October 31, 2017 -- Client Alert
On October 6, 2017, the Governor signed SB 231, which clarifies that the definition of “sewer” includes both sanitary sewers and storm sewers. Senator Hertzberg, the bill’s author, and the California Coastkeeper Alliance have called SB 231’s passage a “watershed moment” because SB 231 can make it easier for local agencies to finance projects which collect storm water and treat it for recycling or recharge.
However, at this time, agencies should not rely on SB 231 to pass separate fees or charges solely for storm sewer system operation, maintenance and capital costs. This client alert explains why and provides context for SB 231.
Article XIII D was added to the California Constitution in 1996 with the passage of Proposition 218, the “Right to Vote On Taxes Act.” Proposition 218 requires most new or increased property-related fees and charges be submitted and approved by a majority vote of the property owners of the property subject to the fee or charge or, at the option of the agency, by a two-thirds vote of the electorate residing in the affected area. (Cal. Const. Art. XIII D § 6, subd. (c).) Proposition 218 also imposes substantive limitations, including restrictions on the use of revenues derived from such charges. (Cal. Const. Art. XIII D § 6, subd. (b); Griffith v. Pajaro Valley Water Management Agency (6th Dist. 2013) 220 Cal.App.4th 586, 597.) Section 6(c) makes an exception for sewer, water and refuse:
“Except for fees or charges for sewer, water, and refuse collection services, no property related fee or charge shall be imposed or increased unless and until that fee or charge is submitted and approved by a majority vote of the property owners of the property subject to the fee or charge or, at the option of the agency, by a two-thirds vote of the electorate residing in the affected area. The election shall be conducted not less than 45 days after the public hearing.”
For property-related sewer, water and refuse fees or charges, Section 6(a) of Article XIII D requires notice of the proposed property-related fee or charge for water, sewer or refuse, plus a public hearing. If a majority of the affected owners submit written protests, the fee may not be imposed. (§ 6, subd. (a)(2).) However, the definitions of “sewer,” “water,” and “refuse” have been the subject of litigation.
- Howard Jarvis Taxpayers Ass’n v. City of Salinas (6th Dist. 2002) 98 Cal.App.4th 1351.
The impetus for SB 231 started with a Court of Appeal opinion, which held the term “sewer,” as used in Proposition 218, was vague. Sanitary sewers carry sewage to a wastewater treatment plant, and storm sewers carry untreated storm water to surface waters. A taxpayer group had challenged a storm drainage fee imposed by the City of Salinas. Plaintiffs contended the fee was a “property-related” fee requiring voter approval, pursuant to California Constitution, Article XIII D, Section 6(c), part of Proposition 218. The trial court ruled that the fee did not violate this provision because it met the exemption for fees for sewer and water services. The Court of Appeal disagreed and ruled the term “sewer services” is ambiguous in the context of Section 6(c) and Proposition 218 as a whole.
The court noted that the voters' intent in passing Proposition 218 should be construed liberally to curb the rise in “excessive” taxes, assessments, and fees exacted by local governments without taxpayer consent. It ruled that the exception to Section 6 (c) applied only to the common meaning applicable to “sewer services,” which is limited to “sanitary sewerage,” as opposed to storm sewers.
- Griffith v. Pajaro (6th Dist. 2013) 220 Cal.App.4th 586.
In Griffith v. Pajaro, decided 11 years later, the Court of Appeal decided a similar controversy over the definition of “water.” However, the Griffith court adopted a broader definition of “water,” and held the costs of augmenting a groundwater supply can be included in charges for “water.” The court looked to the definition of “water” set forth in Government Code Section 53750(m) in construing the term. The California legislature further bolstered this holding by passing AB 2403 in 2014, which amended Section 53750(m) to clarify “water” includes “distribution of water from any source.” As such, the adoption or increase of a groundwater augmentation charge is generally subject to the majority protest, rather than the majority approval, provisions of Proposition 218.
- Crawley v. Alameda County Waste Management Authority (1st Dist. 2015) 243 Cal.App.4th 396.
A similar dispute arose in 2015 over the definition of “refuse” as used in Proposition 218. In 2015, the Court of Appeal decided a case challenging the Alameda County Waste Management Authority’s ordinance imposing an annual charge on all households for disposal of household hazardous waste. A property owner in the county challenged the ordinance contending the fee constituted an assessment under Article XIII D, requiring approval by a majority of the electorate pursuant to Section 4 of the article. In the alternative, he contended the fee was not imposed in compliance with the requirements of Article XIII D, Section 6.
At issue was whether household hazardous waste was “refuse.” In interpreting the term “refuse,” the Court of Appeal looked to the County ordinance and the definition of “refuse” in the Health and Safety Code, noting “a focused legislative judgment as to the appropriate reach of a constitutional provision enjoys significant weight and deference by the courts.” (Id.; see Greene v. Marin County Flood Control and Water Conserv. Dist. (2010) 49 Cal.4th 277, 291.) The court concluded “refuse” included household hazardous waste, and as such, the charge was subject to the majority protest, rather than majority approval, requirements of Proposition 218.
- Senate Bill 231
Recognizing the Salinas court’s holding that “sewer” is ambiguous as used in the Constitution, the legislature passed and the Governor signed SB 231 which defines “sewer.”
Senate Bill 231 (codified at Govt. Code §§ 53750-53751) provides a definition for “sewer” for purposes of Article XIII C and Article XIII D of the California Constitution:
“`Sewer’ includes systems, all real estate, fixtures, and personal property owned, controlled, operated, or managed in connection with or to facilitate sewage collection, treatment, or disposition for sanitary or drainage purposes, including lateral and connecting sewers, interceptors, trunk and outfall lines, sanitary sewage treatment or disposal plants or works, drains, conduits, outlets for surface or storm waters, and any and all other works, property, or structures necessary or convenient for the collection or disposal of sewage, industrial waste, or surface or storm waters. `Sewer system’ shall not include a sewer system that merely collects sewage on the property of a single owner.” (Govt. Code § 53750(k).)
This definition clarifies that “sewer” includes both sanitary sewers and drainage sewers. The Bill included legislative findings that storm waters are carried off in storm sewers, and careful management is necessary to ensure adequate water supplies, especially during drought, and to reduce pollution. The Bill warns that a definition of “sewer” that subjects storm water to voter-approval provisions would prevent important projects.
- Practical Implications
Future case law will determine what effect Senate Bill 231 will have moving forward. Some may argue the Salinas court already defined “sewer” for purposes of Proposition 218, and it is for the judiciary to interpret its terms. Others will argue the Salinas court did not have the benefit of “a focused legislative judgment as to the appropriate reach of a constitutional provision” when Salinas was decided; after all, SB 231’s definition of “sewer” is codified at Government Code Section 53750, which was enacted to explain terms used in Proposition 218. Still others will argue courts should harmonize Salinas with SB 231.
In the meantime, agencies should proceed with caution and ensure any sewer fees passed pursuant to the protest procedure are based on sanitary sewer system costs of service (even if it has other incidental benefits relating to storm water capture) until the courts clarify the impact of SB 231.
For additional client alerts on rate-setting authorities, see: http://www.awattorneys.com/news/tiered-water-rates-and-proposition-218-capistrano-taxpayers-ass%E2%80%99n-inc-v-city-san-juan; http://awattorneys.com/news/wholesale-rates-and-proposition-26-newhall-county-water-district-v-castaic-lake-water-agency
For further information, please contact Kelsey Cropper or Christine Carson from Aleshire & Wynder, LLP’s Water Practice Group at (310) 527-6660.
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.