awarded by introduction and

adoption of an ordinance substantially in the form specified as either Exhibit

A or Exhibit B attached hereto.” By their plain terms, the invitations

contemplated that the final ordinances would not be identical to the exemplar

9 Specifically, POCF noted the adopted ordinances eliminated terms in

the invitations to bid: (1) requiring the franchisee to cooperate in good faith

to attain the goals of the Climate Action Plan “ ‘and any revised or successive

climate plan’ ” with the adopted ordinances eliminating the quoted language;

(2) requiring that SDG&E eliminate greenhouse gases to the “ ‘fullest’ ”

extent practical by deleting the quoted word; (3) requiring distributed energy

systems permit excess energy be made available to other customers;

(4) requiring SDG&E “ ‘not unreasonably oppose or obstruct’ ” mechanisms to

support renewable energy by eliminating the quoted language; and

(5) allowing the City to determine costs associated with relocated water

projects and instead allowing courts to decide the issue.

13

ordinances, but only substantially similar. Competitive bidding law does not

require absolute identity between bid specifications and the final contract

particularly where, as here, the governing documents expressly allow for

modification. (Ghilotti, supra, 45 Cal.App.4th at p. 904.)

The invitations to bid further reserved the City’s right to negotiate

changes to bid terms or to negotiate with the incumbent franchise holder to

renew, extend, or replace the existing franchise. They also expressly

contemplated post-bid negotiation of the energy cooperation agreement,

directing bidders to submit narrative proposals addressing energy policy and

identify desired terms and commitments. Bidders were specifically asked to

describe any barriers to alignment with provisions of the exemplar

ordinances, underscoring that deviations were anticipated and evaluated as

part of the competitive process. Consistent with this framework, all

proposals for the cooperation agreement were subject to acceptance, rejection,

or modification by the mayor. SDG&E’s successful bids expressly requested

negotiations over specific ordinance language, precisely as the invitations to

bid contemplated. Against this record, POCF’s assertion that the City was

bound to adopt the exemplar ordinances without deviation is untenable.

Finally, POCF presented no evidence that any bidder was deterred

from submitting a bid, misled as to the bidding requirements, or placed at a

competitive disadvantage because of the challenged changes. Although two

entities initially expressed interest in the franchises, neither ultimately

submitted a bid, and POCF offered no evidence explaining why they declined

to do so. In the absence of a showing that any deviation materially affected

price, competition, or the fairness of the bidding process, competitive bidding

law does not prohibit the City’s actions. What remains is nothing more than

a disagreement with the City’s policy choices and its exercise of discretion—

14

matters that are legislative in character and entitled to substantial judicial

deference.10 (Mike Moore’s, supra, 45 Cal.App.4th at p. 1303.)

In sum, POCF failed to carry its burden of proving that the City

violated competitive bidding requirements or breached a ministerial duty

enforceable by writ of mandate. The record demonstrates that the bidding

process expressly contemplated negotiation and modification, that any post-

bid changes were within the scope of the invitations to bid, and that no bidder

was misled or disadvantaged. Because POCF did not establish that the City

acted arbitrarily, capriciously, or in violation of law, the trial court properly

denied mandate relief on these claims.

b. Constitutional Franchise

The trial court noted that the parties disagreed as to whether SDG&E

possesses a constitutional franchise but did not resolve the dispute. The

10 POCF’s reliance on Baldwin-Lima-Hamilton Corp. v. Superior Court of

San Francisco (1962) 208 Cal.App.2d 803, Konica Business Machines U.S.A.,

Inc. v. Regents of University of California (1988) 206 Cal.App.3d 449, Eel

River Disposal and Resource Recovery, Inc. v. Humboldt (2013)

221 Cal.App.4th 209, DeSilva Gates Construction, LP v. Department of

Transportation (2015) 242 Cal.App.4th 1409, and Valley Crest Landscape,

Inc. v. City Council (1996) 41 Cal.App.4th 1432 is misplaced because each

involved a losing bidder claiming prejudice as a result of the governmental

defendant’s alleged failure to adhere to bid specifications. (Baldwin-Lima, at

pp. 807–808, 822 [deviation from bid requirement that equipment be

manufactured in the United States allowed winning bidder to beat plaintiff’s

price]; Konica, at pp. 451, 453–454, 457 [acceptance of bid that deviated from

listed performance specifications for copiers put bidders in unfair position of

having to guess what would satisfy defendant’s needs]; Eel River, at pp. 214,

237 [changed criteria after bids were unsealed and introducing previously

unknown factor disadvantaged all bidders except the one receiving franchise];

DeSilva, at pp. 1413, 1423–1424 [allowing correction of “ ‘material’ ” bid

deviation while rejecting bid with no material deviation constituted an abuse

of discretion]; Valley Crest, at pp. 1435, 1442–1443 [winning bidder received

“unfair advantage” being allowed to correct material bid mistake after

submission].)

15

parties fully litigated the issue, and it was central to the parties’ arguments

about the validity of the bidding process. On appeal, POCF argues that the

separate bid terms gave SDG&E an unfair competitive advantage in the

bidding process, alleging that SDG&E in fact did not have a constitutional

franchise, and, further, that SDG&E presented no admissible evidence

supporting its constitutional franchise claim. The City and SDG&E’s

combined respondent’s brief does not address the issue at all, prompting us to

request supplemental briefing. We therefore begin by clarifying what

constitutes a constitutional franchise, then address which party bore the

burden of proof on that issue and whether that burden was met.

Although not defined in the Charter, the term “franchise” generally

refers to services that government is obligated to provide—such as water,

gas, electricity, or telephone service—and the right to use public streets and

ways to deliver those services to the public. (Copt–Air v. City of San Diego

(1971) 15 Cal.App.3d 984, 987–988.) A franchise is conferred through a city’s

legislative authority. (Pacific Rock etc. Co. v. City of Upland (1967) 67 Cal.2d

666, 668.) It arises when a government authorizes private companies to place

infrastructure on public property to deliver utilities across city streets and

other public ways. (Saathoff v. City of San Diego (1995) 35 Cal.App.4th 697,

703–704 (Saathoff).)11 A private utility’s right to use public streets under a

franchise is a property interest created by contract, namely the franchise

agreement (Southern Cal. Gas Co. v. City of Vernon (1995) 41 Cal.App.4th

209, 218), “and a franchise fee is the purchase price of the franchise.” (Jacks

v. City of Santa Barbara (2017) 3 Cal.5th 248, 262 (Jacks).)

11 Courts have also recognized that cities may grant franchises not only

for traditional utilities but also for other public services, such as ambulance

service, garbage collection, and cable television. (Saathoff, supra,

35 Cal.App.4th at p. 704.)

16

In contrast, a constitutional franchise derives from article XI,

section 19, of the 1879 California Constitution, which allowed any person or

company to acquire a constitutional franchise merely by installing

infrastructure in public streets to provide artificial light—without the need

for legislative approval. (City of Santa Cruz v. Pacific Gas & Electric Co.

(2000) 82 Cal.App.4th 1167, 1171 (Santa Cruz).)12 Once infrastructure was

installed, the arrangement became a binding contract with the state and

granted the provider a protected property interest. (Id. at pp. 1171–1172.)

“[A]ny requirement of payment for this privilege or limitation on its duration

was an invalid restriction.” (Id. at pp. 1181–1182.) The existence of a

constitutional franchise gives the franchisee the continuing authority to

extend its infrastructure to new streets “so far as necessary to serve the

municipality . . . .” (Russell v. Sebastian (1914) 233 U.S. 195, 210.)

Although the Constitution was amended in 1911 to eliminate this type

of automatic franchise, the amendment did not affect entities that had

already begun providing electricity for artificial light using city streets.

(Jacks, supra, 3 Cal.5th at p. 264 [“The constitutional amendment did not

12 As amended in 1884, article XI, section 19 stated as follows: “ ‘In any

city where there are no public works owned and controlled by the

municipality, for supplying the same with water or artificial light, any

individual, or any company duly incorporated for such purpose under and by

authority of the laws of this State, shall, under the direction of the

Superintendent of Streets, or other officer in control thereof, and under such

general regulations as the municipality may prescribe for damages and

indemnity for damages, 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.’ ” (Santa Cruz, supra, 82 Cal.App.4th at

p. 1171.)

17

impair rights under existing constitutional franchises.”]; Santa Cruz, supra,

82 Cal.App.4th at p. 1172.) Their rights remained intact, and they could

continue providing electricity for lighting without being subject to new fees

for doing so. (Santa Cruz, at p. 1172.) But to complicate matters, the

infrastructure used to deliver electricity for lighting—such as poles and

wires—also carried electricity for additional purposes, including heating and

cooking. (Ibid.) To cover these non-lighting uses, entities holding

constitutional franchises entered into separate agreements with

municipalities. (Ibid.) These agreements, often referred to as

“complementary” franchises, required the payment of fees for the continued

use of public streets to supply electricity or gas for non-lighting services.

(Ibid.)

POCF contends SDG&E had the burden of proving the existence of a

constitutional franchise because the City and SDG&E asserted in their

answers that they acted lawfully. The City and SDG&E counter that POCF

alleged, as an element of its third cause of action, that SDG&E did not

possess a constitutional franchise and POCF was therefore obliged to prove

its non-existence. We agree with the City and SDG&E that POCF had the

burden of proof on this issue.

The City structured the bidding process around whether a bidder

possessed a constitutional franchise and awarded the franchise under the

ordinance applicable to an entity asserting such a right. Whether SDG&E in

fact possessed a constitutional franchise is therefore integral to POCF’s claim

that the bidding process violated competitive bidding mandates. POCF

expressly alleged that SDG&E lacked a constitutional franchise and that the

two-ordinance structure improperly conferred a competitive advantage.

Because that allegation was essential to POCF’s cause of action, POCF bore

18

the burden of proving it. (Cal. Correctional Peace Officers, supra, 10 Cal.4th

at p. 1153.) POCF’s attempt to shift the burden based on the City’s and

SDG&E’s affirmative defenses is unavailing. An affirmative defense must

raise a “new matter” not already placed at issue by the complaint. (Code Civ.

Proc., § 431.30, subd. (b)(2); State Farm Mut. Auto. Ins. Co. v. Superior Court

(1991) 228 Cal.App.3d 721, 725.) The defenses asserted here merely denied

POCF’s allegations and did not inject new factual issues. They therefore

constituted a traverse, not a shifting of the burden of proof. (Bevill v. Zoura

(1994) 27 Cal.App.4th 694, 698.)

POCF’s alternative argument—that the burden should shift because

the existence of a constitutional franchise was peculiarly within SDG&E’s

knowledge—fails both procedurally and substantively. Exceptions to

Evidence Code section 500 are rare and narrowly construed. (Sargent

Fletcher, Inc. v. Able Corp. (2003) 110 Cal.App.4th 1658, 1670.) Whether the

traditional placement of the burden of proof should be modified depends on a

multifactor analysis that includes the parties’ comparative knowledge of the

issue, the accessibility of relevant evidence, the policy consequences of a

failure of proof, and the likelihood of the fact’s existence or nonexistence.

(Lakin v. Watkins Associated Industries (1993) 6 Cal.4th 644, 660–661.)

POCF did not raise this theory in the trial court, did not address the Lakin

factors on appeal, and identified no evidentiary record showing exclusive

control of relevant documents by SDG&E or the City. The argument is

therefore forfeited. (People v. Accredited Surety & Casualty Co., Inc. (2021)

65 Cal.App.5th 122, 132.)

POCF likewise forfeited three additional theories raised for the first

time in supplemental briefing—that constitutional franchises were

terminated in 1914, expired by 2011, or were negated by franchise fee

19

practices. Arguments not raised in the trial court or opening briefs may not

be introduced at this stage. (Hewlett-Packard Co. v. Oracle Corp., supra,

65 Cal.App.5th at p. 548.)

In summary, POCF’s challenge rises or falls on a factual premise it

failed to prove. Its claim of an unlawful, anti-competitive bidding process

depended entirely on the assertion that SDG&E lacked a constitutional

franchise and therefore received an improper advantage. Because POCF

bore—and failed to meet—the burden of proving that essential fact, the City’s

decision to structure the invitations to bid based on the possible existence of

such a franchise cannot be deemed arbitrary, capricious, or legally invalid.

Absent proof that the predicate assumption underlying the two-ordinance

framework was false, there is no basis for concluding the City violated its

competitive bidding obligations. The trial court therefore correctly denied the

petition for writ of mandate.13

B. THE FOUR CHALLEGED SURCHARGES ARE NOT

UNCONSTITUTIONAL TAXES

1. Voter Initiatives

Through a series of ballot initiatives, California voters have modified

the Constitution to regulate how local governments can impose taxes, fees,

and other assessments. (City of San Buenaventura v. United Water

Conservation Dist. (2017) 3 Cal.5th 1191, 1199 (San Buenaventura).)

Proposition 13, the initial measure in this series, established article XIII A.14

(San Buenaventura, at p. 1199.) Among other things, the initiative prohibits

13 The City’s opposed request to take judicial notice of nine City municipal

ordinances and two documents filed with the California Secretary of State,

filed on January 9, 2026, is denied.

14 All references to articles are to the California Constitution.

20

counties, cities, and special districts from enacting any “special tax” without a

two-thirds vote of the electorate, “ ‘ “to prevent local governments from

subverting its limitations.” ’ ” (Ibid.) However, courts consistently held that

article XIII A did not restrict local governments from imposing “ ‘legitimate

special assessments’ ”—charges on property owners to help defray the costs of

local improvements that directly benefit their properties. (San

Buenaventura, at p. 1199.)

In 1996, voters passed Proposition 218 to further restrict a local

government’s use of such special assessments. (San Buenaventura, supra,

3 Cal.5th at p. 1200.) It expanded Proposition 13’s protections by adding

article XIII D, which introduced new limits on assessments, fees, and charges

tied to property ownership. (San Buenaventura, at p. 1200.) This article

requires that property-related charges must not exceed the proportional cost

of the services provided to the property. (Ibid.) Proposition 218 also

introduced article XIII C, which limits local governments’ power to impose

taxes by requiring voter approval for all such taxes. (San Buenaventura, at

p. 1200.)15 The term “tax” was not specifically defined in Proposition 218.

(Citizens for Fair REU Rates v. City of Redding (2018) 6 Cal.5th 1, 11 (REU

Rates).)

In 2010, Proposition 26 expanded article XIII C’s reach by defining

“tax” to include “any levy, charge, or exaction of any kind imposed by a local

government . . . .” (Art. XIII C, § 1, subd. (e); San Buenaventura, supra,

15 Article XIII C provides that “local government[s]” may not “impose . . .

any general tax . . . until that tax is submitted to the electorate and approved

by a majority vote” (art. XIII C, § 2, subd. (b)), and may not “impose . . . any

special tax . . . until that tax is submitted to the electorate and approved by a

two-thirds vote” (id., § 2, subd. (d)).

21

3 Cal.5th at p. 1200.)16 It imposes on the state or local government the

burden of proving that any charge, levy, or assessment is not a tax (Schmeer

v. County of Los Angeles (2013) 213 Cal.App.4th 1310, 1322) and includes

seven enumerated exemptions to the definition of “tax” for certain types of

exactions. (Art. XIII C, § 1, subd. (e)(1)–(7).) By definition, a charge meeting

an exemption does not constitute a tax. (REU Rates, supra, 6 Cal.5th at

p. 11.) Any local government levy, charge, or exaction that does not meet an

exemption and lacks voter approval is an invalid and unconstitutional tax.

(Howard Jarvis Taxpayers Assn. v. Coachella Valley Water Dist. (2025)

108 Cal.App.5th 485, 504.)

2. Additional Background

The City Council approved ordinance No. 21327 (awarding gas

franchise) and ordinance No. 21328 (awarding electric franchise) to

SDG&E.17 Both ordinances imposed several surcharges that are at issue

before us. First, both ordinances imposed a surcharge of 3 percent of

SDG&E’s gross receipts “as consideration therefor and as compensation for

the use of the Streets of the City.” For clarity, we will refer to this surcharge

as the SDG&E surcharge. The ordinances also imposed a gas surcharge and

an electric surcharge “to be levied solely on customers in the City . . . .”

16 Proposition 26 observed that, despite Propositions 13 and 218,

California taxes continued to rise. (REU Rates, supra, 6 Cal.5th at p. 11.) It

also highlighted a growing trend in which lawmakers and local officials

labeled new taxes as “ ‘ “fees” ’ ” to bypass constitutional voter approval

requirements. (Ibid.)

17 Appellant’s February 14, 2025, unopposed request for judicial notice of

the 2002 electricity franchise award, ordinance No. O-19030, is granted.

(Evid. Code, §§ 452, subds. (b) & (c), 453.)

22

Finally, the electrical ordinance imposed an undergrounding surcharge of

3.53 percent.

The parties do not dispute that these surcharges are a “levy, charge, or

exaction . . . imposed by a local government . . . .” (Art. XIII C, § 1, subd. (e).)

Our next step is to determine whether any of the exemptions apply.

POCF alleges that the four charges do not fall within any of the seven

enumerated exemptions in subdivision (e) of section 1 of article XIII C. The

City and SDG&E argue that exemptions 1 and 4 apply, and therefore the four

charges are not a “tax” under Proposition 26. The trial court found that the

City did not meet its burden of showing exemption 1 applied but had met its

burden to show exemption 4 applied. Accordingly, the trial court denied the

fourth cause of action for a writ of mandate, finding the City had “met their

burden to show exemption 4 applies, such that the fees do not impose taxes

and are not subject to constitutional requirements for taxes.”

3. Analysis

As noted above, Proposition 26 places the burden on the local

government, in this case the City, to establish by a preponderance of the

evidence that an exemption applies. (Art. XIII C, § 1, subd. (e);

San Buenaventura, supra, 3 Cal.5th at p. 1214.) We review independently

whether the four charges qualify for an article XIII C, section 1,

subdivision (e) exemption. (Sutter’s Place, Inc. v. City of San Jose (2024)

104 Cal.App.5th 855, 863.) At issue here are exemptions 1 and 4, which

provide: (1) a “charge imposed for a specific benefit conferred or privilege

granted 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

conferring the benefit or granting the privilege” (art. XIII C, § 1, subd. (e)(1));

and (4) a “charge imposed for entrance to or use of local government property,

23

or the purchase, rental, or lease of local government property” (id., § 1,

subd. (e)(4)).18 The trial court found exemption 4 applied and denied the

petition for writ of mandate on the fourth cause of action. We agree. Because

exemption 4 applies, we do not reach exemption 1.

Exemption 4 applies to charges “imposed for entrance to or use of local

government property, or the purchase, rental, or lease of local government

property.” (Art. XIII C, § 1, subd. (e)(4).) This exemption contains two

distinct clauses: the first addresses entrance to or use of government

property, and the second pertains to the purchase, rental, or lease of such

property. The parties do not discuss the second clause, implicitly conceding it

does not apply. (See Westside Center Associates v. Safeway Stores 23, Inc.

(1996) 42 Cal.App.4th 507, 529 [party “effectively concedes” an issue by

failing to address it in briefing].) Accordingly, our analysis focuses on the

first clause.

Turning to the first clause—which exempts charges imposed for

entering or using government property—the California Supreme Court

addressed this clause in Zolly v. City of Oakland (2022) 13 Cal.5th 780

18 The other five exemptions are for: (1) 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” (art. XIII C, § 1,

subd. (e)(2)); (2) charges “imposed for the reasonable regulatory costs to a

local government for issuing licenses and permits, performing investigations,

inspections, and audits, enforcing agricultural marketing orders, and the

administrative enforcement and adjudication thereof” (id., § 1, subd. (e)(3));

(3) fines, penalties, or other monetary charges “imposed by the judicial

branch of government or a local government, as a result of a violation of law”

(id., § 1, subd. (e)(5)); and (4) charges “imposed as a condition of property

development” (id., § 1, subd. (e)(6)); and (5) “[a]ssessments and property-

related fees imposed in accordance with the provisions of Article [13]D.” (Id.,

§ 1, subd. (e)(7).)

24

(Zolly). There, the City of Oakland (Oakland) granted private waste haulers

the right to operate on public streets and property and required them to pay

franchise fees. (Id. at p. 784.) The Supreme Court granted review to

determine whether those franchise fees constituted taxes under

Proposition 26. (Zolly, at p. 784.)

Addressing the first clause of exemption 4, which exempts charges

“ ‘imposed for entrance to or use of local government property,’ ” the court in

Zolly concluded this exemption applies only to charges for the physical use of

property that the payor may enter or use. (Zolly, supra, 13 Cal.5th at

pp. 792–794.) Oakland, however, had not shown that the haulers paid the

fees in exchange for any specific use of government property unavailable to

the public. (Id. at p. 794.) This is a fact-specific requirement that focuses “on

the actual benefit exchanged between the payor and local government.”

(Ibid.)

POCF contends this exemption does not apply because City ratepayers

obtaining electricity or gas from SDG&E pay the four charges, not SDG&E.

The City and SDG&E do not dispute that the four charges are passed on to

ratepayers; rather they argue that the Supreme Court in Zolly, supra,

13 Cal.5th 780 properly characterized Jacks, supra, 3 Cal.5th 248 and Mahon

v. City of San Diego (2020) 57 Cal.App.5th 681 as examples of payments by a

utility in exchange for a property interest even though these fees are passed

through to ratepayers. (Zolly, at p. 795.) The trial court agreed with the City

and SDG&E. We agree with the result, but our approach is more nuanced.

The first clause of exemption 4 applies to charges “imposed for entrance

to or use of local government property.” (Art. XIII C, § 1, subd. (e)(4).) The

record is clear that the four charges enable SDG&E to use local government

property in a manner that is not available to the general public. The

25

ordinances expressly grant SDG&E the right to install, maintain, and use

“facilities,” “pipes,” “wires,” “conduits,” and “appurtenances” in the public

rights-of-way—in effect, granting SDG&E an easement above, along, and

below City streets. These are rights uniquely conferred on SDG&E as the

franchisee.

At the same time, City ratepayers who obtain electricity or gas from

SDG&E, also receive concrete benefits derived from the use of City property

in exchange for paying the four charges. Gas and electricity cannot be

delivered to homes and businesses without the infrastructure “under or over”

City streets. Thus, ratepayers benefit directly from the use of City streets,

even though they do not themselves install or maintain the infrastructure.

The fact the four charges are paid as part of the franchise ordinances

with SDG&E does not alter this analysis. Ratepayers receive electricity and

gas flowing “under or over” City streets and into their homes and

businesses—benefits they would not receive absent payment of the SDG&E

surcharge and the gas and electric surcharges. (Zolly, supra, 13 Cal.5th at

p. 794.) Ratepayers likewise benefit from the undergrounding surcharge.

Underground electrical lines are far less vulnerable to wind, falling trees,

vehicle collisions, and severe weather. As a result, ratepayers experience

fewer outages and faster restoration times—benefits of particular importance

to businesses and medically vulnerable residents. Undergrounding also

reduces wildfire ignition risk, a substantial public safety benefit in fire-prone

regions, and improves neighborhood aesthetics, which is associated with

increased property values.

We do not interpret the phrase “use of local government property” in

exemption 4 to require that the ratepayer must have the right to dig up a

street and install infrastructure in the same manner as the streets might be

26

used by a franchisee. Zolly instructs courts to look beyond formal labels and

focus instead “on the actual benefit exchanged.” (Zolly, supra, 13 Cal.5th at

p. 794.) Without the use of City’s streets to deliver gas and electricity,

ratepayers could not operate appliances, heat or cool their homes, or conduct

ordinary business activities dependent on utility service. The ordinary

meaning of “use” encompasses employing property to accomplish a purpose

or availing oneself of its function even without physical alteration. (See, e.g.,

Black’s Law Dict. (12th ed. 2024) [“To employ for the accomplishment of a

purpose; to avail oneself of”].)

We conclude the City has met its burden of establishing that the four

charges are exempt under exemption 4. Whether SDG&E or ratepayers are

classified as the payors of the four charges, both benefit from use of local

government property, all that is needed for exemption 4 to apply.19

Further, whether the four charges are viewed as imposed on SDG&E or

passed through to ratepayers, the record demonstrates a direct exchange of

value for the use of local government property. The City therefore met its

burden of establishing that the four charges fall within exemption 4 of article

XIII C, section 1, subdivision (e). Because the charges qualify for

exemption 4, they are not “taxes” within the meaning of Proposition 26 and

are not subject to its voter-approval requirements. The trial court properly

19 In its argument headings and substantive discussion of exemption 4,

POCF did not contend that the trial court was required to make an express

finding regarding the applicability of the final paragraph of article XIII C,

section 1, subdivision (e) to this exemption. The contention is therefore

forfeited, and we decline to consider whether that paragraph applies to

exemption 4. (Cal. Rules of Court, rule 8.204(a)(1)(B); Dilbert v. Newsom

(2024) 101 Cal.App.5th 317, 323 [“When a party fails to place an argument

under a proper heading or subheading, we need not consider the issue.”].)

27

denied the petition for writ of mandate on the fourth cause of action, and we

affirm that ruling.

C. THE TRIAL COURT CORRECTLY INTERPRETED THE CITY

CHARTER IN ORDERING THE SEVERANCE OF THE

TWO-THIRDS VOTING REQUIREMENT

1. Additional Background

The invitations to bid specified that the franchises would be awarded

pursuant to Charter section 103. That section requires approval of franchises

by a two-thirds vote of the City Council.20 The ordinances further provided

that a two-thirds vote of the City Council would be required to terminate the

franchises after 10 years for reasons other than municipalization.

Among other things, POCF alleged in its second cause of action that by

requiring a two-thirds vote to terminate the franchises after 10 years, the

City Council impermissibly violated Charter section 15. The trial court

agreed.

Specifically, the trial court held that the City’s decision to impose a

two-thirds voting requirement on franchise termination violated the express

terms of Charter section 15.21 It granted the petition for writ of mandate in

20 Charter section 103 provides, in relevant part: “ ‘The Council shall

have power to grant to any person, firm or corporation, franchises, and all

renewals, extensions and amendments thereof, for the use of any public

property under the jurisdiction of the City. Such grants shall be made by

ordinance adopted by vote of two-thirds (2/3) of the members of the Council

and only after recommendations thereon have been made by the Manager

and an opportunity for free and open competition and for public hearings

have been given. . . .’ ” (Charter, art. VII, ¶103.)

21 Charter section 15 provides: “A majority of the members elected to the

Council shall constitute a quorum to do business, but a less number may

adjourn from time to time and compel the attendance of absent members in

such manner and under such penalties as may be prescribed by ordinance.

28

part and severed the provisions requiring that any decision to void the

franchises before the end of their term be approved by a two-thirds majority

of the City Council, instead of a bare majority.

The City and SDG&E cross-appeal from that portion of the court’s

order. They assert the trial court misread Charter section 15 because that

section says nothing about whether, when, or under what circumstances the

City Council may adopt a supermajority voting threshold for future Council

action.

2. Analysis

A city charter serves as the highest form of law for the city, subordinate

only to the U.S. and California Constitutions and any overriding state

legislation. (Domar Electric, Inc. v. City of Los Angeles (1994) 9 Cal.4th 161,

170 (Domar).) A charter city is bound to follow its charter, and any action

that contradicts or fails to adhere to the charter is void. (Id. at p. 171.) We

interpret a city charter using the same principles that apply to statutory

interpretation, with the central aim of identifying and carrying out the

legislative intent. (Id. at pp. 171–172.) We start with the charter’s language

and apply its ordinary meaning. If the wording is unambiguous, we cannot

rewrite or expand it to serve an objective not evident from the text or

legislative history. (Id. at p. 172.) “While we apply our independent

judgment in construing a city charter, ‘[a]dministrative interpretations [of

city charter provisions] of longstanding are entitled to great weight unless

Except as otherwise provided herein the affirmative vote of a majority of the

members elected to the Council shall be necessary to adopt any ordinance,

resolution, order or vote; except that a vote to adjourn, or regarding the

attendance of absent members, may be adopted by a majority of the members

present. No member shall be excused from voting except on matters

involving the consideration of his own official conduct or in which his own

personal interests are involved.” (Charter, art. III, ¶15, italics added.)

29

they are plainly wrong.’ ” (Lozano v. City of Los Angeles (2022)

73 Cal.App.5th 711, 724.)

Starting with its plain language, Charter section 15 states, in part, that

“[e]xcept as otherwise provided herein the affirmative vote of a majority of

the members elected to the Council shall be necessary to adopt any

ordinance, resolution, order or vote . . . .” Where, as here, the City Council

was considering the adoption of the ordinances, unless the Charter provides

otherwise, under the plain language of Charter section 15, a majority vote of

the City Council members is required. Charter section 103 “otherwise

provide[s]” that a larger, two-thirds “supermajority” would be required to

grant, renew, extend or amend a franchise; but Charter section 103 does not

include the termination of a franchise. Therefore, under the plain language

of Charter section 15, only a majority vote would be needed for such

termination.

Charter section 15 is not itself ambiguous; but as noted above, we

further consider whether the text shows us a different objective.

Charter section 15 appears in article III of the Charter. That article

addresses the legislative power of the City Council, including the term and

duties of council members (section 12), council rules (section 14), and the

provision that a “quorum” consists of “[a] majority of the members elected to

the Council . . . .” (section 15). A “quorum” is defined as “the minimum

number of members . . . who must be present for a deliberative assembly to

legally transact business.” (Black’s Law Dict. (12th ed. 2024) p. 1509.)

Considered as a whole, we conclude that the functions of Charter

section 15 are to define a quorum; to specify the standard vote threshold (a

majority of City Council members); and to provide guidance on dealing with

the problem that would arise if a quorum were lacking (i.e., a majority of

30

Council members are not present) by allowing the City Council to act on the

quorum problem (because without a quorum, a majority vote would be

impossible). These functions are consistent with the plain language in

Charter section 15 and do not demonstrate any ambiguity.

The City and SDG&E argue that Charter section 15 sets minimum vote

thresholds for valid action and does not establish a voting ceiling (the

maximum number of votes required to act) or otherwise prevent the City

Council from voting to implement higher vote thresholds in its discretion.

In support of this interpretation, the City and SDG&E point to

Municipal Code section 22.0101, rule 7.3.2(b), which provides that the city

attorney include in a proposed ordinance “whether a supermajority vote of

the Council is required for its passage.” We do not read this Municipal Code

section as conferring legislative discretion to create supermajority

requirements for future City Council action; instead, it merely ensures that

ordinances are clear about whether a supermajority vote will be required for

the adoption of the ordinance (e.g., the award of a franchise under Charter

section 103) and which actions would not require a supermajority (all matters

“otherwise provided [in the Charter]).”

The City and SDG&E also point to various procedural rules in the

Municipal Code that require a supermajority. For example, if the City

Council wishes to reconsider a vote on a noticed matter, a two-thirds vote to

suspend the Rules of Council is required before the City Council can vote on

the motion to reconsider. (Mun. Code, § 22.0101, rule 2.12.1(c)(3).) But a

procedural provision in the Municipal Code cannot supersede a substantive

provision in the Charter. As noted above, the Charter is the City’s highest

form of law; Municipal Code provisions cannot take precedence over Charter

provisions. (Domar, supra, 9 Cal.4th at p. 170.) Further, it is not argued

31

that the Municipal Code procedural provisions contradict any specific

provisions of the Charter.

The City and SDG&E contend that “[n]othing forbids the Council from

determining . . . that certain actions be undertaken only after approved by a

supermajority [vote].” They argue the City can choose to impose a higher

burden on itself than provided by Charter section 15. But the City can

always exceed the majority vote requirement if it wishes; no doubt the City

Council members vote unanimously on matters before it from time to time.

The question is whether today’s City Council can bind a future City Council

to a supermajority vote in a situation in which the Charter does not provide

for it (such as on a vote to terminate a franchise). We think it cannot.

Case law also casts doubt on the “minimum vote” argument. In

Howard Jarvis Taxpayers Assn. v. City of San Diego (2004) 120 Cal.App.4th

374 (Howard Jarvis), the court considered a similar argument, concluding

that where the state Constitution required only a majority vote to amend a

Charter, a ballot proposition could not require a supermajority to do so.

Plaintiff there had argued that the proposition did not violate the

constitutional requirement for a majority vote because the majority vote

requirement simply meant that the tax would be unconstitutional if it wasn’t

approved by “at least” a majority vote, and a two-thirds vote did not fall

below that threshold. (Id. at p. 392.)

The court rejected this argument, concluding that the language

(“approved by a majority vote”) “clearly and unambiguously means that

approval of a local government’s imposition or increase of any general tax

requires only a majority vote, and a two-thirds vote cannot be required for

such approval.” (Howard Jarvis, supra, 120 Cal.App.4th at pp. 392–393.)

The court further commented, “[h]ad the drafters of article XIII C intended

32

the term ‘majority vote’ to mean ‘at least a majority vote’ or a ‘majority vote,

including a two-thirds vote at the election of the electorate,’ they easily could

have done so.” (Ibid.) Instead, looking at the language of article XIII C, the

court found that “majority vote” and “two-thirds vote” should “be treated as

separate and distinct voting requirements.” (Howard Jarvis, at pp. 392–393.)

So too here. In more than a dozen places the Charter requires a two-

thirds vote for City Council action. The majority vote requirement in Charter

section 15 is separate and distinct from the supermajority requirements

found elsewhere in the Charter. To paraphrase the Howard Jarvis case, had

the drafters of Charter section 15 “intended the term ‘majority vote’ to mean

‘at least a majority vote’ or a ‘majority vote, including a two-thirds vote at the

election of the [City Council],’ they easily could have done so.” (Howard

Jarvis, supra, 120 Cal.App.4th at pp. 392–393.)

The City and SDG&E argue alternatively that a City Council

determination to terminate a franchise falls within Charter section 103’s

provision for a two-thirds vote for “amendments” to a franchise. However, if

the City Council voted to terminate the franchises, it would not be amending

the franchises in any way. Nothing about the ordinances would be

“amended” or changed by the vote. The ordinances contemplate possible

termination and none of their language would need to be amended for the

City Council to be able to terminate them.

Accordingly, our independent review satisfies us that the trial court did

not err in ordering the severance of the two-thirds requirement for

termination from the balance of the ordinances.

33

D. THE CITY CORRECTLY CONCLUDED THAT CEQA DID

NOT APPLY TO THE ORDINANCES, AND THEREFORE

THE TRIAL COURT DID NOT ERR IN DENYING THE

CEQA CAUSE OF ACTION

1. Additional Background

In May 2021, the City’s planning department sent a memorandum to

the mayor’s office, setting forth its conclusion that the award of the

franchises to SDG&E was not subject to CEQA. Following a public meeting

and discussion, the City Council voted and approved the proposed franchise

agreements. The City Council later issued a resolution concluding that

CEQA review was unnecessary and adopted the two ordinances awarding the

gas and electric franchises to SDG&E. The City later filed a notice of

exemption with the San Diego County Clerk reflecting the City Council’s

determination that the franchise agreements were exempt from CEQA.

In its petition, POCF alleged the City applied an improper legal

standard when it determined the ordinances were not subject to CEQA. The

trial court bifurcated the hearing for the CEQA claims from the remaining

claims. Relying on UMMP, supra, 7 Cal.5th 1171, the court concluded that

the ordinances constituted a project for purposes of CEQA, because they

allowed SDG&E to construct, maintain, and use pipes, poles, wires and

appurtenances to distribute gas and electricity, and therefore it was

reasonably foreseeable that the ordinances could result in new construction

causing environmental change. Nonetheless, the court concluded the

ordinances were categorically exempt from environmental review under the

“existing facilities” exemption (CEQA Guidelines, § 15301; id., § 15300.2,

subd. (c)) and denied the CEQA cause of action. As we explain below, we do

not reach the analysis as to potential exemptions, because in our independent

34

review, we conclude the ordinances do not constitute a project for CEQA

purposes.

2. Legal Principles

Under CEQA, we review the agency’s actions (as opposed to the trial

court’s decision). (Vineyard Area Citizens for Responsible Growth, Inc. v. City

of Rancho Cordova (2007) 40 Cal.4th 412, 427.) Our inquiry extends only to

whether there was a prejudicial abuse of discretion. (Pub. Resources Code,

§ 21168.5.) “Such an abuse is established ‘if the agency has not proceeded in

a manner required by law or if the determination or decision is not supported

by substantial evidence.’ ” (Vineyard Area, at pp. 426–427.) When our review

requires us to interpret a statute, our primary goal is to determine the

Legislature’s intent to fulfill the purpose of the law. (Coalition of Concerned

Communities, Inc. v. City of Los Angeles (2004) 34 Cal.4th 733, 737.)

Whether an activity constitutes a project under CEQA is a legal

question “to be decided on ‘undisputed data in the record on appeal.’ ”

(UMMP, supra, 7 Cal.5th at p. 1198.) As with any CEQA provision, courts

should interpret a “project” in a way that affords “the fullest possible

protection to the environment within the reasonable scope of the statutory

language.” (CEQA Guidelines, § 15003, subd. (f); Laurel Heights

Improvement Assn. v. Regents of University of California (1988) 47 Cal.3d

376, 390.)

CEQA sets out a three-tier process to ensure that public agencies take

environmental factors into account when making decisions. (Muzzy Ranch

Co. v. Solano County Airport Land Use Com. (2007) 41 Cal.4th 372, 379–380.)

“First, the agency must determine whether the proposed activity is subject to

CEQA at all [i.e., whether the proposed activity constitutes a ‘project’].

Second, assuming CEQA is found to apply, the agency must decide whether

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the activity qualifies for one of the many exemptions that excuse otherwise

covered activities from CEQA’s environmental review. Finally, assuming no

applicable exemption, the agency must undertake environmental review of

the activity, the third tier.” (UMMP, supra, 7 Cal.5th at p. 1185.) When an

activity does not meet the definition of a project, the agency is not required to

conduct any additional CEQA review. (UMMP, at pp. 1185–1186.)

The question of whether an activity is a CEQA project focuses on its

general nature and type, not on whether it will ultimately affect the

environment. (UMMP, supra, 7 Cal.5th at pp. 1195–1196.) A “project” is an

activity undertaken, supported, or approved by a public agency that may

cause either a direct physical change in the environment or a reasonably

foreseeable indirect physical change in the environment. (Pub. Resources

Code, § 21065; see also CEQA Guidelines, § 15378, subd. (a).) An effect is not

considered reasonably foreseeable if there is no clear link between the

activity and the change, or if the connection is too weak or speculative.

(UMMP, at p. 1197.)

Relevant here, a CEQA project does not include “[t]he creation of

government funding mechanisms or other government fiscal activities, which

do not involve any commitment to any specific project which may result in a

potentially significant physical impact on the environment.” (CEQA

Guidelines, § 15378, subd. (b)(4).) The CEQA Guidelines further provide that

“ ‘project’ refers to the activity which is being approved and which may be

subject to several discretionary approvals by governmental agencies,” but

“does not mean each separate governmental approval.” (CEQA Guidelines,

§ 15378, subd. (c).) “ ‘This definition ensures that the action reviewed under

CEQA is not the approval itself but the development or other activities that

will result from the approval.’ ” (Citizens for a Megaplex-Free Alameda v.

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City of Alameda (2007) 149 Cal.App.4th 91, 106.) An “approval” of a project

refers to “the decision by a public agency which commits the agency to a

definite course of action in regard to a project intended to be carried out by

any person.” (CEQA Guidelines, § 15352, subd. (a), italics added.)

3. Analysis

POCF argues that the City’s adoption of the ordinances and related

agreements qualifies as a “project” under CEQA. According to POCF, these

franchise approvals represent a binding long-term commitment that limits

consideration of environmentally superior alternatives and creates a causal

link sufficient to trigger CEQA review. We disagree.

As noted above, under CEQA, an “approval” refers to a decision by a

public agency that commits it to a specific course of action regarding a

project. (CEQA Guidelines, § 15352, subd. (a).) However, fiscal activities or

funding mechanisms that do not involve a commitment to any specific

undertaking with the potential for significant environmental impact are not

considered “projects” under CEQA. (CEQA Guidelines, § 15378, subd. (b)(4).)

UMMP, supra, 7 Cal.5th 1171, illustrates this distinction. There, the

court considered a zoning ordinance adopted by the City that allowed for the

creation and operation of medical marijuana dispensaries. (Id. at pp. 1181–

1182.) The court found the ordinance qualified as a CEQA “project” because

the regulatory changes authorized a substantial number of new businesses

and could foreseeably result in new commercial construction and altered

citywide traffic patterns. (UMMP, at pp. 1197, 1199.) The necessary causal

connection existed because the ordinance was a significant step toward

establishing businesses likely to affect the environment. (Id. at p. 1199.)

In UMMP, the court contrasted City of Livermore v. Local Agency

Formation Com. (1986) 184 Cal.App.3d 531 and Kaufman & Broad-South

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Bay, Inc. v. Morgan Hill Unified School Dist. (1992) 9 Cal.App.4th 464

(Kaufman) as examples of what does and does not constitute a CEQA project.

(UMMP, supra, 7 Cal.5th at p. 1197.) In City of Livermore, a county agency

revised its sphere of influence guidelines to allow development in open space

and agricultural lands. (City of Livermore, at pp. 542–543.) Because CEQA

defines “project” to include actions such as amending zoning ordinances or

General Plans (CEQA Guidelines, § 15378, subd. (a)(1)) and excludes only

continuing administrative activities unless applied to a specific instance (id.,

§ 15378, subd. (b)(2)), the court found the guideline revisions analogous to a

General Plan amendment promoting future growth. (City of Livermore, at

p. 539.) They therefore constituted a project requiring the preparation of an

environmental impact report. (Ibid.)

By contrast, in Kaufman, supra, 9 Cal.App.4th 464, the formation of a

community facilities district to raise funds for potential future school needs

was not a CEQA project. (Kaufman, at p. 474.) The court found no causal

link between the community facilities district and school construction, noting

it created no new demand, imposed no binding commitment, and left all

future options open. (Id. at pp. 474, 476.) The court held that where funding

measures alone are at issue, CEQA applies only if there is a binding

commitment to spend in a specific manner—which was not the case there.

(Kaufman, at p. 476.)

Like UMMP, supra, 7 Cal.5th 1171, POCF contends the franchise

approvals in this case similarly commit the City to a long-term energy policy

and authorize construction and energy delivery in a manner triggering CEQA

review. This comparison to UMMP is misplaced. In UMMP, the zoning

ordinance created a new regulatory framework that allowed for the

establishment of entirely new businesses—medical marijuana dispensaries—

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which, in turn, could foreseeably lead to new retail construction and changes

to citywide traffic patterns. (Id. at pp. 1197, 1199.) The court found a

sufficient causal connection between the zoning ordinance and the potential

environmental effects, because the zoning ordinance was a necessary step

toward business development that could affect the environment. (Id. at

p. 1199.)

In contrast, the franchise approvals at issue here do not authorize new

residential or commercial development, establish new land uses, or encourage

population growth. They do not facilitate the creation of new businesses, nor

do they change land use patterns or service areas. Like the community

facilities district in Kaufman, supra, 9 Cal.App.4th 464, the franchise

approvals merely establish a funding and administrative structure, without

committing the City or SDG&E to any particular development or

construction. Crucially, there is no causal link—either direct or reasonably

foreseeable—between the City’s approvals and any potential physical change

in the environment. (Id. at p. 474.)

Although we can speculate as to the need for future infrastructure work

by SDG&E, including possible extension of service to a new development or a

need for major maintenance projects, any actual work will depend on

independent factors, such as customer demand or changes in technology. As

in Kaufman, the absence of a binding commitment or foreseeable

environmental consequence defeats the claim that CEQA review is required.

(See also UMMP, supra, 7 Cal.5th at p. 1197 [weak or speculative link

between activity and the environmental change is not a reasonably

foreseeable link].)

Indeed, SDG&E was already delivering gas and electric services to City

residents prior to the new franchise agreements. The only material effect of

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the approvals is to allow SDG&E to continue providing those services under

revised terms. (CEQA Guidelines, § 15352, subd. (a).) POCF points to

language in the ordinances allowing SDG&E to “construct” and “maintain”

infrastructure. But the existence of this generic language does not mean

construction is imminent or environmentally significant. The ordinances

simply permit SDG&E to use existing infrastructure—or infrastructure

“lawfully placed” in the future—within City streets, and it does so in a

manner indistinguishable from SDG&E’s historic operations. This language

does not establish the existence of a “project” under CEQA because it

contains no commitment to undertake any specific work. It is purely

enabling language, authorizing SDG&E to continue lawfully using City

streets for its infrastructure in the same manner it has historically done and

setting the fiscal terms for such authorization—nothing more.

Further, and importantly, if and when any such work is proposed, the

work will require its own separate regulatory approvals, including applicable

CEQA approvals. The ordinances expressly require that any facilities or

equipment constructed, maintained, used, or removed by SDG&E comply

with “applicable law,” including environmental protection laws. The

administrative MOU underscores this point, stating it “does not supersede

any CITY permits, permissions or other approvals [SDG&E] is required to

obtain to perform Work as described in this MOU.” Taken together, the

provisions in the ordinances and administrative MOU foreclose any

reasonable claim that the ordinances approve or commit the City to a project.

They neither authorize specific construction nor exempt SDG&E from future

permitting or environmental review for such future projects.

In summary, the franchise approvals maintain the status quo, do not

compel or induce new construction, and lack the causal connection necessary

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to trigger CEQA. Requiring CEQA review now, based on undefined,

speculative scenarios, would serve no practical purpose and would contravene

CEQA’s rule that it applies only when an activity may cause a reasonably

foreseeable physical change in the environment. (Lake County Energy

Council v. County of Lake (1977) 70 Cal.App.3d 851, 854–855.) The City’s

determination that CEQA does not apply is both legally sound and supported

by substantial evidence. Because we agree with the City that the franchise

approvals do not qualify as a project under CEQA, we need not address

whether they fall within an exemption from CEQA review. Accordingly, the

trial court correctly denied POCF’s petition for a writ of mandate as to the

CEQA cause of action.

IV. DISPOSITION

The orders are affirmed. The City and SDG&E are entitled to their costs

on appeal.

KELETY, J.

WE CONCUR:

DATO, Acting P.J.

BUCHANAN, J.

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