California Appellate Court Holds Groundwater Pumping Fees are Property-Related Fees Subject to Prop. 218

Decision Conflicts with a Separate Appellate Court Decision to be Considered by the California Supreme Court

In Great Oaks Water Company v. Santa Clara Valley Water District, originally issued March 26, the Sixth District Court of Appeal found that the water district’s groundwater pumping fees are property-related fees subject to Proposition 218. The court later granted two re-hearings in the case. On Tuesday, the court upheld its earlier decisions in a published decision, with a few minor, non-substantive changes, that the fees are subject to Proposition 218 (California Constitution article XIII D, section 6).

The Great Oaks opinion, however, reached a different conclusion than the Second District Court of Appeal reached in City of San Buenaventura v. United Water Conservation District, issued March 17. The Second District held that a water conservation district’s groundwater pumping fees, established at a rate for non-agricultural users that is three times higher than that for agricultural users, are not property-related fees subject to the restrictions imposed under Proposition 218. The court also rejected the argument that the challenged fees are taxes under Proposition 26 (California Constitution, article XIII C, section 1(e)). Rather, the Second District found that the fees are valid fees imposed under two exceptions to the definition of “tax” established under Proposition 26. A summary of the holdings in these two cases was the subject of a previous BB&K Legal Alert.

The distinction as to whether groundwater pumping fees are property-related fees is important because of the procedural and substantive restrictions imposed for property-related fees under Proposition 218, as well as the scope of exemptions for fees that are considered taxes under Proposition 26. The California Supreme Court is expected to resolve the dispute. On June 24, the Court granted review of the San Buenaventura decision on the following two issues: 1.) Do the district’s groundwater pumping charges violate Proposition 218 or Proposition 26? 2.) Does the 3:1 rate ratio mandated by Water Code section 75594 violate Proposition 218 or Proposition 26? The San Buenaventura case is fully briefed and amicus curiae briefs are due this week.