Morgan v. Imperial Irrigation Dist.

Decision Date14 May 2014
Docket NumberD060146,D061087
Citation167 Cal.Rptr.3d 687,223 Cal.App.4th 892
PartiesMichael W. MORGAN et al., Plaintiffs and Appellants, v. IMPERIAL IRRIGATION DISTRICT, Defendant and Respondent; Imperial County Farm Bureau, Real Party in Interest and Appellant.
CourtCalifornia Court of Appeals Court of Appeals

OPINION TEXT STARTS HERE

See 9 Witkin, Summary of Cal. Law (10th ed. 2005) Taxation, § 143.

APPEALS from a judgment and postjudgment order of the Superior Court of Imperial County, Rick S. Brown, Judge. (Retired Judge of the Santa Barbara Super. Ct., assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.) Judgment affirmed; order reversed. (Super. Ct. No. ECU04936)

Law Offices of Patrick J. Maloney, Patrick J. Maloney, Alameda, Thomas S. Virsik; Law Office of Cressey H. Nakagawa and Cressey H. Nakagawa for Plaintiffs and Appellants.

Nossaman, Frederic A. Fudacz, Los Angeles; Allen Matkins Leck Gamble Mallory & Natsis, Mark J. Hattam, Kathryn D. Horning, San Diego; Walker & Driskill and Mitchell A. Driskill, El Centro, for Defendant and Respondent.

California Farm Bureau Federation, Nancy N. McDonough, Sacramento, and Christian C. Sheuring for Real Party in Interest and Appellant.

HUFFMAN, Acting P. J.

In this consolidated appeal, Imperial County Farm Bureau (Farm Bureau), Michael Morgan, John Elmore, and Walter Holtz (Morgan, Elmore, and Holtz collectively the Individuals) contend the trial court erred in determining that the Imperial Irrigation District (District) complied with Proposition 218 (Cal. Const., art. XIII D) in its passage of new water rates. Also, the District appeals a postjudgment order awarding the Individuals attorney fees under California's private attorney general statute, Code of Civil Procedure section 1021.5.

The District provides water to the Imperial Valley. Its customers use the water for a variety of purposes, including agricultural, municipal, industrial, and residential. The District charges varying rates depending on its customers' use of the water. In 2008, the District, after holding a protest election, increased rates for water usage for many of its customers. However, the rates differed among types of customer, creating rate classes. Farm Bureau argues Proposition 218 required the District to conduct a separate protest election for each different rate class the District sought to impose, rather than the omnibus protest election the District conducted, which considered the entire rate scheme. We disagree.

We see nothing in section 6 of article XIII D of the California Constitution1 that prohibits the District from holding a single protest election for a collection of rate increases involving all its customers. Further, if we were to adopt the interpretation Farm Bureau urges, a minority of the customers could prevent any increase of their water rates and call into question the proposed rates for the remaining customer classes without regard to the desires of the majority of the customers as a whole. There is no support for such proportional voting in section 6.

The Individuals join Farm Bureau's argument, but also advance their own claims that the District failed to meet both the substantive and procedural requirements of Proposition 218. We conclude the Individuals forfeited some of their claims by failing to raise the issues with the trial court in the first instance. For the surviving challenges, the Individuals ask this court to reweigh evidence to ascertain if the District complied with the substantive requirements of section 6. This we cannot do. In addition, on the record before us, we determine the District satisfied section 6's substantive requirements.

Like their challenges involving section 6's substantive requirements, the Individuals' claims that the District did not comply with the procedural requirements of section 6 are without merit. Because we determine that neither challenge to the District's increase of water rates is well taken, we affirm the judgment.

Finally, we see no basis on which to award the Individuals their attorney fees under Code of Civil Procedure section 1021.5. On the record before us, there is no substantial benefit the Individuals conferred on the public by virtue of their litigation. We thus reverse the order awarding attorney fees. 2

FACTUAL AND PROCEDURAL BACKGROUND
The District

The District's water service area is located in the Imperial Valley, which is situated between the Colorado River and Arizona on the east, Mexico on the south, Riverside County and the Salton Sea on the north, and San Diego County on the west. (Quantification Settlement Agreement Cases (2011) 201 Cal.App.4th 758, 784, 134 Cal.Rptr.3d 274.) All people in the Imperial Valley rely on the District for their water and power. (Choudhry v. Free (1976) 17 Cal.3d 660, 663, 131 Cal.Rptr. 654, 552 P.2d 438.) Indeed, the District is the sole source of fresh water for the Imperial Valley, which comes from the Colorado River. (Quantification Settlement Agreement Cases,supra, at p. 784, 134 Cal.Rptr.3d 274.) Its customers use the water for a variety of purposes, including agricultural, municipal, industrial, and residential. The District provides irrigation water and drainage for about 475,000 acres of farmland while also supplying water to cities and other users. To deliver water to its customers, the District maintains and operates an extensive delivery system that includes the All American Canal, almost 1,700 miles of other delivery canals, and laterals going to thousands of headgates, numerous reservoirs, and over 1,400 miles of drainage ditches. The District delivers an average of 6,700 acre-feet of water on a daily basis.3

The Setting of New Water Rates

After several years of operating deficits in the District's water department and a forecast of continuing budget deficits, the District's Board decided to review its water rates. In February 2008, the District hired Entrix, Inc. to conduct a water rate cost of service study. The Entrix cost of service study (Cost of Service Study) is an analysis of the costs of providing services to District customers. It used historical costs and projection of future costs to determine revenue requirements that needed to be recovered by the water rates. The primary goal of the Cost of Service Study was to “equitably allocate costs among customer classes in proportion to the services provided to each.”

In preparing the study, Entrix used certain guiding principles including that, [r]ate structures should be designed to ensure that users pay only their proportionate share of costs.” The Cost of Service Study developed its revenue requirements on a six-year timeframe that encompassed 2009 through 2014. Entrix focused on the District's cash needs to provide water service, which included operations, maintenance, debt service reserves, and cost of capital expenditures. Entrix, however, only considered water rate related costs and revenues. The Cost of Service Study was “based strictly on cost-of-service principles, and [did] not consider any principles of value-of-service pricing....” It followed commonly accepted professional standards developed by the American Water Works Association (AWWA) for cost of service studies.

The Cost of Service Study took into account the character of the District and its customers. Most of the District's water system and its water delivery costs are shared by all users, and the study thus allocated costs to all users. However, some types of service require extra costs, and therefore, the study allocated those costs only to the corresponding more expensive services. For example, small pipe and small parcel accounts have particularized costs for repairs and maintenance and Entrix calculated a rate for these accounts that had to bear these special costs. Similarly, municipal and industrial users create special costs so their charges are higher per acre foot than agricultural users. Entrix considered this and similar information in preparing the Cost of Service Study.

Entrix determined that almost all of the actual District water rates were too low to meet the District's actual cost of service. Because there was a considerable gap between what the District was charging and what it needed to charge customers to cover the actual costs of its water service, the Cost of Service Study noted there might be practical difficulties in raising water rates immediately to close the gap. Thus, in the Cost of Service Study, Entrix developed three possible rate structure formats for the District's Board to consider: a single uniform water rate change for the whole period of the study to cover costs; annual water rate changes that attempted to cover costs each year as best as possible; and a phased rate change that started rates low in early years but then moved up significantly over time to cover costs. Each method was expected to reduce the cost deficit to $0 over the six-year period

The Cost of Service Study excluded certain classes of service that existed in the District's billing system, but for which there were no actual paying accounts and use data. The Cost of Service Study also pointed out that the District's untreated water rate was far below that of other public agencies in California.

Entrix did not have perfect data on which to base the Cost of Service Study. For example, the District lacked particularized volumetric use data for the pipe and small parcel and wholesale tier 2 customers. Therefore, Entrix used information from the District's staff to estimate the amount of water used by these customers annually. In addition, these estimates are buttressed by data published by the AWWA, water use data for local municipalities, and local evapotranspiration rates. Such method of average use calculation was utilized for any category of service to which the District did not have clear measurement data.

Additionally, prior to the current rates set by the District, it had certain...

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4 books & journal articles
  • Protecting Public Services for All Ratepayers: Proposition 218 Process After Plantier
    • United States
    • California Lawyers Association California Real Property Journal (CLA) No. 38-3, September 2020
    • Invalid date
    ...substantive requirements of Article XIII D).6. Cal. Const., art. XIII D, § 6, subd. (a).7. Morgan v. Imperial Irrigation Dist. (2014) 223 Cal.App.4th 892, 911; see also Bighorn-Desert View Water Agency (2006) 39 Cal.4th 205, 220 (the provisions of section 6 are intended to facilitate commun......
  • Protecting Public Services for All Ratepayers: Proposition 218 Process After Plantier
    • United States
    • California Lawyers Association Environmental Law News (CLA) No. 29-2, September 2020
    • Invalid date
    ...substantive requirements of Article XIII D).6. Cal. Const., art. XIII D, § 6, subd. (a).7. Morgan v. Imperial Irrigation Dist. (2014) 223 Cal.App.4th 892, 911; see also Bighorn-Desert View Water Agency (2006) 39 Cal.4th 205, 220 (the provisions of section 6 are intended to facilitate commun......
  • Protecting Public Services for All Ratepayers: Proposition 218 Process After Plantier
    • United States
    • California Lawyers Association Public Law Journal (CLA) No. 43-3, September 2020
    • Invalid date
    ...substantive requirements of Article XIII D).6. Cal. Const., art. XIII D, § 6, subd. (a).7. Morgan v. Imperial Irrigation Dist. (2014) 223 Cal.App.4th 892, 911; see also Bighorn-Desert View Water Agency (2006) 39 Cal.4th 205, 220 (the provisions of section 6 are intended to facilitate commun......
  • A Tax by Another Name: Beware of Excessive Fees Included in Exclusive Waste Hauling Franchise Contracts
    • United States
    • California Lawyers Association Public Law Journal (CLA) No. 39-2, June 2016
    • Invalid date
    ...supra, at pp. 60-61.40. Moore v. City of Lemon Grove (2015) 237 Cal.App.4th 363, 372.41. Morgan v. Imperial Irrigation Dist. (2014) 223 Cal.App.4th 892, 899.42. Griffith v. Pajaro Valley Water Mgmt. Agency (2013) 220 Cal.App.4th 586, 591, 600.43. Newhall County Water District v. Castaic Lak......

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