Legal Alerts Sep 10, 2014

Stormwater Management Services That Provide a Water Supply Source May Be Funded With Water Service

New Legislation Defines Water for Purposes of Proposition 218 to Include Water from Any Source

Stormwater Management Services That Provide a Water Supply Source May Be Funded With Water Service

Assembly Bill 2403 amends the definition of “water” contained in the Proposition 218 Omnibus Implementation Act to “include improvements for producing, storing, supplying, treating, or distributing water from any source.” This legislation is intended to clarify that fees imposed to fund the capture (including recharge into a groundwater basin), treatment, production and distribution of stormwater as a water supply source are fees imposed for water services, and therefore are not subject to the more burdensome voter approval requirements of California Constitution article XIII D, section 6(c) (commonly referred to as Proposition 218). The legislation offers one alternative to address the evolving nature of California’s stormwater management programs, especially the growing development of “stormwater recapture” programs for recharging groundwater aquifers — a valuable water supply source for public agencies throughout California.

In November 1996, California voters approved Proposition 218, which amended the state Constitution by adding articles XIII C and XIII D. Article XIII D established a new category of fees and charges referred to as “property-related fees and charges,” and created new procedural requirements for their adoption. Under these requirements, water, sewer and solid waste service fees are subject to a public hearing, notice and majority protest procedure for their approval. All other property-related fees, however, must comply with these requirements and an additional voter approval process — majority approval by the affected property owners or a two-thirds registered voter approval.

In 2002, in Howard Jarvis Taxpayers Association v. City of Salinas, a court of appeal considered a challenge to fees imposed by the City of Salinas to fund a stormwater drainage and flood control program developed to address water quality challenges created by the stormwater runoff. The court held that stormwater captured and discharged into a stream, river or ocean is a “drainage” function, not a water or sewer service function. As such, the fees were subject to the additional voter approval requirement of article XIII D, section 6(c).

In 2013, in Griffith v. Pajaro Valley Water Management Agency, a court of appeal was asked to consider whether a groundwater augmentation charge imposed to fund a supplemental water supply program was a fee for water service. The supplemental water supply program included improvements to capture and treat stormwater for groundwater recharge. The court concluded that the Agency’s groundwater augmentation charges are “water service fees” and therefore are within the express exemption of article XIII D, section 6(c)’s voter approval requirements. The court recognized that “water service” means more than just supplying water — it includes managing a groundwater basin and ensuring an ongoing, potable supply of groundwater to the entire basin.

In adopting AB 2403, the Legislature made specific findings that the legislation is declaratory of existing law, which would include the decisions in Howard Jarvis Taxpayers Association and Griffith. It further declared that the legislation is in furtherance of the policy contained in California Constitution article X, section 2, and the policy that the use of potable domestic water for nonpotable uses, including, but not limited to, cemeteries, golf courses, parks, highway landscaped areas and industrial and irrigation uses, is a waste or an unreasonable use of the water within the meaning of article X, section 2 if recycled water is available. AB 2403 was signed into law by Gov. Jerry Brown on June 28.

If you have any questions about this legislation or how it may impact your agency, please contact the attorney author of this legal alert listed at right in the firm’s Public Finance practice group, or your BB&K attorney.

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