San Marcos Water Dist. v. San Marcos Unified School Dist.

• Decision Date: 19 August 1985
• Citation: 171 Cal.App.3d 223,217 Cal.Rptr. 260
• Court: California Court of Appeals Court of Appeals
• Parties: Previously published at 171 Cal.App.3d 223 171 Cal.App.3d 223, 26 Ed. Law Rep. 1121 SAN MARCOS WATER DISTRICT, Plaintiff and Respondent, v. SAN MARCOS UNIFIED SCHOOL DISTRICT, Defendant and Appellant. D001951.

Page 260

217 Cal.Rptr. 260

Previously published at 171 Cal.App.3d 223

171 Cal.App.3d 223, 26 Ed. Law Rep. 1121

SAN MARCOS WATER DISTRICT, Plaintiff and Respondent, v. SAN MARCOS UNIFIED SCHOOL DISTRICT, Defendant and Appellant.

D001951.

Court of Appeal, Fourth District, Division 1, California.

Aug. 19, 1985.

Review Granted December 5, 1985.

Vernon A. Peltzer, Jeffrey G. Scott and Smith & Peltzer, San Marcos, for plaintiff and respondent.

Lynn R. McDougal and McDougal, Meloche, Love & Eckis, El Cajon, for defendant and appellant.

WIENER, Associate Justice.

Defendant San Marcos Unified School District (School District) appeals from a judgment entered on an agreed case pursuant to Code of Civil Procedure sections 1138 and 1139 validating a "sewer capacity right fee" (capacity fee) imposed on the School District by plaintiff San Marcos Water District (Water District.) We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

The case was submitted to the trial court on a stipulated set of facts. The Water District provides sewer services and the School District provides educational services for the San Marcos area. Although the boundaries of the two districts are not contiguous, they serve roughly the same community. All of the currently used school sites of the School District are within the Water District.

Beginning in 1971, the School District connected certain of its school sites and facilities to the Water District's sewer system and thereby began incurring various charges from the Water District. The Water District charges its customers three different types of fees. A connection fee is charged when a customer's property is initially connected to District sewer lines. (See post, p. 263 and fn. 8.) A monthly

sewer service charge is assessed based on rates approximating the amount of sewage discharged monthly. ¹ And a one-time capacity fee is also charged prior to connection which, like the monthly service charge, is based on approximate amounts of sewage discharged. ² According to a 1983 Water District ordinance, the capacity fee "is a primary source of funds for the development of additional capacity and [is set] at a level which will defray the costs of providing additional sewage treatment and/or reclamation facilities, major trunk and transmission pipelines and facilities for pumping when such facilities are needed."

DISCUSSION

The sole question presented to the trial court and to us on appeal is whether the Water District may validly collect the capacity fee from a property tax-exempt entity such as the School District. There is no dispute as to the Water District's authority to collect or the School District's obligation to pay the connection fees and monthly service charges. Nor is there any contention by the School District that the capacity fee it is charged is any different from the capacity fees charged non-tax-exempt entities. Because the facts are undisputed, we review the trial court action as involving solely a question of law.

I

The Water District's capacity fee is imposed pursuant to Health and Safety Code section 5471. That section provides in relevant part as follows:

"Any entity shall have power ... to prescribe, revise and collect, fees, tolls, rates, rentals, or other charges, including sewer standby or immediate availability charges, for services and facilities furnished by it, either within or without its territorial limits, in connection with its sanitation or sewerage.... Revenues derived under the provisions in this section, shall be used only for the acquisition, construction, reconstruction, maintenance and operation of water systems and sanitation or sewerage facilities ...; provided, however, that such revenue shall not be used for the acquisition or construction of new local sewers or laterals as distinguished from main trunk, interceptor and outfall sewers."

The School District relies on a series of three cases which, with minor factual variations, address the question whether a local government entity which operates a sewer system can collect a fee designed to defray the costs of capital improvements from public entities not subject to the property tax. (See County of Riverside v. Idyllwild County Water Dist. (1978) 84 Cal.App.3d 655, 148 Cal.Rptr. 650; Regents of University of California v. City of Los Angeles (1979) 100 Cal.App.3d 547, 160 Cal.Rptr. 925; Regents of University of California v. City of Los Angeles (1983) 148 Cal.App.3d 451, 196 Cal.Rptr. 14.) In each case, the court concluded that to the extent the fee was used to finance capital improvements, it constituted a special assessment which could not be collected from tax-exempt entities absent legislative authorization. ³

The Water District responds with a sequential argument. It first contends the capacity fee is not a special assessment but rather a service charge or user fee. Accordingly, in the District's view, the fact that the School District is exempt from the property tax is irrelevant. Even if the

                capacity fee is a special assessment, however, the Water District finds legislative authorization for the assessment in Education Code section 39613 which empowers school districts to construct their own sewer systems or to contract for the right to utilize sewer systems constructed by others. 4  The District suggests that since the construction of a sewer system by a school district would clearly involve capital costs, the Legislature must have intended that a school district's "contracts" for sewer utilization rights include payment of capital costs.  Finally, the Water District argues that capacity fees for tax-exempt entities were specifically authorized with the enactment of Water Code section 31101.5 in 1982. 5  (Cf. Water Code, § 71670.5;  Carlton Santee Corp. v. Padre Dam Mun. Water Dist.  (1981) 120 Cal.App.3d 14, 30, 174 Cal.Rptr. 413.)
                

II

The first question we must address is whether the Water District's capacity fee constitutes a "special assessment." If it does, the School District cannot be required to pay it absent special legislative authorization. On the other hand, if the capacity fee is merely a user service charge, i.e., the price charged for a governmental service, there is no reason to exempt the School District from a fee all users of the sewer system must pay.

County of Riverside v. Idyllwild County Water Dist., supra, 84 Cal.App.3d 655, 148 Cal.Rptr. 650 was the first case to confront a similar question. The water district sought to impose a monthly sewer capacity charge against tax-exempt public entities as an " 'equitable contribution toward the capital cost of the sewerage system.' " (Id., at p. 657, 148 Cal.Rptr. 650.) The court began by stating the general rule that tax-exempt public entities are also impliedly exempt from special assessments. (Id., at pp. 659-660, 148 Cal.Rptr. 650.) It then framed its conclusion in the following terms:

"The imposition of a capital cost charge on tax exempt entities was a means of making such entities contribute a proportionate share of the cost of constructing the district's sewerage facilities. The charges are in effect a special assessment under a different name and constitute an attempt by the district to do indirectly that which it could not do directly." ⁶ (Id., at p. 660, 148 Cal.Rptr. 650.)

The court then goes on to support its holding by citing an Attorney General's Opinion (19 Ops.Cal.Atty.Gen. 195) which states that charges and fees for sewer services may be assessed against public entities to the extent the same charges and fees are paid by all other sewer users. Noting that the water district's capacity charge was assessed only against tax-exempt entities, the court concluded the charge was invalid. (84 Cal.App.3d at p. 660, 148 Cal.Rptr. 650.)

A fact situation virtually identical to the present case was considered by the court in Regents of University of California v. City of Los Angeles, supra, 100 Cal.App.3d 547, 160 Cal.Rptr. 925 (Regents I.) The "[T]he revenues collected as a result of the 'sewage facilities charge' are used by the city to provide capital for sewer construction, i.e. to finance local improvements. Such a charge for capital funding is little more than a disguised special assessment." (Ibid.)

City of Los Angeles operated a sewer system and imposed a one-time "sewer facilities charge" before a property improvement could be connected for sewer service. The charge was scaled to anticipated use by each user and was used to defray the costs of sewer construction. As in the present case, the charge was imposed on all sewer system users, not just tax-exempt entities. Relying almost exclusively on the Riverside opinion, the court ignored the portion of that case which discussed the selective impact of the capacity fee on tax-exempt public entities and focused solely on the evaluation of the fee as a special assessment. Defining a special assessment as "a charge imposed on property owners within a limited area to help pay the cost of a local improvement designed to enhance the value of the property within that area" (id., at p. 549, 160 Cal.Rptr. 925), the Regents I court syllogistically concluded:

The same parties again squared off in Regents of University of California v. City of Los Angeles, supra, 148 Cal.App.3d 451, 196 Cal.Rptr. 14 (Regents II.) Los Angeles responded to the Regents I decision by increasing its monthly sewer service charge so that monies from such charge could be used to finance capital improvements. The Regents II court responded by striking down the increased charge, holding that the critical issue in determining whether the charge was a special assessment "is the purpose of the disputed charge." (Id., at p. 455, 196 Cal.Rptr. 14, emphasis in original.) The court read the Regents I decision to hold that where the purpose of the charge is to finance capital improvements rather than operating expenses, it constitutes a special assessment which, as a general rule, cannot be imposed against...