Monette-Shaw v. San Francisco Board of Supervisors et al

Filed 5/26/06

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO

Introduction

                      This is an appeal from the trial court's denial of a petition for writ of mandate seeking to prevent the City and County of San Francisco (City) from diverting tobacco settlement revenues away from the project to replace Laguna Honda Hospital and to require the City to maintain Laguna Honda as a 1,200-bed skilled nursing facility.  We affirm.

Factual Background and Procedural History

                      Laguna Honda Hospital, founded in 1866, has long been a fixture in the City and County of San Francisco (the City), providing continuing care services to the City's elderly and chronically disabled population without regard to ability to pay.  As of 1999, the City operated Laguna Honda as a 1,200-bed skilled nursing facility.  By the late 1990's, its physical condition was seriously deteriorating, it suffered damage from the 1989 earthquake, and its open-ward structure was out-moded, leaving it at risk to lose federal funding that was critical to its survival.  Also, in 1998, the City settled litigation it had brought against the tobacco industry.  As of 1999, the City was projecting that it would receive more than $580 million in settlement payments over the next 37 years.  The proceeds of this settlement gave the City a unique opportunity to address the serious problems at Laguna Honda.

                      In November 1999, the voters of the City approved Proposition A, a ballot measure authorizing the City to incur $299 million in debt for a health care facility to replace Laguna Honda Hospital, and dedicating certain revenues derived from the settlement with the tobacco industry to help pay for the replacement facility.  After passage of Proposition A, the City began planning the project.  In February 2004, the City authorized sale of bonds pursuant to Proposition A.  In October 2004, the City received construction bids for the project as originally contemplated that significantly exceeded the project's budget.  Also in October 2004, in response to the escalating cost of the project, the City adopted an ordinance allowing it to negotiate with bidders to try to reduce the project costs.  The project was then re-bid.

                      During this same time period, the City was experiencing a severe economic downturn.  In fiscal year 2003-2004, the City faced an unprecedented budget deficit.  The tobacco settlement, however, was a fiscal bright spot.  As of June 2003, projections indicated that the City would receive $238 million more over 37 years than projected at the time Proposition A was placed on the ballot.  By the beginning of fiscal year 2003-2004, including interest that would be earned during the coming fiscal year, that unexpected windfall already equaled $25 million.  On July 25, 2003, still before any bonds were authorized or issued pursuant to Proposition A, the City enacted an ordinance authorizing the transfer of $25 million of tobacco settlement payments from the Tobacco Settlement Revenue Sub-account[1] to its general fund. 

                      Petitioner, a resident of the City, brought this writ of mandate action in November 2004 in the San Francisco Superior Court seeking an order that the City (a) return the $25 million and not divert any tobacco settlement funds away from the Laguna Honda project and (b) maintain Laguna Honda as a skilled nursing facility with at least 1,200 inpatient beds unless the City could satisfy certain conditions.  On April 4, 2005, the Superior Court, having heard oral argument, entered judgment on its order denying the writ of mandate, from which this appeal is taken.

Analysis

                      Because this case turns on application of settled principles of statutory interpretation as applied to the Proposition A bond measure, and not on disputed issues of fact, our review is de novo.  â€