Zolly v. City of OaklandAnnotate this Case
Oakland requested proposals for franchise contracts regarding garbage and residential recycling services. Following a lawsuit, a settlement provided that WMAC would receive garbage and mixed materials and organics contracts; CWS would receive the residential recycling contract. WMAC and CWS agreed to pay franchise fees to the city, which redesignated part of WMAC’s franchise fee as a fee to compensate the city for the cost of implementing the Alameda County Waste Management Plan, under Public Resource Code 41901. Plaintiffs challenged the fees as improperly imposed taxes under the California Constitution, article XIIIC.
The court of appeal affirmed the dismissal of claims concerning the Redesignated Fee as not ripe for adjudication but reversed dismissal as to the franchise fees. A franchise fee, arguably subject to an article XIIIC, section 1(e) exemption, must still be reasonably related to the value of the franchise to be exempt from the “tax” definition. The court cited Proposition 26: To qualify as a nontax ‘fee’ under article XIII C, as amended, a charge must satisfy both the requirement that it be fixed in an amount that is ‘no more than necessary to cover the reasonable costs of the governmental activity,’ and the requirement that ‘the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity.