HomeMy WebLinkAbout05.b.2) Letter from District Counsel555 12th Street, Suite 1500
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Kenton L. Alm 5
Attorney at Law
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kalm @meyersnave.com
DATE: May 14, 2015
TO: Board of Directors
Central Contra Costa Sanitary District
FROM: Kenton L. Alm, District Counsel
RE: Report on Capistrano Taxpayers Ass'n, Inc. v. City of San Juan Capistrano
Appellate Decision filed April 20, 2015
Proposition 218 Decision on Use of Tiered Water Rates
I. Holding of Case.
Tiered "conservation" water rate structures that charge less per unit of usage for low usage
customers and more per unit for higher use customers are not easily justified under
Proposition 218. To be sustained, the higher cost per unit must be justified by a showing of
higher costs per unit for service to the higher user classification. The Court held that the City
Water Agency had failed to carry the burden imposed on it by Proposition 218 of showing that
the per unit charges for the higher use tier did not exceed the cost of service attributable to users
within that tier.
II. Brief Discussion.
Since the District does not have any tiered rate structure for District services that is similar to the
rate structure analyzed in this case, the precise holding of the case does not directly affect the
District's current or proposed rate structures. The importance of this case to sanitation agencies is
primarily to reinforce the realization that courts are now consistently applying the "cost for
services" principles of Proposition 218 rather rigidly. This Court applied the cost of service
requirement even when there exists a competing public interest principle found in Article X,
Section 2 of the Constitution that declares that conservation of water is to be exercised throughout
the State. This Court again emphasizes that Proposition 218 requires the public agency to bear
the burden of demonstrating the appropriate allocation of costs among various classes of users.
The Court also dismissed the City's argument that the higher per unit charges for the higher use
water users tier was merely a penalty and therefore not controlled by the cost of service
provisions in Proposition 218. The Court suggested that the City's "penalty rate theory is
inconsistent with the Constitution" and would open a loophole so large that it "would virtually
repeal it (Proposition 218) ".
The Court was in fact sympathetic to the City's attempt to institute a structure that was aimed at
water conservation. The Court noted that tiered structures with higher costs for higher user tiers
could in fact be sustainable under Proposition 218, but their record would need to demonstrate
that in fact the costs per unit for that tier are greater than for lower tiers. For instance, the cost of
obtaining new water supplies required to provide the additional water desired by the higher use
tiers could provide a basis for such a tiered rate structure.