SAN BUENAVENTURA, CITY OF v. UNITED WATER CONSERVATION DISTRICTAmicus Curiae Brief of City of Signal HillCal.November 23, 2015SUPRENE COURT GOPY SUPREME COURT No. 8226036. F | L E Dy IN THE SUPREME COURT NOV 23 2015 OF THE STATE OF CALIFORNIA Frank A. McGuire Clerk . City of San Buenaventura Deputy Plaintiff, Cross-Defendant and Respondent/Cross-Appellant Vv. United Water Conservation District and Board of Directors of United Water Conservation District . Defendants, Cross-Complainants and Appellants/Cross-Respondents. Of a Published Decision by the Second Appellate District, Division Six Case No. B251810 Reversing a Judgment of the Superior Court of the State of California, County of Santa Barbara, Case Nos. VENCI 00401714 and 1414739 . Honorable ThomasP. Anderle, Judge Presiding APPLICATION OF CITY OF SIGNAL HILL FOR LEAVETO FILE AMICUS CURI4E BRIEF IN SUPPORT OF CITY OF SAN BUENAVENTURA; PROPOSED AMICUS CURIAE BRIEF IN SUPPORT OF CITY OF SAN BUENAVENTURA ALESHIRE & WYNDER, LLP June S. Ailin, State Bar No. 109498 jailin@awattorneys.com Lindsay M.Tabaian, State Bar No. 268586 ltabaian@awattorneys.com *Miles P. Hogan, State Bar No. 287345 mhogan@awattorneys.com 18881 Von Karman Avenue,Suite 1700 Irvine, California 92612 Telephone: (949) 223.1170 eer —e~ Facsimile: (949) 223.1180 ECENED 5 Attorneys for Amicus Curiae CITY OF SIGNAL HI CRO a 5 325i)NOV 19 201 a CLERK SUPREME COURT 01002.0003/274271.2 No. S226036 IN THE SUPREME COURT OF THE STATE OF CALIFORNIA City of San Buenaventura Plaintiff; Cross-Defendant and Respondent/Cross-Appellant V. United Water Conservation District and Board of Directors of United Water Conservation District Defendants, Cross-Complainants and Appellants/Cross-Respondents. Of a Published Decision by the Second Appellate District, Division Six Case No. B251810 Reversing a Judgmentofthe Superior Court of the State of California, County of Santa Barbara, Case Nos. VENCI 00401714 and 1414739 Honorable ThomasP. Anderle, Judge Presiding APPLICATION OF CITY OF SIGNAL HILL FOR LEAVETO FILE AMICUS CURIAE BRIEF IN SUPPORT OF CITY OF SAN BUENAVENTURA; PROPOSED AMICUS CURIAEBRIEF IN SUPPORT OF CITY OF SAN BUENAVENTURA ALESHIRE & WYNDER, LLP June S. Ailin, State Bar No. 109498 jailin@awattorneys.com Lindsay M.Tabaian, State Bar No. 268586 ltabaian@awattorneys.com *Miles P. Hogan, State Bar No. 287345 mhogan@awattorneys.com 18881 Von Karman Avenue, Suite 1700 Irvine, California 92612 Telephone: (949) 223.1170 Facsimile: (949) 223.1180 Attorneys for Amicus Curiae CITY OF SIGNAL HILL 01002.0003/274271.2 . -l- CERTIFICATE OF INTERESTED PARTIES AND RULE8.520()(4) STATEMENT Pursuant to California Rules ofCourt, Rule 8.208, subdivision(e)(3), as counsel for amicus curiae City of SignalHill, I hereby certify that none ofthe amicus curiae are “parties” in this case. Additionally, no party or counsel for a party in this appeal authored anypart ofthe attached amicus curiae brief or made anymonetary contribution to fund the preparation of the brief. No person orentity other than the City ofSignal Hill and their attorneys made any monetary contribution to fund the preparation ofthe brief. Thus, I know ofno entity or person that must be disclosed in this case under California Rules of Court, Rule 8.208, subdivision (e)(1) or (2), or Rule 8.520, subdivision(f). DATED: November18, 2015 Respectfully submitted, ALESHIRE & WYNDER,LLP By BAe Kec MILES P. HOGAN Attorneys for Amicus Curiae CITY OF SIGNAL HILL 01002.0003/274271.2 -2- No. 8226036 IN THE SUPREME COURT OF THE STATE OF CALIFORNIA City of San Buenaventura Plaintiff, Cross-Defendant and Respondent/Cross-Appellant V. United Water Conservation District and Board of Directors of United Water Conservation District Defendants, Cross-Complainants and Appellants/Cross-Respondents. Of a Published Decision by the Second Appellate District, Division Six Case No. B251810 Reversing a Judgment of the Superior Court ofthe State of California, County of Santa Barbara, Case Nos. VENCI 00401714 and 1414739 Honorable ThomasP. Anderle, Judge Presiding APPLICATION OF CITY OF SIGNAL HILL FOR LEAVETO FILE AMICUS CURIAEBRIEF IN SUPPORT OF CITY OF SAN BUENAVENTURA; PROPOSED AMICUS CURIAE BRIEF IN SUPPORT OF CITY OF SAN BUENAVENTURA ALESHIRE & WYNDER, LLP June S. Ailin, State Bar No. 109498 jailin@awattorneys.com Lindsay M. Tabaian, State Bar No. 268586 ltabaian@awattorneys.com *Miles P. Hogan, State Bar No. 287345 mhogan@awattorneys.com 18881 Von Karman Avenue, Suite 1700 Irvine, California 92612 Telephone: (949) 223.1170 Facsimile: (949) 223.1180 Attorneys for Amicus Curiae CITY OF SIGNAL HILL 01002.0003/274271.2 -3- APPLICATION FOR LEAVETO FILE BRIEF OF AMICUS CURIAECITY OF SIGNAL HILL I. INTRODUCTION Pursuant to Rule 8.520(f) ofthe California Rules ofCourt, the City of Signal Hill (“City”) respectfully requests permission tofile the attached amicus curiaebrief in support of the City of San Buenaventura (“Ventura”). The City’s interest in the present appeal arises out ofits obligation and duty to provide essential water service to over 11,000 residents, and to ensure its water rates are not unnecessarily inflated by the groundwater extraction fees imposed upon it by its local groundwater replenishmentdistrict. The proposed brief addresses both questions under review, and it will apprise the Court of certain developments in the law of ratemaking generally andspecifically in the groundwater pumpingfee context, ofthe direct and significant impact of this Court’s ruling on pumpers throughouttheState similarly situated to the Ventura, and the importance that the Court’s ruling honorthevoters’ intent that property-related fees conform to the principles of cost-of-service and proportionality. II. INTEREST OF APPLICANT CITY OF SIGNAL HILL Thefactual circumstances and legal claimsofthis litigation are very similar to the City’s priorlitigation against the Water ReplenishmentDistrict of Southern California ““WRD”). The City overlies a groundwater basin knownas the Central Basin, which is adjacent to a separate groundwater basin known as the West Coast Basin. The Central and West Coast Basins are both replenished by WRD and comprise its service area. Approximately 90% of the City’s water supply comes from its groundwater produced from the Central Basin. 01002.0003/274271.2 -4.- WRD’s enabling act authorizes the district to levy a replenishment assessment (“RA”) on every acre-foot of groundwater produced from each basin, however, the RA must be imposed at a uniform rate, regardless ofthe costs ofservice WRDincursto replenish each basin. (See Water Code, § 60317.) In litigation that lasted almostfive years, the City alleged this uniform rate amountedto anillegal subsidy and that its adoption and imposition violated Article XIII D ofthe California Constitution. The City would like a clear ruling from this Court that agencies must comply with Proposition 218 in assessing groundwater extraction fees so as to avoid excessive, disproportionate RAs and future litigation. Therefore, the City has a directinterest in the outcomeofthis matter and in being afforded the procedural and substantive rights that are mandated by Article XIII D ofthe California Constitution. Il, HOW _THE PROPOSED AMICUS CURIAE BRIEF WILL ASSIST THE COURT IN DECIDING THE MATTER As a groundwater producer subject to extraction fees, and a public water purveyor subject to Proposition 218 in its own rate-making, the City offers a balanced perspective on Proposition 218°s mandates. Moreover, the City spent nearly five yearsparticipatingin litigation involving these same issues. As such, the City is uniquely qualified to, and proposes to submit, an amicus curiae brief which addresses the following issues and arguments in response to the Court’s questions: A. The brief offers important additional facts to frame the Court’s analysis of these important issues. The facts of this case are not uniqueto the litigations between UWCD and Ventura, or WRD and the City. As such, it is important that the Court receive briefing on the groundwater agencies and fees imposed throughout the State under 01002.0003/274271.2 -5- similar factual circumstances — whichillustrate the breadth ofthis Court’s ruling and the importance of a determination that i) groundwater extraction feesare “property- related” fees subjectto the mandates ofProposition 218 andii) statutorily-authorized “uniform”rate/ratio provisions are supersededbythis later-enacted constitutional mandate. B. The brief supplements the Proposition 218 analysis set forth in the briefs on file by the parties, which the City offers because of its unique experience litigating these issues for almost five years. As outlined in the City’s proposed briefing, a long line of Proposition 218 jurisprudence confirms that groundwater extraction charges like the rate paid by Ventura and the RA paid bythe City are “property-related” fees. Moreover, the law does not support the distinctions offered by the Court ofAppeal below as reason for deviation from this clear rule of law: One, the Second District misinterprets the seminal Pajaro Valley Water Management Agency v. AmRhein (2007) 150 Cal.App.4th 1364 (“Pajaro I’) decision, whichis controlling in this case. Manyoftheerrors in the opinion below (“Opinion”) stem from its incorrect conclusionthat “Pajaro was based upon a unique set offacts — ‘that the vast majority ofproperty ownersin the Pajaro Valley obtained their water from wells, and that alternative sources were notpractically feasible.’” (Opinion,at 18, citing Pajaro I, 150 Cal.App.4th at 1397.) The City can confirm that the situation in Pajaro [is not unique,as the City relies on groundwater for 90% of its supply. Alternative sources ofwater are cost prohibitive because the City’s only alternative source is expensive imported water. Numerous pumpers throughout California similarly must rely on groundwater as a primary source of supply, 01002.0003/274271.2 -6- meaning those pumpers donotpractically have the “option” of not pumping and avoiding the associated extraction fee. | Two, the commercialversus residential “end use”distinctionsraised by the courtcan find no legal footing, nor do they apply to the types offees paid by Ventura and the City to UWCD and WRD,respectively. Although various water districts around the State impose fees on groundwater extraction pursuant to different enabling acts, the condition for the application ofthe fee is the same: extraction from property within the agency’s service area. Such fees are imposed onthe extraction of groundwater from any property within the respective district’s service area because the pumper has a real property interest in the land from which the water is pumped, and regardless ofthe use to which that water will eventually beput. Three, the “regulatory purpose” exemption that the Opinion offers is both inconsistent with the law and a dangerous precedent to the California water community. This so-called exemption is offered as support for the court’s conclusion that UWCD’s pumping fees served the valid regulatory purpose of “conserving water resources,” and are therefore not property-related. The creation of such an exemptionis not supported by the law because(i) it improperly focuses on the effect rather than purposeofthe fee at the timeofits adoption, an after-the-fact consideration which has no bearing on the validity of a quasi-legislative enactment like a groundwater pumpingfee, and(ii) it directly violates the plain language and stated legislative purpose of Proposition 218 itself. Moreover,it is a dangerous legal precedent which must be stuck down. Given that the majority of the water districts currently in existence in California have a “conservation”function, including UWCD,it stands to reason thatthe adoption ofa 01002.0003/274271.2 -7- regulatory water conservation exemption to Proposition 218 compliance threatens to obviate this constitutional rule in its entirety. C. The brief interprets the significance of the Sustainable Groundwater ManagementAct of 2014 (“SGMA”), which demonstrates the California Legislature’s view that Proposition 218 does apply to groundwater extraction fees. SGMAadded Water Codesections 10730 and 10730.2, which authorize the imposition of “fees on groundwater extraction” and expressly make those fees subject to “subdivisions(a) and (b) of Section 6 of Article XIII D of the California Constitution.” Therefore, through SGMA,the California Legislature expressly recognized the applicability ofProposition 218 to statutory groundwater extraction fees in general. D. Finally, the brief explains why Water Code section 75594is facially unconstitutionalin light of Proposition 218. This is another legalissue the City is again uniquely situated to address, given that it has been involved in five years of litigation focused on the sole issue of whethera parallel uniform water rate provision — Water Code section 60317 — was facially invalid due to WRD’sfailure to comply with the procedural and substantive requirements ofProposition 218, and whetherthe City wasentitled to a full or partial refund of the invalidated extraction fees. IV. CONCLUSION Forthese reasons,the City respectfully requests the Court grant its request to file the proposed amicus curiae brief submitted concurrently herewith. 01002.0003/274271.2 -8- DATED: November18, 2015 01002.0003/274271.2 Respectfully submitted, ALESHIRE & WYNDER, LLP By: FAG MILES P. HOGA Attorneys for Amicus Curiae CITY OF SIGNAL HILL No. 8226036 IN THE SUPREME COURT OF THE STATE OF CALIFORNIA City of San Buenaventura _ Plaintiff; Cross-Defendant and Respondent/Cross-Appellant Vv. United Water Conservation District and Board of Directors of United Water Conservation District Defendants, Cross-Complainants and Appellants/Cross-Respondents. Of a Published Decision by the Second Appellate District, Division Six Case No. B251810 Reversing a Judgment of the Superior Court of the State of California, County of Santa Barbara, Case Nos. VENCI 00401714 and 1414739 Honorable Thomas P. Anderle, Judge Presiding PROPOSED AMICUS CURIAE BRIEF IN SUPPORT OF CITY OF SAN BUENAVENTURA ALESHIRE & WYNDER, LLP June S. Ailin, State Bar No. 109498 jailin@awattorneys.com Lindsay M.Tabaian, State Bar No. 268586 ltabaian@awattorneys.com *Miles P. Hogan, State Bar No. 287345 . mhogan@awattorneys.com 18881 Von Karman Avenue, Suite 1700 Irvine, California 92612 Telephone: (949) 223.1170 Facsimile: (949) 223.1180 Attorneys for Amicus Curiae CITY OF SIGNAL HILL 01002.0003/274271.2 1 CERTIFICATE OF INTERESTED PARTIES Amicus Curiae City of Signal Hill herein certifies, pursuant to Rule 8.208 of the California Rules of Court, that it knowsofno entity or person that must be listed under Rule 8.208, subsection (e)(1) or(2). DATED: November18, 2015 Respectfully submitted, ALESHIRE & WYNDER, LLP By Gate. MILES P. HOGA Attorneys for Amicus Curiae CITY OF SIGNAL HILL 01002.0003/274271.2 2 TABLE OF CONTENTS Page I. INTRODUCTIONoooccescceeecscesessesesesssesssessesseeeseessesesecscsessscsesestsaseaeees 3 II. STATEMENTOF INTEREST... ccccssesssesscsssesscessessessesssssssssaseetseesaeeenes 5 A. The Similarities Between the Ventura-UWCD Dispute and , the City-WRD Litigation ........ccccccseescsseessessesesseseessssscsncsessseaeeecs 8 B. UWCD’sMulti-Basin Operation Is Endemicin the California Water System; As Such, This Court’s Rulings About How: Rates Are Charged in Such a System Have Far-Reaching Implications for All Groundwater Pumpers AcrosstheState........ 12 I. THIS COURT SHOULD AFFIRM THE WELL-SETTLED RULE OF LAW THAT FEES ON GROUNDWATER PUMPING ARE SUBJECT TO ARTICLE XUI Duwi.cccccscsssesscessesscseesesscersessaseceseesens 14 A. The Court ofAppeal Has Conclusively Determined That Fees on Groundwater Extraction Are “Intimately Connected” With Property Ownership .0.......csesssessssccssessecsseesecssessesscsessestesscsacsassceeas 15 B. Groundwater Rights Are “Intimately Connected with Property Ownership” As Recognized in Pajaro L.....ccccccsesessee 18 C. The Extraction Charge Paid by Ventura and the RA Paid by the City Are Indistinguishable From the Rate Charged in POFAVO LD eececcescescescescessessceveesseessessesesessessessseesscssensessessssessesscsseaseneees20 D. Proposition 218’s Plain Language & Jurisprudence Applying The Same Confirm That Groundwater Extraction Charges Are “Property Related,” Regardless of Their End Use...........0......21 1. Jurisprudential History Confirms That Groundwater Pumping Charges Are “Property-Related”Fees................21 2. The Commercial/Residential Use Distinctions Cited By the Opinion Below Have No Bearingonthis Rule Of LAW ooo eee eeeececeeseneseseseeecesesescestecseesecsesseecsesecstsavecsavaceae24 3. Article XIII D Must Be Liberally Construed Pursuant to the Intent of the Voters ..........cccccccescssessssessescssessseecsseens28 E, The Legislature Agrees that Proposition 218 Applies to Groundwater Pumping Fees, As Demonstrated By Its Adoption of Fee Provisions Mandating Proposition 218 Compliancein the Sustainable Groundwater ManagementAct OF 2014oeeeeetsesceseccssnesesessssssecssssecsessecssessessecsesueesesseceusavaceess30 1. SGMA Authorizes a Proposition 218 Fee and a Proposition 26 FOE...eeccsssesssceseecsseessecsessesssssscsseesenseees31 01002.0003/274271 .2 F. SGMA Recognizes That Statutory Fees Imposed Upon Groundwater Extraction Are Fees Imposed “As An Incident of Property Ownership” Subject to Proposition 218 oo...eececeseeceeeeceeeeeseesceseseeseeeaeeees SGMAIs a Clear Expression of the Legislature’s Intent and Understanding of the Constitution and Groundwater Pumping Fees.............c:csccsscssessessesseeees Pajaro I Did Not, As the Opinion Concludes, Create a Regulatory Purpose Exemption...........c:ccccsssesseseseteesesseseseensessseees36 1. The Court of Appeal’s Analysis of this So-Called “Regulatory Purpose” Exemption Improperly Focuses on the Effect Rather Than the Purposeofthe Fee to DetermineIts Classification & Validity ..............00 A Finding that the District’s Fees Do Not Violate Prop 218 Based On the Application of a “Regulatory Purpose” Exemption Would Turn Back the Clock on Proposition 218 Jurisprudence 20 YearS..........c:0c00 Vv. The Uniform Pump Charges Authorized by Water Code section 75594, Like the Parallel Provision ofthe WRD Act, Violate and Are Superseded By Proposition 218 .......ccccsssssssesssessseesscescesessssessesssseseesescesoees40 Neither UWCD Nor WRD’s Enabling Act Can Exempt These Fees From Proposition 218 oo... ccesseesecsceesecseseteeseeseeseseeeseeeeens40 Water Code Sections 77594 and 60317 Are Facially Invalid VI. THIS COURT SHOULD STRIKEWATER CODESECTION 75594 AS UNCONSTITUTIONAL SOUWCDAND OTHERAGENCIES WILL COMPLY WITH PROPOSITION 218 o.oo. eccsscteesesetsesseseesenees44 VIE. CONCLUSION...eeceeeeseesssesesenenseneseneenseesseesseeeneesesseessnessseseneseensenaaee45 A. B. 01002.0003/274271.2 li seesaeee33 eseseee34 eesaeee37 esesees38 seseaeee43 TABLE OF AUTHORITIES Page STATE CASES Apartment Association ofLos Angeles v. City ofLos Angeles (2001) 24 Cal.4th 830 oo. cececccssstesseecescsecseeseeeseceseseeseeeeseeeeeaesnsseessenees 28 Beverly HillsFederal Savings & Loan Association v. Sup. Ct. (1968) 259 CalApp.2d 306oceesescsesseceeeesaeeeeaeeneeeeeseseeerensestanes 38 Big Bear Mun. Water Dist. v. Bear Valley Mutual Water Co. (1989) 207 Cal.App.3d 363 oeeseseecscessresseeeeeseeesesenseaeeeeseneeeeesaeesneas 33 Bighorn-Desert View Water Agencyv. Verjil (2006) 39 Cal.4th 205 ooccscesscesecseceeesseeeeeeeeseeesenseseseeceeeseaeeaeeespassim Cal. Water Svc. Co. v. Edward Sidebotham & Son (1964) 224 Cal.App.2d 715 oieeeseccesececseseesseeeeeeceeeseeseseeseeeesaesseeenees7,19 California Farm Bureau Federation v. State Water Resources Control Board (2011) 51 Cal.4th 421oeecesecseesscesneseseeeseaeeeseessesaseeeseaeeteenaeseates 32 Capistrano Taxpayers Association, Inc. v. City ofSan Juan Capistrano (2015) 235 Cal.App.4th 1493 oooeeccsseecseeeesseeeseeseseeceeeesareeeeaes 18, 19 Central and West Basin Water Replenishment Dist. v. Southern Cal. Water Co., et al. (2003) 109 Cal.App.4th 891 oooecceeeseeseeseceseeeeseeeseeeeseeessseeeseseetesensenaes 6 Evans v. City ofSan Jose (2005) 128 Cal.App.4th 1123 oo... eeesessreeseeesteneesseeeesececeseeeestaeeeneees 38 Greene v. Marin County Flood Control & Water Conservation District (2010) 49 Cal.4th 277 oo... eeccesessessceseeseerseceseeseseseeeeeaeeseeseseaeeeetsass 15,35 Griffith v. Pajaro Valley Water Management Agency (2013) 220 CalApp.4th oieccsecseesessneesnereseeeeseeeasseesseeseaseeesaeeseeees 16 Hillside Memorial Park & Mortuary v. Golden State Water Co. (2011) 205 Cal.App.4th 534 oieeeseeseseseeseeseceesseesessessesseceesseseeseesereeees 7 Howard Jarvis Taxpayers Association v. City ofLos Angeles (2002) 98 Cal.App.4th 1351 oo.ceeesecseseesecsecneeesteneesesseesesesrsseeneeesees 17, 23, 43 Pajaro Valley Water Management Agency v. AmRhein (2007) 150 Cal.App.4th 1364 oo.cseeseeseeesseeereeeenessesssssseeseenespassim Richmondv. Shasta Community Services Dist. (2004) 32 Cal.4th 409 ooo. eseeceseesseeseeeescesseeseessseseeesesesseeeseses 15, 17, 23 Silicon Valley Taxpayers Ass'n v. Santa Clara County Open Space Authority (2008) 44 Cal4th 431 ooeeeceecseseeeeserseseeesesessseeenesnsesseseseeeens 15, 29, 40 01002.0003/274271.2 ili Stanislaus Water Co. v. Bachman (1908) 152 Cal. 716oeeccceescssssssescssecssssesseeesecseessrcsessessesesseaseseentessecses 20 Water Replenishment Dist. ofS. California v. City ofCerritos (2013) 220 CalApp.4th 1450 oo... ceccccsscstesssesssessesssssesesssessesssesseseeeeees 10 Water Replenishment Dist. ofS. California v. City ofCerritos, et al. (2012) 202 Cal.App.4th 1063 oo.cecsssccssecssescecsesesceessseseseessesseeseeesses 7 Wickard v. Filburn (1942) 317 US. LL Lieesecsseseteeseeeesnecceessecseesseessseeecseseesssaseesseasenses24 CALIFORNIA CONSTITUTION Cal. Const., art. XT, § 11 oocccccsseceeseeesssreeeeeseeeesesssssttasesinaatesee20 Cal. Const., art. XTID C, § Loeeeseeseessecseeeneeceeesesesarssesseeseeereesessseessaes44 Cal. Const., art. XTII C, § 1, subd. (€)...... ce ceccesccesssecsseecsenseeeseeesessesesseees 30 Cal. Const., art. XT D vo... eecscssececssscesccsesessscssscessessssesssceseesuenessessennss 3 Cal. Const., art. XII D, § 6, subd. (D)(3) oeeeeeeetecetesteeettereeeeserees 18, 44 Cal. Const., art. XTIT D, § 2, subd. (€) ......c ccc ececsssseccssstsceseeecssseessnseesees 14, 22 Cal..Const., art. XTII D, § 6, subd. (b) oo...eeeeseeeeseeteesereesseeesees 6, 13, 31 Cal. Const., art. XII] D, § 6 oo... ccccceessneesessesnneeeeeeseaeeeseseeneeessaeees 4,5, 18 STATUTES | Government Code Government Code § 53753(a) ....cccesccssssssccsseesccessneeesseeceeesseeresseeeeetsaesenteeees 42 Water Code | Water Code App., § 40-23 oo... eeccscssccesscsecneeeseeceseecseeeseesneeseersasensenepeeenueas 12 Water Code § 1525 voi... ccccccccccsssssneeeeneceesseeecsscneeneeeecessaceeesenensesseneesseeaaaaas 32 Water Code § 1529.5 ooo. cccccsssscceeceeseeseeeeseceseeessenseeneeesneesaesones 32, 34, 35, 36 Water Code, §§ 1529.5, subd. (c), 10730, subd. (a), 10730.2, subd. (a).....35 Water Code, §§ 10709 uu...ccsssscssecsseeceseeeessescecessneesaeesneeetseeessneeseeeaes 12 Water Code, § 10723... ecsecsesesesesersseeseesesseneaseneeanersenssassessesetseenseneasenens 13 Water Code, §§ 10730, subd. (a), and 10730.2, subd.(a)...eee33, 34 Water Code §§ 10730 and 10730.2 oesseceeeeerseeeeseeesseeeeesseesneeespassim Water Code, § 10735.8, Subd. (C) oe. ceeeeeecsseseesseecseseeesseesneseseesenessateaeerenaes 32 01002.0003/274271.2 iv Water Code §§ 60000 oo... ccccscssecsssesssessscssecseetesseesseesseesereessesseeseenes 6, 9 Water Code, §§ 60300-60352 0... ccccsscessecssessssseessestesseesseeseeesssessesans 7, 10 Water Code, § 60317 oo... eee ccessecsnscsecsessesssessecsessesscsesssessessssseeesseenespassim Water Code, §§ 75500 oo... eeseesssesseccsccssecssesessecsecseseesseseessessesseeesaeensenes 36 Water Code § 75594 vcccsccsessssssssssssssssssavessassessevecsessssecssssevsessuvecesusessavesspassim Water Code §§ 77594 and 60317 oo. ceecesssessssscsssssescsscsseseeeassereseeens44,45 CALIFORNIA RULES California Rules of Court, Rule 8.208, subd. (e)(1) or (2)...............c00ee 2 California Rules of Court, Rule 8.208, subd. (€)(3) .......cccsccsssccsesseesseveseeees 2 California Rules of Court, Rule 8.520(b) and 8.204(C)(1) ......cceesesecesnenes47 California Rules of Court, Rule 8.520, subd.(f) cseeseeeaseesseessanensensnenneeseesnetsid OTHER AUTHORITIES 4 Witkin, Summary of Cal. Law (10th ed. 2005) Real Property, § 36), at 217eeeeeeseesseesaceccteeseecceesesesesaseeeesercaessesseeeesseeeesseseeseneeaes19 4 Witkin, Summary of Cal. Law (10th ed. 2005) Taxation, § 178, at 272-273 oe eeeeccceeseeceseeceteeseceeseessensecsecssesseaeseeeaseseeseeeaeeeneeeneeasees 19 01002.0003/274271.2 BRIEF OF AMICUS CURIAE CITY OF SIGNAL HILL 1. INTRODUCTION Amicus curiae the City of Signal Hill (“City”) welcomes the opportunity to address the Court on the two issues under review. The City submits this brief in support of the City of San Buenaventura (“Ventura”) in order to apprise the Court of certain developments in the law of ratemaking generally and specifically in the groundwater pumping fee context, the direct and significant impact ofthis Court’s ruling on pumpers throughout the State similarly situated to the City and Véntura, and the importancethat the Court’s ruling honor the voters’ intent that property-related fees conform to the principles of cost-of-service and proportionality. The City respectfully urges the Court to find as follows: (1) groundwater pumping/extraction charges are “property-related” fees subject to Proposition 218; and (2) the rate ratio mandated by Water Code section 75594 violates Proposition 218 becauseit necessarily conflicts with the cost-of-service analysis and proportionality requirements of Proposition 218; or, in the alternative, the “fair or reasonable relationship” requirement of Proposition 26. Such a ruling is necessary for consistent development ofCaliforniajurisprudence on appropriate rate-setting by local agencies, and is vital to the water community and all pumpers throughout California. 01002.0003/274271.2 The opinion by the Court of Appeal for the Second District below (“Opinion”), which concludes that groundwater pumping fees assessedbythe United Water Conservation District (““UWCD7”)are not “property related” fees and therefore are not subject to Proposition 218, directly contradicts a long line of Proposition 218 jurisprudence. Moreover, the Opinion’s creation of a “regulatory purpose” exemption, allegedly stemming from dicta from the Court of Appeal for the Sixth District in Pajaro Valley Water Management Agency v. AmRhein (2007) 150 Cal.App.4th 1364 (“Pajaro I’), would nullify the voters’ intent in passing Proposition 218 and turn backthe clock by almost 20 years. With the adoption ofthe Sustainable Groundwater Management Act (“SGMA”) in 2014,it is clear the California legislature now understandsthat groundwater extraction fees must comply with the procedural and substantive mandates ofProposition 218. The Opinion below simply cannotbe reconciled with the plain text of Proposition 218, the voters’ intent in adopting these constitutional protections for the express purposeoflimiting taxation without taxpayer consent, case law interpreting Section 6 of Article XIII D of the California Constitution, and the practical concepts of proportionality in property-related fee rate-making. Statutes like Water Code sections 75594(at issue here) and 60317 (the authority for replenishment assessments imposed on the City), whichdictate a set fee without accounting for or analyzing cost ofservice or taxpayer benefit, inevitably result in the assessment of unfair rates among similarly situated 01002.0003/274271.2 pumpers and inhibit consistent application of the law. This system is inequitable for the City, Ventura, and for many other pumpers throughoutthe State, and allows groundwater conservation and replenishment agencies to impose costs that are disproportionate to the benefits received by certain ratepayers. I. STATEMENT OF INTEREST _ The City’s interest in the present appealarises outofits obligation and duty to provide essential water service to over 11,000 residents, and to ensure its water rates are not unnecessarily inflated by the groundwater extraction fees imposed upon it by the Water Replenishment District of Southern California (““WRD”). Such fees constitute a quarter ofthe City’s watercosts, yet the City has never been afforded the meaningful review andprotest rights that are mandated by Section 6 ofArticle XIII D ofthe California Constitution (“Proposition 218”or “Article XIII D”). The City is located in Los Angeles County and overlies a groundwater basin known asthe Central Basin, which is adjacent to a separate groundwater basin known as the West Coast Basin. The Central and West Coast Basinsare both replenished by the WRD,and comprise WRD’sservice area.' The City is The Central and West Coast Basins are two of four groundwater sub-basins that comprise the Coastal Plain ofLos Angeles Groundwater Basin. (See Coastal Plain of Los Angeles Groundwater Basin, Central Subbasin, Cal. Department of Water Resources Bulletin 118, 2004 Update, available at http://www.water.ca.gov/groundwater/bulletin18/basindescriptions/4-11.04.pdf; Coastal Plain of Los Angeles Groundwater Basin, West Coast Subbasin, Cal. 01002.0003/274271 2 the owner and lessee, respectively, of two parcels with groundwater production facilities which extract water from the Central Basin. The City is one ofmore than 140 holders ofrights to produce groundwater within WRD’s service area, including private water companies, manufacturers, businesses, individuals, churches, and other organizations. Approximately 90% of the City’s water supply comes from its groundwater production wells, with the remainder supplied through the purchase of treated surface water from the Metropolitan Water District of Southern California. Like UWCD, WRD isa special district created in 1959 pursuantto the Water Replenishment Act, California Water Code §§ 60000, et seq. (the “WRD Act”), to replenish the Central and West Coast Basinsfor the benefit of groundwater pumpers and the public in general. WRD does not, however, manage any water or property rights in the basins within its service area. Jurisdiction over the adjudication ofwater rights in each basin is with the Los Angeles Superior Court in each of the cases that separately adjudicated the rights in each basin. (See Central and West Basin Water ReplenishmentDist. v. Southern Cal. Water Co., et al. (2003) 109 Cal.App.4th 891 (“Central Basin I’), 898-899; Water ReplenishmentDist. ofS. California v. City ofCerritos, et al, (2012) 202 Cal.App.4th 1063 (“Central Basin IP’), 1067-1068; Cal. Water Sve. Co. v. Edward Sidebotham & Son (1964) 224 Cal.App.2d 715 (“West Department of Water Resources Bulletin 118, 2004 Update, available at http://www.water.ca.gov/groundwater/bulletin1! 1 8/basindescriptions/4-11.03.pdf.) 01002.0003/274271.2 Coast Basin I’), 721; Hillside Memorial Park & Mortuary v. Golden State Water Co. (2011) 205 Cal.App.4th 534 (“West Coast Basin IP’), 540-541.) Important to the analysis herein, the City’s vested right to extract water from the Central Basin arises from the Court’s adjudication ofthose property rights in Central Basin I and II. The WRD Act authorizes the district to levy a replenishment assessment (“RA”) on entities that pump water from the Central and West Coast Basins, which is then used to fund replenishment and clean-up operations. (Water Code, §§ 60300-60352.) The RA is assessed on all groundwater production from any property within WRD’sservice area on a per acre-foot basis. The RA is the source ofapproximately 80-90% ofWRD’s revenues. The WRD Act, which pre-dates Proposition 218 by nearly forty years, requires the RA to be imposedat a uniform rate, regardless ofthe costs ofservice WRD incursto replenish each basin: Ifthe board determinesthat a replenishment assessmentshall be levied upon the production of groundwater from groundwater supplies within the district during the ensuingfiscal year,... the replenishment assessment shall be fixed by the board at a uniform rate per acre-foot of groundwater produced. (Id. at § 60317.) WRD’sresolutions adopting the RA, to date, use no other factor or condition for the imposition ofthe RAs on the extraction ofgroundwater other than production ofwater from a property within its service area. WRD does not set different classes or rates for different types ofpumpersorfor different 01002.0003/274271.2 uses of the water extracted, nor does its RA rate account for the extreme disparity between the cost of providing service in the Central Basin as compared to the West Coast Basin. WRD incurs much greater costs to replenish and clean-up the West Coast Basin than the Central Basin, but continues to assess a uniform rate to pumpersin both basins — even after the adoption of Proposition 218. Due to this illegal subsidy, a dispute arose betweenthe City (and several other Central Basin pumpers) and WRD. On August 24, 2010, the City, along with the cities of Cerritos and Downey, filed a complaint against WRD allegingits uniform RA violates Proposition 218 and results in an illegal subsidy. The resultinglitigation, City ofCerritos, et. al. v. Water ReplenishmentDist. ofS. California, Los Angeles County Superior Court Case No. BS128136, lasted almost five years. The case wassettled earlier this year, with the order of dismissal signed by Hon. Michael P. Linfield on May 27, 2015. The City, therefore, has a direct interest in how the Court resolves the issues ofwhether Proposition 218 applies to groundwater pumping fees, and the appropriate standard with which the assessing agency must comply in setting said fees. A, The Similarities Between the Ventura-UWCDDispute and the City-WRD Litigation The marked numberof similarities between the City’s litigation with WRD,and Ventura’s litigation with UWCD unquestionably demonstrate the 01002.0003/274271.2 City’s interest in this case. For example,as detailed herein, both cases analyze the constitutional standards applicable to groundwater extraction fees imposed by a legislatively-created district formed to prevent overdraft. Both the City and Ventura are municipal water providers located in a multi-basin system. Both pay assessments pursuant to a uniform rate/ratio statute which are inequitable when comparedto the actual benefit they receive. Indeed, the Court of Appeal for the Second District’s own characterization of these cases and parties demonstrate their similarity. The following statement of facts from the Second District’s analysis of the City- WRD litigation, when comparedto the parallel statement offered by the same Court in the Opinion (see Opinion, 211-212 [Factual and Statutory Background]), illustrates this point: Prior to the formation of [WRD], groundwater was being produced from the Central Groundwater Basin (Central Basin) and the West Coast Groundwater Basin (collectively Basins) that provided water to residents in Los Angeles County in amounts that “greatly exceeded natural replenishment, creating a condition in the Basins knownas‘overdraft.’ That overdraft condition caused numerousproblems,including drastic overall decline of the elevation of the groundwater table and the intrusion of seawater into the Basins.” As a result of these concerns, in 1959 the District was formed by a vote of the citizens of Los Angeles County and pursuant to the Water Replenishment District Act enacted in 1955, codified at section 60000 et seq. (Stats. 1955, ch. 1514, § 1, p. 2755) (Water Replenishment Act). The District manages the Basins, which provide water for almost 4,000,000 residents in Los Angeles County. The District replenishes the groundwater under its jurisdiction by, amongother things, buying and selling water; exchanging water; storing water; recycling water; injecting water into seawater barriers located along the coast and 01002.0003/274271.2 spreading water at the Montebello Forebay; “[b]uild[ing] the necessary worksto achieve ground water replenishment”; and “manag[ing] and control[ling] water for the beneficial use of personsor property within the district.” (§ 60221.) On an annual basis, the District conducts an engineering survey to determine the state of groundwater supplies and total production of groundwaterfor “both the current year and the following year,” holds a public hearing to determine the estimated costs of replenishing the groundwater supplies, and then adopts a resolution, levying an assessment on the production of groundwater from the Basins. (See §§ 60300, 60306, 60315.) (Water Replenishment Dist. ofS. California v. City ofCerritos (2013) 220 Cal.AppAth 1450, 1454-1455 [holding that “pay first, litigate later” principle required city to pay assessmentuntil a final judgment invalidated the assessment].) Ventura and the City are similarly situated in that they both pay an assessment to a groundwater conservation/replenishment agency on every acre-foot ofgroundwatertheypump. Ventura generally alleges that UWCD’s rate-making administrative records do not comply with Proposition 218 for 1) 2) 3) 01002.0003/274271.2 three reasons: “The 3:1 ratio of M&I to agricultural charges cannot be justified on this — or any conceivable — record.” “The District admits its services are not of equal benefit to all eight basins by maintaining its Zone B charge, which requires those who benefit from the Freeman Diversion Dam alone to bear its cost; yet it pools all other charges in a District-wide Zone A that necessarily overcharges the City for the benefit it receives.” “The record is insufficient to show the District spends the proceedsofthe charge only to provide groundwaterservices and -10- that it has estimated the cost of that service with reasonable accuracy.” (City of San Buenaventura Opening Brief [“OB”],at 4-5.) In its litigation against WRD,the City made very similarallegations. As to the first and second issues, the WRD Act mandates a uniform rate among all pumpers regardless of the basin they pump from, the customer class, or the ultimate use of water (Water Code § 60317); for UWCD, Water Code section 75594 dictates rates based on ultimate use of water (i.e., municipal and industrial comparedto agricultural uses). Additionally, JWCD imposesa uniform rate acrossall ofits Zone A basins, regardless ofthe cost of providing service to the parcels overlying different basins within Zone A; WRD applies a uniform rate to parcels in the two distinct basins in its service area. Asto the third issue, the City similarly alleged in its litigation against WRD thatproceeds collected from the RA were spent on programsunrelated to WRD’s function ofproviding groundwater replenishment and water quality services. Finally, both UWCD and WRD haveutilized parallel defensesin their respectivelitigations. To namea few, both have argued that these water rates are not “property-related” due to the fact that the water is sold to the City’s residents and the cost “passed through.” Both have arguedthat their uniform rates are statutorily authorized, and therefore they not required to comply with Proposition 218’s proportionality requirements due to considerations of 01002.0003/274271.2 -ll- “legislative policy.” And both ask the courts to consider after-the-fact justifications for their rates not consideredat the time of their adoption. For example,near the endoflitigation, one of WRD’sprimary defenses wasthat the Central and West Coast Basins are hydrogeologically connected, and so a benefit to one basin is a benefit to both basins. Here, UWCD uses the same defenseas to its uniform charge throughoutall ofits Zone A, which Ventura thoroughly dispels at pages 18 to 24 of its Opening Brief. B. UWCD’s Multi-Basin Operation Is Endemic in the California Water System; As Such, This Court’s Rulings About How Rates Are Charged in Such a System Have Far-Reaching Implications for All Groundwater Pumpers Acrossthe State The issue ofProposition 218’s applicability to groundwater extraction fees arises in many other circumstances beyond the specific fee before this Court. There are numerousspecialdistricts and local agencies throughoutthe State that have been authorized to replenish and manage groundwater basins for the limited purposesset forth in their enabling legislation.” That legislation 2 See Water Code, §§ 10709 [Mendocino City Community Services District], 60317 [Water Replenishment District of Southern California], 75594 [United Water Conservation District, and several other water conservation districts]; Water Code App., §§ 40-23 [Orange County Water District], 60-26 [Santa Clara Valley Water District], 100-15.4 [Desert Water Agency], 118-343 [Monterey Peninsula Water ManagementDistrict], 119-801 [Sierra Valley Groundwater ManagementDistrict and Long Valley Groundwater Management District], 121-1001 [Fox Canyon Groundwater Management Agency], 124-1001 [Pajaro Valley Water Management Agency], 129-801 [Honey Lake Groundwater ManagementDistrict], 131-1101 [Ojai Groundwater Management Agency], 135-801 [Willow Creek Groundwater Management Agency]. 01002.0003/274271.2 -12- further authorizes the imposition offees on groundwater extraction forthe sole purpose offunding replenishment and other groundwater basin management. Therefore, whether statutory fees imposed on groundwater extraction are subject to the constitutional mandates of Proposition 218 is of great significance to many groundwater producers and agencies throughout the State paying or imposing suchfees. Moreover, with the implementation of SGMA, new Groundwater Sustainability Agencies (“GSAs”) will be created throughoutthe State. (See Water Code, § 10723.) As discussed in further detail below, Water Code sections 10730 and 10730.2, added by SGMA,authorize the imposition of “fees on groundwater extraction” and expressly make those fees subject to “subdivisions (a) and (b) of Section 6 of Article XIII D of the California Constitution.” (/d. at §§ 10730, 10730.2.) Therefore, a ruling by this Court that Proposition 218 does not apply to UWCD’s pumping fees would confuse this area ofthe law for local agencies and pumpers forming GSAs. Thiswill directly impact the hundreds ofGSAsthatwill be formed in the comingyears. Thepractical effect of SGMAisthat, soon,virtually all properties overlying groundwater basins that require replenishment services will be affected by this ruling. This demonstrates the importance of the uniform application of Proposition 218 to groundwater pumpingfees statewide. | Finally, this Court’s ruling will have a significant impact on the City and the customers of its water department. WRD’s costs of replenishing the 01002.0003/274271.2 -13- West Coast Basin are dramatically higher than the costs of replenishing the Central Basin. As the costs of imported water continue to rise, WRD’s RA will likely rise each year. The RA is already 25% of the City’s annual water system operating costs each year. Therefore, it is ofutmost importanceto the City and its customers that it only pay an assessment in the amount commensurate with the benefits it receives from the groundwater replenishmentservices actually provided by WRD. As a municipal water provider subject to similar fees, the City provides herein not only its view ofthe legal support for the applicability ofProposition 218 to groundwater extraction fees, but also the importance of enforcing the protest and proportionality rights for the benefit of all ratepayers. Il. THISCOURT SHOULD AFFIRMTHE WELL-SETTLEDRULE OF LAW THAT FEES ON GROUNDWATER PUMPING ARE SUBJECT TO ARTICLE XIII D Article XIIJ D applies to “any levy other than an ad valorem tax, a special tax, or an assessment, imposed by an agency upona parcel or upon a person as an incident ofproperty ownership,including a userfee or charge for a property-related service.” (Cal. Const., art. XIII D, § 2, subd. (e) [emphasis added].) “The phrase ‘[p]roperty-related service” is defined to mean a “public service having a direct relationship to property ownership.” (Pajaro I, 150 Cal.App.4th at 1385.) Whether a fee is a “service fee,” 01002.0003/274271.2 _14- however, is “beside the point if the charge is imposed as an incident of property ownership.” (/d. at 1389.) The Opinion subject to this Court’s review held that groundwater extraction fees are not subject to Proposition 218. This Opinion stands in sharp contrast from this Court’s broad and proper application of Proposition 218 to fees for water service of any kind. (See Bighorn-Desert View Water Agencyv. Verjil (2006) 39 Cal.4th 205 (“Bighorn’’); Silicon Valley Taxpayers Ass’n v. Santa Clara County Open Space Authority (2008) 44 Cal.4th 431(“Silicon Valley’); Greene v. Marin County Flood Control & Water Conservation District (2010) 49 Cal.4th 277 (“Greene”); Richmond v. Shasta Community Services Dist. (2004) 32 Cal.4th 409 (“Richmond’”).) Consistently, this Court has enforced the intent of the voters when they passed Proposition 218. The SecondDistrict, however, has disregarded this Court’s conclusions based upon (1) a misinterpretation of the seminal Pajaro I decision, whichis controlling in this case, and (2) the false assumption that groundwater producers have alternative sources of water and are, therefore, voluntarily seeking the services of water districts for groundwater replenishment. A. The Court of Appeal Has Conclusively Determined That Fees_on Groundwater Extraction Are “Intimately Connected” With Property Ownership The Sixth District Court of Appeal, in Pajaro I and Pajaro II, determined that a “groundwater augmentation charge” levied by the Pajaro 01002.0003/274271.2 -15- Valley Water Management Agency was a property-related fee subject to Proposition 218’s cost-of-service requirements. (Pajaro Valley Water Management Agency v. AmRhein (2007) 150 Cal.App.4th 1364 (“Pajaro I’), 1370; Griffith v. Pajaro Valley Water Management Agency (2013) 220 Cal.App.4th 587 (“Pajaro IT’), 592.) Like UWCD and WRD,the Pajaro Agency wascreated through legislative act to manage groundwater resources in a specific geographic area: the Pajaro Valley Groundwater Basin. (Pajaro I, 150 Cal.App.4th at 1371.) The Pajaro Agency levied a “groundwater augmentation fee” upon all users of groundwater from the Pajaro Valley Groundwater Basin to fund its replenishment activities. (/d. at 1372.) In 2003, the Pajaro Agency proposed to increase its per-foot charge to fund projects to replenish coastal areas of its basin, disproportionately benefitting the coastal pumpers. (/d. at 1373-1374.) The Sixth District initially interpreted this Court’s decisions regarding Proposition 218 to mean that consumption-based fees, as opposedto flat fees, could not be subject to Article XIII D restrictions. (Pajaro I, 150 Cal.App.4th at 1385-1386.)° Twodayslater, however,this Court “flatly rejected the view that consumption-based delivery fees are beyond the reach of [Proposition 2 “Tn ouroriginal opinion we reasonedthat in holding ongoing service fees to be within the purview of Article 13D, the Richmond [v. Shasta Community Services Dist. (2004) 32 Cal.4th 409] court must have been speaking offlatfees, as opposed to those based on the amount of water (or similar commodity) consumed.” (/d. at 1387 [emphasisin original].) 01002.0003/274271.2 -16- 218]” and expressly disapprovedHowardJarvis Taxpayers Associationv. City ofLos Angeles (2002) 98 Cal.App.4th 1351 (“Howard Jarvis”). (Bighorn— Desert View Water Agency v. Verjil (2006) 39 Cal.4th 205 (“Bighorn”).) In light ofthe Bighorn decision, the Pajaro Icourt granted a re-hearing, reasoning: [T]he only question left for us by Bighorn is whether the charge on groundwater extraction at issue here differs materially, for purposes of Article 13D’s restrictions on fees and charges, from a charge on delivered water. We havefailed to identify any distinction sufficient to justify a different result, and the Agency points us to none. (/d. at 1388-1389 [first emphasis added].) Asthis re-hearing, the Court recognized that the fee for water delivery in Bighorn (i.e., water delivered via a waterutility’s distribution mains) was different from the charge on groundwater extraction before it, butfound no reason to distinguish them for purposes of Article XIII D. (Ibid.) Accordingly, it held that the agency’s groundwater augmentation charge was a property-related fee under Article XIII D, and thus subject to Proposition 218. (/d. at 1370, 1387-1389.) In so holding, the Court importantly noted that, the groundwater extraction fee was “not actually predicated uponthe use ofwater but onits extraction, an activity in some ways more intimately connected with property ownership than is the merereceipt of delivered water.” (Id. at 1391.) In the San Juan Capistrano decision issuedearlier this year, applying the above-stated rule oflaw from Bighorn, another Court ofAppeal affirmed 01002.0003/274271.2 -17- that water rates are subject to Proposition 218 and public water agencyis therefore required to comply with Proposition 218 and account for proportional cost of servicein its tiered water rate structure: Proposition 218 requires public water agencies to calculate the actual costs of providing water at various levels of usage. Article XIII D, section 6, subdivision (b)(3) of the California Constitution, as interpreted by our Supreme Court in [Bighorn] provides that water rates must reflect the “cost of service” attributable to a given parcel. If the phrase “proportional cost of service attributable to the parcel” is to mean anything, it has to be that article XIII D, section 6, subdivision (b)(3) assumes that there really is an ascertainable cost of service that can be attributed to a specific hence the little word “the” — parcel. Otherwise, the cost of service language would be meaningless. Whyuse the phrase “cost of service to the parcel”if a local agency doesn’t actually have to ascertain a cost of service to that particular parcel? (Capistrano Taxpayers Association, Inc. v. City of San Juan Capistrano (2015) 235 Cal.App.4th 1493 (“San Juan Capistrano”), 1497, 1505.) This Court was asked to disturb this general ruling and the specific application of Proposition 218’s proportionality requirements to the water rates at issue in San Juan Capistrano. It declined to do so, and should consistently issue a similar ruling here. B. Groundwater Rights Are “Intimately Connected with Property Ownership” As Recognized in Pajaro I The Pajaro I court relied upon well-established California law that groundwater rights are connected to property ownership, and the rights to pumpanduse groundwaterare property rights. (Pajaro I, 150 Cal.App.4th at 01002.0003/274271.2 -18- 1393.) Indeed, the Pajaro I court relied on case law regarding the nature of rights to take groundwater from the West Coast Basin to demonstrate the connection between groundwaterrights and property rights and to support its holding that groundwaterrights are tied to property ownership. (/d. at 1391- 1392, citing Cal. Water Svc. Co. v. Edward Sidebotham & Son (1964) 224 Cal.App.2d 715(“West Basin I’), 725 [“These rights are said to be ‘based on the ownership of land and . . . appurtenantthereto.”’].) This analysis is consistent with the long-established tenet that real property includes “all freehold interests, together with such things closely associated with land as fixtures, growing crops and water.” (4 Witkin, Summary ofCal. Law (10th ed. 2005) Real Property, § 3(6), at 217 [emphasis added]; see also 4 Witkin, Summary of Cal. Law (10th ed. 2005) Taxation, § 178, at 272-273 [right to divert water for nonriparian use is real property right].) Section 11 ofArticle XIII entitled “Taxation oflocal government real property,”includes “rights to use or divert water from surface or underground sources and any other interests in lands” as real property subject to taxation. (Cal. Const., art. XIII, § 11 [emphasis added]; see also Stanislaus Water Co.v. Bachman (1908) 152 Cal. 716, 725 [right to use water diverted from stream for irrigation is real, not personal, property].) 01002.0003/274271.2 -19- C. The Extraction Charge Paid by Ventura and the RA Paid by the City Are Indistinguishable From the Rate Charged in Pajarol The “groundwater augmentation fee” levied by the Pajaro Agencyis indistinguishable from fees imposed by UWCD and WRD.Norisit different from any other statutory fee on groundwater extraction imposed pursuant to separate legislation, in that they require no other factor for an agencyto impose fees other than the activity of groundwater extraction from parcels within the agency’s service area. Nothingelse. The Opinion below incorrectly observesthat, “Pajaro was based upon a unique set of facts — ‘that the vast majority of property owners in the Pajaro Valley obtained their water from wells, and that alternative sources were not practically feasible.’” (Opinion, at 18, citing Pajaro J, 150 Cal.App.4th at 1397.) The City can confirm that the situation in Pajaro Jis not unique,as the City relies on groundwater for 90% ofits supply. Alternative sources ofwater are cost prohibitive because the City’s only alternative source is expensive imported water. Numerous pumpers throughout California similarly must rely on groundwateras a primary source ofsupply, meaning those pumpersdo not practically have the “option” of not pumping and avoiding the associated extraction fee. The chargein this case is analogousto the charge in Pajaro I, and those facts are not “unique”to that case. 01002.0003/274271.2 - 20 - D. Proposition 218’s Plain Language & Jurisprudence Applying The Same Confirm That Groundwater Extraction Charges Are “Property Related,” Regardless of Their End Use While courts have notindicated the full scope offees subject to Article XIU D, they have expressly applied Articlea D to water delivery charges andfees imposed upon groundwater extraction. As discussedin detail above, this Court’s opinion in Bighorn and the Sixth District’s opinion in Pajaro I settled the applicability of Proposition 218 to fees imposed by government agencies upon the extraction of groundwater. The courts have further madeclear that it was the intent of the voters that these constitutional protections be “liberally construed” in favor of taxpayers. Conversely, the Opinion’s convoluted interpretation of Pajaro I and of the cases leading up to Pajaro J is not in line with the intent of the voters, or the plain meaning of Article XIII D. The ruling below,if adopted by this Court, threatens to overturn this long-established body of law to the detriment ofthousands ofgroundwater pumpersthat are similarly situated to Ventura and the City. lL Jurisprudential History Confirms That Groundwater Pumping Charges Are “Property-Related” Fees This Court’s opinion in Bighorn and the Sixth District’s opinion in Pajaro Iyears ago settled the applicability ofProposition 218 to fees imposed by governmental agencies uponthe extraction ofgroundwater. The Opinion’s contrary determination that groundwater pump charges are not “property- 01002.0003/274271.2 2] - related” fees is based, in large part, on the mischaracterization ofthose fees as “a charge on the activity ofpumping[rather] than a charge imposed by reason of property ownership.” (Opinion, at 20.) This is a distinction without a difference, and directly contradicts Pajaro I and Bighorn, whichare not — as the Opinion suggests — “distinguishable.” As noted, in Pajaro I, the Sixth District determined that water extraction is “an activity in some ways more intimately connected with property ownership than is the merereceipt of delivered water.” (Pajaro I, 150 Cal.App.4th at 1391 [emphasis added].) Similarly, in Bighorn, this Court rejected the argumentthat only a fixed monthly charge, rather than a charge based on the user’s amount of pumping activity, was property related. The Bighorn opinion pointed out that Article XIII D “include[s] a user fee or charge for a property related service” (Cal. Const., art. XIII D § 2, subd. (e)) and concludedthat “/c/onsumption-based water delivery charges also fall within the definition of user fees, which are ‘amounts charged to a person using a service where the amountofthe chargeis generally related to the value ofthe services provided’”—i.e. a fee on the activity ofpumping. (Bighorn, 39 Cal.4th 205 at 227 [emphasis added].) In Howard Jarvis, the Fifth District Court of Appeal made the same mistake in interpreting Article XIII D as the Second District now makeshere. The court there held that Article XIIJ D exempts water fees from the voting requirement and therefore such charges must be exempt from Article XIII D 01002.0003/274271.2 22 - altogether. (Howard Jarvis, 98 Cal.App.4th at 83.) The Court also reasoned that ifthe fee did not depend on property ownership,it must not be subject to Article XIII D. (dbid.) This Court later disapproved this misinterpretation, and should do the same here. (Bighorn, 39 Cal.4th 205 at 217, fn. 5.) Earlier Proposition 218 jurisprudence is similarly clear that groundwater pumping charges imposedbyvirtue of the simple fact that the pumper ownsthe property on which the wateris delivered or extracted, andis putting that property to its normaluse, are “property-related” and thus subject to Proposition 218. (Bighorn, 39 Cal.4th 205 at 215; Richmond, 32 Cal.4th at 427.) For example, in Richmond, supra, 32 Cal .4th at 427, this Court found that “[a] fee for ongoing water service through an existing connection is imposed ‘as an incident of property ownership’ because it requires nothing other than normal ownership and use of property.” This was confirmed in Bighorn, where this Court noted that “[a] fee for ongoing water service through an existing connection is imposed ‘as .an incident of property ownership’ because it requires nothing other than normal ownership and use ofproperty.” (Bighorn, supra, 39 Cal4th at 215 [emphasis added].) In Bighorn, the agency arguedits rates were not subject to Proposition 218 because they were | consumption based, levied as a result of the landowners’ “voluntary decision” to use water. (Bighorn, 39 Cal.4th at 216.) This Court rejected this distinction finding that both fixed and meteredrates for water service to existing customers to be within the reach of Proposition 01002.0003/274271.2 23 - 218, and disapproving ofHowardJarvis. (Id. at 216, 217, fn. 5.) The Bighorn decision supports the conclusion that any fee on groundwater extraction from groundwater-producing facilities are imposed “as an incident of property ownership,” because they do not require anything other than normal ownership and use of the groundwater-producingfacilities. 2. The Commercial/Residential Use Distinctions CitedBy the Opinion Below Have No Bearing on this Rule of Law . The Opinion generally acknowledges the rule of law offered in Richmond and Bighorn that a groundwater extraction fee that is paid for “nothing other than normal ownership and use of property” is a property- related fee subject to Proposition 218. (Opinion, at 15, 21.) However, it ultimately incorrectly concludes that “voluntarily generating one’s own utilities arguably is not a normal use of property, and in any event, it is a “business operation’ in the sense that it affects the demand for municipal services.” (/d. at 21; cf. Wickard v. Filburn (1942) 317 U.S. 111.) Stated another way, the Opinion concludesthat the fee at issue is not property-related because Ventura sells the groundwater it extracts, thus concluding that Ventura’s use is “commercial” rather than “residential.” Proposition 218 jurisprudence makesclear that these distinctions based on the ultimate end use ofthe extracted water should not and do not have any bearing on whetheror not the fee at issue is “property-related.” 01002.0003/274271.2 -24- For example, in Pajaro IT, the Sixth District upheld the various rates applicable in different zones within a single basin. (220 Cal.App.4th at 603- 604.) Importantly, the court made clear that the applicability of Proposition 218 and an agency’s obligations pursuant thereto are not changedor limited when an ownerofa parcel with a groundwater-producing facility happensto be a water service provider (a public utility). (Ud. at 596 [Court rejected argumentthat it was notthe public utility that was entitled to notice ofthe fee, because that public utility eventually passed on the fee to its customers].) Notably, in Pajaro IT, the agency therein set rates based upon the location of the groundwater producing facility of the pumper, much ofwhich coincided with the types of water use of each pumper. (220 Cal.App.4th at 593, fn. 4.) The metered wells outside the delivered water zone applied “primarily [to] municipal, industrial, and agricultural users.” (lbid.) Nevertheless, the court did not split the Proposition 218 applicability to the water pumped andusedon the parcel. Nor does the Pajaro I decision support a legal distinction between pumpers whousethe waterfor residential rather than commercial purposes,as the Opinionposits. (Opinion,at 17 [claiming supposedresidential/commercial distinction was “dispositive” in Pajaro J].) To the contrary, the Pajaro Icourt itself explicitly rejects this distinction, along with the idea that the characterization of a fee for Proposition 218 purposes could depend on 01002.0003/274271.2 -25- whether the pumperbeing charged uses water for residential or commercial purposes: A charge may be imposed on a person because he ownsland, or. it may be imposed because he engagesin certain activity on his land. A charge of the former type is manifestly imposed as an incident of property ownership. A chargeofthe latter may not be. This appears to be the distinction Justice Mosk sought to articulate for the court in ApartmentAssociation. We doubt that it is satisfactorily captured by a distinction between business and domestic uses or purposes. (150 Cal.App.4th at 1391, fn. 18 [emphasis in original].) The supposedresidential/commercial distinction thus finds no support in the law,andflatly contradicts the explicit language ofPajaro J. Moreover, it would be difficult to reconcile a domestic use distinction with the facts ofPajaro I. The majority ofwater in Pajaro Iwas used for the business of farming, which had statutory priority over other uses. (150 Cal.App.4th at 1371-1372.) Indeed, three out of seven of the agency’s board members were required to derive mostoftheir incomefrom the “production of agricultural products.” (Pajaro Valley Water Management AgencyAcct,Stats. 1984, ch. 257, § 402, p. 805.) Thus, the only reasonable meaning of “domestic” in Pajaro I is use on landowners’ property,for anypurpose. Although various water districts around the State impose fees on groundwaterextraction pursuantto different enablingacts, the imposition and purpose of the fees are indistinguishable for purposes of Proposition 218. They are imposedonthe extraction ofgroundwater from anyproperty within 01002.0003/274271.2 -26- the respective district’s service area because thepumperhasa realproperty interest in the landfrom which the water ispumped, and regardless ofthe use to which that water will eventually be put. Some districts set different rates for different types ofuse, but the condition for the application ofthe fee is the same: extraction from property within the agency’s service area. In the case of Ventura, Signal Hill and manyothercities across the State, the groundwater extraction rights secured andsettled long ago are the primary sources of water. Therefore, the Opinion’s conclusion that Proposition 218 does not apply, because groundwater pumpingis “voluntary,” is a misapplication ofthe law and reflects a complete misunderstanding ofthe reality ofwater resources in California. It is true, as the Opinion notes, that the Richmond court determinedthat a connectionfee imposedby a local waterdistrict(i.e., a fee for making a new connection to the system), “voluntarily” incurred by the pumperin orderto connect to the system, was not a charge subject to Article XIII D. (Opinion,at 21.) However, this statement should not be further stretched to stand for the proposition that commercial uses of groundwater by a public entity are “voluntary” and therefore not subject to Proposition 218. Unlike the Richmond connection fee, the groundwater extraction fees imposed by UWCDandWRD arenotlimited to new wells on properties, but instead apply to groundwater extraction from all groundwater-producing facilities within both district’s geographical boundaries. (Water Code, § 01002.0003/274271.2 27 - 60317 [uniform rate imposed on “groundwater extraction from all groundwater-producing facilities within [WRD’s] district”].) There is no factual support for the notion that fees imposed on the simple exercise of extraction rights are not “property-related” simply because they have a commercial rather than residential “end use.” The Opinion’s analogies to Apartment Association ofLos Angeles v. City ofLos Angeles (2001) 24 Cal.4th 830 (“Apartment Association”), do not changethis. In that case, this Court held that an inspection fee on the business ofrenting property wasnot subject to Article XIII D. This Court notedthat“the merefact that a levy is regulatory (as [the] fee clearly [was]) or touches on businessactivities (as it clearly [did there]) is not enough,by itself, to removeit from article XIII D’s scope.” (/d. at 838.) This Court reasoned, however, that the fee there depended solely on the business of renting property. (/d. at 838- 841.) Here, on the other hand, the owners ofgroundwater-producingfacilities within UWCD and WRD’sservice areas are subject to the groundwater extraction fees simply by virtue of ownership the groundwater-producing facilities and putting them to their normaluse: the extraction ofgroundwater. 3. Article XIID Must Be Liberally Construed Pursuant to the Intent ofthe Voters Additionally, the Opinion diminishesthe constitutionalrights this Court articulated in Silicon Valley and enforced in Bighorn. The analysis by the court below is not limited to an attempt to distinguish or contradict the 01002.0003/274271.2 - 28 - opinionsofthe Sixth District, but is also an attempt to carve out exceptions to Bighorn. Neither is consistent with the interpretation of Proposition 218 as this Court expressly and clearly stated in Silicon Valley. Bypassing Proposition 218, “the voters intended to reverse the usual deference accorded governmental action and to reverse the presumption of validity.” (Silicon Valley, 44 Cal.4th at 445.) To that end, the voters were . clear that Proposition 218 must be “liberally construed to effectuate its purposes,” which purposesincluded(1) “limiting the methods by whichlocal governments exact revenue from taxpayers without their consent” and (2)“to makeit easier for taxpayers to win lawsuits that result in reduced or repealed taxes.” (id. at 448, citing Ballot Pamp., Gen. Elec., text of Prop. 218, argumentin favor of Prop. 218, p. 76 (“Ballot Pamphlet”), §§ 2, 5, pp. 108- 109.) Pumping fees becamethe primary source ofrevenuefor these districts after the passage of Proposition 13* in 1978, whichrestricted the amount of taxes that can be imposed without voter approval. This shift in revenue source wasprecisely whatthe voters intended to address with Proposition 21 8,° and which this Court hasstressedin its earlier decisions. Now, the decision below “Cal. Const., art. XIII C, § 1, subd. (e) (“Proposition 13”). > Byway ofexample, the City notes that the RAsconstituted 81-91% ofWRD’stotal revenue for the years at issue in its earlierlitigation against the district. . 01002.0003/274271.2 -29 - creates a large loophole in Proposition 218 and it does so in direct conflict with decisions from the Sixth District Court of Appeal and this Court. In utilizing a narrow interpretation of dicta in Pajaro I, the Opinion directly contradicts the legislature’s clear direction that Proposition 218 must be “liberally construed” in favor of taxpayers and to limit taxation without consent. Had this Court intended such a narrow interpretation ofProposition 218 vis-a-vis groundwater pumping fees, it could have granted review of the Sixth District’s opinions in Pajaro I and Pajaro I, This Court did not take issue with the Sixth District’s conclusions that fees on groundwater pumping are imposed as an incident of property ownership and subject to Proposition 218. The Second District in this Opinion has, however, taken issue with those decisions and attempts to contradict them. Therefore, the City requests that this Court establish a clear and singular interpretation of the constitutional mandates of Proposition 218: that it applies to fees on groundwater pumping applied by many groundwater conservation and replenishment agencies throughoutthe State. E. The Legislature Agrees that Proposition 218 Applies to Groundwater Pumping Fees, As Demonstrated By Its Adoption of Fee Provisions Mandating Proposition 218 Compliance in the Sustainable Groundwater Management Act of 2014 SGMAwasenacted by the California Legislature in 2014, authorizing certain local agencies to undertake replenishment and other management activities in previously unadjudicated groundwater basins, and further 01002.0003/274271.2 - 30- authorizing those agencies to impose fees on groundwater extraction therefrom. While SGMA does not have any direct applicability to fees imposed pursuant to separate legislation, SGMA certainly provides the California Legislature’s view that statutory fees imposed upon groundwater extraction — without any other requirement or factor — are subject to Proposition 218. Specifically, Water Code sections 10730 and 10730.2 authorize the imposition of“fees on groundwater extraction” and expressly makethose fees subject to “subdivisions (a) and (b) of Section 6 of Article XIII D of the California Constitution.” Therefore, SGMA expressly recognizes the applicability ofProposition 218 upon statutory groundwaterextraction fees in general. The SGMA fee is indistinguishable from the fees imposed by UWCD,the Pajaro Valley Water Management Agency, WRD,and other statutory fees on groundwater extraction imposed pursuant to separate legislation, in that it requires no other factor for the imposition of the fees. Theonly relevant factoris the activity ofgroundwater extraction from parcels within the agency’s service area. 1. SGMA Authorizes a Proposition 218 Fee and a Proposition 26 Fee SGMAestablishes Water Code section 1529.5 fees, which are fees charged by the State Water Resources Control Board (“State Water Board”) for participation in an administrative adjudication of rights in a groundwater 01002.0003/274271.2 -31- basin. (See Water Code, §1529.5; see also Water Code, §§ 10730, et seq. [establishing administrative adjudication process].) The Legislature recognizes the applicability of Proposition 26 to those fees, by expressly subjecting the determination of the amount of those fees to Article XIII A, Section 3. (Ud. at § 1529.5, subd. (e).) The fees are similar to other fees imposedby the State Water Board for the managementofsurface waterrights. (See California Farm Bureau Federation v. State Water Resources Control Board (2011) 51 Cal.4th 421, 437-444 [review ofexisting Water Code section 1525].) Notably, the Act requires compliance with Article X, Section 2 (the reasonable and beneficial use mandate) in connection with the administrative adjudication process (or “State Intervention”), as this is the process that establishes water rights and the amounts a party may extract from a probationary basin. (Water Code, § 10735.8, subd. (c) [restricting groundwater extraction and establishing extraction rights], and subd. (d) [expressly incorporating Article X, Section 2].) The sameis true in judicial adjudications. (Big Bear Mun. Water Dist. v. Bear Valley Mutual Water Co. (1989) 207 Cal.App.3d 363.) Neither the SGMA administrative process nor the judicial adjudication process, however, is relevant to the statutory fees imposed upon groundwater extraction presently before this Court or even to the statutory fees imposed upon groundwater extraction by SGMA. SGMA separately establishes statutory fees. upon groundwater extraction that are similar to the fees presently before this Court. The Act 01002.0003/274271.2 -32- establishes Water Code section 10730 fees upon groundwater extraction for the purposeoffunding the costs ofa groundwatersustainability plan designed to replenish a groundwater basin. (Water Code, §§ 10730, subd. (a), and 10730.2, subd. (a).) The fees are applicable based upon one condition: the extraction of groundwater. The fees are, therefore, no different than the UWCDfee. Unlike UWCD’sfees, however, the Legislature enacted this fee after the passage of Proposition 218 and, therefore, had the opportunity to expressly incorporate the requirements ofProposition 218. Fees enacted prior to Proposition 218 must nevertheless similarly yield to the constitutional mandate. (Bighorn, 39 CalAth at 217.) There is nothing in SGMA that establishes a distinction between Proposition 218’s applicability in adjudicated and unadjudicated basins. The Act only sets out to establish management regimes in unadjudicated basins; therefore, no need existed for the Act to address any statutory or other fees applicable in adjudicated basins. 2. SGMARecognizes That Statutory Fees Imposed Upon Groundwater Extraction Are Fees Imposed “As An Incident ofProperty Ownership”Subject to Proposition 218 Section 10730 fees are indistinguishable from the UWCDfees before this Court, the fees in the Pajaro I and Pajaro II decisions, and the fees imposed by WRD.Eachfeeis triggered simply bythe activity ofgroundwater extraction — nothing else. (Water Code, §§ 10730, subd. (a), and 10730.2, 01002.0003/274271.2 -33- subd. (a).) Indeed, in Pajaro I, the Court noted that the particular nature of a right pursuant to which a groundwater producer extracted its water was irrelevant for purposes ofProposition 218, because it was not considered when the fee was adopted. (150 Cal.App.4th at 1391.) Similarly, the nature of a particular right is not a factor in the Section 10730 fees or UWCDfees. 3. SGMA Is aClear Expression ofthe Legislature’s Intent and Understanding of the Constitution and Groundwater Pumping Fees Notably, in SGMA,the Legislature has expressly recognized not only the application of Proposition 218 to statutory groundwater extraction fees (Water Code § 10730), but also the application of Proposition 26 to other management fees not imposed directly as an incident of property ownership (Water Code § 1529.5). This interpretation is consistent with this Court’s and the Sixth District Court ofAppeal’s decisions, as well as the trial court in this case. Although SGMA is not directly applicable to the UWCD fee, the express incorporation of Proposition 218 within this Act demonstrates the Legislature’s interpretation of the issue and is therefore, persuasive. (See Greene, 49 Cal.4th at 290-291 [“[i]n cases of ambiguity we also may consult any contemporaneousconstructions of the constitutional provision made by the Legislature or by administrative agencies”(citation omitted)].) Thefact that the agencies created or authorized to act under SGMAwill be created for the purpose ofmanaging unadjudicated basinsis irrelevant for purposes of Proposition 218 and SGMA’s statutory fee on groundwater 01002.0003/274271.2 - 34- extraction (Section 10730 fees). SGMA imposesseparate fees in connection with the administrative adjudication procedureit establishes for groundwater basins that have not yet been adjudicated in a court proceeding. Section 1529.5 authorizes the imposition of fees upon those whoseekto establish their water rights pursuant to the State Water Board’s adjudicative process established at Sections 10735, et seq. of the Act. SGMAexpressly distinguishes between the different types of fees and expressly incorporates Proposition 218’s requirements for statutory fees imposed upon groundwater extraction and Proposition 26’s requirements for fees imposed in connection with the administrative adjudication process. (Water Code, §§ 1529.5, subd. (c), 10730, subd. (a), 10730.2, subd. (a).) SGMAcorrectly does this becausethe fees are distinct from each other. Both UWCD and WRD’s fees are statutory fees imposed upon groundwater extraction, with no other relevant factor. Therefore, they are indistinguishable from Section 10730 fees for purposes ofProposition 218 andare not similar in any way to the SGMA’sSection 1529.5 fees. Moreover, the fees here are not conditioned upon any adjudication within UWCD’sdistrict, nor is WRD’s RA conditioned uponthe adjudications of the Central and West Coast Basins. (See Water Code, §§ 75500, et seq.; Water Code, § 60317.) Similarly, the Legislature has authorized a statutory fee on groundwaterextraction in SGMA thatis not conditioned in any way on 01002.0003/274271.2 -35- the administrative adjudicative process created concurrently therewith. (Water - Code, §§ 1529.5, 10730, 10730.2.) - F. Pajaro I Did Not, As the Opinion Concludes, Create a Regulatory Purpose Exemption The Opinion below interpreted dicta in Pajaro I as creating a “regulatory purpose” exception, allowing an entity that levies a fee with a valid regulatory purpose to argue that the fee falls outside the scope of Proposition 218. (Opinion, at 29.) Specifically, the court claimsthat the fact that UWCD’s pumping fees served the valid regulatory purpose of “conserving water resources” supports its holding that the fees are not property-related. (/bid.) The creation ofsuch an exemptionis not supported by the law because (i) it improperly focuses on the effect rather than purposeofthe feeat the time of its adoption, an after-the-fact consideration which has no bearing on the validity ofa quasi-legislative enactmentlike a groundwater pumping fee, and (ii) it directly violates the plain language andstated legislative purpose of Proposition 218 itself. Moreover, given that the majority ofthe water districts currently in existence in California have a “conservation”function, including UWCD, it stands to reason that the adoption of a regulatory water conservation exemption to Proposition 218 compliance threatens to obviate this constitutional rule in its entirety. 01002.0003/274271.2 - 36- L. The Court of Appeal’s Analysis of this So-Called “Regulatory Purpose”Exemption Improperly Focuses on the Effect Rather Than the Purpose ofthe Fee to Determine Its Classification & Validity The Opinion’s conclusion that dicta in Pajaro I creates a regulatory purpose exemption to Proposition 218 complianceis fundamentally flawed because it focuses on the effect of the fee to determine whether it is “regulatory” and therefore “exempt,” rather than thepurposeofthe fee at the time it is adopted. As the court’s own summary ofthe classification system created by Propositions 13, 218 and 26 makes clear (Opinion, at 5-9), a measure is classified based upon the purpose for which it is enacted (e.g., general revenue purposes, an identified special purpose such a groundwater replenishment, etc.). Thevalidity ofthese actions then “standsor falls” on the administrative record which supports the agency’s stated purpose for imposing the exaction at the time it was adopted. (Evansv. City ofSan Jose (2005) 128 Cal.App.4th 1123, 1144, 1153 [“A fundamentalrule of administrative law is that a court’s review is confined to an examination of the record before the administrative agency at the time it takes the action being challenged.”]; Western States Petroleum Assn. v. Superior Court (1995) 9 Cal .4th 559, 576, 579 [validity of quasi-legislative decision to adopt fee is based solely on the administrative record; extra-record evidence can never be admitted to contradict the evidence the agency relied on in making the decision]; Beverly Hills Federal Savings & 01002.0003/274271.2 -37- Loan Association v. Sup. Ct. (1968) 259 Cal.App.2d 306, 324 [“The sufficiency of the evidence to support the commissioner’s decision for the purpose of judicial review sought by an objector stands or falls on the administrative record.”].) It would run contrary to this clear body oflaw to create an exemption like the one offered by the Opinion — which looks not to the purpose, but instead to the after-the-fact effect ofthe fee to determine whetherit is subject to Proposition 218. For example, the court below reasonsthat an otherwise “property-related” groundwater extraction fee could be exempt from Proposition 218 because Ventura is choosing to pump that water andthen sell it to residents. This effect or end use is clearly not something that an agency could know at the time it adopted the fee — only at the time it imposed and collected the same. As such,this “effect” cannot be considered in determining whether the fee at issue is subject to Proposition 218. 2. A Finding that the District’s Fees Do Not Violate Prop 218 Based On the Application of a “Regulatory Purpose” Exemption Would Turn Back the Clock on Proposition 218 Jurisprudence 20 Years Pajaro Idoes nothold,in dicta or otherwise,that the fact that a fee has some valid regulatory purpose renders it exempt from Proposition 218. Instead, Pajaro I stands for the proposition that a fee that is-predominantly designed to regulate consumption of a resource, rather than to generate revenue, might tenably fall outside the scope of Proposition 218. The 01002.0003/274271.2 - 38 - S C M S G E B a e * pumping fee paid by Ventura, much like the RAspaid by the City to WRD, was imposed to finance the construction of improvements to UWCD’s facilities, not to encourage conservation, even if it secondarily served that purpose. Furthermore, it would undercut the constitutional protections of Proposition 218 and run counter to the plain language of this constitutional provision for this Court to conclude that such a “regulatory purpose” exemption exists. Article XIII D, Section 3, unequivocally states that “{njo tax, assessment, fee, or charge shall be assessed by any agency upon any parcel of property or upon any person as an incident of property ownership except” unless that agency complies with the procedural (i.e. voter approval) and substantive (i.e., proportionality) requirements of Proposition 218. Moreover, the voters were clear that Proposition 218 must be “liberally construed” to effectuate its purpose: “limiting the methods by which local governments exact revenue from taxpayers without their consent.” (Silicon Valley, 44 Cal.4th at 448, citing Ballot Pamphlet, §§ 2, 5, pp. 108-109.) A regulatory purpose exemption directly contradictsthis plain language ofProposition 218 by permitting a property-related fee to be imposed without compliance with the proceduralor substantive requirements ofArticle XIII D so long asthe fee is imposed for the amorphously-stated regulatory purpose of “conserving water resources.” It stands to reason that, particularly in the era of extreme drought that California is experiencing, every groundwater 01002.0003/274271.2 -39- extraction fee is — at least in some way — imposedin order to conserve water resources. In this regard, the exemption has the potentialto eclipse the rule of law created by Proposition 218 entirely. At a minimum,it runs contrary to the purpose of“limiting the methods by which local governments exact revenue from taxpayers without their consent” — instead authorizing the proliferation of classes ofexactions for whichProposition 218 mandated voter approvalis no longer required. Vv. THE UNIFORM PUMPCHARGESAUTHORIZED BYWATER CODE SECTION 75594, LIKE THE PARALLEL PROVISION OF THE WRD ACT, VIOLATE AND ARE SUPERSEDED BY PROPOSITION 218 A. Neither UWCD Nor WRD’s Enabling Act Can Exempt These Fees From Proposition 218 Pursuant to Water Code sections 75594 and 60317, UWCD and WRD, respectively, are authorized to charge a “uniform” rate. Under the 1965 statute, the UWCDis required to impose fees on the municipal andindustrial groundwaterusers that are three to five times higher than those imposed on agricultural users. Similarly, under the WRD Act, the District imposes a uniform “RA”on both Central and West Basin pumpers despite the fact that the cost to replenish the West Basin far exceeds the cost to replenish the Central Basin. As such, on any conceivable administrative record, these legislatively authorized water extraction rates impose a disproportionaterate on the non-agricultural users in UWCD’sservice area and the Central Basin pumpers in WRD’s service area. 01002.0003/274271.2 - 40 - Nevertheless, the Court of Appeal below concludes — for reasons the Opinion does not make clear —that “it is possible to reconcile the language of Proposition 218 [requiring a proportionate rate] with section 75594’s mandatory rate ratio [requiring a uniform ratio].” (Opinion, at 225.) In so holding, the court reasoned that the fact “[t]hat the City’s desired use for the water it pumpsis subject to a higher regulatory fee than agricultural use is a policy decision made bythe Legislature, not the District,” with which the District is statutorily bound to comply. (/bid. [emphasis added].) To the contrary, California law is clearthat statutory “policy decisions” are superseded by Constitutional mandates. “The Legislature is bound by the state Constitution.” (Bighorn, 39 Cal.4th 205 at 217 [rejecting contention that initiative power required by Proposition 218 might be defeated by statutory provision regarding the setting of water rates].) Where legislation conflicts with the Constitution, “the Legislature’s authority in enacting the statutes under which the Agency operates must. . . yield to constitutional command.” (Ibid.) Accordingly, the City respectfully asks this Court to affirm that uniform groundwater extraction rates that do not proportionately charge users for the benefits received are superseded by Proposition 218. The question of whether the constitutional amendment of 1996 was intended to supersedethe existing authority ofagencies to exact revenue from rate payers was clearly answered by Article XIII D, § 1, which providesthat: 01002.0003/274271.2 -A] - Notwithstanding any other provision of law, the provisions of this article shall apply to all assessments, fees and charges, whether imposed pursuantto state statute or local government charter authority. The voters made only two exceptionstothis rule that are not applicable here: (1) fees or charges imposedas a condition ofproperty development, and (2) timber yield taxes. (/d. at subds. (b) and (c).) Thus, compliance with UWCD’s and WRD’s Enabling Acts (the “Acts”) does not exempttheir rates from Article XIII D. There is nothing that the voters who approved the formationofthese districts in the early to mid-1900s could have intended with respect to Proposition 218 applicability, which was passed decadeslater. Ifthe mandatesofthe Acts and Article XIII D conflict, as they do here, the constitutional mandates supersede the requirements of the WRD Act. (Bighorn, 39 Cal.4th 205 at 217.) Indeed, the Legislature has recognizedthis, amending most (but plainly not all) local government financestatutes to implement Proposition 218’s mandates. For example, Government Code section 53753(a), addressing implementation ofProposition 218, providesthat “It]he notice, protest, and hearing requirements imposed by this section supersede anystatutory provisions applicable to the levy ofa new or increased assessmentthat is in existence on the effective date ofthis section, whether or not that provision is in conflict with this article.” Case law applyingthis rule oflaw to waterextraction fees supports the view that statutory authority cannotbe utilizedasjustification for violating the 01002.0003/274271.2 - 42 - California Constitution. For example, in Bighorn, this Court held thatfees for water delivery service are subject to Article XIII D, regardless ofthe authority in the Bighorn Mountains Water Agency Law enacted in 1969. (Bighorn, supra, 39 Cal.4th 205 at 210.) This Court rejected the agency’s argumentthat compliance with Proposition 218 “would interfere with the statutory responsibility of the Agency’s board of directors to set the water rate. . ..” (bid.) Additionally, the Bighorn court disapproved the HowardJarvis holding that Article XIII D is inapplicable to water rates, even though the City Charter authorized Los Angeles to fix rates at a uniform rate. (Bighorn, 39 Cal.4th 205 at 217, fn. 5.; see also Howard Jarvis, 98 Cal.App.4th at 81-82.) As more directly applicable to this case, in Pajaro I, statutory authority did not exempt the fees on groundwater extraction from Article XIII D applicability. (Pajaro I, 150 Cal.App.4th at 1371-1372.) B. Water Code Sections 77594 and 60317 Are Facially Invalid Water Codesections 77594 and 60317 are facially unconstitutional because they violate Proposition 218’s substantive requirementthat an agency set rates as follows: “The amount of a fee or charge imposed uponany parcel or person as an incident of property ownership shall not exceed the proportional cost of the service attributable to the parcel.” (Cal. Const., art. XIII D, § 6, subd. (b)(3).) An agency must analyze the proportional cost of providing service in setting rates and that analysis must be demonstratedin the 01002.0003/274271.2 - 43 - rate-setting administrative record. By their express terms, Water Code sections 77594 and 60317 tell these agencies notto perform that analysis, and to instead impose fees at pre-determined rates. A statute that runs counter to such analysis by instead mandating a uniform rate violates Proposition 218 and is facially invalid, as a matter of law. Alternatively, Proposition 26 substantively requires that an agencyset rates as follows: “The local government bears the burden of proving by a preponderanceofthe evidence...that the amountis no more than necessary to coverthe reasonable costs ofthe governmentalactivity, and that the mannerin whichthose costs are allocated to a payorbeara fair or reasonable relationship to the payor's burdens on, or benefits received from, the governmental activity.” (Cal. Const., art. XIII C, § 1 [unnumbered text].) Proposition 26 requires agencies to perform an analysis to ensure the costs allocated to a payor“beara fair or reasonable relationship” to the benefits received by the payor from the agency’s groundwater conservation/replenishmentservices. Water Code sections 77594 and 60317 violate the California Constitution on their face by inhibiting such analysis and preventing levies from beingset at a “reasonable”rate. VI. THIS COURT SHOULD STRIKE WATER CODE SECTION 75594_AS UNCONSTITUTIONAL SO UWCD AND OTHER AGENCIES WILL COMPLY WITH PROPOSITION218 The City will leave the Court with a rhetorical question that speaks to the policies and interests at play in this litigation: Why does UWCDcare 01002.0003/274271.2 -44- whether it imposes a uniform rate throughout its Zone A at a 3-to-1 non- agricultural to agricultural rate ratio throughoutits service area? The City cannot think of any reason whya conservation/replenishmentdistrict would show justifiable preference for pumpersin certain basinsin its service area, or a preference for particular uses in its service area. UWCD and WRD,and any other conservation/replenishment agency, should only be concerned about recovering the costs of providing groundwater conservation/replenishment services. This leads to the conclusion that UWCD and WRD areonly imposing their rates without the necessary cost-of-service analysis and proportionality requirements because specific legislation is directing them to do so. Therefore, these agencies will continue violating the mandates of the California Constitution until it is made clear that what the legislation is directing them to do is unconstitutional. Vil. CONCLUSION For these reasons, amicus curiae City of Signal Hill respectfully requests the Court grant the reliefrequested by the City of San Buenaventura. 01002.0003/274271.2 - 45 - DATED: November 18, 2015 01002.0003/274271.2 Respectfully submitted, ALESHIRE & WYNDER, LLP By: Pathe Koze— MILES P. HOGAN” Attorneys for Amicus Curiae CITY OF SIGNAL HILL - 46 - CERTIFICATE OF COMPLIANCE WITH California Rules of Court 8.520(b) and 8.204(c)(1) WORD COUNT Pursuant to California Rules ofCourt, Rules 8.520(b) and 8.204(c)(1), the foregoing Amicus Briefby Amicus Curiae the City ofSignal Hill contains 12,060 words (including footnotes, but excluding Table ofContents and Table ofAuthorities, Application, and this Certificate, and is within the 14,000 word limit set by California Rules of Court, Rules 8.520(b) and 8.204(c)(1). In preparing this Certificate, I relied on the word count generated Microsoft Word,version 14, included in Microsoft Office Professional Plus 2010. DATED: November 18, 2015 ALESHIRE & WYNDER, LLP By RAL. Klong MILES P. HOGAN Attorneys for Amicus Curiae CITY OF SIGNAL HILL 01002.0003/274271.2 47 - PROOF OF SERVICE IN THE SUPREME COURTOF THE STATE OF CALIFORNIA City ofSan Buenaventura v. United Water Conservation District, etal. CASE NO. 8226036 Atthe time ofservice, I, Bonnie J. Blythe, was over 18 years ofage and not a party to this action. I am employedin the County of Orange, State of California. My businessaddress is 18881 Von Karman Avenue, Suite 1700, Irvine, CA 92612. On November 18, 2015, I served the following document(s) described as APPLICATION OFCITYOF SIGNAL HILL FORLEAVE TO FILE AMICUS CURIAE BRIEF IN SUPPORT OF CITY OF SAN BUENAVENTURA; PROPOSED AMICUS CURIAE BRIEF IN SUPPORTOF CITY OF SAN BUENAVENTURA ontheinterested parties in this action as follows: SEE ATTACHED SERVICELIST [ X ] BY U.S. MAIL: I enclosed the document(s) in a sealed envelope or package addressedto the personsat the addresseslisted in the Service List and placed the envelope for collection and mailing, following our ordinary business practices. I am readily familiar with the practice of Aleshire & Wynder, LLP for collecting and processing correspondence for mailing. On the same day that correspondenceis placed for collection and mailing,it is deposited in the ordinary course of business with the United States Postal Service, in a sealed envelope with postage fully prepaid. I am a resident or employedin the county where the mailing occurred. The envelope wasplaced in the mail at Irvine, California. [| X ] BY E-MAIL OR ELECTRONIC TRANSMISSION: Based on a court order or an agreement of the parties to accept service by e-mail or electronic transmission, by causing documentsto be sentto the personsat the email addresses listed on the service list on November 18, 2015, at approximately P.M.from e-mail address: bblythe@awattorneys.com. No electronic message or other indication that the transmission was unsuccessful was received within a reasonable timeafter the transmission. I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. 01002.0003/274271.2 SERVICE LIST IN THE SUPREME COURTOF THE STATE OF CALIFORNIA City ofSan Buenaventura v. United Water Conservation District, etal. CASE NO. 8226036 COURT CLERK via Federal Express CALIFORNIA SUPREME COURT 350 McAllister Street San Francisco, CA 94102-4797 The Honorable Thomas P. Anderle via U.S. Mail SANTA BARBARA SUPERIORCOURT 1100 AnacapaStreet . Santa Barbara, CA 93101 OFFICE OF THE ATTORNEY GENERAL via U.S. Mail 1300 “T” Street Sacramento, CA 95814-2919 COURT CLERK via U.S. Mail SANTA BARBARA SUPERIOR COURT 1100 AnacapaStreet Santa Barbara, CA 93121-1107 COURT CLERK via U.S. Mail COURT OF APPEAL,Division 6 200 E. Santa Clara Street Ventura, CA 93001 OFFICE OF THE ATTORNEY GENERAL via U.S. Mail Consumer Law Section 455 Golden Gate Avenue,Suite 11000 San Francisco, CA 94102 01002.0003/274271.2 Anthony H. Trembley Cheryl A. Orr MUSICK, PEELER & GARRETT LLP 2801 Townsgate Road, Suite 200 Westlake Village, CA 91361 Phone: (805) 418-3100 Fax: (805) 418-3101 a.trempley@mpglaw.com c.orr@mpglaw.com Jane E. Usher Cheryl A. Orr MUSICK, PEELER & GARRETT LLP One Wilshire Boulevard, Suite 2000 Los Angeles, CA 90017 Phone: (805) 418-3100 Fax: (805) 418-3101 j.usher@mpglaw.com c.orr@mpglaw.com Dennis LaRochelle Susan L. McCarthy John M. Mathews Arnold LaRochelle Mathews VANCONAS& ZIRBEL, LLP 300 Esplanade Drive, Suite 2100 Oxnard, CA 93036 Phone: (805) 988-9886 Fax: (805) 988-1937 dlarochelle@atozlaw.com Jmathews@atozlaw.com smecarthy@atozlaw.com jJmahan@atozlaw.com 01002.0003/274271.2 via U.S. Mail and electronic Service Defendants, Cross-Complainants and Appellants/Cross- Respondents United Water Conservation District and Board of Directors of United Water Conservation District via U.S. Mail and electronic service Defendants, Cross-Complainants and Appellants/Cross- Respondents United Water Conservation District and Board of Directors of United Water Conservation District via U.S. Mail and electronic service Attorneys for Intervener Pleasant Valley County Water District Nancy N. McDonough Christian C. Scheuring Associate Counsel CALIFORNIA FARM BUREAU 2300 River Plaza Drive Sacramento, CA 95833 Phone: (916) 561-5660 Fax: (916) 561-5699 nmcdonough@cfbf.com cscheuring@cfbf.com Gregory G. Diaz Assistant City Attorney CITY OF SAN BUENAVENTURA P.O. Box 99 Ventura, CA 93002-0099 _gdiaz@ci.ventura.ca.us gdiaz@cityofventura.net Michael G. Colantuono David J. Ruderman Michael R. Cobden COLANTUONO, HIGHSMITH & WHATLEY,PC 300 South Grand Ave., Suite 2700 Los Angeles, CA 90071-3137 mcolantuono@cllaw.us druderman@cllaw.us mcobden@chwlaw.us alloyd@cllaw.us Paul N. Singarella Kathryn M. Wagner LATHAM & WATKINS 650 Town Center Drive, 20tn Floor Costa Mesa, CA 92626-1925 paul.singarella@lw.com kate.wagner@lw.com 01002.0003/274271.2 via U.S. Mail Attorneys for Amicus Curiae for Appellant California Farm Bureau Federation and Farm Bureau of Ventura County, via U.S. Mail andelectronic Service Plaintiff, Cross-Defendant and Respondent/Cross- Appellant -City of San Buenaventura via U.S. Mail andelectronic service Plaintiff, Cross-Defendant and Respondent/Cross- Appellant . City of San Buenaventura via U.S. Mail andelectronic service Attorneys for Amicus Curiae Water Replenishment District of Southern California