Appellate Court Decision Held that the Pumping Fee is Subject to Prop. 26 and is not a Property-Related Fee Subject to Prop. 218

Two California Appellate Court decisions handed down in March addressed whether or not a local water agency’s groundwater pumping charges are property-related fees. One of these cases concluded that they are not property-related fees. That court decision will now be reviewed by the California Supreme Court. The distinction is important because of the restrictions imposed for property-related fees under Proposition 218 — as well as the exemptions for fees that are considered taxes under Proposition 26.

In City of San Buenaventura v. United Water Conservation District, issued March 17, the Second District Court of Appeal held that a water conservation district’s groundwater pumping fees, established at a rate for non-agricultural users that is three times higher than that for agricultural users, are not property-related fees subject to the restrictions imposed under Proposition 218 (California Constitution article XIII D, section 6). The court also rejected the argument that the challenged fees are taxes under Proposition 26 (California Constitution, article XIII C, section 1(e)). Rather, the court found that the fees are valid fees imposed under two exceptions to the definition of “tax” established under Proposition 26. The California Supreme Court has granted review of this decision.

In the other case, Great Oaks Water Company v. Santa Clara Valley Water District, issued March 26,the Sixth District Court of Appeal came to a contrary conclusion regarding the classification of the district’s groundwater pumping fees. Here, the court found that the District’s groundwater pumping fees are property-related fees subject to Proposition 218. This case is not under review by the California Supreme Court.