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August 12, 2015  |  Written by Jason T. Canger

California Supreme Court Denies Request to De-Publish Fourth District Court of Appeals’ Decision Invalidating Tiered Water Rate Structures

On July 22, 2015, the California Supreme Court denied Attorney General Kamala Harris’ request to de-publish the Fourth District Court of Appeals’ decision in Capistrano Taxpayers Assn., Inc. v. City of San Juan Capistrano, 235 Cal.App.4th 1493 (2015), which held that the City’s tiered rate structure for water service violated article XIII, section 6 of the California Constitution, also known as Proposition 218.  Passed as an initiative by California voters in 1996, Proposition 218 amended the Constitution to restrict the ability of local governments to impose new assessments by ensuring such assessments comply with substantive and procedural requirements justifying their cost and need to local property owners and ratepayers.

The Fourth District Court of Appeals’ decision does not forbid local governments’ use of tiered water rate structures in all instances.  Instead, the appeals court found that Proposition 218 “requires public water agencies to calculate the actual costs of providing water at various levels of usage.”  Capistrano Taxpayers Assn. Inc., 235 Cal.App.4th at 1497.  The Court held that the City violated Proposition 218 because it failed entirely to analyze or “calculate the actual costs of service for the various tiers…”  Id. at 1506.

In a June 2015 letter to the California Supreme Court requesting that the Fourth District Court of Appeals’ decision be de-published, and thus without precedential effect, Attorney General Kamala Harris, on behalf of the State Water Resources Control Board, warned that the decision could have “immediate chilling effect on urgently needed water conservation efforts.”  Harris’ letter continued to explain that the decision was overly broad and could be read to prohibit any rate structure that imposes a penalty for unreasonable uses of water.  Notwithstanding the plea of the Attorney General and other water agency representatives, on July 22, 2015, the California Supreme Court refused the invitation to de-publish the decision signaling its conclusion that the issues were correctly decided and may be cited as precedential authority.  While it is unclear whether similar tiered rate structures will be immediately challenged, going forward, local governments and urban water suppliers must – even during times of drought – calculate the actual costs of providing water at a given level within a tiered rate structure to avoid invalidation under Proposition 218.

For more information on the California Supreme Court’s denial of requests to de-publishCapistrano Taxpayers Assn., Inc. v. City of San Juan Capistrano, please contact Jason Canger at jcanger@somachlaw.com.

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