SAN BUENAVENTURA, CITY OF v. UNITED WATER CONSERVATION DISTRICT

Amicus Curiae Brief of The Metropolitan Water District of Southern California

Cal.November 23, 2015

SUPREME COURT No. $226036 FILED {Exempt From Filing Fee Government Code §610NPV 2 3 2015 IN THE SUPREME COURT Frank A. McGuire Clerk OF THE STATE OF CALIFORNIA Deputy CITY OF SAN BUENAVENTURA, Plaintiffand Respondent / Cross-Appellant, Vv. UNITED WATER CONSERVATION DISTRICT AND BOARD OF DIRECTORSOF UNITED WATER CONSERVATIONDISTRICT, Defendants and Appellants / Cross-Respondents, APPLICATION FOR LEAVE TO FILE AMICUS CURIAE BRIEF AND PROPOSED AMICUS CURIAEBRIEF OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA Review of a Published Decision of the Second Appellate District, Division 6, Case No. B251810 Reversing a Judgment of the Superior Court of the State of California for the County of Santa Barbara, Case Nos. VENCI-00401714 and 1414739 Honorable ThomasP. Anderle, Judge Presiding MARCIA SCULLY(Bar No. 80648) HEATHER C. BEATTY (Bar No. 161907) The Metropolitan Water District of Southern California 700 N. Alameda Street, Los Angeles, CA 90012 Telephone: (213) 217-6834, Fax: (213) 217-6890 E-mail: mscully@mwdh20.com, hbeatty@mwdh20.com Attorneys for The Metropolitan WaterDistrict of Southern California RECEIVED = NOV 19 2015 CRO. 8,25((CLERK SUPREME COURT } No. $226036 [Exempt From Filing Fee Government Code §6103] IN THE SUPREME COURT OF THE STATE OF CALIFORNIA CITY OF SAN BUENAVENTURA, Plaintiffand Respondent / Cross-Appellant, Vv. UNITED WATER CONSERVATION DISTRICT AND BOARD OF DIRECTORS OF UNITED WATER CONSERVATIONDISTRICT, Defendants and Appellants / Cross-Respondents, APPLICATION FOR LEAVE TO FILE AMICUS CURIAE BRIEF AND PROPOSED AMICUS CURIAEBRIEF OF THE METROPOLITAN WATERDISTRICT OF SOUTHERN CALIFORNIA Review of a Published Decision ofthe Second Appellate District, Division 6, Case No. B251810 Reversing a Judgment of the Superior Court of the State of California for the County of Santa Barbara, Case Nos. VENCI-00401714 and 1414739 Honorable ThomasP. Anderle, Judge Presiding MARCIA SCULLY(Bar No. 80648) HEATHER C, BEATTY (Bar No. 161907) The Metropolitan Water District of Southern California 700 N. AlamedaStreet, Los Angeles, CA 90012 Telephone: (213) 217-6834, Fax: (213) 217-6890 E-mail: mscully@mwdh2o0.com, hbeatty@mwdh20.com Attorneys for The Metropolitan Water District of Southern California - TABLE OF CONTENTS APPLICATION FOR PERMISSION TO FILE AMICUS CURIAE BRIEF INTEREST OF AMICUS ANDISSUESTO BE BRIEFEDA.............. 1 PROPOSED AMICUS CURIAE BRIEF OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA INTRODUCTION0.00.cecetesesssssssessescacsseesesesescsvavevevacsessavevensesasavstees ] BACKGROUNDOF THE PROPOSITIONS....0.....cccccecesscseccsseeeesesess 2 ARGUMENT....00..ccccccccsscesscsssesessessesesescsesessesesssesssesescssavsvavscsensareratsusacaeaeees 6 I. PROPOSITION 26 DOES NOT INCORPORATEINTO ITS EXEMPTIONS THE PROPORTIONAL COST REQUIREMENT OF PROPOSITION 218 0000.cc cccccscscscsessecssssssscssscsescscesseseevacsessesssessssesesesees 6 A. Proposition 218 Requires Proportional Cost Allocation............. 6 B. The Applicability of the Exemptions to Proposition 26 at Subdivision (e)(1) Through (e)(3) Is Determined Pursuant To A “Reasonable Cost” Standard............cccccccccccssssscccescesessscssessseccesecessees 8 Il. THE “REASONABLE COST” STANDARD IN PROPOSITION 26’S EXEMPTIONS INVOLVES THE OVERALL COST OF THE RELATED GOVERNMENTACTIVITY....000..cccscccscceccsssesessescsceseees 1] Hil. EVEN IF THE COST ALLOCATION STANDARDSOF PROPOSITION 218 WERE INCORPORATED INTO PROPOSITION 26’S EXEMPTIONS, INDIVIDUAL RATEPAYER COST ALLOCATIONIS NOT REQUIRED...........ccccccccsccseseceseceseeststseesseceees 13 TABLE OF CONTENTS(Cont'd) TV. CONCLUSIONuucecceceesesesecseesssecnseesessesseeatsneensenaesaetetensenees 16 ii TABLE OF AUTHORITIES Page Cases Amador Valley Joint Union High Sch. Dist. v. State Bd. ofEqualization, (1978) 22 Cal.3d 208 oo... eesccescessctscecsecssecsessscsecesscseessssessesseesseeaeeeesees 2,3 Apartment Assn. ofLos Angeles County, Inc. v. City ofLos Angeles, (2007) 24 Cal.4th 830 occeecessesccesssesessesseessesseesecstesesecessessessessteeernees 3 Barratt American, Inc. v. City ofRancho Cucamonga, (2005) 37 Cal.4th 685 oo... cccessseseseeseseescseeesssesesssesssecssenesssessserecassesrerees 4 Brydon v. East Bay Mun. Utility Dist. (1994) 24 CalApp.4th 178 ooocecsecsssccsssssesseecssecssessssseeesseseeseteraeeees 1] Cal. Farm Bureau Fed’n v. State Water Res. Control Bd, (2011) 51 Cal.4th 420 ooeeecsecsseneeseeseeseeseeesssesseeeneeesens passim California Assn. ofProf. Scientists v. Department ofFish & Game, (2000) 79 Cal.App.4th 935 oo... cccsscssssssscssessseessseessessseessecenssesssssssasens 12 Capistrano Taxpayers Ass'n, Inc. v. City ofSan Juan Capistrano, (2015) 235 Cal.App.4th 1493 ooo ccessecssssscsecesscsssssessssessecsseserereses 7,15 Citizensfor Fair REURates v. City ofRedding, (2015) 233 Cal.App.4th 402 ooo.ecccessscessstecssesesssesesesseseeeesssesssseeses 3 City and County ofSan Franciscov. Farrell, (1982) 32 Cal.3d 47oeeescceccetessetsesessecssessesseessessesscesessseeessecesceecsucenseas 3 City ofBuenaventura v. United Water Conservation Dist., (2015) 235 Cal.App.4th 228 oo.ecsesseseesesseseecseessresesecesesseseenens 2, 10 Griffith v. City ofSanta Cruz, (2012) 207 Cal.App.4th 892 o..c.cccccccsssesssssssssssssesesssstesssssrseversseeenesars 9,12 Griffith v. Pajaro Valley Water Mgmt. Agency, (2013) 220 Cal. App. 4th 586.0... cescsscssesssessessecsenssseseeees 8, 13, 14, 15 ill TABLE OF AUTHORITIES(Cont'd) In re Attorney Discipline System (1998) 19 Cal.4th 582 v...ccccccccscsssscsessesseees 4 Knox v. City ofOrland, (1992) 4 Cal.4th 132 oocesssssseesesescsssssesssrsnsrsscststesessestacarsvatessesessees 3 Schmeer v. County ofLos Angeles, (2013) 213 Cal.App.4th 1310 ..ccccccccccscscsssscscrcesesstscssescavssssescssecses 2,3 Silicon Valley Taxpayers’ Assn., Inc. v. Santa Clara County Open Space Authority (2008) 44 Cal.4th 431 oncccsccsescscssssscsverecsesesesessesessecscevess 3, 7, 8, 10 Sinclair Paint Co. v. State Bd. ofEqualization, (1997) 15 Cal.4th 866 oo. ccccsscssscssscsessscsesssvssssassrsussssssseavavsvessseceeseees 4 Ventura Group Ventures v. Ventura Port Dist., (2001) 24 Cal.4th 10890ccscssssssssssssscscscsvsssssssssssstsvsssesecssesesesees 8 White v. County ofSan Diego, (1980) 26 Cal.3d 897 ooo. ccccesessesssessssssesssssecssessrsssssstsescstsesssecicesesesees 14 Other Authorities Prop. 218 Ballot Pamp., Gen. Elec., Nov. 5, 1996,text of Prop. 218, Fgoe 3 Prop. 26 Ballot Pamp., Gen. Elec., Nov. 2, 2010, text of Proposition 26, §1, subd. (c)-(€), p. 114 ..cccccccsessesssessssecesssees passim Constitutional Provisions California Constitution, Article XIII A.....cccccccccccscsescccssccseceseccceceeceeces, 2, 3,4 California Constitution Article XTID Cw... ccccecsssssesesesscseseecesscsceseces passim California Constitution Article XIII C, Section (1)(€).....c:sssscssseseeseees 5, 8, 10 California Constitution Article XIII C, subdivision (€) ....c.ccccccsssscsssssescsesesee 6 iv TABLE OF AUTHORITIES(Cont'd) California Constitution Art. XIII C, Section 1(e)(1)-(3)...........c.0. 9, 13, 16 California Constitution Art. XIII C, Section 1(e)(1)-(7)..........ccceeseeeeee 9, 13 California Constitution Art. XIII D, § 6, subd. (b)(5).......... ccc seeceseseseeceeees 3 California Constitution Article XIII Dun...cee ececsessesereereeesseeceseeeees passim California Constitution Art. XIII D, Section 4.00.0... cescecceecescssessseseseeees 7 California Constitution Art. XIII D, Section 4(€).........ccccceeesscesseseseesseenees 7 California Constitution Art. XIII D, Section Gcccssssnsnsssesstianssese eee 7 California Constitution Article XIII D, Section 6(b).............00...... cee 14 California Constitution Art. XIII D, Section 6(b)(3) uo... cece ceeeeeeereeeeee 7,10 APPLICATION FOR PERMISSION TO FILE AMICUS CURIAE BRIEF TO THE HONORABLECHIEF JUSTICE OF THE SUPREME COURT OF THE STATE OF CALIFORNIA: Pursuant to Rule 8.520, subdivision (f), of the California Rules of Court, The Metropolitan Water District of Southern California (“Metropolitan”) respectfully requests permissionto file the accompanying brief as amicus curiae. INTEREST OF AMICUS ANDISSUES TO BE BRIEFED Amicus Curiae Metropolitan is a public agency organized underthe Metropolitan Water District Act operating as a cooperative of 26 member agencies — also public agencies themselves (12 special districts and 14 municipalities, all of which provide water at wholesale and/or retail for municipal, domestic, and industrial use). (Stats. 1969, ch. 209 as amended; West’s California Water Code Append. §§ 109-134 (2015)). Metropolitan sells wholesale, supplemental water (imported from the Feather Riverin Northern California and the Colorado River) and provides other water services to its member agencies. Those memberagencies, or their own memberagencies, in turn serve nearly 19 million people throughout Southern California. Water delivered by Metropolitan —whichis then sold by the memberagencies and their memberagencies, often combined with water from local and alternative sources—makesup approximately 50% ofthe water consumed within Metropolitan’s service area. Residents and businesses within the service area that do not consumewateroriginating from Metropolitan also benefit from the availability of Metropolitan’s — water supplies, conservation efforts, and distribution system. Indeed,in times of drought, Metropolitan’s role as a supplemental water wholesaleris particularly critical, as its member agencies rely on Metropolitan storage and distribution system whenlocal or alternative supplies are unavailable or restricted. The rates Metropolitan charges its member agencies have been challenged under Proposition 26.' As a result,like many wateragencies, Metropolitan hasaninterest in obtaining clarification regarding the applicability of Proposition 26, particularly the interpretationofits exemptions, for public agencies that provide water and waterservices. In the present case, the Court has granted review to determine whether United Water Conservation District’s groundwater pumping charges violate Proposition 218 or Proposition 26. As the Court has recognized, the constitutional provisions resulting from each ofthe Propositions are distinct. Each governs the imposition of different kinds of ' Metropolitan contendsthatits rates — which are wholesale rates for supplemental water and waterservices, set by a Board of Directors comprised entirely of representatives of Metropolitan's only customers,its memberagencies — are not governed by either Proposition 26 or 218. governmentlevies, but doesso in different ways. Proposition 218 sets certain restrictions on real property-related levies. Proposition 26 coversall local charges that are imposed, except those that are expressly exempted. Nevertheless, Proposition 218’s restrictions and Proposition 26’s exemptions are often referred to collectively and interchangeably as “cost of service requirements,” leading to confusion about what Proposition 26 exempts and whatit does not. Absenta clear judicial interpretation from this Court, local agencies lack the certainty they need to secure the necessary funding from exempted payor-specific charges for essential governmentservices. For water agencies, specifically, uncertainty regarding the requirements and level of deference that may applyto their charges for government benefits, services, products, and property may prevent them from continuing those essential functions. The present case presents a rare opportunity for the Court to consider the applicability of both Proposition 218 and Proposition 26. As a result, Metropolitan respectfully requests the Court grant permission to address in its Amicus Curiae Brief the distinctions between the proportional cost of service requirements of Proposition 218 and the “reasonable cost” standard contained in three of the exemptions to Proposition 26.” Metropolitan * Similar questions regarding the cost standard of the Proposition 26 exemptionsare currently pending before this Court in Citizensfor Fair REURates v. City ofRedding (2015) 233 Cal.App.4th 402, review granted, Mar.3, 2015, 347 P.3d 89 (Cal. 2015), Cal. Sup. Ct. Case No. 8224779. believes its perspective in this matter is worthy of the Court’s consideration and its additional briefing will assist the Court in deciding this matter. No party other than Metropolitan and its counsel authored the proposed Amicus Curiae Brief in whole or in part or made a monetary contributiontoits preparation or submission. November18, 2015 Respectfully submitted, By. ALenthn C Lethey Heather C. Beatty The Metropolitan Water District of Southern California 700 N. AlamedaStreet Los Angeles, CA 90012 Telephone:(213) 217-6834 Fax: (213) 217-6890 E-mail: hbeatty@mwdh2.com Attorneys for Amicus Curiae, The Metropolitan Water District of Southern California No. S226036 [Exempt From Filing Fee Government Code §6103] IN THE SUPREME COURT OF THE STATE OF CALIFORNIA CITY OF SAN BUENAVENTURA, Plaintiffand Respondent / Cross-Appellant, Vv. UNITED WATER CONSERVATION DISTRICT AND BOARD OF DIRECTORS OF UNITED WATER CONSERVATIONDISTRICT, Defendants and Appellants / Cross-Respondents, PROPOSED AMICUS CURIAE BRIEF OF THE METROPOLITAN WATERDISTRICT OF SOUTHERN CALIFORNIA Review of a Published Decision of the Second Appellate District, Division 6, Case No. B251810 Reversing a Judgmentofthe Superior Court of the State of California for the County of Santa Barbara, Case Nos. VENCI-00401714 and 1414739 Honorable Thomas P. Anderle, Judge Presiding MARCIA SCULLY(Bar No.80648) HEATHERC. BEATTY(Bar No. 161907) The Metropolitan Water District of Southern California 700 N. Alameda Street, Los Angeles, CA 90012 Telephone:(213) 217-6834, Fax: (213) 217-6890 E-mail: mscully@mwdh20.com, hbeatty@mwdh20.com Attorneys for The Metropolitan Water District of Southern California INTRODUCTION The Court has granted review to determine whether a groundwater pumping charge violates Proposition 218 or Proposition 26. As the Court’s question suggests, each Proposition is separate and distinct. Thus, whether a charge is subject to Proposition 26 must be analyzed pursuantto the specifically applicable standard of that Proposition, and not the separate restrictions of Proposition 218. Specifically, Proposition 218 requires that certain property-related fees and charges be both limited to the charging agencies’ reasonable cost of providing related services and limited to the proportional cost of providingrelated services and benefits to payors. By contrast, three of Proposition 26’s exemptions remove from the definition of “taxes” covered by Proposition 26 certain government-imposed levies to the extent they do not exceed the reasonable cost of the agency's related activities. These exemptions contain no standard based on the proportional cost of providing services and benefits to individual payors. Yet, the standards of each Proposition are often confused and misapplied, which is highlighted in the briefing in this case. However, the Court of Appealin the present case correctly limited its Proposition 26 exemption analysis to the “reasonable cost” standard, without reference or | application of Proposition 218’s proportional cost standards. (City of Buenaventura v. United Water Conservation Dist. (2015) 235 Cal.App.4th 228, 254-255, citing Cal. Farm Bureau Fed’n v. State Water Res. Control Bd. (2011) 51 Cal.4th 421, 438.) Metropolitan respectfully requests that the Court affirm that distinction to provide much neededclarification and guidanceparticularly for water service providers whose services and charges vary significantly and who, like Metropolitan, may face challenges to their rates under varying and often inconsistent theories. BACKGROUND OF THE PROPOSITIONS Although Proposition 26 is the latest of a numberofvoterinitiatives on taxes since Proposition 13 was passed in 1978, each initiative was passed for a specific purpose. The requirements of these voter initiatives are not simply interchangeable with the other. The applicability of each depends upon the type of exaction governed. California voters passed Proposition 13 in 1978, which addedarticle XIII A to the California Constitution and imposed limitations upon taxes and assessments on real property, and a two-thirds voting requirement on State and local taxes relating to real property. (See Schmeer v. County of Los Angeles (2013) 213 Cal.App.4th 1310, 1317; see also Amador Valley Joint Union High Sch. Dist. v. State Bd. ofEqualization (1978) 22 Cal.3d 208, 218.) This Court explained in Amador,that the various new requirements resulting from Proposition 13 “formed ‘an interlocking package’ with the purposeofproviding effective real propertytax relief.” (Schmeer, supra, 213 Cal.App.4th at 1317, emphasis added, quoting Amador, supra, 22 Cal.3d at 220.) Thus, this Court concluded general taxes and special assessments were notspecial taxes subject to the Proposition 13 voting requirement. (See City and County ofSan Francisco v. Farrell (1982) 32 Cal.3d 47, 57; see also Knox v. City ofOrland, (1992) 4 Cal.4th 132, 141-145, superseded on other groundsby Cal. Const.’ art. XIII D, § 6, subd. (b)(5).) In response, California voters passed Proposition 218 in 1996 adding Articles XIII C and XIII D to the California Constitution to add express voting requirements andlimitations similar to Proposition 13 to “assessments, fees, and charges relating to real property.” (See Schmeer, supra, 213 Cal.App.4th at 1319-1320, citing Apartment Assn. ofLos Angeles County, Inc. v. City ofLos Angeles (2007) 24 Cal.4th 830, 837.) The voters through Proposition 218 expressly imposed a liberal interpretation mandate in favor or ratepayers, which they had not previously done in Proposition 13. (Silicon Valley Taxpayers’ Assn., Inc.v. Santa Clara County Open Space Authority (2008) 44 Cal.4th 431, 448, [noting Proposition 218 specifically states “[t]he provisions ofthis act shall be liberally construed to effectuate its purposes of limiting local government revenue and enhancing taxpayer consent.”]; see also Prop. 218 Ballot Pamp., Gen. Elec., Nov. 5, 1996, text of Prop. 218, § 5, p. 109; see, 3 All referencesto articles are to articles of the California Constitution, unless otherwisestated. Historical Notes, 2A West’s Ann. Const. (2008 supp.) foll. art. XIII C,p. p. 85, available at http://vigarchive.sos.ca.gov/1996/general/ pamphlet/218.htm.) In Sinclair Paint Co. v. State Bd. ofEqualization (1997) 15 Cal.4th 866, this Court held regulatory fees not exceeding the “reasonable cost” of providing the service for which the regulatory fees are charged are not “special taxes” subject to the voting requirements of Proposition 13 or 218; they serve a regulatory purposeandrepresent an exercise of an agency's police power, ratherthanits taxing power. (/d. at p. 876.) This decision wasfollowed by extensive disagreement over what constituted a “regulatory fee” unlimited by Constitutional amendments, and what constituted a “special tax” subject to a two-thirds voting requirement, which becamethe subject of subsequentdisputes in different contexts. (See, e.g., Barratt American, Inc. v. City ofRancho Cucamonga (2005) 37 Cal.4th 685, 700-701 [surplus building permit was not regulatory fee or a tax]; In re Attorney Discipline System (1998) 19 Cal.4th 582 [regulatory fee imposed uponattorneys for the purpose of supporting an attorney discipline system wasa regulatory fee and nota tax].) Then, in 2010, the voters passed Proposition 26. "[L]argely a response to Sinclair" and subsequentcasesrelating to the distinction between regulatory fees and taxes, Proposition 26 was enacted“to close perceived loopholesin Proposition 13 and 218”. (Schmeer, supra, 213 Cal.App.4th at 1322, petition for review denied, 2013 Cal. LEXIS 4326, May 15, 2013.) Proposition 26 addedto the California Constitution the first affirmative definition of “taxes” for state and local governments. The new definition of local taxes at Article XIII C, Section (1)(e) is broadly written to define local taxes as: “any levy, charge, or exaction of any kind imposedby a local government,” excepting levies, charges, or exactions that fall into seven categories listed therein (the seven exemptions). (Art. XIII C, §1, subd.(e).) Asthe text of Proposition 26 states, Proposition 26 was adopted to address a myriad oftaxes paid by individuals and businesses and to ensure general revenue-raising taxes “disguised” as “fees” are subject to the existing voting requirements. (Prop. 26 Ballot Pamp., Gen. Elec., Nov.2, _ 2010, text of Proposition 26, §1, subd. (c)-(e), p. 114, available at http://voterguide.sos.ca.gov/past/2010/general/propositions/26/index.htm) As the Legislative Analyst explained, “[g]enerally, the types of fees and charges that would becometaxes under the measureare onesthat government imposesto address health, environmental, or other societal or economic concerns.” (/d. at Analysis by the Legislative Analyst, p. 3 of 5.) “This is because these fees pay for manyservices that benefit the public broadly, rather than providing services directly to the fee payer.” (bid., emphasis added.) In other words, Proposition 26 does not cover payor- specific charges. The Analyst explained to voters that the measure “would not affect most user fees, property development charges, and property assessments.” (/bid.) As the proponents of Proposition 26 argued, they intended to address “hidden taxes” (fees intended to collect general revenue) and leave unaffected “legitimate fees” charged in exchangefor a service, benefit, or imposed for regulatory purpose or in response to wrongdoing. (Prop. 26 Ballot Pamp. supra, arguments in favorat p. 60.) Notably, Proposition 26 does not contain the “liberal construction” language the voters included in Proposition 218 andinsteadits legislative history contains language expressly directing that the exempted charges remain unaffected. (See Prop. 26 Ballot Pamp., supra, legislative analysis, p. 58; cf Prop. 218 Ballot Pamp., supra, text of Proposition 218, p. 109.) ARGUMENT I. PROPOSITION 26 DOES NOT INCORPORATEINTO ITS EXEMPTIONS THE PROPORTIONAL COST REQUIREMENTOF PROPOSITION 218 Both Article XIII C (Proposition 26) and Article XIII D (Proposition 218) contain language referencing a “cost” standard. However, the cost standard of Article XIII C, subdivision (e)’s first three exemptionsare not one and the samewith those of Article XIII D. The voters added each of the “cost” standards for different purposes, which should be effectuated by the courts. A. Proposition 218 Requires Proportional Cost ANocation Asrelevant here, Proposition 218 added Article XIII D to the California Constitution, establishing voting requirements andlimitations on exactions imposed directly or indirectly on real property (through assessments and property-related fees). (Silicon, supra, 44 Cal.4th 437.) Article XIII D specifically addresses exactions having a direct relationship to the property upon which the exaction is imposed. (Art. XIII D, §§4-6.) Assessments and property-related fees covered by Article XIII D relate to governmentservices or benefits that are typically directly related to a particular parcel or property. (Silicon, supra, 44 Cal.4th at 437.) Although the specific substantive cost allocation and limitations differ between assessments and property-related fees, Article XHI D consistently requires cost allocation proportional to specific parcels. (See, art. XIII D, §4, subd. (a) and §6, subd. (b)(3).) Asit relates specifically to property-related fees, Article XIII D provides, "The amountofa fee or charge imposed upon anyparcel or person as an incident of property ownership shall not exceed the proportionalcost of the serviceattributable to the parcel." (Article XIII D, § 6, subd. (b)(3).) While Article XII] D refers to "the parcel," courts have consistently acknowledged that charges may be imposed uniformlyacross a group of reasonably similar payors. (See Capistrano Taxpayers Ass’n, Inc. v. City ofSan Juan Capistrano (2015) 235 Cal.App.4th 1493, 1502; Griffith y. Pajaro Valley Water Mgmt. Agency [“Griffith v. Pajaro”] (2013) 220 Cal. App. 4th 586, 601 .) It is clear from the plain language of Article XIII D thatthe standard set forth therein is a real property-specific standard. The proportionality imposed by Article XIII D, or Proposition 218, has a purpose founded in real property and otherspecifically identifiable property rights. Consistently, this Court has explained that the required proportionality for Proposition 218 is determined by reference to particular properties or parcels. (Silicon, supra, 44 Cal.4th at 443; see also Ventura Group Ventures v. Ventura Port Dist. (2001) 24 Cal.4th 1089, 1106.) No similar proportionality language or reference to real property appears in the exemptions to Proposition 26 at Article XIII C, Section (1)(e), and none should be incorporated in the absence of evidence ofthe voters’ intent to do sO. B. The Applicability of the Exemptions to Proposition 26 at Subdivision (e)(1) Through (e)(3) Is Determined Pursuant To A “Reasonable Cost” Standard. Proposition 26 addedthe first constitutional definition of local “taxes” to Article XIII C’ in orderto ensurethat existing requirements for voter approval of taxes applied to so-called “hidden taxes” that voters believed had incorrectly beentreated as “regulatory fees.” (Prop. 26 Ballot Pamp., supra, Leg. Analyst at p. 58.) All other exactions, the voters were told, “are not affected” as they are “legitimate [government] fees” expressly exempt from Proposition 26. (/bid.; see also argumentsin favor, at p. 60; see also art. XIII C, §1, subd. (e)(1)-(7).) Each of those legitimate fees is exempted by an expressprovision that “repeat[s] nearly verbatim the languageofprior cases assessing” those types of charges. (/d.; see also Griffith v. City ofSanta Cruz (2012) 207 Cal.App.4th 892, 996 (Griffith v. City ofSanta Cruz) [noting the exemption for regulatory fees repeats the legal standard applied prior to Proposition 26].) Moreover, only three of the exemptions contain any cost standard. (Art. XIII C, §1, subd. (e)(1)- (3).) The first three exemptionsat (e)(1) through (e)(3) are for charges imposed for benefits, services, or regulatory government functions, so /ong as the charges do not exceed the “reasonable cost” to the government of providing that benefit, service, or regulatory function to the payor. (Jbid., emphasis added). This reasonableness standard has been the subject of dispute and confusion. * This Amicus Brief focuses solely on the applicability of Proposition 26 to local charges, pursuant to Article XIII C, and not to state taxes, addressed at Article XIII A. Neither these cost-limited exemptions norany of the other exemptionsin Proposition 26 incorporate Proposition 218’s “proportional” cost restrictions. (Compare Art. XIII C, § 1, subd. (e)(1), with Art. XIII D, s 6, subd. (b)(3).) Instead, only the “reasonable cost” standard set forth in Proposition 26’s plain language, which existed in commonlaw priorto the passage of Proposition 26, carries over. (See, e.g., Griffith v. City ofSanta Cruz, supra, 207 Cal.App.4th at 996 [noting the language in Proposition 26 regulatory exception “repeats nearly verbatim the languageofprior cases assessing whether a purported regulatory fee was indeeda fee or a special tax.”].) Indeed, that is what the Court of Appeal concludedinthis case, citing this Court’s Cal. Farm Bureau Fed’n v. State Water Res. Control Bd. decision, when it applied the Proposition 26 payor-specific exemptions. (Buenaventura, supra, 235 Cal.App.4th at 254-255, citing Cal. Farm Bureau, supra, 51 Cal.4th at 438.) This conclusionis also consistent with the relevant legislative history. (See Silicon, supra, 44 Cal.4th at 444-445 [holding ballot materials are relevant to prove voter intent].) The Legislative Analyst explained to the voters “there has been disagreement regarding the difference between regulatory fees and taxes, particularly when the moneyis raised to payfor a program ofbroadpublic benefit.” (Prop. 26 Ballot Pamp., supra, Leg. Analysis, p. 58 [emph. added].) The Legislative Analyst explained that Proposition 26 would expandthe definition of “taxes to include fees that 10 “pay for manyservices that benefit the public broadly, rather than providing services directly to the fee payer.” (/bid.) Those fees that pay for benefits or services provided directly to the fee payer, or associated with the fee payer directly, the Legislative Analyst explained, would not be affected. (/bid.) Similar representations were made by the proponents of the Proposition. (See Prop. 26 Ballot Pamp., supra, argumentsin favorat p 60.) Clearly, the objective of Proposition 26 was to ensure non-payor- specific fees imposed for general revenue raising purposes would be subject to the two-thirds voting requirements. Payor-specific charges, however, would be exempted, with three of the exemptions containing a broader “reasonable cost” standard as previously applied by this Court. Il. THE “REASONABLE COST” STANDARDIN PROPOSITION 26’S EXEMPTIONS INVOLVES THE OVERALL COST OF THE RELATED GOVERNMENTACTIVITY This Court has recently explained that a “reasonable cost” standard refers to the overall cost of related governmentactivities, not to the cost of providing services or benefits to individual payors. (Cal. Farm Bureau, supra, 51 Cal.4th at 438.) "A regulatory fee does not becomea tax simply because the fee may be disproportionate to the service rendered to individual payors." (/bid., citing Brydon v. East Bay Mun. Utility Dist. (1994) 24 Cal.App.4th 178, 194.) "The question of proportionality is not 1] measured on an individual basis. Rather, it is measured collectively, considering all rate payors." (/bid., citing California Assn. ofProf. Scientists v. Department ofFish & Game (2000) 79 Cal.App.4th 935, 948.) Thus, permissible fees must berelated to the overall cost of the governmental! regulation. They need notbefinely calibrated to the precise benefit each individual fee payor might derive. Whata fee cannot do is exceed the reasonable cost of regulation with the generated surplus used for general revenue collection. An excessive fee that is used to general revenue becomesa tax. (lbid.) While Cal. Farm Bureau did not apply Proposition 26—the underlying dispute predated the proposition's enactment—the “reasonable cost” standard referenced in Proposition 26’s first three exemptionsis intended to apply to exempted charges in the same waythat prior case law applied it. (See, e.g., Griffith v. Santa Cruz, supra, 207 Cal.App.4th at 905 [noting language of exemption for regulatory fees is “nearly identical” to languageestablished in case law prior to the passage of Proposition 26].) While voters were clear that fees unrelated to the services, benefits, or regulatory charges providedto the payor could no longertreated as payor- specific charges, they did not intend to change the standards governing legitimate payor-specific charges. To ensure that legitimate government charges continue to serve the purposethey served prior to Proposition 26, the Court should clarify that 12 the collective “reasonable cost” standard of Proposition 26’s first three exemptions continues to apply andthat the stricter proportionality standard of Proposition 218 does not apply. I. EVEN IF THE COST ALLOCATION STANDARDSOF PROPOSITION 218 WERE INCORPORATEDINTO PROPOSITION 26’S EXEMPTIONS, INDIVIDUAL RATEPAYER COST ALLOCATIONIS NOT REQUIRED Courts have recently held the cost proportionality required by Proposition 218 can be achieved by “grouping similar users together for the same augmentation rate and charging the users according to usage ... .” (Griffith v. Pajaro, supra, 220 Cal.App.4th at 601.) Customerclass allocation methodology, the Sixth District held, “is a reasonable way to apportion the cost of service” required by Article XIII D. (/d.) Therefore, even if one could reasonably interpret the cost standard in Proposition 26’s first three exemptions as merely an incorporation of the Proposition 218 proportionality requirements,it is clear individual ratepayer allocations are not required. If customerclassification serves to meet the proportional cost allocation requirements of Proposition 218, it must also serve to meet the less specific reasonable cost standard in the Proposition 26 exemptionsat (e)(1) through (e)(3). In Griffith v. Parajo, supra, the Sixth District of the Court of Appeal. held the defendant district’s method ofallocating a groundwater pumping 13 fee (the augmentation charge in that case) met the requirements of Article XIII D,section 6(b). (Griffith v. Pajaro, supra, 220 Cal.App.4th at 600- 601, review denied Jan. 21, 2014.) The plaintiff argued the amountofthe augmentation charge imposedonhis parcel by the defendantdistrict was disproportionate, becauseplaintiff did not use the specific service the charge wasintended to fund. The court rejected the strict proportionality requirements the plaintiff read into Article XIII D. The court in Griffith v. Pajaro, supra, held that the proportionality requirements of Article XIII D do not prohibit setting rates by (1) setting revenue requirements and deductingall other sources of revenue (“working backwards” from revenueneeds, or (2) grouping similar users together for the same [water] rate and charging the users according to usage.” (Jd.at 601.) Proposition 218, the court clarified does not compela “parcel-by- parcel proportionality analysis, because: Apportionmentis not a determination that lends itself to precise calculation. (White v. County of San Diego (1980) 26 Cal.3d 897, 903.) ... “The question of proportionality is not measured on an individual basis. Rather, it is measured collectively, considering all rate payors.” (California Farm Bureau Federation v. State Water Resources Control Bd. (2011) 51 Cal.4" 421, 438.) Given that Proposition 218 prescribes no particular method for apportioning a fee or charge other than that the amount shall not 14 exceed the proportional cost of the service attributable to the parcel, defendant's method of grouping similar users together for the same augmentation rate and charging the users according to usage is a reasonable wayto apportion the cost of service. That there may be other methods favoredby plaintiffs does not render defendant's method unconstitutional. Proposition 218 does not require a more finely calibrated apportion. (/d.) Therefore, whetherthe plaintiff in Griffith v. Pajaro specifically used or benefitted from a particular project was not the relevant question for proportionality. Instead, the proper question is whether his property had been properly classified with similar users. See, [bid. Morerecently, the Fourth District of the Court of Appeal similarly held the proportional cost allocation requirement of Article XIII D permits a holistic approachto rate-setting. (Capistrano Taxpayers Ass’n, Inc. v. City ofSan Juan Capistrano (2015) 235 Cal.App.4th 1493, 1502.) There, the Court of Appeal concluded that a city mayallocate the costs of recycled waterservices and projects to all of its water customers, even though they do notall use the specific service. (/bid.) The court reasonedthat delivery of recycled services to one group of customers benefitted the other customers by reducing demandon the potable water system. Thus, given the history of charges imposed for regulatory and other payor-specific governmentservices, it would be unreasonableto apply a stricter cost allocation standard in the exemptions to Proposition 26 at 15 (e)(1) through (e)(3) than applies to the per-parcel proportionality provisions of Proposition 218. CONCLUSION Forall these reasons, Metropolitan respectfully requests that the Court affirm the lower court’s application of the Cal. Farm Bureau collective, reasonable cost standard to the exemptions of Proposition 26, which expressly contain a reasonableness standard. (Art. XIII C, §1, subd. (1)-(3).) Metropolitan further requests that the Court clarify the distinction between the cost standard in the exemptions to Proposition 26, versus the requirements of Proposition 218, to reflect the distinct issues intended to be addressed bythe voters. November 18, 2015 Respectfully submitted, MARCIA SCULLY HEATHER C. BEATTY By: ALenthn Cewt Heather C. Beatty The Metropolitan Water District of Southern California 700 N. Alameda Street Los Angeles, CA 90012 Telephone:(213) 217-6834 Fax: (213) 217-6890 E-mail: hbeatty@mwdh2o0.com Attorneys for Amicus Curiae The Metropolitan Water District of Southern California 16 CERTIFICATE OF WORD COUNT The text ofAPPLICATION FOR PERMISSION BY THE METROPOLITAN WATERDISTRICT OF SOUTHERN CALIFORNIA TO FILE A BRIEF AS AMICUS CURIAE AND PROPOSEDBRIEFconsists of 3,424 words (including footnotes but excluding the table of contents, the table of authorities, and certificates) as counted by Microsoft Word 2010 word-processing program. Dated: November 18, 2015 Jktvdtrvr ©. “Ye otf HeatherC.Beatty The Metropolitan Water District of Southern California 700 N. Alameda Street Los Angeles, CA 90012 Telephone: (213) 217-6834 Fax: (213) 217-6890 E-mail: hbeatty@mwdh2o0.com CERTIFICATE OF SERVICE I hereby certify that I am a citizen of the United States, over the age of 18 years, with business address at 700 North AlamedaStreet, Los Angeles, California and am neither a party nor interested in the within action. On November 18, 2015, in Los Angeles, California, I caused to be served the following: APPLICATION BY THE METROPOLITAN WATERDISTRICT OF SOUTHERN CALIFORNIA TO FILE A BRIEF AS AMICUS CURIAE AND PROPOSED BRIEF Xx OVERNIGHT MAIL:I caused such true copy of the above documentto be delivered to UPS for overnight courier service to the office of the party as set forth below: SEE ATTACHED SERVICE LIST x I hereby certify that the document(s) listed above was / were produced on paper purchased asrecycled. xX I declare under penalty of perjury underthe lawsofthe State of California that the foregoing is true and correct. Dated: November 18, 2015 SORIOGINA SERVICE LIST Michael G. Colantuono David J. Ruderman MeganS. Knize Colantuono, Highsmith & Whatley, PC 300 S. Grand Avenue, Suite 2700 Los Angeles, CA 90071-3137 City ofSan Buenaventura: Respondent and Cross-Appellant Anthony H. Trembley Jane E. Usher Musick Peeler & Garrett LLP 2801 Townsgate Road, Suite 200 Westlake Village, CA 91361 United Water Conservation District: Defendant and Appellant Gregory G.Diaz Assistant General Attorney City of San Buenaventura P.O. Box 99 Ventura, CA 93002-0099 City ofSan Buenaventura: Cross- Appellant and Respondent Dennis LaRochelle Susan L. McCarthy John M. Mathews Arnold Bleuel LaRochelle,et al. 300 Esplanade Drive, Suite 2100 Oxnard, CA 93036 Pleasant Valley County Water District: Intervener Clerk of the CourtCo Santa Barbara Superior Court 1100 AnacapaStreet Santa Barbara, CA 93121-1107 Clerk of the Court Court of Appeal Second District, Division 6 200 East Santa Clara Street Ventura, CA 93001 Office of the Attorney General1300 I StreetSacramento, CA 95814-2919 Clerk of the California SupremeCourt350 McAllister StreetSan Francisco, CA 94102-7303Filed electronically and served viaovernight delivery, 8 copies (CRC8.25(b)(3))