PARADISE IRRIGATION DISTRICT et al., Plaintiffs and Appellants, v. COMMISSION ON STATE MANDATES, Defendant and Respondent; DEPARTMENT OF WATER RESOURCES et al., Real Parties in Interest and Respondents.
C081929
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (Sacramento)
March 20, 2019
Opinion following rehearing
CERTIFIED FOR PUBLICATION; (Super. Ct. No. 34201580002016)
APPEAL from a judgment of the Superior Court of Sacramento County, Timothy M. Frawley, Judge. Affirmed.
MINASIAN, MEITH, SOARES, SEXTON & COOPER, Dustin C. Cooper, Andrew J. McClure, Peter C. Harman for Paradise Irrigation District, South Feather Water & Power Agency, Richvale Irrigation District and Oakdale Irrigation District; SOMACH SIMMONS & DUNN, Andrew M. Hitchings and Alexis K. Stevens for Biggs-West Gridley Water District and Glenn-Colusa Irrigation District, Plaintiffs and Appellants.
Camille Shelton and Matthew B. Jones for Defendant and Respondent.
Xavier Becerra, Attorney General, Douglas J. Wоods, Thomas S. Patterson, Senior Assistant Attorneys General, Marc A. LeForestier, Tamar Pachter, Supervising Deputy Attorneys General and Peter H. Chang, Deputy Attorney General for Real Parties in Interest and Respondents.
This appeal focuses on circumstances in which local water and irrigation districts may be entitled to subvention for unfunded state mandates. “Subvention” refers to claims by local governments and agencies in California for reimbursement from the state for costs of complying with state mandates for which the mandate does not concomitantly provide funds to the local agency. (Connell v. Superior Court (1997) 59 Cal.App.4th 382, 395 (Connell).) In the event a local agency believes it is entitled to subvention for a new unfunded state mandate, the agency may file a “test claim” with the Commission on State Mandates (Commission). The Commission hears the matter and determines whether the statute or executive order constitutes an unfunded state mandatе for which subvention is required.
Here, the Commission denied consolidated test claims for subvention by appellants Paradise Irrigation District (Paradise), South Feather Water & Power Agency (South Feather), Richvale Irrigation District (Richvale), Biggs-West Gridley Water District (Biggs), Oakdale Irrigation District (Oakdale), and Glenn-Colusa Irrigation District (Glenn-Colusa). We refer to appellants collectively as the Water and Irrigation Districts, except when addressing individual appellants’ separate claims. The
On appeal, the Water and Irrigation Districts present a question left open by this court‘s decision in Connell, supra, 59 Cal.App.4th 832. Connell addressed the statutory interpretation of
In Connell, supra, 59 Cal.App.4th 832, this court declined to consider a passing comment by Santa Margarita that the then-recent passage of Proposition 218 (as approved by voters Gen. Elec. Nov. 5, 1996, eff. Nov. 6, 1996 <https://elections.cdn.sos.ca.gov/sov/1996-general/official-declaration.pdf> [as of
The Water and Irrigation Districts argue Proposition 218 removed their prerogative to impose fees because any new fees may be defeated by a majority of their water customers filing written protests. They also challenge the Commission‘s ruling it lacked jurisdiction to consider reimbursement claims by Richvale and Biggs because those two districts have not shown they collect any taxes. In support of the Water and Irrigation Districts’ position, we have received and considered two amicus curiae briefs: one from the California State Association of Counties and League of California Cities (collectively the Counties and Cities), and one from the California Special Districts Association, Association of California Water Agencies, and California Association of Sanitation Agencies (collectively the Special Districts). We also have received briefing from real parties in interest, the Department of Finance and Department of Water Resources.
We affirm. The Water and Irrigation Districts possess statutory authority to collect fees necessary to comply with the Water Conservation Act. Thus, under
BACKGROUND
The Water and Irrigation Districts’ Test Claims
In 2011, the Water and Irrigation Districts filed a joint test claim with the Commission. The Water and Irrigation Districts asserted the Conservation Act “imposes unfunded state mandates to conserve water and achieve water conservation goals on local public agencies that are ‘urban retail water suppliers’ and/or ‘agricultural water suppliers.‘” In 2013, Richvale and Biggs filed a second test claim asserting various regulations implementing the Conservation Act also constitute reimbursable state mandates. The Commission consolidated the test claims. After consolidating the test claims, the Commission determined Richvale and Biggs did not have standing to bring the second test claim. The Commission reasoned Richvale and Biggs are not “subject to the tax and spend limitations of articles XIII A and B of the California Constitution”1 because they are funded solely from service charges, fees, and assessments. Thereafter Oakdale Irrigation District and Glenn-Colusa Irrigation District substituted in as claimants for the second test claim.
The Commission‘s Decision
In December 2014, the Commission denied the consolidated test claims “on the grounds that most of the code sections and regulations pled do not impose new mandated
The Commission‘s decision concludes that, “to the extent that the test claim statute and regulations impose any new state-mandated activities, they do not impose costs mandated by the state because the Commission finds that urban water suppliers and agricultural water suppliers possess fee authority, sufficient as a matter of law to cover the costs of any new required activities. Therefore, the test claim statute and regulations do not impose costs mandated by the state pursuant to
As to the second test claim, the Commission determined these water and irrigation districts “are not subject to the taxing and spending limitations of articles XIII A and XIII B, and are therefore not eligible for reimbursement under
Trial Court Proceedings
In February 2015, the Water and Irrigation Districts filed a petition for writ of administrative mandate under
The trial court‘s decision noted that “[w]hile the court agrees with [the Water and Irrigation Districts] that the Commission abused its discretion in dismissing the test claims of Richvale and Biggs-West, the court shall deny the petition because [the Water and Irrigation Districts] have failed to show how they incurred reimbursable state-mandated costs.” Noting the Water and Irrigation Districts admitted “that, but for Proposition 218, they would have sufficient authority to establish or increase fees or charges to recover the costs of any new mandates,” the trial court determined it was “unwilling to conclude that [the Water and Irrigation Districts] lack ‘sufficient’ fee authority based on the speculative and uncertain threat of a majority protest. Thus, in the absence of a showing that [the Water and Irrigation Districts] have ‘tried and failed’ to impose or increase the neсessary fees, the Commission properly concluded that [the Water and Irrigation Districts] have sufficient fee authority to cover the costs of any
The trial court also concluded the Commission abused its discretion in determining Richvale and Biggs are ineligible for subvention because they do not receive ad valorem property tax revenue. However, the trial court declined to make a determination of these districts’ entitlement to reimbursement for lack of an adequate record. In the trial court‘s view, “[d]etermining whether Richvale and Biggs-West receive ‘proceeds of taxes’ will require a comprehensive account of the revenues received by them, and a subsequent determination as to whether those revenues constitute ‘taxes’ within the meaning of Article XIII B. No simple feat.” Nonetheless, the trial court determined the ability of Richvale and Biggs to levy fees supported the conclusion they are not eligible for subvention for their test claims.
DISCUSSION
I Standard of Review
As the California Supreme Court has explained, “Courts review a decision of the Commission to determine whether it is supported by substantial evidence. (
II Subvention and the Authority to Levy Fees
The Water and Irrigation Districts contend they no longer have authority to impose fees to pay for state-mandated water upgrades because Proposition 218 provides that any new fees may be defeated by a majority protest by their water customers. We are not persuaded.
A. Subvention
The voters’ passage of Proposition 4 in 1979 added a subvention requirement to article XIII B in addition to restricting the amount of taxes state and local governments
To implement the constitutional subvention requirement, the Legislature enacted
In the event the local agency believes it is entitled to subvention for a new unfunded state mandate, “[t]he local agency must file a test claim with the Commission, which, after a public hearing, decides whether the statute mandates a new program or increased level of service. (
B. Connell v. Superior Court
Connell involved a test claim brought by Santa Margarita to seek subvention for a statewide regulation requiring the water districts to increase water purity for reclaimed wastewater when used for certain types of irrigation. (Connell, supra, 59 Cal.App.4th at p. 385.) The state Board of Control (now Commission on State Mandates) found the regulation constituted a reimbursable state mandate. (Id. at p. 387.) The trial court affirmed the Board‘s decision, from which the State Controller and State Treasurer appealed. (Id. at pp. 385-386.) The State Controller and State Treasurer argued Santa Margarita had legal authority to pay for the increased water quality costs and therefore was not entitled to subvention. Relying on a statutory provision now contained in
Connell noted the California Supreme Court has held that
This court, in Connell, held
In so holding, Connell rejected the Santa Margaritas’ invitation “to construe ‘authority,’ as used in the statute, as a practical ability in light of surrounding economic
Finally, this court noted but did not decide on a passing comment by Santa Margarita that, under Proposition 218, “‘the authority of local agencies to recover costs for many services [is] impacted by the requirement to secure the approval by majority vote of the property owners voting, to levy or to increase property related fees.‘” (Connell, supra, 59 Cal.App.4th at p. 403.) This case takes up where Connell left off, namely with the question of whether the passage of Proposition 218 undermined water and irrigation districts’ authority to levy fees so that they are entitled to subvention for state-mandated regulations requiring water infrastructure upgrades. The Water and Irrigation Districts do not argue this court wrongly decided Connell, supra, 59 Cal.App.4th 382, but only that the rule of decision was superseded by Proposition 218. Consequently, we proceed to examine the effect of Proposition 218 on the continuing applicability of Connell.
C. Proposition 218
To determine whether and how Proposition 218 affects the entitlement of the Water and Irrigation Districts to subvention of the costs of state-mandated water upgrades, we survey the context within which Proposition 218 was passed by California voters. “Proposition 218 can best be understood against its historical background, which begins in 1978 with the adoption of Proposition 13. ‘The purpose of Proposition 13 was to cut local property taxes. [Citation.]’ (County of Los Angeles v. Sasaki (1994) 23 Cal.App.4th 1442, 1451.)
“In November 1979, the voters adopted Proposition 4, adding article XIII B to the state Constitution. Article XIII B—the so-called ‘Gann limit‘—restricts the amounts state and local governments may appropriate and spend each year from the ‘proceeds of taxes.’ (Art. XIII B,] §§ 1, 3, 8, subds. (a)–(c).)” (City of Sacramento, supra, 50 Cal.3d at pp. 58-59.) The Supreme Court in City of Sacramento noted that “Articles XIII A and XIII B work in tandem, together restricting California governments’ power both to levy and to spend for public purposes.” (Id. at p. 59, fn. 1.)
The Gann Limit applies to taxes rather than fees. “Article XIII B of the Constitution was intended to apply to taxation—specifically, to provide ‘permanent protection for taxpayers from excessive taxation’ and ‘a reasonable way to provide discipline in tax spending at state and local levels.’ (See County of Placer v. Corin (1980) 113 Cal.App.3d 443, 446, quoting and following Ballot Pamp., Proposed Stats. and Amends. to Cal. Const. with arguments to voters, Special Statewide Elec. (Nov. 6,
The Gann Limit does not require voter approval for imposition of special assessments. (Howard Jarvis Taxpayers Ass‘n., supra, 73 Cal.App.4th at p. 682.) The court in Howard Jarvis Taxpayers Ass‘n. recounted that, “[i]n November 1996, in part to change this rule, the electorate adopted Proposition 218, which added Articles XIII C and XIII D to the California Constitution. Proposition 218 allows only four types of local property taxes: (1) an ad valorem property tax; (2) a special tax; (3) an assessment; and (4) a fee or charge. (
D. The Water and Irrigation Districts’ Statutory Authority to Recover Costs from Ratepayers
In approaching the Water and Irrigation Districts’ argument regarding their statutory аuthority, or lack thereof, to impose fees for improvements required by the Water Conservation Act, we begin by considering the California Supreme Court‘s guidance in Bighorn, supra, 39 Cal.4th 205. Bighorn involved the question whether local voters could adopt an initiative measure to reduce a local water district‘s charges for
At the heart of Bighorn lies the distinction between majority protest procedures for fees that may occur after imposition of the fees and assessments in contrast to the voter-approval requirement impоsed by Proposition 218 before new taxes may be imposed. The voter-approval requirement of article XIII C, in section 2, subdivision (b), provides that ” ‘[n]o local government may impose, extend, or increase any general tax unless and until that tax is submitted to the electorate and approved by a majority vote,’ and it provides, in subdivision (d), that ‘[n]o local government may impose, extend, or increase any special tax unless and until that tax is submitted to the electorate and approved by a two-thirds vote.’ ” (Bighorn, supra, 39 Cal.4th at p. 211.) This voter-approval requirement, however, does not apply to levying fees for water service. Instead, section 6 of article XIII D “expressly exempts water service charges from the voter-approval requirement that it imposes on all other fees and charges.” (Bighorn at pp. 218-219.) The Bighorn court concluded that, “[a]t least as to fees and charges that are property rеlated,
We reach the same conclusion with respect to the irrigation districts even though they derive their statutory fee authority from elsewhere in the Water Code. Paradise, South Feather, Richvale, Oakdale, and Glenn-Colusa are irrigation districts governed by Division 11 of the Water Code, which is known as the Irrigation District Law. (
The express statutory authority of the Water and Irrigation Districts to impose fees under Divisions 11 and 13 of the Water Code means the costs of complying with the Conservation Act are not subject to subvention because the costs are “recoverable from sources other than taxes” within the meaning of article XIII B. (County of Fresno, supra, 53 Cal.3d at p. 487.) As the California Supreme Court has held, “Article XIII B of the
The Water and Irrigation Districts in this case do not dispute that
Proposition 218 also imposes a majority protest procedure but also does not divest the Water and Irrigation Districts of their authority to levy fees. (
As a constitutionally sound power-sharing arrangement, the protest procedure implemented by Proposition 218 is not properly construed as a deprivation of fee authority as the Water and Irrigation Districts urge. We disagree with the assumption of the Water and Irrigation Districts and amici that water customers’ ability to file written protests by its very nature deprives local agencies of their ability to raise fees for necessary projects. Consistent with the California Supreme Court‘s reasoning in Bighorn, we presume local voters will give appropriate consideration and deference to state mandated requirements relating to water conservation measures required by statute. (Bighorn, supra, 39 Cal.4th at p. 220.) Consequently, we reject the Water and Irrigation Districts’ proposition that the existence of the majority protest procedure enacted through Proposition 218 represents the evisceration of water and irrigation districts’ legal authority to levy fees necessary to comport with state water laws. Proposition 218 implemented a power-sharing arrangement that does not constitute a revocation of the Water and Irrigation Districts’ fee authority. (Ibid.)
We also reject the Water and Irrigation Districts’ claim that, as a matter of practical reality, the majority protest procedure allows water customers to defeat the Districts’ authority to levy fees. This contention is similar to the argument presented in Connell where Santa Margarita asserted the state mandated regulation was not economically practicable. (Connell, supra, 59 Cal.App.4th at p. 401.) We adhere to our holding in Connell that the inquiry into fee authority constitutes an issue of law rather
The corollary of our continued adherence to the rule articulated in Connell, supra, 54 Cal.App.4th 382 is that fee authority is not controlled by whether the Water and Irrigation Districts have “tried and failed” to levy fees. We decline to adopt the trial court‘s try-and-fail approach that suggests the Water and Irrigation Districts may become entitled to subvention despite their continuing statutory authority to levy fees upon showing a district‘s water customers with majority voting power defeated the proposed levy. As noted above, Bighorn instructs that we presume voters will give appropriate consideration and deference to proposals of fees by the boards of the Water and Irrigation Districts. (Bighorn, supra, 39 Cal.4th at pp. 220-221.) Statutory authorization to levy fees – rather than practical considerations – conclusively determines whether the Water and Irrigation Districts are entitled to subvention. Thus, the authority conferred by
We also decline to address the Special Districts amici argument regarding the exclusion of enterprise special districts from the state mandate reimbursement. Again, this issue has not been raised by the parties and is not necessary to resolve the gravamen of this appeal. ” ‘Amicus Curiaе must accept the issues made and propositions urged by the appealing parties, and any additional questions presented in a brief filed by an amicus curiae will not be considered.’ ” (Lance Camper Mfg. Corp. v. Republic Indemnity Co. of America (2001) 90 Cal.App.4th 1151, 1161, fn. 6, quoting Eggert v. Pacific States S. & L. Co. (1943) 57 Cal.App.2d 239, 251.)
Finally, we deny the Special Districts amici request for judicial notice of legislative history materials relating to special districts as unnecessary to the determination of the issue presented in this case.
In Manteca, this court concluded that “[a]rticle XIII D, section 4, subdivision (a), which supersedes section 51200 in both time and stature, commands that ‘Parcels within a district that are owned or used by any agency [or] the State of California . . . shall not be exempted from assessment unless the agency can demonstrate by clear and convincing evidence that those publicly owned parcels in fact receive no special benefit.’ ” (Manteca, supra, 10 Cal.App.5th at p. 737.) For purposes of this case, however, Manteca is inapposite because it concerned only the narrow question of whether school districts are eligible for categorical exemption from fees levied by reclamatiоn districts. Manteca did not address the question of whether the existence of a majority protest procedure so
The Water and Irrigation Districts also rely on the inapposite case of Capistrano Taxpayers Assn., Inc. v. City of San Juan Capistrano (2015) 235 Cal.App.4th 1493. That case did not examine the effect of the majority protest procedure on the ability of government agencies to levy fees. Instead, Capistrano involved the issue of how public water agencies may formulate their rate structures for their customers to be in compliance with the proportionality requirements of Proposition 218. (Id. at pp. 1498, 1516.)
We are also not persuaded by the Water and Irrigation Districts’ reliance on Mission Springs Water Dist. v. Verjil (2013) 218 Cal.App.4th 892. Mission Springs centered on the extent of the initiative power reserved to the people. The Mission Springs court held that because water districts did not have the power to set rates so low that they are inadequate to pay the costs of water supply that voters similarly lacked the same power through the initiative process. (Id. at p. 921.) That decision did not consider whether the majority protest procedure had any effect on the Water and Irrigation Districts’ power to collect fees.
The Commission has brought to our attention the Legislature‘s passage of Senate Bill No. 231 (2017-2018 Reg. Sess.) (Stats. 2017, ch. 536, § 2 (SB 231)). The Water and Irrigation Districts asserted SB 231 was not relevant to the issue in this case. We agree. SB 231 was passed in response to the decision in Howard Jarvis Taxpayers Ass‘n v. City of Salinas (2002) 98 Cal.App.4th 1351. City of Salinas held storm water drainage fees were a property-related fee requiring voter approval because storm water drains are not “sewers” that are exempt from the voter-approval requirement of article XIII D, section 6, subdivision (c). (Id. at p. 1355-1356.) SB 231 amended
In this case, none of the parties argue the costs for upgrading water service that may be required by the Conservation Act are subject to voter approval. Such an argument would be untenable because SB 231 added
III Subvention Eligibility for Richvale and Biggs
Our conclusion that Proposition 218 does not undermine the statutory authority of the Water and Irrigation Districts to levy fees to pay for the costs of complying with the Conservation Act, obviates the need to consider whether the Commission erred in dismissing the test claims of Richvale and Biggs on grounds Richvale and Biggs are not eligible for subvention because they do not receive tax revenues. Richvale and Biggs – along with the other Water and Irrigation Districts – have statutory authority to impose оr increase water fees under
The judgment is affirmed. Respondent Commission on State Mandates and real parties Department of Finance and Department of Water Resources shall recover their costs, if any, on appeal. (
/s/
HOCH, J.
We concur:
/s/
RAYE, P. J.
/s/
BUTZ, J.