By William W. Abbott

In 2006, the Santa Clara Valley Water District (“District”) adopted higher rates for groundwater pumping. These charges were imposed on water districts and utilities which pumped their own groundwater, including the Great Oaks Water Company (“Great Oaks”). Great Oaks subsequently filed suit seeking to set aside the increases claiming that the District had failed to comply with CEQA by not specifying the factual or evidentiary basis for the rate increases and that exemptions from CEQA are invalid because the District’s budget included monies dedicated to system expansion.

The District’s response was that the rate setting was exempt from CEQA by virtue of Public Resources Code section 21080 (b) which provides:

(8) The establishment, modification, structuring, restructuring, or approval of rates, tolls, fares, or other charges by public agencies which the public agency finds are for the purpose of: (A) meeting operating expenses, including employee wage rates and fringe benefits, (B) purchasing or leasing supplies, equipment, or materials, (C) meeting financial reserve needs and requirements, (D) obtaining funds for capital projects necessary to maintain service within existing service areas, or (E) obtaining funds necessary to maintain those intracity transfers as are authorized by city charter.

Great Oaks challenged the sufficiency of the District’s findings of exemption on the basis that the findings were purely conclusory and failed to set forth sub-conclusions and detailed references to the record to support the exemption.[1] In Great Oaks Water Company v. Santa Clara Valley Water District (2009) 170 Cal.App.4th956, the Court of Appeal, Sixth Appellate District declined to apply the findings requirement too rigorously, noting first that this case was in ordinary mandamus, not administrative mandamus. However, even in a more rigorous 1094.5 (Administrative Mandamus) proceeding, the Supreme Court was willing to give a passing grade to findings if the reviewing court had “no trouble under the circumstances discerning ‘the analytic route the administrative agency traveled from evidence to action.’” (Environmental Protection & Information Center v. California Dept. of Forestry & Fire Protection (2008) 44 Cal.4th 459.). Under the less rigid standard, or ordinary mandamus, the appellate court concluded that the record and findings disclosed an adequate basis to support the exemption.

Great Oaks’ second basis to invalidate the rate increases was the argument that the proceeds would be used for expansion of facilities. As to this issue, the record was well documented as to the intended use of proceeds. Referring to the annual report and budget references to capital projects and expenditures, the appellate court concluded that “…none of them on their face express or connote actual expansion of the District’s system beyond existing levels of service.”

Bill Abbott is a partner at Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, LLP 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.

[1] The CEQA Guidelines provide that an exemption does not apply to rates used for system expansion, and that if the lead agency does rely upon an exemption then the lead agency is required to set forth the basis for the exemption with specificity. CEQA Guidelines section 15273.