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December 20, 2017  |  Written by Michelle E. Chester

District Court Reaffirms and Applies Supreme Court Test for State Mandates

The California Constitution provides that when the Legislature or a state agency requires, or mandates, a local government to provide a new program or to offer a higher level of service to an existing program, the state must reimburse the local government for the costs. Cal. Const., art.  XIII B, § 6(a).  The California Commission on State Mandates (Commission) is responsible for determining in the first instance whether a state action constitutes a state mandate subject to reimbursement.  Reimbursement from the state is not available if the state-imposed requirement stems from an obligation created under federal law.  Gov. Code, § 17556(c).

In reviewing a Los Angeles County Municipal State Storm Sewer System (MS4) permit, which governs discharges to municipal stormwater sewer systems, the Commission determined that the permit imposed new obligations on regional cities and counties and, therefore, constituted a state mandate.  The Commission’s decision was overturned by the Los Angeles County Superior Court, which ruled in favor of the state agencies, arguing that the obligations contained in the permit were federally mandated under the Clean Water Act (CWA) and, therefore, did not constitute state mandates.  On appeal, the Second District Court of Appeal upheld the superior court’s decision.

In August of 2016, in the case of Department of Finance v. Commission on State Mandates, (2016) 1 Cal.5th 749, the Supreme Court reviewed the holding by the Second District that the Commission erred in determining that terms of the Los Angeles County MS4 permit were state mandates.  The Supreme Court reversed the Second Appellate District’s decision, finding that the permit terms were not mandated by the federal CWA and, instead, were requirements imposed by the state.  In reaching this holding, the Supreme Court established a new 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.  Department of Finance, supra, 1 Cal.5th at 765.

In 2010, before a final judicial decision was reached regarding the Los Angeles County MS4 permit, the Commission reviewed a National Pollutant Discharge Elimination System (NPDES) permit issued by the Regional Water Quality Control Board, San Diego Region (San Diego Regional Board) for urban runoff discharges and determined that the permit amounted to a state mandate and not a federal mandate under the CWA.  The Commission’s decision was challenged.

On December 19, 2017, in the case of Department of Finance et al. v. Commission on State Mandates, the California Court of Appeal, Third Appellate District, applied the new test created by the California Supreme Court for determining when federal law amounts to a federal mandate.  Dep’t of Fin. v. Comm’n on State Mandates (Dec. 19, 2017, No. C070357) ___Cal.App.5th ___ [2017 Cal. App. LEXIS 1134].  The Third District noted that the Commission had correctly applied the Supreme Court’s test, even though the test had not yet been formally adopted by the Court at the time of the Commission’s review.  The Third District agreed with the Commission’s decision and held that federal law did not compel imposition of the San Diego Regional Board’s permit requirements; instead, federal law vested the Board with discretion to choose how permittees were required to meet water quality standards.  The Board’s exercise of discretion, therefore, resulted in the imposition of a state mandate, subject to reimbursement under the California Constitution.

A copy of the Third District’s decision can be found here.

Somach Simmons & Dunn attorneys Theresa Dunham and Nicholas Jacobs represented the California Stormwater Quality Association as amicus curiae.  For further information please contact Michelle Chester at mchester@somachlaw.com.

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