Cal. Building Industry Assn. v. State Water Resources Control Bd.
232 Cal. Rptr. 3d 64
Cal.2018Background
- The State Water Resources Control Board (Board) sets annual waste discharge permit fees under Water Code §13260 to fund permitting, monitoring, and enforcement; fees deposit into the Waste Discharge Permit Fund.
- For FY 2011–12 the Budget Act required $103M from the Permit Fund; staff projected $100.7M needed in fee revenue, about $27M more than then-current fees would raise.
- At the Sept. 19, 2011 meeting three Board seats existed but two were vacant; two of three present members voted to adopt an emergency, retroactive fee schedule and one abstained.
- California Building Industry Association sued, alleging (1) procedural defect (insufficient Board votes), (2) statutory violations of §13260 (cost-recovery and adjustment rules), and (3) constitutional violation under article XIII A (fees vs. taxes).
- Trial court and Court of Appeal (majority) upheld the fee schedule; the Supreme Court affirmed, rejecting plaintiff’s procedural, statutory, and constitutional challenges.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether adoption required majority of all five Board members under §183 | §183 requires a majority of all members for any final action, so 2 votes insufficient | §183’s "majority of all members" clause applies only when a single member is authorized to conduct a hearing/investigation; otherwise §181 quorum/majority-of-quorum rule governs | Adoption valid: §183 limited to delegation contexts; §181 quorum satisfied and two-of-three votes carried the action |
| Whether storm water fee violated §13260(d)(1)(B) (fees ≤ recoverable costs) | Storm water fee exceeded storm water program costs historically and thus violated the statute | §13260 limits total fees across all program areas, not each program area separately; overall program costs exceeded revenues | No violation: statute governs total program cost recovery; FY11–12 projected costs ≥ projected fee revenues |
| Whether Board violated §13260(f)(1) (adjust for over/under collection) | Board failed to reduce storm water fee despite past overcollections and thus violated adjustment requirement | §13260(f)(1) permits, but does not mandate, further adjustments for particular categories; Board complied with setting total fee revenue to Budget Act levels | No violation: statute does not compel per-program retroactive offsets; Board acted within §13260(f)(1) authority |
| Whether fees were unconstitutional taxes under art. XIII A / Prop.26 standards | Fees function as taxes because they exceed reasonable regulatory costs and are unfairly allocated (storm water payors subsidized others) | Fees limited to recoverable costs, deposited into Permit Fund, spent only for Porter-Cologne purposes; allocation and projections reasonable | No violation: fees neither exceed reasonable program costs nor are levied for unrelated revenue; allocation bears a reasonable relationship to burdens/benefits; plaintiff failed to show invalid tax |
Key Cases Cited
- Sinclair Paint Co. v. State Bd. of Equalization, 15 Cal.4th 866 (1997) (establishes that bona fide regulatory fees are allowed under art. XIII A if they meet cost, purpose, and allocation tests)
- California Farm Bureau Federation v. State Water Resources Control Bd., 51 Cal.4th 421 (2011) (applies Sinclair Paint framework to water-rights fees and discusses burden/remand procedure)
- Western States Petroleum Assn. v. Board of Equalization, 57 Cal.4th 401 (2013) (interprets scope of article XIII A changes post-Prop.26)
- FTC v. Flotill Products, 389 U.S. 179 (1967) (majority-of-quorum common-law rule for collective bodies)
- People v. Harrington, 63 Cal. 257 (1883) (California precedent recognizing majority-of-quorum rule)
- Professional Scientists v. Department of Fish & Game, 79 Cal.App.4th 935 (2000) (treats evidentiary approach to fee constitutionality and reasonableness)
- Equilon Enterprises LLC v. Board of Equalization, 189 Cal.App.4th 865 (2010) (discusses fair allocation standard for regulatory fees)
- Capistrano Taxpayers Assn. v. City of San Juan Capistrano, 235 Cal.App.4th 1493 (2015) (distinguishable; concerns property-related tiered rates under art. XIII D)