On December 4 2017 the California Supreme Court, in City of San Buenaventura v United Water Conservation Dist, ruled that the charges that the city of Ventura pays to the United Water Conservation District for groundwater conservation activities are neither taxes nor fees that require approval by property owners or vote.

In California, water districts are responsible for managing, protecting, conserving and enhancing water resources in the most cost-effective and environmentally balanced manner. In some groundwater basins, users often use more water than is replaced by natural processes, including rainfall and river and stream flow. To address this, districts replenish groundwater supply by diverting water from other sources and spreading it over the ground covering certain basins within district boundaries. To reduce the demand for groundwater extraction, districts may also provide pipeline deliveries of water derived from other sources. These activities are financed by a groundwater charge.

Ventura pumps large quantities of groundwater for delivery to residential customers and had been paying groundwater charges to the district. Ventura argued that the groundwater pumping charges it was paying to the water conservation district were disproportionate to the benefits that it received from the district's conservation activities. The California Constitution provides that a charge imposed as an incident of property ownership, including a charge for a property-related service, may not exceed the proportional cost of the service that is attributable to the parcel on which the charge is imposed. The Constitution also provides that local government charges that are taxes generally must be approved by voters. Believing its payment was disproportionate and amounted to an unapproved tax, the city sued the district. Ruling for the district, the Supreme Court held that because the charges were not for property-related services, they did not require approval either by property owners or two-thirds of area voters.

As these fees ultimately get included in the charges that a property owner pays for water supply, this decision limits to some degree the ability of the municipal water supplier to set rates for water service and will have an effect on both agricultural and residential water users.

For further information on this topic please contact Samuel B Boxerman, Terence T Healey or Kenneth W Irvin at Sidley Austin LLP office by telephone (+1 202 736 8000) or email (sboxerman@sidley.com, thealey@sidley.com or kirvin@sidley.com). The Sidley Austin LLP website can be accessed at www.sidley.com.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.