An appellate court Monday struck down a Southern California city’s method of charging water users based on a tiered-rate system, a potential setback to municipalities across a parched state laboring to curtail water consumption under Gov. Jerry Brown’s recent order.
“The practical effect of the court’s decision is to put a straitjacket on local government at a time when maximum flexibility is needed,” Brown said in a prepared statement. “My policy is and will continue to be: Employ every method possible to ensure water is conserved across California.”
Amid four years of drought, Brown earlier this month ordered the State Water Resources Control Board to direct urban water suppliers to develop rate structures and other pricing mechanisms, including surcharges, fees and penalties, to maximize water conservation. The state water board is requiring individual districts to reduce water use by 4 percent to 36 percent less than 2013 levels. A spokesman for the board said the agency was reviewing the ruling and did not have a comment.
In the 28-page ruling, the 4th District Court of Appeal ruled that while tiered rates that rise incrementally based on a customer’s usage are “perfectly consonant” with the law, the tiers still must correspond to the cost of delivering the service. The case involved San Juan Capistrano, in southern Orange County.
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“The water agency here did not try to calculate the cost of actually providing water at its various tier levels,” the three-judge court wrote in the unanimous ruling. “It merely allocated all its costs among the price tier levels, based not on costs, but on predetermined usage budgets.”
Tim Quinn, executive director of the Association of California Water Agencies, called the ruling a potentially major blow to water conservation efforts in California. Quinn said two-thirds of urban water agencies in the state use some form of tiered or block pricing, mainly as a way of encouraging users to refrain from overusing water. He said attorneys are reviewing the ruling to determine its implications.
“We are very concerned,” Quinn said, adding that his agency is taking a deeper look at the ruling. “My gut tells me it is a serious problem.”
Benjamin Benumof, an attorney for taxpayer advocates who filed the lawsuit, disagreed, contending that promoting savings and meeting the court’s standards are not at odds with each other.
“The court simply invalidated ‘arbitrary’ tiered rates,” he said.
Government has many tools at its disposal to promote savings, including further increasing rebate programs for low-flow appliances and turf removal, Benumof said.
“There are lots of ways to conserve, and if anything, (the ruling) provides a better road map for governments to become compliant and have a real conservation program that attains real conservation goals,” he said.
Many Sacramento-area water agencies use a tiered pricing system, including Placer County, Roseville, West Sacramento, Folsom, San Juan and Sacramento Suburban. Ross Branch, spokesman for the Placer County Water Agency, which provides water for most of the county, said his agency officials also will be reviewing the court opinion. “We have to let the dust settle. It just came out,” he said.
In 2010 – before drought gripped the state – San Juan Capistrano established a tiered system to charge heavy users nearly four times more per unit than their lower-usage neighbors were made to pay.
The Capistrano Taxpayers Association sued, saying it violated Proposition 218, a 1996 ballot measure stating that a city cannot impose fees for services that exceed the actual cost. The Superior Court in Orange County sided with the taxpayers in August 2013 and found the tiered water rate structure unconstitutional, and the city amended its rates and brought them closer to the cost of water.
In the appellate ruling, the justices said the trial court correctly determined that the water agency failed to carry the burden imposed by Proposition 218. Benumof said his clients are “very reasonable ... and wanting to move on. We don’t anticipate any further challenge to the city’s rates at this point,” he said.
Still, it’s unclear how the ruling will be interpreted elsewhere. Neither the voters, nor the Constitution, say anything that would prohibit tiered pricing, Judge William Bedsworth wrote in the opinion. He added: “But the tiers must be based on usage, not budgets.”
San Juan Capistrano officials stressed in a statement that the Court of Appeal returned the matter to the trial court for further litigation, specifically stating that there was not yet a “prevailing party” in the case. A spokesman said he could not comment on whether the city plans to appeal.
“City officials are analyzing the ruling and the City Council will consider the city’s options shortly,” the statement said.
Attorney Kelly Salt, with Best Best & Krieger in San Diego, said the ruling appears to be narrow enough that it could allow some agencies to maintain tiered pricing. Salt filed an amicus brief in the case for the California State Association of Counties, League of California Cities and Association of California Water Agencies.
She said the court ruled that the city of San Juan Capistrano did not do enough to show that its pricing structure is based on the cost to the the city to provide water, but some other water agencies may feel that they can show, if challenged, their pricing structure meets Proposition 218’s “nexus” requirements.
“It’s hard to say at this point,” she said. “The court didn’t provide a great deal of guidance.”
“Many water agencies may feel they already meet the standard stated in the court’s opinion. Others may want to take a second look” at their pricing structure, she said. Salt added: “It is unfortunate that this decision came down during the worst drought in California history.”
Call Christopher Cadelago, Bee Capitol Bureau, (916) 326-5538. Follow him on Twitter @ccadelago.