Conservation Water Rates Under Prop. 218 Urban Water Institute’s Spring Water Conference Palm Springs February 20, 2013

MICHAEL G. COLANTUONO Colantuono & Levin, PC 11364 Pleasant Valley Road Penn Valley, CA 95946-9000 (213) 542-5737 (530) 432-7357 (530) 432-7356 (fax) MColantuono@CLLAW.US December 28, 2018

Groundwater Extraction Charges Pajaro Valley Water Mgmt. Agency v. AmRhein (6th DCA 2007) Groundwater augmentation / extraction charges are property related fees subject to Prop. 218 December 28, 2018

Groundwater Extraction Charges Griffith v. Pajaro Water Mgmt. Agency (2013) 220 CA4th 586 (6th DCA) Charge is a fee for “water service” exempt from 13D, 6(c) election requirement Omnibus Act’s definitions are good authority notwithstanding HJTA v. Salinas Notice of protest hearing can be given to property owners alone December 28, 2018

Groundwater Extraction Charges Griffith (continued) Debt service, GA&O, service planning all permissible uses of fee AWWA M-1 Manual’s cost-accounting process complies w/ Prop. 218 Parcel-by-parcel cost analysis is not required; class-by-class is okay provided the classes are rationally drawn December 28, 2018

Groundwater Extraction Charges Cerritos, Downey & Signal Hill v. Water Replenishment District of So. Cal. LA Superior Court Case No. BS128136 Trial court invalidated WRD’s charges for non-compliance w/ 218 in 2011; appeal likely when remedies resolved Ventura v. United Water Conservation Dist., 2nd DCA No. B251810 Trial court found Prop. 218 violation and awarded $1.3m refund, appeal and cross-appeal filed; briefing underway December 28, 2018

Groundwater Extraction Charges Great Oaks Water Company v. Santa Clara Valley Water District, 6th DCA Case No. H035885 Revisits AmRhein v. Pajaro and application of 218 Did SCVWD comply w/ 218? Fully briefed 12/8/11 December 28, 2018

Water Fees City of Palmdale v. Palmdale Water District (2011) 198 CA4th 926 (2nd DCA) City challenged conservation water rates, claiming Prop. 218 disallows them DCA found 218 and Constitutional provision against wasting water could be harmonized, but struck down PWD rates as insufficiently justified Caution required when constructing conservation rates December 28, 2018

Prop. 218 & Water Rates Morgan v. Imperial Irr. Dist. 2014 WL 410039 (4th DCA 1/17) Farmers not entitled to separate rate protest Applied deferential substantial evidence review to trial court rulings Allowed secrecy of protests Rates can be less than cost Pet’n for review may be likely December 28, 2018

San Juan Capistrano’s Rates Has used inclining-block, budget-based rates since 1991 Four tiers: 1 super efficient use 6 hcf/mo 2 efficient use on av. 17 hcf/mo 3 up to twice tier 2 volume 4 above twice tier 2 volume December 28, 2018

San Juan Capistrano’s Rates Tier 1 & 2 calculated to recover 70% of fixed costs and 75% of local well costs 90% of water sales are in these tiers Tier 3 is 50% more expensive and covers most costs to operate groundwater recovery plan and part of Met imported water costs Tier 4 is 175% more expensive and covers the balance of GWRP and Met costs December 28, 2018

San Juan Capistrano’s Rates Tier 1 fixed & groundwater Tier 2 same Tier 3 GWRP & Met imports Tier 4 same December 28, 2018

San Juan Capistrano’s Rates Proceeds of Tier 3 and 4 rates fund Marginal supplies Additional conservation If no or little water sold in these tiers, these expenses are not incurred; thus, rates are self-balancing December 28, 2018

Prop. 218 Builds on Prop. 13 Bryden v. EDMUD ruled Prop. 13 did not make conservation rates special taxes Citizens Assn of Sunset Beach v. OC LAFCO found Prop. 218 to preserve Prop. 13 precedents not expressly overruled Therefore, Bryden is good law even after Prop. 218 because nothing in the later measure expressly disagrees with it December 28, 2018

Conservation Rates are Penalties Penalties are not subject to Props. 218 & 26: CalTax v. FTB: penalty for late corporate taxes was not a tax because it is intended to change behavior rather than raise money Article 13C, section 1(e)(5) Prop. 26 excludes fines and penalties from its definition of taxes No one pays conservation penalty rates without exceeding a water budget December 28, 2018

Prop. 218 Doesn’t Apply to Excess Water Use Rationale for applying Prop. 218 to metered water rates is that water service “indispensable to most uses of real property” One can make good use of real property without wasting water Therefore, water use above reasonable levels is not a property related service subject to Prop. 218 December 28, 2018

Prop. 218 Doesn’t Apply to Excess Water Use Cases support this argument Bighorn-Desert View Water Agency v. Verjil Apartment Assn v. City of LA AmRhein v. Pajaro Valley WMA December 28, 2018

Environmentalists Argue Conservation Rates are Required SWRCB Petition Against United Water Conservation District argues its failure to use conservation rates encourages water waste in violation of Article 10, section 2 December 28, 2018

Recommendations Allow reasonable water use at non-penalty rates Justify higher rates both as penalties and as based on cost Establish record basis for cost-justification of higher rates by assigning more expensive water sources and funding supplemental conservation services or marginal supplies December 28, 2018

More recommendations Make a good record Not just tables of numbers, but text easily understood by folks who went to law school Stay tuned for new developments CTA v. SJC Groundwater cases (Great Oaks v. Santa Clara VWD) Initiative Cases (Vagim v. Fresno) December 28, 2018

Questions? December 28, 2018