April 22, 2015 -- Client Alert
On April 20, 2015, the Fourth Appellate District issued its long-awaited decision in Capistrano Taxpayers Ass’n, Inc. v. City of San Juan Capistrano (“San Juan Capistrano”). The San Juan Capistrano decision expressly rejects the idea that tiered water rates are inherently unconstitutional pursuant to Proposition 218. However, the decision also holds that a tiered rate structure unsupported by actual cost of service calculations for each tier is unconstitutional. As a result, unless San Juan Capistrano is reheard by the Fourth District or reviewed by the California Supreme Court, tiered rate structures may be vulnerable to challenge to the extent they are not tied to identifiable, incremental costs correlating to the tiers.