IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIFTH APPELLATE DISTRICT CASE NO. F FOSTER POULTRY FARMS, INC., Plaintiff and Respondent,

Transcription

1 IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIFTH APPELLATE DISTRICT CASE NO. F FOSTER POULTRY FARMS, INC., Plaintiff and Respondent, vs. CITY OF LIVINGSTON, ET AL., Defendants and Appellants. On Appeal From a Judgment by the Superior Court, Merced County, Case No. CV000292, Hon. Brian L. McCabe APPLICATION TO FILE AMICUS BRIEF AND AMICUS CURIAE BRIEF OF ASSOCIATION OF CALIFORNIA WATER AGENCIES, CALIFORNIA STATE ASSOCIATION OF COUNTIES, AND LEAGUE OF CALIFORNIA CITIES ON BEHALF OF DEFENDANTS & APPELLANTS Daniel S. Hentschke (CA 76749) dhentschke@ sdcwa.org 4677 Overland Ave. San Diego, CA Telephone: (858) Facsimile: (858) Colantuono & Levin PC Michael G. Colantuono (CA ) mcolantuono@ cllaw.us 300 S. Grand Avenue, Suite 2700 Los Angeles, California Telephone: (213) Facsimile: (213) Attorneys for Amicus Curiae Association of California Water Agencies, California State Association of Counties, and League of California Cities 1

2 APPLICATION FOR PERMISSION TO FILE AMICI CURIAE BRIEF TO THE HONORABLE PRESIDING JUSTICE: Pursuant to Rule 8.200(c) of the California Rules of Court, the Association of California Water Agencies ("ACWA"), California State Association of Counties ("CSAC"), and the League of California Cities ("League") respectfully request permission to file the joint amici curiae brief that is combined with this application. Each applicant is an organization that represents public agencies that have a substantial interest in this case because each member public agency is a local government that has the power to provide water, sewer, or other public utility service subject to statutory and constitutional requirements for the setting of service fees and charges at issue in this case, including the requirements of California Constitution article XIII D, section 6. (See Cal. Const. art. XIII C, 1 (b) and XIII D, 2(a) (defining the "local agencies" to which Prop. 218 applies).) Amici desire to address four rulings in this case that have impacts beyond the parties to this litigation and affect the interests of local government agencies throughout the State. These are: The trial court's determination that Health & Safety Code section 5471 is the exclusive method by which the City of Livingston could establish the water charge; I

3 The trial court's determination that a new 45-day notice must be mailed each time a legislative body continues a public hearing to consider fees or charges subject to the requirements of California Constitution article XIII D, section 6; The trial court's determination that the City of Livingston was precluded from adopting a water service fee in an amount less than specified in the public notice; The trial court's determination that the City of Livingston was precluded from including costs to repay prior general fund expenditures for water service when calculating the amount of the new water service fee. The applicants' attorneys have examined the briefs on file in this case and are familiar with the issues involved and the scope of the presentations. The applicants respectfully submit a need exists for additional briefing regarding the statewide impact of a decision by this Court on the correct interpretation of applicable statutes and the California Constitution. In the proposed brief combined with this application, applicants address the need for local agencies to have reasonable flexibility, consistent with express statutory and Constitutional authorization, to establish procedures for the conduct of meetings, adoption of water service fees, and payment of the cost of their utility enterprise operations. II

4 For the reasons stated in this application and further developed in the Introduction and Interest of Amici portion of the proposed brief, the applicants respectfully request leave to file the amicus curiae brief that is combined with this application. The amici curiae brief was authored by Michael G. Colantuono, Colantuono & Levin, PC and Daniel S. Hentschke, General Counsel, San Diego County Water Authority. No party, person, or entity made a monetary contribution to fund the preparation of this brief. Dated: Au,. :Z 2_tl/[? Respectfully submitted: Colantuono & Levin, P.C. Michael G. Colantuono III

5 TABLE OF CONTENTS TABLE OF AUTHORITIES ii I. INTRODUCTION AND INTEREST OF AMICI... 1 A. DESCRIPTION OF AMICI CURIAE... 3 B. AMICI HAVE A UNITY OF INTEREST BECAUSE THEIR PUBLIC AGENCY MEMBERS ARE ALL LOCAL GOVERNMENT AGENCIES SUBJECT TO ARTICLE XIII D AND ALL IMPOSE PROPERTY RELATED FEES AND CHARGES... 4 II. FACTS AND PROCEDURAL HISTORY III. ARGUMENT... 5 A. THE TRIAL COURT MISAPPREHENDED THE CITY'S RATE-MAKING POWER... 5 B. THE TRAIL COURT MISAPPREHENDED THE REQUIREMENTS OF PROPOSITION IV. CONCLUSION

6 TABLE OF AUTHORITIES Cases Apartment Ass'n of Los Angeles County, Inc. v. City of Los Angeles (2001) 24 Ca1.4 th Beaumont Investors v. Beaumont-Cherry Valley Water District (1985) 165 Cal.App.3d Bel Mar Estates v. California Coastal Com. (1981) Cal.App.3d Bighorn-Desert View Water Agency v. Verjil (2006) 39 Ca1.4 th 2052, 18, 19, 20 California Apartment Assn. v. City of Stockton (2000) 80 Cal.App.4 th 699, Cavalier Acres, Inc, v. San Simeon Acres Community Services District, 151 Cal.App.3d , 13 Chaffee v. San Francisco Public Library Com. (2005) 134 Cal.App.4 th City and County of San Francisco v. Farrell (1978) 32 Cal.3d 47, County of Inyo v. Public Utilities Com. (1980) 26 Ca1.3d 154, Cramer v. City of San Diego (1958) 164 Cal.App.2d Crowe v. Boyle (1920) 184 Cal Dahms v. Downtown Pomona Property Improvement District (2009) 174. Cal.App.4 th Durant v. City of Beverly Hills (1940) 39 Cal.App.2d Glenbrook Develop. Co. v. City of Brea (1967) 253 Cal.App.2d , 9 Gordon v. Lance (1971) 403 U.S. 1, 6, 91 S.Ct. 1889, 1892, 29 L.Ed.2d : Greene v. Marin County Flood Control & Water Conservation Dist. (2010) 49 Cal. 4th , 18 Hansen v. City of San Buenaventura (1986) 42 Ca1.3d , 37, 41 11

7 Homebuilders Ass 'n of Tulare I Kings Counties v. City of Lemoore City Council, et al., (2010) 185 Cal. App. 4th 554, 2010 WL Howard Jarvis Taxpayers Assn. c. City of Fresno (2005) 127 Cal. App. 4t h , 37 Howard Jarvis Taxpayers Assn. v. City of Roseville (2002) 97 Cal. App. 4t h ,37 Irvin v. City of Manhattan Beach (1966) 65 Cal.2d Johnson v. Bradley (1992) 4 Cal.4t h 389, Kennedy v. City of Ukiah (1977) 69 Cal.App.3d , 11 Longr dge Estates v. City of Los Angeles (1960) 183 Cal.App.2d Pajaro Valley Water Management Agency v. Amrhein (2007) 150 Cal.App.4t h , 19, 28, 29 Paland v. Brooktrails Township Community Services Dist. Bd. of Directors (2009) 179 Cal. App. 4th Pinewood Investors v. City of Oxnard, 133 Cal.App.3d , 12, 13 Richmond v. Shasta Community Services District (2004) 32 Cal. 4th , 12,19,34 San Marcos Water Dist. v. San Marcos Unified Sch. Dist. (1986) 42 Cal.3d Silicon Valley Taxpayers' Ass'n v. Santa Clara County Open Space Authority (2008) 44 Cal. 4t h , 39 Codes Government Code Government Code Government Code Goveniment Code Government Code Government Code , 26,

8 Government Code , 21, 26 Government Code Government Code Government Code Government Code , 13, 14, 15 Government Code , 13, 14, 15 Government Code Government Code Government Code Government Code Government Code Government Code Government Code Government Code Health & Safety Code passim Public Resources Code Public Utility Code Public Utility Code ; Water Code : Water Code Water Code Water Code Constitutional Provisions California Constitution Article XI... passim IV

9 California Constitution Article XIII C... 1, California Constitution Article XIII D passim v

10 I. INTRODUCTION AND INTEREST OF AMICI Proposition 218, adopted by the voters in November 1996, added articles XIII C and XIII D to the California Constitution and, among other things, fundamentally changed the law relating to imposition of property related fees and charges. Important among the innovations of Proposition 218 was the requirement that a new class of "property related fees and charges," defined by article XIII D, section 2(e), be subject to a noticed hearing at which property owners subject to the fee might protest its imposition. (Cal. Const. art. XIII D, 6(a).) Local legislative bodies may not impose a property related fee or charge if a majority of affected property owners submit written protests, and fees for services other than water, sewer and trash removal are also subject to an election among property owners. (Cal. Const. art. XIII D, 6(c).) Also, article XIII D, section 6(b) establishes substantive limitations on property-related fees and charges. Although Proposition 218's fee provisions took effect with the fiscal year (Cal. Const. art. XIII D, (d)), most public utilities did not view the measure as applicable to usage fees, charges, or rates for voluntary consumption of utility services in reliance on the California Supreme Court' s decision in Apartment Ass'n of Los Angeles County, Inc. v. City of Los Angeles (2001) 24 Cal.4t h 830 (fee on landlords to fund Housing Code 1

11 enforcement was not a property-related fee subject to Prop. 218 because triggered by voluntary entry into rental housing business). In 2006, the California Supreme Court clarified the impact of Proposition 218 on ordinary utility rates in Bighorn-Desert View Water Agency v. Verjil (2006) 39 Cal.4th 205 (water rates for domestic water service are property related fees subject to Prop. 218). Thus, local agencies have been implementing Proposition 218 with respect to fees and charges for utility services such as water for four years. The authors of this brief have been actively involved as counsel to a party or amici in every major appellate case involving Proposition 218 since its adoption and, to their knowledge, the instant case is the first to litigate the questions addressed here. Over the past several years, Proposition 218's provisions have required clarification by the courts in cases beyond those cited above. (E.g., Greene v. Marin County Flood Control & Water Conservation Dist. (2010) 49 Cal. 4th 277 (election procedures for property related fees under Article XIII D, section 6(c); Silicon Valley Taxpayers' Ass'n v. Santa Clara County Open Space Authority (2008) 44 Cal. 4t h 43 1 Uudicial review of assessment determinations under Article XIII D, section 4); Richmond v. Shasta Community Services District (2004) 32 Cal. 4th 409 (water connection fee for new service is not a property related fee subject to Proposition 218); Pajaro Valley Water Management Agency v. Amrhein (2007) 150 Cal.App.4t h 1364 (groundwater extraction fee subject to Prop. 218 because 2

12 imposed on domestic water use). Amici agencies have individually or collectively participated in these cases by submission of amicus curiae briefs. A. DESCRIPTION OF AMICI CURIAE ACW A is a non-profit public benefit corporation organized and existing under the laws of the state of California since ACWA is comprised of over 450 water agencies, including municipal water districts, irrigation districts, county water. districts, California water districts and a number of special purpose agencies. ACWA's Legal Affairs Committee, comprised of attorneys from each of ACW A's regional divisions throughout the State, monitors litigation and has determined that this case involves issues of significance to ACW A's member agencies. CSAC is a non-profit corporation. The membership consists of the 58 California counties. CSAC sponsors a Litigation Coordination Program, which is administered by the County Counsels' Association of California and is overseen by the Association's Litigation Overview Committee, comprised of county counsels from throughout the state. The Litigation Overview Committee monitors litigation of concern to counties statewide and has determined that this case is a matter affecting all counties. The League is an association of essentially all of California's 481 cities dedicated to protecting and restoring local control to provide for the public health, safety, and welfare of their residents, and to enhance the 3

13 quality of life for all Californians. The League is advised by its Legal Advocacy Committee, which is comprised of 24 city attorneys from all regions of the State. The Committee monitors litigation of concern to municipalities, and identifies cases that are of statewide or national significance. The Committee has identified this case as being of such significance. B. AMICI HAVE A UNITY OF INTEREST BECAUSE THEIR PUBLIC AGENCY MEMBERS ARE ALL LOCAL GOVERNMENT AGENCIES SUBJECT TO ARTICLE.XIII D AND ALL IMPOSE PROPERTY RELATED FEES AND CHARGES The outcome of this case will impact the Amici's members because each member is a local government having the power to provide water, sewer, or other public utility service subject to the requirements of various statutes governing the setting of service fees and charges, as well as to article XIII D, section 6. (See Cal. Const. art. XIII C, 1 (b) and XIII D, 2(a) (defining the "local agencies" to which Prop. 218 applies).) The trial court's erroneous rulings, if upheld on appeal, will severely infringe the legislative discretion of local government to establish budgets; manage fiscal resources, and finance, operate and maintain utility services for the benefit of their residents and other customers. The local agencies represented by ACW A, CSAC, and the League have a significant interest in cases, such as this one, which involve statutory and constitutional 4

14 limitations on the ability of local public agencies to establish budgets, allocate fiscal resources, and levy property related fees. II. FACTS AND PROCEDURAL HISTORY Rather than restate the facts and procedural history in detail, Amici adopt the description of facts as set forth in the Appellant' s opening brief. III. ARGUMENT A. THE TRIAL COURT MISAPPREHENDED THE CITY'S RATE-MAKING POWER A general law city like Livingston has two kinds of authority to impose rates for its utility services - the power directly conferred by California Constitution article XI, section 91 and the power conferred by a number of mutually non-exclusive statutes adopted by the Legislature. The trial court erred by restricting the Livingston's power to a single statute that requires approval of two-thirds of city council members to collect utility rates via the property tax roll even though Livingston does not to collect rates in that manner. 1 Cities may also impose service fees under their general police power to legislate for the public health, safety and general welfare under California Constitution article XI, section 7. Because this argument is fully briefed by the City's brief, Amici do not repeat it here. 5

15 1. The City's Constitutional Power to Impose Utility Rates Article XI, section 9 of the California Constitution authorizes both general law2 and charter cities3 to operate utilities and to charge fees for doing so: "(a) A municipal corporation4 may establish, purchase, and operate public works to furnish its inhabitants with light, water, power, heat, transportation, or means of communication. It may furnish those services outside its boundaries, except within another municipal corporation which furnishes the same service and does not consent. (b) Persons or corporations may establish and operate works for supplying those services upon conditions and under regulations that the city may prescribe under its organic law." (Emphasis added.) 2 A "general law city" is a city like Livingston that does not operate under a voter-approved charter, but instead derives its powers from the Constitution and the general laws adopted by the Legislature. (Gov't Code 34102; Irvin v. City of Manhattan Beach (1966) 65 Cal.2d 13.) 3 A charter city is a city operated under a voter-approved charter. It derives its authority directly from the California Constitution as limited by the provisions of the city charter and such state legislation as may properly apply to a charter city as pertaining to matters of state wide concern, rather than municipal affairs. (Gov't Code 34101; Johnson v. Bradley (1992) 4 Cal.4t h 389, 394.) 4 The term "municipal corporation" includes general law and charter cities as well as special districts because "in its ordinary sense the term applies to all corporations exercising governmental functions on the local level." (California Apartment Assn. v. City of Stockton (2000) 80 Cal.App.4t h 699, 704.) 6

16 The power to "establish" and "operate" utilities includes the power to establish rates and charges. (Long ridge Estates v. City of Los Angeles (1960) 183 Cal.App.2d 533 (sewer rates); Durant v. City of Beverly Hills (1940) 39 Cal.App.2d 133 (water rates).) A city' s power under article XI, section 9 is self-executing and does not require enabling state legislation. (Glenbrook Development Co. v. City of Brea (1967) 253 Cal.App.2d 267.) This power can be exercised by ordinance or resolution unless an applicable statute requires action by ordinance. 5 As discussed below, because Livingston bills customers for water service via mailed bills, and does not rely on the property tax rolls to make property owners responsible for these rates, Health & Safety Code sections et seq. do not require action by ordinance in this context. The Livingston Municipal Code reflects this understanding and states that the City Council may establish water and sewer rates by resolution. Section provides as to water rates: " CHARGES FOR WATER SERVICE (A) Water Fees. The City Council shall by Resolution or Ordinance set the amount of charges, fees, and 5 In the absence of statutory or charter provisions to the contrary, a legislative act may be taken by resolution or ordinance. (Crowe v. Boyle (1920) 184 Cal

17 assessments that include, but are not limited to the following: 1. Base rate or fixed component service charges. 2. Usage charge or variable component charges per 1,000 gallons used. 3. Service charges other than the base rate. 4. Late fees. 5. Return check fees. 6. Development water impact fees. 7. Water connection fees. 8. Reconnection fees during regular business hours after water shut off. 9. Fire hydrant water use fees from construction or roving meters. 10. Fee for water used by contractors in new construction. 11. Meter tampering fee. 12. Missed appointment fee after second missed appointment. 13. Penalty fee for unauthorized water connections and use of City water by the use of 'cheater pipes,' 'straight lines,' 'hoses' or other means. 14. Other fees as determined by the City Council." (Emphasis added.) 8

18 Accordingly, the trial court's conclusion that the City was bound by the requirement of Health & Safety Code section 5471 to approve water rates with a two-thirds majority of its City Council was error. 2. The Revenue Bond Law of 1941 and Health & Safety CQde 5471 Although state legislation is not required to authorize a city to exercise its constitutional authority to provide utility service or to charge fees for that service, 6 the powers to issue debt backed by those fees and to collect those fees via the property tax roll are established by statute. The statutes local governments most commonly rely on to issue utility revenue bonds or to collect utility fees via the tax roll (as sewer providers which are not also water providers typically do 7) are the Revenue Bond Law of 1941, Government Code section et seq., and Health & Safety Code section 5471 et seq.8 6 Glenbrook Development Co. v. City of Brea, supra, 253 Cal.App.2d 267 (constitutional power to operate public utilities is self-executing). 7 A water utility can enforce its rates by turning off water service for nonpayment. Sewer service cannot be turned off so easily and most sewer agencies rely on their power to turn off the water supply - if they have it - to enforce their rates. Those that do not supply water as well as sewer typically place sewer fees on the property tax roll to ensure payment and to protect customers who pay their bills from being compelled via higher rates to subsidize those who do not. 8 In addition, many special districts have specific statutory authority in the enabling legislation pursuant to which the district is organized. 9

19 Government Code section authorizes local agencies to "prescribe, revise, and collect charges for the services, facilities, or water furnished by the [utility or other] enterprise." Government Code section authorizes Livingston and other local agencies to collect such charges via a utility bill. The courts have read these sections to authorize action by resolution. (Kennedy v. City of Ukiah (1977) 69 Cal.App.3d 545.) As to collection of rates via the property tax roll - i.e., making property owners guarantors of utility bills due from those who occupy their properties - Health & Safety Code section 547 1(a) provides: "(a) In addition to the powers granted in the principal act, any entity shall have power, by an ordinance approved by a two-thirds vote of the members of the legislative body thereof, to prescribe, revise and collect, fees, tolls, rates, rentals, or other charges for services and facilities furnished by it, either within or without its territorial limits, m connection with its water, sanitation, storm drainage, or sewerage system." (Emphasis added.) This statute is, by its very terms, supplemental to other authority granted to a local government - like the Constitutional power of cities and counties to provide utility service and to set rates for that service and power granted by other statutes. Health & Safety Code section is also the source of the trial court's erroneous conclusion that a two-thirds vote of the 10

20 Livingston city council is needed to adopt an ordinance to impose water rates. The courts have, over the years, ruled variously on the question whether compliance with this statute is optional or mandatory with respect to various utility fees. In 1977, Kennedy v. City of Ukiah, 69 Cal.App.3d 545 concluded that a general law city could adopt sewer and water charges by resolution under the Revenue Bond Law of 1941 and was not bound by Health & Safety Code sections 5471 et seq. to act by ordinance adopted by a two-thirds vote because the Health & Safety Code provided additional authority for city utility rates that supplemented other authority and did not control over the Revenue Bond Law of In 1982, Pinewood Investors v. City of Oxnard, 133 Cal.App.3d 1030, held that a general law city had authority to impose sewer connection fees, but only by complying with the ordinance requirement of Health & Safety Code section 5471, finding it to be the more specific and therefore controlling provision as compared to Government Code section (authorizing a city to operate sewers) and the more general police power authority of California Constitution article XI, section 7.9 In 1984, the Court of Appeal reached a similar conclusion in Cavalier Acres, Inc, v. San Simeon Acres Community Services District, The police power discussed in Pinewood is the power to legislate for the public health, safety and general welfare. Pinewood does not cite article XI, section 9, a more specific source of Livingston's power to provide public utility services and to charge fees for those services. 11

21 Cal.App.3d 798, which concluded that a Community Services District (CSD) 1 0 was required to adopt sewer and water connection charges by ordinance because the Health & Safety Code and the Community Services District Law were more specific to connection charges imposed by CSDs than the Government Code provision regarding connection charges and were therefore controlling. In 2004, the California Supreme Court rejected this result in Richmond v. Shasta Community Services District, 32 Cal. 4t h 409, concluding that the Government Code section specific to connection charges was the more specific and controlling. The Pinewood and Cavalier Acres cases, which involved connection charges rather than basic service rates, are no longer good authority for two reasons. First, the California Supreme Court rejected this rule in the Richmond case as to connection charges, finding Government Code provisions specific to connection charges to be controlling. Second, in after both Pinewood and Cavalier Acres were decided- the Legislature amended Health & Safety Code section 5471 to add the introductory phrase, "[i]n addition to the powers granted in the principal 1 0 A CSD is a limited-purpose local government created pursuant to the Community Services District Law. (Gov't Code et. seq). Such entities derive their powers solely from statute, unlike cities and counties which derive power directly from such provisions of the California Constitution as the utility service authority conferred by article XI, section 9, in issue here. (See Gov 't Code (listing powers of a CSD).) 12

22 act," evidencing plain intent to make Health & Safety Code provisions supplemental, rather than exclusive, authority for utility rates. 1 1 Moreover, Pinewood and Cavalier Acres were wrongly decided, as neither considered the power of a general law city under California Constitution article XI, section 9, but instead the police power alone. Still further, as those cases involved connection charges on new development, a subject closely regulated by the Legislature, and not basic charges for utility service to existing structures, a subject held to be a matter of local concern; 1 2 those cases are distinguishable in any event. Additional authorities support the conclusion that Livingston and other cities, counties and special districts may adopt water and sewer rates by majority-vote resolution rather than two-thirds-approved ordinance. Nothing in either Government Code section or suggests that the authority those statutes confer to adopt rates by resolution is intended to be limited to agencies that have issued bonds under the Revenue Bond Law of Indeed, Government Code section states that the Revenue Bond Law of 11 Indeed, Amicus ACWA requested this legislation for this very purpose. (3 Clerk's Transcript ) 12Cramer v. City of San Diego (1958) 164 Cal.App.2d 168 (utility finance is a municipal affair rather than a matter of statewide concern, thus state legislation could not preempt the acts of a charter city). 13

23 including sections and shall be "liberally construed to promote its objects." Its objects are those stated in section 54301: "the issuance of bonds and the acquisition, construction, or improvement of any enterprise." (Emphasis added.) The liberal construction rule required the trial court to read this as stating multiple purposes - the issuance of bonds may be distinguished from the other activities to improve a utility enterprise and the City need not issue bonds to have the power to impose rates under this statute. The trial court's failure to read the Revenue Bond Law of 1941 broadly was error and defeated the legislative purpose to provide flexible statutory authority to supplement the constitutional rate-making power of Livingston and other local governments. The two-thirds Council approval requirement of Health & Safety Code section 5471 is anti-democratic in that it empowers a minority of a local legislative body to obstruct basic business of the agency. As the California Supreme Court put it in construing Proposition 13's requirement of two-thirds-voter approval of special taxes: In reaching this conclusion, we held that, while the requirement for a two-thirds vote as a condition for adoption of a tax is not unconstitutional (see Gordon v. Lance (1971) 14

24 403 U.S. 1, 6, 91 S.Ct. 1889, 1892, 29 L.Ed.2d 273), the language of section 4 must be strictly construed and ambiguities therein resolved so as to limit the measures to which the two-thirds requirement applies. In this connection, we reasoned that the two-thirds vote requirement in section 4 is inherently undemocratic; the requirement was imposed by a simple majority of the voters throughout the state upon a local entity to prohibit a majority (but less than two-thirds) of the voters of that entity from taxing themselves for programs or services which would benefit largely local residents; and the sales tax in issue in that case unlike the levy in Gordon, did not result in "committing... the credit of... generations yet unborn." (City and County of San Francisco v. Farrell (1978) 32 Cal.3d 47, (emphasis added).) Thus in a representative democracy a super-majority voting requirement of voters or legislators, state or local, requires justification. The apparent purpose of the super-majority requirement of Health & Safety Code section is to protect property owners from lightly being made guarantors of utility bills by collection of utility fees on property tax bills. Accordingly, a general law city's authority to impose water and sewer rates by resolution under its own ordinances pursuant to its constitutional power under article XI, section 9 and Government Code sections and 54345, allows it to act by resolution passed by three affirmative votes of its five-member city council. The requirement of 15

25 Health & Safety Code section 5471 that it act by ordinance adopted by a two-thirds vote of the city council is not applicable unless the city chooses to act under that statute to use the property tax roll to make property owners guarantors of utility bills. B. THE TRAIL COURT MISAPPREHENDED THE REQUIREMENTS OF PROPOSITION 218 Proposition 218, adopted in 1996 to regulate the imposition of taxes, assessments and certain property related fees, imposes procedural requirements on water and sewer fees imposed by local governments. (Cal. Const. art. XIII D, 6.) Specifically, that section provides, in relevant part: Sec. 6. Property Related Fees and Charges. (a) Procedures for New or Increased Fees and Charges. An agency shall follow the procedures pursuant to this section in imposing or increasing any fee or charge as defined pursuant to this article, including, but not limited to, the following: (1) The parcels upon which a fee or charge is proposed for imposition shall be identified. The amount of the fee or charge proposed to be imposed upon each parcel shall be calculated. The agency shall provide written notice by mail of the proposed fee or charge to the record owner of each identified parcel upon which the fee or charge is proposed for imposition, the amount of the fee or charge proposed to be imposed upon each, the basis upon which the amount of the 16

26 proposed fee or charge was calculated, the reason for the fee or charge, together with the date, time, and location of a public hearing on the proposed fee or charge. (2) The agency shall conduct a public hearing upon the proposed fee or charge not less than 45 days after mailing the notice of the proposed fee or charge to the record owners of each identified parcel upon which the fee or charge is proposed for imposition. At the public hearing, the agency shall consider all protests against the proposed fee or charge. If written protests against the proposed fee or charge are presented by a majority of owners of the identified parcels, the agency shall not impose the fee or charge. The Legislature has provided some small guidance regarding these requirements in the Proposition 218 Omnibus Implementation Act of (Gov't Code (i) (defining "notice by mail"), 53750(m) (defining "water"), (a) (notice may be provided by insert in utility bill), (fee schedule may include inflation-adjustment mechanism and means to pass-through increases in cost of water delivered by a local agency's wholesaler).) However, it has not provided much amplification on the Constitution's text. Similarly, with one exception, judicial decisions construing article XIII D, section 6 have generally focused on whether particular fees are or are not "property related fees" subject to its terms. (E.g. Bighorn-Desert 17

27 View Water Agency v. Verjil, supra, 39 Cal.4t h 205 (rates for domestic water service are property related fees subject to Prop. 218). The exception is the recent decision of Greene v. Marin County Flood Control & Water Conservation District (2010) 49 Cal.4th 277, which construes the election requirement, from which water, sewer, and trash fees are expressly exempt. Accordingly, in construing the procedural requirements of article XIII D, section 6(a), this Court must rely on the text of the provision, its purpose, and background principles of law governing noticed hearings before local governments in our State. The trial court reached four remarkable conclusions regarding the City's asserted procedural errors, each of them wrong. It also reached erroneous conclusions regarding substantive requirements. Each of these is discussed below. 1. No Law Requires a Prop. 218 Notice to be Limited to a Single Proposal Like many products of the initiative process, the fee provisions of article XIII D, section 6 are not especially well drawn. On their face, they seem best applied to flat fees imposed at a single point in time ("The amount of the fee or charge proposed to be imposed upon each parcel shall be calculated.'' Cal. Const. art. XIII D, 6(a)(l ).) However, our Supreme Court held in Bighorn that a metered rate for ongoing water service is subject to Prop. 218 and the Court of Appeal has concluded that giving f8

28 notice of "the amount of the fee or charge proposed to be imposed" may be done by giving notice of a rate from which a customer can estimate future bills. As the Court explained in Pajaro Valley Water Management Authority v. Amrhein (2007) 150 Cal.App.4t h 1364 regarding its initial decision in that case, which was revised on remand following the Supreme Court's Bighorn decision: We assumed [in our initial, pre-bighorn decision] that the drafters of Article 13D used the term "amount," in deliberate contradistinction to "rate," to mean the actual sum to be charged to the owner of a given property. Unlike a rate, a consumption-driven charge cannot be determined until the amount consumed is known, i.e., after the fact. The holding in Bighorn appears incompatible with this view, compelling the conclusion that the notice requirements of Article 13D are satisfied if the agency apprises the owner of the proposed rate to be charged. Otherwise, the [Bighorn] court's distinction between connection fees and ongoing service charges appears difficult, if not impossible, to defend. (150 Cal. App. 4t h at 1395 n. 15 (emphasis added).) Richmond v. Shasta Community Services District, supra, 32 Ca1.4t h 409 held the connection fees imposed on developers of housing units seeking new water service were not property related fees subject to Proposition 218 in part because local governments could not predict in advance of a request 19

29 Thus, the requirement that a notice of a proposed water increase include "the amount of the fee or charged proposed to be imposed upon each [parcel and] the basis on which the amount of the proposed fee or charged was calculated" can be satisfied by including in the notice the proposed rate table to be applied to future water consumption, as Livingston did here. Thus, Proposition 218's reference to "the amount" of a proposed fee or charge cannot mean a single amount a property owner must pay, but can include a rate table from which future bills can be calculated. Moreover, our Supreme Court has explained the purpose of the notice and hearing requirement of article XIII D, section 6(a) as follows: The notice and hearing requirements of subdivision (a) of section 6 of California Constitution article XIII D will facilitate communications between a public water agency's board and its customers, and the substantive restrictions on property-related charges in subdivision (b) of the same section should allay customers' concerns that the agency's water delivery charges are excessive. Bighorn, supra, 47 Cal.4 th at 220 (emphasis added). Where, then, does one find a rule that a local agency giving notice of a hearing under article XIII D, section 6(a) may give notice of only one for a connection to which parcels the connection fee would apply. Bighorn found the property related fee provisions of Proposition 218 to apply to water rates notwithstanding the imperfect fit of such rates in the language of article XIII, 6(a), which seems to apply only to flat fees. 20

30 proposed rate structure? Provided that customers actually have notice of the highest rate they might be asked to bear, they have the information they need to participate in the hearing, to express their views to their elected representatives and, if they choose, to protest those rates to prevent their imposition.14 Requiring a notice to contain but a single rate structure either artificially required Livingston staff to restrict its council's legislative discretion in choosing the best means tci allocate the benefits and burdens of water. service among its customers or to send out three separate notices for three rate proposals - raising postage costs that must ultimately be recovered from water rates and engendering confusion, but not meaningfully advancing the goal of article XIII D, section 6(a) to facilitate dialog between government and the governed. Indeed, the Legislature has authorized local governments acting under Proposition 218 to propose not just a single rate, or a single rate table, but a "schedule or fees or charges for a property-related service for a period not to exceed five years" that "may include a schedule of adjustments, including a clearly defined formula for adjusting for inflation" and provision "for automatic adjustments that pass through the adopted increases or decrease in the wholesale charges for water establishing by... [an]other agency." (Gov't Code ) There simply is no requirement 14 Cal. Canst. art. XIII D, 6(a)(2) says, "If written protests against the proposed fee or charge are presented by a majority of owners of the identified parcels, the agency shall not impose the fee or charge." 21

31 that a notice of hearing under article XIII D, section 6(a)(1) be limited to a single rate proposal. Given the goals of Proposition 218 to minimize water rates and to promote dialog between rate-payers and rate-makers, a balance must be structure between notice and hearing requirements sufficient to allow meaningful public participation, but sufficiently administrable and flexible to avoid needless expense and delay. In short, the trial court' s conclusion that Livingston erred by informing its water customers of three alternative water rate proposals rather than one is without legal support and this Court should reverse. 2. Prop. 218 Does Not Forbid an Agency to Impose Lower Rates Than Those Identified in a Notice The trial court faulted the Livingston city council for imposing a rate lower than that stated in the hearing notice. It thus concluded the council was required to either abandon a rate increase it found necessary or to ignore public objections to water rates by imposing every single penny of the rate of which it gave notice. Such rigidity is nowhere required by the text of Proposition 218 and is destructive of the purposes of Proposition 218 for it frustrates rather than furthers dialog between customers and ratemaking legislators. Local agencies work no injury to the goals of Proposition 218 when they refrain from imposing the whole rate of which they have given notice in response to objections from those they serve - 22

32 this is the essence of government action in response to public comment. The rigid rule articulated below would have instead required the Livingston city council to ignore public comment and impose the whole rate of which it had given notice or to start the 45-day hearing process anew and to conduct further hearings to impose a lower rate. What purpose of Proposition 218 is served by such rigidity? What harm is caused by government forbearance in light of objections from those government serves? Fortunately, case law developed in related settings makes clear that a local agency satisfies a notice requirement by giving the recipient sufficient information to decide whether or not the proposed rates are so high as to justify his or her time and effort in attending the hearing. (Dahms v. Downtown Pomona Property Improvement District (2009) 174 Cal.App.4t h 708, 723 (assessment approved in balloting under Cal. Const. art. XIII D, 4 could be imposed at lower level than special benefit determined in accordance with that section would justify).) Livingston's brief details this law, so amici will not belabor the point. It is enough to note that the purposes of Proposition 218 to protect rate-payers from excessive rates and to encourage dialog between rate-payers and rate-makers are hardly served by the rule the trial court imposed here. Again, this Court should reverse that error. 23

33 3. Nothing in Proposition 218 Requires a Local Agency to Complete a Hearing in One Sitting Given the substantial public interest in Livingston's proposed water rate increase, including ample input on behalf of the Respondent here, and the city council's efforts to overcome the minority veto of dissident council members allowed by the erroneous initial impression that a two-thirds vote of the city council was required, Livingston was unable to complete its ratemaking process in a single evening. Instead, the new rate proposal was discussed at each of Livingston's twice-monthly city council meetings from April 21, 2009 to July 7, a period of 11 weeks. The trial court found this error, concluding Livingston was obligated to provide a 45-day mailed notice of each of its regularly scheduled city council meetings in order to continue discussion of the matter. (Feb. 25, 2010 Findings and Order at p. 9: "Such notices were required for each and every hearing held by the Respondent.") The result of this rule would be that a local legislative body must complete its hearing and adopt its rates on the date on which the hearing commenced. Otherwise, 45 days' notice is required of any continuance and a necessary increase in a local agency's rates might be delayed indefinitely. This is not a realistic rule for a responsive local democracy with ample citizen participation. California's courts have considered in other contexts the practical need to continue hearings from day to day to allow all 24

34 who would be heard to speak. (E.g., Chaffee v. San Francisco Public Library Com. (2005) 134 Cal.App.4t h 109 (public comment right at open meeting of local government under the Ralph M. Brown Act need not extend to second day of two-day hearing when all who sought to be heard on the first date were heard and second day may be restricted to commission deliberations).) Thus, lengthy hearings are not uncommon in California's local governments, as the record here amply demonstrates. The constitutional text requires only that "[t]he agency shall conduct a public hearing upon the proposed fee or charge not less than 45 days after mailing the notice" and that "[a]t the public hearing, the agency shall consider all protests against the proposed fee or charge." (Cal. Const. art. XIII D, 6(a)(2).) The text makes plain that allowing input more than 45 days after notice is given is not problematic - the mandate is that at least 45 days notice be given. Moreover, the agency is obliged to consider all protests against the fee or charge and no mention is made of a requirement that the hearing be completed in one day. Once a local agency completes the notice and hearing requirements of article XIII D, section 6(a), it need not impose a rate increase at all - it is merely authorized to do so if there is no majority protest. Nothing in the text of Proposition 218 sheds any light on how much time may elapse between determining that no majority protest has occurred under article XIII D, section 6(a)(2) and actually imposing the rate. At least five days 25

35 will be required for a general law city that acts by ordinance, for ordinances require two readings not less than five days apart. (Gov't Code ) Indeed, the Legislature has found that a period of five years may be allowed to elapse between a Proposition 218 proceeding authorizing a rate structure and any legislative acts necessary to actually impose the rates that are contemplated by the approved rate structure. Government Code section states: An agency providing water, sewer, or refuse collection service may adopt a schedule of fees or charges authorizing automatic adjustments that pass through increases in wholesale charges for water or adjustments for inflation, if it complies with all of the following: (a) It adopts the schedule of fees or charges for a propertyrelated service for a period not to exceed five years pursuant to Section (b) The schedule of fees or charges may include a schedule of adjustments, including a clearly defined formula for adjusting for inflation. Any inflation adjustment to a fee or charge for a property-related service shall not exceed the cost of providing that service. 15 Government Code implements the notice and hearing requirement of article XIII D, section 6(a). 26

36 (c) The schedule of fees or charges for an agency that purchases wholesale water from a public agency may provide for automatic adjustments that pass through the adopted increases or decreases in the wholesale charges for water established by the other agency. (d) Notice of any adjustment pursuant to the schedule shall be given pursuant to subdivision (a) of Section 53755, not less than 30 days before the effective date of the adjustment. (Emphasis added.) Thus, the Legislature has determined that a property-owner protest proceeding under Prop. 218 may involve a rate proposal that includes "a schedule of adjustments for a period not to exceed five years" and the local government may, if no majority protest arises, impose those rates over that five-year period, provided only that each increase is preceded by 30 days' notice- not a hearing on the increase, but of the increase itself. The rationale for continuances without further mailed notice is that recipients of hearing notices who wish to be heard attend the hearing and are present when the date of a continuance is announced or. can readily learn of the date to which the hearing was continued by inquiry. (E.g., Gov' t Code (public hearing on land use application under Planning and Zoning Law "may be continued from time to time"); Bel Mar Estates v. California Coastal Com. (1981) Cal.App.3d 936 (upholding Coastal 27

37 Commission approval of permit despite continuance of hearing before action).) Only when a matter is continued to an unspecified date is a new notice required to inform affected persons of the new hearing date, time and place. Thus, the trial court's conclusion that the Livingston city council could not continue its hearing on the proposed water rates, and could not delay imposing rates after it determined the absence of a majority protest, is 4 too rigid to reflect the realities of participatory democracy at the local level, and frustrates the very dialog between rate-payer and rate-maker our Supreme Court found to be the purpose of article XIII D section 6(a). Again, this Court should reverse this error. 4. The Trial Court Erred by Imposing an Elaborate Post-Hoc Content Requirement on the City's Notice California Constitution article XIII D, section 6(a)(l) requires a notice of a property-owner protest hearing on a water rate to state only: "the amount of the fee or charge proposed to be imposed on each [parcel], the basis upon which the amount of the proposed fee or charge was calculated, the reason for the fee or charge, together with the date, time, and location of a public hearing... " As the Pajaro court explained, application of this language to a water fee comprised of a base periodic charge (like a monthly or bi-monthly 28

38 minimum account charge or a base fixed charge) and a rate based on the volume of water consumed is non-obvious and that Court concluded the notice requirement is satisfied if a water provider gives notice of a rate table from which a customer can estimate future water bills. (Pajaro Valley Water Management Authority v. Amrhein, supra, 150 Cal.App.41 h at 1399 n. 15.) We are given but the bare text, "the reason for the fee or charge," as to the required content of a notice beyond the amount of the fee and the time, date and place of hearing. Given the purposes of Proposition 218 to encourage dialog between rate-payers and rate-makers, a notice must provide enough information to allow customers to decide whether or not to participate in a hearing. It is enough for the average water customer - much less the sophisticated corporate respondent and large water consumer at bar - to know that the fee is imposed for water service to determine whether to participate in the hearing. Had Proposition 218 intended to impose information disclosure standards like those required by the California Environmental Quality Act (Pub. Res et seq.) (CEQA), surely the constitutional text would provide more guidance than the bare phrase "the reason for the fee." If there be but one reason for a fee, it must be the provision of the service for which the fee is imposed. If the voters who approved Proposition 218 intended a detailed statement of the reasons for a fee "increase" - as opposed to a reason for a fee itself - they 29