by Robert T. Yamachika

Richmond v. Shasta Community Services District (2004) 32 Cal.4th 409

The issue in this case was whether a water district’s increase of its two component water connection fees violated Proposition 218’s voter approval requirement. Proposition 218, the Right to Vote on Taxes Act, was approved by California voters in 1996 and added articles XIIIC and XIIID to the California Constitution. The Shasta Community Services District (“SCSD”) operates a water system for residential and commercial users and a volunteer fire department that provides fire suppression and emergency services.

The SCSD adopted an ordinance that established a capacity fee and a fire suppression fee for new water service connections. The SCSD later adopted a resolution which amended the ordinance. Several owners within the district challenged the SCSD’s resolution, alleging that: (1) the resolution imposed an assessment within the meaning of article XIIID, but the SCSD failed to satisfy the constitutional requirements (i.e., voter approval) for imposing an assessment; (2) the fire suppression fee was a fee or charge within the meaning of article XIIID, and it violated the prohibition against fees or charges for general governmental services; and (3) the original ordinance could only be amended by another ordinance, not a mere resolution.

The trial court concluded that the connection fee was not a special assessment but a development fee exempt from article XIIID and that the fire suppression charge was merely a continuation of a fee imposed before article XIIID was imposed. The trial court also found that the connection fee could be legally adopted by a resolution and the enactment of an ordinance was not required.

On plaintiff’s appeal, the Court of Appeal affirmed the trial court’s judgment, except as to the fire suppression charge. With regard to the fire suppression charge, the Court of Appeal held that the fire suppression charge violated the constitutional provision prohibiting the imposition of any fee or charge for governmental services if the service is available to the public at large in substantially the same manner on real property owners.

The California Supreme Court reversed, holding that both the capacity and fire suppression fees imposed as a condition of making a new connection to a water system, are not “property assessments” or “property-related fees” subject to the voter approval requirements of article XIIID. In its holding, the Court focused on the definition of several terms defined in article XIIID. Article XIIID defines an “assessment” as “any levy or change upon real property . . . for a special benefit conferred upon the real property . . . .” It defines a “special benefit” as “a particular and distinct benefit over and above general benefits conferred on real property located in the district or to the public at large . . . .”

The Court also considered the requirements and procedures that article XIIID imposes on assessments. Specifically, article XIIID requires that an agency imposing an assessment identify “all parcels which will have a special benefit conferred upon them and upon which an assessment will be imposed.” In contrast, SCSD could not identify the parcels upon which the capacity charge would be imposed because the capacity charge was imposed only on property owners who applied for a new service connection.

The Court found that the proper conclusion to be drawn from this impossibility of compliance was that an assessment within the meaning of article XIIID must not only confer a special benefit on real property, but also be imposed on identifiable parcels. Because the SCSD did not impose the capacity charge on identifiable parcels, but only on individuals who request a new service connection, the capacity charge was not an assessment within the meaning of article XIIID, and not subject to Proposition 218 voter approval requirements. A key point the Court focused on was that this case concerned only the imposition of costs on new connections and that presumably, any costs imposed on customers receiving service through existing connections would be subject to Proposition 218’s voter approval requirements, and thus their consent. Here customers who apply for new connections gave their consent through the act of applying.

With regard to the fire suppression charge, the Court reversed the Court of Appeal ruling. Article XIIID provides that “no fee or charge may be imposed for general governmental services including, but not limited to, police, fire, ambulance or library services, where the service is available to the public at large in substantially the same manner as it is to property owners.” The appellate court held that the evidence showed that the SCSD used the proceeds of the fire suppression component of the connection fee to purchase equipment for its volunteer fire department, including both firefighting equipment and emergency medical equipment. Furthermore, the fire department provides firefighting and emergency medical services to the public at large. In the opinion of the appellate court, the SCSD’s fire suppression charge is “imposed for general governmental services” within the meaning of article XIII D, and it is prohibited by that provision if it satisfies article XIII D’s definition of a “fee or charge.”

The SCSD argued that the connection fee, including its fire suppression component, did not fall within article XIII D’s definition of a fee or charge because it is not imposed “upon a parcel or upon a person as an incident of property ownership.” The SCSD does not impose the fee on parcels of real property but on persons who apply for a water service connection. The SCSD does not impose the fee on such persons “as an incident of property ownership” but instead as an incident of their voluntary decisions to request water service. The California Supreme Court agreed that a connection charge, because it is not imposed “as an incident of property ownership,” is not a fee or charge under article XIII D. The connection fee in this case was not imposed simply by virtue of property ownership, but instead it was imposed as an incident of the voluntary act of the property owner in applying for a service connection. Finally, the Court found that the SCSD could use a resolution to amend an ordinance.

In conclusion, this case turned on the fact that the fees were imposed only on the self-selected group of water service applicants, and not on real property that the District has identified or is able to identify. Because neither fee could ever become a charge on the property itself, neither fee was subject to the voter approval requirements of Proposition 218.

Robert T. Yamachika is an associate with Abbott & Kindermann, LLP in Sacramento. For questions relating to this article or any other California land use, environmental and planning issues contact Abbott & Kindermann at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, nor the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.