Articles XIIIC and XIIID of the California Constitution generally require that assessments, fees, and charges be submitted to property owners for approval or rejection after the provision of written notice and the holding of a public hearing. Existing law, the Proposition 218 Omnibus Implementation Act, prescribes specific procedures and parameters for local jurisdictions to comply with Articles XIIIC and XIIID of the California Constitution and defines terms for these purposes.

This bill would define the term sewer for these purposes. The bill would also make findings and declarations relating to the definition of the term sewer for these purposes.

Articles XIIIC and XIIID of the California Constitution generally require that assessments, fees, and charges be submitted to property owners for approval or rejection after the provision of written notice and the holding of a public hearing. Existing law, the Proposition 218 Omnibus Implementation Act, prescribes specific procedures and parameters for local jurisdictions to comply with Articles XIIIC and XIIID of the California Constitution and defines terms for these purposes.

This bill would define the term sewer for these purposes. The bill would also make findings and declarations relating to the definition of the term sewer for these purposes.

Articles XIIIC and XIIID of the California Constitution generally require that assessments, fees, and charges be submitted to property owners for approval or rejection after the provision of written notice and the holding of a public hearing. Existing law, the Proposition 218 Omnibus Implementation Act, prescribes specific procedures and parameters for local jurisdictions to comply with Articles XIIIC and XIIID of the California Constitution and defines terms for these purposes.

This bill would define the term sewer for these purposes. The bill would also make findings and declarations relating to the definition of the term sewer for these purposes.

Articles XIIIC and XIIID of the California Constitution generally require that assessments, fees, and charges be submitted to property owners for approval or rejection after the provision of written notice and the holding of a public hearing. Existing law, the Proposition 218 Omnibus Implementation Act, prescribes specific procedures and parameters for local jurisdictions to comply with Articles XIIIC and XIIID of the California Constitution and defines terms for these purposes.

This bill would define the term sewer for these purposes. The bill would also make findings and declarations relating to the definition of the term sewer for these purposes.

SENATE THIRD READING

STR Bill Id:

Author:(Hertzberg)

As Amended Ver:

Majority vote

SENATE VOTE: 23-10

SUMMARY: Defines "sewer" for the purposes of the Proposition 218 Omnibus Implementation Act. Specifically, this bill:

1. Adds a definition for "sewer" to the Proposition 218 Omnibus Implementation Act, that "includes systems, all real estate, fixtures, and personal property owned, controlled, operated, or managed in connection with or to facilitate sewage collection, treatment, or disposition for sanitary or drainage purposes, including lateral and connecting sewers, interceptors, trunk and outfall lines, sanitary sewage treatment or disposal plants or works, drains, conduits, outlets for surface water or storm waters, and any and all other works, property, or structures necessary or convenient for the collection or disposal of sewage, industrial waste, or surface water or storm waters." Prohibits "sewer system" from including a sewer system that merely collects sewage on the property of a single owner.
2. Specifies that the definitions in the Proposition 218 Omnibus Implementation Act shall be read and interpreted in light of the findings and declarations established by this bill.
3. Adds the following findings and declarations:
   1. Proposition 218 was approved by the voters at the November 5, 1996, statewide general election. Some court interpretations of the law have constrained important tools that local governments need to manage storm water and drainage runoff;
   2. Storm waters are carried off in storm sewers, and careful management is necessary to ensure adequate state water supplies, especially during drought, and to reduce pollution. But a court decision has found storm water subject to the voter-approval provisions of Proposition 218 that apply to property-related fees, preventing many important projects from being built;
   3. The court of appeal in Howard Jarvis Taxpayers Ass'n v. City of Salinas (2002) 98 Cal.App.4th 1351 (HJTA v. City of Salinas) concluded that the term "sewer," as used in Proposition 218, is "ambiguous" and declined to use the statutory definition of the term "sewer system," which was part of the then existing law as Section 230.5 of the Public Utilities Code;
   4. The court in HJTA v. City of Salinas failed to follow long-standing principles of statutory construction by disregarding the plain meaning of the term "sewer." Courts have long held that statutory construction rules apply to initiative measures, including in cases that apply specifically to Proposition 218 (see People v. Bustamante (1997) 57 Cal.App.4th 693; Keller v. Chowchilla Water Dist. (2000) 80 Cal.App.4th 1006). When construing statutes, courts look first to the words of the statute, which should be given their usual, ordinary, and commonsense meaning (People v. Mejia (2012) 211 Cal.App.4th 586, 611). The purpose of utilizing the plain meaning of statutory language is to spare the courts the necessity of trying to divine the voters' intent by resorting to secondary or subjective indicators. The court in HJTA v. City of Salinas asserted its belief as to what most voters thought when voting for Proposition 218, but did not cite the voter pamphlet or other accepted sources for determining legislative intent. Instead, the court substituted its own judgment for the judgment of voters;
   5. Proposition 218 exempts sewer and water services from the voter-approval requirement. Sewer and water services are commonly considered to have a broad reach, encompassing the provision of clean water and then addressing the conveyance and treatment of dirty water, whether that water is rendered unclean by coming into contact with sewage or by flowing over the built-out human environment and becoming urban runoff;
   6. Provides numerous sources predating Proposition 218 rejecting the notion that the term "sewer" applies only to sanitary sewers and sanitary sewerage;
   7. Courts have read the Legislature's definition of "water" in the Proposition 218 Omnibus Implementation Act to include related services. In Griffith v. Pajaro Valley Water Management Agency (2013) 220 Cal.App.4th 586, the Court of Appeal concurred with the Legislature's view that "water service means more than just supplying water," based upon the definition of water provided by the Proposition 218 Omnibus Implementation Act, and found that actions necessary to provide water can be funded through fees for water service. Consistent with this decision, "sewer" should be interpreted to include services necessary to collect, treat, or dispose of sewage, industrial waste, or surface or storm waters, and any entity that collects, treats, or disposes of any of these necessarily provides sewer service.
4. Makes additional findings and declarations.

FISCAL EFFECT: None

COMMENTS:

1. Financing Water Infrastructure. Local governments in California provide most water related services in the state which include water service, sewer service, flood control, and storm water management. A Public Policy Institute of California (PPIC) report, Paying for Water in California, outlines four sources of funding currently used for water in California: a) Fees, which include water and waste water bills, property assessments or fees, developer or connection fees, and permitting fees; b) Taxes, which include both general and special taxes, including parcel taxes; c) Fines and penalties, which include excessive pumping on groundwater or directly to customers in violation of rationing restrictions during drought emergencies; and, d) Bonds, which include general obligation and revenue bonds. Local agencies frequently point to the series of constitutional reforms, Proposition 13 (1978), Proposition 218 (1996), and Proposition 26 (2010), that have made it increasingly more difficult to generate the necessary revenue to fund the costs of providing water and other essential services.

Local governments face several barriers to funding for storm water and dry weather runoff projects due to the constitutional requirements for special taxes, benefit assessments, and property-related fees. Many of the local governments that operate MS4 (Municipal Separate Storm System) systems differ from water and wastewater utilities that existed prior to the passage of Proposition 218, which have in place service fees. On the other hand, many storm water programs in cities and counties are funded by the general fund, primarily through property and local sales taxes. As regulatory burdens continue to increase, financially strapped local governments are forced to examine alternative funding mechanisms and regional strategies to address MS4 costs. For example, the costs in Los Angeles County alone are cited to be over $20 billion dollars.

1. Proposition 218. Proposition 218 distinguishes among taxes, assessments, and fees, for property-related revenues, and requires certain actions before such revenues may be collected. Counties and other local agencies with police powers may impose any one of these options on property owners, after completing the Proposition 218 process. Special districts created by statute, however, must have specific authority for each of these revenue sources.

The Constitution defines a fee (or charge) as any levy other than an ad valorem tax, special tax, or assessment that is imposed by a local government on a parcel or on a person as an incident of property ownership, including a user fee for a property-related service. The fee imposed on any parcel or person cannot exceed the proportional cost of the service that is attributable to the parcel. Prior to imposing or increasing a property-related fee, the local government is required to identify the parcels, mail a written notice to all the property owners subject to the fee detailing the amount of the fee, the reason for the fee, and the date, time, and location of a public hearing on the proposed fee. No sooner than 45 days after mailing the notice to property owners, the agency must conduct a public hearing on the proposed fee. If a majority of owners of the identified parcels provide written protests against the fee, it cannot be imposed or increased by the agency.

Additionally, the California Constitution Article XIII D, Section 6, subdivision (c) provides election requirements, "Except for fees or charges for sewer, water, and refuse collection services, no property-related fee or charge shall be imposed or increased unless and until that fee or charge is submitted and approved by a majority vote of the property owners of the property subject to the fee or charge or, at the option of the agency, by a two-thirds vote of the electorate residing in the affected area." The election for the fee is required to be conducted no less than 45 days following the public hearing.

The definition of "water" and "sewer" under the Proposition 218 Omnibus Implementation Act (Act) is significant because the election requirements are on fees for services other than water, sewer, and trash services. Determining the services that fall within the definitions of "water" and "sewer" services has been the subject of litigation. An appellate court decision in HJTA v. City of Salinas (2002) found that a city's charges on developed parcels to fund storm water management were property-related fees, and were not covered by the exemption for sewer or water services. A subsequent appellate court decision in Griffith v. Pajaro Valley Water Management Agency (2013) the court relied on the definition of "water" in Proposition 218 Omnibus Implementation Act narrowly construing an earlier decision in HJTA v. City of Salinas, which did not apply the Act's definitions to a storm water charge dispute. The Griffith decision found that a groundwater augmentation charge is a fee for "water service".

1. Bill Summary. This bill adds a definition for "sewer" to the Act. The definition of "water" and "sewer" under the Act is significant because the election requirements are on fees for services other than water, sewer, and trash services. This bill provides a definition of "sewer" in the Act using the definition of "sewer" from the Public Utilities Code, which includes storm drainage. Additionally, this bill adds a number of findings and declarations to the Act. This bill is sponsored by the Water Foundation.
2. Author's Statement. According to the author, "Storm water is a key source of local water supply, and careful management is necessary now more than ever due to California's cycles of drought and flood. This legislation adds a missing definition of "sewer" to state law, including sewage and storm water, conforming with an existing 25-year-old definition in the California Public Utilities Code and dictionary definitions for sewer water which make no distinctions among types of dirty water — rain water, urban runoff, and sewage. Clarity is needed due to debate among the courts on interpreting "sewer.""
3. Prior Legislation. AB 1362 (Gordon) of 2015, would have provided a definition for "storm water" in the Act. AB 1362 would have only become operative if a constitutional amendment was approved by the voters. The introduced version of AB 1362 was subsequently amended into a different issue area to address mosquito and vector control districts. AB 2403 (Rendon), Chapter 78, Statutes of 2014, expanded the definition of "water" in the Proposition 218 Omnibus Implementation Act. This bill is substantially similar to SB 1298 (Hertzberg) of 2016, which would have added definition of "sewer" but contained fewer findings and declarations.
4. Arguments in Support. The California State Association of Counties, and the Rural County Representatives of California argue, "SB 231 authorizes counties, cities, and local water agencies to finance storm water projects in the same manner as other public works projects under Proposition 218. Counties, cities, and local water agencies throughout California face many cost pressures and funding challenges that affect water, including maintenance of aging infrastructure and requirement to comply with higher regulatory standards. These entities need to fund storm water and flood control projects to protect people and property from flooding, remove pollutants from storm water, and increase groundwater recharge. However, financing these projects is costly and difficult under current law."
5. Arguments in Opposition. Howard Jarvis Taxpayers Association argues, "SB 231 amends the Proposition 218 Omnibus Implementation Act in ways that violate the California Constitution and will only lead to unnecessary litigation and increased costs for ratepayers. Most importantly, SB 231 contravenes the appellate court case of HJTA v. City of Salinas…By including storm water within the definition of a property related fee, SB 231 ensures that voters will be unable to have a say at the ballot box. SB 231 shows contempt for the separation of powers by proposing, in a statute, the same plan that the judiciary has already found unconstitutional."

Analysis Prepared by: Misa Lennox / L. GOV. / (916) 319-3958 FN: 0000994

Date of Hearing: June 14, 2017

ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT

Cecilia Aguiar-Curry, Chair

SBPCA Bill Id:SB 231

Author:(Hertzberg) – As Amended Ver:April 19, 2017

SENATE VOTE: 23-10

SUBJECT: Local government: fees and charges.

SUMMARY: Defines "sewer" for the purposes of the Proposition 218 Omnibus Implementation Act. Specifically, this bill:

1. Adds a definition for "sewer" to the Proposition 218 Omnibus Implementation Act, that "includes systems, all real estate, fixtures, and personal property owned, controlled, operated, or managed in connection with or to facilitate sewage collection, treatment, or disposition for sanitary or drainage purposes, including lateral and connecting sewers, interceptors, trunk and outfall lines, sanitary sewage treatment or disposal plants or works, drains, conduits, outlets for surface water or storm waters, and any and all other works, property, or structures necessary or convenient for the collection or disposal of sewage, industrial waste, or surface water or storm waters." Prohibits "sewer system" from including a sewer system that merely collects sewage on the property of a single owner.
2. Specifies that the definitions in the Proposition 218 Omnibus Implementation Act shall be read and interpreted in light of the findings and declarations established by this bill.
3. Adds the following findings and declarations:
   1. Proposition 218 was approved by the voters at the November 5, 1996, statewide general election. Some court interpretations of the law have constrained important tools that local governments need to manage storm water and drainage runoff;
   2. Storm waters are carried off in storm sewers, and careful management is necessary to ensure adequate state water supplies, especially during drought, and to reduce pollution. But a court decision has found storm water subject to the voter-approval provisions of Proposition 218 that apply to property-related fees, preventing many important projects from being built;
   3. The court of appeal in Howard Jarvis Taxpayers Ass'n v. City of Salinas (2002) 98 Cal.App.4^th 1351 (HJTA v. City of Salinas) concluded that the term "sewer," as used in Proposition 218, is "ambiguous" and declined to use the statutory definition of the term "sewer system," which was part of the then existing law as Section 230.5 of the Public Utilities Code;
   4. The court in HJTA v. City of Salinas failed to follow long-standing principles of statutory construction by disregarding the plain meaning of the term “sewer.” Courts have long held that statutory construction rules apply to initiative measures, including in cases that apply specifically to Proposition 218 (see People v. Bustamante (1997) 57 Cal.App.4th 693; Keller v. Chowchilla Water Dist. (2000) 80 Cal.App.4th 1006). When construing statutes, courts look first to the words of the statute, which should be given their usual, ordinary, and commonsense meaning (People v. Mejia (2012) 211 Cal.App.4th 586, 611). The purpose of utilizing the plain meaning of statutory language is to spare the courts the necessity of trying to divine the voters’ intent by resorting to secondary or subjective indicators. The court in HJTA v. City of Salinas asserted its belief as to what most voters thought when voting for Proposition 218, but did not cite the voter pamphlet or other accepted sources for determining legislative intent. Instead, the court substituted its own judgment for the judgment of voters;
   5. Neither the words "sanitary" nor "sewerage" are used in Proposition 218, and the common meaning of the term "sewer services" is not "sanitary sewerage." In fact, the phrase "sanitary sewerage" is uncommon;
   6. Proposition 218 exempts sewer and water services from the voter-approval requirement. Sewer and water services are commonly considered to have a broad reach, encompassing the provision of clean water and then addressing the conveyance and treatment of dirty water, whether that water is rendered unclean by coming into contact with sewage or by flowing over the built-out human environment and becoming urban runoff;
   7. Provides numerous sources predating Proposition 218 rejecting the notion that the term “sewer” applies only to sanitary sewers and sanitary sewerage;
   8. In Crawley v. Alameda Waste Management Authority (2015) 243 Cal.App.4th 396, the Court of Appeal relied on the statutory definition of “refuse collection services” to interpret the meaning of that phrase in Proposition 218, and found that this interpretation was further supported by the plain meaning of refuse. Consistent with this decision, in determining the definition of “sewer,” the plain meaning rule shall apply in conjunction with the definitions of terms as provided in Section 53750;
   9. The Legislature reaffirms and reiterates that the definition found in Section 230.5 of the Public Utilities Code is the definition of “sewer” or “sewer service” that should be used in the Proposition 218 Omnibus Implementation Act; and,
   10. Courts have read the Legislature’s definition of “water” in the Proposition 218 Omnibus Implementation Act to include related services. In Griffith v. Pajaro Valley Water Management Agency (2013) 220 Cal.App.4th 586, the Court of Appeal concurred with the Legislature’s view that “water service means more than just supplying water,” based upon the definition of water provided by the Proposition 218 Omnibus Implementation Act, and found that actions necessary to provide water can be funded through fees for water service. Consistent with this decision, “sewer” should be interpreted to include services necessary to collect, treat, or dispose of sewage, industrial waste, or surface or storm waters, and any entity that collects, treats, or disposes of any of these necessarily provides sewer service.
4. Makes additional findings and declarations.

FISCAL EFFECT: None

COMMENTS:

1. Financing Water Infrastructure. Local governments in California provide most water related services in the state which include water service, sewer service, flood control, and storm water management. A Public Policy Institute of California (PPIC) report, Paying for Water in California, outlines four sources of funding currently used for water in California: a) Fees, which include water and waste water bills, property assessments or fees, developer or connection fees, and permitting fees; b) Taxes, which include both general and special taxes, including parcel taxes; c) Fines and penalties, which include excessive pumping on groundwater or directly to customers in violation of rationing restrictions during drought emergencies; and, d) Bonds, which include general obligation and revenue bonds. Local agencies frequently point to the series of constitutional reforms, Proposition 13 (1978), Proposition 218 (1996), and Proposition 26 (2010), that have made it increasingly more difficult to generate the necessary revenue to fund the costs of providing water and other essential services.

Local governments face several barriers to funding for storm water and dry weather runoff projects due to the constitutional requirements for special taxes, benefit assessments, and property-related fees. Many of the local governments that operate MS4 (Municipal Separate Storm System) systems differ from water and wastewater utilities that existed prior to the passage of Proposition 218, which have in place service fees. On the other hand, many storm water programs in cities and counties are funded by the general fund, primarily through property and local sales taxes. As regulatory burdens continue to increase, financially strapped local governments are forced to examine alternative funding mechanisms and regional strategies to address MS4 costs. For example, the costs in Los Angeles County alone are cited to be over $20 billion dollars.

1. Proposition 218. Proposition 218 distinguishes among taxes, assessments, and fees, for property-related revenues, and requires certain actions before such revenues may be collected. Counties and other local agencies with police powers may impose any one of these options on property owners, after completing the Proposition 218 process. Special districts created by statute, however, must have specific authority for each of these revenue sources.

The Constitution defines a fee (or charge) as any levy other than an ad valorem tax, special tax, or assessment that is imposed by a local government on a parcel or on a person as an incident of property ownership, including a user fee for a property-related service. The fee imposed on any parcel or person cannot exceed the proportional cost of the service that is attributable to the parcel. Prior to imposing or increasing a property-related fee, the local government is required to identify the parcels, mail a written notice to all the property owners subject to the fee detailing the amount of the fee, the reason for the fee, and the date, time, and location of a public hearing on the proposed fee. No sooner than 45 days after mailing the notice to property owners, the agency must conduct a public hearing on the proposed fee. If a majority of owners of the identified parcels provide written protests against the fee, it cannot be imposed or increased by the agency.

Additionally, the California Constitution Article XIII D, Section 6, subdivision (c) provides election requirements, "Except for fees or charges for sewer, water, and refuse collection services, no property-related fee or charge shall be imposed or increased unless and until that fee or charge is submitted and approved by a majority vote of the property owners of the property subject to the fee or charge or, at the option of the agency, by a two-thirds vote of the electorate residing in the affected area." The election for the fee is required to be conducted no less than 45 days following the public hearing.

The definition of "water" and "sewer" under the Proposition 218 Omnibus Implementation Act (Act) is significant because the election requirements are on fees for services other than water, sewer, and trash services. Determining the services that fall within the definitions of "water" and "sewer" services has been the subject of litigation. An appellate court decision in HJTA v. City of Salinas (2002) found that a city’s charges on developed parcels to fund storm water management were property-related fees, and were not covered by the exemption for sewer or water services. A subsequent appellate court decision in Griffith v. Pajaro Valley Water Management Agency (2013) the court relied on the definition of "water" in Proposition 218 Omnibus Implementation Act narrowly construing an earlier decision in HJTA v. City of Salinas, which did not apply the Act's definitions to a storm water charge dispute. The Griffith decision found that a groundwater augmentation charge is a fee for "water service".

1. Bill Summary. This bill adds a definition for "sewer" to the Act. The definition of "water" and "sewer" under the Act is significant because the election requirements are on fees for services other than water, sewer, and trash services. This bill provides a definition of "sewer" in the Act using the definition of "sewer" from the Public Utilities Code, which includes storm drainage. Additionally, this bill adds a number of findings and declarations to the Act. This bill is sponsored by the Water Foundation.
2. Author's Statement. According to the author, "Storm water is a key source of local water supply, and careful management is necessary now more than ever due to California’s cycles of drought and flood. This legislation adds a missing definition of “sewer” to state law, including sewage and storm water, conforming with an existing 25-year-old definition in the California Public Utilities Code and dictionary definitions for sewer water which make no distinctions among types of dirty water — rain water, urban runoff, and sewage. Clarity is needed due to debate among the courts on interpreting “sewer.”"
3. Prior Legislation and Ballot Measures. AB 1362 (Gordon) of 2015, would have provided a definition for "storm water" to mean "any system of public improvements, or service intended to provide for the quality, conservation, control, or conveyance of waters that land on or drain across the natural or man-made landscape" in the Act. AB 1362 would have only become operative if a constitutional amendment was approved by the voters. The introduced version of AB 1362 was subsequently amended into a different issue area to address mosquito and vector control districts. AB 2403 (Rendon), Chapter 78, Statutes of 2014, expanded the definition of "water" in the Proposition 218 Omnibus Implementation Act. This bill is substantially similar to SB 1298 (Hertzberg) of 2016, which would have added definition of "sewer" but contained fewer findings and declarations.

In 2016, the League of California Cities, California Association of Counties and Association of California Water Agencies filed a statewide ballot initiative - California Water Conservation, Flood Control and Stormwater Management Act of 2016. The proponents of the initiative declined to move forward after doing polling research.

1. Arguments in Support. The Association of California Water Agencies states, "SB 231 would make it clear that under state law, the process for funding storm water projects is the same as the process for funding other water and sewer projects. The bill is based on the fact that state law has long recognized that the term "sewer" includes services for the management of storm water. The definition of "sewer" in Public Utilities Code Section 230.5, on which SB 231 is based, dates back to 1970. It predates Proposition 218."

The California State Association of Counties, and the Rural County Representatives of California argue, "SB 231 authorizes counties, cities, and local water agencies to finance storm water projects in the same manner as other public works projects under Proposition 218. Counties, cities, and local water agencies throughout California face many cost pressures and funding challenges that affect water, including maintenance of aging infrastructure and requirement to comply with higher regulatory standards. These entities need to fund storm water and flood control projects to protect people and property from flooding, remove pollutants from storm water, and increase groundwater recharge. However, financing these projects is costly and difficult under current law."

1. Arguments in Opposition. Howard Jarvis Taxpayers Association argues, "SB 231 amends the Proposition 218 Omnibus Implementation Act in ways that violate the California Constitution and will only lead to unnecessary litigation and increased costs for ratepayers. Most importantly, SB 231 contravenes the appellate court case of HJTA v. City of Salinas…By including storm water within the definition of a property related fee, SB 231 ensures that voters will be unable to have a say at the ballot box. SB 231 shows contempt for the separation of powers by proposing, in a statute, the same plan that the judiciary has already found unconstitutional. Should SB 231 be signed into law and adopted by local agencies, a precedent setting victory invalidating this clearly unconstitutional bill would be followed by copycat lawsuits that impose retroactive refunds and attorney fees on public treasuries all across California."

The California Contract Cities Association states, "We believe that SB 231, while well-intentioned, violates the intent of Proposition 218 to only include limited exceptions to the requirement of a vote on most taxes to maintain a baseline level of public health and safety services. Carving out new exceptions by changing the definitions of the original exceptions would set an unfortunate precedent and undermine the longstanding right of residents to vote on their own local taxes and fees. While our member cities certainly need assistance in complying with our MS4 requirements for storm water management, we believe that passing the costs on to property owners without a vote is not the right or sustainable way to do it."

REGISTERED SUPPORT / OPPOSITION:

Support

Water Foundation [SPONSOR]
Association of California Water Agencies

Bay Area Council

Bay Area Stormwater Management Agencies Association

California Association of Sanitation Agencies

California Building Industry Association

California Council for Environmental & Economic Balance

California State Association of Counties

California Stormwater Quality Association

California Water Partnership (if amended)

Cities of Alameda, Beverly Hills, Camarillo, Carmel-by-the-Sea, Commerce, Culver City, Cupertino, Del Rey Oaks, El Cerrito, Hawthorne, Hermosa Beach, Industry, Lakewood, Lawndale, Monterey, Norwalk, Pacific Grove, Petaluma, Santa Rosa, Signal Hill, Torrance, and Woodland

City /County Association of Governments of San Mateo County

Contra Costa Clean Water Program
Contra Costa County

County of Santa Clara’s Clean Water Program
County of Santa Cruz Department of Public Works
Environmental Defense Fund

Inland Empire Utilities Agency
Integrated Stormwater Resources

Los Angeles County

Los Angeles Gateway Region Integrated Regional Water Management Joint Powers Authority

Marin County

Mayors’ and Councilmembers’ Association of Sonoma County

Metropolitan Water District of Southern California

Monterey Bay Aquarium

Monterey Regional Water Pollution Control Agency

Rural County Representatives of California

San Joaquin County

San Joaquin Delta Coalition

Santa Clara County

Santa Clara Valley Water District

Save The Bay

Sierra Club California

State Building and Construction Trades Council of California

Town of Tiburon

TreePeople

Individual letters (1)

Opposition

BizFed
California Association of Realtors
California Contract Cities Association
California Taxpayers Association
Cities of Baldwin Park, Claremont, Diamond Bar, Duarte, Gardena, Glendora, Los Alamitos, Maywood, Rolling Hills, Rosemead, Sierra Madre, South El Monte, Walnut, West Covina, and Whittier
Contra Costa Association of Realtors
Council Member Charlie Rosales, City of La Verne
Howard Jarvis Taxpayers Association
Mayor Joseph Romero Rocha, City of Azusa

Monterey County Association of Realtors
North Bay Association of Realtors
North San Diego County Association of Realtors
Northern Solano County Association of Realtors
Pacific Southwest Association of Realtors
San Gabriel Valley Council of Governments
San Gabriel Valley Economic Partnership
San Rafael Neighborhoods Association
Southwest Riverside County Association of Realtors
Yolo County Association of Realtors
Individual letters (5)

Analysis Prepared by: Misa Lennox / L. GOV. / (916) 319-3958

 THIRD READING  

Bill No: SB 231

Author:

Amended:

Vote:

SENATE GOVERNANCE & FIN. COMMITTEE: 5-2, 4/5/17

AYES: McGuire, Beall, Hernandez, Hertzberg, Lara

NOES: Nguyen, Moorlach

SUBJECT:

SOURCE: Water Foundation

DIGEST: This bill defines “sewer” for the purposes of Proposition 218.

Senate Floor Amendments of 4/19/17 revise the definition of “sewer” provided in the bill to conform more closely to existing law and add new findings and declarations to support the purpose of the bill.

ANALYSIS:

Existing law:

1. Imposes constitutional limits on local officials’ ability to impose, increase, and extend fees, including property-related fees (Proposition 218, 1996).
2. Defines a property-related fee as any levy other than an ad valorem tax, a special tax, or an assessment imposed by an agency on a parcel or on a person as an incident of property ownership, including a user fee for a property-related service.
3. Specifies definitions and procedures related to Proposition 218 in the Proposition 218 Omnibus Implementation Act (SB 919, Rainey, 1997). The Act requires local officials to, before imposing a new property related fee or increase an existing one:
4. Identify the parcels to be charged.
5. Calculate the fee for each parcel.
6. Notify the parcels’ owners in writing about the fees and the hearing.
7. Hold a public hearing to consider and count protests.
8. Abandon the fees if a majority of the parcels’ owners protest.
9. Requires new or increased property-related fees to:
10. Be less than the proportional cost of service to each parcel.
11. Receive approval by a majority-vote of the affected property owners, two-thirds registered voter approval, or weighted ballot approval by the affected property owners.
12. Exempts property-related fees for water, sewer, and refuse collection from the voter approval requirements of Proposition 218.
13. Defines “sewer” in the Public Utilities Code.

This bill:

1. Defines “sewer” for the purposes of Proposition 218, using the existing Public Utilities Code definition, to include:
2. Systems, all real estate, fixtures, and personal property owned, controlled, operated, or managed in connection with or to facilitate sewage collection, treatment, or disposition for sanitary or drainage purposes, including lateral and connecting sewers, interceptors, trunk and outfall lines, sanitary sewage treatment or disposal plants or works, drains, conduits, outlets for surface or storm waters, and any and all other works, property, or structures necessary or convenient for the collection or disposal of sewage, industrial waste, or surface or storm waters, but excluding a sewer system that merely collects sewage on the property of a single owner from the definition of “sewer.”
3. Provides that the terms in the Proposition 218 Omnibus Implementation Act should be interpreted in light of findings codified by the bill, including findings that:
4. State that storm waters are carried off in storm sewers, and describe the importance of storm water management.
5. State that the court of appeal in Salinas (2002) concluded that the term “sewer,” as used in Proposition 218, is “ambiguous” and declined to use the statutory definition of the term “sewer system” which was part of the then-existing law as Section 230.5 of the Public Utilities Code.
6. Argue that the court failed to follow long-standing principles of statutory construction by disregarding the plain meaning of the term “sewer” and instead substituted its own judgment for the judgment of voters.
7. Identify numerous sources predating Proposition 218 that reject the notion that the term “sewer” applies only to sanitary sewers.
8. Identify AB 2403 (Rendon, Chapter 78, Statutes of 2014) as a case where prior legislation has affirmed particular interpretations of words in Proposition 218.
9. State that other courts have used different principles consistent with the bill, and different from those used in the Salinas (2002) decision, to interpret Proposition 218’s terminology.
10. Reaffirm and reiterate that the definition found in Section 230.5 of the Public Utilities Code is the definition of “sewer” or “sewer service” that should be used in the Proposition 218 Omnibus Implementation Act.

Background

Proposition 218’s vote requirements don’t apply to property-related fees for sewer, water, or refuse collection services, but the measures didn’t define those terms. Thus, determining what services fall within the definition of “water” and “sewer” services has been the subject of litigation. An appellate court decision in Howard Jarvis Taxpayers Association v. City of Salinas 98 Cal. App. 4th 1351 (2002) found that a city’s charges on developed parcels to fund storm water management were property-related fees and were not covered by the exemption for sewer or water services. The court reasoned that the definition of “sewer” in Proposition 218 was ambiguous and that in light of Proposition 218’s intent to be construed liberally to enhance taxpayer consent, fees for storm water management should require voter approval.

In light of these court rulings and local governments’ continued struggles to finance storm water management, groundwater augmentation, water conservation, and similar activities, in 2014 the Legislature amended the Proposition 218 Implementation Act to define “water” in a manner that is consistent with Griffith v. Pajaro Valley Water Management Agency (AB 2403, Rendon). AB 2403 clarified local agencies’ ability to impose some storm water management fees—where the management programs capture storm water for domestic and irrigation supply—without having to subject those fees to a vote.

Because of the Salinas decision, fees for projects that treat and discharge storm water still must receive voter approval, despite other sections of law that include storm drainage in the definition of sewer. Specifically, the Public Utilities Code defines “sewer system” to include all real estate, fixtures, and personal property owned, controlled, operated, or managed in connection with or to facilitate sewage collection, treatment, or disposition for sanitary or drainage purposes, including lateral and connecting sewers, interceptors, trunk and outfall lines, sanitary sewage treatment or disposal plants or works, drains, conduits, outlets for surface or storm waters, and any and all other works, property, or structures necessary or convenient for the collection or disposal of sewage, industrial waste, or surface or storm waters (Chapter 1109, Statutes of 1970). The definition excludes a sewer system which merely collects sewage on the property of a single owner. However, the Salinas court declined to use this definition.

Since the 2002 Salinas decision, state and federal water quality regulators have imposed increasingly costly requirements on cities and counties to clean up their storm water discharge under the Municipal Separate Storm Sewer System (MS4) permitting program. For example, the costs of complying with the most recent MS4 permit for Los Angeles County and the 88 cities in the county are expected to exceed $20 billion over the next 20 years. Local governments that fail to comply can face fines of up to $250,000 per day.

Finding the money to pay for these costs is challenging. Because storm water cleanup fees are subject to voter approval, some local governments, such as Culver City, have put storm water assessments or special taxes on the ballot that were subsequently approved. Others have tried and failed; Los Angeles County sought to put a storm water measure on the ballot in 2013, but it never made it past the Board of Supervisors. The author of this bill and the sponsor want to make it easier for local governments to levy fees to pay for storm water cleanup.

Comments

1. Purpose of the bill. In 2002, an appellate court ruled that the meaning of sewer in Proposition 218 was “ambiguous,” and proceeded to develop a new definition of sewer service that did not include storm water without citing any sources for that definition. As a result, storm water programs must meet a higher standard than other water and sewer services to raise capital, and local governments are struggling to fund the projects they need to meet state and federal water quality regulations. These governments face the prospect of redirecting scarce general fund dollars to pay for storm water programs or could get hit with expensive fines if they don’t comply. Storm water is plainly a part of managing water and sewer and should follow the same procedures. SB 231 addresses this problem by providing a definition of sewer that definition predates Proposition 218 and treats fees for storm water like all other water and sewer fees. SB 231 does not change the Constitution’s mandate for rigorous oversight of water and sewer fees, including reports, hearings, and protest votes. As with setting other fees, public officials remain ultimately accountable to the voters for their re-election. SB 231 won’t provide all the funding that local governments need to fund their storm water programs, but it is a step in the right direction.
2. Who’s right? Opponents of the bill argue that Proposition 218 was intended to provide an expansive right for the public to vote on tax increases and only included limited exemptions from this requirement to maintain basic public health and safety services, such as providing drinking and irrigation water and disposing of sanitary sewage and refuse. Cleaning up storm water and discharging it simply to benefit the environment shouldn’t fall within those categories, and, thanks to the Salinas court decision, it doesn’t. SB 231 directly contradicts this decision. Should the Legislature override the courts, and potentially the will of the people, by allowing local governments to raise fees for storm water cleanup projects without a vote?

Related/Prior Legislation

1. SB 231 is similar to SB 1298 (Hertzberg, 2016), which would have added a similar definition of sewer to the Proposition 218 Omnibus Implementation Act, supported by less expansive findings. SB 1298 was held on the Assembly Floor.
2. In 2014, the Legislature amended the Proposition 218 Omnibus Implementation Act to define “water” to include water from any source (AB 2403, Rendon, Chapter 78, Statutes of 2014). AB 2403 clarified local agencies’ ability to impose some storm water management fees—where the management programs capture storm water for domestic and irrigation supply—without having to subject those fees to a vote.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 4/7/17)

Water Foundation (source)

Bay Area Stormwater Management Agencies Association

California Association of Sanitation Agencies

California Building Industries Association

California Council for Environmental and Economic Balance

California State Association of Counties

California Stormwater Quality Association

City/County Association of Governments of San Mateo County

City of Alameda

City of Beverly Hills

City of Commerce

City of Covina

City of Commerce

City of Hawthorne

City of Hermosa Beach

City of Industry

City of Lawndale

City of Norwalk

City of Petaluma

City of San Gabriel

City of Signal Hill

County of Contra Costa

County of San Joaquin

Inland Empire Utilities Agency

Los Angeles Gateway Region Integrated Regional Water Management Authority

Metropolitan Water District of Southern California

Santa Clara Valley Water District

Save the Bay

Sierra Club California

State Building and Construction Trades Council of California

Tree People

OPPOSITION: (Verified 4/7/17)

BizFed

City of Claremont

City of Diamond Bar

City of Glendora

City of Los Alamitos

City of Rosemead

City of Sierra Madre

City of West Covina

Howard Jarvis Taxpayers Association

Prepared by:

4/28/17 12:55:33

**** END ****

 THIRD READING  

Bill No: SB 231

Author:

:

Vote:

SENATE GOVERNANCE & FIN. COMMITTEE: 5-2, 4/5/17

AYES: McGuire, Beall, Hernandez, Hertzberg, Lara

NOES: Nguyen, Moorlach

SUBJECT:

SOURCE: Water Foundation

DIGEST: This bill defines “sewer” for the purposes of Proposition 218.

ANALYSIS:

Existing law:

1. Imposes constitutional limits on local officials’ ability to impose, increase, and extend fees, including property-related fees (Proposition 218, 1996).
2. Defines a property-related fee as any levy other than an ad valorem tax, a special tax, or an assessment imposed by an agency on a parcel or on a person as an incident of property ownership, including a user fee for a property-related service.
3. Specifies definitions and procedures related to Proposition 218 in the Proposition 218 Omnibus Implementation Act (SB 919, Rainey, 1997). The Act requires local officials to, before imposing a new property related fee or increase an existing one:
4. Identify the parcels to be charged.
5. Calculate the fee for each parcel.
6. Notify the parcels’ owners in writing about the fees and the hearing.
7. Hold a public hearing to consider and count protests.
8. Abandon the fees if a majority of the parcels’ owners protest.
9. Requires new or increased property-related fees to:
10. Be less than the proportional cost of service to each parcel.
11. Receive approval by a majority-vote of the affected property owners, two-thirds registered voter approval, or weighted ballot approval by the affected property owners.
12. Exempts property-related fees for water, sewer, and refuse collection from the voter approval requirements of Proposition 218.
13. Defines “sewer” in the Public Utilities Code.

This bill:

1. Defines “sewer” for the purposes of Proposition 218, using the existing Public Utilities Code definition, to mean:
2. Services and systems provided by all real estate, fixtures, and personal property owned, controlled, operated, or managed in connection with or to facilitate sewage collection, treatment, or disposition for sanitary or drainage purposes, including lateral and connecting sewers, interceptors, trunk and outfall lines, sanitary sewage treatment or disposal plants or works, drains, conduits, outlets for surface or storm waters, and any and all other works, property, or structures necessary or convenient for the collection or disposal of sewage, industrial waste, or surface or storm waters, but excluding a sewer system that merely collects sewage on the property of a single owner from the definition of “sewer.”
3. Provides that the terms in the Proposition 218 Omnibus Implementation Act should be interpreted in light of findings codified by the bill, including findings that:
4. State that storm waters are carried off in storm sewers, and describe the importance of storm water management.
5. State that the court of appeal in Salinas (2002) concluded that the term “sewer,” as used in Proposition 218, is “ambiguous” and declined to use the statutory definition of the term “sewer system” which was part of the then-existing law as Section 230.5 of the Public Utilities Code.
6. Argue that the court failed to follow long-standing principles of statutory construction by disregarding the plain meaning of the term “sewer” and instead substituted its own judgment for the judgment of voters.
7. Identify numerous sources predating Proposition 218 that reject the notion that the term “sewer” applies only to sanitary sewers.
8. Identify AB 2403 (Rendon, Chapter 78, Statutes of 2014) as a case where prior legislation has affirmed particular interpretations of words in Proposition 218.
9. Reaffirm and reiterate that the definition found in Section 230.5 of the Public Utilities Code is the definition of “sewer” or “sewer service” that should be used in the Proposition 218 Omnibus Implementation Act.

Background

Proposition 218’s vote requirements don’t apply to property-related fees for sewer, water, or refuse collection services, but the measures didn’t define those terms. Thus, determining what services fall within the definition of “water” and “sewer” services has been the subject of litigation. An appellate court decision in Howard Jarvis Taxpayers Association v. City of Salinas 98 Cal. App. 4th 1351 (2002) found that a city’s charges on developed parcels to fund storm water management were property-related fees and were not covered by the exemption for sewer or water services. The court reasoned that the definition of “sewer” in Proposition 218 was ambiguous and that in light of Proposition 218’s intent to be construed liberally to enhance taxpayer consent, fees for storm water management should require voter approval.

In light of these court rulings and local governments’ continued struggles to finance storm water management, groundwater augmentation, water conservation, and similar activities, in 2014 the Legislature amended the Proposition 218 Implementation Act to define “water” in a manner that is consistent with Griffith v. Pajaro Valley Water Management Agency (AB 2403, Rendon). AB 2403 clarified local agencies’ ability to impose some storm water management fees—where the management programs capture storm water for domestic and irrigation supply—without having to subject those fees to a vote.

Because of the Salinas decision, fees for projects that treat and discharge storm water still must receive voter approval, despite other sections of law that include storm drainage in the definition of sewer. Specifically, the Public Utilities Code defines “sewer system” to include all real estate, fixtures, and personal property owned, controlled, operated, or managed in connection with or to facilitate sewage collection, treatment, or disposition for sanitary or drainage purposes, including lateral and connecting sewers, interceptors, trunk and outfall lines, sanitary sewage treatment or disposal plants or works, drains, conduits, outlets for surface or storm waters, and any and all other works, property, or structures necessary or convenient for the collection or disposal of sewage, industrial waste, or surface or storm waters (Chapter 1109, Statutes of 1970). The definition excludes a sewer system which merely collects sewage on the property of a single owner. However, the Salinas court declined to use this definition.

Since the 2002 Salinas decision, state and federal water quality regulators have imposed increasingly costly requirements on cities and counties to clean up their storm water discharge under the Municipal Separate Storm Sewer System (MS4) permitting program. For example, the costs of complying with the most recent MS4 permit for Los Angeles County and the 88 cities in the county are expected to exceed $20 billion over the next 20 years. Local governments that fail to comply can face fines of up to $250,000 per day.

Finding the money to pay for these costs is challenging. Because storm water cleanup fees are subject to voter approval, some local governments, such as Culver City, have put storm water assessments or special taxes on the ballot that were subsequently approved. Others have tried and failed; Los Angeles County sought to put a storm water measure on the ballot in 2013, but it never made it past the Board of Supervisors. The author of this bill and the sponsor want to make it easier for local governments to levy fees to pay for storm water cleanup.

Comments

1. Purpose of the bill. In 2002, an appellate court ruled that the meaning of sewer in Proposition 218 was “ambiguous,” and proceeded to develop a new definition of sewer service that did not include storm water without citing any sources for that definition. As a result, storm water programs must meet a higher standard than other water and sewer services to raise capital, and local governments are struggling to fund the projects they need to meet state and federal water quality regulations. These governments face the prospect of redirecting scarce general fund dollars to pay for storm water programs or could get hit with expensive fines if they don’t comply. Storm water is plainly a part of managing water and sewer and should follow the same procedures. SB 231 addresses this problem by providing a definition of sewer that definition predates Proposition 218 and treats fees for storm water like all other water and sewer fees. SB 231 does not change the Constitution’s mandate for rigorous oversight of water and sewer fees, including reports, hearings, and protest votes. As with setting other fees, public officials remain ultimately accountable to the voters for their re-election. SB 231 won’t provide all the funding that local governments need to fund their storm water programs, but it is a step in the right direction.
2. Who’s right? Opponents of the bill argue that Proposition 218 was intended to provide an expansive right for the public to vote on tax increases and only included limited exemptions from this requirement to maintain basic public health and safety services, such as providing drinking and irrigation water and disposing of sanitary sewage and refuse. Cleaning up storm water and discharging it simply to benefit the environment shouldn’t fall within those categories, and, thanks to the Salinas court decision, it doesn’t. SB 231 directly contradicts this decision. Should the Legislature override the courts, and potentially the will of the people, by allowing local governments to raise fees for storm water cleanup projects without a vote?

Related/Prior Legislation

1. SB 231 is similar to SB 1298 (Hertzberg, 2016), which would have added a similar definition of sewer to the Proposition 218 Omnibus Implementation Act, supported by less expansive findings. SB 1298 was held on the Assembly Floor.
2. In 2014, the Legislature amended the Proposition 218 Omnibus Implementation Act to define “water” to include water from any source (AB 2403, Rendon, Chapter 78, Statutes of 2014). AB 2403 clarified local agencies’ ability to impose some storm water management fees—where the management programs capture storm water for domestic and irrigation supply—without having to subject those fees to a vote.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 4/7/17)

Water Foundation (source)

California State Association of Counties

City/County Association of Governments of San Mateo County

City of Alameda

City of Beverly Hills

City of Commerce

City of Hawthorne

City of Hermosa Beach

City of Industry

City of Norwalk

City of Petaluma

City of San Gabriel

City of Signal Hill

County of Contra Costa

County of San Joaquin

Inland Empire Utilities District

Los Angeles Gateway Region Integrated Regional Water

Santa Clara Valley Water District

Save the Bay

Sierra Club California

State Building and Construction Trades Council of California

Tree People

OPPOSITION: (Verified 4/7/17)

City of Claremont

City of Diamond Bar

City of Glendora

City of Los Alamitos

City of Rosemead

City of Sierra Madre

City of West Covina

Howard Jarvis Taxpayers Association

Prepared by:

4/10/17 11:57:17

**** END ****

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Mike McGuire, Chair

2017 - 2018 Regular

Local government: fees and charges

Defines “sewer” for the purposes of Proposition 218.

Background

Proposition 218 procedures. Proposition 218 (1996) imposed constitutional limits on local officials’ ability to impose, increase, and extend fees, including property-related fees. Proposition 218 defined a property-related fee as any levy other than an ad valorem tax, a special tax, or an assessment imposed by an agency on a parcel or on a person as an incident of property ownership, including a user fee for a property-related service. The Legislature enacted the Proposition 218 Omnibus Implementation Act to translate many of Proposition 218's requirements into statutory definitions and procedures (SB 919, Rainey, 1997).

Before a local government can charge a new property-related fee, or increase an existing one, Proposition 218 requires local officials to:

• Identify the parcels to be charged.
• Calculate the fee for each parcel.
• Notify the parcels’ owners in writing about the fees and the hearing.
• Hold a public hearing to consider and count protests.
• Abandon the fees if a majority of the parcels’ owners protest.

New or increased property-related fees cannot exceed the proportional cost of service to each parcel and generally require a majority-vote of the affected property owners, two-thirds registered voter approval, or weighted ballot approval by the affected property owners.

Defining “water” and “sewer.” Proposition 218’s vote requirements don’t apply to property-related fees for sewer, water, or refuse collection services, but the measures didn’t define those terms. Thus, determining what services fall within the definition of “water” and “sewer” services has been the subject of litigation. An appellate court decision in Howard Jarvis Taxpayers Association v. City of Salinas 98 Cal. App. 4th 1351 (2002) found that a city’s charges on developed parcels to fund storm water management were property-related fees and were not covered by the exemption for sewer or water services. The court reasoned that the definition of “sewer” in Proposition 218 was ambiguous and that in light of Proposition 218’s intent to be construed liberally to enhance taxpayer consent, fees for storm water management should require voter approval.

A subsequent appellate court decision in Griffith v. Pajaro Valley Water Management Agency 220 Cal. App. 4th 586 (2013) found that storm water projects, when used for water supply purposes, provide water service as defined by Proposition 218, and therefore the fees that support them are exempt from voter approval.

In light of these court rulings and local governments’ continued struggles to finance storm water management, groundwater augmentation, water conservation, and similar activities, in 2014 the Legislature amended the Proposition 218 Implementation Act to define “water” in a manner that is consistent with Griffith (AB 2403, Rendon). AB 2403 clarified local agencies’ ability to impose some storm water management fees—where the management programs capture storm water for domestic and irrigation supply—without having to subject those fees to a vote.

Because of the Salinas decision, fees for projects that treat and discharge storm water still must receive voter approval, despite other sections of law that include storm drainage in the definition of sewer. Specifically, the Public Utilities Code defines “sewer system” to include all real estate, fixtures, and personal property owned, controlled, operated, or managed in connection with or to facilitate sewage collection, treatment, or disposition for sanitary or drainage purposes, including lateral and connecting sewers, interceptors, trunk and outfall lines, sanitary sewage treatment or disposal plants or works, drains, conduits, outlets for surface or storm waters, and any and all other works, property, or structures necessary or convenient for the collection or disposal of sewage, industrial waste, or surface or storm waters (Chapter 1109, Statutes of 1970). The definition excludes a sewer system which merely collects sewage on the property of a single owner. However, the Salinas court declined to use this definition.

Storm water regulatory requirements. Since the 2002 Salinas decision, state and federal water quality regulators have imposed increasingly costly requirements on cities and counties to clean up their storm water discharge under the Municipal Separate Storm Sewer System (MS4) permitting program. For example, the costs of complying with the most recent MS4 permit for Los Angeles County and the 88 cities in the county are expected to exceed $20 billion over the next 20 years. Local governments that fail to comply can face fines of up to $250,000 per day.

Finding the money to pay for these costs is challenging. Because storm water cleanup fees are subject to voter approval, some local governments, such as Culver City, have put storm water assessments or special taxes on the ballot that were subsequently approved. Others have tried and failed; Los Angeles County sought to put a storm water measure on the ballot in 2013, but it never made it past the Board of Supervisors. The author of this bill and the sponsor want to make it easier for local governments to levy fees to pay for storm water cleanup.

Proposed Law

Senate Bill 231 borrows closely from the Public Utilities Code definition of “sewer system” to define “sewer” for the purposes of the Proposition 218 Omnibus Implementation Act. Specifically, SB 231 copies the definition, except that it defines the term “sewer” instead of “sewer system,” and specifies that sewer “means services and systems provided by,” instead of “includes,” all real estate, fixtures, and personal property owned, controlled, operated, or managed in connection with or to facilitate sewage collection, treatment, or disposition for sanitary or drainage purposes, including lateral and connecting sewers, interceptors, trunk and outfall lines, sanitary sewage treatment or disposal plants or works, drains, conduits, outlets for surface or storm waters, and any and all other works, property, or structures necessary or convenient for the collection or disposal of sewage, industrial waste, or surface or storm waters. SB 231 excludes a sewer system that merely collects sewage on the property of a single owner from the definition of “sewer.”

SB 231 also codifies numerous findings and declarations in the Proposition 218 Omnibus Implementation Act and provides that the terms in the Proposition 218 Omnibus Implementation Act should be interpreted in light of those findings. The findings:

• State that storm waters are carried off in storm sewers, and describe the importance of storm water management.
• State that the court of appeal in Salinas (2002) concluded that the term “sewer,” as used in Proposition 218, is “ambiguous” and declined to use the statutory definition of the term “sewer system” which was part of the then-existing law as Section 230.5 of the Public Utilities Code.
• Argue that the court failed to follow long-standing principles of statutory construction by disregarding the plain meaning of the term “sewer” and instead substituted its own judgment for the judgment of voters.
• Identify numerous sources predating Proposition 218 that reject the notion that the term “sewer” applies only to sanitary sewers;
• Identify AB 2403 (Rendon, 2014) as a case where prior legislation has affirmed particular interpretations of words in Proposition 218.
• Reaffirms and reiterates that the definition found in Section 230.5 of the Public Utilities Code is the definition of “sewer” or “sewer service” that should be used in the Proposition 218 Omnibus Implementation Act.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. In 2002, an appellate court ruled that the meaning of sewer in Proposition 218 was “ambiguous,” and proceeded to develop a new definition of sewer service that did not include storm water without citing any sources for that definition. As a result, storm water programs must meet a higher standard than other water and sewer services to raise capital, and local governments are struggling to fund the projects they need to meet state and federal water quality regulations. These governments face the prospect of redirecting scarce general fund dollars to pay for storm water programs or could get hit with expensive fines if they don’t comply. Storm water is plainly a part of managing water and sewer and should follow the same procedures. SB 231 addresses this problem by providing a definition of sewer that definition predates Proposition 218 and treats fees for storm water like all other water and sewer fees. SB 231 does not change the Constitution’s mandate for rigorous oversight of water and sewer fees, including reports, hearings, and protest votes. As with setting other fees, public officials remain ultimately accountable to the voters for their re-election. SB 231 won’t provide all the funding that local governments need to fund their storm water programs, but it is a step in the right direction.

2. Who’s right? Opponents of the bill argue that Proposition 218 was intended to provide an expansive right for the public to vote on tax increases and only included limited exemptions from this requirement to maintain basic public health and safety services, such as providing drinking and irrigation water and disposing of sanitary sewage and refuse. Cleaning up storm water and discharging it simply to benefit the environment shouldn’t fall within those categories, and, thanks to the Salinas court decision, it doesn’t. SB 231 directly contradicts this decision. Should the Legislature override the courts, and potentially the will of the people, by allowing local governments to raise fees for storm water cleanup projects without a vote?

3. Constitutional approach needed? SB 231 amends statute to incorporate storm water into the exemption from voter approval provided for water and sewer fees. But this approach is not a guaranteed success. Because Proposition 218’s restrictions are enshrined in the California Constitution, SB 231’s definition will still have to be found valid by the courts. Amending the Constitution to explicitly authorize local governments to fund storm water projects without a vote could provide more certainty about whether storm water cleanup fees are classified as water or sewer fees, if voters ultimately agree. However, voters may be disinclined to approve a constitutional amendment if they want to make sure they have the right to vote on as many charges as possible. Does the risk of an uncertain outcome in the courts for SB 231’s statutory approach outweigh risk of a constitutional amendment being rejected by voters?

4. Mandate ruling. The California Constitution generally requires the state to reimburse local governments for the costs they incur when providing new or increased programs mandated by the state. However, the state does not have to reimburse local governments if the programs fall under any of several exemptions, including if the federal government has imposed the requirement or if the local government can levy service charges, fees, or assessments to cover the cost of the program. In 2016, the California Supreme Court ruled that certain storm water regulations imposed by the State Water Resources Control Board did not fall under the exemption for federal requirements, and remanded the case to the lower courts to determine whether these requirements fall under the exemption for fees and assessments. SB 231 would make it easier for local governments to levy fees to fund storm water cleanup. For this reason, some local governments argue that SB 231 could undermine their position that these mandates are not exempt from reimbursement, with the result that local governments pay more and the state pays less. Should the Legislature wait until this question is resolved by the courts?

5. Related legislation. SB 231 is similar to SB 1298 (Hertzberg, 2016), which would have added a similar definition of sewer to the Omnibus Implementation Act, supported by less expansive findings. SB 1298 was held on the Assembly Floor and was never heard by the Senate Governance and Finance Committee.

Support and Opposition

(3/30/17)

Support: Water Foundation (sponsor); California State Association of Counties; City of Hawthorne; City of Hermosa Beach; City of Industry; City of Norwalk; City of San Gabriel; City of Signal Hill; County of Contra Costa; Los Angeles Gateway Region Integrated Regional Water Management Joint Powers Authority; Save the Bay; Sierra Club California; State Building and Construction Trades Council of California; Tree People.

Opposition: City of Glendora; City of Rosemead; City of West Covina; Howard Jarvis Taxpayers Association.

-- END --