• Land Use Attorney Capitola

CASE UPDATE: Court Rules That Tiered Water Rates Must Be Based On Actual Usage and Costs Of Providing Services.

In Capistrano Taxpayers Assoc., Inc. v. City of San Juan Capistrano, (2015) 2015 WL 1798898, the court of appeal struck down a city water provider’s rate structure as violating Proposition 218.  Prop. 218, the Right to Vote on Taxes Act, was intended to limit the methods by which local governments exact revenue from taxpayers without their consent.  Among other things, Prop. 218 requires that fees and assessments imposed by local government agencies against property owners in order to pay for public services must be correlated with the actual, proportional costs of providing those services to a parcel.

If there is no such correlation, or “nexus,” then the fee or assessment is considered a tax, which must be approved by the voters.  The relevant language from Prop. 218, contained in California Constitution  Article XIII D, section 6, subdivision (b)(1), Requirements for Existing, New or Increased Fees and Charges, provides that:

A fee or charge shall not be extended, imposed, or increased by any  agency unless it meets all of the following requirements: [¶] (1) Revenues derived from the fee or charge shall not exceed the funds required to provide the property related service. [¶] … [¶] (3) The amount of a fee or charge imposed upon any parcel or person as an incident of property ownership shall not exceed the proportional cost of the service attributable to the parcel.

In this case, the City used a four-tiered rate structure; each tier represented an increasingly large volume of water used, and the rate (cost per gallon) also increased with each tier, so that conservers paid much less per gallon than did those who consumed more.  The court struck down this fee structure because it was not based on any calculation of the City’s actual costs of providing water at various levels of usage and because the City did not even attempt to correlate rates with costs of service.

©2015 Miles J. Dolinger. This article is not intended to and does not constitute legal advice or a solicitation for the formation of an attorney-client relationship.

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Miles J. Dolinger
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