Newhall County Water District v. Castaic Lake Water Agency
243 Cal. App. 4th 1430
| Cal. Ct. App. | 2016Background
- Castaic Lake Water Agency (the Agency) is a wholesale water special district supplying imported water to four retail purveyors in the Santa Clarita Valley, including Newhall County Water District (Newhall). The Agency may develop groundwater management plans but lacks unilateral authority to regulate groundwater without retailer approval.
- Historically the Agency charged a 100% volumetric rate for imported water; in 2013 it adopted a two-part rate: a fixed charge (80% of revenue) allocated using each retailer’s three-year rolling average of total water demand (imported water + groundwater) and a volumetric component for imported water.
- Newhall relies substantially on groundwater in some years; under the new rates Newhall faced a large immediate increase while Agency-controlled retailers saw reductions.
- Newhall challenged the rates under Proposition 26 (art. XIII C), arguing the fixed-charge allocation unlawfully used retailers’ groundwater use (which the Agency does not supply) and thus failed the proportionality and "specific service" requirements; trial court granted writ and ordered refunds.
- The Court of Appeal affirmed, holding the Agency cannot base wholesale rates on groundwater use it does not provide or have authority to regulate, because that allocation fails Proposition 26’s requirement that charges bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity and that the charge be for a specific service provided directly to the payor.
Issues
| Issue | Newhall's Argument | Agency's Argument | Held |
|---|---|---|---|
| Whether the two-part wholesale rate is a non-tax fee under Prop. 26(e)(2) | Rate violates Prop. 26 because fixed charge is allocated using groundwater use (a product Agency does not supply); thus not reasonably related to Newhall’s benefit or burden | Allocation may be measured collectively across all retailers and can account for the Valley water portfolio and groundwater management benefits that accrue to all purveyors | Held for Newhall: allocation based on groundwater use fails Prop. 26 proportionality requirement and is not a charge for a specific service provided directly to the payor |
| Whether proportionality may be measured "collectively" rather than by individual payor | Proportionality must be assessed purveyor-by-purveyor here because there are only four payors and the service (wholesale water) is provided directly to each | Proportionality can be evaluated collectively, as in some precedent accepting group/class allocation | Held for Newhall: collective-measure rationale (from regulatory-fee contexts) does not justify using groundwater demand to allocate wholesale fixed costs among four direct customers |
| Whether Agency’s groundwater-management activities make groundwater-based allocation lawful | Groundwater management benefits are indirect and accrue to all basin extractors (including uncharged parties); not a specific direct service to purveyors | Agency contends its groundwater management and role in conjunctive-use planning justifies treating total demand as the basis for fixed-cost allocation to promote conservation/conjunctive use | Held for Newhall: groundwater-management activities are not a specific service provided directly to payors and cannot justify charging for groundwater use under Prop. 26(e)(2) |
| Whether conservation/conjunctive-use goals permit the challenged allocation | Conservation goals do not override Prop. 26’s substantive proportionality and specificity limits | Agency argues rates encourage conservation and conjunctive use, fitting its statutory/constitutional duties | Held for Newhall: conservation objectives do not excuse ignoring Prop. 26’s proportionality and direct-service requirements |
Key Cases Cited
- Griffith v. City of Santa Cruz, 207 Cal.App.4th 982 (court upheld regulatory inspection fees and noted proportionality may be assessed collectively in regulatory-fee contexts)
- California Farm Bureau Federation v. State Water Resources Control Bd., 51 Cal.4th 421 (discusses flexibility of proportionality in regulatory fees)
- Griffith v. Pajaro Valley Water Management Agency, 220 Cal.App.4th 586 (upheld groundwater augmentation charge under Proposition 218; grouped many payors and statutory authority to charge groundwater extractors distinguishes it from this case)
- Paland v. Brooktrails Township Community Serv. Dist. Bd. of Directors, 179 Cal.App.4th 1358 (upheld minimum charge as fee for immediately available water service under Proposition 218)
- Great Oaks Water Co. v. Santa Clara Valley Water Dist., 242 Cal.App.4th 1187 (addressed groundwater extraction fees where district had statutory authority to impose them)
- Capistrano Taxpayers Assn., Inc. v. City of San Juan Capistrano, 235 Cal.App.4th 1493 (cautions against overbroad readings of Griffith II and emphasizes proportionality under Proposition 218)