Coachella Valley Water Dist. v. Superior Court of Riverside Cnty.

• Decision Date: 09 March 2021
• Docket Number: E074010
• Citation: 276 Cal.Rptr.3d 61,61 Cal.App.5th 755
• Court: California Court of Appeals Court of Appeals
• Parties: COACHELLA VALLEY WATER DISTRICT et al., Petitioners, v. The SUPERIOR COURT OF RIVERSIDE COUNTY, Respondent; Randall C. Roberts, Real Party in Interest.

61 Cal.App.5th 755

276 Cal.Rptr.3d 61

COACHELLA VALLEY WATER DISTRICT et al., Petitioners,

v.The SUPERIOR COURT OF RIVERSIDE COUNTY, Respondent;

Randall C. Roberts, Real Party in Interest.

E074010

Court of Appeal, Fourth District, Division 2, California.

Filed March 9, 2021

Colantuono, Highsmith & Whatley, Michael G. Colantuono, Pamela K. Graham, Liliane M. Wyckoff, Pasadena, for Petitioners.

Costell & Adelson Law Corporation, Jeffrey Lee Costell, Santa Monica, Joshua S. Stambaugh, Sara M. McDuffie, and Timothy J. Burke, Los Angeles, for Real Party in Interest.

Aleshire & Wynder, Anthony R. Taylor, Christine M. Carson, El Segundo, William G. Ash, as Amicus Curiae on behalf of State Water Contractors.

OPINION

SLOUGH, J.

In this writ proceeding we must answer a single question: Do the validation statutes ( Code Civ. Proc., §§ 860 - 870.5 ) apply to a county water district's ad valorem property tax such that a challenge to the tax must be brought within the 60-day statute of limitations in Code of Civil Procedure section 860 ? As we'll explain, the answer is yes.

The tax at issue in this case relates to the State Water Project (or SWP)—California's vast system of storage and conveyance facilities designed to provide water to its millions of residents and farmers. (See San Diego County Water Authority v. Metropolitan Water Dist. of Southern California (2017) 12 Cal.App.5th 1124, 1132-1133, 220 Cal.Rptr.3d 346 ( San Diego ).) In 2013, the Coachella Valley Water District (the water district) passed a resolution adopting a two-cent increase to the rate of its ad valorem property tax, which the water district levies annually to satisfy its contractual financial obligations to the SWP (the SWP tax).

In 2018, Randall Roberts filed a lawsuit against the water district and the County of Riverside, seeking to invalidate the tax under the Burns-Porter Act of 1960 ( Wat. Code, §§ 12930 - 12944 ) and the California Constitution (Propositions 13, 26, and 218) and to obtain a refund.¹ The water district demurred, arguing the entire action was time-barred because Roberts was required under the validation statutes to present his claims in a "reverse validation action" no later than 60 days after the water district adopts the tax, which it does annually by resolution. ( Code Civ. Proc., §§ 806, 863.) The trial court concluded the validation statutes do not apply to the SWP tax and overruled the demurrer.²

The water district now seeks a writ of mandate ordering the trial court to reverse its decision and sustain the demurrer. It argues the validation statutes apply to the SWP tax by operation of the County Water District Law ( Wat. Code, § 30000 et seq. ), which makes the validation statutes applicable to any action to determine the validity of a county water district's "assessment" (id. , § 30066) and defines a property tax as an "assessment" (id. , § 31702.3). We agree and therefore grant the petition.

IFACTS

A. The Water District and the State Water Project

The water district is a public agency and local water district which was formed and operates under the County Water District Law and the Coachella District Merger Law. ( Wat. Code, § 33100.) The water district provides water to over 100,000 customers in the Coachella Valley, including Roberts who lives in the district. As a local water district, it has the power to set water rates and levy taxes on property within the district to satisfy its debts and expenses. ( Wat. Code, §§ 31007, 31701, 31702.) And, like 28 other local water districts across the state, it is an "SWP contractor," meaning it has a water supply contract with the Department of Water Resources (DWR) for SWP water. (See California Department of Water Resources (2020) ["The SWP delivers water to 29 water contractors in the state"] at We-Do/Water-Storage-And-Supply> [as of Mar. 8, 2021].)

The State Water Project, which DWR owns and operates, is a complex water storage and supply system that transports water from Northern to Southern California, over 700 miles. (California Department of Water Resources, supra , at We-Do/Water-Storage-And-Supply> [as of Mar. 8, 2021].) It consists of a network of dams, canals, and pumping plants that " ‘stretch from Lake Oroville in Butte County to Lake Perris in Riverside County.' " (San Diego, supra , 12 Cal.App.5th at p. 1132, 220 Cal.Rptr.3d 346.) Water conveyed through the SWP comes from various sources but reaches Southern California through the California Aqueduct, which itself is over 400 miles long. ( Id. at pp. 1133-1134, 220 Cal.Rptr.3d 346.)

The SWP is financed in part by state bonds issued under the Burns-Porter Act (or the Act). ( Goodman v. County of Riverside (1983) 140 Cal.App.3d 900, 903, 190 Cal.Rptr. 7 ( Goodman ).) California voters approved the Burns-Porter Act in 1960 to establish a financing system for, and authorize DWR to construct and operate, the State Water Resources Development System (the System), which consists of various water facilities and includes the SWP. ( Wat. Code, § 12931 ; see also Warne v. Harkness (1963) 60 Cal.2d 579, 582-583, 35 Cal.Rptr. 601, 387 P.2d 377.) Under the Act, bondholders lent DWR millions in funds to construct the SWP on a promise of repayment. That repayment was secured by revenue from public agencies with taxing authority, in exchange for allowing those agencies to participate in the State Water Project (thus creating the SWP contractors). ( Wat. Code, § 12937, subd. (b).) Our Supreme Court validated this funding scheme in 1963. ( Metropolitan Water Dist. v. Marquardt (1963) 59 Cal.2d 159, 179-202, 28 Cal.Rptr. 724, 379 P.2d 28.)

As relevant here, the Burns-Porter Act directed DWR "to enter into contracts for the sale, delivery or use of water or power, or for other services and facilities made available by the State Water Resources Development System." ( Goodman, supra , 140 Cal.App.3d at p. 903, 190 Cal.Rptr. 7, citing Wat. Code, § 12937, subd. (b).) The water supply contracts between DWR and the 29 SWP contractors are substantively identical and "require regular payments [from the local governmental entities] to the state in return for participation in the System." ( Goodman , at p. 904, 190 Cal.Rptr. 7.) "The payments under these contracts pay for project operating costs and the public bonds issued to build the system." ( San Diego, supra , 12 Cal.App.5th at p. 1133, 220 Cal.Rptr.3d 346.)

Article 34 of the water supply contracts provides: "If in any year the District fails or is unable to raise sufficient funds by other means, the governing body of the District shall levy upon all property in the District not exempt from taxation, a tax or assessment sufficient to provide for all payments under this contract then due or to become due within that year. " ( Goodman, supra , 140 Cal.App.3d at p. 905, 190 Cal.Rptr. 7, italics added.) "Not all the districts [contracting with DWR] actually receive water, but all must make payments according to their respective maximum annual water entitlements and the portion of the System required to deliver such entitlements." ( Id. at pp. 903-904, 190 Cal.Rptr. 7.) The water district is one such district, as the SWP is unable to deliver water to the Coachella Valley. "Those [districts] which actually receive water also pay amounts attributable to the water received." ( Ibid. )

In Goodman , the court upheld local water districts' right to levy property taxes to fund their obligations under their water supply contracts. The court concluded such taxes were exempt from Proposition 13's one percent cap on property taxes imposed without first obtaining voter approval because, by approving the Burns-Porter Act in 1960, "the voters necessarily approved the use of local property taxes whenever the boards of directors of the agencies determined such use to be necessary to fund their water contract obligations." ( Goodman, supra , 140 Cal.App.3d at pp. 909-910, 190 Cal.Rptr. 7 ; see also Cal. Const., art. XIII A, § 1, subd. (a) [Prop. 13 1% limit].)

The water district entered into its water supply contract with DWR in 1963. Its contract contains the language in Article 34 quoted above. However, because the SWP lacks the means to deliver water directly to the Coachella Valley, the water district (like at least one other similarly situated public agency) has entered into a separate exchange agreement with the Metropolitan Water District of Southern California (MWD) to exchange its entitlement to SWP water for Colorado River water because MWD's canals can carry Colorado River water to the Coachella Valley. (See San Diego, supra , 12 Cal.App.5th at p. 1136, 220 Cal.Rptr.3d 346 [San Diego County Water Authority entered into an exchange agreement with MWD in 2003].) In other words, the water district is one of the districts that doesn't receive SWP water but makes payments to DWR under Article 34 of the water supply contract to secure its maximum annual water entitlement.

B. The SWP Tax

To satisfy its contractual obligation to DWR, the water district levies an ad valorem property tax on all properties in the district ("ad valorem" meaning the tax is imposed at a set percentage rate of each taxed property's assessed value). The tax is not part of, but imposed in addition to, the one percent tax the County of Riverside levies for all taxing local governments under Proposition 13. ( Cal. Const., art. XIII A, § 1, subd. (a).) Following the procedures set out in the County Water District Law, each year, the water district's board of directors adopts a resolution certifying to the County Auditor the property tax rate necessary to fund its SWP obligations in the coming year. ( Wat. Code, § 31701.) The county's board of supervisors then levies the tax and certifies the rate to the county auditor, who enters it in "the county assessment roll." ( Wat. Code, § 31702.4.) The county treasurer-tax collector includes the tax on property bills, collects the tax, and disburses the proceeds to the water district following the...