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California Supreme Court Rules That Key Terms of Los Angeles MS4 Permit Are State Mandates and Remands for Further Proceedings

The California Constitution provides that when the Legislature or a state agency requires a local government to provide a new program or offer a higher level of service to an existing program, the state must “reimburse that local government for the costs of the program or increased level of service.”  Cal. Const. art. XIII B § 6(a).  The initial determination of whether a legislative or state agency act constitutes a “state mandate” subject to reimbursement is made by the California Commission on State Mandates (Commission).  The Commission earlier ruled that certain terms of the Los Angeles County Municipal Separate Storm Sewer System (MS4) permit were state mandates and, as such, subject to reimbursement by the State.  MS4 permits govern discharges to municipal stormwater sewer systems, and the trial court and Court of Appeal both ruled that the Commission erred when it found that the MS4 permit terms requiring local jurisdictions to inspect various commercial and industrial sites, as well as install and maintain trash receptacles, were imposed by the state and not compelled by the federal Clean Water Act mandate that MS4 permits must contain controls to reduce the discharge of pollutants to the “maximum extent practicable.”  In a 4-3 decision filed August 29, 2016 in the case of Department of Finance et al. v. Commission on State Mandates (Case No. S214855), the California Supreme Court reversed, however, and agreed with the numerous local agencies that argued those permit terms were not mandated by the federal Clean Water Act.

The Supreme Court set forth the following test for state mandate determinations:

If federal law compels the state to impose, or itself imposes, a requirement, that requirement is a federal mandate.  On the other hand, if federal law gives the state discretion whether to impose a particular implementing requirement, and the state exercises its discretion to impose the requirement by virtue of a “true choice,” the requirement is not federally mandated.

The Supreme Court also agreed with appellants’ argument that the Commission properly declined to defer to the Regional Water Quality Control Board, a state agency, on the issue of whether the permit terms were federally mandated.  The Court made clear that the California Constitution endows the Commission with the sole authority to make these decisions.  Further, the Court’s opinion states that “the State has the burden to show the challenged conditions were mandated by federal law.”

Even where a program is determined to be state mandated, the Government Code provides there will be no right to reimbursement if “[t]he local agency or school district has the authority to levy service charges, fees, or assessments sufficient to pay for the mandated program or increased level of service.”  Gov’t Code § 17556(d).  The Supreme Court remanded the matter for further proceedings because neither the trial court nor the Court of Appeal reached this secondary issue of whether the local agencies have the authority to levy fees sufficient to pay for implementation of the MS4 permit terms.  As well, the remand will address several issues raised by the appellants that were not the subject of the lower courts’ rulings.

A copy of the Supreme Court’s ruling can be found here.

Somach Simmons & Dunn attorneys Theresa Dunham and Nicholas Jacobs represented Amici Curiae parties California Stormwater Quality Association, Riverside County and the Riverside County Flood Control and Water Conservation District in the case.

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