By Cori Badgley
In City of Palmdale v. Palmdale Water District (Aug. 9, 2011, B224869) __ Cal.App.4th __, the appellate court confronted two constitutional mandates that were seemingly at odds with one another. The first constitutional mandate was Proposition 218, requiring that water service fees not exceed the proportional cost of providing the service. The second was Article X section 2 and the statutes adopted thereunder permitting allocation-based conservation water pricing whereby the price increases dramatically once a user surpasses the allocation amount. In the end, the court found that these two provisions could be harmonized because there could still be much higher fees imposed above a certain allocated amount that did not exceed the proportional cost of providing the service.
The Palmdale Water District (“district”) adopted a water rate structure that established three categories of uses (i.e., residential, commercial and irrigation). Each category then had 5 tiers of rates correlating to how much water was used beyond the budgeted allotment for each category. On its face, this is an acceptable method to establish water rates while promoting water conservation. However, in this case, the tiers for each category differed, meaning that an “irrigation only” water user would pay $5.03 per unit for any water used amounting to 130% of the allocated budget whereas a residential user would only pay $3.20 for using 130% of the budgeted amount. The City of Palmdale (“city”), an “irrigation only” user, challenged the rate structure as violating Proposition 218, and the appellate court agreed.
On appeal, the district argued that Article X section 2 of the California Constitution specifically permitted the district to impose an unequal rate structure based on a water allocation budget. That section states: “It is hereby declared that because of the conditions prevailing in this State the general welfare requires that the water resources of the State be put to beneficial use to the fullest extent which they are capable… the Legislature may also enact laws in the furtherance of the policy in this section contained.” In order to promote Article X section 2, the Legislature enacted Water Code section 372, which allows allocation-based water conservation pricing. The district also argued that Water Code section 106 allowed preferential pricing because it declares that “the use of water for domestic purposes is the highest use of water.” However, what the district failed to mention, but the court pointed out, is that Section 106 goes on to state: “…and that the next highest use [after residential] is for irrigation.” (Emphasis added.)
In addressing the seeming contradiction between Article X section 2 of the Constitution and Proposition 218, the appellate court found that these two provisions were not at odds with one another and could work together while still accomplishing the goal of water conservation. Proposition 218 requires that water rates not exceed the proportional cost of providing the service. A rate structure can be created that still penalizes those who use above the allocated amount, while not exceeding the proportional cost of providing the water service. Therefore, the appellate court held that Proposition 218 applied to the district’s allocation-based water rate structure.
Next, the court addressed whether the rate structure complied with Proposition 218. Under Proposition 218 challenges, the agency that imposed the fee has the burden in court to show that the fee is valid. In this case, the appellate court found that the district had no justification for why “irrigation only” users paid higher rates for the same amount of water use, especially in light of the fact that a residential user could also use water for irrigation purposes on his or her property without having to pay the higher rates. Therefore, the appellate court held that the district failed to show that the rate structure did not exceed the proportional cost of providing the service, and the district’s ordinance was invalid.
Cori Badgley is an attorney 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, or 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.