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February 4, 2014  |  Written by Alexis K. Stevens

Unpublished Opinion from the Fourth District Addresses Proposition 218 Fee Protest Procedures for Water Rate Increases Involving Multiple Classes of Customers

In an unpublished opinion, the Fourth District Court of Appeal has held that a public agency does not need to conduct a separate fee protest election for each different rate class the agency seeks to impose.  Rather, an agency may conduct a single omnibus protest election for all classes subject to the fee increase.  While the decision in Morgan v. Imperial Irrigation District, No. D061087, 2014 Cal. App. Unpub. Lexis 333 (January 17, 2014) (Morgan) is currently unpublished, it is expected that publication will be requested by one or more agencies in the near future so that the court’s opinion can be relied upon by public agencies defending themselves against Proposition 218 challenges.

In 2008, the Imperial Irrigation District (District) conducted a cost of service study (study) to analyze the costs of providing water service to its customers.  The District charges various rates depending on its customers’ use of the water (e.g., agricultural, municipal, industrial, and residential).  The District explained the study in a workshop in 2009 and provided notice of a proposed rate increase to all affected customers.  The notice explained that customers had the right to protest the increases, explained the protest procedures, and included a protest form.  The District received protests representing 40.47 percent of fields counted under a canal-gate-field method and 31.25 percent counted under a legal parcel method.  Under either method, the protests did not pass the 50 percent threshold required to prevent the imposition of the increased fees.

The Imperial County Farm Bureau (Farm Bureau) and several individual landowners filed suit alleging that the District improperly counted the protests.  The Farm Bureau and landowners argued that the District was required to conduct a separate protest election for each different rate class the District sought to impose.  The trial court disagreed and the Fourth District Court of Appeal affirmed.

The Court of Appeal found that nothing in section 6 of Article XIII D of the California Constitution requires an agency to hold “individual protest elections” for “similarly situated citizens.”  The court contrasted section 6 with section 4 of Article XIII D of the California Constitution, which deals with assessments.  Section 4 specifically requires that agencies weigh each landowner’s vote in proportion to the assessment amount to be paid by the landowner.  In light of this, the court found the omission of proportional vote weighing from section 6 “telling” and concluded that “in the context of fees, each parcel owner receives one vote weighted the same regardless of the proportional amount he or she must pay.”  Morgan, 2014 Cal. App. Unpub. LEXIS 333 at *29.  Additionally, the court noted its concern that if the position of the Farm Bureau were adopted, a minority of landowners could effectively veto an entire rate plan, creating an “unworkable system” and frustrating the purpose of section 6.  The court therefore found that the protest procedure used by the District did not violate the procedural or substantive requirements of section 6 of the California Constitution.

For more information, please contact Alexis K. Stevens at (916) 446-7979 or by email atastevens@somachlaw.com.

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