Great Oaks Water Co. v. Santa Clara Valley Water Dist.

Decision Date26 March 2015
Docket NumberH035260.
Citation235 Cal.App.4th 523
Parties GREAT OAKS WATER COMPANY, Plaintiff and Respondent, v. SANTA CLARA VALLEY WATER DISTRICT, Defendant and Appellant.
CourtCalifornia Court of Appeals Court of Appeals

Hanson Bridgett, Joseph M. Quinn , Adam Hofmann ; and Stanly T. Yamamoto for Defendant and Appellant.

Silicon Valley Law Group, Jeffrey S. Lawson ; Johnson & James, Robert K. Johnson , Omar F. James ; and Timothy S. Guster for Plaintiff and Respondent.

Daniel S. Hentschke for Association of California Water Agencies as Amicus Curiae.



Plaintiff Great Oaks Water Company (Great Oaks), a water retailer, brought this action challenging a groundwater extraction fee imposed on water it draws from wells on its property. The power to impose such a fee is vested in defendant Santa Clara Valley Water District (the District), under the Santa Clara County Water District Act (District Act or the Act) (Stats. 1951, ch. 1405, p. 3336 et seq., West's Ann. Wat. — Appen. (1999 ed. & 2012 supp.) ch. 60, p. 354 et seq.). Among the District's major responsibilities is preventing depletion of the aquifers from which Great Oaks extracts the water it sells. The trial court awarded a complete refund of the charges paid by Great Oaks, and in the alternative a partial refund, on the grounds that the charge violated the provisions of both the District Act and article XIII D of the California Constitution (Article 13D), which impose procedural and substantive constraints on fees and charges imposed by local public entities. We hold that (1) the fee is a property-related charge for purposes of Article 13D, and thus subject to some of the constraints of that enactment; (2) however, it is also a charge for water service, and as such exempt from the requirement of voter ratification; (3) the presuit claim submitted by Great Oaks did not preserve any monetary remedy against the District for the violations of Article 13D found by the trial court; and (4) the trial court failed to apply a properly deferential standard of review to the question whether the District's setting of the fee, or its use of the resulting proceeds, complied with the District Act. Accordingly, we will reverse the judgment.

A. The District Act

Prior to adoption of the District Act, the Santa Clara Valley was plagued by overdraft of the underlying groundwater basin, causing among other things the subsidence of land — with resulting disruption of roads and structures — and the intrusion of saltwater into groundwater aquifers.1 A similar pattern marked much of the American settlement of California.2 Over the years the Legislature created numerous local districts and agencies to address this and other water management issues. As pertinent here, the Legislature created the District in 1951 by adopting the District Act.3 (Stats. 1951, ch. 1405, p. 3336 et seq.) The District's territory is coextensive with the County of Santa Clara. (Dist. Act, § 2.) The Act recites the intention that the District will, among other things, "(3) Provide for the conservation and management of ... water ... for beneficial and useful purposes, including spreading, storing, retaining, and causing the waters to percolate into the soil within the district. [¶] (4) Protect, save, store, recycle, distribute, transfer, exchange, manage, and conserve in any manner any of the waters. [¶] (5) Increase and prevent the waste or diminution of the water supply in the district. [¶] (6) Obtain, retain, protect, and recycle drainage, stormwater, floodwater, or treated wastewater, or other water from any sources, within or outside the watershed in which the district is located for any beneficial uses within the district." (Dist. Act, § 4.)

The Act empowers the District to establish zones of benefit within its boundaries and to "institute zone projects for the specific benefit of such zones." (Dist. Act, § 3.) It empowers the District to levy property taxes and assessments to pay its general operating costs and activities "of common benefit to the district." (Id., § 13, subd. 1.) It also grants the District the power "to levy and collect a ground water charge for the production of water from the ground water supplies within a zone or zones of the district which will benefit from the recharge of underground water supplies or the distribution of imported water in such zone or zones." (Id., § 26.) The Act declares such charges to be "in furtherance of district activities in the protection and augmentation of the water supplies for users within a zone or zones of the district which are necessary for the public health, welfare and safety of the people of this State," and authorizes their imposition "upon the production of ground water from all water-producing facilities, whether public or private, within said zone or zones of the district for the benefit of all who rely directly or indirectly upon the ground water supplies of such zone or zones and water imported into such zone or zones." (Id., § 26.3 (section 26.3).) The proceeds of such charges are to be used "exclusively" for four enumerated purposes, discussed in greater detail below. (Ibid.; see fn. 23, post.)

The Act requires the District to issue an annual report containing "a recommendation as to whether or not a groundwater charge should be levied in any zone or zones of the district during the ensuing water year and, if any groundwater charge is recommended, a proposal of a rate or rates per acre-foot for agricultural water and a rate or rates per acre-foot for all water other than agricultural water for the zone or zones."4 (Dist. Act, § 26.5, subd. (a).) The District is required to publish the report by the first Tuesday of April, and to hold a hearing on it on the fourth Tuesday of April, following notice to the public with "an invitation to all operators of water-producing facilities ... and to any person interested in the district's activities ... to call at the offices of the district to examine the report." (Id., § 26.6.) At the hearing, any operator of a water-producing facility, or other interested person, may "appear and submit evidence concerning the subject of the written report." (Id., § 26.6.) Before the end of a "`[w]ater year,'" defined as July 1 through June 30 (id., § 26.1), the board is to "determine whether or not a groundwater charge should be levied in any zone or zones" (id., § 26.7, subd. (a)(1)), and if so, "shall levy, assess, and affix the charge or charges against all persons operating groundwater-producing facilities within the zone or zones during the ensuing water year" (id., § 26.7, subd. (a)(2)). The rate within a given zone is to be uniform, except that the rate for agricultural extractions "shall not exceed one-fourth of the rate" for nonagricultural extractions. (Id., § 26.7, subd. (a)(3)(D).)

The Act declares that monetary claims against the District "are governed by Part 3 (commencing with Section 900) and Part 4 (commencing with Section 940) of Division 3.6 of Title 1 of the Government Code, except as provided therein. Claims not governed thereby or by other statutes or by ordinances or regulations ... shall be prepared and presented to the governing body, and all claims shall be audited and paid, in the same manner and with the same effect as are similar claims against the county." (Dist. Act, § 30.)

B. District's Zones

Although we are directed to no competent evidence on this point, Great Oaks asserted in its trial brief — and the District has never denied — that the District has only two permanent zones, designated "W-2" and "W-5." Great Oaks described zone W-2 as comprising approximately 240 square miles in the northern part of the county, while W-5 consists of about 14 square miles in the southern part. They are sometimes referred to as the "North County" zone and the "South County" zone, respectively.

At the time of trial, Great Oaks operated 19 wells, of which 16 were located in zone W-2, and three in zone W-5.

C. Notice and Hearings on 2005-2006 Charge

On or about March 1, 2005, the District mailed a "notice of hearings on groundwater charges for 2005-2006" to about 4,500 well owners in the county. (See pt. I.F.1., post.) According to later recitals by the board, the accuracy of which is not contested, the written report required by section 26.5 of the Act was duly prepared, and was delivered to the clerk of the board on March 22, 2005. The board thereafter held hearings on the proposed rates on April 5, April 11, and April 19. On April 19, 2005, the board adopted resolution 05-28 setting groundwater charges for 2005-2006. For extractions in zone W-2, the per-acre-foot charge was $420 for nonagricultural use and $42 for agricultural use. In zone W-5 the respective charges were $215 and $21.50.

D. Presuit Claim

On May 20, 2005, Great Oaks submitted a claim to the District under Government Code section 900 et seq. The sole stated ground for recovery was that the District was "illegally using pump tax revenues for purposes outside the four (4) statutorily specified uses, and that to cover those unauthorized expenditures the amount of the pump tax is excessive." It was further asserted that the District had "damaged Great Oaks by requiring it to pay more than necessary for the pump tax," such that the District was "indebted to Great Oaks for the amount it charged over and above what was necessary to fulfill the statutorily listed uses for pump tax revenues." The claim concluded with the statement, "Great Oaks hereby makes a claim for the refund of the amount which it was overcharged for the pump tax and requests that the [District] lower the pump tax and modify its uses of pump tax revenues to come into conformity with the Act." The District took no action on the claim, causing its rejection by operation of law on July 5, 2005. (See Gov. Code, § 912.4, subds. (a), (c).)

E. Proceedings Below

Great Oaks filed this action on November 22, 2005. The matter was tried on an...

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