City & County of San Francisco v. Regents of the University of California

Filed 5/25/17

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION ONE

CITY AND COUNTY OF SAN

FRANCISCO,

Plaintiff and Appellant, A144500

v. (San Francisco City & County

REGENTS OF THE UNIVERSITY OF Super. Ct. No. CPF-14-513-434)

CALIFORNIA et al.,

Defendants and Respondents.

This case asks us to decide whether the City and County of San Francisco can

compel state universities that operate parking lots in the city to collect city taxes from

parking users and remit them to San Francisco. The answer turns on whether the

California Constitution’s “home-rule provision”—which grants charter cities broad

powers, including the power to tax—creates an exception to the long-recognized doctrine

that exempts state entities from local regulation when they are performing governmental

functions. We conclude that it does not. As a result, we affirm the trial court’s denial of

San Francisco’s petition for writ of mandate.

I. BACKGROUND

For over 40 years, San Francisco has had an ordinance that imposes a tax on

parking lot users for the “rent” paid to occupy private parking spaces in the city.

(S.F. Bus. & Tax Regs. Code, art. 9, §§ 602, 606; see City and County of San Francisco

v. Flying Dutchman Park, Inc. (2004) 122 Cal.App.4th 74, 80.) Since 1980, the amount

of the tax has been 25 percent of the rent. (S.F. Bus. & Tax Regs. Code, art. 9, §§ 602,

602.5.) Under the ordinance, parking lot users owe the tax, but parking lot operators are

required to collect the tax when the users pay to park. (Id., art. 9, §§ 603, 604, subd. (a).)

1

The operator is required to hold the collected taxes in trust for, and periodically remit

them to, San Francisco. (Id., art. 6, §§ 6.7-1, 6.7-2.) If an operator fails to collect a

parking tax from a user, the operator is liable for it. (Id., art. 6, § 6.7-1, subd. (d); id.,

art. 9, § 604, subd. (a).)

The ordinance states it is not to be construed as imposing a tax on the state or its

political subdivisions. (S.F. Bus. & Tax Regs. Code, art. 6, § 6.8-1, subd. (a)(2).) Still,

these “exempt” entities must “collect, report, and remit” the tax (id., art. 6, § 6.8-1,

subd. (b); id., art. 9, § 601, subd. (a)), pay any taxes that they fail to collect (see id., art. 9,

§ 604, subd. (a)), and comply with various administrative obligations, such as obtaining a

certificate of authority to operate a parking lot; maintaining a log of, and bearing the

burden of explaining, all lost parking tickets and cancelled transactions (id., art. 9, § 604,

subd. (c)); and filing monthly parking tax returns (id., art. 6, § 6.7-2, subds. (b) & (c)).

The defendants, which we will refer to as the universities, are the Regents of the

University of California (Regents), which is responsible for the operation of the

University of California at San Francisco (UCSF); the Board of Directors of Hastings

College of the Law (Hastings); and the Board of Trustees of the California State

University (CSU), which is responsible for the operation of San Francisco State

University (SFSU). The universities operate parking lots within San Francisco on

property that is mostly owned by the state. All of these lots are in close proximity to

other university facilities. Students, faculty, administrators, guests, patients at certain

medical facilities, and with a few exceptions, members of the general public may pay to

park in them.

The universities have never collected or remitted city parking taxes. In 1983, San

Francisco tried to recover an alleged parking-tax deficiency from UCSF, but the Regents

claimed immunity and San Francisco dropped the matter. The current controversy was

prompted almost 30 years later, when in 2011 San Francisco directed the universities to

start collecting and remitting the parking tax. After the universities refused, San

Francisco petitioned the trial court for a writ of mandate to force compliance. The court

denied the writ, ruling that the universities are immune from complying with the

2

ordinance because they have not expressly consented to collecting and remitting the tax

and their parking-lot operations are a governmental, not a proprietary, function.

II. DISCUSSION

A. The Standard of Review.

“ ‘In reviewing a trial court’s judgment on a petition for writ of ordinary mandate

[brought under Code Civ. Proc., § 1085], we apply the substantial evidence test to the

trial court’s factual findings. However, we exercise our independent judgment on legal

issues . . . .’ ” (City of Oakland v. Oakland Police and Fire Retirement System (2014)

224 Cal.App.4th 210, 226.) Where, as here, the facts are undisputed, the issue whether a

state entity is exempt from complying with a local ordinance presents a question of law

that we review de novo. (Bame v. City of Del Mar (2001) 86 Cal.App.4th 1346, 1354

(Bame); see also California Public Records Research, Inc. v. County of Stanislaus (2016)

246 Cal.App.4th 1432, 1443.)

B. The Parties’ Constitutional Powers.

San Francisco is a charter city, and as such it has broad powers by virtue of the

California Constitution’s home-rule provision. (Cal. Const., art. XI, § 5, subd. (a).)

These powers include the authority to “make and enforce all ordinances and regulations

in respect to municipal affairs, subject only to restrictions and limitations provided in [its]

several charters.” (Ibid.) The “power to tax for local purposes clearly is one of the

privileges accorded chartered cities by [the home-rule provision].” (Weekes v. City of

Oakland (1978) 21 Cal.3d 386, 392 (Weekes).)

The universities’ constitutional powers are similarly substantial. The Regents

governs a statewide system of campuses, including UCSF, and is vested with “full

powers of organization and government” and has “all the powers necessary or convenient

for the effective administration of [the University of California’s] trust,” including “the

management and disposition of the property of the university.” (Cal. Const., art. IX, § 9,

subds. (a) & (f).) “Article IX, section 9, grants the [R]egents broad powers to organize

and govern the university and limits the Legislature’s power to regulate either the

university or the [R]egents. This contrasts with the comprehensive power of regulation

3

the Legislature possesses over other state agencies.” (San Francisco Labor Council v.

Regents of University of California (1980) 26 Cal.3d 785, 788.)

Hastings is “affiliated with the University of California and is the law department

thereof,” and it is governed by a Board of Directors appointed by the Governor and

approved by the Senate. (Ed. Code, §§ 92201, 92206.) Its mission is to “afford facilities

for the acquisition of legal learning in all branches of the law.” (Id., § 92202.)

Lastly, CSU is a constitutionally authorized “state agency created by the

Legislature in the field of public higher education which is charged with the management,

administration, and control of the State College System of California.” (Cal. Const.,

art. XX, § 23; Ed. Code, §§ 66600 et seq., 89000 et seq.) The CSU system is governed

by a board of trustees. (Ed. Code, § 66600.) SFSU is part of this system, and its

structure and mission are set forth in state statutes. (Id., § 89001 et seq.)

4

C. The Doctrine Exempting State Entities from Local Regulation.

Over 60 years ago, our state Supreme Court held that when the state “engages in

such sovereign activities as the construction and maintenance of its buildings, as

differentiated from enacting laws for the conduct of the public at large, it is not subject to

local regulation unless the Constitution says it is or the Legislature has consented to such

regulation.” (Hall v. City of Taft (1956) 47 Cal.2d 177, 183 (Hall).) Under this doctrine,

courts evaluate whether the endeavor in which a state entity is engaged is a “sovereign

activit[y].” (Ibid.) If it is, the state entity is exempt from complying with local regulation

unless constitutional or statutory provisions provide otherwise.1 (Hall, at p. 183.)

In the decades since Hall, courts have applied the doctrine to bar attempts by local

jurisdictions to regulate state entities engaged in governmental activities. (See, e.g.,

Bame, supra, 86 Cal.App.4th at p. 1357 [state agricultural district’s operation of

fairground governmental activity and therefore operators contracting with district exempt

from local regulation]; Laidlaw Waste Systems, Inc. v. Bay Cities Services, Inc. (1996)

43 Cal.App.4th 630, 637-639 (Laidlaw) [school district is state agency exempt from city

regulations involving trash collection]; Del Norte Disposal, Inc. v. Department of

Corrections (1994) 26 Cal.App.4th 1009, 1015 [“state prisons are matters of state, not

local, concern” and their operations therefore exempt from local ordinance giving

exclusive franchise to certain trash hauler]; City of Santa Ana v. Board of Education

(1967) 255 Cal.App.2d 178, 180 [same as Laidlaw].)

1

For years, appellate courts have described this doctrine as an extension of

“sovereign immunity,” but in our view this description risks creating confusion.

Sovereign immunity typically refers to a limit on the ability to recover money damages,

which means it is inapplicable to claims, such as those here, seeking equitable relief

against state entities. (See Western Title Guar. Co. v. Sacramento & San Joaquin

Drainage Dist. (1965) 235 Cal.App.2d 815, 823-824.) The term also typically refers to

the government’s immunity from suits brought by those who are governed, or who are at

least outside of the governmental structure. (See Muskopf v. Corning Hospital Dist.

(1961) 55 Cal.2d 211, 214, fn. 1.) This suit satisfies neither of these elements: it does not

seek money damages, and it is an internal state governmental dispute. While the doctrine

at issue here involves a type of governmental immunity, the law that governs in typical

sovereign-immunity contexts is largely inapplicable.

5

The doctrine has specifically been applied to bar a charter city’s attempt to

regulate the construction of a university building by the Regents. In Regents of

University of California v. City of Santa Monica (1978) 77 Cal.App.3d 130, the Court of

Appeal cited Hall in holding that Santa Monica could not force the Regents to obtain a

building permit and pay city inspection fees as a condition for constructing a university

building in the city. (Id. at p. 136.) In concluding that constructing university buildings

is a governmental activity, the court pointed to the constitutional provision that vests the

Regents with “ ‘the legal title and management of [the] property of the University of

California’ ” and gives it “the unrestricted power to take and hold real and personal

property for the benefit of the university.” (Ibid.; see Cal. Const., art. IX, § 9, subd. (f).)

While courts since Hall have barred local regulation of state entities engaged in

governmental activities, they have allowed local regulation of state entities engaged in

proprietary activities. In Board of Trustees v. City of Los Angeles (1975) 49 Cal.App.3d

45, the Court of Appeal held that Los Angeles, a charter city, could regulate a circus held

on property owned by CSU at Northridge. (Id. at p. 47.) The court determined that the

doctrine exempting state entities from local regulation was inapplicable because the

circus operations were a “revenue-producing activity” that had “no relation to the

governmental functions of the university.” (Id. at p. 50.) Similarly, in City of Modesto v.

Modesto Irrigation Dist. (1973) 34 Cal.App.3d 504 (City of Modesto), the Court of

Appeal held that Modesto could require state irrigation districts to collect a tax imposed

on users of the districts’ electricity because “an irrigation district which manufactures,

distributes[,] and sells electrical energy, in competition with public service corporations,

is engaged in a proprietary activity.” (Id. at pp. 506-507.)

Thus, the analytical framework under the doctrine is straightforward: state entities

are exempt from otherwise-valid local regulation when they are engaged in governmental

activities unless a constitutional provision or statute says they are not exempt. (Hall,

supra, 47 Cal.2d at p. 183.) While state entities are free to comply voluntarily with local

measures to further the public interest, and we expect they often do, they cannot be

6

forced to comply with those measures when they are performing their governmental

functions.

D. The Universities Are Exempt from the Ordinance Under the Doctrine

Recognized in Hall.

Applying Hall’s analytical framework to the case before us, we conclude that the

doctrine exempting state entities from local regulation defeats San Francisco’s effort to

compel the universities to comply with the ordinance.2 The universities’ parking

operations are governmental activities, and the universities are therefore exempt from the

ordinance, as it is undisputed that no constitutional provision or statute provides

otherwise.

As we have mentioned, the state’s exemption from local regulation “is limited to

situations where [a state entity] is operating in its governmental capacity” as opposed to

engaging in “proprietary activity.” (Bame, supra, 86 Cal.App.4th at p. 1356.) This

distinction between governmental and proprietary activity “remains viable in the context

of encroachment of municipal regulations” even though it “is no longer applicable to

determine governmental tort liability [under principles of sovereign immunity],” the area

in which it developed. (Ibid.; 8 Witkin, Summary of Cal. Law (10th ed. 2005)

Constitutional Law, § 991.) “The scope of the relevant inquiry is defined by the

particular activities in question” and whether they are related to the state entity’s

governmental purposes. (Bame, at p. 1357.)

The trial court found that the universities are furthering governmental purposes in

operating their parking lots, and we agree. As the court explained, the undisputed

evidence established that providing parking for students, faculty, staff, and visitors is

2

The parties dispute whether San Francisco is seeking to compel the universities

to comply with the ordinance’s administrative requirements other than the obligations to

collect and remit the city parking taxes. We need not resolve this dispute in light of our

conclusion that the universities are exempt from complying with the ordinance. Still, we

are not as convinced as the dissent seems to be that the burdens San Francisco seeks to

impose are necessarily “minimal” or that the universities “will bear no costs of

collection.”

7

integral to the universities’ educational and, in the case of the UCSF hospitals, clinical

purposes.

As to UCSF, the trial court found that the “parking facilities are used for staff,

faculty, students, researchers, patients receiving inpatient and outpatient care, and

visitors. Parking facilities are critical to UCSF because it is located in a densely

populated urban environment and is a very decentralized campus. UCSF’s parking

facilities are important in meeting [its] clinical and life-safety mission,” and “UCSF uses

its parking fee revenue to fund a shuttle bus service for students, faculty[,] and staff

between its various locations, including San Francisco General and the VA Hospital.”

As to Hastings, the trial court found that “[t]he garage provides access to the

campus”—which “is located in an urban area with limited street parking”—“for students,

faculty, staff, [and] others who attend events [there].” The garage also “plays an

important role in . . . Hastings’[s] effort to maintain a safe and secure environment for its

students. The . . . library is open until 11:00 p.m. and even later during finals,” and “[t]he

garage provides a safe, well-lit[,] and convenient way to leave the campus and encourage

continued use of the library and other school facilities for study purposes.”

Finally, as to CSU, the trial court found that “the operation of nine parking

facilities on the SFSU campus constitutes an activity that is integral to CSU’s educational

mission and bears a direct and necessary relationship to its functioning. [SFSU] is

located in an urban environment where available parking for students, staff[,] and visitors

in scarce. Each of CSU’s parking stations provides ready access to campus facilities for

those who cannot use public transportation to get there. The parking stations are also

used by visitors to the [SFSU] campus for the purposes of attending meetings, lectures,

arts performances[,] and other educational events.”

In challenging the trial court’s determination that the operation of the universities’

parking lots is a governmental activity, San Francisco contends that “[t]he essential

question in the analysis . . . is whether the municipal provision regulates the ‘main

purpose’ of the [state] agency.” (Quoting City of Modesto, supra, 34 Cal.App.3d at

p. 507.) It argues that the universities’ “main purpose is not to provide parking, let alone

8

paid parking,” but “is education. The tax here, however, is not on the education of

undergraduates, training in medicine, training in law, or the like. It is on paid parking.”

We reject San Francisco’s cramped view that the universities’ governmental role

is to provide education but nothing related to it. To be sure, we agree with San Francisco

that an activity is not necessarily governmental just because it generates revenue used to

support a state entity’s purpose. (See, e.g., Board of Trustees v. City of Los Angeles,

supra, 49 Cal.App.3d at pp. 47, 49-50; City of Modesto, supra, 34 Cal.App.3d at p. 507.)

But operating university parking lots is not simply a revenue-generating endeavor; it is an

activity that directly supports the universities’ educational and clinical functions by

enabling students, staff, and visitors to access university programs and facilities.

Even if operating parking facilities might fall outside the governmental mission of

some state entities, it is within the mission of the universities. All of them are directly or

indirectly empowered to operate parking facilities by constitutional or statutory

provisions that allow them generally to manage their facilities and real estate or

specifically to provide parking. (Cal. Const., art. IX, § 9, subd. (f) [Regents vested with

“management . . . of . . . property”]; Ed. Code, §§ 89701, subd. (a) [CSU “authorized to

. . . construct, operate, and maintain motor vehicle parking facilities”], 92202 [Hastings

“shall afford facilities” for legal learning].)

Because the universities’ parking operations support the universities’ educational

and clinical programs and are directly or indirectly authorized by constitutional or

statutory provisions, we reject San Francisco’s argument that they are a proprietary

activity falling outside the doctrine exempting state entities from local regulation.

E. There Is No Exception to the Doctrine Exempting State Entities from Local

Regulation for Charter Cities’ Tax-related Measures.

San Francisco maintains that Hall’s analytical framework is inapplicable because

the ordinance’s collection-and-remittance requirement is not “regulatory” but is instead a

“revenue measure.” Although San Francisco does not dispute that the universities are

exempt from paying local taxes themselves, it contends that the home-rule provision

confers on charter cities the authority to require state entities to undertake “reasonable

9

measures” to collect and remit local taxes. In other words, San Francisco asserts that,

even though state entities are exempt from local taxes and local regulatory measures, they

are not exempt from local measures requiring them to collect and remit taxes. We are not

persuaded. San Francisco’s argument draws from the law governing state preemption,

but that law is largely inapplicable, and even under that law, the distinction between tax

and regulatory measures has been abandoned. Our state Supreme Court has never

endorsed extrapolating such a distinction to the doctrine exempting state entities from

local regulation, and we decline to do so for the first time here.

We begin by reiterating our agreement with San Francisco that the home-rule

provision confers broad powers on charter cities. “Charter cities are specifically

authorized by our state Constitution to govern themselves, free of state legislative

intrusion, as to those matters deemed municipal affairs.” (State Building and

Construction Trades Council of California v. City of Vista (2012) 54 Cal.4th 547, 555.)

The home-rule provision “represents an ‘affirmative constitutional grant to charter cities

of “all powers appropriate for a municipality to possess . . .” and [includes] the important

corollary that “so far as ‘municipal affairs’ are concerned” charter cities are “supreme

and beyond the reach of legislative enactment.” ’ ” (Id. at p. 556; see California Fed.

Savings & Loan Assn. v. City of Los Angeles (1991) 54 Cal.3d 1, 11-18 (California

Federal).) As we have observed, these broad powers include the power to tax. (Weekes,

supra, 21 Cal.3d at p. 392.)

But no Supreme Court case has intimated, and no Court of Appeal decision has

directly held, that these broad powers trump the doctrine exempting state entities from

local regulation. At least two Court of Appeal cases have explicitly held that they do not.

In the first, Laidlaw, supra, 43 Cal.App.4th 630, the plaintiff argued that the home-rule

provision authorized charter cities to regulate state entities engaged in governmental

activities so long as the cities were regulating matters pertaining to municipal affairs, in

that case garbage collection. In emphatically rejecting the argument, the Court of Appeal

stated,

10

“[This] argument confuses the issues of preemption and sovereign

immunity. The issue . . . is not [as it would be under preemption analysis]

whether the City has [authority under the home-rule provision] over

garbage collection within its city limits. Unquestionably, local

governments have that authority . . . . [Citations.]

The issue here is not preemption; the issue is whether state agencies

are exempt from local trash collection regulations under the doctrine of

sovereign immunity. Hall, City of Santa Ana, and Del Norte make clear

state agencies are indeed immune from such local regulation absent an

express legislative or constitutional waiver of that immunity. Since the

question is one of immunity, not preemption, it makes no difference

whether the local governmental entity is a charter city as opposed to some

other form of local government. The sovereign immunity of a state agency

from local regulation does not depend upon the source of the local

governmental entity’s authority to make regulations, it depends upon

whether consent to regulation has been expressly stated by the Legislature

or in the state Constitution.”

(Laidlaw, at pp. 638-639, italics added.) Laidlaw’s holding that charter cities’

powers under the home-rule provision do not overcome state entities’ exemption

from local regulation was decisively confirmed in Bame. Quoting Laidlaw at

length, Bame repeated that the source of a city’s authority is irrelevant to the

analysis. (Bame, supra, 86 Cal.App.4th at pp. 1355-1356.)

We take a moment to briefly discuss preemption because, as did the plaintiffs in

Laidlaw and Bame, San Francisco and the dissent conflate principles of preemption with

the doctrine exempting state entities from local regulation. “ ‘Under article XI, section 7

of the California Constitution, “[a] county or city may make and enforce within its limits

all local, police, sanitary, and other ordinances and regulations not in conflict with

general [state] laws.” [¶] “If otherwise valid local legislation conflicts with state law, it

is preempted by such law and is void.” [Citations.] [¶] “A conflict exists if the local

legislation ‘ “duplicates, contradicts, or enters an area fully occupied by general law,

either expressly or by legislative implication.” ’ ” ’ ” (O’Connell v. City of Stockton

(2007) 41 Cal.4th 1061, 1067, italics omitted.) The consequence of the preemption of a

local measure is that the measure is unenforceable against anyone. In contrast, the

11

consequence of the application of the doctrine exempting state entities from local

regulation is that the measure is unenforceable only against state entities. Thus, the law

governing preemption has little to do with the doctrine exempting state entities from local

regulation. Preempted local measures are unenforceable against state entities because

they are void, not because of anything having to do with these entities’ governmental

status.

Until our state Supreme Court stepped in, some appellate courts had treated

charter cities’ tax measures as different from, and weightier than, other regulatory

measures in considering whether they were unenforceable against anyone because they

conflicted with, and were therefore preempted by, state law. (California Federal, supra,

54 Cal.3d at pp. 13-14.) California Federal rejected this distinction and held that both

types of measures, tax and non-tax, are subject to the same preemption analysis, which

requires courts to focus on whether an actual conflict exists between the local measure

and the state’s governance in the field. (Id. at p. 7.) The Court explained, “In the event

of a true conflict between a state statute reasonably tailored to the resolution of a subject

of statewide concern and a charter city tax measure, the latter ceases to be a ‘municipal

affair’ to the extent of the conflict and must yield.” (Ibid.) The heart of California

Federal’s holding was that a charter city’s measure, whether tax-related or regulatory in

some other sense, is void under the law of state preemption only if it truly conflicts with

state law. Since California Federal, courts reviewing a charter city’s measure to

determine whether it is preempted consider the extent to which it conflicts with state law,

regardless of whether the measure is tax-related.

The two main cases that San Francisco relies on in urging us to adopt the

distinction between tax-related and other local measures are Court of Appeal decisions

announced before California Federal and involving circumstances far different than

those presented here. Oakland Raiders v. City of Berkeley (1976) 65 Cal.App.3d 623

involved a Berkeley ordinance requiring private businesses pay a gross-receipts tax. (Id.

at p. 626.) The Court of Appeal held that this tax could be imposed on a private business

even though the business leased property from the University of California. Referring to

12

the pre-California Federal distinction between tax and other local measures, the court

stated that “whether or not the state law has occupied the field of regulation, cities may

tax businesses carried on within their boundaries,” including a business that is a “lessee

of publicly owned property.” (Id. at pp. 626-627.) Similarly, City of Los Angeles v.

A.E.C. Los Angeles (1973) 33 Cal.App.3d 933 authorized a charter city, Los Angeles, to

impose a gross-receipts tax on a private business that was performing contract work for

the state because there was no “state statutory scheme which preempt[ed] the area of

taxation in which the City business tax operate[d].” (Id. at pp. 939-940.) The holdings in

these cases do not apply to the case at hand. The issue here is whether the universities

are exempt from collecting and remitting the parking tax, not whether third parties can

avoid the tax by virtue of their business relationship with the universities or principles of

state preemption.

In arguing that charter cities’ power to tax under the home-rule provision

authorizes charter cities to require state entities to collect and remit taxes, San Francisco

and the dissent also rely on an alternative rationale used by the Court of Appeal in

reaching its holding in the decades-old case of City of Modesto, supra, 34 Cal.App.3d

504. In our view, that reliance is misplaced. In City of Modesto, Modesto, a charter city,

imposed a tax on users of water, gas, electricity, and telephone services and required

providers of those services to collect the tax. (Id. at p. 506.) As a consequence, the city

sought to compel two state irrigation districts that sold electricity to city users to collect

the tax. (Id. at pp. 505-506.) Although the districts conceded that the city had the power

to impose the local tax on its residents, they claimed that they were not required to collect

those taxes because if that power were “extended to state agencies, [it would]

contravene[] the almost universal rule . . . that the activities of the state and its agencies

cannot be controlled or regulated by local entities in the absence of legislative consent.”

(Id. at p. 506.)

The Court of Appeal first determined that the irrigation districts were not exempt

from the city’s regulation because our state Supreme Court had previously held, in two

separate cases, that (1) irrigation districts selling electricity on the open market are

13

engaged in a proprietary activity and (2) an ordinance requiring a utility to collect a city

tax on users is not invalid under preemption principles because it does not “constitute

forbidden or conflicting regulation of the utility.” (City of Modesto, supra,

34 Cal.App.3d at pp. 506-507; see Rivera v. Fresno (1971) 6 Cal.3d 132, 139; Yolo v.

Modesto Irrigation Dist. (1932) 216 Cal. 274, 278.) If both of these propositions were

true, the Court of Appeal asked, “how can it be argued plausibly that the collection

requirement of [Modesto’s] ordinance, if applied to that proprietary activity, is regulation

which impinges on the state’s sovereignty[?]” (City of Modesto, at p. 507.) This

analysis, to which we subscribe, comports with Hall by recognizing that state entities

engaged in proprietary activities are subject to local regulation.

But City of Modesto went on to offer an alternative rationale in support of its

holding that does not comport with Hall and to which we do not subscribe. In this

alternative rationale, the Court of Appeal explained that a charter city’s power to “levy a

utility user’s tax is a municipal affair and stems from the Constitution” and carries with it

the “the corollary power to use reasonable means to effect [the tax’s] collection.” (City of

Modesto, supra, 34 Cal.App.3d at p. 508.) The court then determined that Modesto’s

constitutionally grounded powers took precedence over the irrigation districts’ statutorily

grounded state sovereignty, stating, “It is . . . basic that if there is a conflict between the

California Constitution and a law adopted by the Legislature, the California Constitution

prevails. While irrigation districts may be state agencies, they are nevertheless creatures

of the Legislature, and like the Legislature must submit to a constitutional mandate; the

California Constitution is the paramount authority to which even sovereignty of the state

and its agencies must yield. It follows that the collection requirement of [Modesto’s]

ordinance, though applicable to state agencies, is a reasonable exercise of [Modesto’s]

constitutional power to tax for revenue purposes.” (Ibid.) This rationale, in other words,

was premised on the notion that a charter city’s constitutional authority under the home-

rule provision should be weighed against and take precedence over statutory authority

conferred on a state entity.

14

Laidlaw and Bame squarely, and in our view properly, rejected this premise. As

those two decisions explained, what matters is not the source of a local agency’s

authority, but instead whether, under Hall’s analytical framework, the state entity is

engaged in a governmental activity and whether consent to local regulation has been

conferred by a statute or constitutional provision. (Bame, supra, 86 Cal.App.4th at

pp. 1355-1356; Laidlaw, supra, 43 Cal.App.4th at pp. 638-639.) City of Modesto’s

alternative rationale exacerbated the error of focusing on the source of the city’s

authority, i.e., the home-rule provision, by then weighing that authority against the state

entities’ statutory authority. We have found no other cases that have taken such an

approach, and we decline to adopt it here.

Furthermore, even if we were to accept the alternative rationale’s premise that a

city’s constitutional authority trumps a state entity’s statutory authority, we still would

not be compelled to sanction San Francisco’s effort to impose the ordinance’s

requirements on the universities. The irrigation districts’ authority in City of Modesto

was based on statutes, but the universities’ authority here is derived from the

Constitution. Thus, even if the proper analysis did involve a weighing of the local

agency’s authority against the state entity’s authority, we would not necessarily conclude

that San Francisco’s constitutional authority trumps the universities’ constitutional

authority.

We are similarly unimpressed with dicta in Eastern Mun. Water Dist. v. City of

Moreno Valley (1994) 31 Cal.App.4th 24, upon which both San Francisco and the dissent

rely. In Moreno Valley, the Court of Appeal permitted a non-charter city to require a

municipal water district—i.e., a non-state entity—to collect and remit a utility tax after

determining that the district had waived any sovereign immunity that it might possess.

(Id. at pp. 25, 30.) The court did not need to go any further to conclude that the district

was therefore subject to the city’s regulation. Nevertheless, after noting that the district’s

sole argument was that the city, a general law city, “lacked the statutory authority” to

require the district to collect the tax, the court referred to City of Modesto’s alternative

rationale in remarking that the “ ‘power to tax carries with it the corollary power to use

15

reasonable means to effect its collection’ ” regardless of the source of that power. (Id. at

pp. 28-30.) This passage has no bearing on the case before us. While we have no quarrel

with the principle that a city’s authority to impose a tax generally carries with it the

corollary power to collect the tax, that principle has nothing to do with whether any such

corollary power can be used to force a state entity to collect and remit local taxes against

its will when it is engaged in a governmental activity.3 Moreno Valley did not involve a

comparison of the source of a city’s authority with the source of a state entity’s authority.

Just because a city has the general power to collect a tax does not mean it has the power

to force a state entity to collect that tax on the city’s behalf.

Finally, we recognize that in Weekes our state Supreme Court mentioned the

state’s participation in collecting and remitting certain local taxes. There, taxpayers

challenged an “ ‘employee license fee’ ” that Oakland, a charter city, imposed on people

who worked in the city for the “privilege of engaging in or following any business, trade,

occupation or profession as an employee.” (Weekes, supra, 21 Cal.3d at pp. 390, 415.)

“Although the employee [was] the actual taxpayer, . . . employers [were required] to

collect the license fee by withholding tax from each employee’s paycheck.” (Id. at

p. 391.) At the end of its opinion, after rejecting the taxpayers’ contention that the fee

was “essentially a municipal income tax” prohibited by statute, the Court commented that

Oakland was “not barred from imposing its license tax upon state employees who work

within the city.” (Id. at pp. 390, 398.)

In our view, the dissent reads far too much into this comment. As support for the

remark, Weekes cited only Graves v. N.Y. ex rel. O’Keefe (1939) 306 U.S. 466, 486-487

(Weekes, supra, 21 Cal.3d at p. 398), in which the United States Supreme Court held that

federal employees were not immune from state income tax because there was no “basis

3

San Francisco and the dissent also rely on an opinion by the Attorney General

(65 Ops.Cal.Atty.Gen. 267 (1982)) that cited City of Modesto’s alternative rationale in

concluding that a charter city could require an agent of the state to collect a local

occupancy tax. We reject the opinion’s reasoning because it also fails to acknowledge

the distinction between a charter city’s power to impose a local tax and its power to force

a state entity to collect that tax.

16

for the assumption that any . . . tangible or certain economic burden is imposed on the

government . . . as would justify a court’s declaring that the taxpayer is clothed with the

implied constitutional tax immunity of the government by which he [or she] is

employed.” (Graves, at p. 486.) Thus, Weekes’s comment addressed whether state

employees might be charged the license tax, not whether the state was exempt from local

regulation or could instead be forced to collect and remit those taxes. Weekes is silent on

the effect of the doctrine exempting state entities from local regulation, and “ ‘it is

axiomatic that cases are not authority for propositions not considered.’ ”4 (Sonic-

Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1160.)

In conclusion, although San Francisco has broad powers under the home-rule

provision, including the power to tax, the doctrine exempting state entities from local

regulation prevents San Francisco from forcing the universities to collect and remit city

taxes imposed on users of the universities’ parking facilities. Unlike the dissent, we do

not consider the law in this area to be in a state of disarray, and we see no need to craft a

judicial exception to the doctrine. While there may be a value in having state entities

collect and remit charter-city taxes, the doctrine incorporates readily available methods to

implement any such value: state entities can voluntarily collect and remit those taxes, or

the Legislature can tell them they must.

III. DISPOSITION

The judgment is affirmed. The parties shall bear their own costs on appeal.

4

We are similarly not persuaded by the dissent’s discussion of federal cases

involving the federal government, states, and Indian tribes that permit the imposition of a

“minimal burden” related to taxes. These cases have nothing to do with the California-

law doctrine exempting state entities from local regulation, and there is no reason to look

to them for guidance.

17

_________________________

Humes, P.J.

I concur:

_________________________

Margulies, J.

City and County of San Francisco v. Regents of the University of California et al.

(A144500)

18

DISSENTING OPINION BY BANKE, J.

With the majority’s opinion, the law on whether a municipality can ask a state

entity to collect a general local tax imposed not on the state entity, but on third parties

doing business with the entity, is as follows: Irrigation districts providing electrical

service (a proprietary activity because non-state entities also produce electricity) can be

required to collect a local utility users tax. (City of Modesto v. Modesto Irrigation Dist.

(1973) 34 Cal.App.3d 504 (City of Modesto).) Water districts providing water and sewer

services (both governmental functions [Wat. Code, §§ 71610, 71670]) can be required to

collect a local utility users tax. (Eastern Mun. Water Dist. v. City of Moreno Valley

(1994) 31 Cal.App.4th 24, 26 (Eastern Mun. Water).) The State Parks Department can

be required to collect a local occupancy tax imposed on those using its Asilomar

conference center (with no determination of whether this historic and required use of the

state’s property is a proprietary activity or governmental function).

(65 Ops.Cal.Atty.Gen. 267 (1982).) In addition, a city can impose a local privilege tax

on all employees working within its municipal boundaries, including state employees (at

least some of whom are presumably performing governmental functions), pursuant to an

ordinance that requires employers, including the state, to collect the tax. (Weekes v. City

of Oakland (1978) 21 Cal.3d 386 (Weekes).) However, the majority concludes that the

state universities cannot be asked to collect a local parking tax imposed on third parties

paying to use the schools’ parking facilities.1

Certainly the prior cases differ in varying respects from the case at hand, as the

majority points out. But these differences do not, independently or collectively, provide a

cogent legal framework that explains how the results in the prior authority—allowing a

municipality to look to a state entity for help in collecting a general local tax imposed on

1

I have not included Bame v. City of Del Mar (2001) 86 Cal.App.4th 1346

(Bame), in this litany because, as I shall discuss, the appellate court, in barring

enforcement of two local revenue measures, treated the challenged fee and tax as

imposed on the state entity, itself.

1

third parties—can exist in harmony with the result here, disallowing such help unless the

state entity consents to provide it. I do not see how, for example, water districts can

continue to be required to collect local utility taxes on users of water and sewer services

in the wake of the majority’s opinion, unless these districts agree to do so.

The majority grounds its conclusion that the state universities need not collect San

Francisco’s parking tax on Hall v. City of Taft (1956) 47 Cal.2d 177 (Hall) and its

progeny, the rationale being that requiring the universities to collect the tax would be an

impermissible regulation of the universities’ use and maintenance of their property (a

governmental function). I certainly agree San Francisco cannot tell the universities, for

example, how much of their property they can use for parking, or how much they can

charge, or how they can spend their parking revenue. However, in my view, whether the

universities can be asked to collect a general local tax imposed on third parties doing

business with the schools presents a different question, particularly where the universities

will not bear the cost of collection and, thus, there will be no impingement of their

sovereign resources.2 I also think the answer to this question is better informed by those

cases addressing the scope of a municipality’s power to tax third parties, than it is by the

cases addressing the state’s exemption from local regulation of its governmental

functions.

There is no question, however, that the law on whether a municipality can look to

a state entity to collect a general local tax imposed on third parties has been far from a

paragon of clarity. Respectfully, the majority’s opinion leaves the law in some disarray.

Yet municipalities need to know with some assurance whether third parties who do

2

The City has expressly stated it is not seeking to compel the universities to

comply with the administrative and regulatory provisions of its parking tax ordinance,

nor is it seeking to subject the universities to the ordinance’s penalty provisions. While

the universities have objected to this representation by the City, there is no impediment to

the City limiting, or abandoning portions of, the writ relief it seeks. (See S.F. Bus. & Tax

Regs. Code, § 6.23-1 [provisions of parking tax ordinance are severable]; City of

Modesto, supra, 34 Cal.App.3d at p. 509 [suggesting severable penalty provision of local

utility tax ordinance might not be enforceable against state entity, but declining to reach

issue].)

2

business with a state entity will essentially receive a pass on a general local tax. It is time

for our Supreme Court to squarely address this issue and to state clearly whether or not a

state entity can be asked to collect a local tax imposed on third parties doing business

with the entity, particularly where, as here, the entity will be reimbursed its costs of doing

so.

The Exempt from Local Regulation Cases3

In Hall, the case undergirding the majority’s decision, a general law city ordered

work stopped on a public school project, insisting the school district’s contractor comply

with its local building ordinance, which included permit and fee requirements. (Hall,

supra, 47 Cal.2d at p. 179.) The school district had already secured review and approval

of its construction plans through the State Department of Education and State Division of

Architecture. (Ibid.) The contractor sued the city, seeking an injunction. The city

claimed, in turn, it had the power to enact and enforce local building regulations under its

police powers. (Ibid.)

Our Supreme Court held the “public schools of this state are a matter of statewide

rather than local or municipal concern” and therefore state “legislative enactments

thereon control over attempted regulation by local government units.” (Hall, supra,

47 Cal.2d at pp. 179, 181.) “When [the state] engages in such sovereign activities as the

construction and maintenance of its buildings, as differentiated from enacting laws for the

conduct of the public at large, it is not subject to local regulations unless the Constitution

says it is or the Legislature has consented to such regulation.” (Id. at p. 183.)

3

I discuss the exempt from local regulation cases and the third party tax cases

separately because they involve different factual scenarios and discuss different legal

principles, as the following overview of these cases makes clear. This in no way

contradicts our Supreme Court’s holding in California Fed. Savings & Loan Assn. v. City

of Los Angeles (1991) 54 Cal.3d 1 (California Federal), that no distinction is to be drawn

between local tax measures and local regulatory measures when engaging in a

preemption analysis. As the majority states, there is no preemption issue before us.

Rather, the issue here is whether requiring the state universities to collect the City’s

general parking tax imposed on third parties would impermissibly impinge on the

schools’ sovereignty, and specifically on their control and maintenance of their property.

3

The high court in Hall quoted extensively from its earlier decision in In re Means

(1939) 14 Cal.2d 254 (Means), in which a state worker employed as a plumber at the

state fairgrounds, had been arrested for violating a charter city ordinance requiring all

journeyman plumbers to obtain a registration certificate. Thus, the issue was “whether a

state employee, working entirely on state property, may be punished for his failure to

comply with the municipal requirement.” (Id. at p. 255.) The state employee claimed the

state had “occupie[d] the field” of state employment and the local ordinance could not be

applied “in derogation of sovereignty.” (Id. at p. 257.) The charter city maintained it was

empowered to regulate local construction. (Id. at p. 256.)

The Supreme Court agreed with the state employee. “There can be no question

concerning the power of the state . . . to lay down the qualifications for its employees. It

acts in an exclusive field [citations], and is not subject to the legislature enactments of

subordinate governmental agencies.” (Means, supra, 14 Cal.2d at p. 258.) A “municipal

affair” is not, explained the court, “entirely a geographical one” (i.e., the bounds of a

city), and “an act relating to property within a city may be of such general concern that

local regulation concerning municipal affairs is inapplicable.” (Id. at p. 259.) The court

quoted from a Kentucky case in which a city had tried to regulate fire escapes on

buildings at a state institution for the blind. (Ibid.) “ ‘The municipal governmental is but

an agent of the state—not an independent body. . . . How can a city have ever a superior

authority to the state over the latter’s own property or in its control and management?

From the nature of things it cannot. . . .’ ” (Ibid.) The Means court thusly summarized

the outcome in the case before it: “The result is a direct conflict of authority. Either the

local regulation is ineffective or the state must bow to the requirement of its

governmental subsidiary. Upon fundamental principles, that conflict must be resolved in

favor of the state.” (Id. at p. 260.)

Hall’s language, including its quotations from Means, is an amalgam of what is

now considered preemption (e.g., “a matter of statewide rather than local or municipal

concern”) and sovereign immunity (e.g., “not subject to local regulations unless the

Constitution says it is or the Legislature has consented to such regulation”) terminology.

4

In my view, both Hall and Means are best characterized as early cases addressing the

scope of “municipal affairs,” over which local municipalities (whether a general law or a

charter city) have extensive control, and distinguishing such affairs from matters of

“statewide concern,” as to which the state has paramount control.

Hall’s progeny have, thus, focused on the distinction between municipal affairs

and matters of statewide concern. In City of Santa Ana v. Board of Education (1967)

255 Cal.App.2d 178 (City of Santa Ana), for example, the appellate court, relying on

Hall, held the city (not identified as either a charter or general law city) could not require

the local school district to employ the city’s garbage collector. (Id. at pp. 179–180.) The

court rejected the city’s proffered distinctions between local regulations that directly or

indirectly affect internal or external control. The test under Hall as to whether “local

regulations may control state maintenance of state buildings,” said the court, is “whether

the Constitution or Legislature has consented to such regulation . . . .” (Id. at p. 180.)

In City of Orange v. Valenti (1974) 37 Cal.App.3d 240 (City of Orange), a city

(not identified as either a charter or general law city) sued both the state and the owner of

a building the state leased to enforce several local ordinances, including a parking

ordinance controlling the number of off street spaces. Citing Hall, the Court of Appeal

ruled “[w]hen the state engages in such sovereign activities as the construction and

maintenance of its buildings (and leasing of the building is no different), it is not subject

to local regulations unless the Constitution says it is or the Legislature has consented to

such regulations.” (Id. at p. 244.) “If the ordinance were applicable, and if more spaces

are required than are provided, the use of the building as an unemployment insurance

office would have to be curtailed. This would have the effect of limiting the state’s

sovereignty by local regulations, which is prohibited by Hall . . . .” (Ibid.) The court

went on to conclude the state had not expressly consented to the applicability of the local

regulations. (Id. at p. 245.) As for the requirement that the state’s consent must be

explicit, the court explained: “A stronger reason for holding that the Legislature’s

consent must be expressed in a statute can be drawn from the analogy to the state’s

5

sovereign immunity from damage claims. This immunity stems from the sovereignty of

the state, as does the exemption from local regulations.” (Ibid.)

Thus, City of Orange is among the earlier cases describing the state’s paramount

authority in matters of statewide concern as an aspect of its sovereign immunity, and in

subsequent cases addressing the extent to which the state is exempt from local regulation,

the appellate courts have routinely used sovereign immunity terminology.4

In Board of Trustees v. City of Los Angeles (1975) 49 Cal.App.3d 45 (Board of

Trustees), for example, both the state university and a circus performing on the

university’s property were cited for violating a charter city’s ordinance on circuses,

which required, among other things, that circuses obtain a permit and pay a fee. (Id. at

p. 47.) The university sued for declaratory relief, claiming “activities conducted upon the

university’s property were not subject to” local regulation. (Id. at p. 48.) The appellate

court held the circus was subject to the ordinance, breaking its analysis into two parts,

sovereign immunity and preemption.

The court rejected the university’s sovereign immunity claim on the ground that in

leasing its property to the circus, the university was engaged in “proprietary activity” and

was not “operating in a governmental capacity.” (Board of Trustees, supra,

49 Cal.App.3d at p. 49.) “The state of the law in the field of tort liability

notwithstanding, . . . the doctrine of sovereign immunity remains viable. However, we

believe that the previously well recognized distinction between governmental and

proprietary activity [citations] serves to limit that immunity to the situation where the

state is operating in a governmental capacity.” (Ibid.) The court viewed Hall, Means,

and City of Orange as examples “in which the state was clearly acting in its governmental

capacity” (although later in its opinion, the court characterized Hall as being based

4

While I have no quarrel with the majority’s observation that sovereign immunity

often is interposed as a legal defense to a damages lawsuit, I do not agree with its

suggestion that the state’s exemption from local regulation of its governmental functions

is merely a judicially created “doctrine” and not a consequence of the state’s sovereignty.

Rather, in my view, the state is exempt from local regulation of its governmental

functions, unless it consents thereto, because of its sovereign status.

6

“primarily” on preemption). (Id. at pp. 50–51.) The court further observed the

university’s state sovereign immunity ought not to extend to “private entrepreneurs who

are involved in the local commercial market where their competitors are subject to local

regulation.” (Id. at p. 50) Indeed, in the lease, the university had “specifically disavowed

any governmental status for its lessee.” (Ibid.) The court then turned to preemption and,

distinguishing Hall, concluded there was no statutory scheme pertinent to the university

that purported to vest control of circus performances exclusively in the state. (Id. at

pp. 50–52.)

Board of Trustees is, thus, one of the earlier cases drawing a clear distinction

between sovereign immunity and preemption analyses, and ruling explicitly that

sovereign immunity applies only when the state is acting in its “governmental capacity”

and does not apply to the state’s “proprietary activities.”

In Regents of University of California v. City of Santa Monica (1978)

77 Cal.App.3d 130 (Santa Monica), the University of California, which leased and

wanted to improve property for “educational purposes,” sued a charter city after the city

claimed the university had to obtain a local building permit and pay permit fees.

Accordingly, this case was very similar to Hall, except that it involved a charter city and

the Regents of the University of California. The court first ruled the Regents has every

bit as much autonomy over its own affairs as does the state with respect to local school

districts—the Regents is “ ‘a branch of the state itself’ ” having “virtual autonomy in self-

governance.” (Id. at p. 135, quoting Pennington v. Bonelli (1936) 15 Cal.App.2d 316,

321.) And, “[i]n view of the virtual plenary power of the Regents in the regulation of

affairs relating to the university and the use of property owned or leased by it for

educational purposes,” the court held it is “not subject to municipal regulation,” citing to

Hall. (Santa Monica, at p. 136.) The court next rejected the city’s invocation of its

charter status. “[T]he authority of a charter city to regulate municipal affairs is not

plenary [citation]. The California Constitution (Cal. Const., art. XI, § 7) does not

authorize municipalities to apply local zoning restrictions to state agencies [citation], a

power that can be granted only by legislative consent.” (Santa Monica, at p. 136.)

7

In Del Norte Disposal, Inc. v. Department of Corrections (1994) 26 Cal.App.4th

1009 (Del Norte Disposal), the company having the exclusive garbage contract with the

local waste authority sued the state and its garbage collector for Pelican Bay State Prison.

Citing to Hall, the court reiterated that when the state “ ‘engages in such sovereign

activities as the construction and maintenance of its buildings, . . . it is not subject to local

regulations unless the Constitution says it is or the Legislature has consented to such

regulation.’ ” (Id. at p. 1012.) And citing to Board of Trustees, the court reiterated that

because the state’s “ ‘immunity from local regulations is merely an extension of the

concept of sovereign immunity’ [citation], the consent to waive immunity must be stated

in ‘express words.’ ” (Id. at p. 1013.) The court held no such express waiver appeared in

the state Integrated Waste Management Act (Pub. Resources Code, § § 40000, 40050 et

seq.). (Del Norte Disposal, at pp. 1013–1015.)

This brings me to Laidlaw Waste Systems, Inc. v. Bay Cities Services, Inc. (1996)

43 Cal.App.4th 630 (Laidlaw), the most recent exempt from local regulation case relied

on by the majority. In that case, a charter city issued a cease and desist order to a school

district’s garbage company, and the city’s garbage company, in turn, sued the school

district’s garbage company for declaratory and injunctive relief. (Id. at p. 634.) The

court cited to Hall for the proposition that the “ ‘public schools of this state are a matter

of statewide rather than local or municipal concern,’ ” and to Del Norte for the

proposition that “[s]tate agencies, including school districts, enjoy immunity from local

regulation unless the state, through statute or provision of the California Constitution, has

consented to waive such immunity.” (Id. at p. 635.) “Like state prisons, the public

schools of this state are a matter of state, not local concern,” and “[s]pecifically, the

state’s maintenance of its buildings is a sovereign activity not subject to local regulation

absent legislative or constitutional consent to local regulation.” (Id. at p. 637.) The court

held there was no such consent in any legislative enactment or constitutional provision,

including in the state Integrated Waste Management Act. (Id. at pp. 636–637.)

The Laidlaw court also ruled, as had the court in Santa Monica, that the city’s

charter city status was immaterial. “Laidlaw’s ‘home rule’ argument,” said the court,

8

“confuses the issues of preemption and sovereign immunity. The issue in this case is not

whether the City has ‘home rule’ authority over garbage collection within its city limits.

Unquestionably, local governments have that authority. . . .” (Id. at p. 638.) However,

“[t]he issue here is not preemption; the issue is whether state agencies are exempt from

local trash collection regulations under the doctrine of sovereign immunity,” and “Hall,

City of Santa Ana, and Del Norte make clear state agencies are indeed immune from such

local regulation absent an express legislative or constitutional waiver of that immunity.”

(Ibid.)

These exempt from local regulation cases address, sometimes with a lack of

analytical clarity, a number of issues, including what constitutes a municipal affair or a

matter of statewide concern, sovereign immunity, and preemption. All of the cases

holding that local regulations were inapplicable to the state (or a state entity) involved

situations where the municipality was attempting to exert regulatory control directly over

the state (or a state entity or state agent). The one contrary case, allowing local

regulatory control, differed in two respects—it involved direct regulatory control of a

third party (a lessee who expressly was not an agent of the state university) and it

involved proprietary activity by the university (leasing its property for a circus show),

rather than a governmental function.

In my view, the question before us is a more nuanced one—whether a

municipality can look to a state entity to collect a general local tax imposed, not on the

state entity, itself, but on third parties transacting business with the entity, and

particularly where, as here, the state entity will not bear the costs of collection. I also

think the line of cases addressing, specifically, the scope of municipal taxing power, is

more helpful in answering this question.

The Third Party Tax Cases

While many cases have addressed the bounds of municipal taxing power,

Ainsworth v. Bryant (1949) 34 Cal.2d 465 (Ainsworth) provides a sensible starting point

for purposes of the issue before us. In Ainsworth, a liquor retailer challenged a charter

city’s local sales tax, claiming it was invalid as to such retailers because liquor sales were

9

exclusively regulated by the state. Our Supreme Court rejected the retailer’s claim,

explaining that the “constitutional provision removing the licensing and regulation of the

liquor business from the realm of a municipal affair to that of a matter of general state-

wide concern” did not impair the “plenary power of taxation possessed by a chartered

municipality as an essential attribute of its existence.” (Id. at p. 472.) The “distinction

between regulation and taxation,” said the court, “has been uniformly maintained,” and

the court did not discern anything in the state liquor licensing and regulatory scheme that

limited the taxing power of charter cities. (Id. at pp. 472–473.) Further, in examining the

nature of the tax, the court pointed out “the subject of the tax under the ordinance is the

transaction of sale; the purchaser or consumer is made the taxpayer, and the retailer acts

only as the tax collector, responsible for remitting it to the taxing authority.” (Id. at

p. 474.)

As for the recordkeeping and remittance provisions of the local sales tax

ordinance, they appeared “reasonably adapted to insure collection and proper remission

of the tax” and, thus, constituted “an accounting standard coincident with the city’s

taxing power rather than regulation exclusively reserved to the state in the exercise of its

police power over the liquor traffic.” (Ainsworth, supra, 34 Cal.2d at p. 476.) Indeed,

said the high court, “[t]he field of taxation is replete with examples of a governmental

entity making businesses generally its agent in tax collections and prescribing certain

regulations in the accounting therefor, although such businesses are not subject to

‘regulations’ by the governmental body in any sense comparable to that use of the term,

for example, in our state constitutional provision relative to the intoxicating liquor

businesses such as withholding taxes and social security taxes for the United States

government, unemployment taxes and numerous excise taxes for the state . . . .” (Id. at

p. 477.)

In my view, Ainsworth articulates two relevant points: (1) charter cities have

“plenary power” to impose local taxes, and (2) requirements to collect and remit a local

tax are not “regulation” of the collecting entity in the sense that term means control and

oversight of the entity’s business. In other words, even if the state has exclusive

10

regulatory authority over the business engaged in by the collecting entity, that entity can

still be required to collect and remit a valid local tax. Ainsworth did not, however,

involve the collection of a local tax by a state entity.

In Rivera v. City of Fresno (1971) 6 Cal.3d 132, disapproved on another ground in

Yamaha Corp. of America v. State Bd. Of Equalization (1998) 19 Cal.4th 1, 9 (Rivera),

city users of telephone, gas, and electrical services sought to invalidate a local utility tax,

which was collected by the utilities. Observing that “some forty or more cities” imposed

this kind of tax (id. at pp. 134–135), our Supreme Court prefatorily stated that, as a

charter city, Fresno was “empowered to exercise full control over its municipal affairs,

unaffected by general laws on the same subject matters and subject only to limitations

found in the Constitution and the city charter.” (Id. at p. 135.) The principal issue in the

case was whether the utility tax was a statutorily prohibited local sales or use tax, and the

court concluded it was not. (Id. at pp. 135–139.) The court also rejected the assertion the

tax “invade[d] the field of regulation of public utilities which has clearly been preempted

by the state under applicable provisions of the California Constitution.” (Id. at p. 139.)

“[W]hether or not the state has occupied the field of regulation,” said the court, “cities

may levy fees or taxes solely for revenue purposes, as was done by the Fresno utility

users’ tax.” (Ibid.) “Further, the requirement that the utility company supplying a

particular utility service collect the utility users’ tax and remit to the city does not

constitute forbidden or conflicting regulation of the utility.” (Ibid.)

What seems most significant about Rivera for purposes of the instant case is its

reiteration of the point made in Ainsworth, that requiring an entity to collect a valid local

tax imposed on third parties does not infringe on the state’s regulatory power over that

entity, nor does it “constitute forbidden or conflicting regulation” of that entity. (Rivers,

supra, 6 Cal.3d at p. 139.) Rivera did not, however, address whether any of the utilities

were state entities and whether, as such, they could object to collecting the local tax on

sovereign immunity grounds.

In City of Los Angeles v. A.E.C. Los Angeles (1973) 33 Cal.App.3d 933 (A.E.C.

Los Angeles), a charter city sought to collect a gross receipts tax from an electrical

11

contractor that did business with state entities, including local school districts. The

contractor variously claimed that, as to receipts from its state contracts, the tax was

tantamount to an impermissible regulation of the state’s improvement of its property and

therefore it was “entitled to the state’s immunity from local regulation and taxation.” (Id.

at p. 939.) “The fatal flaw in Taxpayer’s argument,” said the appellate court, “is its

failure to recognize that the Los Angeles City business tax is a revenue and not a

regulatory measure and that the imposition of the tax upon a contractor doing business

with the state is a tax upon the contractor and not the state.” (Ibid.) Stating a “municipal

taxing scheme is [] valid unless preempted by state law or prohibited by constitutional

principles” (ibid), the court held no statute or constitutional provision preempted the

city’s local tax. (Id. at p. 940.)

The A.E.C. Los Angeles court went on to explain that “[w]hile local ordinances

may not impose a regulatory scheme upon private persons which operates to impinge

upon the sovereign power of the state (Hall [, supra,] 47 Cal.2d [at p.] 183 . . .), 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.” (A.E.C. Los

Angeles, supra, 33 Cal.App.3d at p. 940.) Furthermore, “the fact that a municipal tax is

imposed in a fashion which permits its ultimate economic burden to be passed on to a

higher governmental unit [e.g., the contractor charges the state entity a price that recoups

the local tax] does not invalidate it.” (Ibid.) The court additionally explained that the

fact the contractor was required to obtain a registration certificate showing compliance

with the local tax was not an impermissible “regulation” of its contracting business

impinging on the state’s exclusive regulatory control of such contractors. “The document

is required not to regulate but to expedite the collection of revenue.” (Ibid.) “Since no

regulatory purpose is served by the questioned provisions of the Los Angeles Municipal

Code and since Taxpayer as an independent contractor to the state cannot appropriate to

itself the state’s immunity from local taxation,” the court concluded the city could impose

its tax on receipts from state contracts. (Id. at pp. 940–941.)

12

In my view, A.E.C. Los Angeles makes a number of relevant points: (1) a charter

city’s local tax measure is valid unless prohibited by the state constitution or preempted

by conflicting state law addressing a matter of statewide concern; (2) there is a critical

distinction between a tax imposed directly on the state and a tax imposed on a third party

doing business with the state (including a third party doing business with the state in

connection with its sovereign activity of building and maintaining its property); (3) an

independent contractor does not automatically share the state’s immunity from local

taxation; (4) there is a distinction (as explained in Ainsworth and Rivera) between

administrative requirements that insure payment of a local tax and the state’s “regulation”

of how an entity conducts its business; and (5) the fact taxation of a third party may result

in an indirect burden on the state or a state entity (e.g., through a higher contract price to

cover the local tax), does not invalidate the local tax.

This brings me to City of Modesto, supra, 34 Cal.App.3d 504, one of the two cases

that have been at the center of the debate between the city and the state universities in this

case. City of Modesto involved another charter city utility tax imposed on local users of

water, gas, electricity and telephone services. (Id. at p. 506.) Two irrigation districts,

which were state agencies and sold electricity as well as water, were among the utilities

required to collect and remit the tax. The districts did not dispute that the city had the

power to impose the local tax, no doubt given Rivera, in which the Supreme Court upheld

a charter city’s utility tax against statutory and preemption challenges. Rather, the

districts claimed they could not be compelled to collect the tax “because the ordinance, to

the extent that it applies to them, impinges on the state’s sovereignty over local entities;

they assert that the collection requirement of the city ordinance is a regulation and that

this regulation, if extended to state agencies, contravenes the almost universal rule . . .

that the activities of the state and its agencies cannot be controlled or regulated by local

entities in the absence of legislative consent.” (Ibid.) Thus, the City of Modesto court

was required to address the sovereign immunity question that was neither raised nor

addressed in Rivera.

13

The appellate court first stated the districts’ position ran counter to “the doctrine of

stare decisis,” citing two California Supreme Court cases. (City of Modesto, supra,

34 Cal.App.3d at p. 506.) These cases held (a) irrigation districts that generate electricity

are engaged in a proprietary activity in competition with other public service corporations

(Yolo v. Modesto Irr. Dist. (1932) 216 Cal. 274, 278 (Yolo)),5 and (b) an ordinance

requiring a utility to collect a city’s tax on users does not “constitute forbidden or

conflicting regulation of the utility” (Rivera, supra, 6 Cal.3d at p. 139). (City of Modesto,

at pp. 506–507.) The court did not discuss the fact Yolo involved an irrigation district’s

governmental immunity defense to a tort action or that Rivera dealt with an asserted

statutory bar to the local utility tax and preemption, not sovereign immunity. Rather, the

City of Modesto court simply concluded that if both of these propositions were so, “how

can it be argued plausibly that the collection requirement of respondent’s ordinance, if

applied to that proprietary activity, is regulation which impinges on the state’s

sovereignty[?]” (Id. at p. 507.) The court then went on to defend its reliance on Yolo,

which the districts claimed was no longer a controlling precedent. (Id. at pp. 506–508.)

Presumably, the City of Modesto court could have stopped there, but it did not.

Instead, it stated: “We affirm the judgment for another reason.” (City of Modesto, supra,

34 Cal.App.3d at p. 508.) While the majority views this reason as an “alternative”

rationale that is mere dicta, it is not at all clear that that is the case. While the appellate

court clearly believed the combination of Yolo and Rivera provided sufficient authority to

affirm, the opinion can also be read as ultimately affirming “for another reason.”

In any case, the City of Modesto’s other reason is grounded on three points which

neither the majority, nor any subsequent case, has questioned: one, a charter city’s power

to “levy a utility user’s tax is a municipal affair and stems from the Constitution” (citing

Cal. Const., art XI, § 5 and Rivera, supra, 6 Cal.3d at p. 135); two, such a city “has no

5

The appellate court did not address the fact the utility tax also applied to water

service, even though that would seemingly have been within the districts’ governmental

function. The irrigation districts may have supplied water only to municipal water

districts, however, and not directly to city users.

14

practical nor economical means of collecting such a tax without the cooperation of the

supplier of the utility service”; and three, “[i]t is basic that the power to tax carries with it

the corollary power to use reasonable means to effect its collection.” (City of Modesto,

supra, 34 Cal.App.3d at p. 508.) The court, thus, concluded the charter city’s

constitutionally grounded power to impose and collect a local utility tax took precedence

over the irrigation districts’ state sovereign immunity. (Id. at p. 508.) “While irrigation

districts may be state agencies, they are nevertheless creatures of the Legislature, and like

the Legislature must submit to a constitutional mandate; the California Constitution is the

paramount authority to which even sovereignty of the state and its agencies must yield.”

(Ibid.) “It follows,” then, said the court, “that the collection requirement of respondent’s

ordinance, though applicable to state agencies, is a reasonable exercise of the city’s

constitutional power to tax for revenue purposes.” (Ibid.) The court also dismissed the

districts’ assertion that collection would be a burden. “[T]he districts are merely conduits

for the collection of the city’s tax; they are not liable for the tax itself or the cost of

collection; the trial court has ordered the city to reimburse the districts for all costs

incurred in the collection process.” (Id. at pp. 508–509.)

There is no question, then, that City of Modesto rejected a sovereign immunity

defense raised by state entities to collecting a local tax imposed not on the entities,

themselves, but on third parties doing business with the state entities.

While the majority views City of Modesto’s holding as limited to its stare decisis

rationale, which, in turn, points out the utility tax was imposed on third parties in

connection with a proprietary activity (the irrigation districts’ sale of electricity), I am not

persuaded the court’s stare decisis rationale is necessarily its holding. It appears equally

plausible to me that the court ultimately grounded its affirmance on its power-to-tax-

includes-power-to-collect rationale, which makes no mention of any distinction between

a state entity’s proprietary activity and governmental function when it comes to a general

tax imposed on third parties. Indeed, if a general local tax cannot be imposed on third

parties in connection with an activity within a state entity’s governmental function and

for which it charges a fee, then the problem in the instant case is not merely one of

15

collection, but rather, it is the validity of the tax, itself, as to such third parties. And if

that were the case, then third parties doing business with the state in connection with any

governmental function (and who are not agents of the state) would essentially “share” the

state’s sovereign immunity from local taxation, a proposition seemingly rejected in

A.E.C. Los Angeles, supra, 33 Cal.App.3d at pp. 939–940.

The majority also distinguishes City of Modesto on the ground the irrigation

districts were legislatively created state entities, whereas the instant case involves state

universities whose existence is rooted, in varying degrees, in our state constitution.

However, the sovereignty of any state entity, be it created by constitution or by statute, is,

at its core, derived from the sovereignty of the State of California. Thus, while it is true

the Regents of the University of California is largely an independent entity (a “ ‘ “public

trust” ’ ” that has been characterized as “ ‘ “ ‘branch of the state itself’ ” ’ ” (Goldbaum v.

Regents of University of California (2011) 191 Cal.App.4th 703, 709)), its sovereignty

derives from that of the state as imparted to it by the state constitution.6 (Ibid. [the

Regents is “not entirely autonomous” and “[t]he Legislature may regulate the Regents’

conduct in three areas”7].) The Legislature, another branch of the state, also gives effect

to the state’s sovereign immunity, including waiving it as it sees fit. (See Razeto v. City

of Oakland (1979) 88 Cal.App.3d 349, 352 [after Supreme Court “eliminated” sovereign

immunity, the Legislature commissioned study “to develop legislation insuring the

preservation of necessary sovereign immunity”].) State districts and agencies, in turn,

like the California State University, also share in the state’s sovereign immunity, as

afforded to them by the state Legislature. (See Lofchie, supra, 229 Cal.App.4th at

6

“The University of California was originally a corporation, with the Regents as

its board of directors.” (People v. Lofchie (2014) 229 Cal.App.4th 240, 248, fn. 5

(Lofchie).) After controversy arose between political factions seeking to control the

university’s governance and curriculum, it was given constitutional stature to promote

academic independence. (Ibid.)

7

In nearly all other respects, the Regents has a “ ‘general immunity from

legislative regulation.’ ” (Lofchie, supra, 229 Cal.App.4th at p. 249, quoting San

Francisco Labor Council v. Regents of University of California (1980) 26 Cal.3d 785,

788.)

16

pp. 248–250 & fn. 6; Western Title Guar. Co. v. Sacramento & San Joaquin Drainage

Dist. (1965) 235 Cal.App.2d 815, 820.) Indeed, the City of Modesto court made no

distinction between the state Legislature and the irrigation districts in terms of their

sovereign immunity. The districts, said the court, “like the Legislature must submit to a

constitutional mandate,” namely, a charter city’s “constitutional power to tax for revenue

purposes.” 8 (City of Modesto, supra, 34 Cal.App.3d at p. 508, italics added.)

In any case, given the fundamental points undergirding City of Modesto’s power-

to-tax-includes-power-to-collect rationale, I think City of Modesto has greater

significance than the majority credits. In my view, that court properly concluded the

state’s sovereign immunity is not impinged by (or, as the court phrased it “must yield” to)

an otherwise valid exercise of a charter city’s constitutionally secured power to tax—a

power that “necessarily includes” the ability to use reasonable means to collect, at least

where the city reimburses the state entity’s collection costs, as San Francisco represents it

will do here.

Moving on from City of Modesto brings me to Oakland Raiders v. City of Berkeley

(1976) 65 Cal.App.3d 623 (Oakland Raiders). In that case, a National Football League

team that played at the University of California at Berkeley’s stadium, sued the city,

claiming its local license tax based on gross receipts was a “regulatory rather than a

revenue-raising measure” and, thus, was “an improper regulation” of the university’s use

of its property. (Id. at p. 626.) While recognizing that the Regents “is not subject to local

regulations with regard to its use or management” of its property, citing Hall, the

appellate court explained, as prior cases had done, that “ ‘whether or not the state law has

occupied the field of regulation, cities may tax businesses carried on within their

8

Moreover, because the Board of Trustees of the California State University––an

entity largely created, and extensively controlled, by the Legislature––is also a defendant

in this case, City of Modesto cannot be distinguished on the ground it involved only

legislatively created state entities. (See Lofchie, supra, 229 Cal.App.4th at p. 248–249,

fn. 6 [“In contrast [to the Regents], the Legislature possesses comprehensive powers of

regulation over the California State University, which ‘ “ ‘is subject to full legislative

control, and has “only such autonomy as the Legislature has seen fit to bestow.” ’ ” ’ ”].)

17

boundaries . . . .’ ” (Ibid.) “A tax upon the operation of a business by a lessee of publicly

owned property constitutes a tax upon the privilege of performing the business rather

than a tax upon the property.” (Id. at p. 627.) And where one operating under a

government contract or lease is taxed like any other contractor or lessee, “ ‘there is no

sufficient ground,’ ” said the court, “ ‘for holding that the effect upon the Government is

other than indirect and remote,’ ” citing Helvering v. Mountain Producers Corp. (1938)

303 U.S. 376, 386–387 (Helvering).9 (Oakland Raiders, at p. 627.) Moreover, “the fact

that a tax may constitute an indirect burden upon an organ of government does not

invalidate the tax.” (Ibid.) Nor does the “mere fact that a [local] tax has a collateral

effect of regulating an activity” conducted on public property. (Id. at p. 628.)

Oakland Raiders, thus, reaffirmed several points being developed in the line of

cases dealing directly with the interplay of municipal taxing power and the state’s

sovereignty, including that: (1) taxing a third party contracting with a state entity is

fundamentally different from taxing a state entity, itself; (2) a local tax of general

application imposed on a third party is not a “regulatory scheme” interfering with the

state’s regulatory authority over its own property or over the third party’s business

activities; and (3) the fact a local tax on a third party may impose an indirect burden on

the state, or have a collateral regulatory effect on a third party’s use of state property,

does not invalidate the local tax.

9

Helvering is one of the early United States Supreme Court cases examining the

scope of what came to be called “intergovernmental tax immunity,” shared by the federal

and state governments. In Helvering, an energy lessee claimed, among other things, that

it was effectively a state instrumentality and, thus, was not subject to federal income tax.

(Helvering, supra, 303 U.S. at p. 383.) The Supreme Court rejected this argument,

commenting “the power to tax should not be crippled ‘by extending the constitutional

exemption from taxation to those subjects which fall within the general application of

non-discriminatory laws, and where no direct burden is laid upon the governmental

instrumentality, and there is only remote, if any, influence upon the exercise of the

functions of government.’ ” (Id. at p. 385, quoting Willcuts v. Bunn (1931) 282 U.S. 216,

225.)

18

The majority discounts Oakland Raiders as embracing the regulatory versus tax

distinction subsequently rejected by our Supreme Court in California Federal. But that is

not the case. As I shall discuss more fully, California Federal addressed a different

problem—the dual preemption analyses that had developed in the courts of appeal,

depending on whether a challenged local ordinance was a tax or a regulatory measure,

and which essentially had made local tax measures inviolable as against a preemption

challenge. (California Federal, supra, 54 Cal.3d at pp. 13–18.) Indeed, a comparison of

the fundamental taxation principles relied on in Oakland Raiders, and the preemption

principles explicated in California Federal, shows the cases involved different issues and

reached conclusions that are not at odds with one another.

Our Supreme Court took up the issue of local taxation of third parties again in

Weekes, supra, 21 Cal.3d 386. In that case, individuals employed within the bounds of a

charter city challenged an “ ‘employee license fee’ ”—or a “privilege tax” (id. at pp. 390,

395)—imposed by the city on the “ ‘privilege of engaging in or following any business,

trade, occupation or profession as an employee.’ ” (Id. at p. 390.) In the vernacular, this

kind of tax was called a “ ‘commuter’s tax,’ ” designed to insure individuals working, but

not residing, in a city pay some share of the cost of municipal services. (Id. at p. 413 (dis.

opn. of Thompson, J.).) The individuals claimed the tax was, in actuality, a statutorily

prohibited local income tax. (Id. at p. 390.) The city disagreed and further maintained

that even if the tax was an income tax, its constitutionally secured taxing power could not

be infringed by the state Legislature. (Id. at pp. 390–391.) The Supreme Court

concluded the city’s revenue measure was not an income tax and, thus, did not reach the

issue of whether the statute impermissibly constrained the city’s home rule powers.

At the end of its opinion, the high court “also conclude[d]” the city was “not

barred from imposing its license tax upon state employees who work within the city,”

citing to Graves v. N.Y. ex rel. O’Keefe (1939) 306 U.S. 466, 486–487 (Graves).

(Weekes, supra, 21 Cal.3d at p. 398.) In Graves, the United States Supreme Court held

intergovernmental tax immunity did not bar states from imposing an income tax on

federal workers. The court did not consider whether the federal government could refuse,

19

on sovereign immunity grounds, to collect and remit an otherwise permissible state

income tax.

The city ordinance upheld in Weekes, however, in addition to taxing individuals

working within the city, “require[d]” employers, which included the state, to withhold the

tax from employee wages. (Weekes, supra, 21 Cal.3d at p. 398.) The majority does not

view this fact as being of any note, pointing out the state was not a party in Weekes and

the state can waive its sovereign immunity. That is true. But upholding the local tax as

to state employees would have been pointless if the city could not expect the tax to be

collected by the state. Thus, in my view, Weekes at least inferentially suggests that

collecting a valid local tax is not an impingement of the state’s sovereignty. It also

suggests third parties can be taxed in connection with their participation in a

governmental function, as some of the state employees taxed by the city in Weekes must

have been delivering services within the state’s governmental function. In short, I cannot

square the result in Weekes—the state collecting a valid local tax imposed on its own

employees—with the majority’s conclusion, here, that the state universities need not

collect a valid parking tax imposed on third parties, even though the schools will be

reimbursed their costs of collection.

The next legal decision of note is an Attorney General opinion concluding a

charter city could require the State Park System’s agent operating the Asilomar

conference center to collect a local occupancy tax from those using the center.

(65 Ops.Cal.Atty.Gen., supra, at pp. 269–271.) The Attorney General recognized that

ordinarily the state and its agents are exempt from taxation unless the Legislature

consents, but the tax in question was “an excise tax upon the occupant and not upon the

proprietor.” (Id. at p. 269) Thus, the “sole issue” was whether “the state or its agent may

be required to collect the tax for and on behalf of the city.” (Ibid.) The Attorney General

concluded this was permissible, citing to City of Modesto and specifically to the appellate

court’s power-to-tax-includes-power-to-collect rationale. (Id. at pp. 270–271.) The

Attorney General did not discuss whether the state was engaged in a proprietary activity

or a governmental function, and this might well have presented a close question given

20

that Asilomar was built as a contemplative retreat and was substantially gifted to the state

to preserve its iconic character and continue as a “ ‘Refuge by the Sea.’ ” (Asilomar

Conference Grounds, Park History <http://www.visitasilomar.com/discover/park-

history/> [as of May 25, 2017].10)11

This brings me to California Federal, supra, 54 Cal.3d 1, in which our Supreme

Court rectified what had become an overly indulgent view of charter city taxing power

10

Asilomar was built by the Young Women’s Christian Association (YWCA)

commencing in 1913. Many of its building were designed by architect Julia Morgan, and

those buildings designed by Morgan are designated National Historic Landmarks.

(Asilomar Conference Grounds, Park History

<http://www.visitasilomar.com/discover/park-history/> [as of May 25, 2017].)

11

The Attorney General concluded the State Park System’s lessee operating

cabins and a lodge at Pfeiffer Big Sur state park could also be required to collect a county

occupancy tax. However, the Attorney General used a different analysis given that the

county’s taxing authority derived largely from statute. (65 Ops.Cal.Atty.Gen., supra, at

p. 271–272.) The Attorney General invoked the principle that while the state and its

agencies generally are not included within the general provisions of an authorizing

statute, this exclusion only applies if their inclusion “would result in an infringement

upon sovereign powers.” (Id. at p. 273.) Thus, as to the county tax, the Attorney General

examined whether the Big Sur cabins and lodge were “an integral facet of” a state park’s

“exercise of sovereign power” and concluded they were not. (Id. at pp. 273–274.) Since

the lodging was “operated by the state in a proprietary capacity,” the Attorney General

concluded its agent could be required to collect the statutorily authorized local tax. (Id. at

p. 274.) Thus, in contrast to the Attorney General’s analysis of the charter city’s

occupancy tax, his analysis of the county’s tax depended on the state entity being

engaged in a proprietary activity, even though the tax was a general one imposed on third

parties and not on the state, itself (or on its agent).

In my view, the Attorney General’s struggle with the county tax reflects the

absence of a cogent analytical template that allows the courts to evaluate the role of a

state entity in collecting a general local tax imposed on third parties. Indeed, the

Attorney General’s limited view of the Park System’s governmental function at Big Sur

is difficult to square with the generous view of governmental function more recently

embraced in Bame and taken by the trial court and majority here. (Bame, supra,

86 Cal.App.4th at pp. 1356–1357.) I do not disagree with this broader view of

governmental activity, but I do note that in applying intergovernmental tax immunity, the

federal courts take a much narrower view of what governmental activity is immune from

taxation. (E.g., New York v. United States (1946) 326 U.S. 572, 581 [upholding federal

tax imposed on state in connection with its bottling and sale of mineral water].)

21

vis-à-vis conflicting state enactments. In that case, a charter city sought to collect an

annual license fee from a financial corporation, which, by statute, was subject to a state

income tax in lieu of any other taxes and license fees. (Id. at p. 6.) The trial court ruled

the taxation of such corporations was a matter of statewide concern and the city’s tax

was, therefore, preempted as to such corporations. The Court of Appeal, following a

trend that had developed in the appellate courts, reversed, ruling charter city “tax

measures” are “municipal affairs” and “invariably are immune from state legislative

supremacy.” (Ibid.)

The Supreme Court reversed, rejecting the notion that in considering a preemption

claim there is any distinction between local “regulatory” and local “tax measures.”

(California Federal, supra, 54 Cal.3d at pp. 13–14 [to extent courts had “made city

powers of taxation forever sacrosanct” leading the courts of appeal “to fracture”

municipal affairs into “two halves” (i.e., revenue and regulatory matters), that “duality”

was “illusory”], at p. 15 [“we find no reason in any policy underlying the municipal home

rule provision why the subject of charter city taxation should merit treatment different

from charter city regulatory measures”].) Whether a regulatory or tax measure, the

fundamental inquiry as to preemption concerns the “limits on a charter city’s

sovereignty.” (Id. at p. 13.) Accordingly, the problem before the high court was “that of

adjusting the conflict between the effects of the City’s business license tax and the

Legislature’s asserted interest in the uniform taxation of commercial banks and financial

institutions.” (Id. at p. 15.)

Our Supreme Court then set forth the proper approach for resolving true conflicts

between state laws and otherwise permissible charter city enactments. (California

Federal, supra, 54 Cal.3d at pp. 16–18.) “[A] court asked to resolve a putative conflict

between a state statute and a charter city measure initially must satisfy itself that the case

presents an actual conflict.” (Id. at p. 16.) If it does, the court must then make the

“bedrock” determination of whether the state statute addresses a matter of “statewide

concern.” (Id. at p. 17.) In making that determination, the court “should avoid the error

of ‘compartmentalization,’ that is, of cordoning off an entire area of governmental

22

activity as either a ‘municipal affair’ or one of statewide concern.” (Ibid.) Rather, what

the court must determine is whether “the state has a more substantial interest in the

subject than the charter city.” (Id. at p. 18.)

Thus, when “[w]hen a court invalidates a charter city measure in favor of a

conflicting state statute, the result does not necessarily rest on the conclusion that the

subject matter of the former is not appropriate for municipal regulation. It means, rather,

that under the historical circumstances presented, the state has a more substantial interest

in the subject that the charter city.” (California Federal, supra, 54 Cal.3d at p. 18.)

After canvassing the history of the state’s control of financial institutions, the high court

concluded the statute at issue concerned a matter of statewide concern and, as to financial

corporations, took precedence over the city’s local tax. (Id. at pp. 18–24.)

In my view, the Supreme Court’s preemption analysis set forth in California

Federal—which applies to any local ordinance, regardless of whether it is a local tax or

regulatory measure—is not inconsistent with the court’s earlier rulings in Rivera and

Ainsworth that the imposition and collection of local taxes is not impermissible

“regulation” in conflict with the state’s sovereign regulatory authority. (Rivera, supra,

6 Cal.3d at p. 139; Ainsworth, supra, 34 Cal.2d at pp. 472–473; see Oakland Raiders,

supra, 65 Cal.App.3d at pp. 626–628; City of Modesto, supra, 34 Cal.App.3d pp. 506–

507; A.E.C. Los Angeles, supra, 33 Cal.App.3d at pp. 939–940.) Indeed, the high court

expressly distinguished Ainsworth as holding that the state’s exclusive regulatory control

of liquor sales did not foreclose the local taxation of third parties or collection of such a

tax by regulated entities. (California Federal, supra, 54 Cal.3d at p. 14, fn. 12.)

There is no question that under California Federal a local tax imposed on a third

party (and its collection) is preempted if there is an actual conflict with state law and that

law addresses a matter of statewide concern. However, there is no such issue here, as the

parties have assumed the City’s local parking tax is valid for purposes of the universities’

sovereign immunity claim. Rather, the issue here is whether the state universities can be

asked to collect the local tax from third parties, particularly where their costs of doing so

will be reimbursed.

23

In Eastern Mun. Water, supra, 31 Cal.App.4th 24, a municipal water district that

provided water and sewer services to city residents refused to collect a local tax on those

services. (Id. at pp. 26–27) The water district, a state entity, did not claim the local

ordinance impinged on state sovereignty, but “only that there was no statute” authorizing

general law cities to require collection of a local tax. (Id. at p. 30.) The appellate court

nevertheless discussed City of Modesto at some length. (Id. at p. 29.) This included

paraphrasing that court’s discussion of Yolo, supra, 216 Cal. at p. 274, as concluding

“irrigation districts such as appellants [are] engaged in proprietary activity.” (Eastern

Mun. Water, at p. 29.) In fact, City of Modesto did make such a blanket statement, but

said that in providing electricity, irrigation districts engage in a proprietary activity. (City

of Modesto, supra, 34 Cal.App.4th at pp. 506–507.) This paraphrase also ignored that the

district before the Eastern Mun. Water court was a municipal water district whose

governmental functions are to provide water and sewer services directly to city users.

(Wat. Code, §§ 71610 [authorizing water districts to supply water], 71670 [authorizing

water districts to construct and operate sewage facilities].)

In any case, the appellate court relied on the principles undergirding City of

Modesto’s power-to-tax-includes-power-to-collect rationale to conclude that even a

general law city can look to a state water district to collect a local utility tax. “The

authorities are uniform in concluding that ‘the city’s power to levy such tax would

include the power to use reasonable means to effect its collection.’ ” (Eastern Mun.

Water, supra, 31 Cal.App.4th at p. 30, quoting Ainsworth, supra, 34 Cal.2d at p. 476.)

The court also looked to several federal cases, quoting one to the effect that reserving the

power to tax also includes reserving the power to collect, as “ ‘[t]he former without the

latter would be an empty gesture.’ ” (Eastern Mun. Water, at p. 31, quoting Ranier Nat.

Park Co. v. Martin (W.D. Wn. 1937) 18 F. Supp. 481, 488, aff’d 302 U.S. 661.)

The majority distinguishes Eastern Mun. Water as involving only an issue of

statutory construction, pointing out the water district did not raise sovereign immunity.

That is true. Nevertheless, Eastern Mun. Water is significant for two reasons. First, it

reaffirmed the fundamental principles underlying City of Modesto’s power-to-tax-

24

includes-power-to-collect rationale. Second, there can be no doubt that in providing

water and sewer services to city residents, the water district was performing

governmental functions—yet, it was still required to collect the city’s local tax on those

services. Thus, I also cannot square the result in Eastern Mun. Water—that state water

districts are required to collect a local tax imposed on third parties in connection with

their governmental functions—with the majority’s conclusion, here, that the state

universities need not collect a local parking tax imposed on third parties in connection

with a governmental function, and even though the schools will be reimbursed their costs.

Finally, I arrive at Bame, supra, 86 Cal.App.4th 1346, which is the other principal

case, in addition to City of Modesto, on which the parties have focused, and which the

majority says rejects City of Modesto’s power-to-tax-includes-power-to-collect rationale

and supports the result it reaches here. In Bame, a charter city sought to collect a license

fee and an admissions tax in connection with certain events conducted under contract for

the “ ‘state institution’ ” (the district) that conducts the Del Mar Fair and also leases its

property to the Del Mar Thoroughbred Club for horse racing. (Id. at p. 1351.) Event

operators eventually began to refuse to pay the license fee and admissions tax, and the

city sued the district seeking a declaration that its local revenue raising measures were

valid. (Id. at pp. 1353–1354.) The district, claiming its contractors were extensions of

itself and thus were imbued with its state sovereignty, raised several defenses, including

sovereign immunity and preemption. (Id. at pp. 1354–1355.) The city maintained, in

turn, that its revenue raising measures were a valid exercise of its constitutional home

rule power to tax and, in any case, the district, in contracting with the event operators,

was acting “in a ‘proprietary’ as opposed to governmental capacity.” (Id. at p. 1355.)

Citing extensively to Laidlaw, supra, 43 Cal.App.4th 630, which, as discussed,

had concluded a local school district could not be required to use a charter city’s garbage

collector, the Bame court stated “[i]n determining whether the District’s contractors are

exempt from local regulations under the doctrine of sovereign immunity, the relevant

inquiry is whether the District acts within its governmental capacity in contracting with

these entities.” (Bame, supra, 86 Cal.App.4th at p. 1355.) And, like Laidlaw, the Bame

25

court explained the city’s charter city status “is not pertinent to this analysis.” (Id. at

pp. 1355–1356.) “The issue of sovereign immunity,” reiterated the Bame court, “is

distinct from that of preemption . . . . ‘[S]tate agencies are indeed immune from . . . local

regulation absent an express legislative or constitutional waiver of that immunity.’ ” (Id.

at p. 1356, quoting Laidlaw, at pp. 638–639.) As for the distinction between proprietary

and governmental activity, while it is “no longer applicable to determine governmental

tort liability,” the Bame court agreed it “remains viable in the context of encroachment of

municipal regulations.” (Bame, at p. 1356.)

Looking to the district’s statutorily authorized purposes and activities, which

included promoting and featuring “all of the industries and industrial enterprises,

resources and products of every kind or nature in the state,” the Bame court concluded

that “[g]iven the broad functions and authority granted to the District, . . . its sovereign

immunity extends to those private entities with which it leases or contracts in order to put

on product exhibitions and shows.” (Bame, supra, 86 Cal.App.4th at p. 1358.) The court

next concluded the state had not expressly agreed to the city’s licensing fee and

admissions tax. (Id. at pp. 1359–1361.) Accordingly, the court invalidated the city’s

ordinance to the extent it imposed “a license fee on the entities contracting with the

District to put on consumer shows,” as it taxed “the District’s sovereign activities.” (Id.

at p. 1362, italics added.)

The problem with using Bame as an analytical guidepost is its lack of clarity as to

the nature of the disputed license fee and admissions tax. Most of its language

characterizes the fee and tax as imposed on the district’s agents (and, thus, effectively, on

the district, itself). (E.g., Bame, supra, 86 Cal.App.4th at p. 1351 [Bame, one of the

contractors, “sought a refund of fees and taxes paid to the City”], at p. 1352 [“It is

undisputed that the admissions tax is ‘paid 100% by contractors who put on the events at

[the] Del Mar Fairgrounds.’ ”], at p. 1353 [Bame “alleged that up until 1997 he paid the

City a 10 percent admissions tax for conducting his home and garden show”], at

pp. 1361–1362 [the provisions of certain horse racing statutes “do not constitute express

consent by the state to taxing or regulation of the District or its contractors by the City;

26

thus, “as applied to permit the City to impose an admissions tax on entities contracting

with the District to put on consumer shows, [Del Mar Mun. Code,] section 3.08.010 of

the ordinance taxes the District’s sovereign activities and is invalid and unenforceable”].)

However, other language in Bame suggests there was, in fact, a distinction

between the license fee and the admissions tax, namely that the former was imposed

directly on the event operators (and thus, effectively, directly on the district), while the

latter was imposed on those attending events, but was collected by the contractors. For

example, the appellate court quoted verbatim an admission by the City of Del Mar that

limited the case to contractors putting on non-horse racing events—a significant

narrowing of the case. (Bame, supra, 86 Cal.App.4th at p. 1355.) That admission was as

follows: “The City maintains it, ‘does not impose a business license requirement on the

District or the Del Mar Thoroughbred Club, the association which conducts horse racing

and satellite wagering. Nor does the City impose admissions taxes on patrons of the

racetrack or the Del Mar Fair.’ Given these admissions . . . we do not address the validity

of the ordinance to the extent it arguably permits the City to tax or impose fees upon the

District itself or Del Mar Thoroughbred Club patrons . . . .” (Ibid.) This quoted

statement by the city suggests that while the city’s licensing fee was, indeed, imposed

directly on the district’s contractors, its admissions tax was actually imposed on patrons,

with the contractors liable for its collection.12

In any case, the Bame court did not identify any such distinction between the

disputed licensing fee and admissions tax, but treated both as though they were imposed

on the district’s agents (and, thus on the district, itself). Given that view of the local

revenue measures, the result Bame reached—that, regardless of its charter status, the city

could not impose the fee and tax on the district’s agents—is indisputably correct, as no

state entity can, itself, be subject to a local tax unless it consents. Given that view of the

12

The same is suggested by the language of the ordinance—that the admissions

tax was actually imposed on patrons, but collected and remitted by the contractors, who

were liable for the tax if they failed to collect it. (See Del Mar Mun. Code, §§ 3.08.010,

3.08.070, 3.08.080, 3.08.090.)

27

revenue measures, however, Bame does not address the issue before us—whether a state

entity can be required to collect a general local tax imposed not on the entity, itself, but

on third parties doing business with the entity. Thus, contrary to the majority’s view,

Bame does not reject City of Modesto or any other third party taxation or collection case–

–in fact, Bame makes no mention of any of these cases. Nor does Bame support the

result reached by the majority in this third party case.

Reconciling the Exempt from Local Regulation and Third Party Tax Cases

As the foregoing recitation of the exempt from local regulation and the third party

tax cases reflects, I am unable to subscribe to the majority’s view—that collection of the

City’s parking tax would constitute impermissible regulation of the state universities’ use

and maintenance of their property—for several reasons. It disregards the distinction

consistently made in the third party tax cases between a local tax imposed on a state

entity and a general tax imposed on a third party doing business with the entity. (See

Eastern Mun. Water, supra, 31 Cal.App.4th at p. 26 [utility tax on third parties]; Oakland

Raiders, supra, 65 Cal.App.3d at pp. 626–628 [license tax on third parties]; City of

Modesto, supra, 34 Cal.App.3d at p. 506 [utility tax on third parties]; A.E.C. Los Angeles,

supra, 33 Cal.App.3d at p. 939 [gross receipts tax on third parties]; see also Weekes,

supra, 21 Cal.3d at pp. 390–391 [privilege tax imposed on third parties]; Rivera, supra,

6 Cal.3d at p. 135 [utility tax on third parties]; cf. Bame, supra, 86 Cal.App.4th at

pp. 1361–1362 [characterizing local fee and tax as “on” district’s agents].) It disregards

the uniform view in the third party tax cases that such a tax does not impermissibly

invade the state’s exclusive regulatory authority over a collecting entity or a third party

(see Rivera, at p. 139; Ainsworth, supra, 34 Cal.2d at p. 472), nor does it constitute

impermissible regulation of the state’s use of its own property. (See Oakland Raiders, at

pp. 627–628; City of Modesto, at pp. 506–507.) And it disregards the authority upholding

local taxes imposed on third parties doing business with the state, even in connection

with the performance of a governmental function (see Weekes, at p. 398 [upholding local

privilege tax on state employees]; A.E.C. Los Angeles, at pp. 939–941 [upholding local

gross receipts tax on contractor working on local school projects]), as well as the

28

authorities requiring state entities to collect valid local taxes, including taxes on services

within an entity’s governmental function (see Eastern Mun. Water, at p. 30 [water district

required to collect local utility tax on water and sewer services]; cf.

65 Ops.Cal.Atty.Gen., supra, at pp. 270–271 [state’s agent required to collect local

occupancy tax on use of Asilomar]; cf. Weekes, at p. 398 [upholding local ordinance

imposing tax on all employees, including state employees, that required employers to

collect tax]). In fact, a number of these third party tax cases explain why Hall’s not-

subject-to-local-regulation rational does not apply. (See, e.g., Oakland Raiders, at

p. 626; A.E.C. Los Angeles, at p. 940.)

Accordingly, in my view, the principles undergirding the City of Modesto’s

power-to-tax-includes-power-to-collect rationale more appropriately resolves the

question of a state entity collecting a valid local tax imposed on third parties, particularly

where, as here, the state entity will be reimbursed its costs of collection and, thus, will

serve as a “mere[] conduit[]” of the tax. (City of Modesto, supra, 34 Cal.App.3d at p.

508.) As our Supreme Court observed in California Federal, “the power to levy local

taxes in support of local expenditures is an essential function of municipal government.”

(California Federal, supra, 54 Cal.3d at p. 13; see Ainsworth, supra, 34 Cal.2d at p. 472

[the “plenary power of taxation possessed by a chartered municipality [is] an essential

attribute of its existence”].) And as the appellate courts in Eastern Mun. Water and City

of Modesto pointed out, that power is illusory without the power to collect. (Eastern

Mun. Water, supra, 31 Cal.App.4th at p. 30; City of Modesto, at p. 508.) There is no

question that requiring a state entity to collect a local tax brings the respective sovereign

spheres of the state and a municipality within harrowingly close proximity. Nevertheless,

it is “the difficult but inescapable duty of the court to, in the words of one authoritative

commentator, ‘allocate the governmental powers under consideration in the most sensible

and appropriate fashion.’ ” (California Federal, at p. 17.)

I find support for a more nuanced view of sovereign immunity—that it is not

impinged by collecting a general local tax imposed on third parties, particularly where the

costs of such are reimbursed—not only in the principles developed in the third party tax

29

cases, but also in federal tax cases (which our appellate courts have cited as supporting

authority in a number of the third party tax cases).

The United States Supreme Court has addressed competing sovereignty claims

over taxation in two contexts—disputes between states and the federal government, and

between federally recognized Indian tribes and the states. While the source and nature of

sovereign immunity attendant to the federal government, the states, and recognized

Indian tribes differs, as far as taxation within their respective jurisdictional spheres is

concerned, each is recognized as a sovereign, with the power and dignity that imports.

(See, e.g., Washington v. Confederated Tribes of Colville Indian Reservation (1980)

447 U.S. 134, 135–136, 152–154 (Colville) [“power to tax transactions occurring on trust

lands . . . is a fundamental attribute of sovereignty which the tribes retain unless divested

of it by federal law or necessary implication by their dependent status”; “even if the

State’s interests were implicated by the tribal taxes . . . it must be remembered that tribal

sovereignty is dependent on, and subordinate to, only the Federal Government, not the

States”]; Graves, supra, 306 U.S. at p. 477 [“The theory of the tax immunity of either

government, state or national, and its instrumentalities, from taxation by the other, has

been rested upon an implied limitation on the taxing power of each, such as to forestall

undue interference, through the exercise of that power, with the governmental activities

of the other.”]; Helvering v. Gerhardt (1938) 304 U.S. 405, 411–422 [discussing

evolution of implied constitutional intergovernmental tax immunity].) Thus, while I have

no quarrel with the majority’s point that federal and state sovereign immunity differ, and

that tribal sovereign immunity differs from both federal and state sovereign immunity,

when it comes to the power to tax third parties within their jurisdictional borders, the

sovereign power of all three is on fairly even footing.

The United States Supreme Court has consistently reaffirmed that one sovereign

cannot directly tax another sovereign with respect to its governmental functions. (See,

e.g., United States v. County of Fresno (1977) 429 U.S. 452, 459 (County of Fresno)

[“[s]ince McCulloch [v. Maryland (1819)17 U.S. 316, 4 Wheat. 316, 4 L.Ed. 579

(McCulloch)], this Court has adhered to the rule that States may not impose taxes directly

30

on the Federal Government”].) It also has repeatedly held, however, that a generally

applicable tax imposed by one sovereign on third parties doing business with another

sovereign, does not impinge on the latter’s immunity, even if the tax indirectly imposes

additional costs on the nontaxing sovereign. (See County of Fresno, at p. 462 [“The rule

to be derived from the Court’s more recent decisions” is that “the economic burden on a

federal function of a state tax imposed on those who deal with the Federal Government

does not render the tax unconstitutional so long as the tax is imposed equally on other

similarly situated constituents of the State.”]; Helvering v. Gerhardt, supra, 304 U.S. at

pp. 421–424 [upholding power of federal government to impose income tax on state

employees; “[t]he mere fact that the [indirect] economic burden of such taxes may be

passed on to a state government . . . infringes no constitutional immunity”].)

The Supreme Court’s reasoning in these tax-imposition cases, at bottom, has been

that tax revenues are the lifeblood of every sovereign, and sovereigns with overlapping

jurisdiction must therefore bear the indirect consequences, including increased costs,

necessarily associated with each other’s revenue raising measures. (See Graves, supra,

306 U.S. at p. 483 [implied constitutional immunity from taxation is narrowly construed

because “the expansion of the immunity of the one government correspondingly curtails

the sovereign power of the other to tax”].) “The state and national governments must

coexist. Each must be supported by taxation of those who are citizens of both.”

(Helvering v. Gerhardt, supra, 304 U.S. at p. 422.)

While this body of federal cases has consistently upheld taxes imposed by one

sovereign on third parties within the overlapping jurisdiction of another sovereign, it has

not addressed one sovereign’s efforts to persuade another to collect a duly imposed tax.

Moreover, as between the federal government and the states, collection has largely been

dealt with by way of statute and reciprocal agreement. (See, e.g., 5 U.S.C. §§ 5517, 5520

31

[authorizing Secretary of the Treasury to enter into tax withholding agreements for state

and local taxes].13)

However, the United States Supreme Court has dealt with sovereignty issues

associated with the collection of taxes in the context of state efforts to require federally

recognized Indian tribes to collect state taxes. The high court has brought the same

pragmatic view to this context that has driven its tax-imposition cases—that to insure the

mutual survival of sovereigns with overlapping jurisdiction, their respective sovereign

immunity necessarily must have some degree of fluidity. Thus, in a series of cases the

court repeatedly rejected sovereign immunity defenses by tribes against state efforts to

require them to collect state sales taxes. (See, e.g., Oklahoma Tax Com’n v. Potawatomi

Indian Tribe (1991) 498 U.S. 505, 513 (Oklahoma Tax Com’n) [“the doctrine of tribal

sovereign immunity does not prevent a State from requiring Indian retailers doing

business on tribal reservations to collect a state-imposed cigarette tax on their sales to

nonmembers of the Tribe”14]; Colville, supra, 447 U.S. at p. 151 [“And the State may

impose at least ‘minimal’ burdens on the Indian retailer to aid in enforcing and collecting

the [state] tax.”]; Moe v. Confederated Salish and Kootenai Tribes of Flathead

13

Title 5 of the United States Code sections 5517 and 5520 state, among other

things, that they “do not give consent of the United States to the application of” a state

statute or local ordinance “which imposes more burdensome requirements on the United

States than on other employers”—language which suggests a limited waiver of perceived

sovereign immunity. However, I am aware of no federal case holding that, absent

consent, one sovereign’s collection of another sovereign’s ordinary income tax, for

example, in and of itself, impermissibly impinges on federal intergovernmental tax

immunity. (Cf. Jefferson County v. Acker (1999) 527 U.S. 423, 441, fn. 11 [majority

responding to dissent’s view that local occupational tax imposed on federal judges

impermissibly imposed administrative burden on federal court exceeding those associated

with ordinary, permissible income tax].)

14

Because tribal sovereign immunity does preclude suit against a federally

recognized tribe without its consent, the court also held the state could not enforce its

collection requirements in court. (Oklahoma Tax Com’n, supra, 498 U.S. at p. 514.)

While the state complained that gave it “a right [to require collection] without any

remedy,” the court suggested it had other avenues to secure compliance its sales tax law.

(Ibid.)

32

Reservation (1976) 425 U.S. 463, 483 [burden of collecting state tax would not

“frustrate[] tribal self-government”].) Indeed, Justice Rehnquist observed in his

concurring and dissenting opinion in Colville, “[i]f Indians are to function as quasi co-

sovereigns with the States, they like the States, must adjust to the economic realities of

that status as every other sovereign competing for tax revenues . . . .” (Colville, supra,

447 U.S. at p. 186 (conc. & dis. opn. of Rehnquist, J.).)

The majority dismisses these federal cases as having nothing to do with the state

universities’ sovereign immunity, let alone the principle that a state entity is exempt from

local regulation of its governmental functions. Certainly, federal and state

intergovernmental tax immunity, and tribal sovereign immunity, differ from the state’s

exemption from local regulation as developed by the California courts. But this misses

the bigger picture—that the United States Supreme Court’s pragmatic view that

sovereign immunity is not impinged by a minimal burden associated with the collection

of another sovereign’s lawful tax, is essentially the view reflected by City of Modesto’s

the-power-to-tax-includes-the-power-to-collect rationale.

In my view, this is also the approach that best accommodates the respective

sovereign interests of the state and of municipalities in connection with a general local

tax imposed on third parties doing business with a state entity. Under this approach, it

does not matter whether that business is arguably within the sphere of a state entity’s

governmental function (particularly given the current expansiveness of that term (see e.g.,

Bame, supra, 43 Cal.App.4th at p. 1358)). What is significant is whether it is a general

tax imposed on third parties doing business with the state entity, particularly where, as

here, the entity will bear no costs of collection. Accordingly, in my view, the state

universities can be required to collect the city’s parking tax from those paying to park in

their parking lots.

_________________________

Banke, J.

33

Trial Court:

San Francisco County Superior Court

Trial Judge:

Hon. Ernest H. Goldsmith

Hon. Marla J. Miller

Counsel for Plaintiff and Appellant:

Dennis J. Herrera; City Attorney

Jean H. Alexander; Chief Tax Attorney

Peter J. Keith; Deputy City Attorney

Counsel for Defendant and Respondent

Kamala D. Harris; Attorney General of California

Paul D. Gifford; Senior Assistant Attorney General

Joyce E. Hee; Supervising Deputy Attorney General

David Lew; Deputy Attorney General

Robert E. Asperger; Deputy Attorney General

Benjamin P. Fay, Gabriel McWhirter; Jarvis, Fay, Doporto & Gibson, LLP

Elise Traynum, General Council; UC Hastings College of the Law

Charles F. Robinson, Karen J. Petrulakis, Margaret L. Wu; The Regents of the

University of California Office of the General Counsel

City and County of San Francisco v. Regents of the University of California et al.

(A144500)

1