Cal. Bldg. Indus. Ass'n v. State Water Res. Control Bd.

Decision Date20 April 2015
Docket NumberA137680.
Parties CALIFORNIA BUILDING INDUSTRY ASSOCIATION, Plaintiff and Appellant, v. STATE WATER RESOURCES CONTROL BOARD, Defendant and Respondent.
CourtCalifornia Court of Appeals Court of Appeals

Rutan & Tucker and David P. Lanferman for Plaintiff and Appellant.

Kamala D. Harris , Attorney General, Paul D. Gifford and Robert W. Byrne , Assistant Attorneys General, Gavin G. McGabe , Molly K. Mosley , Robert E. Asperger and Tiffany Yee , Deputy Attorneys General, for Defendant and Respondent.

OPINION

KLINE, P. J.

When parties discharge waste that could affect the quality of California's water they must pay an annual permit fee set by the State Water Resources Control Board (the Board). (See Wat. Code, § 13260.)1 In 2011, two of the five seats of the Board were vacant; two of the remaining three Board members voted to approve an increase of fees for the 2011-2012 fiscal year. The California Building Industry Association (CBIA) asserts that section 183 required the fees to be approved by a majority of the five-person Board. CBIA also contends that the Board violated section 13260 and imposed an illegal tax because the fee imposed on the dischargers in the stormwater program — one of eight program areas in the waste discharge permit program — exceeded the cost of regulating this particular program.

The Board responds that a majority of the Board's quorum voted to approve the fee in compliance with section 181, the applicable statute. The charge was a valid regulatory fee under section 13260, according to the Board, because the total fees collected for all eight programs did not exceed the total cost to regulate the entire waste discharge permit program. The Board maintains that CBIA incorrectly interprets the law to impose a requirement that the fees charged to stormwater dischargers must correspond exactly to the costs of regulating that one program.

We conclude that section 181, not section 183, applies to the Board's adoption of the fee schedule and that the Board's action complied with section 181. We also reject CBIA's principal argument that the fees and regulating expenses for one particular program must be equal; we hold that section 13260 requires that the total fees collected from all waste dischargers must equal the costs of regulating the entire waste discharge permit program.

CBIA bears the burden of making a prima facie case showing the fee was invalid. (See California Farm Bureau Federation v. State Water Resources Control Bd. (2011) 51 Cal.4th 421, 436 [121 Cal.Rptr.3d 37, 247 P.3d 112] (Farm Bureau).) Courts have held that a regulatory fee is valid as long as the charges do not surpass the costs of regulating the program and the allocation of the fees to the payor is fair and reasonable. (See, e.g., Sinclair Paint Co. v. State Bd. of Equalization (1997) 15 Cal.4th 866, 878 [64 Cal.Rptr.2d 447, 937 P.2d 1350] (Sinclair Paint); San Diego Gas & Electric Co. v. San Diego County Air Pollution Control Dist. (1988) 203 Cal.App.3d 1132, 1146 ; Beaumont Investors v. Beaumont-Cherry Valley Water Dist. (1985) 165 Cal.App.3d 227, 235 .) Here, CBIA did not make a prima facie case that the charges surpassed the costs of regulating the program or that allocation of the fees was unfair or unreasonable. Accordingly, we affirm the judgment.

BACKGROUND
The Permit Fees for Water Dischargers

The Board, a state agency within the California Environmental Protection Agency, regulates water rights and water quality. (§§ 175, 179.) In 1969, the Legislature added to the Water Code, Assembly Bill No. 413 (1969 Reg Sess.) (Stats. 1969, ch. 482, p. 1045), which included the Porter-Cologne Water Quality Control Act (the Act), a statewide program for water quality control. (§ 13000 et seq.) Under this Act, nine regional boards, overseen by the Board, administer the state program in their respective regions. (§§ 13140, 13200 et seq., 13240, 13301.) The Act vests the Board with authority to formulate and adopt state policy for water quality control. (§ 13140.)

Parties who discharge waste or propose to discharge waste "that could affect the quality of the waters of the state" are required by the Act to file a "report of waste discharge" (i.e., a permit application) with the Board. (§ 13260, subds. (a)-(c).) Each party filing a permit application under the Act must pay an annual fee according to a fee schedule established by the Board. (§ 13260, subd. (d)(1)(A).) The fees collected are deposited in the Waste Discharge Permit Fund (the Fund), and "[t]he money in the [F]und is available for expenditure by" the Board "upon appropriation by the Legislature, solely for the purposes of carrying out this division." (Id., subd. (d)(2)(A).) "The total amount of annual fees collected ... shall equal that amount necessary to recover costs incurred in connection with the issuance, administration, reviewing, monitoring, and enforcement of waste discharge requirements and waivers of waste discharge requirements." (Id., subd. (d)(1)(B).)

The Board must annually adopt a water quality fee schedule by emergency regulation to establish the amount of fees each discharger must pay that year. (§ 13260, subd. (f)(1).) "The total revenue collected each year through annual fees shall be set at an amount equal to the revenue levels set forth in the Budget Act for this activity. The state board shall automatically adjust the annual fees each fiscal year to conform with the revenue levels set forth in the Budget Act for this activity. If the state board determines that the revenue collected during the preceding year was greater than, or less than, the revenue levels set forth in the Budget Act, the state board may further adjust the annual fees to compensate for the over and under collection of revenue." (Ibid.)

The Schedule of Fees for the 2011-2012 Fiscal Year

For the 2011-2012 fiscal year, the annual budget act provided for $100,672,000 in spending from the Fund for the waste discharge permit program, but the projected revenue based on the existing fee schedule was $73,070,000. The Board staff calculated that it would have to increase the fees to compensate for a $27.6 million dollar shortfall, and proposed significant fee increases in the eight program areas within the waste discharge program, including the stormwater program area.2 With regard to the stormwater program, the Board had collected substantially more revenues than it reported as "expenditures" for each of the seven fiscal years prior to the fiscal year 2011-2012. The net surplus over the seven years since fiscal year 2004-2005 was $23,506,000.

The Board's staff proposed a 34.9 percent increase in fees for all stormwater dischargers to generate fee revenue to equal the stormwater program area's budget of $26,619,000 for fiscal year 2011-2012. The Board scheduled a public hearing for September 19, 2011, for the consideration of new "emergency regulations" related to the proposed schedule of fees for fiscal year 2011-2012.

The Board currently consists of five members. (§ 175, subd. (a).) At the time of the hearing on September 19, 2011, two seats on the Board were vacant. The remaining three Board members conducting the hearing considered the opposition to the fee increase presented by CBIA and others. The Board adopted resolution No. 2011-0042, which approved the proposed new schedule of fees. The new fee schedule increased the stormwater program fees by 34.9 percent; the total fee increase for all eight programs cumulatively averaged 37.8 percent. Two of the three Board members voted for the resolution, while the third abstained.

On September 22, 2011, the Board submitted the emergency regulation adopted at the Board meeting on September 19, 2011, to the Office of Administrative Law for approval. The emergency regulations were filed with the Secretary of State, and published in the California Code of Regulations.

Court Proceedings

On December 9, 2011, CBIA filed a petition for writ of mandate and a complaint for declaratory and injunctive relief. CBIA is a nonprofit corporation with 3000 members who are "active in all aspects of the home-building industry throughout California." CBIA and its members "are required to seek waste discharge and storm water discharge permits from the Board."

CBIA claimed the stormwater fees were higher than the amount permitted under section 13260 and were not a valid regulatory fee. Additionally, it claimed that section 183 requires a majority vote by all members of the Board to adopt a fee schedule, which did not occur; therefore the fee, according to CBIA, was invalid.

The trial court held a hearing on September 20, 2012, and later that day issued an order denying the writ petition. CBIA filed a motion for reconsideration, which was heard on October 25, 2012. The court denied this motion and filed its judgment in favor of the Board.

CBIA filed a timely notice of appeal. After filing their briefs, and at our request, the parties provided supplemental briefing on the applicability of sections 181 and 183.

DISCUSSION
I. The Number of Board Members Necessary for Approval of the Fee

As noted, in September 2011, when the Board adopted the fee schedule for fiscal year 2011-2012, two Board seats were vacant. Of the three remaining Board members conducting the hearing in September 2011, two voted to approve the fee schedule; the third member abstained.

CBIA contends that under the plain language of section 183, a majority of the Board members — three — had to approve the fee schedule, and the approval by two Board members was not procedurally valid. The Board responds that section 181, not section 183, applies to the Board's action and the fee was validly approved pursuant to section 181 because two of the three Board members, a majority of the quorum, voted to adopt the fee schedule.

A. Standard of Review

(1) Interpreting statutes is a question of law subject to de novo review. (In re Tobacco II Cases (2009) 46...

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