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Whether the requirements of Proposition 218 apply to the different types of rates and charges that a water agency may impose in a drought is a complicated issue and subject to different interpretations by attorneys in the industry.  In my view, drought water rates and excess use charges that impose a charge on each unit of water consumed would be subject to the requirements of Proposition 218.  However, fines that are not tied to the amount of water used, likely are not subject to the requirements of Proposition 218.

 

Question: Hi Pat.  We are a retail water agency and we are evaluating different rates and fines in light of the drought.  Do we need to comply with Proposition 218?

Answer:  This is a complex question, and different attorneys may have different views on the answer.  As background, Proposition 218, the Right to Vote on Taxes Act, was approved by the voters in 1996 and it amended the California Constitution by adding Articles XIIIC and XIIID.  Proposition 218 established additional substantive and procedural requirements and limitations on new and increased taxes, assessments, and property-related fees and charges.  In 2006, the California Supreme Court, in the Bighorn-Desert View Water Agency v. Verjil decision, determined that water rates are property-related fees subject to the requirements of Proposition 218.

Now, I will provide you with an oversimplified summary of my views on the different types of charges that may come into play in a water shortage emergency.

1. Drought Water Rates – If your agency intends to adopt a new water rate structure with increased commodity charges based on the amount of water used, then Proposition 218 would apply to the proposed drought rate structure.
2. Excess Use Charges – If your agency intends to adopt an excess use charge that is tied to the amount of water consumed, for example, by imposing a $1.00 charge on each unit of water used over a set allocation, then the excess use charge likely would be deemed a property related fee and, therefore, subject to the requirements of Proposition 218.
3. Fine – If your agency intends to adopt a new fine that is not tied to the amount of water used, then I think there is a strong argument that the fine is not subject to the requirements of Proposition 218.  For example, a fine of $50.00 for water use exceeding a set allocation, regardless of whether the exceedance is by one unit or one hundred units, may not be deemed a property related fee.  This type of fine would be subject to Proposition 26, but it likely would fall within an exemption to the voter approval requirement.

Again, this is a complicated area, so please be sure to consult with your agency's legal counsel before proceeding with any of these charges. 

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Pat Miyaki has been representing local government agencies for more than 20 years as both general counsel and special counsel. He represents water districts, transportation districts, sanitary districts, cities, and joint powers agencies.

 

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