Groundwater Pumping Fees Are Not Taxes, California Court Says

By Carolyn Whetzel

A decision by California’s highest court could give a boost to local water agencies grappling with how to implement the state’s landmark groundwater management law.

The California Supreme Court ruled that the charges Ventura, Calif., must pay to a local water district for groundwater conservation activities aren’t taxes or fees that require approval by property owners or voters.

Because the United Water Conservation District’s charges aren’t for property-related services, they don’t require approval either by property owners or two-thirds of area voters, the court said, affirming a 2015 lower court ruling.

This “decision is significant because it provided needed and timely guidance to local groundwater management agencies, groundwater users and state officials as to how groundwater fees should assessed prospectively,” Richard M. Frank, director of the California Environmental Law & Policy Center at the University of California, Davis, told Bloomberg Environment in a Dec. 5 email.

The state’s high court rejected the city’s claims the charges violate Proposition 218 and Proposition 26, voter-approved measures that made it more difficult for government agencies and utilities to impose or increase certain taxes or fees.

Such fees will be a critical component of the plans local agencies must complete and administer under the 2014 Sustainable Groundwater Management Act over the next several years, Frank said.

Groundwater, which is water found underground, typically provides about 40 percent of the state’s water supply but much more in dry years.

The groundwater law requires the formation of local groundwater sustainability agencies to manage their groundwater resources within the next several years, along with the development plans designed to bring basins into balanced levels of pumping and recharge by 2050. Should local entities fail to enforce the law, the state will then intervene.

‘Reasoned, Fair, Practical’

“The justices ably worked through the morass of Lilliputian tax principles that California voters have placed in the California Constitution—and the relevant facts—to reach a reasoned, fair and practical result,” Frank said.

Article XIII C of the California Constitution, as amended by Proposition 26, “supplies the proper framework for evaluating the constitutionality of the groundwater charges at issue in this case,” the court said in a Dec. 4 opinion.

The case now heads back to the Second Appellate District to answer the city’s question as to whether the water district’s charges are fair or reasonable under Proposition 26, Jane Ellison Usher, United Water’s attorney at Musick, Peeler & Garrett in Los Angeles, told Bloomberg Environment Dec. 5.

“The California Supreme Court found the appeals court didn’t adequately consider that second prong of the case,” she said.

Ventura alleged it pays a disproportionate share of the district’s charges.

Under state water code, groundwater pumping charges for non-agricultural uses must be three times those levied for agricultural uses. The justices intimated that the Water Code section 75594 is unconstitutional under Proposition 26,” Frank said.

The water district manages all or part of eight groundwater basins in central Ventura County.

This case is (City of San Buenaventura v. United Water Conservation Dist., 2017 BL 432760, Cal., No. S226036, 12/4/17).