Wilde v. City of Dunsmuir

• Citation: 266 Cal.Rptr.3d 688,9 Cal.5th 1105,470 P.3d 590
• Decision Date: 03 August 2020
• Docket Number: S252915
• Parties: Leslie T. WILDE, Plaintiff and Appellant, v. CITY OF DUNSMUIR et al., Defendants and Respondents.
• Court: California Supreme Court

9 Cal.5th 1105

470 P.3d 590

266 Cal.Rptr.3d 688

Leslie T. WILDE, Plaintiff and Appellant,

v.CITY OF DUNSMUIR et al., Defendants and Respondents.

S252915

Supreme Court of California.

August 3, 2020

Howard Jarvis Taxpayers Foundation, Jonathan M. Coupal, Sacramento, Trevor A. Grimm, Los Angeles, Timothy A. Bittle, Sacramento, Laura E. Dougherty; and Leslie T. Wilde, in pro. per., for Plaintiff and Appellant.

Jack Cohen as Amicus Curiae on behalf of Plaintiff and Appellant.

Kenny, Snowden & Norine, Kenny & Norine, John Sullivan Kenny, Redding, Linda R. Schaap and Rob J. Taylor for Defendants and Respondents.

Colantuono, Highsmith & Whatley, Michael G. Colantuono, Pasadena, and Conor W. Harkins for Association of California Water Agencies, California Association of Sanitation Agencies, California State Association of Counties, California Special Districts Association and League of California Cities as Amici Curiae.

Opinion of the Court by Kruger, J.

The California Constitution grants voters the power of referendum, which allows them to approve or reject laws enacted by their elected representatives before the laws take effect. But to prevent the referendum process from disrupting essential governmental operations, the Constitution exempts certain categories of legislation, including "statutes providing for tax levies or appropriations for usual current expenses" of the government. ( Cal. Const., art. II, § 9, subd. (a).) The question in this case is whether this exemption applies to measures setting municipal water rates. We conclude the answer is yes. Municipal water rates and other local utility charges may be challenged by other means, but they are not subject to referendum.

I.

A.

Under the California Constitution, "[t]he legislative power of this State is vested in the California Legislature ... but the people reserve to themselves the powers of initiative and referendum." ( Cal. Const., art. IV, § 1.) The powers of initiative and referendum were enacted as part of the Constitution in 1911 as companion reforms. The initiative power allows voters to propose new measures and place them on the ballot for a popular vote. If the measure is approved by popular vote, it becomes law. ( Cal. Const., art. II, § 8 ; id. , § 10, subd. (a).) The referendum power, by contrast, allows voters to weigh in on laws that have already been passed by their elected representatives. Any voter or group of voters that gathers enough signatures can place a legislative enactment on the ballot for an up or down vote. A referendum suspends operation of the law until it is approved by a majority of voters. ( Cal. Const., art. II, § 9, subd. (a); id. , § 10, subd. (a); see City of Morgan Hill v. Bushey (2018) 5 Cal.5th 1068, 1078, 236 Cal.Rptr.3d 835, 423 P.3d 960 (City of Morgan Hill ).) Like the initiative power, the referendum power applies to both state statutes and local enactments. ( Cal. Const., art. II, § 11, subd. (a) ["Initiative and referendum powers may be exercised by the electors of each city or county under procedures that the Legislature shall provide"]; City of Morgan Hill , supra , 5 Cal.5th at p. 1078, 236 Cal.Rptr.3d 835, 423 P.3d 960 ; cf. Elec. Code, §§ 9141 et seq. [extending referendum to county electors], 9235 et seq. [extending referendum to electors of general law cities].)

The referendum power is, however, subject to certain exceptions. These exceptions are spelled out in article II, section 9, which provides, in relevant part: "The referendum is the power of the electors to approve or reject statutes or parts of statutes except urgency statutes, statutes calling elections, and statutes providing for tax levies or appropriations for usual current expenses of the State ." ( Cal. Const., art. II, § 9, subd. (a), italics added.) Although this section is, by its terms, addressed to state statutes, the same exceptions apply to local legislation. ( Rossi v. Brown (1995) 9 Cal.4th 688, 698 & fn. 4, 38 Cal.Rptr.2d 363, 889 P.2d 557 ( Rossi ); Geiger v. Board of Supervisors (1957) 48 Cal.2d 832, 836–837, 313 P.2d 545 ( Geiger ); Associated Home Builders etc., Inc. v. City of Livermore (1976) 18 Cal.3d 582, 591–592, fn. 7, 135 Cal.Rptr. 41, 557 P.2d 473.)¹

B.

Several decades after the powers of initiative and referendum were established in the Constitution, voters enacted a series of reforms aimed at increasing voter control over revenue-raising measures. These provisions are of limited relevance to our decision in this case, for reasons we explain below, but help to explain the history of this litigation and the nature of the parties’ arguments in this court.

The series of reforms began with Proposition 13, a ballot initiative passed in 1978 to cap increases in property taxes and assessments, as well as other state and local taxes. Then, in 1996, voters passed Proposition 218, which further curbed state and local government authority to generate revenue through taxes and other exactions. Finally, in 2010, voters approved Proposition 26, which expanded the reach of these limitations by broadening the definition of "tax" to cover "any levy, charge, or exaction of any kind imposed by a local government," subject to several specified exceptions. ( Cal. Const., art. XIII C, § 1, subd. (e); see generally City of San Buenaventura v. United Water Conservation Dist. (2017) 3 Cal.5th 1191, 1199–1200, 226 Cal.Rptr.3d 51, 406 P.3d 733.)

The provisions most relevant here are articles XIII C and XIII D of the California Constitution (hereafter articles XIII C and XIII D), which were added by Proposition 218. These articles set out detailed procedural and substantive requirements for imposing or increasing various types of government exactions. Article XIII C requires the approval of either a majority or two-thirds of voters before new or increased local taxes take effect, depending on the type of tax. (Art. XIII C, § 2.) Article XIII C also affirms voters’ power to reduce or repeal local taxes, assessments, fees, and charges through the initiative process. (Id. , § 3.) Article XIII C does not address the availability of the referendum.

Article XIII D circumscribes state and local government authority to impose or increase property-related taxes, assessments, fees, and charges. Under this article, a fee or charge is defined as "any levy other than an ad valorem tax, a special tax, or an assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership, including a user fee or charge for a property-related service." (Art. XIII D, § 2, subd. (e).) These are commonly referred to as property-related fees and charges — a category that includes water service fees. Before levying new or increased fees or charges, article XIII D requires the relevant government authority to conduct a public hearing and allow property owners who are affected by the exaction to submit written protests. If a majority of affected owners file protests, the exaction cannot be imposed. (Art. XIII D, § 6; see Plantier v. Ramona Municipal Water Dist. (2019) 7 Cal.5th 372, 381–382, 247 Cal.Rptr.3d 619, 441 P.3d 870.) In general, property-related fees and charges must also be approved by either a majority of affected property owners or two-thirds of voters. Fees for sewer, water, and refuse collection services are, however, exempt from this voter approval requirement. (Art. XIII D, § 6, subd. (c).)

With this backdrop in mind, we turn to the facts of the case before us.

C.

The City of Dunsmuir is known for its water. Located on the Upper Sacramento River, just south of Mount Shasta, the City draws its water from natural mountain springs and dubs it the "Best Water on Earth." The City pumps, stores, and distributes this water to its residents using a water system that the City owns and operates. The City pays for this system using proceeds from monthly water rates paid by the City's residents.

Like any public utility, the water system requires regular repair and periodic improvements. In 2014, the City conducted an assessment of the improvements needed to meet the City's projected water needs. This assessment concluded that a significant number of the system's aging water main sections required replacement and that the water storage tank, which is more than 105 years old, would need to be upgraded "to insure water pressure and fire protection in major sections of the City." As the City explained in a public notice, 50,000 feet of old water pipes had remained in the ground well past their lifespan, and an "extremely large number of leaks" pervaded the water system, leading to regular loss of water and a "continuous need to decontaminate large sections of water mains adjacent to the break in the pipe." The City's aging water tank likewise suffered from leaks. The City also commissioned a study to evaluate its water rates, which were at the time based on a 20-year-old water plan. The study proposed new water rates that would raise the funds necessary for the infrastructure improvements.

In early 2015, the City appointed a committee of city council members and community members to evaluate the proposed water rates. ( Wilde v. City of Dunsmuir (2018) 29 Cal.App.5th 158, 164, 240 Cal.Rptr.3d 88 ( Wilde ).) The committee recommended new rates to support the replacement of the water storage tank and water mains. ( Ibid. ) Plaintiff Leslie T. Wilde, a Dunsmuir resident, opposed the proposed rates. She has attempted to block them by various means.

Wilde's first attempt came in March 2016, when the city council held a public hearing on the proposed water rates. ( Wilde , supra , 29 Cal.App.5th at 164, 165, 240 Cal.Rptr.3d 88.) Consistent with the requirements of Proposition 218, the City issued public notice of the hearing and provided an opportunity for residents to submit objections via protest ballots. Wilde organized the protest effort, but it yielded only 40 protest ballots — far short of the approximately 800 that would have been needed to halt the rate...