Issue
In Bighorn-Desert View Water Agency v. Beringson, (2004 WL 1627032, Cal.App. 4 Dist., July 20, 2004), the California Court of Appeal again addressed the issue of whether the voter initiative provisions of Proposition 218 can be used to reduce the usage-based water rates charged by a public water agency.
Facts
Bighorn-Desert View Water Agency (Bighorn) supplies domestic water to some customers in Landers, San Bernardino County, California. Bighorn’s board of directors are empowered to fix water rates in a manner that will pay the operating expenses of the agency. E.W. Kelley qualified an initiative petition seeking a reduction in the water rates and other fees charged by Bighorn and also seeking to require a two-thirds voter approval for subsequent increases. Bighorn filed a declaratory action against the registrar of voters seeking a declaration that the initiative was invalid. The trial court and the Court of Appeal both found that the initiative process could not be used to reduce the fees charged by Bighorn. The California Supreme Court granted review of the Court of Appeal’s decision but later transferred the case back to the Court of Appeal for reconsideration in light of the Supreme Court’s recent decision in Richmond v. Shasta Community Services Dist. (2004) 32 Cal. 4th 409.
Appellate Court Decision
Proposition 218, adopted by the voters in 1996 to curb and control property taxes, added two amendments to the California Constitution: Article 13(C), which includes the power of initiative and requires approval by the voters for local tax levies, and Article 13(D), which places similar restrictions on fees, assessments, and charges. Article 13(D) defines “fee” or “charge” as “any levy other than an ad valorem tax, a special tax, or an assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership. . .” The Court of Appeal determined that the usage-based water rates charged by Bighorn are not property related or imposed on landowners as an incident of property ownership and are excluded from the voter approval and initiative provisions of Proposition 218.
In Richmond, the Supreme Court determined that, although a water service fee may be a fee or charge subject to the requirements of Article 13(D), not all water service charges are subject to its provisions. The Supreme Court concluded that a water service fee is subject to Article 13(D)’s restrictions “only if it is imposed upon a person as an incident of property ownership.” The high court went on to state, “A fee for ongoing water service through an existing connection is imposed as ‘an incident of property ownership’ because it requires nothing other than normal ownership and use of property.” However, the Court of Appeal distinguished the Bighorn case from the Richmond case on the basis that Richmond did not involve the initiative power of Proposition 218 or usage-based water rates. At issue in Richmond was the amount of a connection charge for new water service.
The Court of Appeal determined that Bighorn’s rates are not property related or incidents of property ownership. Instead, the fees are based on water consumption and are imposed only on voluntary water users. However, the Court concluded that, even if it were to hold that the fees and charges for the water service provided by Bighorn are property related or incidents of ownership, Proposition 218’s power of initiative does not apply to the fees charged by Bighorn because Article 13(D), section 6, specifically excludes from the voter approval requirement fees or charges for sewer, water, and refuse collection services.
The Court also concluded that the rate-setting function delegated to Bighorn by the Legislature is an administrative duty that is not subject to initiative. Accordingly, the Court held that the cost of water services provided by Bighorn is not subject to the voter approval and initiative requirements of Proposition 218.
Note
For the previous KMTG Legal Alert on the Bighorn case, see Voter Initiative Cannot Be Used To Control Rates Fixed By A Public Water Agency (February 12, 2004).
UPDATE
For a discussion of the Supreme Court decision in this case, please see our Legal Alert entitled, "California Supreme Court: Metered Water Rates Are Subject to Proposition 218", August 14, 2006.