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_____________ IN THE SUPREME COURT OF THE STATE OF CALIFORNIA
PROFESSIONAL ENGINEERS IN CALIFORNIA GOVERNMENT and DENNIS ALEXANDER, Plaintiffs/Petitioners and Appellants, v. CALIFORNIA DEPARTMENT OF TRANSPORTATION, et al. Defendants and Respondents.
PETITION FOR REVIEW
First District Court of Appeal Case No. A131449 Certified for Publication Upholding a Judgment and Order by the Superior Court of the State of California for the County of Alameda (Case No. RG10544672) Honorable Wynne S. Carvill SOMACH SIMMONS & DUNN A Professional Corporation Kanwarjit S. Dua, Esq. (SBN: 214591) Adam D. Link, Esq. (SBN: 271370) 500 Capitol Mall, Suite 1000 Sacramento, CA 95814 Telephone: (916) 446-7979 Facsimile: (916) 446-8199 Attorneys for Plaintiffs/Petitioners/Appellants, Professional Engineers in California Government and Dennis Alexander. PROFESSIONAL ENGINEERS IN CALIFORNIA GOVERNMENT Gerald A. James, Esq. (SBN: 179258) 455 Capitol Mall, Suite 501 Sacramento, CA 95814 Telephone: (916) 446-0400 Facsimile: (916) 446-0489
TABLE OF CONTENTS I. II. III. IV. V. PETITION FOR REVIEW................................................................... 1 ISSUES PRESENTED FOR REVIEW ................................................ 1 WHY REVIEW SHOULD BE GRANTED ........................................ 2 FACTUAL AND PROCEDURAL BACKGROUND ......................... 7 LEGAL DISCUSSION ...................................................................... 12 A. The Appellate Court Erroneously Found That Caltrans Can Satisfy Section 143(f)(1) by Merely Overseeing or Approving Work and Does Not Actually Have to Perform the Engineering Work Assigned to It on P3 Projects. ........................................ 13 The Appellate Court Incorrectly Interpreted Section 143(a)(6) and Ignored the Legislature’s Intent in Enacting the Statute ... 19 The Appellate Court Erred In Concluding the Presidio Parkway Project and Future P3s Need Not Be Funded Through Tolls and User Fees .................................................................................. 24 1. Section 143 Both Requires and Presupposes the Existence of a Toll or User Fee Agreement, and Contemplates No Other Financing Mechanism ............. 24 The Appellate Court’s Reliance on Subdivision (a)(6) Ignores the Reality That No P3 Project Consists Purely of Planning or Design Activities, and Thus All P3 Projects Are Capable of Being Assessed Tolls or User Fees ...... 27 Section 143(s) and Section 143(j)(1) Can Be Harmonized, and Section 143(s) Does Not Excuse Caltrans’ Obligation to Comply With Section 143(j)(1) 28
CONCLUSION .................................................................................. 30
TABLE OF AUTHORITIES CASES Arias v. Superior Court (2009) 46 Cal.4th 969 ............................................................................... 18 Briggs v. Eden Council For Hope & Opportunity (1999) 19 Cal.4th 1106 ............................................................................. 19 Common Cause v. Board of Supervisors (1989) 49 Cal.3d 432 ................................................................................ 25 Cortez v. Abich (2011) 51 Cal.4th 285 ............................................................................... 18 Dix v. Superior Court (1991) 53 Cal.3d 442 ................................................................................ 17 People v. King (1993) 5 Cal.4th 59 ................................................................................... 29 People v. Woodhead (1987) 43 Cal.3d 1002 .............................................................................. 18 Professional Engineers in California Government v. Department of Transportation (2011) 198 Cal.App.4th 17 .................................. 25, 27, 28 Sonic-Calabasas A, Inc. v. Moreno (2011) 51 Cal.4th 659 ............................................................................... 18 STATUTES Cal. Const., art. XXII .................................................................................... 13 Cal. Rules of Court, Rule 8.500, subd. (b) ................................................... 12 Pub. Contract Code, § 6801(c) ....................................................................... 4 Streets & Highways Code: § 143 ................................................................................................... passim § 143(a)(6) .......................................................................................... passim § 143(d) ............................................................................................... 22, 25 § 143(d)(1) .......................................................................................... 15, 16 § 143(f) ...................................................................................................... 16 § 143(f)(1) .......................................................................................... passim § 143(f)(1)(A) ........................................................................................... 13 § 143(f)(1)(B) ...................................................................................... 13, 14 § 143(f)(2) ..................................................................................... 15, 17, 18 § 143(i) ...................................................................................................... 25 § 143(j)(1) ............................................................................... 24, 25, 29, 30 § 143(s) ......................................................................................... 28, 29, 30
OTHER AUTHORITIES Black’s Law Dict. (9th ed. 2009) ................................................................. 25
PETITION FOR REVIEW To the Honorable Chief Justice of the California Supreme Court
and the Honorable Associate Justices of the Supreme Court of California: Professional Engineers in California Government, Plaintiff and Appellant, respectfully petitions the Court for review following the decision of the Court of Appeal, First Appellate District, Division One, filed on August 8, 2011. A copy of this decision is attached hereto and marked as Attachment A. II. ISSUES PRESENTED FOR REVIEW This case presents the following issues for review: 1. Whether in passing Senate Bill 2X 4 in 2009, the
Legislature required that certain architectural and engineering services on public-private-partnership (P3) state highway projects (Streets and Highways Code section 143(f)(1)) be performed by employees or consultants of the state Department of Transportation? 2. In order to qualify as a P3 project under Streets and
Highways Code section 143, must projects continue to result in new facilities “supplemental” to the existing state highway system by offering additional capacity or a new state highway option, or can existing state owned highway facilities now be replaced or rehabilitated as P3s, resulting in a lease to the private sector?
Are availability payments from the state highway account
now a legally viable way to finance P3 projects on the state highway system under Streets and Highways Code section 143, or must P3 projects continue to be funded by tolls or user fees? III. WHY REVIEW SHOULD BE GRANTED The outcome of this case will determine the future of how state highway projects costing billions of dollars will be developed, constructed, and inspected. It will also determine the types of projects that qualify as public-private-partnerships (P3s) going forward and how those P3 projects will be funded. Will a public agency, through engineers employed by or under direct contract with Caltrans, perform certain critical engineering functions designed to protect the public interest and public safety, including inspection of the construction work done by the design-build entity building the facility as required by the Legislature? Or instead, will a design-build entity be able to inspect its own work, with Caltrans providing mere “oversight” and quality assurance “approval” of construction work performed on the state highway system? Will P3s be authorized for projects replacing existing state highway facilities that result in leases of public facilities to the private sector, with payments to the private sector coming from existing state gas taxes and other highway funds over periods of 30 years or more? Or instead, will P3 projects continue, as they historically have, to be for new transportation facilities, which provide new lanes and options for motorists that will be funded by tolls or user fees?
These significant public policy issues, which are addressed in the Court of Appeal decision, turn entirely on the words used by the Legislature and what the Legislature intended when passing statutory changes in 2009 allowing, for the first time, unlimited P3s on the state highway system. This case is the first proceeding interpreting the P3 statutory provisions, which took effect January 1, 2010. Review of the Court of Appeal decision is necessary to provide guidance to lower courts and to all entities involved in transportation projects on the state highway system as to which projects may proceed as P3s, the manner in which the work on those P3 projects must be performed, and how those projects are to be funded. Projects on the state highway system have historically been procured through a “design-bid-build” method where a project is fully designed and plans are completed to 100 percent final design. For projects on the state highway system, this design work is typically performed by Caltrans employees or consultants directly retained by Caltrans. Following completion of this design work, the construction portion of a project is then put out to “bid” with the construction contract awarded to the lowest responsible bidder. Independent inspection of that construction contractor’s work for state highway projects is then typically performed by Caltrans engineers or consultants retained by Caltrans. (AA Vol. 13, 003493-003494.) In 2009, for the first time, the Legislature authorized the widespread use of P3s which may utilize a design-build process, replacing the traditional design-bid-build process. These changes were added by Senate Bill No. 4 (2009-2010 2d Ex. Sess. (SB 2X 4)). 3
“Design-build” means a procurement process in which both the final design and construction of a project are procured from a single design-build entity. (Pub. Contract Code, § 6801(c).) As it has on every design-build project authorization on the state highway system, both before and after the passage of SB 2X 4, the Legislature in SB 2X 4 specifically identified engineering services to be performed by Caltrans. For these design-build projects, the Legislature called for Caltrans to perform preliminary engineering work. The design-build entity then completes the final design and constructs the Project, and Caltrans is assigned to perform construction inspection. In assigning tasks to Caltrans, the Legislature stated Caltrans could either perform those services with state employed engineers, or with consultant engineers retained by Caltrans directly. The Court of Appeal found that under Section 143(f)(1) “CalTrans is only required to be responsible for the performance of the work on the Project. CalTrans is not required to actually perform the work.” (Emphasis in original, Slip Op. at p. 6.) The court reached this conclusion despite legislative history that showed the Legislature was knowingly assigning these tasks to be performed by Caltrans staff or its consultants. The Chaptered version of SB 2X 4 passed by the Legislature in the Legislative Counsel’s Digest provides: The bill would provide that the Department of Transportation is the responsible agency for the performance of certain tasks and the preparation of certain documents, relative to projects on the state highway system, where a regional transportation agency is otherwise the sponsor of the project. The bill would state that the department may perform those functions with department employees or with consultants contracted by the department. 4
While this leaves no doubt that the Legislature assigned this work to Caltrans and intended for Caltrans to actually “perform those functions” with its employees or with Caltrans retained consultants, the Court of Appeal ruled otherwise. While SB 2X 4 made changes to Section 143 (f)(1) requiring that Caltrans perform certain functions, other sections of Section 143, the only statutory authority for P3s on the state highway system, were left intact. The Court of Appeal decision erroneously ignores the original legislative intent of the language in Section 143 requiring tolls on projects and requiring that projects result in new facilities supplemental to the existing state highway system. Assembly Bill 680 added the original Section 143 to the law in 1989. There is no dispute that the original purpose was to allow private industry to propose, build and operate toll roads. The toll roads were required to be supplemental, or additional to state owned facilities, and were to be paid for with private money rather than public funds. Contrary to the Court of Appeal decision, SB 2X 4 did not repeal Section 143’s existing requirements that P3 projects be funded by tolls or user fees, and did not amend the provision that projects be for new facilities supplemental to existing state owned transportation facilities. The Court of Appeal decision simply ignores this clear legislative language and history. The Presidio Parkway project to replace Doyle Drive is the first P3 project on the state highway system to be attempted under SB 2X 4. The Presidio Parkway project did not originate as a P3. Rather it proceeded under a traditional design-bid-build procurement method 5
with a plan to utilize the traditional pay as you go constructionfinancing model. The preliminary engineering work on this project was not done by Caltrans, as required by the statute. The Project does not result in a new facility, but rather is a replacement project and is not supplemental to the existing state highway system. Finally, the cost to complete the Project is not funded by tolls or user fees at all, but rather will be repaid through payments out of the State Highway Account over the next 30 years. As the Presidio Parkway project was being considered for conversion from a design-bid-build project to a P3, separate and distinct legal opinions of counsel to the California Transportation Commission, the Legislative Counsel and a finding of the Legislative Analyst’s Office each concluded the Project would not be eligible for conversion to a P3 as follows: In a detailed 16-page analysis tracking the statutory language and legislative history, counsel for the Respondent California Transportation Commission concluded that Section 143 contained the same “financing provisions” of the original AB 680, and therefore allowed private investment to be repaid only from tolls or user fees. That analysis also concluded that section 143 prohibited the “availability payments,” which are the financing mechanism for this project. Finally, the opinion found that the original language of Section 143, as added by AB 680, requiring projects to be supplemental to existing facilities still controlled. (AA Vol. 2, 000274-289.)
The California Legislative Counsel also expressly found that “availability payments” from the state highway account do not comply with Section 143. (AA Vol. 2, 00247.) The Legislative Counsel opinion also concluded that the legislative requirement that a P3 transportation project must be “supplemental to the existing system” and requires that an additional lane be added or that the Project provide an alternative route to an existing route. (AA Vol. 2, 000259.) Finally, the Legislative Analyst’s Office found that because tolls were not part of the Project, this project “does not appear to be allowed under the P3 authorizing legislation.” (AA Vol. 14, 003780.) Despite these clear opinions that the Project could not legally proceed as a P3, the Respondents converted the Project anyway, committing nearly $1.4 billion to this project as a P3 over 30 years. The trial court and the Court of Appeal, setting aside all statutory language and legislative intent and history to the contrary, allowed this project to proceed, despite the requirements of Section 143. IV. FACTUAL AND PROCEDURAL BACKGROUND In 1989, the Legislature adopted Assembly Bill 680, thereby creating the public-private partnership program for transportation projects. AB 680 added Section 143 to the Streets and Highways Code. (AA Vol. 6, 001509.) According to the bill’s author, and as confirmed by its legislative history, this arrangement was proposed to permit private industry to “propose, finance, design, construct and operate SUPPLEMENTAL transportation systems which would 7
eventually be turned over to Caltrans.” (Id. at 00152) Financing for the design, construction, maintenance and operations of these new facilities would come from tolls, rents, and royalties derived from their private use. (Id. at 000152-153.) While this law has been amended multiple times since its initial enactment, these fundamental precepts – that the projects be privately funded and provide facilities that are additional to the existing state-owned facilities – have never been changed. In 2009, the Legislature passed and Governor Schwarzenegger signed into law Senate Bill 4 (SB 2X 4, Cogdill, 2nd Extraordinary Session), which amended Section 143 and authorized unlimited P3’s for state highway transportation projects. SB 2X 4 added a new Section 143(f)(1): (A) Notwithstanding any other provision of this chapter, for projects on the state highway system, the department is the responsible agency for the performance of project development services, including performance specifications, preliminary engineering, prebid services, the preparation of project reports and environmental documents, and construction inspection services. The department is also the responsible agency for the preparation of documents that may include, but need not be limited to, the size, type, and desired design character of the project, performance specifications covering the quality of materials, equipment, and workmanship, preliminary plans, and any other information deemed necessary to describe adequately the needs of the department or regional transportation agency. (B) The department may use department employees or consultants to perform the services described in subparagraph (A), consistent with Article XXII of the California Constitution. Department resources, including personnel requirements, necessary for the performance of those services shall be included in the department’s capital outlay support program for workload purposes in the annual Budget Act. 8
In June 2009, the San Francisco County Transportation Authority (“SFCTA”) ceased the development of the detailed Plans, Specifications and Estimates for Phase II Contracts 5 to 8 and instead utilized the contract with Arup/Parsons Brinkerhoff to analyze the options of pursuing a P3 method of procurement. (AA Vol. 4, 00989.) Despite having a fully funded plan, SFCTA and Caltrans requested the California Transportation Commission (CTC) approve this project as P3 at a cost of $1.378 billion from the State Highway Account. On May 15, 2010, CTC staff recommended that the CTC not grant the request as the proposal would take up to $1 billion from State Highway Account capital programs. The recommendation against approval noted that there were legal questions concerning whether the statutes require that financing of a P3 project include tolls or user fees and whether a P3 project must be supplemental to the existing transportation system. CTC staff attached three legal separate opinions to its recommendation, two of which opined the Project did not meet the requirements of the law. (AA Vol. 2, 00199.) Contrary to the staff recommendation and legal opinions, on May 20, 2010, the CTC approved the Presidio Parkway Project to proceed as a P3 under Section 143. The P3 agreement was then submitted to the Legislature and the Public Infrastructure Advisory Commission. The P3 agreement would make the private contractor the lessee of the Project for the term of the agreement.
PECG’s November 2, 2010 complaint for declaratory relief and petition for writ of mandate challenged the conversion of the Presidio Parkway Project (“Project”) to a P3 on the grounds that the Project did not meet the requirements of Section 143. The complaint alleged that to proceed as a P3, the Project must comply with the requirements the Legislature has mandated in Section 143: (1) Caltrans must serve as the “responsible agency” for performance of the Project development engineering services, (2) the Project must be for facilities that are supplemental to existing facilities, and (3) the lease agreement must authorize the private developer to collect tolls or user fees to defray the funding cost. As the Court of Appeal noted, the essential facts are not in dispute. The Project involves the replacement of the existing southern approach to the Golden Gate Bridge, known as Doyle Drive. The existing Doyle Drive facilities are part of State Route 101. The current Doyle Drive does not meet current highway standards. The Project began in 1998 with a feasibility study conducted by the SFCTA pursuant to a Memorandum of Understanding with Caltrans. The MOU provided funding and called for Caltrans to provide “oversight, reviews, and approvals.” SFCTA and Caltrans then entered into a series of cooperative agreements. SFCTA was the lead agency for preliminary project and development design and environmental studies, and the resulting documents had to be submitted to Caltrans for its “review and concurrence” and its “ongoing review”. Through this series of cooperative agreements, Caltrans provided “quality assurance.” (Slip. Op. at p. 2.) 10
Preliminary design, engineering and environmental documents were completed in 2008 while the Project was still proceeding under a SFCTA design-bid-build method. The Project reports and environmental documents were prepared by a private contractor, Parsons Brinkerhoff, through a contract with SFCTA (Contract Number 99/00-7). Caltrans did not perform the preliminary engineering, pre-bid services, the preparation of project reports and environmental documents, or the documents setting forth the scope and estimated price of the Project. (AA Vol. 1, 00005, 00036.) Phase I of the Project includes part of the permanent facility and a detour to accommodate traffic during Phase II. Phase I construction was underway at the time of the trial under a set of traditional design-bidbuild contracts. Following briefs on the merits and oral argument, the trial court on February 23, 2011 denied the Petition for Writ of Mandate and dismissed the Complaint for Injunctive and Declaratory Relief. Judgment was entered for Caltrans, SFCTA and the California Transportation Commission. (AA Vol. 19, 004867-4872.) Following briefing and oral argument, on August 8, 2011, the First District Court of Appeal, Division One, affirmed the trial court’s decision in a written decision certified for publication. No Petition for Rehearing was filed with the Court of Appeal. The Court of Appeal decision noted the facts were not in dispute and that all of the challenges involved questions of statutory interpretation. The Court conducted a de novo review of the three 11
claims raised by PECG, each involving the interpretation of Section 143’s statutory language. First, the Court ruled that Caltrans could satisfy the language of Section 143 by being the responsible agency and providing oversight and approval and did not need to actually perform the work on a P3 project. Second, relying in part on a dictionary definition, the Court ruled that under any standard definition of the term “supplement,” the Project is “supplemental to existing facilities and adds capacity” thus satisfying Section 143. Third, the Court ruled that projects under Section 143 must authorize tolls and use fees, but not necessarily require them for every project. V. LEGAL DISCUSSION Review is appropriate by this Court when necessary to secure uniformity of decision or settle an important question of law. (Cal. Rules of Court, Rule 8.500, subd. (b).) This is the first case interpreting the new amendments to the P3 statute. While it therefore does not directly conflict with any other rulings regarding this statute, the conclusions reached by the Court of Appeal regarding the legislative intent behind Section 143 deviate from the proper rules regarding statutory interpretation by ignoring the express words of the statutes and the clear legislative history. The ruling unquestionably impacts an important question of law. The Presidio Parkway Project at issue in this case is a $1.3 billion dollar project. With unlimited P3 authorization on the state highway system, this ruling will likely impact billions of dollars worth of state highway projects.
The Appellate Court Erroneously Found That Caltrans Can Satisfy Section 143(f)(1) by Merely Overseeing or Approving Work and Does Not Actually Have to Perform the Engineering Work Assigned to It on P3 Projects.
The Legislature specifically assigned Caltrans responsibility for the performance of project development services for P3 projects on the state highway system and specifically assigned Caltrans responsibility for the preparation of certain project documents. In order to comply with Article XXII of the California Constitution (which gives Caltrans the choice and authority to perform engineering work assigned to it on any given project utilizing either state employees or to retain consultants to perform the work on any given project), the Legislature took care to specify that Caltrans may use either department employees or consultants to perform those services, though it unambiguously left Caltrans ultimately responsible for performance of those services. Section 143(f)(1)(B) explicitly directs Caltrans to perform the services described in subparagraph (A), using either its own employees or its own consultants. Section 143(f)(1)(A), in turn, specifies that Caltrans is responsible for the performance of the listed engineering functions and for the preparation of the listed documents. (A) Notwithstanding any other provision of this chapter, for projects on the state highway system, the department is the responsible agency for the performance of project development services, including performance specifications, preliminary engineering, prebid services, the preparation of project reports and environmental documents, and construction inspection services. The department is also the responsible agency for the preparation of documents that may include, but need not be limited to, the size, type, and desired design character of the project, performance specifications covering the quality of materials, equipment, and workmanship, preliminary plans, and any other information deemed 13
necessary to describe adequately the needs of the department or regional transportation agency. (B) The department may use department employees or consultants to perform the services described in subparagraph (A), consistent with Article XXII of the California Constitution. Department resources, including personnel requirements, necessary for the performance of those services shall be included in the department’s capital outlay support program for workload purposes in the annual Budget Act. The Court of Appeal decision ignores the words “to perform” in Section 143(f)(1)(B) and allows Caltrans to instead fulfill its “responsible agency” role by merely supervising work that was previously done by consultants retained by a local transportation agency. The legislative history confirms that the Legislature knowingly assigned Caltrans the responsibility to perform this work with its staff engineers or its own directly retained consultants. The Court of Appeal decision fails to acknowledge that SB 2X 4 itself includes language expressly acknowledging that Caltrans would actually perform the work: The bill would provide that the Department of Transportation is the responsible agency for the performance of certain tasks and the preparation of certain documents, relative to projects on the state highway system, where a regional transportation agency is otherwise the sponsor of the project. The bill would state that the department may perform those functions with department employees or with consultants contracted by the department.
Further confirming the intent of the Legislature, a Senate Floor Analysis of SB 2X 4 states: Caltrans is the responsible agency for the performance of project development services and Caltrans can use either department personnel or consultants to perform those services. (AA Vol. 13, 03373.) As originally enacted in 1989, Section 143 provided that Caltrans “may provide services for which they are reimbursed with respect to planning, environmental certification, and preliminary design of the demonstration projects.” (AA Vol. 7, 001740.) Thus, the legislative history of Section 143 confirms that the Legislature knowingly assigned Caltrans the responsibility to perform this work with its staff engineers or its own directly retained consultants – and that, when the preliminary work was performed by a local transportation agency, the project is not eligible to proceed as a P3. As discussed above, Section 143, originally enacted in 1989, provided that Caltrans "may provide services for which they are reimbursed with respect to preliminary planning, environmental certification, and preliminary design of the demonstration projects." (AA Vol. 7, 001740.) Current Section 143(f)(2) was previously found at former Section 143(d)(1), which defined Caltrans’ role as follows: (d)(1) The department or a regional transportation agency may exercise any power possessed by it with respect to transportation projects to facilitate the transportation projects pursuant to this section. The department, regional transportation agency, and other state or local agencies may provide services to the contracting entity for which the public entity is reimbursed, including, but not limited to, planning, environmental planning, environmental certification, environmental review, preliminary design, design, right-of-way acquisition, construction, maintenance, and policing of these transportation projects. The department or regional 15
transportation agency, as applicable, shall regularly inspect the facility and require the lessee to maintain and operate the facility according to adopted standards. The lessee shall be responsible for all costs due to development, maintenance, repair, rehabilitation, and reconstruction, and operating costs. (AA Vol. 13, AA003321.) At the same time, former Section 143(f) required that each transportation project "comply with the department’s standards for state transportation projects" and mandated that projects for facilities on the state highway system "meet all requirements for noise mitigation, landscaping, pollution control, and safety that otherwise would apply if the department were designing, building, and operating the facility." (AA Vol. 13, 003325-3326.) Thus, at the time SB 2X 4 was passed, the former Section 143(d)(1) expressly stated that preliminary engineering services could be performed by: (1) Caltrans, (2) a regional transportation agency, or (3) other state or local agencies; former Section 143(f) provided quality assurance for work performed by others by requiring all parties to meet Caltrans’ standards, including specified requirements for projects on the state highway system. SB 2X 4 amended Section 143 to delete the authorization for the engineering services to be performed by a regional transportation agency or other state or local agencies. The trial court and the appellate decision nonetheless permits a regional transportation agency or other state or local agencies to perform these engineering services, as long as the performance is subject to Caltrans’ oversight. (Slip Op. at p. 7.) This interpretation is in error as it engrafts back onto the statute the very language that the Legislature deleted.
SB 2X 4’s amendment to Section 143 directs Caltrans "to perform" the specified tasks, via its staff or its consultants; deletes reference to other entities previously authorized to perform them; and requires that the resources necessary to accomplish this work be included in the Caltrans’ Capital Outlay Support portion of the state budget. This amendment necessarily evinces a legislative intent to alter the prior framework and assign specific responsibility for performing this work to Caltrans. (Dix v. Superior Court (1991) 53 Cal.3d 442, 461 (in construing statutes, courts presume the Legislature intends to change the meaning of a law when it alters the statutory language).) The statutory role of Caltrans in the planning, development, and construction inspection of these state highway projects reflects a considered judgment by the Legislature on the appropriate method of performing these responsibilities. The appellate court’s holding overturns the Legislature’s decision and interprets the statute so that it has the same meaning as it did prior to its amendment designating Caltrans as the agency responsible for performing this work. This construction of the statute is entirely unsustainable. Emphasizing the phrase "any power," the Court of Appeal relies upon Section 143(f)(2) noting that it authorizes cooperative agreements that do not have Caltrans perform the services set forth in Section 143(f)(1). (Slip. Op. at p. 7.) This finding is in error as it ignores the effect of the Legislature’s deliberate amendment to Section 143, as set forth immediately above. Furthermore, this finding disregards the plain text of Section 143(f)(1), which includes a 17
qualifier stating that the subdivision applies "[n]otwithstanding any other provision of this chapter…." This phrase commands that Section 143(f)(1)’s limitations be given effect, even if they conflict with other provisions within Section 143 or its chapter of the Streets and Highways Code. (Arias v. Superior Court (2009) 46 Cal.4th 969, 983 ("Notwithstanding any other provision . . . " is a "term of art" that "declares the legislative intent to override all contrary law.").) The Legislature expressly stated, in the plain text of the statute that Section 143(f)(1) was to apply "notwithstanding any other provision of this chapter." Such an interpretation cannot withstand scrutiny. Indeed, this overbroad construction of subdivision (f)(2) has the effect of impliedly repealing the specific limiting language the Legislature carefully included in subdivision (f)(1). As this Court has recently reaffirmed, "all presumptions are against implied repeal." (Sonic-Calabasas A, Inc. v. Moreno (2011) 51 Cal.4th 659, 675.) In determining legislative intent, courts look first to the words of the statute, "‘giving to the language its usual, ordinary import and according significance, if possible, to every word, phrase and sentence in pursuance of the legislative purpose.’" (Cortez v. Abich (2011) 51 Cal.4th 285, 292.) The appellate court’s interpretation, which has rendered the limiting language of subdivision (f)(1) null and of no force, must be rejected. (Cf., People v. Woodhead (1987) 43 Cal.3d 1002, 1010 (interpretation which has the effect of making words in a statute surplusage should be avoided).)
The Appellate Court Incorrectly Interpreted Section 143(a)(6) and Ignored the Legislature’s Intent in Enacting the Statute
To qualify as an eligible project under Section 143, a transportation project must be “supplemental to existing facilities currently owned and operated by the department or regional transportation agencies.” Specifically, Section 143(a)(6) provides, in pertinent part: “Transportation project” means one or more of the following: planning, design, development, finance, construction, reconstruction, rehabilitation, improvement, acquisition, lease, operation, or maintenance of highway, public street, rail, or related facilities supplemental to existing facilities currently owned and operated by the department or regional transportation agencies that is consistent with the requirements of subdivision (c). (Id., emphasis added.) Both the trial court and the appellate court properly applied the “last antecedent rule,” which directs that “qualifying words and phrases and clauses are to be applied to the words or phrases immediately preceding and are not to be construed as extending to or including others more remote.” (Briggs v. Eden Council For Hope & Opportunity (1999) 19 Cal.4th 1106, 1114.) In doing so, the lower courts each held that the modifying phrase “supplemental to existing facilities” modifies the term “facilities.” (AA Vol. 19, 004829.) While the appellate court correctly applied the last antecedent rule to determine that “facilities” is the antecedent for the modifying phrase, like the trial court, it violated the rule by truncating the modifying phrase and separating “supplemental to existing facilities” from the remainder of the qualifier, “currently owned and operated by 19
the department or regional transportation agencies.” Rather than completing its analysis of the full language of Section 143(a)(6), the appellate court instead diverted its attention towards the definition of “supplement” to find that the Project is supplemental to existing facilities and therefore satisfies Section 143(a)(6). The result of the appellate court’s failure to fully analyze the language of Section 143(a)(6) is fatal to its true meaning and results not only in its misinterpretation, but also in an aberration of the Legislature’s intent in enacting the statute. By analyzing the full language Section 143(a)(6) using its plain meaning, and read in accordance with standard rules of English grammar, the proper interpretation is easily reached. The phrase “currently owned or operated by the department or a regional transportation agency” modifies the antecedent “facilities,” which is also qualified by the adjective “existing.” Applying the last antecedent rule yields the result that the facilities created through Section 143 transportation projects must be: (1) supplemental to (2) existing facilities (3) that are owned or operated (4) by the department or a regional transportation agency. Thus, this sentence unambiguously bars application of P3 to existing Caltrans- and regional transportation agency -owned facilities. The reason for this limitation is obvious: the purpose of Section 143 was to use private money to create additional transportation facilities for Caltrans and regional transportation agencies, not to cannibalize and privatize their existing, limited facilities.
The appellate court thus erred when it held that the Project satisfies Section 143(a)(6) because it includes “a series of supplemental new improvements to existing facilities.” (Slip Op. at p. 9.) None of the features cited by the appellate court result in new facilities. Rather, these are merely new features of an existing stateowned facility. It is undisputed that Doyle Drive is already a part of the state highway system and has been since 1945. (AA Vol. 1, 000028, 000037.) Because it is a state facility, and because the Project will not supplement this existing facility, the Project does not qualify as a P3. Leaving the appellate court’s decision undisturbed would result in the absurd conclusion that Section 143 authorizes P3s for any project undertaken on facilities within the state highway system: under the appellate court’s (and trial court’s) interpretation of Section 143, as long as the Project resulted in new features for existing facilities, it is irrelevant that it does not result in new facilities. This reading does violence to the statutory language because it renders the qualifying language of Section 143(a)(6) – “supplemental to existing facilities currently owned and operated by the department or regional transportation agencies” – completely out of existence. Interpreting Section 143(a)(6) in this manner would effectively allow private parties to lease existing state highway facilities, thereby removing them from public control and responsibility for the period of the lease. This is not what the Legislature intended or authorized when it passed Section 143. The trial court recognized this and noted in its January 3, 2011 Order, that Section 143(a)(6) does allow for 21
reconstruction or rehabilitation of existing facilities, but only as long as those facilities are not already owned and operated by the department or regional transportation agencies. (AA Vol. 6, 0014641465.) Under Section 143(a)(6) and (d), an older, existing facility may be rehabilitated or reconstructed as part of a P3 project as long as: (1) it is not currently owned or operated by Caltrans or a regional transportation agency, and (2) ownership and operation of the facility will be transferred to Caltrans or a regional transportation agency at the conclusion of the P3 lease. The legislative history of Section 143 also confirms that P3 Projects such as the Presidio Parkway must be “supplemental” to existing facilities owned or operated by Caltrans or a regional transportation agency. (AA Vol. 8, 001876.) For example, the Caltrans Director sent a memo on July 6, 1989, discussing AB 680 specifically noting, “[t]hese projects are to be supplemental to existing state owned facilities.” (Id. at AA001886.) Caltrans also issued a Privatization Newsletter in October 1989, which stated that “Projects must supplement the existing “free” system, and they must offer a reasonable choice (free or toll) to potential users and the public.” (Id. at AA001905.) Similarly, the Legislature’s analysis of AB 680 said: While new highways or other transportation facilities could be built under the bill, additions to existing state facilities could also be built, including expanded toll bridge capacity in the San Francisco Bay area. (AA Vol. 9, 002169.)
The Legislature recognized and intended that “[t]his new private capital would be applied to the development of new facilities not currently programmed with examples ranging from major new bay crossings, rail corridor development, and double decking of freeways.” (AA Vol. 8, 001754, 1836, 1847, 1861, 2218.) While the amendments to Section 143 expanded the definition of transportation facilities, none of these amendments eliminated or narrowed the application of the “supplemental” phrase to something less than all transportation facilities produced as part of P3 projects. (AA Vol. 6, 001528-1529.) The appellate court also unconvincingly found that “by the time Phase II of the Project begins, Phase I will be completed and constitute an existing facility.” (Slip Op. at p. 9.) This result is absurd, because it would mean that any transportation project that included a temporary detour, such as will occur with Phase I of the Project, could qualify as a P3. Phase I of the Project is a temporary realignment of the street to allow tearing out the existing state highway facilities. Once the Project is complete, the detour will be removed and the street will return to its original location. Neither the Phase I temporary realignment and/or the Project’s completion in Phase II result in facilities that will be incorporated into the state highway system at the conclusion of the long-term lease, as required by Section 143(d). (AA Vol. 19, 004832 (“[T]he agreement shall provide for complete reversion of the leased facility, together with the right to collect tolls and user fees, to the department or regional transportation 23
agency, at the expiration of the lease at no charge to the department or regional transportation agency.”) The appellate court’s interpretation of Section 143(a)(6) is flawed, contrary to the Legislature’s intent and should accordingly be reversed. C. The Appellate Court Erred In Concluding the Presidio Parkway Project and Future P3s Need Not Be Funded Through Tolls and User Fees
Both the trial court and appellate court erred in concluding that Section 143 does not require tolls and user fees to be included as part of the Presidio Parkway Project P3 agreement. Section 143 presupposes the existence tolls and user fees for all P3 projects, and the legislative intent of the P3 statutes confirm that the imposition of tolls and user fees on P3 projects is mandatory. Conclusions of the trial and appellate courts to the contrary were based on erroneous interpretations of the statute and should be reversed. The Supreme Court’s determination of this issue is significant because the trial and appellate court decisions represent a judicial authorization for the use of public financing in P3 projects, in the form of availability payments, without any Legislative authorization and in spite of a clear legislative intent that compels an opposite conclusion. 1.
Section 143 Both Requires and Presupposes the Existence of a Toll or User Fee Agreement, and Contemplates No Other Financing Mechanism
The unambiguous language of Section 143 requires that a P3 agreement be funded using tolls or user fees. Section 143(j)(1) states that:
Agreements entered into pursuant to this section shall authorize the contracting entity or lessee to impose tolls and user fees for use of a facility constructed by it, and shall require that over the term of the lease the toll revenues and user fees be applied to payment of [specified costs]. The use of the term “shall” clearly indicates that the inclusion of this provision is mandatory. (See Black’s Law Dict. (9th ed. 2009) p. 1499, col. 2d; Common Cause v. Board of Supervisors (1989) 49 Cal.3d 432, 443.) The trial court concluded that the provisions of Section 143 “fall short of requiring the use of tolls and user fees as a necessary funding element or the sole funding source of every P3.” (Slip Op. at p. 10.) The appellate court, without further analysis, agreed with the trial court on this issue, concluding that “agreements must authorize tolls and user fees, but not necessarily require them for every project.” (Professional Engineers in California Government v. Department of Transportation (2011) 198 Cal.App.4th 17, 27.) Both opinions miss the mark. Every P3 project undertaken pursuant to Section 143 has been based on the imposition of tolls and user fees. Aside from the inclusion of subdivision (s), there have been no legislative amendments or any indications by the Legislature that this mandatory tolling, inherently part of the P3 statute, should change. In fact, there are no fewer than ten specific references to tolls and user fees contained in Section 143. (See Section 143 subdivisions (j)(1), (d), (i).) All of these subsections of the statute presume the existence of toll or user fees as an integral part of any P3 agreement and project, and no other financing alternatives are discussed in Section 143. The trial court acknowledged as much, noting that all of these statutory 25
references are “consistent with the origins of Section 143 and the earlier versions of the statute that clearly contemplated the imposition of tolls and user fees on P3 projects.” (AA Vol. 19, 004826, emphasis added.) Yet somehow, the appellate court concluded that tolls and user fees were not a necessary funding element in every P3, and that availability payments were authorized absent any mention of them in the statute. Had the Legislature intended the assessment of tolls or user fees to be merely one financing option among many, the statute would have stated as much. It does not. Section 143 does not have to do so because the legislative history of that section indicates that it was assumed and expected that tolls or user fees would be used to support P3 projects, and thus this language was written into numerous other subdivisions of the statute. Indeed, Section 143 authorizes tolls and user fees as the exclusive funding mechanism for P3 projects because it specifically provides for that mechanism, repeatedly incorporates that mechanism into numerous subdivisions, and refers to no other means of funding the Projects. By reading this language out of the statute, the trial court and the appellate court misinterpreted Section 143 and improperly approved of a funding mechanism not authorized by the Legislature. If the appellate court’s opinion stands, the result will be a judicially created authorization for the use of all manner of payments for future P3 projects that has no basis in Section 143 or the legislative intent behind that law.
The Appellate Court’s Reliance on Subdivision (a)(6) Ignores the Reality That No P3 Project Consists Purely of Planning or Design Activities, and Thus All P3 Projects Are Capable of Being Assessed Tolls or User Fees
An additional basis of the appellate court’s conclusion that Section 143 does not require tolling was that such a requirement would, at first glance, seem to conflict with other provision of the statute, and specifically subdivision (a)(6) defining eligible “transportation projects” for purposes of a P3. Specifically, the appellate court found that “‘transportation projects’ are broadly defined in section 143, subdivision (a)(6) to include activities such as planning and design, for which, of course, tolls and fees could not be charged” and thus it would be unreasonable to infer a legislative intent to require tolls that cannot be collected. (Professional Engineers in California Government v. Department of Transportation, supra, 198 Cal.App.4th at p. 27.) Such a conclusion is fundamentally flawed because it is premised on the false assumption that the mere planning or design of a facility, standing alone, could constitute a discrete P3 project. Non-physical elements such as “planning” or “design” are not undertaken in a vacuum and cannot be separated from the physical transportation facilities to which they are related. P3 agreements are entered into for the planning and design “…of highway, public street, rail, or of highway, public street, rail, or related facilities supplemental to existing facilities.” (§ 143(a)(6).) All projects, whether they involve planning, design, construction, rehabilitation, or otherwise, must be attached to an actual, physical (and supplemental) 27
transportation facility. There is no evidence of any P3 agreement that contemplates only planning facilities in a vacuum, without constructing anything, and indeed such a project would not meet the requirements of Section 143. Thus, simply because one cannot toll a single component of a larger P3 project does not mean it is unreasonable to infer that the finished project must be tolled. Obviously, tolls or user fees can be assessed on the transportation facilities for which the planning and design activities were undertaken. Both the trial and appellate court’s reliance on subdivision (a)(6) as evidence of some legislative intent not to require the imposition of such tolls or fees on the actual finished P3 project is a clearly erroneous interpretation of the statutory language. 3.
Section 143(s) and Section 143(j)(1) Can Be Harmonized, and Section 143(s) Does Not Excuse Caltrans’ Obligation to Comply With Section 143(j)(1)
Finally, the appellate court’s third basis for concluding that Section 143 authorizes availability payments and does not require tolls or user fees was that subdivision (s) specifically provides that no P3 agreement can be entered into that affects, alters, or supersedes the Memorandum of Understanding (MOU) relating to the financing of the Presidio Parkway project. (Professional Engineers in California Government v. Department of Transportation, supra, 198 Cal.App.4th at pp. 27-28.) The appellate court reasoned that because the MOU identified in subdivision (s) specifically allows for tolls only when certain limited conditions are met, an interpretation of section 143 that requires mandatory tolling would therefore violate the MOU incorporated into section 143 by subdivision (s). (Id. at pp. 27-28.) 28
However, the trial and appellate courts fail to acknowledge that the provisions of Section 143(s) and Section 143(j)(1) can and should be harmonized, and do not need to be read as contradictory or conflicting requirements. “Provisions relating to the same subject matter must be harmonized to the extent possible.” (People v. King (1993) 5 Cal.4th 59, 69.) Both the trial and the appellate court overread Section 143(s), and concluded that because it may be difficult (though not impossible) to comply with both subdivision (s) and subdivision (j)(1), therefore the Legislature must have intended to eviscerate the toll and user fee mandate in the rest of Section 143. However, subdivision (s) does not state that the 2008 MOU preempts any contrary provision of Section 143. Rather, Section 143(s) merely provides that any P3 lease agreement developed for the Presidio Parkway Project must not “affect, alter or supersede” the 2008 MOU – in other words, that any P3 agreement for the Presidio Parkway Project must comply with the 2008 MOU. The 2008 MOU itself does not eliminate the lessee’s ability to collect tolls or user fees, but rather expressly allows tolls to be collected for the Doyle Drive facilities under a Regional Cordon Tolling Program. (AA Vol. 4, 000858.) Thus, it is possible to comply with the statutory requirement of procuring funding via tolls or user fees without “affecting, altering, or superseding” the 2008 MOU. It is undisputed that the P3 agreement for the Presidio Parkway Project did not include a provision for the imposition of tolls or fees. Instead, the parties agreed not to impose the required tolls or user fees at all. However, the terms of the lease 29
agreement cannot abrogate Caltrans’ obligation to follow the statutory prerequisites for executing a P3 agreement that includes a provision for tolls or user fees. In essence, the parties cannot simply be permitted, through a contractual agreement, to excuse themselves from the mandatory statutory requirements of Section 143(j)(1). In a broader sense, the presence of subdivision (s), which references one MOU for the single project at issue here, cannot and should not be the basis for authorizing all manner of financing mechanism for all other P3 projects in the future, which would be the effective result of upholding the appellate court’s decision on this issue. VI. CONCLUSION The language, context and legislative history of Section 143 all compel the conclusion that in order for a transportation project to qualify as a P3: (1) Caltrans employees or its consultants must perform the project development services; (2) the project must result in new facilities that are supplemental to existing facilities on the state highway system; and (3) the project must be financed using private revenue with the investment being repaid through tolls or user fees. The appellate court’s decision holding to the contrary constitutes a misinterpretation of relevant statutory provisions at issue here. Left unfettered, the decision will have a drastic impact on how and which future state highway projects will be developed, constructed, inspected and funded. At risk is billions of the State’s taxpayer dollars Review of the Court of Appeal’s decision is therefore necessary to ensure that lower courts are properly interpreting the P3 statute and 30
to provide guidance to the entities involved in state highway projects as to how to proceed with P3 projects. For all of these reasons, Appellants respectfully request that the Court grant Appellants' Petition for Review. SOMACH SIMMONS & DUNN A Professional Corporation DATED: September 16, 2011 By: Kanwarjit S. Dua Adam D. Link Attorneys for Plaintiffs/Petitioners/Appellants PROFESSIONAL ENGINEERS IN CALIFORNIA GOVERNMENT and DENNIS ALEXANDER. PROFESSIONAL ENGINEERS IN CALIFORNIA GOVERNMENT DATED: September 16, 2011 By: Gerald A. James Attorney for Plaintiffs/Petitioners/Appellants PROFESSIONAL ENGINEERS IN CALIFORNIA GOVERNMENT and DENNIS ALEXANDER
CERTIFICATE OF WORD COUNT (Cal. Rules of Court, Rule 8.204(c).)
The text of this APPELLANTS’ PETITON FOR REVIEW is 7,658 words as counted by the Microsoft Word X for Mac word processing program used to generate the document.
Respectfully Submitted, DATED: September 16, 2011 By: Kanwarjit S. Dua Adam D. Link Attorneys for Plaintiffs/Petitioners/Appellants PROFESSIONAL ENGINEERS IN CALIFORNIA GOVERNMENT and DENNIS ALEXANDER.
PROFESSIONAL ENGINEERS IN CALIFORNIA GOVERNMENT, ET AL v. CALIFORNIA DEPARTMENT OF TRANSPORTATION, ET AL.
COURT/CASE NO: California Supreme Court Case No. ________ Court of Appeal, First Appellate District Case No. A131449 PROOF OF SERVICE I am employed in the County of Sacramento; my business address is 500 Capitol Mall, Suite 1000, Sacramento, California; I am over the age of 18 years and not a party to the foregoing action. On September 16, 2011, I served the following document(s): APPELLANTS’ PETITION FOR REVIEW __ (by mail) on all parties in said action, in accordance with Code of Civil Procedure §1013a(3), by placing a true copy thereof enclosed in a sealed envelope, with postage fully paid thereon, in the designated area for outgoing mail, addressed as set forth below. (by personal delivery) by personally delivering a true copy thereof to the person and at the address set forth below: _X (by overnight delivery) on all parties in said action, by placing a true copy thereof enclosed in a sealed envelope in a designated area for outgoing, same-day pickup by Federal Express at the offices of Somach Simmons & Dunn for overnight delivery, billed to Somach Simmons & Dunn, and addressed as set forth below. Gerald A. James, Esq. Professional Engineers in California Government 455 Capitol Mall, Suite 501 Sacramento, CA 95814 Telephone: (916) 441-2222 Facsimile: (916) 442-4182 Co-Counsel for Appellants/Petitioners Professional Engineers in California Government and Dennis Alexander
Jeffrey Rich, Esq. Attorney General’s Office 1300 I Street Sacramento, CA 95814 Telephone: (916) 324-7862 Facsimile: (916) 327-2247 Erin Holbrook, Esq. 1120 N Street (MS 57) Sacramento, CA 95812 Telephone: (916) 654-2630 Facsimile: (916) 654-6128 Stephen N. Roberts, Esq. Nossaman LLP 50 California Street, 34th Floor San Francisco, CA 94111 Telephone: (415) 398-3600 Facsimile: (415) 398-2438 Barbara A. Brenner, Esq. Stoel Rives LLP 500 Capitol Mall, Suite 1600 Sacramento, CA 95814 California Court of Appeal 350 McAllister Street San Francisco, CA 94102 Alameda County Superior Court Attn: Dept. 21, Hon. Wynne Carvill 1225 Fallon Street Oakland, CA 94612
Attorneys for Respondents/Defendants California Transportation Commission and James Earp
Attorneys for Respondents/Defendants California Department of Transportation and Cindy McKim Attorneys for Respondents/Defendants San Francisco County Transportation Authority and Ross Mirkarimi
Attorneys for Amicus Curiae American Council of Engineering Companies of California
I declare under penalty of perjury that the foregoing is true and correct. Executed on September 16, 2011, at Sacramento, California.
ASTRID B. WATTERSON, CCLS
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