SAN FRANCISCO — The state Supreme Court has rejected a challenge to a novel, multimillion-dollar municipal fee that was imposed on new office buildings here to pay for expanded public transit use.
In a brief order Friday, the justices left intact a ruling by a state appellate panel that upheld the legality of the transit-fee despite claims by developers that the measure was unconstitutional and violated Proposition 13.
The developers said the appellate decision threatened to create a "giant loophole" for municipalities to escape the 1978 initiative's tight restrictions on new taxes.
Friday's action was hailed by attorneys for the city, who said it could encourage other municipalities to consider similar revenue-producing devices to help pay for expanded urban needs resulting from downtown building projects.
Fees have been imposed on developers in California in the past to pay for expanded school, park and roads needs--but San Francisco's was believed to be the first effort to require builders to pay for increased public transit.
"We are most pleased with the outcome and the fact that the legality of such a plan is no longer open to question," said Jerome B. Falk Jr., a San Francisco attorney representing the city. "It gives a green light to other cities to pursue a similar course of action if they wish."
San Francisco Deputy City Atty. Burk E. Delventhal welcomed the action as removing any question about the validity of the fee under the state Constitution and Proposition 13. "We've come to the end of the road on that issue," he said.
Attorneys for the developers who challenged the transit fee could not be reached for comment.
Under an ordinance adopted in 1981 by the city's Board of Supervisors, developers of downtown office buildings are charged up to $5 a square foot to finance the anticipated costs of providing service to new riders generated by new downtown construction. Officials calculate that the city stands to collect nearly $80 million from 163 projects that they say are now covered by the ordinance.
The fee was challenged in a lawsuit filed in behalf of more than 6,000 downtown property owners, contending that the measure amounted to a "special tax" that under Proposition 13 would require approval of two-thirds of the city voters.
They also argued that approval of such an ordinance would improperly give cities almost unlimited power to subsidize transit or other public programs at the expense of a select group of property owners.
But a San Francisco Superior Court judge rejected the developers' claims, as did a state appellate panel here in a ruling issued in January.
But in a separate 2-1 vote, the panel also ruled that developers who had obtained permits and begun construction before the measure was enacted were not subject to its requirements.
The justices, in their order on Friday, said they would hear argument over only that part of the appellate decision dealing with retroactive application of the transit fee. Specifically, the justices will be deciding whether the building permits issued to some developers before the ordinance was passed contained language that gave them adequate notice that they might later be subject to a transit fee.
The rest of the appellate decision was left intact by the justices. The court's order was signed by Justices Stanley Mosk, Allen E. Broussard, John A. Arguelles and Marcus M. Kaufman.