e-Bulletin: Court Rules Water Service Fees and Charges are Subject to Proposition 218

On July 24, 2006, the California Supreme Court ruled that a public agency’s water rates and charges for ongoing water delivery are subject to the initiative provisions of article XIII C, section 3 (“Article XIII C”) and are property-related fees and charges subject to the provisions of article XIII D, section 6 (“Article XIII D”), of the California Constitution.

The Bighorn case concerned a ballot initiative to reduce the water rates of the Bighorn-Desert View Water Agency (“Agency”), a special district that provides domestic water service. The California Supreme Court first concluded that the terms “fee” and “charge” were intended to have the same meaning in both Article XIII C and XIII D. Consequently, fees and charges subject to the provisions of Article XIII D are also subject to the voter initiative provisions of Article XIII C.

The Court then analyzed whether fees and charges for ongoing water delivery are property-related fees within the meaning of Article XIII D. The Court concluded that “once a property owner or resident has paid the connection charges and has become a customer of a public water agency, all charges for water delivery incurred thereafter are charges for a property-related service, whether the charge is calculated on the basis of consumption or is imposed as a fixed monthly fee.” (Bighorn (July 24, 2006) 2006 Cal. LEXIS 8776, at *22.) The Court explicitly disapproved the decision of the Court of Appeal in Howard Jarvis Taxpayers Ass’n v. City of Los Angeles (2000) 85 Cal. App. 4th 79, which previously held that consumption-based water charges are not fees and charges within the meaning of Article XIII D because they are not imposed as an incident of property ownership, but instead as the result of the voluntary decision of each water customer.

Having concluded that fees and charges for ongoing water delivery are property-related fees pursuant to Article XIII D, the Court concluded that such fees and charges are subject to the voter initiative provisions of Article XIII C “insofar as they seek to reduce or repeal a public agency’s water rates and other water delivery charges.” (Id. at *20.) The Court, however, found that the initiative provisions of Article XIII C did not authorize “initiative measures that impose voter-approval requirements for future increases in fees or charges.” (Id. at *24.) In short, the initiative process may be used to reduce or repeal water fees and charges but it may not be used to impose voting requirements that currently do not exist under the current provisions of Article XIII D respecting property-related fees and charges.

For more information on the Bighorn decision or its implications on your agency, contact an attorney with BB&K's Special Districts Practice Group or Municipal & Redevelopment Law Group.

Disclaimer: BB&K eBulletins are not intended as legal advice. Additional facts or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information in this communiqué. ©2006 Best Best & Krieger LLP