Northern California Record

Monday, December 16, 2019

California Supreme Court fails to resolve conflict over groundwater fees, charges

By Karen Kidd | Dec 15, 2017

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SAN FRANCISCO (Northern California Record) — Despite hopes for a resolution after two appeals courts issued conflicting rulings over whether groundwater extraction fees violate the state's constitution, the California Supreme Court decided to send part of that question back to the district court.

"The court affirmed part of the ruling and reversed part for further consideration at the appellate court," Robert J. Saperstein, a shareholder in Brownstein Hyatt Farber Shreck Santa Barbara office who focuses on water law and policy issues, told the Northern California Record. "So no, it is not settled."

In a unanimous ruling handed down Dec. 4, the California high court remanded City of San Buenaventura v. United Water Conservation District back to the Second District Court of Appeal with instructions to consider whether the water district's rates "bore a reasonable relationship to the benefits of its conservation activities," as required by the state's constitution.

"In making this determination, the court of appeal may consider whether, as the district argues, it should be afforded the opportunity to supplement the administrative record with evidence bearing on this question," said the ruling penned by Justice Leondra R. Kruger.

The California Supreme Court agreed to hear City of San Buenaventura v. United Water Conservation District following opposing opinions handed down in 2015 by the state's Second and Sixth District Courts of Appeal. The Second District, which handed down an opinion in City of San Buenaventura v. United Water Conservation District, and the Sixth District, which opined in another similar case, differed over whether groundwater extraction fees or charges are subject to Article 13D of the California Constitution, created by Proposition 218.  

Proposition 218, the so-called "Right to Vote on Taxes Act", passed by California voters in 1996, amended the state constitution to allow taxpayers to limit the ways in which local governments can create or increase taxes, fees and charges without their consent. Under Proposition 218, voters must approve new or increased taxes, assessments and certain user fees.

In 2010, California voters also passed Proposition 26, which requires a super-majority vote on new taxes and fees.

In March 2015, the Sixth District ruled in Great Oaks Water Company v. Santa Clara Valley Water District that groundwater extraction fees imposed by a state water district on a water retailer did not violate Proposition 218. In the same month, the Second District, in City of San Buenaventura v. United Water Conservation District, came to the opposite conclusion, ruling a water conservation district's groundwater pumping fees are not property-related and, therefore, Proposition 218 does not apply.

The California Supreme Court ruling did resolve part of the question, Kelly J. Salt, a partner in Best, Best & Krieger's San Diego office and a legal authority on Prop 218 and Prop 26 compliance, said during a separate Northern California Record interview. "The issue of whether a pumping/extraction charge is subject to Proposition 218 is settled," she said. "It is not a property-related charge and therefore is not required to comply with the substantive and procedural requirements of Proposition 218."

What the high court didn't settle was whether the charge is a tax as defined by Proposition 26, Salt said.

 "The court of appeal must now decide whether United Water Conservation District met its burden of demonstrating the charge is not a tax under the two requirements of Proposition 26," she said. "If it does not, then the charge is a tax under Proposition 26."

The appeals court will now have to deal with a Proposition 26 exemption that United Water Conservation District relied upon to support its pump charge without obtaining voter approval, Saperstein said. "With the added confusion of the mandatory pump charge ratio of Water Code 75594, the appellate court will have some analytic challenge," Saperstein said.

A footnote in the state supreme court's ruling refers to another bugbear with which the Second District will have to contend, Saperstein said. "One other aspect of this opinion is interesting for folks involved with implementation of the Sustainable Groundwater Management Act," he said.

Meanwhile, United Water Conservation District can expect to have a difficult time when it returns to the Second District, Salt said. 

"Unless United Water Conservation District can demonstrate that it costs them three times more to provide its conservation services to non-agricultural groundwater extractors than it does to all other groundwater extractors," she said. "I expect the district will have a difficult time meeting its burden under the second prong of the Proposition 26 test." 

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