March 7, 2018 -- Client Alert
On December 19, 2017, the Court of Appeal issued a published opinion in Department of Finance v. Commission on State Mandates (2017) 18 Cal.App.5th 661 (petition for review filed Jan. 26, 2018, request for depublication filed Feb. 15, 2018) (“San Diego DOF Decision”). The County of San Diego and the cities located in that county were seeking a determination that certain municipal separate storm sewer system (MS4) permit requirements imposed by the Regional Water Quality Control Board (“San Diego Regional Board”) are unfunded state mandates. The Court, applying a 2016 California Supreme Court decision, concluded that six permit requirements are unfunded mandates under the California Constitution and therefore local governments are entitled to reimbursement by the State. The six requirements are listed in the more detailed discussion of the case below.
The California Constitution provides when local governments are required to incur costs to provide a new program or a higher level of service, the State must reimburse that local government for the costs of implementing the program or the increased level of service, unless the requirement is federally mandated. Cal. Const., art. 13B, § 6, subd. (a) (“Section 6”).
In a landmark Supreme Court decision, Department of Finance v. Commission on State Mandates (2016) 1 Cal.5th 749 (“Supreme Court DOF Decision”), the Supreme Court established a test to determine whether a requirement imposed in a National Pollutant Discharge Elimination System (“NPDES”) permit is a federal, rather than a State, mandate. This test is twofold:
(1) whether any federal law, guideline, or any other evidence of a federal mandate, required each condition; if so then the requirement is a federal mandate, but
(2) if the condition was not “expressly required” by federal law and was instead imposed pursuant to the State’s discretion, then the requirement is not federally mandated.
The burden is on the State to establish its requirements are imposed by federal law.
In the context of MS4 permits, the Supreme Court concluded the Clean Water Act requirement for MS4 permits to reduce pollution impacts to the “maximum extent practicable” was not a federal mandate, because determining the controls necessary to meet the “maximum extent practicable” standard is a discretionary action directing the regional boards to make a “true choice.” That “true choice” imposes a State mandate where no federal requirement explicitly applies–unless the conditions are the only means by which the “maximum extent practicable” standard can be met.
The Supreme Court DOF Decision concluded the following conditions imposed by the Los Angeles Regional Board’s MS4 permit were not connected to any federal requirement and were therefore unfunded State mandates subject to Section 6 reimbursement:
- requiring the installation and maintenance of trash receptacles at transit stops, and
- requiring the inspection of certain commercial and industrial facilities and construction sites.
The Court of Appeal Strictly Applied New Standards for MS4 Permit Requirements
In the recent San Diego DOF Decision, the Court of Appeal strictly applied the analytical framework established by the Supreme Court DOF Decision, concluding the San Diego Regional Board had a “true choice” and exercised its discretion in determining and imposing the conditions on the MS4 permit. Because the San Diego Regional Board exercised that discretion, the permit requirements it imposed were not federal mandates. In the absence of any federal law, regulation, or administrative case authority expressly requiring the MS4 permit conditions, those requirements were State mandates. Therefore, the local governments were entitled to reimbursement for the costs associated with meeting the MS4 permit requirements pursuant to Section 6.
Specifically, the Court concluded the following MS4 permit requirements were not federally mandated, and were thus unfunded State mandates:
- street sweeping and cleaning storm water conveyances,
- the development of a hydromodification plan,
- low impact development practices,
- jurisdictional and regional education programs,
- regional and watershed urban runoff management programs, and
- program effectiveness assessments.
Importance and Implication of the Court of Appeal Decision
The impact of the San Diego DOF Decision is far reaching. If a regional board contends its requirements are federal mandates, then it has the burden to establish the requirements are in fact mandated by federal law. To establish permit requirements are federally mandated, a regional board must connect each permit requirement to an express requirement in federal law. If the regional board cannot make this showing, then the permit requirement is deemed an unfunded State mandate, and the State must reimburse the local government for the costs associated with satisfying the imposed requirement, unless it can show some other exception to Section 6 applies.
The Court of Appeal’s strict interpretation of the Supreme Court DOF Decision sets a critical precedent for how lower courts must analyze local agencies’ claims for reimbursement associated with MS4 permit requirements. However, the future impact of this decision remains in question until the pending petition for Supreme Court review and request for depublication of the opinion have been resolved. The Supreme Court will decide whether to grant review, or potentially deny and depublish, by late April 2018. We will update this alert when that information is available.
For further information, please contact Christine M. Carson or Gabriel Pitassi from Aleshire & Wynder, LLP’s Water Practice Group at (949)223-1170.
Disclaimer: Aleshire & Wynder, LLP legal alerts are not intended as legal advice. Additional facts or future developments may affect subjects contained herein. Please seek legal advice before acting or relying upon any information in this communication.