City of Half Moon Bay v. Granada Cmty. Servs. Dist.

• Docket Number: H049896
• Decision Date: 15 December 2023
• Parties: CITY OF HALF MOON BAY, Plaintiff, Cross-defendant and Appellant, v. GRANADA COMMUNITY SERVICES DISTRICT et al., Defendants, Cross-complainants and Respondents.
• Court: California Court of Appeals Court of Appeals

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CITY OF HALF MOON BAY, Plaintiff, Cross-defendant and Appellant, v. GRANADA COMMUNITY SERVICES DISTRICT et al., Defendants, Cross-complainants and Respondents.

H049896

California Court of Appeals, Sixth District

December 15, 2023

NOT TO BE PUBLISHED

(Santa Clara County Super. Ct. No. 17CV316927)

WILSON, J.

In 1976, the City of Half Moon Bay, the Granada Community Services District, and the Montara Water and Sanitary District entered into a joint powers agreement (agreement) creating the Sewer Authority Mid-Coastside (authority) to develop a joint wastewater treatment and disposal system. Specific portions of the system which the two districts initially paid to construct, but which are operated and maintained by the authority pursuant to the agreement, have recently required, and will continue to require, replacement and repair. The parties now dispute whether the City must contribute to the funding of those improvements under the terms of the agreement.

All parties sought declaratory relief as to whether the replacement and repair work at issue constitutes "maintenance" or a new "project" under the agreement-the former requiring approval and funding from every member agency, the latter requiring funding only from each agency that elects to approve and participate in the project. The parties then filed cross-motions for summary judgment as to all the complaints; the trial court granted the districts' motions and denied the City's holding that the specified replacement and repair work constitutes "maintenance" under the agreement, so the City is required to fund its proportional share.

The City appeals. We conclude the agreement is ambiguous and capable of multiple reasonable interpretations regarding what constitutes "maintenance" or a "project," and that the extrinsic evidence is conflicting, thereby creating a triable issue of material fact precluding summary judgment. Accordingly, we reverse and remand with directions to enter a new order denying all parties' motions for summary judgment.

I. Factual and Procedural Background^[1]

A. History of wastewater challenges

For decades, the mid-coastal communities in San Mateo County have faced extensive wastewater management challenges in attempting to meet state and federal discharge standards, accommodate growth, and develop adequate facilities for treatment and delivery. In the early 1970s, after years of operating independent wastewater facilities, the City of Half Moon Bay (City), the Granada Sanitary District (Granada) and the Montara Sanitary District (Montara)^[2] sought to form a joint powers agency and develop a regional facility to address the areawide wastewater problems and obtain state and federal grant funding. In 1972, the City was designated by the State Water Resources Control Board (SWRCB) as the lead agency for the proposed regional system, after the three agencies were initially unable to form a joint powers agency.

Over the course of the next several years, the agencies explored numerous alternatives for a regional system, from which two preferred plans emerged. "Plan A" proposed retaining and upgrading the three agencies' existing independent treatment plants for a combined capacity of 2.0 million gallons per day (mgd), and constructing an "intertie" conveyance line connecting the three plants to a common ocean outfall and a reclamation line. "Plan F" proposed constructing a consolidated 2.0 mgd treatment plant in the City as well as an intertie conveyance connecting to a common outfall and a reclamation line. In January 1976, the agencies signed a letter of understanding (LOU), subsequently incorporated into their joint powers agreement, which LOU recognized the agencies' preference for Plan F as the best apparent alternative and provided for costsharing of roughly 50 percent to the City and 50 percent to the districts, "with modification of such share possibly being made based upon actual benefit and total past investments in existing plant facilities."

B. The agreement and relevant amendments

In February 1976, the agencies entered into the agreement pursuant to Government Code section 6500 et seq., thereby creating the authority.^[3] The agreement recognized the agencies' mutual interest in developing a joint waste collection, transmission, treatment disposal and management plan for the Half Moon Bay Basin, "capable of acquiring, constructing, maintaining, managing, operating and controlling facilities for the joint collection, transmission, treatment and disposal of wastewater within said basin." It further provided that its purpose was for the agencies to jointly exercise their common power to "plan for, acquire, construct, reconstruct, alter, enlarge, replace, repair, maintain, manage, operate and control facilities for the collection, transmission, treatment and disposal of wastewater for the benefit of the lands and inhabitants within their respective boundaries."

The agreement set forth the authority's "planning policy" and authorized studies and planning relative to the combined service areas of the agencies, "to develop regional solutions to the wastewater treatment and management problems... in accordance with all applicable federal, state and regional water quality control requirements, consistent with demographic studies. and planned so as not to result in unreasonable financial burdens on the member agencies whatever course future development of the area might take." The agreement defined the "present project" as the one set forth in the LOU, which it attached and incorporated by reference.

Two distinct categories of budgets are identified in the agreement. The annual "general budget" includes, among other things, administrative expenses and "the expenses of operating and maintaining any improvements operated or maintained by the Authority." Approval of the general budget requires consent of all member agencies. A "project budget," by contrast, pertains only to a specific project and may include administrative expenses, the cost of studies, planning, engineering and construction, and the allocation among the participating member agencies of the total project costs. A project budget does not require approval by all member agencies; instead, where a member agency does not approve, the remaining members may elect to proceed with the project, in which case the non-participating member "shall not be obligated for future debts of the project concerned nor shall it receive any benefits therefrom."

The agreement also provided that the authority must determine, prior to the construction of any project, "whether or not the authority shall maintain and/or operate such facilities." Where the authority will maintain and operate a facility, "it shall do so in an efficient and economical manner, and in a manner not detrimental to the member agencies."

The agreement was amended in June of 1976 to re-define the "present project," specifying that the member agencies agreed that "the initial project to be commenced by the Authority shall be the fully consolidated San Mateo County midcoastside wastewater treatment and disposal system as envisioned in Plan F.."

The authority initially encountered obstacles moving forward with the project in the form of public opposition, delay-driven cost increases, and Coastal Commission permit denials. As a result, the Regional Water Quality Control Board (RWQCB) issued cease and desist orders and sewer connection bans for each of the three member agencies based on continuing violations of discharge standards.

Shortly thereafter, the attorney general brought an action in Santa Clara County Superior Court against the individual agencies and the authority, resulting in a preliminary injunction issued on May 10, 1979 (injunction). The injunction required each agency to comply with certain existing RWCQB orders, and required the agencies and the authority to construct and implement the consolidated wastewater project in two phases over a specified timeline. Phase I would consist of "construction of the deepwater ocean outfall at Half Moon Bay and conveyance, tie-in and pumping facilities," and Phase II would consist of "construction or upgrading of one, two, or three secondary treatment facilities...."

The injunction mandated that Phase I be fully constructed and operational by June 30, 1980. With respect to Phase II, the injunction required the agencies and authority to submit a proposed timeline for construction to the SWRCB by December 15, 1979, and reserved jurisdiction to the court to prescribe time schedules for implementation of Phase II. In any event, construction was to be completed, and the facilities operational, by July 1, 1983, and would be operated and maintained by the authority "in accordance with the rules and regulations applicable to the California Clean Water Grants Program."

Shortly thereafter, the agencies amended the agreement again. In a resolution adopted on May 24, 1979, the authority stated that, before the construction grant funding application can be approved by the SWRCB, "it must further detail in the joint powers agreement the present project, together with the agreed-to capacity allocation and costsharing formulas attendant thereto." The authority therefore resolved to amend the agreement accordingly, which it did on July 2, 1979. The agreement thus redefined the authority's "present project" as: "a secondary wastewater treatment and disposal system, divided into four components, to service the combined needs of the member agencies to the year 2000." It also divided the project into two phases.

1. Phase I

Under the agreement, Phase I would include three components: (1) the intertie pipeline and pumping facilities connecting the Montara and Granada systems...