Is the 911 Fee Road Worthy? The Design and Viability of 911 Fees. By: Joe Quinn Meyers, Nave, Riback, Silver & Wilson INTRODUCTION

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1 Is the 911 Fee Road Worthy? The Design and Viability of 911 Fees By: Joe Quinn Meyers, Nave, Riback, Silver & Wilson INTRODUCTION California law obligates cities to maintain a 911 system; but, this state mandate is largely unfunded. Recent studies have demonstrated that many 911 systems fail to provide the protection available; but, the studies provided no guidance on how cities can pay for improvements. In order to improve and operate their 911 systems, some cities have turned to a measure pioneered by the City and County of San Francisco and the County of Santa Cruz: the emergency communication system response access fee, also known as a 911 fee. Typically, a city council will enact an ordinance that establishes a 911 fund supported by fees paid by residents and businesses maintaining non-exempt access lines, typically land-based and cellular telephone lines. The service suppliers (mostly telephone companies) bill, collect and remit the fee to the city. The city, however, assumes responsibility for collecting delinquent fees. A typical ordinance also includes a claim procedure by which a party who believes that the fee is being "illegally collected" can file a written claim setting forth the argument. The initial determination, which is usually made by the administrative services director, is appealable and the city council is usually given the final say. Most ordinances also provide for reimbursement for service suppliers billing, collection and remission costs and authorize the director of administrative services to vary the requirements of the ordinance for service suppliers so requesting. The telephone companies dislike the fees, apparently believing that any dollar billed to customers that goes to someone else is a dollar less in their coffers. The telephone companies have threatened suit against every city and county that has made public its consideration of a 911 fee. They have actually sued Stockton and Union City seeking to invalidate their fees.

2 The companies argue that the 911 fees are "special taxes" that can be enacted, if at all, only by super-majority support at a general election. The companies also argue that Stockton's and Union City's 911 fees allow the cities to collect more than the cost of providing the 911 service and, therefore, the 911 fees are not "fees" under state law. These arguments have support in the law and cannot be ignored. However, the author believes that the law better supports a finding that a properly-designed 911 fee is, in fact a fee, not a special tax, and, therefore, a council may enact an ordinance imposing a 911 fee. Of course, each city contemplating a 911 fee must ensure that the amount charged to subscribers does not exceed the cost of providing the 911 service and the value of that service to the subscriber. DISCUSSION 911 SYSTEMS: A CASE STUDY A brief history of a typical 911 system is helpful to provide context. We use Union City's 911 system, which is representative of most systems in California. The Union City Police Department was established in At that time, callers could obtain emergency services by calling the police or fire departments, either through a seven-digit business line, or through seven-digit emergency lines dedicated to police or fire emergencies, or by dialing "0" for the operator. However, in 1976, the State Legislature adopted the W arren-911-emergency Assistance Act, California Government Code Sections et seq. That Act required cities to establish a 911 phone system, which allowed callers to reach emergency service dispatchers by dialing the digits Union City adopted a 911 system to augment its existing phone system that same year. Union City's emergency communication system now includes four 911 lines, three dedicated seven-digit police emergency lines, and three dedicated seven-digit fire emergency lines. Between the 911 lines and the seven-digit emergency lines, the System can answer seven calls simultaneously: Callers dialing the digits or the seven-digit police emergency line on their. landline phone, or wireless customers dialing the seven-digit police emergency line on their wireless phone are immediately connected to the City's emergency communications center. The system's dispatchers answer all incoming landline 911 calls, because the system is the Public Safety Answering Point for Union City. In most cities, callers dialing the digits from wireless telephones face another step in the process. 911 calls from wireless telephones are first directed to the California Highway Patrol ("CHP"). If the call involves a genuine emergency needing Union City police response, the CHP operator immediately transfers the call to the City's 911 line. A dispatcher then handles the call in the same manner he or she would handle a call from a landline telephone or a wireless caller who used a seven-digit emergency number. However, following a year-long review of maps and back and forth with wireless providers, Union City went live with wireless 911 calls in January Union City dispatchers now receive wireless 911 calls directly. They also receive the latitude and longitude of each wireless 911 caller, and when necessary, they can pinpoint their location within 100 feet. Moreover, Union City is adding the floor plans for complicated 2

3 addresses-e.g., apartment complexes and schools. This is most helpful from both a tactical and emergency standpoint, because it allows the dispatchers to direct the emergency personnel to the exact location of the distressed caller If a Union City dispatcher learns that a 911 caller requires fire or medical assistance rather than police assistance, the caller is connected to the regional fire dispatch center located at the Lawrence Livermore Laboratory ("LLL"), although in many cases the dispatcher also sends a police response in the hope of providing aid before the fire department or paramedics arrive. The fire dispatch center receives the caller information from the emergency communication system dispatcher and responds directly to the fire or medical emergency. The seventeen dispatchers operating the emergency communication system work in three shifts of at least three dispatchers, designed to ensure around-the-clock availability of the emergency service dispatch. Typically, the dispatchers handle nearly 100,000 calls every year. Of those, more than 78,000 required a police response, more than one emergency police call per resident per year. Three dispatchers are involved in every call that requires a response. One dispatcher is assigned to be the primary responder for incoming calls. This dispatcher answers each call and communicates directly with the caller. A second dispatcher provides backup for the primary responder, answering additional emergency calls that come in while the primary responder is on another call, or conducting searches relevant to the primary responder's call, such as doing background checks on those involved in an event, or determining whether the location of the event has a history of specific activity. The third dispatcher occupies a "hot seat," operating the police radio, dispatching the police to the emergency, and coordinating among the responding officers. Recent Events and Technical Developments Compel Upgrades To Most 911 Systems Investigations following the Lorna Prieta earthquake in northern California and the killings at 101 California Street in San Francisco revealed weaknesses in San Francisco's 911 system. Most California cities maintain 911 systems no better than San Francisco's system was at the time of the investigations. More recently, federal studies following the terrorist attacks of September 11, 2001 established that many 911 systems fail to provide adequate communications capabilities to effectively handle a large-scale disaster. Finally, while fastmoving telecommunications technology has improved communication possibilities, use of such technologies requires sizeable hardware and software investments and investments in staff that can efficiently and effectively operate such technology. Many cities had ideas for improvement but no means by which to make those improvements. 911 ORDINANCES A Brief History Prior to the advent of 911 fees, there were only two sources of funding for the emergency communication system: the general fund and revenues generated by a 3

4 statewide surcharge imposed on telephone charges paid by telephone service subscribers. But money generated by the surcharge never reaches the city directly; those funds are given to SBC California, who provides cities with equipment upgrades. San Francisco changed this in Quickly acted on the results of its investigations into the Lorna Prieta and 101 California responses, the San Francisco board of supervisors passed a 911 ordinance and imposed a 911 fee. Soon thereafter, San Francisco built a new 911 system with greatly-expanded capacities. San Francisco continues to improve its 911 system and operate its improved system through funds received from the 911 fee. San Francisco recovers between 60% and 70% of the annual 911 costs. Since 1992, just under a dozen California cities have established 911 fees. Most of these fees have been established in the past three years. The 911 Ordinance: Another Case Study Union City's fee is representative. In mid 2003 and upon the suggestion of the local firefighter's union, Union City's city council considered adopting an access line fee to support the 911 system. After reviewing similar ordinances, the council decided to proceed with its own ordinance. The council conducted first and second readings and provided multiple opportunities for public comment. Ultimately, the council adopted the Emergency Communication System Response Fee Ordinance, Union City Ordinance No , on November 25, In January 2004, the City Council adopted a resolution setting the fee rat s for various forms of access lines. In Union City, the fee is charged to those who subscribe to telephone service in the City, based on the type of line and the number of subscriptions. The fee is charged to wireless service subscribers if Union City is their primary place of use. "Primary place of use" is a term defined in federal law. From the beginning, Union City intended the fee to recover less than the total costs of operating, maintaining, and improving the emergency communication system. To accomplish this goal, the City determined the typical annual cost of the system, around $3.1 million per year, including the cost of the LLL contract for fire and medical dispatch. Union City then multiplied this figure by 75%, to obtain a target recovery of $2. 3 million. The City then spread this recovery among all telephone subscribers in the City. Currently the fee is $3.22 per access line per month except that customers maintaining trunk lines must pay $28.98 per month and those maintaining high capacity trunk lines must pay $77.28 per line per month. The precise number of telephone subscribers in Union City was difficult to obtain because the wireless companies refused to share the total number of subscribers who maintained their place of primary use in Union City. Nevertheless, SBC Californiawhich maintains virtually every landline in Union City- provided its data. Although the City knew that it would get the real number of access lines once it imposed its fee because it would receive payments for each non-exempt line, the City initially estimated 4

5 the total number of access lines by assuming that there was slightly more than one wireless access line for every landline. Using this calculation, the City arrived at an estimate of 60,000 exempt and non-exempt access lines. By including exempt lines in its estimate, the City insured that each Fee payer was responsible only for his or her proportionate share of the fee, even though that meant that the City would not receive some portion of the Fee attributable to exempt lines. In effect, the general fund would subsidize exempt subscribers. The City divided $2. 3 million by 60,000 to determine the per-line charge. The real number is in flux, but is somewhere between 71,000 and 76,000. Because there are more access lines than the City initially anticipated, the City now recovers approximately 82% of the System's total costs. The collected fees are placed into a restricted special revenue fund. The funds are never commingled with any other City funds, and are therefore identifiable at all times from deposit until they are ultimately used. City administrators can determine the date that a telephone service provider paid the funds to the City, how much the collected funds were, and for what the funds were used. The ordinance also restricts the use of the funds, which it limits to the payment and installation of computerized call delivery processing and dispatch equipment and software, and/or any other acquisition necessary to house 911 communication system equipment and staff in a seismically safe and fire retardant facility, including any debt payments related thereto; and the payment of operating, repair and maintenance expenses for the 911 communication system, including but not limited to costs for personnel, planning, training, software and hardware maintenance and upgrades, facility maintenance and repair, depreciation, equipment replacement, technical infrastructure and attorneys' fees. Telephone service suppliers, such as the telephone companies, are required to collect the fee from customers and remit the sum collected. Service suppliers themselves are exempt from payment of the fee. Other categories of subscribers are also exempt, including non-profit schools and hospitals. For payers and service suppliers the ordinance includes a refund mechanism. Any payer or service supplier who believes that she has overpaid the fee, paid it more than once, or that the fee "has been erroneously or illegally collected... by the City" may file a refund claim with the Director of Administrative Services. The claim must be "in writing" and it must set forth "the specific grounds upon which [it] is founded." The Director's decision can be appealed to an Administrative Hearing Officer before whom the appellant has an opportunity to present evidence and argue the claim. The Council's decision is reviewable in Superior Court. The ordinance makes additional provisions for service suppliers. Service suppliers "may assess a service charge of up to one-eighth of one percent of [fees] actually collected." Additionally, "[t]he Administrative Services Director may make administrative agreements with service suppliers to vary the strict requirements of [the ordinance] so that collection of any fee imposed herein may be made in conformance with the billing procedures of a particular service supplier so long as the overall result of said agreement results in collection of the fee in conformance with the general purpose 5

6 and scope of this chapter." As with the refund claims, the Director's decision is appealable to the Council and the Council's decision is reviewable in Superior Court. THE TELEPHONE COMPANIES' CHALLENGES In June 2004, a consortium of wireless telephone companies sued to invalidate Union City's 911 ordinance, arguing that: (1) the fee was a "tax" and, under the state constitution, only the voters could enact a local tax; (2) the fee was a "special tax" and, under the state constitution, such a charge must win the support of a super-majority of the voters before it can be enacted; (3) the fee is a "property-related fee" that cannot be enacted the way the ordinance was enacted; (4) the fee violates section of the Government Code because the receipts exceed the cost of providing the 911 system; ( 5) the fee violates equal protection because land-line subscribers and wireless subscribers are not treated equally. At about the same time, the wireless companies also sued to invalidate Stockton's 911 ordinance. SBC California joined the cause a month later when it filed its own suit to invalidate Stockton's ordinance. All three cases present substantially similar claims. The author represents the cities in all three cases. The analysis that follows is the author's best case for 911 fees. The reader should be cognizant that the law is unsettled. A court may well adopt a different approach and may well reach a different conclusion regarding the legality of 911 fees. 911 FEES ARE SOLIDLY GROUNDED IN THE LAW California's courts have held that a city may recover some or all of the costs of providing a service by imposing user fees in exchange for that service. A 911 fee providing for a flat-rate access fee on all telephone access lines within the city to fund the operation and maintenance of the 911 system is just another such fee. The telephone companies' arguments to the contrary are unavailing. Through Propositions 13,62 and 218, Voters Have Restricted Local Revenue Options Principally, the telephone ompanies argue that a 911 fee is akin to a tax on real property, and, thus, cannot be imposed absent super-majority approval by the voters. A 911 fee, however; is a type of user fee, not a tax, and a city council may enact an ordinance imposing such a fee. The telephone companies rely on articles XIIIC & D, also known as Proposition 218. Proposition 218 is best understood for what it is- the product of nearly two decades of voter initiatives designed to restrict government's ability to impose real property taxes, and the most recent articulation of policies begun by Proposition 13. (See Apartment Association of Los Angeles v. City of Los Angeles (1998) 24 Cal. 4t h 830, 837, 839. ) In the 1960s and 1970s, California's government grew exponentially. (Flavin, Taxing California Property (3d ed. 2005), at 2: 01.) The consequence of this growth was a rapid increase in the need for funding. (ld.) Local government's principal source of funds was property taxation. Local governments would reassess property values yearly 6

7 or semi-yearly. (Id.) Because property values in California consistently increased, these reassessments resulted in large increases in assessed property taxes. (I d.) Between 1962 and 1978, assessed values of properties tripled, tax rates doubled, and many homeowners' property tax bill increased by a factor of four. (Id.) Concerned with spiraling government spending and rising property taxes, in June 1978 California voters adopted Proposition 13 by a nearly two-to-one margin, enacting Article XIII A of the California Constitution. (Throckmorton, What Is a Property Related Fee? An Interpretation of California 's Proposition 218 ( 1997) 48 Hastings Law J. 1059, 1061.) Proposition 13, entitled the "People's Petition to Control Taxation," (1) capped real property taxes at one percent of the full cash value of the property, assessed on March 12, or at the date of the change of ownership or construction if after March 1, 1975; (2) limited subsequent annual inflation adjustments to two percent per year; (3) prohibited state and local governments from imposing any sales or transaction taxes on the sale of real property; and (4) required a two-third vote in each house of the Legislature to increase or impose new state taxes and a two-thirds vote of the "qualified electors" to increase or add new local special-purpose taxes. (Id. at p ) Eight years later, voters adopted Proposition 62, in response to City and County of San Francisco v. Farrell (1982) 32 Cal.3d 47, in which the Supreme Court held that a tax imposed for a specific purpose was not a special tax under Proposition 13 if the revenues were placed in a general fund. (Throckmorton, supra, 48 Hastings L.J. at p ) To prevent local governments from imposing special taxes without obtaining super-majority voter approval, Proposition 62 added California Government Code Sections et seq., declaring that taxes in California were either general taxes, requiring a bare majority of voter approval, or ' special taxes, requiring a two-third majority of voter approval, and that special taxes did not lose their character if the revenue is placed in a general fund. (Id. and Cal. Gov. Code ) After the adoption of Proposition 62, some local governments sought to avoid the voter-approval requirements by recasting some taxes as assessments, charges, and fees. (Throckmorton, supra, 48 Hastings L.J. at p ) At the November 1996 general election, California's voters adopted Proposition 218 to foreclose this practice. (Cal. Const. Arts. XIII C and D.) Proposition 218 added two provisions to the California Constitution. The fi st was Article XIII C, which imported the provisions of Proposition 62 into the state Constitution, making the voting provisions for general and special taxes applicable to all cities in California. This provision applies to all taxes imposed in California, regardless of the tax's purpose or the object of the tax. (See Cal. Const. Art. XIII C.) Proposition 218 also added Article XIII D to the state Constitution. Specifically addressing the voters' concern that local governments were adopting property taxes disguised as assessments, charges and fees, Article XIII D prohibits assessments charged on real property for special benefits conferred on real property, and fees and charges imposed on a parcel pf land or upon a person as an incident of property ownership, including a fee or charge for a property-related service, unless at least a bare majority of 7

8 Road Worthy: Design and Viability of 911 Fees the affected property owners, or two-thirds of the entire electorate, approves the assessment, fee, or charge. (See Cal. Const. Art. XIII D. ) A Properly-Designed 911 Fee Is Indeed A Fee, Not A Tax There can be no doubt that a 911 fee is not a general tax because the revenue is not deposited in the general fund for use for general governmental purposes. (See Cal. Const. Art. XIII C, 1, subd. (a) ["'General tax' means any tax imposed for general governmental purposes."]; Howard Jarvis Taxpayers Assn. v. City of Roseville (2003) 106 Cal.App. 4th1178, 1185 [manner that funds used distinguishes general and special taxes]. ) Rather, 911 fee revenue is placed in a special fund and the revenue issued solely to improve and operate the 911 system. Therefore, the question is whether a 911 fee is a special tax. (See Const. art. XIII C, 1, subd. (d) ["'Special tax' means any tax imposed for specific purposes..."]. ) A 911 fee is not a special tax. A 911 Fee is a "Fee" A user fee is a charge imposed by a government entity on an individual in exchange for a benefit or service conferred by the entity. (See Kern County Farm Bureau v. County of Kern (1992) 19 Cal.App. 4th 1416, ;1 Sinclair Paint Co. v. State Bd. of Equalization (1997) 15 Cal. 4th 866, [distinguishing fees from taxes as a method of compensating government for the costs of providing specific services]; San Diego Gas & Elect. Co. v. San Diego County Air Pollution Control Dist. (1988) 203 Cal. App. 3d 1132, 1146 [distinguishing fees from taxes on the basis of the benefit conferred on fee payers].) User fees typically are charged on a monthly basis, and can be used to recover all of the entity's costs for providing the service or benefit. (Howard Jarvis Taxpayers Ass'n v. City of Fresno (2005) 127 Cal.App. 4th 914, 922, citing Howard Jarvis Taxpayers Ass 'n v. City of Roseville (2002) 97 Cal.App. 4th 637, 648. ) The Court of Appeal's decision in Kern County, supra, compels the conclusion that the City's Fee is a valid user fee and not a "special tax" for which voter approval was 1 Although the court of appeal decided the Kern County case before the adoption of Proposition 218, that case remains valid precedent. (See Sinclair Paint, supra, 15 Ca1. 4th at p [post-prop. 218 Supreme Court case citing Kern County with approval for the proposition that "compulsory fees may be deemed legitimate fees rather than taxes."].) This is because Proposition 218 did not alter the law established under Proposition 13 and its progeny concerning the differences between taxes and other impositions such as special assessments and fees. (See Apartment Association of Los Angeles County v. City of Los Angeles (2001) 24 Cal. 4th 803, [noting that Proposition 218 did not change exemption of special assessments from category of taxes, and that Proposition 218 only buttressed existing limitations on taxation]. ) Moreover, the fact that the Kern County fee was imposed on property does not affect its applicability here. The Kern County court did not rely in any way on the fact that the imposition was on real property. Because that factor played no role in the decision, the principles announced in Kern County court apply here, where a fee is not imposed on real property. 8

9 Road Worthy: Design and Viability of 911 Fees required. That case involved a "landfill assessment" imposed by Kern County to defray the skyrocketing costs of maintaining a landfill within the county. (Kern County, supra, 19 Cal.App. 4th at p ) The county imposed the "assessment"- actually a regulatory and service fee - on property, at different levels depending on the types of property, based on usage patterns for each type of property. (Id. at p ) The county assessed the fee on each property owner regardless of whether the owner actually used the landfill. (!d.) The Kern County court held that the landfill assessment was a fee and not a tax - despite being compulsory, and despite claims that the fee was assessed whether or not the property owner used the service funded- because the fee was properly calculated to do no more than mitigate the costs of providing and maintaining a county landfill, and because the fee served a regulatory function: by allowing the County to maintain the landfill without charging gate fees, the County discouraged illegal dumping of materials that would otherwise have gone into the landfill. (!d.) A properly-designed 911 fee is analytically identical to the landfill fee in Kern County. A 911 fee defrays the costs of a local program. A 911 fee is imposed based on the degree of impact individual telephone service subscribers likely will have on the system. A 911 fee is imposed and used only for the purposes of maintaining the emergency communication system. And because a city seeks to recover - and indeed recovers -less than the total costs of operating the emergency communication system, a 911 fee, like the fee in Kern County, is per se reasonable. (See Kern County, supra, 19 Cal.App. 4th at p ) Finally, like the assessment, a 911 fee promotes public policy, by not charging those who dial 911 for the services, thus removing a cost disincentive from requesting emergency assistance for oneself and others. Apparently believing that a fee must be voluntary, the telephone companies argue that a 911 fee is not "voluntary" because most households subscribe to telephone services. Actually, a levy need not be voluntary to be a fee, as long as it bears other fee characteristics. (Sinclair Paint Co. v. State Bd. of Equalization (1997) 15 Cal. 4th 866, 874; see also Kern County Farm Bur.eau, supra, 19 Cal.App. 4th at p [charges assessed on the use of government services whether or not the payer uses the service - or ever intends to use the service - are not taxes, so long as the charge is reasonable]. ) Moreover, the number of people that subscribe does not affect the voluntariness of the act of subscribing. Individuals must take action (in addition to merely owning property in, residing in, or visiting, the city) to become subject to the 911 fee. Second, even if every person who resided in, or visited, the City were subject to the 911 fee, the Fee is not charged against every person at the same ratethe more phone lines a person has, the more the Fee; this reflects the fact that people are paying an amount that directly relates to the benefit they are receiving. For example, a person who subscribes to both a land line and wireless service has more access to the 911 system than a person who has -only a landline; and the former pays more than the latter. This is different from a tax (even a special tax), which is charged against people regardless of their access to a particular service. Apparently believing that a fee must be apportioned based on individuals' actual use of the service, the companies argue that a 911 fee cannot be a fee because it is charged regardless of the individual's use of the 911 system. Even Article XIII D, 6, subd. (b)(4), 9

10 however, recognizes that fees may be imposed for a service that either "actually used by or immediately available to" the property in question. (Emphasis added. ) Also, as demonstrated in Kern County, a fee need not be based on payers' individual use but on the availability of the service. The unique attributes of the 911 system justify an access-oriented user fee. For example, a per-call fee may be too high, may discourage people from using the 911 service when use is justified, and the cost of collections could defeat the benefit of the fee. An accessoriented 911 fee is also proper because the availability of the service, not necessarily its use, benefits telephone subscribers and provides a comfort to subscribers that, should they need urgent assistance, the service is there. Instructive is Evans v. City of San Jose (1992) 3 Cal.App. 4th 728. There, the court considered whether a legislatively-enacted charge on businesses for downtown promotion was an illegal special tax. The Court held that the fact that the charge did not neatly fit within an alternative non-tax category did not mean it was a "special tax:" With each of these cases, a discrete group receives a benefit... or a service... or a permanent public improvement... which inures to the benefit of that discrete group. The public as a whole may be incidentally benefited, but the discrete group is specifically benefited by the expenditure of these funds. [Citations. ] (Evans, supra, 3 Cal.App. 4th at p. 738; see also City of San Diego, supra, 72 Cal.App. 4th at pp [Evans analysis applies to "special tax" inquiry under Prop 218].) The discrete group that benefits from improvements to, and operation of, a 911 system are those with access to the system, i.e., local subscribers to landlines and wireless subscribers whose principal place of use is local. Members of this group are most likely to use the system and benefit from ts improvements. Others may benefit incidentally, like by making a call while passing through Union City, but such an incidental benefit is insufficient to change the nature of the charge. A 911 Fee Is Not a Special Tax Article XIII C, Section 1 (d) defines a "special tax" as "any tax imposed for specific purposes, including a tax imposed for specific purposes; which is placed into a general fund." Although the Fee is earmarked for a specific purpose- partially defraying the costs of operating and maintaining the City's Emergency Communication Systemthe Fee is not a special tax within the meaning of Article XIII C because it does not fund the treasury and does not exceed the System's costs. As explained above, in Kern County, supra, the court addressed the question whether an assessment to support the County's landfill facility was a "special tax" subject to voter approval. (Kern County, supra, 19 Cal.App. 4 th at p ) There, the Court found that a fee assessed on property for the level of possible use it will have of a city service, which is imposed only for the purposes of providing that service, and which does not produce revenues beyond the costs incurred in providing the service is not a special tax. (!d.) As explained above, this analysis applies here. 10

11 Moreover, because a 911 fee only recovers part of the expenses the city incurs in operating, maintaining, and improving the emergency communication system, it is not a special tax as a matter of law. Under Government Code Section 50076, the term "special tax" does not include "any fee which does not exceed the reasonable cost of providing the service or regulatory activity for which the fee is charged and which is not levied for general revenue purposes." As explained in greater detail below, a properly designed fee falls within the exemption established by Section The City's Fee Is Not A Property-Related Fee under Article XIII D The telephone companies also argue that a council-enacted fee violates Proposition 218 because it is a "property-related fee" under Article XIII D of the California Constitution, for which the City did not seek or obtain voter approval. In Apartment Association, supra, the Supreme Court made clear that Article XIII D "only restricts fees imposed directly on property owners in their capacity as such," and does not apply to fees or other charges imposed on things other than real property or on property owners in their capacity as property owners. (Apartment Association, supra, 24 Cal. 4th at p. 838 [finding that service fee imposed on landlords to permit annual inspection of rental housing was not a tax for purposes of Article XIII D, because it was not imposed on property owners as property owners].) Because a properly-designed fee is not imposed on real property, and is not imposed on property owners or occupants in their capacity as owners and occupants, the Fee does not fall within the scope of Article XIII D. The Fee is Not Assessed on Real Property A local government's assessment, charge, or fee constitutes an imposition on a parcel of real property in several circumstances. First, and most obviously, is where the assessment, fee, or charge is by its terms imposed on a parcel of land on a per-parcel or per-acre basis. (See 81 Ops. Cal. Atty. Gen. 1 04; 80 Ops. Cal. Atty. Gen. 183 [noting that such impositions fall within the scope of Proposition 218]. ) Second is where the identification of those subject to the assessment, fee, or charge requires reliance on a parcel map. (See Cal. Const. Art. XIII D, 6(b )( 5); Howard Jarvis Taxpayers Assn. v. City of Fresno (2005) 127 Cal.App. 4th 914, 919. ) Third is where the assessment, fee, or charge is imposed on identified parcels or categories of parcels of land. (See Richmond v. Shasta Community Services Dist. (2004) 32 Cal. 4th 409, 419. ) None of these circumstances exist with a properly-designed 911 fee. A properly-designed 911 fee is not assessed on real property. By the ordinance's plain terms, the fee is assessed on telephone access lines located within the city (in the case of landlines).and on access lines where the city is the primary place of use (in the case of wireless telephones). Access lines are not real property. (See Garner, Black's Law Diet. (Deluxe 7th Ed. 1999), at p. 1234, co1.1 [defining "real property" as "Land and anything growing on, attached to, or erected on it, excluding anything that may be severed without injury to the land," and characterizing such property as "soil and buildings"]. ) Indeed the most obvious means of identifying an access line - its telephone 11

12 number- is not link d in any way to a specific property. Under Federal and State law, a telephone service subscriber may "take" his or her telephone number with them on a change addresses or service provider. Moreover, the identification of persons subject to a 911 fee does not depend on the location of real property that they own or occupy. Instead, a city identifies those subject to the Fee based on their maintenance of a telephone access line. Accordingly, this identification is associated with a telephone number or numbers, not a street address, parcel number, or other identifier of place. And a properly-designed ordinance will make no reference to real property or parcels. Imposing the Fee on access lines makes location identification - beyond the threshold of the location of the landline or the primary place of use of a wireless phone within the City- irrelevant for fixing the Fee. A 911 Fee is Not Assessed "on a Person as an Incident of Property Ownership" Nor is a 911 fee imposed on a person as an incident of property ownership. California's Supreme Court has established a simple test for determining whether an assessment, fee, or charge is imposed on a person as an incident of property ownership for purposes of Article XIII D: if the fee is imposed on a property owner in his or her capacity as a property owner, then the imposition falls within the scope of Article XIII D. (Apartment Assn., supra, 24 Cal. 4th at p. 842; see also Patel, Is Nothing Uncertain But Death? The Uncertainty Created By California's Proposition 218 (2001) 35 U.S.F. Law Rev. 385, 398 [noting that California Attorney General has through a series of decisions recognized the existence of the test]. ) If, on the other hand, the imposition is based on something other than property ownership, it is not imposed "as an incident of property ownership" and does not require supermajority voter approval. (Apartment Assn., supra, 24 Ca1. 4th at p. 842.) Applying this test here compels the conclusion that a 911 fee is not imposed on a person as an incident of property ownership. As explained.above, a 911fee is assessed on an individual as a consequence of that person's maintenance of a telephone access line. The maintenance of an access line is not an "incident of property ownership" because the choice to subscribe to telephone service is independent of the ownership or occupancy of property. Although almost all households in most cities have telephone service, some do not. Similarly, some telephone service subscribers - for instance teenagers living with their parents -neither own nor rent property, but still maintain access lines and, for that reason, pay the fee. Additionally, it is not necessary to own or occupy property to maintain an access line. A wireless phone owned by a non-resident remains subject to the fee if the city is that phone's place of primary use. And the cessation of phone service terminates an individual's obligation to pay the fee, regardless of whether that person continues to own or occupy property in Union City. Moreover, access to the emergency communication system does not depend on whether the person seeking access owns or rents property. The telephone companies contend that 911 fees are property related because the fee is assessed on a wireless subscriber based on the subscriber's principal place of use, "which must 12

13 either be a residential or business address in the [ c ]ity." But the contention puts the cart before the horse. A person has a principal place of use only after she voluntarily decides to subscribe to wireless services. And, there is no dispute that a person may make ordinary use of real property without wireless services, whether or not she volunteers that property as her principal place of use. Moreover, a subscriber may use a post office box as her local address. A post office box is surely not "real property" under Article XIII D. The companies also contend that Article XIII D, 6, subd. (b)(5)'s admonishment that "[ n ]o fee or charge may be imposed for general government service" means no fee of any kind can be charged for a general service. First, 6 is entitled "Property-Related Fees and Charges" and thus obviously applies only to fees that are "property related." Second, the section's title aside, "fee" in Article XIII D refers to a levy imposed ''upon a parcel or upon a person as an incident of property ownership, including a user fee or charge for a property related service." (Cal. Const. Art. XIII D, 2, subd. (e). ) A "property-related service" is a "public service having a direct relationship to property ownership." (Cal. Const. Art. XIII D, 2, subd. (h). ) Union City's 911 system is not a property related service and, therefore, it is not prohibited under 6(b)( 5). The companies also rely on Richmond, supra, where the Court observed that "[a] fee for ongoing water service through an existing connection is imposed 'as an incident of property ownership' because it requires nothing other than the normal ownership and use of property." This observation, however, is dicta since the legality of a fee for ongoing water services was not before the Court. The issue the Court actually ruled on was whether water connection charges, including a charge for a fire suppression component of the connection fees, were fees imposed as an incident of property ownership so as to be within the provisions of Proposition 218; d with regard to that issue the Court held that such water connection fees were not subject to Proposition 218. In fact, the Supreme Court granted review in a later case to actually decide the water service issue. (See Bighorn-Desert View Water Agency v. Beringson, _Cal. 4th_ (review granted October 27, 2004, S127535).) Even were the California Supreme Court to ultimately hold that water service fees are imposed as an incident of property ownership, the 911 Fee is distinguishable from water service fees. As the Court noted in Richmond, the apparent basis for the Legislative Analyst's conclusion in the ballot pamphlet on Proposition 218 that water service "has a direct relationship to property ownership, and thus is a property-related service within the meaning of Article XIII D," is because (1) water is indispensable to most uses of real property; (2) water is provided through pipes that are physically connected to the property; and (3) a water provider may, by recording a certificate, obtain a lien on the property for the amount of any delinquent service charges. (Richmond, supra, 32 Cal. 4th at ) Unlike water service, the 911 fee is based on telephone service, which is not indispensable to most uses of real property; is not provided through pipes that are physically connected to the property; and neither the telephone provider nor the County can record a certificate obtaining a lien on the property for the amount of any delinquent service charges. A properly-designed 911 fee is more like the water connection fee and fire suppression fee that were upheld in Richmond. Specifically, the fee is not imposed ''upon a parcel or upon a person as an incident of property ownership," but rather on those persons who voluntarily 13

14 Road Worthy: Design and Viability of 911 Fees apply for telephone service. To paraphrase the Court: "The [County] does not impose the fee on such persons 'as an incident of property ownership' but instead as an incident of their voluntary decisions to request [telephone] service." (Richmond, supra, 32 Cal.4th at 426.) A 911 fee is also similar to Los Angeles's inspection fee on private landlords that the Court found outside the confines of Proposition 218 in Apartment Assn. of Los Angeles County, Inc v. City of Los Angeles (2001) 24 Ca1.4th 830. Specifically, the Fee is imposed upon an activity (obtaining and using telephone service). Like the fee in Apartment Association, the 911 Fee "ceases along with [the cancellation of telephone service], whether or not ownership remains in the same hands." (Apartment Assn., supra, 24 Cal. 4th at 838.) The Fee is only imposed upon those who voluntarily choose to obtain telephone service, and only while they keep that service. Just as in Apartment Assn., were the Court to accept plaintiffs' argument in this case, it would have to rewrite Proposition 218 to apply to fees on an incident of property ownership, rather than on a parcel or a person as an incident of ownership. (!d. at ) Like the inspection fee, a 911 fee bears no direct relationship with property ownership - it only applies to landowners or renters who subscribe to telephone service. Also instructive is City of San Diego, where payers challenged a council-enacted Business Improvement District (BID) charge as "property related." While most businesses require property to operate, the court readily rejected plaintiffs' argument: "As [plaintiffs] acknowledge, the assessment here was not imposed upon real property but upon businesses in the BID." (City of San Diego, supra, 72 Cal.App.4th at p. 236, emphasis added.) Similarly, here, a 911 fee applies to telephone service subscriptions. While many subscribers maintain property, the fee is not imposed upon the property holding. A 911 fee is imposed upon the telephone service, which, in the case of wireless service, by design has no permanent connection to any specific property. Like the BID charge in City of San Diego, a 911 fee is not property related, as that term is used in Prop 218. The Fee Is Not a Tax Under Government Code Section Finally, the telephone companies contend, at least for Stockton and Union City, the 911 fee violates Government Code Section 50076, claiming that the fees is an "illegal special tax" under that section. (Cmplt. at pp ) They argue that the provisions of Section excluding true user fees from the definition of special taxes does not render those cities' fees valid. Not so. The Legislature adopted Government Code Section in 1979 as enabling legislation for Proposition 13. (See 66 Ops. Cal. Atty. Gen. 321, citing Los Angeles County Transportation Com. v. Richmond (1982) 31 Cal.App.3d 197, ) Until adoption of Government Code Section et seq., California's general law cities lacked the authority to impose special taxes. (See Stats ch. 903, reprinting Legislative Counsel's Digest.) The adoption of those sections granted general law cities that authority, and established a process by which those cities could impose special taxes. Government Code Section provides, in its entirety, that "[a]s used in this article, 'special tax' shall not include any fee which does not exceed the reasonable cost of providing the service or regulatory activity for which the fee is charged and which is 14

15 Road.. Worthy: Design and Viability of 911 Fees not levied for general revenue purposes." This provision applies to all impositions in California. Government Code Sections et seq. do not transform a properly-designed 911 fee into a special tax. First, the costs associated with the operation, maintenance, and capital improvement of the emergency communication system are reasonable. The significant costs associated with the emergency communication system are salaries for the employees operating the system, payments for phone lines and access fees, capital replacement costs, and overhead costs. These costs are reasonable - salaries are based on a civil service pay scale, and the City does not employ more dispatchers than necessary to cover three shifts necessary to ensure around-the-clock access to the emergency communication system. Further, the costs of the phone lines and access fees are necessary for operation and are dictated by SBC California. Second, a properly-designed 911 fee does not generate revenue above the reasonable costs of operating, maintaining, and improving the system. As explained above, a 911 fee is designed to recover significantly less than the actual costs of running the system. Initially; based on an estimated number of access lines within the city, a city council sets the fee to recover no more than 70% of the 911 system's total annual costs. A council does this by multiplying the total cost of the system by. 70 and dividing the product by the number of access lines -whether or not the Fee ultimately would be imposed on those lines. Because the ordinance exempts a percentage of all access lines from paying the fee, the actual total recovery envisioned was 70% less the amount of the fee that would have been attributable to exempt lines, but which the City would not recover. If the number of lines subject to the fee is higher or lower than the estimate, the city can (and should) adjust the rate. Because a fee does not exceed the reasonable costs of operating, maintaining, and improving a 911 system, and because a fee does not raise revenue for general government purposes, Section does not transform a properly-designed 911 fee into a special tax. THE LITIGATION While the analysis above presents the author's best case for 911 fees, the telephone companies' arguments merit careful consideration. And, as previously noted, the unsettled nature of the law allows for different analyses and different results. While the issues have been joined in pending litigation, the author expects that uncertainty will remain, at least for another 18 months which is the earliest that we can expect an opinion on the merits from the court of appeal. In the Union City 911 case, the parties have cross-moved for summary adjudication of the tax v. fee issue and "property-related" issue. The court issued a tentative ruling denying both motions. On February 2, the court hear argument and took the motions under submission. If the court ultimately adopts its tentative rulings, we will likely try the case to a judge, not a jury, in the summer. 15

16 Road Worthy: Design and Viability o/911 Fees The Stockton 911 litigation is not as far along. Stockton successfully moved to dismiss the wireless companies' suit because the companies failed to first pursue a refund claim. That issue is now before the Court of Appeal. The Court of Appeal heard oral argument on January 20 and will likely issue a decision shortly. Even if the appellate court reverses the judgment, the wireless companies will be starting from scratch against Stockton. SBC California's suit against Stockton is still in discovery. We anticipate that the parties will file cross-motions for summary judgment in the late spring or early summer. In other developments, the Sixth District Court of Appeal recently issued an unpublished opinion upholding Santa Cruz County's 911 fee against Prop 218 challenges. Unpublished appellate court opinions cannot be cited as authority. Union City asked the appellate court to publish its decision. Even though the wireless companies and SBC California opposed publication, the appellate court agreed with Union City that the opinion should be published; but, due to the timing of the request, the appellate court had to refer the matter to the California Supreme Court for its approval. The California Supreme Court should decide the publication issue by the middle of March. For your review, the following materials: (1) Union City's 911 ordinance; (2) the unpublished Mancini opinion; (3) Union City's request for publication of Mancini; and, (4) the Court of Appeal's recommendation regarding publication of Mancini. CONCLUSION 911 fees are not without risk because the relevant law is unsettled. A city considering imposition of a fee must proceed with caution and must be attentive to the Prop. 218 and section risks. A city council considering whether to enact a 911 fee should proceed only after weighing the substantial Prop. 218 risks against the benefits of a 911 fee. A city can reduce the Prop. 218 risk by presenting the fee to the voters, but the fee will likely have to obtain two-thirds support in order for it to take effect. And, all 911 fees-whether council or voter enacted-will still have to pass section scrutiny, meaning the city will have to demonstrate that the fee does not allow for recovery of more than the cost of the 911 system. #