Opinion
ANDREEN, J.
Following the issuance of our opinion in this matter, both parties petitioned for rehearing. We granted same in order to consider issues raised by the parties for the first time, to reconsider our earlier opinion and to have the benefit of the brief and oral argument of new counsel representing respondent City of Fresno.
After further consideration, we affirm the court below. In doing so, we adopt the first part of our original opinion, changing, however, footnote 1. At the appropriate place below, we will note where this opinion differs from the first.
The plaintiff commenced this taxpayer’s suit pursuant to Code of Civil Procedure section 526a, seeking to require the City of Fresno (hereinafter City) to repay to the Water Division of the City of Fresno (hereinafter Water Division) $847,828 which was allegedly received by way of unlawful in lieu tax payments made by the Water Division over a period of two years—1975/1976 and 1976/1977. He also seeks a permanent injunction enjoining the City from collection of illegal taxes in the future. The central issue pertains to the proper interpretation of section 1218 of the Fresno City Charter (hereinafter section 1218).
Section 1218, enacted in 1957, provides: “Section 1218. Municipally Owned Utilities. The Council through the Chief Administrative Officer shall endeavor to make each municipally owned utility financially self-sustaining. After providing for depreciation reserves and amortization of general obligation and revenue bonds issued for such utility and for [463]*463reasonable accumulation of reserves for improvement and expansion, and for deposits into special funds created to secure revenue bonds issued for such utility, each utility shall apply all annual profits thereafter remaining to rate reductions, subject to any limitations on the application of such profits or on rate reductions contained in any resolution of the Council relating to the issuance of revenue bonds for such utility. No municipally owned utility shall be operated for the benefit of other municipal functions nor be used directly or indirectly as a general revenue-producing agency for the City, but may pay to the City such amounts of money, in lieu of property and other taxes normally placed upon private business enterprises, as the Council may provide by ordinance and may also pay to the City for any lawful purpose such amounts of surplus annual profits as may be permitted by the provisions of any resolution of the Council relating to the issuance of revenue bonds. ’ ’
Pursuant to section 1218, in 1967 the City passed ordinance No. 67-40 adding sections 4-801, 4-802 and 4-803 to article 8, chapter 4 of the Fresno Municipal Code, which insofar as germane here adopted an in lieu tax. The tax rate adopted is the annual weighted average of the total property tax rate levied in all tax areas as established by the county assessor, hereinafter referred to as the county tax rate. Under the ordinances, this tax rate has been and is applied to the value of the fixed assets of the Water Division.
The plaintiff contends that these ordinances are rendered unlawful by section 1218 of the charter in that the taxes authorized by that section may not exceed those that would be collected by the City from a private water company in the City. Those city taxes would be city property taxes, the utility users’ tax, business license tax and sales tax, hereinafter referred to as city taxes.1
Plaintiff presented evidence in the trial court of four fiscal years, by year, showing the amount of taxes paid by the Water Division based upon the county tax rate and the amount that would have been paid if only city taxes had been paid. Based upon these calculations, the application of the county rate resulted in an alleged excess amount of taxes collected per year as follows:
[464]*464Fiscal Year Difference
1975/76 $493,662
1976/77 521,428
1977/78 480,353
1978/79 185,618
Total $1,681,061
The trial court held that the in lieu county tax rate was authorized by section 1218 and that there is no limitation on the amount of tax that may be assessed by the City under that section. Plaintiff appealed. (The remainder of this opinion has been revised from the original, although portions of it are incorporated herein.)
The operation of the water department is a municipal affair.2 (Mefford v. City of Tulare (1951) 102 Cal.App.2d 919, 924 [228 P.2d 847].) Established law governing municipal affairs of chartered cities is that the city has all powers over its municipal affairs subject only to the clear and explicit limitations and restrictions contained in the charter. (City of Grass Valley v. Walkinshaw (1949) 34 Cal.2d 595, 599 [212 P.2d 894].) “All rules of statutory construction as applied to charter provisions [citations] are subordinate to this controlling principle.” {Ibid.)
A charter is to be broadly construed to permit the exercise of municipal power, and limitations on that power must be expressly stated in the charter, and may not be implied. (Taylor v. Crane (1979) 24 Cal.3d 442, 450-451 [155 Cal.Rptr. 695, 595 P.2d 129]; City of Grass Valley v. Walkinshaw, supra, 34 Cal.2d 595, 599.) Full exercise of municipal power is permitted except where it is “clearly and explicitly curtailed.” (City of Grass Valley v. Walkinshaw, supra, 34 Cal.2d at p. 599.)
[465]*465. The rules of statutory interpretation are to be applied to the construction of charters. (Castaneda v. Holcomb (1981) 114 Cal.App.3d 939, 942 [170 Cal.Rptr. 875].) Since there was no extrinsic evidence introduced as to the meaning of the language used, the proper interpretation of that language is a question of law for the court, and we are not constricted in this regard by the conclusions of the trial court. (Neal v. State of California (1960) 55 Cal.2d 11, 17 [9 Cal.Rptr. 607, 357 P.2d 839.], cert. den. 365 U.S. 823 [5 L.Ed.2d 700, 81 S.Ct. 708].)
We turn to an examination of the language. The charter provides in part: “No municipally owned utility shall be operated for the benefit of other municipal functions nor be used directly or indirectly as a general revenue-producing agency for the City, but may pay to the City such amounts of money, in lieu of property and other taxes normally placed upon private business enterprises, as the Council may provide by ordinance and may also pay to the City for any lawful purpose such amounts of surplus annual profits as may be permitted by the provisions of any resolution of the Council relating to the issuance of revenue bonds.” (Italics added.)
It is significant that the word “but” precedes the clause defining the extent of the in lieu payment. “But” is defined as: “without, except, outside.” (Webster’s New Internat. Diet. (3d ed. 1961) p.
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Opinion
ANDREEN, J.
Following the issuance of our opinion in this matter, both parties petitioned for rehearing. We granted same in order to consider issues raised by the parties for the first time, to reconsider our earlier opinion and to have the benefit of the brief and oral argument of new counsel representing respondent City of Fresno.
After further consideration, we affirm the court below. In doing so, we adopt the first part of our original opinion, changing, however, footnote 1. At the appropriate place below, we will note where this opinion differs from the first.
The plaintiff commenced this taxpayer’s suit pursuant to Code of Civil Procedure section 526a, seeking to require the City of Fresno (hereinafter City) to repay to the Water Division of the City of Fresno (hereinafter Water Division) $847,828 which was allegedly received by way of unlawful in lieu tax payments made by the Water Division over a period of two years—1975/1976 and 1976/1977. He also seeks a permanent injunction enjoining the City from collection of illegal taxes in the future. The central issue pertains to the proper interpretation of section 1218 of the Fresno City Charter (hereinafter section 1218).
Section 1218, enacted in 1957, provides: “Section 1218. Municipally Owned Utilities. The Council through the Chief Administrative Officer shall endeavor to make each municipally owned utility financially self-sustaining. After providing for depreciation reserves and amortization of general obligation and revenue bonds issued for such utility and for [463]*463reasonable accumulation of reserves for improvement and expansion, and for deposits into special funds created to secure revenue bonds issued for such utility, each utility shall apply all annual profits thereafter remaining to rate reductions, subject to any limitations on the application of such profits or on rate reductions contained in any resolution of the Council relating to the issuance of revenue bonds for such utility. No municipally owned utility shall be operated for the benefit of other municipal functions nor be used directly or indirectly as a general revenue-producing agency for the City, but may pay to the City such amounts of money, in lieu of property and other taxes normally placed upon private business enterprises, as the Council may provide by ordinance and may also pay to the City for any lawful purpose such amounts of surplus annual profits as may be permitted by the provisions of any resolution of the Council relating to the issuance of revenue bonds. ’ ’
Pursuant to section 1218, in 1967 the City passed ordinance No. 67-40 adding sections 4-801, 4-802 and 4-803 to article 8, chapter 4 of the Fresno Municipal Code, which insofar as germane here adopted an in lieu tax. The tax rate adopted is the annual weighted average of the total property tax rate levied in all tax areas as established by the county assessor, hereinafter referred to as the county tax rate. Under the ordinances, this tax rate has been and is applied to the value of the fixed assets of the Water Division.
The plaintiff contends that these ordinances are rendered unlawful by section 1218 of the charter in that the taxes authorized by that section may not exceed those that would be collected by the City from a private water company in the City. Those city taxes would be city property taxes, the utility users’ tax, business license tax and sales tax, hereinafter referred to as city taxes.1
Plaintiff presented evidence in the trial court of four fiscal years, by year, showing the amount of taxes paid by the Water Division based upon the county tax rate and the amount that would have been paid if only city taxes had been paid. Based upon these calculations, the application of the county rate resulted in an alleged excess amount of taxes collected per year as follows:
[464]*464Fiscal Year Difference
1975/76 $493,662
1976/77 521,428
1977/78 480,353
1978/79 185,618
Total $1,681,061
The trial court held that the in lieu county tax rate was authorized by section 1218 and that there is no limitation on the amount of tax that may be assessed by the City under that section. Plaintiff appealed. (The remainder of this opinion has been revised from the original, although portions of it are incorporated herein.)
The operation of the water department is a municipal affair.2 (Mefford v. City of Tulare (1951) 102 Cal.App.2d 919, 924 [228 P.2d 847].) Established law governing municipal affairs of chartered cities is that the city has all powers over its municipal affairs subject only to the clear and explicit limitations and restrictions contained in the charter. (City of Grass Valley v. Walkinshaw (1949) 34 Cal.2d 595, 599 [212 P.2d 894].) “All rules of statutory construction as applied to charter provisions [citations] are subordinate to this controlling principle.” {Ibid.)
A charter is to be broadly construed to permit the exercise of municipal power, and limitations on that power must be expressly stated in the charter, and may not be implied. (Taylor v. Crane (1979) 24 Cal.3d 442, 450-451 [155 Cal.Rptr. 695, 595 P.2d 129]; City of Grass Valley v. Walkinshaw, supra, 34 Cal.2d 595, 599.) Full exercise of municipal power is permitted except where it is “clearly and explicitly curtailed.” (City of Grass Valley v. Walkinshaw, supra, 34 Cal.2d at p. 599.)
[465]*465. The rules of statutory interpretation are to be applied to the construction of charters. (Castaneda v. Holcomb (1981) 114 Cal.App.3d 939, 942 [170 Cal.Rptr. 875].) Since there was no extrinsic evidence introduced as to the meaning of the language used, the proper interpretation of that language is a question of law for the court, and we are not constricted in this regard by the conclusions of the trial court. (Neal v. State of California (1960) 55 Cal.2d 11, 17 [9 Cal.Rptr. 607, 357 P.2d 839.], cert. den. 365 U.S. 823 [5 L.Ed.2d 700, 81 S.Ct. 708].)
We turn to an examination of the language. The charter provides in part: “No municipally owned utility shall be operated for the benefit of other municipal functions nor be used directly or indirectly as a general revenue-producing agency for the City, but may pay to the City such amounts of money, in lieu of property and other taxes normally placed upon private business enterprises, as the Council may provide by ordinance and may also pay to the City for any lawful purpose such amounts of surplus annual profits as may be permitted by the provisions of any resolution of the Council relating to the issuance of revenue bonds.” (Italics added.)
It is significant that the word “but” precedes the clause defining the extent of the in lieu payment. “But” is defined as: “without, except, outside.” (Webster’s New Internat. Diet. (3d ed. 1961) p. 303.) The in lieu payment, then, is an exception to the charter mandate that a municipally owned utility may not be used as a general revenue-producing agency.
Plaintiff argues that only those taxes assessed by the City may be used as the measure of the in lieu payments and that county property taxes may not be included. The drafters of the city charter easily could have limited the in lieu payments to an amount equal to the imposition of the taxes levied against private business enterprises by the City. After the words in section 1218 granting the City power to collect payments “in lieu of property and other taxes normally placed upon private enterprises” the insertion of the words “by the City” would have limited the City’s power as argued by plaintiff. The drafters’ failure to place this clear and simple limitation on the City’s power is evidence of an intent not to so restrict it.
The language of section 1218 provides that the in lieu payments may be measured by taxes normally placed upon private business enterprises. As observed by the trial court below, the reference to an in lieu amount measured by taxes “normally placed on private business enterprises” is a reference to the tax burden that is avoided rather than the tax loss to the [466]*466City by reason of public ownership. This manifests an intent to give water users the benefit of the profits that would have been distributed to the owners if the utility were private, but not more.
This interpretation in no sense gives the City carte blanche to impose any in lieu payment it wishes. Starting in 1967, the in lieu payments to the City were limited to the annual weighted average of the total property tax as established by the county assessor. Now, by state law all property taxes are assessed and collected by the County of Fresno and then disbursed to various governmental entities, including respondent City of Fresno, according to a preset formula prescribed by Proposition 13. Because of Proposition 13, the payments of in lieu taxes have declined in recent years.3
We conclude that the charter provision should be read as meaning that a municipal utility, such as the Water Division, shall operate without a profit, but may pay an in lieu amount measured by those property taxes (and other city and county taxes) normally assessed against private business enterprises. That means all property taxes, without limitation. The intent of section 1218—to assure cheap water rates—is met because the Water Division is precluded from making a profit, as would a private business, and is precluded from raising funds for municipal purposes beyond payment to the City of an amount equal to taxes assessed against private enterprise.