Petition for Writ of Certiorari — San Marcos County Water District v. San Marcos Unified School District
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Court, U.S.
FILED
NOV 26 1966
YOSEPH F. SPANIOL, JR.
inn.
86-8 92,
IN THE
Supreme Court of the United States
OcTOBER TERM, 1986
AO eg
SAN MARCOS COUNTY
WATER DISTRICT,
Petitioner,
VS.
SAN MARCOS UNIFIED
SCHOOL DISTRICT,
Respondent.
ON PETITION FOR WRIT OF CERTIORARI
TO THE CALIFORNIA SUPREME COURT
PETITION FOR WRIT OF CERTIORARI
LOUIS E. GOEBEL”
GOEBEL, SHENSA & BEALE
Suite 6000
1202 Kettner Boulevard
San Diego, California 92101
(619) 239-2611
VERNON A. PELTZER
JEFFREY G. SCOTT
SMITH & PELTZER, A.P.C.
Suite 2
751 East Rancheros Drive
San Marcos, California 92069
(619) 744-7125
Attorneys for Petitioners
* Counsel of Record
Lawyers Brief Service / Legal Publishers / (213) 383-4457 / (714) 720-1510 be
aerate nentntenaensent ates
eet cities
QUESTIONS PRESENTED
1. Does the arbitrary requirement of the California
Supreme Court that private customers of petitioner Water
District pay for all of the capital improvements of the
Water District, including the share required for and used by
public entities, such as respondent School District, violate
the guarantees of the Taking Clause of the Fifth
Amendment against such uncompensated exactions?
2. Does the arbitrary classification of payers for use of
the Water District’s capital improvements into fuli-paying
private customers and non-paying public entity customers
lack a legitimate purpose and thereby violate the Equal
Protection Clause of the Fourteenth Amendment?
3. Where not insubstantial constitutional issues such as
violation of the Taking Clause of the Fifth Amendment and
violation of the Equal Protection Clause of the Fourteenth
Amendment are raised, is it not the heavy obligation of the
courts to interpret state statutes, if fairly possible, to avoid
the constitutional questions?
4. Have not the California trial court and the California
intermediate appellate court clearly demonstrated that it is
fairly possible — indeed convincingly preferable — to
interpret the state statutes to avoid uncompensated
exactions and arbitrary classifications which would violate
the Fifth and Fourteenth Amendments?
pe ee
TABLE OF CONTENTS
Page
ge. Be PF eg gt Leg |. SR nenn NE TOM NeR mm N mm
PETITION FOR WRIT OF CERTIORARI ...........:....0005 l
Ce OT MUI TY cislscasicenisusansciakteiciuuntipbenaditanaseebenaitaga tile l
PRMD iat F RUEN cciccnstssnonsaisdestssoicadiatanidaaieapnsaaabiaiacaditnlaaiatae 2
CONSTITUTIONAL PROVISIONS INVOLVED .......... 2
a A eee oO Ee CAD wissscassactseilcicctcsinhinen cite 3
PRARA FUT REBT. sscdussscciceitcmpatnccouasasenpeebaianusataaaaiaaeieie taint 8
I IT IS A CARDINAL PRINCIPLE OF
THIS COURT TO INTERPRET LEG-
ISLATION, IF FAIRLY POSSIBLE, TO
AVOID CONSTITUTIONAL QUES-
ER IDUDD cssnsssassassiasnascetanistceantsaeanpnadatamaalabiniaintians 8
II THE DECISION OF THE CALIFOR-
NIA SUPREME COURT MANDATES
A TAKING OF PRIVATE PROPERTY
WITHOUT JUST COMPENSATION
(OR ANY COMPENSATION) IN DIR-
ECT VIOLATION OF THE FIFTH
AMENDMENT OF THE UNITED
SEAT ES CONG EES 8 GY scctescncsessalacticsasicnnsees 10
III THE DECISION OF THE CALIFOR-
NIA SUPREME COURT MANDATES
A VIOLATION OF THE EQUAL PRO-
TECTION CLAUSE OF THE UNITED
STATES COPIES EE G2 WIS wcestncsscssntiansadiinscsseas 15
A. The Requirement of Equal
PRORIIIIOU. | ccisinsRiccacodsrvencivnteasiaaaies ioe iin 15
—iti—
eI... 0 < insnsebasesanccsoocae
C. The Classification Fails the Equal
I Ss cosuemmnnsogonnnnns
ial sesdabbonepecenenesseence
APPENDIX
A
B
Opinion, California Supreme Court, Filed
July 21, 1986
Opinion, Court of Appeal, Fourth Appel-
late District, Filed August 19, 1985
Judgment, Superior Court of San Diego
County, Filed January 31, 1984
Petition For Rehearing, Filed July 31,
1986
Reply to Petitioner’s Supplementary Au-
thority Submitted at Oral Argument, Filed
June 17, 1986
Order Denying Rehearing by Supreme
Court, Filed August 28, 1986
Complaint on Agreed Case, Superior
Court of San Diego County, Dated
November 18, 1982
Page
socal 16
seats 16
—
TABLE OF AUTHORITIES
Federal Cases
Adaman Mutual Water Co. v. United States
278 F.2d 842 (9th Cir. 1960) occcccccccscccseeose
Califano v. Yamasaki
442 US. 682, 99 S.Ct. 2542 (1979) o00000....
City of Cleburne v. Cleburne Living Center
an US aw, TOS SAX. 3269 (1965 ............
Crowell v. Benson
285 US. 22, 32 S.Ct. 28S (1932) ................
Hoffman v. United States
767 F.2d 1431 (Sth Cir. 1985) .............c..000.
Loretto v. Teleprompter Manhattan CATV Corp.
458 U.S. 419, 102 S.Ct. 3164 (1982) .........
Rackelshaus v. Monsanto Co.
Reed v. Reed
404 U.S. 71, 92 S.Ct. 251 (1971) ceecccccccssee.
Royster Guano Co. v. Virginia
Be Oe IE so cccnstindnstiienssncaeivacissinptinaiens
Tyler v. Doe
I cea
United States v. 129.4 Acres of Land
Cee me TES COU Gee TODD ocecentitnscntccsessn.
United States v.Security Industrial Bank
459 U.S. 70, 103 S.Ct. 407 (1982) .....000000..
Page
Page
Webb’s Fabulous Pharmacies, Inc. v. Beckwith
449 U.S. 155, 101 S.Ct. 446 (1980) ..... 12, 13, 19
State Cases
Beaumont Investors v. Beaumont Cherry Valley
Water District
165 Cal. App.3d 287 (1985) ...ccccssseesessteeseeseees 18
Carlton Santee Corp. v. Padre Dam Mun. Water
Dist.
120 Cal.App.3d 14 (1981) ...cccccccsseseeeeeeeseeeseesees 6
County of Riverside v. Idylwild County Water Dist.,
84 Cal. App.3d 655 (1978) -..cccccseseceseseeereseeeeeeseesees 5
Eisley v. Mohan
BE Gab Dd G37 C196) nnceccsccsrccccrssccrcccoscrcccossescsecsesas 17
Regents of the University of California v.
City of Los Angeles
100 Cal.App.3d 547 (1979) [Regents I] ............4. 5
Regents of the University of California v.
City of Los Angeles
148 Cal.App.3d 451 (1983) [Regents II] .............. 5
Serrano v. Priest
18 Cal.3d 728 (1976) ...........ccccccrccrcsccssecscscesssssrsnees 16
Young v. Haines
41 Cal.3d 883 (1986) .............scccccssrrrcessrssessssscessssonees 9
Federal Statute
28 USCA § 1257(3) ...ecccscccsscesseeseeesecssesenesensssssssrassnsensssenssensenes 2
a
Page
State Statutes
California Code of Civil Procedure
Ie I inhi hence a Sa Da 3
Be SRE SAS EE Ls en eee ey 17
California Education Code
RSS EN ae ee a 5, 18
California Health and Safety Code
I aa 4
California Water Code
I kl te 6
TE NE Rn eee aa OO 6
Government Code
ST landicsicasctiahnntaietianiinadiitainita elie lan een 18
ip TUNED cttinsdnssthieniinniniaiaaiiiia ais idee tS 18
Text
State of California Annual Report,
1984-85 Fiscal Year pp. A-8 and A-9 .............. 19
Constitutions
United States Constitution
_, ERE RMD EI 2, 10, 14
Fourteenth Amendment .............ccccccccccecsceesceees 2, 15
California Constitution
CANES Seineesenteentpettnescentnsievnitnesitiniintinns Renisnane 5
GN, Fi eteikidiiaitenetnninnicsidintemenedbcatiie eee ae 18
et See ne aNred tte de ee er OT TTY 18
es
IN THE
SUPREME COURT OF THE UNITED STATES
October Term, 1986
SAN MARCOS COUNTY
WATER DISTRICT,
Petitioner,
vs.
SAN MARCOS UNIFIED
SCHOOL DISTRICT,
Respondent.
PETITION FOR WRIT OF CERTIORARI
Petitioner San Marcos County Water Dis‘rict respect-
fully prays that a writ of certiorari issue to review the order
of the California Supreme Court excusing respondent San
Marcos Unified School District from paying a capacity fee
based upon projected use even though it utilizes the
petitioner’s sewer facilities, and imposing the entire burden
of cost of capital improvements upon the private customers
of petitioner.
OPINIONS BELOW
The decision of the California Supreme Court issued on
July 21, 1986 reversing the judgment of the trial court and
is set forth in Appendix A, infra. The Opinion of the Court
of Appeal is attached as Appendix B, and the Judgment of
the trial court is attached as Appendix C.
JURISDICTION
The decision of the California Supreme Court reversing
the judgment of the trial court was filed on July 21, 1986. A
timely petition for rehearing was filed, and the California
Supreme Court denied rehearing by order filed August 28,
1986. Jurisdiction of this Court is proper pursuant to 28
US.C.A.§ 1257(3).
CONSTITUTIONAL PROVISIONS
INVOLVED
Fifth Amendment to United States Constitution:
No person shall be held to answer for a capital, or
otherwise infamous crime, unless on a present-
ment or indictment of a Grand Jury, except in
cases arising in the land or naval forces, or in the
Militia, when in actual service in time of War or
public danger; nor shall any person be subject for
the same offence to be twice put in jeopardy of life
or limb; nor shall be compelled in any criminal
case to be a witness against himself, nor be
deprived of life, liberty, or property, without due
process of law; nor shall private property be taken
for public use, without just compensation.
Fourteenth Amendment to United States Constitution:
Section 1. All persons born or naturalized in the
United States, and subject to the jurisdiction
thereof, are citizens of the United States and of
the State wherein they reside. No State shall make
or enforce any law which shall abridge the
privileges or immunities of citizens of the United
States; nor shall any State deprive any person of
life, liberty, or property, without due process of
law; nor deny to any person within its jurisdiction
the equal protection of the laws.
STATEMENT OF THE CASE
This case was tried as an Agreed Case pursuant to
California Code of Civil Procedure § 1138. See, Complaint
on Agreed Case, Appendix G, for full details.
Briefly, petitioner Water District provides sewer services,
and respondent School District provides educational
services for the San Marcos area in San Diego County,
California. 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 applied for sewer
service and connected its school sites and facilities to the
Water District’s sewer system, incurring various charges
from the Water District and paying capacity fees. The
Water District charges all customers three different types
of fees. A connection [cost to install] fee is charged when a
customer’s property is initially connected to Water
District’s sewer lines. A monthly sewer service charge is
imposed to cover operation, maintenance, and sewage
treatment and disposal costs based on the amount of sewage
discharged monthly. A capacity [user] fee is also charged,
which, like the monthly service charge, is based on quantity
of sewage discharged. For schools, the capacity fee charge
is equal to $2,400.00 for each 25 students, faculty, staff, etc.,
assigned to the school.
The capacity [user] fee is a primary source of funds for
the development of replacement capacity for that
ciliata iis 5
Fy
oa test Reta
committed to the user and is set at a level which will defray
the costs of providing replacement sewage treatment
and/or reclamation facilities, major trunk and transmission
pipelines, and facilities for pumping, as such facilities are
needed. It is not used for local benefit (assessment)
facilities.
The sole question presented to the trial court and on
appeal is whether the Water District may validly collect the
capacity fee — user fee — from the School District, an ad
valorem property tax-exempt entity.
There is no dispute as to the Water District’s authority to
collect or the School District’s obligations to pay the
connection fees and monihly 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-property-tax-exempt entities.
The Water District’s capacity fee is imposed pursuant to
the provisions of the California Water Code, Education
Code, and Health and Safety Code. California Health and
Safety Code § 5471 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, reconstruc-
tion, 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
ee
local sewers or laterals as distinguished from main
trunk, interceptor and out-fall sewers. [Emphasis
supplied; Ergo, not used for local assessment-t ype
facilities].
The School District relied primarily 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 exempt from
the ad valorem property tax (California Constitution,
Article 13, § 3). See: County of Riverside v. Idyllwild
County Water Dist., 84 Cal.App.3d 655 (1978); Regents of
the University of California v. City of Los Angeles, 100
Cal.App.3d 547 (1979) [Regents I]; Regents of the
University of California v. City of Los Angeles, 148
Cal.App.3d 451 (1983) [Regents IJ]. In each case, the
California appellate 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 ad
valorem property tax-exempt entities absent legislative
authorization.
Water District presented alternative contentions. It
contends the capacity fee is not a special assessment, but
rather, a user fee; the fact that the School District is exempt
from an ad valorem property tax is not relevant.
Alternatively, if the capacity fee is a special assessment,
legislative authorization for the assessment is provided by
the California Education Code, the California Water Code,
and the California Health and Safety Code. California
Education Code § 39613 empowers school districts to
construct their own sewer systems or to contract for the
right to utilize sewer systems constructed by others, viz:
In addition to the other powers granted, the
governing body of each school district may
provide sewers and drains adequate to treat
and/or dispose of sewage and drainage on or
away from each school property. For this purpose
it may construct adequate systems or acquire
adequate disposal rights in systems constructed or
to be constructed by others for these purposes
without regard to their proximity. The cost
thereof may be paid from the building fund,
including any bond moneys therein. [Emphasis
supplied]
The construction of a sewer system by a school district
involves capital costs. The alternative is for a school district
to “contract” for sewer disposal rights — pay a user fee
based on capital costs to replace the capacity committed to
and used by the School District in the sewer system owned
by another agency. The School District voluntaril y pursued
the latter alternative, paid capacity fees from 1971 to 1979,
but now refuses to pay the fees while continuing to use
increasing amounts of Water District’s sewer capacity.
A user [capacity] fee for tax-exempt entities is specifically
authorized with the enactment of California Water Code
§ 31101.5 in 1982. [Effective January 1, 1983: “A district may
supply sewage and waste services to property not subject to
district taxes at special rates, terms, and conditions as are
determined by the board for the services.”] (Cf. California
Water Code § 71670.5; Carlton Santee Corp. v. Padre Dam
Mun. Water Dist.,120 Cal.App.3d 14, 30 (1981).)
The trial court ruled there was a valid contract obligating
School District to pay capacity [user] fees to Water District.
School District appealed.
The California intermediate appellate court affirmed the
judgment of the trial court, holding that a capacity [user] fee
is a valid user charge (as contended by Water District) and
not an invalid assessment (as contended by School District).
School District petitioned the California Supreme Court for
review and review was granted. ‘
The California Supreme Court reversed the judgment of
the trial court and the decision of the Court of Appeal,
holding that the capacity [user] fee was a special assessment
not authorized by the California Legislature and that the
private customers of Water District must pay the entire cost
of capital improvements, including those used by public
entities, such as School District.
Water District raised its federal constitutional objections
at the earliest stage the constitutional violations manifested
and documented its federal constitutional objection by post-
argument brief (Appendix E) and Petition for Rehearing
(Appendix D).
The California Supreme Court refused to address Water
District’s federal constitutional objections and rehearing
was denied.
The issue here involved is one of enormous statewide
importance in California and many, many millions of
dollars are ultimately involved unless the proper constitu-
tional restraints are imposed by this Court and the
misdirection of the California Supreme Court righted.
a
ARGUMENT
I
IT IS A CARDINAL PRINCIPLE OF THIS
COURT TO INTERPRET LEGISLATION, IF
FAIRLY POSSIBLE, TO AVOID CONSTITU-
TIONAL QUESTIONS
This Court has frequently stated a controlling rule of
practice in statutory interpretation — indeed, a cardinal
principle — to interpret a statute, if fairly possible, to avoid
a constitutional question. For example, in the case of
United States v. Security Industrial Bank, 459 US. 70, 103
S.Ct. 407 (1982), this Court declared:
We consider the statutory question because of the
“cardinal principle that this Court will first
ascertain whether a construction of the statute is
fairly possible by which the constitutional question
may be avoided.” 459 U.S. 78, 103 S.Ct. 412
(1982).
In concluding, this Court stated:
. “‘we decline to construe the Act in a manner
that could in turn call upon the Court to resolve
difficult and sensitive questions arising out of the
guarantees of the” taking clause. 459 U.S. 82, 103
S.Ct. 414 (1982). |
Similarly, in Califano v. Yamasaki, 442 US. 682, 99 S.Ct.
2545 (1979), this Court declared:
And if “a construction of the statute is fairly
possible by which [a serious doubt of constitution-
ality] may be avoided,” Crowell y. Benson, 285 US.
22, 62, 52 S.Ct. 285, 296, 76 L.Ed. 598 (1932), a
ne a
CL cab LE abate: om wifey REE
lhl ite Pani oem
sundliit
court should adopt that construction.
442 US. at 693, 99 S.Ct. at 2553.
See, also, Crowell v. Benson, 285 US. 22, 52 St. 2685
(1932).
The California Supreme Court is no stranger to this
important principle. Indeed, in deciding a case only one
month before the instant case was decided, the California
Supreme Court acknowledged:
Finally, today’s conclusion is compelled by the
precept “that a court, when faced with an
ambiguous statute that raises serious constitu-
tional questions, should endeavor to construe the
statute in a manner which avoids any doubt
concerning its validity.” (Citations.) (Emphasis
original.) Young v. Haines, 41 Cal.3d 883, 898
(1986).
Yet, in this case, despite the urgings of petitioner at oral
argument, by post-argument briefing, and on petition for
rehearing, the California Supreme disregarded its acknow-
ledged cardinal precept and navigated into troubled
constitutional waters raising “difficult and sensitive
questions arising out of the guarantees of the Taking
Clause” (United States v. Security I ndustrial Bank, supra)
and similar serious questions regarding equal protection.
snes
II
THE DECISION OF THE CALIFORNIA
SUPREME COURT MANDATES A TAKING
OF PRIVATE PROPERTY WITHOUT JUST
COMPENSATION (OR ANY COMPEN-
SATION) IN DIRECT VIOLATION OF THE
FIFTH AMENDMENT OF THE UNITED
STATES CONSTITUTION
While steadfastly refusing to address the federal
constitutional issues raised by petitioner, the California
Supreme Court was candid enough in its opinion to project
the practical effect of its decision:
Our conclusion does not mean that the water
district cannot collect money for capital improve-
ments from its customers; it simply means that the
private customers will pay the entire cost of
capital improvements. Slip Opinion, p. A- 2,
Appendix A. (emphasis original).
Put a little more directly, the practical effect of the
decision of the California Supreme Court is to create for
public entities and users such as the respondent School
District a right of use in the sewer System, without paying
for it. In short, the California Supreme Court decision
attempts to transform private property into public property
without compensation.
This Court has dealt with a number of situations in the
past where the same objective was evident — whether for
noble reasons or by candid admission or subterf uge or
otherwise, private property was taken by the government
without compensation. The consistent thread of the
“Taking Clause” cases arising under the Fifth Amendment
_ | a
of the United States Constitution is there is no “set
formula” and ordinarily the Court must engage in
“essentially ad hoc, factual inquiries.” Loretto v. Tele-
prompter Manhattan CATV Corp, 458 US. 419, 426, 102
S.Ct. 3164, 3171 (1982).
This Court has found numerous types of tangible and
intangible property to be property for purposes of the Fifth
Amendment’s Taking Clause. In Ruckelshaus v. Monsanto
Co., 467 US. 986, 104 S.Ct. 2862, 2873 (1984), this Court
summarized:
Although this Court has never squarely addressed
the question whether a person can have a property
interest in a trade secret, which is admittedly
intangible, the Court has found other types of
intangible interests to be property for purposes of
the Fifth Amendment’s Taking Clause. See, e.g.,
Armstrong v. United States, 364 US. 40, 44, 46, 80
S.Ct. 1563, 1566-67, 4 L.Ed.2d 1554 (1960)
(materialman’s lien provided for under Maine law
protected by Taking Clause); Louisville Joint
Stock Land Bank v. Radford, 295 US. 555, 596-
602, 55 S.Ct. 854, 866-69, 79 L.Ed. 1593 (1935)
(real estate lien protected); Lynch v. United States,
292 U.S. 571, 579, 54 S.Ct. 840, 843, 78 L.Ed. 1434
(1934) (valid contracts are property within
meaning of the Taking Clause). That intangible
property rights protected by state law are
deserving of protection of the Taking Clause has
long been implicit in the thinking of this Court:
“It is conceivable that [the term ‘property’ in
the Taking Clause] was used in its vulgar and
untechnical sense of the physical thing with
respect to which the citizen exercises rights
—— wn
recognized by law. On the other hand, it may
have been employed in a more accurate sense
to denote the group of rights inhering in the
citizen’s relation to the physical thing, as the
right to possess, use and dispose of it. In point
of fact, the construction given the phrase has
been the latter.” 467 U.S. 986 , 104 S.Ct. 2873,
2874.
The cases have made it clear that the assessment base or
the capacity of a special district, such as Water District, to
collect from others to defray various costs and expenses is a
property interest, the taking of which requires compen-
sation. See, United States v. 129.4 Acres of Land, 789 F.2d
715 (9th Cir. 1986); United States v. 129.4 Acres of Land,
572 F.2d 1385 (9th Cir. 1978); and Adaman Mutual Water
Co. v. United States, 278 F.2d 842 (9th Cir. 1960).
Despite the endless variety of Taking Clause cases, to
find a close analogue to the instant case, we need look no
further than Webb’s Fabulous Pharmacies, Inc. v. Beckwith,
449 US. 155, 101 S.Ct. 446 (1980). In Webb’s Fabulous
Pharmc cies, supra, as here, we have
e A state statute (or statutes) drawn into question.
e An attempt to transform private property into public
property without compensation in reliance upon the
statute.
e@ The decision of the highest state court interpreting the
Statute to support such a result.
In determining that the private entity and not the public
entity was entitled to the interest accruing on an
interpleader fund deposit in the registry of a county court,
this Court provided a primer of principles applicable to
disputes such as the one now before this Court:
_ we
The pertinent words of the Fif th Amendment of
the Constitution of the United States are the
familiar ones: “Nor shall private property be
taken for public use, without just compensation.”
That prohibition, of course, applies against the
States through the Fourteenth Amendment.
(Citations.) Our task is to determine whether the
second exaction by Seminole County amounts to a
“taking” — it was obviously uncompensated —
within the Amendment’s proscription.
“Here, however, Seminole County has not merely
adjusted the benefits and burdens of economic life
to promote the common good (citation). Rather,
the exaction is a forced contribution to general
governmental revenues, and it is not reasonably
related to the costs of using the courts. Indeed, the
Fifth Amendment’s guarantee ... was designed
to bar Government from forcing some people
alone to bear public burdens which, in all fairness
and justice, should be borne by the public as a
whole. (Citation.)
Neither the Florida Legislature by statute, nor the
Florida courts by judicial decree, may accomplish
the result the County seeks simply by recharacter-
izing the principal as “‘public money” because it is
held temporarily by the court. The earnings of a
fund are incidents of ownership of the fund itself
and are property just as the fund itself is property.
The state statute has the practical effect of
appropriating for the county the value of the use
_
/
of the fund for the period in which it is held in the
registry.
To put it another way: A State, by ipse dixit, may
not transform private property into public
property without compensation, even for the
limited duration of the deposit in court. This is the
very kind of thing that the Taking Clause of the
Fifth Amendment was meant to prevent. That
Clause stands as a shield against the arbitrary use
of governmental power. 449 U.S. at 160, 163-64, 101
S.Ct. at 450, 452 (emphasis added).
Here, too, by interpretation of state statutes, the highest
State court has made an exaction which
e “Is a forced contribution to general governmental
revenues and .. . is not reasonably related to the costs
of [use]”.
e ... [forces] some people alone to bear public burdens
which, in all fairness and justice should be borne by the
public as a whole.”
@ “Seeks to accomplish its result simply by recharacter-
izing” the obligation.
e Is, in substance and practical effect, nothing more than
an attempt to transform private property into public
property without compensation.
Both the trial court and the intermediate appellate court
in California found a reasonable means of interpretation to
avoid this constitutional dilemma. The California Supreme
Court remained oblivious and insensitive to the issue and its
decision cannot stand. This is the very thing that the Taking
Clause ofthe Fifth Amendment was meant to prevent. This
Court must intervene because the state Statutes, as
interpreted by the state’s highest court, to paraphrase again
— {5—
the words of Webb’s Fabulous Pharmacies, supra — has the
practical effect of appropriating for the [School District] the
value of the [contributions of private customers of the
Water District]. 449 U.S. 164, 101 S.Ct. 452.
THE DECISION OF THE CALIFORNIA
SUPREME COURT MANDATES A VIO-
LATION OF THE EQUAL PROTECTION
CLAUSE OF THE UNITED STATES CON-
STITUTION
A. The Requirement of Equal Protection.
The equal protection clause of the Fourteenth Amend-
ment of the United States Constitution commands that no
state shall deny any person the equal protection of the laws.
City of Cleburne v. Cleburne Living Center, _ U.S. — , 105
S.Ct. 3249, 3254 (1985). This requires that “all persons
similarly circumstanced shall be treated alike.” Tyler v. Doe,
451 US. 202, 216 (1982); Royster Guano Co. v. Virginia, 253
US. 412, 415 (1920).
As this Court noted in Reed v. Reed, 404 US. 71, 92 S.Ct.
251 (1971):
The Equal Protection Clause of [the Fourteenth]
Amendment does, however, deny to States the
power to legislate that different treatment be
accorded to persons placed by a statute into
different classes on the basis of criteria wholly
unrelated to the objective of that statute. A
classification “must be reasonable, not arbitrary,
and must rest upon some ground of difference
—=* =
having a fair and substantial relation to the object
of the legislation, so that all persons similarly
circumstanced shall be treated alike.” Royster
Guano Co. y. Virginia, 253 U.S. 412, 415, 40 S.Ct.
560, 561, 64 L.Ed. 989 (1920). 404 US. at 75-76, 92
S.Ct. at 253-54.
B. The Classification.
The California Supreme Court’s decision mandates that
“private customers” of the area served by the Water
District are subject to discrimination — they must pay taxes
to support the schools; pay capacity fees for their own use
and as an added exaction, an additional sum for the entire
cost of capital improvements provided by the Water District
for the use of the School District.
Persons residing outside the water district who use the
school (public hospital, prison, etc.) do not pay the
additional exaction. There is no rational basis for the
difference. It rests on chance, the place of residence, and
the situs of the public entity. This is contrary to the
constitutional doctrine of equal protection of the laws.
C. The Classification Fails the Equal
Protection Test.
The requirement to pay the additional exaction is not
based on ability to pay. It is not levied statewide on a
uniform basis. It imposes costs on the local community
which, as mandated by the California Supreme Court in
Serrano v. Priest, 18 Cal.3d 728 (1976), are the responsibility
of the state to obviate local financing as a violation of equal
protection in education. The cost of building and operating
schools is a state, not local, responsibility. Under the state
=
statutory scheme, the state has the funds and system to
meet this duty.
To justify the difference in classification between those
who must pay the additional exaction and those not paying
it, there must be a rational basis for the difference. This
requires (I) a legitimate purpose, and (2) a classification
which promotes the purpose. Hoffman v. United States,
767 F.2d 1431, 1436-1437 (9th Cir. 1985).
The purported purpose of the state court-created (not a
legislative creation) implied exemption is to avoid
impairment of the exercise of government powers.
The historical basis for a tax or assessment exemption is
the prohibition against enforcing a lien on public property
(selling the property to enforce the lien). That rationale has
no application to a sewer capacity fee. A user fee is not for a
lien.
A public agency is not subject to a mechanic’s /ien, but a
public agency does not get capital improvement benefits for
free; a “stop notice” is used to extract payment, not a lien.
California Code of Civil Procedure §§ 3179-3214. The stop
notice does not become a lien merely by serving the same
purpose — to enforce payment. No valid purpose emerges.
The other reason for an exemption from ad valorem
taxation is that the object of taxation is revenue and none
results from state taxation of its own property. Eisley v.
Mohan, 31 Cal.2d 637, 642 (1948). That is not the issue here.
At bench the question is which residents are the source of
funds to pay the capacity fee for the Schcol District.
Factually, there is no impairment of the school function
in this case. There is no attempt to regulate or impose liens
or levy an ad valorem tax on the school. There is aid, not
impairment, for education by providing sewer facilities at
far less cost than the school could provide the facilities, the
alternative required by California Education Code § 39613.
The School District paid fees from 1971 to 1979 without
impairing education and then stopped payment on a legal,
not factual impairment basis. The intermediate appellate
court decision demonstrates conclusively and at length that
sister states pay user-impact fees and the functioning of
their government is not impaired.
There are no facts in this record showing that education
(or other government functions) will be impaired by paying
user (capacity) fees. The belated $66.24 million self-serving
cost statement, by the Los Angeles Unified School District,
is unaudited and based on speculation and conjecture. It is
not based on the Los Angeles capacity fee nor related to
incremental payments over a period of time. It is not in the
Agreed Case nor subject to judicial notice and is not
properly before this Court as a basis for decision any more
than the comparable cost-fee relationship excluded by the
California Supreme Court. Slip Opinion, pp. A-17, 18,
Appendix A.
There being no valid purpose served by the distinction of
classification of payers of the additional exaction, , i.e.
private parties, and nonpayers of the exaction, there is a
denial of equal protection of the laws as defined by this
Court.
An attempt to surcharge private users to pay the School
District’s fee would be a forbidden special tax. Government
Code §§ 50076 and 54992 (charges exceeding the reasona-
ble cost of providing the service are a “special tax”
requiring a two-thirds voter approval). Beaumont Investors
v. Beaumont Cherry Valley Water District, 165 Cal.App.3d
287 (1985); California Constitution, Articles 13A and 13B.
This is not a case of exchanging tax dollars between
public agencies, but a case of which citizens — consistent
~—
with the federal and state constitutions and state statutes —
must pay the bill.
There is no need for (or purpose served by) this
classification. The state has funding sources of a magnitude
not applicable to the Water District or residents of the
Water District. Illustratively, the state is known to have an
excellent bond rating and the ability to spread costs over a
wide population base. The state is responsible for funding
education. In addition to the lottery, the state has a fund
balance, as of June 30, 1985 of $1,400,210,818.00, State of
California Annual Report, 1984-85 Fiscal Year, pp. A-8 and
A-9 (Exhibits A-l and A-2 to Petition for Rehearing,
Appendix D), an increase from $490,621,849.00 at the
beginning of the period June 20, 1984. (This impartial
source is not a party to this litigation, as is the self-serving
speculation of Amicus Los Angeles Unified School District
cited by the California Supreme Court in Footnote 2, Slip
Opinion, p. A-4, Appendix A.)
Consistent with the cardinal principle of interpretation,
the statutes must be interpreted to avoid this untenable
classification. The decisions of the trial court and the
intermediate appellate court clearly demonstrate that such
an interpretation is fairly possible.
CONCLUSION
This Court in Webb’s Fabulous Pharmacies, supra, laid
down a clear blueprint for protection from arbitrary
exactions by government. The blueprint fits the instant case.
The arbitrary exaction of the California Supreme Court of
the entire cost of capital improvements from private
customers alone when public entities, such as School
District, enjoy the benefits of use cannot stnd.
?
oe, el
As the California trial and intermediate appellate courts
clearly demonstrated, there is a fairly possible — indeed,
much preferable — interpretation of state statutes which
will avoid the constitutional violations.
The Petition for Certiorari should be granted and the
Judgment of the California Supreme Court reversed.
Respectfully submitted,
GOEBEL, SHENSA & BEALE
By: Louis E. Goebel
SMITH & PELTZER, A.P.C.
By: Vernon A. Peltzer
By: Jeffrey G. Scott
Attorneys for Petitioner
APPENDIX A
SUPREME COURT
FILED
JUL 21 1986
Laurence P. Gill, Clerk
DEPUTY
IN THE SUPREME COURT
OF THE STATE OF CALIFORNIA
SAN MARCOS L.A. 32134
WATER DISTRICT, (Ct. of Appeal No.
Plaintiff and Respondent, 4/1 DOO1951
Super. Ct. No.
v. N24145)
SAN MARCOS UNIFIED
SCHOOL DISTRICT,
Defendant and Appellant.
I. INTRODUCTION
Are utility fees for capital funding “special assessments”
from which public entities are exempt, or “‘user fees” which
public entities must pay? This case presents the question
whether the San Marcos Unified School District (school
district) is obligated to pay “sewer capacity right fees”
(capacity fees) imposed by the San Marcos Water District
(water district). The capacity fees are used by the water
district to fund capital improvements. The school district
argues that the capacity fee is a special assessment, and that
school districts and other public entities are impliedly
A-2
exempt from paying special assessments unless the
Legislature directs otherwise. The water district argues that
the capacity fee is not a special assessment, but is a user
charge which all utility users must pay. In the alternative,
the water district argues that even if we hold that the
capacity fee is a special assessment, it is legislatively
authorized by either the Education Code or the Water
Code. Finally, the water district maintains that the school
district should be required by its water use contract or by
the doctrine of promissory estoppel to pay the capacity fees
imposed for the use of the sewer system.
We conclude that the trial court erred in finding that the
school district is required to pay the sewer capacity fee. We
believe that the capacity fee is an assessment whick has not
been authorized by the Legislature, and that the school
district is not required by either contract or promissory
estoppel to pay the capacity fee. Our conclusion does not
mean that the water district cannot collect money for
capital improvements from its customers; it simply means
that the private customers will pay the entire cost of capital
improvements. Public entities, such as the school district,
will not be required to allocate their limited tax revenues to
pay for capital improvements built by the sewer district.
II. THE FACTS
This case was submitted to the trial court on
November 15, 1983, as an “agreed case” as provided for in
Code of Civil Procedure section 1138. Thus, the parties
filed an agreed statement of facts and sought adjudication
of their obligations concerning any payment of future fees
or return of fees already paid. The facts which follow are
derived from the agreed statement.
A-3
Both the water district and the school district are located
in the San Marcos area of San Diego County. The territory
of the school district is larger than that of the water district,
but all currently used school sites are within the water
district’s sewer service area.
In 1971, the school district connected its facilities to the
water district’s sewer system. From 1971 to 1981, the school
district paid three type of fees to the water district:
connection fees, monthly service fees, and capacity fees. The
water district imposed these fees pursuant to Health and
Safety Code section 5471.'! The connection fee is charged
when the property is connected to the sewer system in order
to pay for labor and materials involved in making the new
connection. The monthly service fee is based on the
approximate amount of sewage discharged and is computed
according to the number of students, faculty, and staff
members assigned to the school. The capacity fee is a one-
time fee for capital improvements paid at the time of
connection; the capacity fee is based on anticipated sewage
discharge. (The capacity fee charged is $2,400 for each 25
students and staff members assigned to the school.) If the
population of a school increases, the water district on an
annual basis can charge an additional capacity fee. 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
! This section provides in pertinent part: “Any entity shall have power,
by an ordinance approved by a two-thirds vote of the members of the
legislative body thereof, 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 system;....”
A-4
treatment and/or reclamation facilities; major trunk and
transmission pipelines and facilities for pumping when such
facilities are needed.” (San Marcos Water District Ord.
No. 47-6, art. X,§ 4.)
Although the school district paid $59,750? in capacity
fees from 1971 to 1980, beginning in 1981 the school district
refused to pay the capacity fees, claiming to be exempt from
such assessments. Litigation ensued and the trial court
entered judgment on March 14, 1984, ruling that “the
Education Code, particularly section 39613,” provides the
authority for imposing capacity fees upon the school
district. In addition, the court found that Water Code
section 31101.5, effective January 1, 1983, also provides
authority for the water district to impose the capacity fees.
Because the trial court based its ruling on the statutory
authority for the capacity fee, the court impliedly found that
the capacity fee is a special assessment requiring such
authorization. The trial court ruled that the school district
must pay to the water district “all amounts owing as
capacity fees billed but unpaid together with interest at 7%
per annum up to the time of Judgment and 10% per annum
on said amount thereafter until paid.”
III, THE COURT OF APPEAL OPINION
Because this case came to us on a petition for review, we
will review the Court of Appeal opinion. The Court of
Appeal upheld the judgment, but its reasoning was different
than that of the trial court. The appellate court did not
? Amicus Los Angeles Unified School District (LAUSD) notes that,
with its population of over 690,000 students and employees, LAUSD
would have to pay $66.24 million ($2,400 per 25 students and staff
members) if it were charged an identical capacity fee.
A-5
reach the question whether there is legislative authority in
the Education Code or the Water Code for the water
district’s capacity fee. The Court of Appeal found that no
such authority was needed, because the capacity fee is not a
special assessment, but rather a user charge, and as such the
school district must pay the fee.
The court declined to follow three California appellate
decisions which had held that a local public utility which
operates a sewer system cannot collect a fee, designed to
defray the costs of future capital improvements, from public
entities not subject to the property tax. (See County of
Riverside v. Idyllwild County Water Dist. (Riverside)
(1978) 84 Cal.App.3d 655; Regents of University of
California v. City of Los Angeles (Regents IT) (1979) 100
Cal.App.3d 547; hg. den.; Regents of University of
California v. City of Los Angeles (Regents IT) (1983) 148
Cal.App.3d 451, hg. den.) Instead, the Court of Appeal
examined the differences between “assessments” and “user
charges,” and the manner in which several out-of-state
cases treated similar situations. The court found that the
weight of authority in the out-of-state cases was that a fee
for capital improvements to a sewer system is a user fee, not
an assessment. The court noted that Associated Home-
builders v. City of Livermore (1961) 56 Cal.App.2d 847,
held that a sewer charge for capital improvements imposed
pursuant to Health and Safety Code section 5471 “does not
constitute an assessment on the value of property . . . but
rather is in the nature of an excise tax . . . .” (/d. at p. 853.)
The Court of Appeal concluded that “The capacity fee
does not constitute a special assessment for the purpose of
the implied exemption [from paying such assessments]
because it is not assessed against all property benefited by
the sewer system but is only imposed on users of the system
A-6
whose use gives rise to the need for additional sewer
capacity.” Because the school district is not exempt from
paying “user fees,” the Court of Appeal held that it must
pay the capacity fees at issue here.
In a dissenting opinion, Acting Presiding Justice
Staniforth asserted that the majority should have followed
the three California appellate decisions previously cited. He
believed that, based on California law, the capacity fee is a
special assessment which has not been positively authorized
by the Legislature in ei. er the Education Code or the
Water Code. He also rejected the water district’s argument
that the school district is bound by contract or promissory
estoppel to pay the capacity fees. Because a public entity
which is exempt from property taxes is also impliedly
exempt from “special assessments” not expressly authorized
by the Legislature, the dissent found that the school district
should not have to pay the capacity fees.
IV. DISCUSSION
A. Special Assessment or User Charge?
Article XIII, section 3, subdivision (b), of the California
Constitution provides that property owned by public entities
such as the school district is exempt from property taxation.
Courts have held that such property is likewise impliedly
exempt from “special assessments.” “While publicly owned
and used property is not exempt from special assessments
under the constitution or Statutory law of this state, there is
an implied exemption of such property from burdens of that
nature .... The principle which makes property of the
State ... nontaxable . . . also precludes the imposition of a
special assessment for a street or other local improvement
upon such property, unless there is a positive legislative
authority therefor. [Citations.]” (Inglewood v. County of
Los Angeles (1929) 207 Cal. 697, 703-704).
The rationale behind a public entity’s exemption from
property taxes and special assessments is to prevent one tax-
supported entity from siphoning tax money from another
such entity; the end result of such a process could be
unnecessary administrative costs and no actual gain in tax
revenues. (Eisley v. Mohan (1948) 31 Cal.2d 637, 642.) On
the other hand, when one tax-supported entity provides
goods or services to another, neither the California
Constitution nor decisional law exempts the public entity
from paying for these goods or services.
Although both parties agree that the school district is
exempt from special assessments unless there is contrary
legislative authority, the parties disagree as to whether the
challenged capacity fee is a special assessment. The water
district and its amici argue that the capacity fee does not
have the characteristics of an assessment, but rather those
of a usage fee. For example, the amount of the capacity fee
is based on anticipated usage, not the value of ihe benefit to
the property. The capacity payment is “voluntary” — in the
sense that it is the payor’s solicitation and utilization of the
sewage service which triggers the charge As such, the
capacity fee must be paid by the school district as well as by
all other users of the sewer system. The school district and
its amici urge the court to reach the same conclusion as did
the courts in Riverside, Regents I, and Regents II: a fee
used to provide funds for capital improvements to sewer
facilities, rather than simply to cover ongoing costs of
service, is a special assessment, even if the amount of the fee
is based on actual or anticipated usage.
What is a special assessment? “A special assessment is
not in the constitutional sense a tax at all. It is a compulsory
charge placed by the state upon real property within a
predetermined district, made under express legislative
authority for defraying in whole or in part the expense of a
permanent public improvement therein ... .” (Spring Street
Co. v. City of Los Angeles (1916) 170 Cal.24, 29.) The
court in Solvang Municipal Improvement District v. Board
of Supervisors (1980) 112 Cal.App.3d 545, discussed the
difference between a property tax and a special assessment:
“An ad valorem tax on real property describes a general tax
levy which applies a given rate to the assessed valuation of
all taxable property within a particular taxing district. Such
is the tax levied by a county to pay for general expenditures,
such as fire and police protection, and for general
improvements, such as fire Stations, police stations, and
public buildings, which are deemed to benefit all property
owners within the taxing district, whether or not they make
use of or enjoy any direct benefit from such expenditures or
improvements.... In contrast, a special assessment,
sometimes described as a local assessment, is a charge
imposed upon particular real property for a local public
improvement of direct benefit to that property, as for
example, a street improvement, lighting improvement,
irrigation improvement, sewerage connection, drainage
improvement, or flood control improvement . . . . This view
makes a clear distinction between taxes which are levied for
general revenue and for general public improvement; and
Special assessments, which are levied for local improve-
ments which directly benefit specific real property.” (Jd. at
pp. 552-553.)
The Court of Appeal in the instant case described the
average special street assessment as a_ typical special
assessment. The assessment is a one-time charge. “‘The cost
of paving a street is assessed against all abutting property
Owners in proportion to the amount of property fronting on
ee ees
oe ne
A-9
the street. The assessment is involuntary (a property owner
cannot refuse to have the street in front of his house paved)
and unrelated to actual use of the paved street (a similarly
situated property owner with no vehicles is assessed by the
same as one with several).”
In contrast to a special assessment, a usage fee typically is
charged only to those who use the goods or services. The
amount of the charge is related to the actual goods or
services provided to the payer. The usage fee for an ongoing
service would normally be a monthly charge rather than a
one-time charge.
In its opinion, the Court of Appeal pointed out that
Health and Safety Code section-5471, enacted in 1945,
authorizes the collection of “fees, tolls, rates, rentals, or
other charges” for services and facilities furnished by the
water district. The court found it significant that the
Legislature did not include the word “‘assessments” in the
list, and concluded that the Legislature understood that a
user charge does not become a special assessment merely
because it is used for capital improvements.
We do not find the absence of the word “assessments” to
be convincing evidence that the Legislature would not
consider fees for capital improvements to be special
assessments. Amicus University of California, supporting
the school district, points out that the state and its agencies
are not bound by general words used in a statute
(Inglewood v. County of Los Angeles, supra, 207 Cal. 697,
707) unless compliance with that statute would result in no
impairment of sovereign powers. (Hoyt v. Board of Civil
Service Commrs. (1942) 21 Cal.2d 399, 402.) In this case,
according to amicus, such an impairment could occur,
because the charges necessary to fund local capital
improvements to the sewer district would reduce the
resources which the school district may use to perform its
other functions. (County of Santa Barbara v. City of Santa
Barbara (1976) 59 Cal.App.3d 364, 369).
The Court of Appeal concluded that the capacity fee in
the instant case is a hybrid: “‘The capacity fee thus has some
characteristics which resemble a special assessment (one
time charge; not based on actual use) and some which look
more like a user charge (charge only applies to users; based
on anticipated use).” We agree that the capacity fee is a
hybrid, but we conclude we should follow the three prior
appellate opinions which held that a similar fee is a special
assessment. These opinions established a rule which looks to
the purpose of the fee being charged, and not simply to form
of the fee, a matter which can be easily manipulated.
In Riverside, a water district attempted to collect a
“capital cost sewer capacity charge” from all tax-exempt
entities. The county refused to pay, contending the charge
was invalid. The Riverside court held that “unless the
Legislature expressly so authorizes, property publicly
owned and used is exempt from special assessments.
[Citations.] 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. [Citations.]” (Italics added, Riverside, supra
84 Cal.App.3d 655, 659-660.)
In Regents I, the Regents of the University of California
challenged a “sewage facilities charge” imposed by the City
of Los Angeles on all users of the city sewer system. (The
Regents did not dispute a connection charge and a monthly
service charge which were also imposed.) The court stated
+
that “although the amount of the ‘sewage facilities charge’
is based upon anticipated use of the sewer system by the
user, the collected revenues are not used to defray the costs
of providing sewer service to the users. Such costs are
funded through the ‘sewer connection charge’ and the
‘monthly sewer service charge,’ charges whose payment the
Regents do not dispute. Rather, the 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. [Citation.]”
(Italics added, Regents I, supra, 100 Cal.App.3d 547, 549-
550.) The court concluded that, although it might be more
fair if the Regents were required to pay their share of the
capital costs of local improvements whose benefits they
enjoy, the court had no authority to modify the tax-exempt
status of the university.
Following Regents I, the City of Los Angeles amended
its municipal code to increase its sewer service charge. The
new charge included a portion for capital funding and was
based on actual rather than anticipated use. The Regents
nonetheless refused to pay the portion of the service charge
that was earmarked for capital improvements. The Court of
Appeal in Regents II, supra, 148 Cal.App.3d 451, rejected
the city’s argument that this new charge differed from the
one in Regents I because it was based on actual use. The
court held that “The Regents test is the purpose of the
disputed charge. [Citation.] Nor does the method of
calculating a charge define its nature. Whether the charge
is a one time occurrence or a monthly assessment is
irrelevant to the purpose for which the collection is made.
The character of the assessment is also not affected by the
fact that the sewer service charge is unrelated to property
value. [Citation.]” (Jd. at p. 456.)
A-12
The Court of Appeal in the instant case found that the
Capacity fee at issue is a user charge because it was charged
only to users of the sewer system rather than being assessed
to all property owners in the district. Although the courts in
Riverside, Regents I, and Regents II did not analyze this
factor, we suggest that charging users rather than property
Owners is a factor as easily manipulated as is the method of
computing the fee.
In Regents I and Regents II, the capital improvements
charge was assessed only to users of the sewer system, yet
the courts found the charge to be an assessment. By placing
the emphasis on the purpose of the charge, the courts in
those cases created a rule which both conforms to the policy
behind the implied exemption for public entities, and avoids
easy manipulation. A contrary ruling would, in effect,
abrogate the public entities’ implied exemption from
assessments by sewer districts. Under the rule we adopt, no
matter how the form of the fee is varied (i.e., whether based
on actual or anticipated use, or unrelated to use; whether a
one-time fee or monthly fee; and whether charged to all
property owners or only to users of the sewer system), the
purpose of the fee will determine whether or not public
entities are exempt from paying the fee. In sum, a fee aimed
at assisting a utility district to defray costs of capital
improvements will be deemed a Special assessment from
which other public entities are exempt.
Amicus University of California points out that the 5,244
special districts in California are responsible for most of the
basic infrastructure systems which are vital to our economy.
Costs for these special districts often exceed revenues and
the districts frequently need more money. Rather than
allowing these essentially local special districts to determine
that public entities should contribute to their capital
improvements, however, we believe that the Legislature
should evaluate statewide needs and allocate funds
accordingly. Thus, a state agency is responsible for paying a
special assessment such as the instant capacity fee only
when the Legislature authorizes such payment.
B. Legislative Authority for the Capacity Fee
The water district and its amici argue that even if we find
that the capacity fee is a special assessment from which
public entities ordinarily would be impliedly exempt, there
is legislative authority, in either the Education Code or the
Water Code, for requiring the school district to pay the
challenged assessment. We will examine these codes
separately.
1. The Education Code
Education Code section 39613? permits a school district
to construct its own sewer system or acquire “rights” in
sewer systems constructed by others. The water district
contends that this section provides express legislative
authorization for its capacity fee. We disagree.
The water district’s argument is that because the section
permits the school district to build its own sewer system or
acquire rights in another system, and to pay for such
projects with money from the district’s building fund
3 This section provides: ‘In addition to the other powers granted the
governing board of each school district may provide sewers and drains
adequate to treat and/or dispose of sewage and drainage on or away
from each school property. For this purpose it may construct adequate
systems or acquire adequate disposal rights in systems constructed or to
be constructed by others for these purposes without regard to their
proximity. The cost thereof may be paid from the building fund,
including any bond moneys therein.”
A-14
(which is used for funding capital improvements), therefore
this section implicitly authorizes the school district to pay
an assessment imposed on it by the water district. But if the
Legislature intended school districts to be subject to special
assessments for sewer systems, it undoubtedly would have
said so directly. For example, Education Code
Section 39609 expressly authorized school districts to
“appropriate money to pay assessments, for the improve-
ment of streets or other public places.” By contrast,
Education Code section 39613 contains no _ reference
whatsoever to assessments.
The predecessor of Education Code section 39613 was
enacted as an urgency measure in 1950 to allow school
districts to use building funds to construct sewer systems
either alone or in conjunction with others, without regard to
the proximity of the systems. According to section 39613, a
school district can build its own sewer system or acquire
ownership rights in a system built with others. In addition,
Education Code section 39011° authorizes or requires a
* This section provides: “The governing board of any school district
may appropriate money to pay assessments, for the improvement of
streets or other public places, levied against any real property owned by,
or under the control of the board, when the property is included within
an assessment district formed in pursuance of any general law of the
State or under the charter of any municipality. The assessments may be
paid out of any funds belonging to the school district, except funds
derived from the sale of bonds or required by law to be used for teachers’
salaries.”
5 This section provides in pertinent part: “Where a city, district, or
other political corporation or subdivision of the state is authorized by
law to furnish sewerage, water or other utility facilities to a school
district and is not required to provide for the installation thereof to such
school district at its own expense, it may enter into an agreement with
such school district whereby the cost of installation will be paid by the
school district to pay for the installation costs when
contracting with a water district for sewer service. Neither
statute authorizes or requires a school district to
appropriate money to pay special assessments. As we have
previously explained, a special assessment may not be
imposed on property belonging to a public agency absent
express legislative authorization. (Riverside, supra, 84
Cal.App.3d at pp. 659-660.)
2. The Water Code
The water district next argues that section 31101.5 of the
Water Code, which became effective in 1983, authorizes the
water district to levy a special assessment for capital
improvements upon the school district. Section 31101.5
states: “A district may supply sewage and waste services to
property not subject to district taxes at special rates, terms,
and conditions as are determined by the board for the
services.” But this section uses the word “‘services”; it does
not mention assessments and it does not mention fees for
capital improvements. It simply allows water districts to set
rates for public agencies that are different than the rates for
private customers.
Other sections of the Water Code cited by the water
district likewise provide no authority for assessing property
owned by public agencies. Section 31100 gives water
districts the right to contract with public agencies.
Section 31101 permits water districts to charge for services
and facilities. None of these sections provides the express
school district under such terms as the parties may agree to, with
reimbursement from charges made or to be made to other users of such
facilities as may be agreed upon between the parties, same insofar as
other provisions of law control the terms of such reimbursement.”
authority that is required for imposing a special assessment
on a public entity.
C. Payment Not Required by Contract or
Promissory Estoppel
Finally, the water district points out that the school
district had a choice of constructing its own sewer system
or contracting with another agency to provide the service.
Because the school district has voluntarily elected to
connect its schools to the water district’s System, the school
district should be required by contract to pay all fees,
including the capacity fee. It is uncontested, of course, that
the school district is required to pay the water district
connection fee and the monthly service fee. But because we
believe the capacity fee is a special assessment, it is not a fee
that the school district can agree by contract to pay.
According to Riverside, supra, 84 Cal.App.3d at page 659,
“whether the [school district] can agree to pay the charge
depends on whether the [water] district has the power to
impose it.” Because the water district does not have the
power to impose the capacity fee here, if the school district
pays the invalid charge it would amount to a “gift of public
funds in contravention of article XVI, section 6 of the
California Constitution.” (7d. p. 660.)
The water district alternatively urges us to hold that the
doctrine of promissory estoppel applies to require the
school district to pay the capacity fee. Here, the school
district (1) promised to pay the capacity fee upon first being
allowed to connect to the water district’s sewer system, and
(2) furthermore paid the capacity fees for 10 years before
claiming an exemption. The water district contends that the
school district is accordingly estopped from denying the
obligation to pay Capacity fee.
In City of Long Beach v. Mansell (1975) 3 Cal.3d 462, we
stated that it is a “well-established proposition that an
estoppel will not be applied against the government if to do
so would nullify ‘a strong rule of policy, adopted for the
benefit of the public, ....’ [Citation.]” (Jd. at p. 493.) Public
entities are exempt from property taxes and special
assessments in order to preserve the balance in funding
established by the Legislature and to avoid unnecessary
administrative costs. (See Eisley v. Mohan, supra, 31 Cal.2d
637, 642.) Because we believe that the implied exemption
against special assessments on property owned by public
agencies is indeed a “strong” public policy, the doctrine of
promissory estoppel is not applicable to this case.
D. The “Special Tax” Issue
The school district had argued that even if the capacity
fee is not deemed a special assessment, the fee is not
reasonably related to the cost of the service for which it is
imposed within the meaning of Government Code
section 50076.° Therefore, according to the school district,
the capacity fee is a “special tax” which would require a
two-thirds voter approval to be valid under article XIIIA,
section 4 of the California Constitution.
The school district raised this argument for the first time
on appeal and the water district had no opportunity to make
a record on this issue. Although we do not find it necessary
to reach it because we hold the capacity fee is a special
assessment, we agree with the Court of Appeal’s statement
6 ‘As used in this article, ‘special tax’ shall not include any fee which
does not exceed the reasonable cost of providing the service or
regulatory activity for which the fee is charged and which is not levied
for general revenue purposes.”
that the issue was untimely raised. Because the issue of
reasonable relationship is largely factual (see Beaumont
Investors v. Beaumont Cherry Valley Water Dist. (1985)
165 Cal.App.3d 227, 234-235), the appellate court’s refusal
to examine this issue was correct.
Vv. CONCLUSION
Because the capacity fee is a special assessment which has
not been authorized by the Legislature, we hold that the
school district is not required to pay the fee. The judgment
of the Court of Appeal is reversed. As for capacity fees that
were paid by the school district from 1971 to 1980, this
matter is remanded to the Court of Appeal for further
proceedings to determine whether those fees must be
refunded.
LUCAS, J.
WE CONCUR:
MOSK, J.
BROUSSARD, J.
REYNOSO, J.
PANELLI, J.
COPY
SAN MARCOS WATER DIST. vy. SAN MARCOS
UNIFIED SCHOOL DIST. L.A. 32134
CONCURRING OPINION BY GRODIN, J.
It is not entirely clear to me — nor was it to the Court of
Appeal — why a fee which is based upon an estimate of
prospective use is a “special assessment” rather than a “user
fee” because its purpose is to fund capital improvement. I
agree with the majority, however, that we should defer to
the now well-established precedent to that effect and invite
the Legislature, if it sees fit, to establish a different rule. On
that basis, I concur.
GRODIN, J.
I CONCUR:
BIRD, CJ.
APPENDIX B
wants ey fic)
CERTIFIED FOR PUBLICATION
FILED
Keenan G. Casady, Clerk
AUG 19 1985
COURT OF APPEAL
FOURTH DISTRICT
COURT OF APPEAL
FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
SAN MARCOS WATER DISTRICT,
Plaintiff and Respondent, D001951
(Super. Ct. No. N24145)
v.
SAN MARCOS UNIFIED
SCHOOL DISTRICT,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of San
Diego County, F. V. Lopardo, Judge. Affirmed.
Vernon A. Peltzer, Jeffrey G. Scott and Smith & Peltzer
for Plaintiff and Respondent.
Lynn R. McDougal and McDougal, Meloche, Love &
Eckis for Defendant and Appellant.
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. 10 and fn. 8.) A monthly
sewer service charge is assessed based on rates approxi-
mating the amount of sewage discharged monthly.' 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.* 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.”
' For schools, the monthly service charge amounts of $5.75 for the
first 25 students, faculty, staff, etc., at the facility and $3.50 for each
additional 25 persons assigned to the school.
2 For schools, the capacity fee charged is equal to $2,400.00 for each
25 students, faculty, staff, etc. assigned to the school.
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 mo 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 a ¢ 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:
“An 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, reconstruc-
tion, 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.”
B-4
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; Regents of
University of California vy. City of Los Angeles (1979) 100
Cal.App.3d 547; Regents of University of California v.
City of Los Angeles (1983) 148 Cal.App.3d 451.) 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.
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
3 Under established law, public agencies in California are generally
exempt from property taxation under the provisions of article XIII,
section 3 of the California Constitution. (J nglewood v. County of Los
Angeles (1929) 207 Cal. 697, 702.) Although the constitutional
exemption does not apply to special assessments, the courts have
considered public property impliedly exempt from special assessments
unless the Legislature provides otherwise. (Id., at pp. 703-704.)
* Education Code section 39613 provides:
“In addition to the other powers granted the governing
me el A ET ana nate RN Saetiad
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.)
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.
board of each school district may provide sewers and drains
adequate to treat and/or dispose of sewage and drainage on
or away from each school property. For this purpose it may
construct adequate systems or acquire adequate disposal
rights in systems constructed or to be constructed by others
for these purposes without regard to their proximity. The
cost thereof may be paid from the building fund, including
any bond moneys therein.”
5 Water Code section 31101.5, effective January 1, 1983, provides:
“A distr’ct may supply sewage and waste services to
property not subject to district taxes at special rates, terms,
and conditions as are determined by the board for the
services.”
B-6
County of Riverside v. Idyllwild County Water Dist.,
supra, 84 Cal.App.3d 655 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.’ ” (Jd, at p. 657.) The court
began by stating the general rule that tax-exempt public
entities are also impliedly exempt from special assessments.
(/d., at pp. 659-660.) 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.” (/d., at p. 660.)
The court then goes on to support is 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.)
® The Riverside court cited County of Santa Barbara v. City of
Santa Barbara (1976) 59 Cal.App.3d 364, 376 in support of its holding.
While the Santa Barbara case does indicate that a public entity cannot
label as a “‘charge” that which is really a special assessment, there is no
discussion of how to distinguish the two concepts.
i Vu reenable
TO aT
B-7
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 (Regents I.) The 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), Regents I court syllogistically
concluded:
‘(T]he revenues collected as a result of the
‘sewage facilities charge’ are used by the city of
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.)
The same parties again squared off in Regents of
University of California v. City of Los Angeles, supra, 148
Cal.App.3d 451 (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
B-8
that the critical issue in determining whether the charge
was a special assessment “is the purpose of the disputed
charge.” (Id., at p. 455, 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 tax-
exempt public entities. (J bid.)
Ill
It would be a simple matter for us to cite Riverside and
the two Regents decisions for the “purpose of the charge”
proposition in rejecting the Water District’s contention.
Unfortunately, the easy way is not always the correct one.
We are concerned that a statement unnecessary to the
holding in Riverside has been developed by the Regents
cases into a full-blown proposition of law without
sufficient — indeed without any — analysis of the econ-
omic implications of the proposition on local government
finance.
t is perhaps helpful to begin by analyzing the economic
rationale behind the Water District’s capacity fee. We will
then proceed to examine the economic factors which
distinguish user charges from special assessments and, more
generally, from taxes.
A
It is obvious that the Water District has sought to finance
its sewer system largely by payments from users of that
system rather than from general tax revenues. Accordingly,
each sewer user pays a connection fee to compensate for the
labor and materials involved in connecting a property
B-9
improvement to the sewer system. In addition, a monthly
service charge is imposed to cover the operating expenses
associated with treating the amount of sewage discharged
by the user during the month. Both of these charges,
however, assume the existence of an operating sewage
system including main sewer lines, a treatment plant and a
sewage outfall for discharge of the treated sewage into the
ocean. The Water District has sought to recoup the costs of
constructing such major facilities by way of the challenged
capacity fee. The capacity fee assumes that a system with x
capacity is needed to effectively treat a monthly sewage
discharge of x. If a new building is connected to the sewer
system which increase the monthly sewage discharge to
x + y, the capacity of the system must correspondingly be
increased by y. By setting its capacity fee at a level equal to
the cost of adding y capacity, the Water District is simply
charging to each new sewer use the capacity costs
associated with its impact on the system.
B
In economic terms, user charges are merely one source of
revenue for local governments. For our purposes we can
divide self-generated revenues into three general categories:
taxes, special assessments and user fees. There is a great
deal of legal literature attempting to distinguish between
taxes and special assessments, but very little which analyzes
the concept of a user charge. (E.g., State Highway
Commission v. City of Topeka (Kan. 1964) 393 P.2d 1008,
1010; see also 14 McQuillin, Municipal Corporations (1970
rev.) § 38.01 and cases there cited.) In contrast, economists
writing on the topic of public finance spend a great deal of
time discussing taxes and user charges but routinely omit
extensive references to special assessments. (See, e.g.,
B-10
Hirsch, The Economics of State and Local Government
(1970); Kamer, Crisis in Urban Public Finance (1983).) This
is because, to the economist, there is a great deal of
difference between taxes and user charges but significantly
less difference between special assessments and _ user
charges. User charges for public services are viewed as
analogous to the prices charged by private business entities
for commercial services. The amount of the charge is
closely tied to the benefits received by the purchaser. (See,
e.g., Hirsch, op. cit. supra, at p. 31.) Special assessments,
though distinguishable from user charges, are functionally
quite similar because the amount of the assessment, at least
in theory, is tied to the benefits received by the owner of the
assessed property. (E.g., Bird & Slack, Urban Finance and
User Charges, in State and Local Finance (Break edit.
1983), p. 216; 4 Sands & Libonati, Local Government Law
(1982) § 24.06, pp. 24-17.) Taxes on the other hand, are
quite different from both user charges and special
assessments because their amount is generally determined
not by reference to benefits received but rather on some
measure of the taxpayer's ability to pay. (Due and
Friedlaender, Government Finance — Economics of the
Public Sector (1973) pp. 236-237; Hirsc’. 2p. cit. supra, at
pp. 50-51.)
Economists have for some time advocated more extensive
utilization of user charges by local governments to finance
certain public services. (E.g., Bird & Slack, op. cit. supra, at
p. 251.)
“User charges put public prices on _ public
products. They apply to those who voluntarily
consume public services or use _ public
facilities. ... They are favored by economists not
only because they raise additional revenues, but
B-11
also because they can lead to a more efficient
allocation of resources arid a more equitable
distribution of public services. Efficiency is served
because user charges provide a price signal as to
what goods should be produced and at what
levels. Equity is served because only those who
benefit from a service actually pay for it.”
(Kamer, op. cit. supra, at p. 64.)
As noted above, economists tend to view special
assessments as analogous to user charges because the
amount of the assessment varies with the benefits received.
Special assessments, however, are not true “public prices.”
One set of economists has sought to define special
assessments and distinguish user charges:
“Special assessments and related devices such as
subdivision exactments or lot levies are compul-
sory payments (in cash or kind) intended to defray
the cost of certain public sector capital outlays.
They are not ‘user charges’ as normally defined,
because the amount charged is not related to the
use made of any good or service provided by
governments.” (Bird & Slack, op. cit. supra, at
p. 216.)
Thus defined, special assessments are properly viewed as a
one-time benefit tax which, like taxes based on the ability-
to-pay principle, are distinguished from user charges by
their involuntariness and the fact that the amount of the
assessment is unrelated to use of the public service.’
7 The average special street assessment is a typical example. The cost
of paving a street is assessed against all abutting property owners in
proportion to the amount of property fronting on the street. The
assessment is involuntary (a property owner cannot refuse to have the
B-12
Because they view user charges as a pricing system for
public services, it seems clear economists would have no
trouble concluding that the type of monthly fee struck
down by the court in Regents II, supra, 148 Cal.App.3d
451 is in reality a true user charge rather than a special
assessment. While it is true that special assessments are
used to fund capital improvements, it does not follow that
any charge used to fund capital improvements is necessarily
a special assessment. By analogy to the private sector,
businesses normally obtain capital to finance improvements
from the prices they charge for their goods and services. If a
dry cleaning business needs new equipment, there is no
procedure for specially assessing its customers. The cost of
the new equipment must be factored into the prices charged
for cleaning clothes in the same way as Los Angeles
factored the cost of sewer treatment improvements into the
price charged for sewer service in Regents IJ. As one
economist has stated in explaining the advantages of user
charges:
“User charges can reduce congestion by rationing
scarce facilities to those who place the highest
value on access to them. User charges can also
provide the capital needed to maintain or expand
existing public facilities. For example, a user
charge imposed on motorists who travel on major
highways during peak rush hours can reduce
highway congestion while, at the same time,
generating the capital needed for highway
Street in front of his house paved) and unrelated to actual use of the
paved street (a similarly situated property owner with no vehicles is
assessed the same amount as one with several.)
B-13
improvements.” (Kamer, op. cit. supra, at p. 64,
emphasis added.)
The major difference between the capacity fee in this case
and in Regents I compared with the service charge in
Regents II is that the capacity fee is a one-time charge
based on anticipated use whereas the service charge is a
monthly assessment based on actual use. The capacity fee
thus has some characteristics which resemble a special
assessment (one time charge; not based on actual use) and
some which look more like a user charge (charge only
applies to users; based on anticipated use). (Compare Seal
Tanning Co. v. City of Manchester (N.H. 1978) 393 A.2d
1382, 1386 (A special assessment “is incurred only once
and is collected from a landowner who is specially benefited
by the sewer’s construction whether or not he is actually
connected to the sewer system.’’).) To resolve the question
of which category this hybrid is most properly placed
within, we must turn from the realm of public economics to
that of legal precedent. Our examination will necessarily
include an analysis of the rationale underlying the
exemption from special assessments enjoyed by public
entities to determine whether policy considerations warrant
its extension to the capacity fee at issue in this case.
IV
Our research has disclosed several out-of-state cases in
which courts have been asked to review sewer charges
analogous to the Water District’s capacity fee. The closest
on point would appear to be Murray City v. Board of Ed.
of Murray City Sch. Dist. (Utah 1964) 396 P.2d 628.
Murray City issued revenue bonds for extensions and
improvements to the city’s water plant and sewer system.
To pay off the bonds, the city imposed a sewer charge based
B-14
on anticipated use of the sewer system. (/d., at p. 629.) As
in California, public agencies in Utah are generally exempt
from taxes and special assessments. The school district
accordingly contended it was exempt from the sewer
charge. Rejecting the school district’s argument that the
sewer charge was in reality a special assessment, the Utah
Supreme Court sought to distinguish the two concepts:
“An assessment ... is levied under the taxing
power and is imposed upon property within a
limited area for an improvement to enhance all
property within that area. [Citation.] On the other
hand, the cost of a service is determined by the
benefits conferred upon the occupants of the land
rather than an increase in value to the land itself.”
(Jd. at p. 630).
Murray City was relied on by that same court in Home
Builders Ass’n of Gr. Salt Lake v. Provo City (Utah 1972)
503 P.2d 451, sustaining a $100-per-living-unit “connection
fee”® designed to defray the costs of improvements and
enlargements to the sewer system. Citing Murray City, the
court noted that sewer charges and connection fees “are
neither taxes nor assessments but payments for services
furnished.” (/d., at p. 452.)
A similar conclusion with respect to a similar connection
fee was reached by the Indiana Supreme Court in Brandel
8 The connection fee in Home Builders and some of the cases we later
discuss would be distinguished from the connection fee charged by the
Water District in this case. (See ante, p.2.) The Water District’s
connection fee is designed solely to compensate for the labor and
materials costs incurred in physically connecting a property improve-
ment to the sewer system. The connection in Home Builders and the
other cases is analogous to the Water District’s capacity fee because it is
designed to defray the cost of capital improvements to tiie sewer system.
a ne Be
v. Civil City of Lawrenceburg (Ind. 1967) 230 N.E.2d 778.
In distinguishing benefit taxes such as special assessments
from user charges (referred to in the opinion as “use taxes”’)
the Brandel court explained:
‘The tax here involved, it should be noted, is not a
benefit tax, but rather a use tax for the services of
disposing of sewage from particular property. It is
not a benefit tax for the reason that not all
property in the area under the ordinance is
required to pay the $200.00 fee. It is only such
property as has sewage to be disposed of to which
the tax is applicable.” (/d., at p. 780.)
In City of Dunedin v. Contractors & Builders Assn’n(Fla.
App. 1975) 312 So.2d 763, the city imposed a $325 “impact
fee” for connections to the city’s sewer system to cover the
costs of capital improvements to that system. The court
quite succinctly defined the issue before it:
“No one doubts that a municipality has the power
to make reasonable charges for water and sewer
services. The question is whether the cost of
projected capital improvements can be considered
in setting the charges.” (/d., at p. 766, fn. 4.)
In concluding that sewer service charges may properly
include the cost of projected capital improvements, the
court stated as follows:
“The imposition of fees for the use of a municipal
utility system is not an exercise of the taxing
power nor is it the levy of a special assessment.
[Citation.] In our view, connection fees such as
those invo'ved in this case do not constitute a tax
but a charge which may be made for the use of the
utility service... .” (/d., at p. 766, fn. omitted.)
B-16
In Opinion of Justices (N.H. 1944) 39 A.2d 765, the New
Hampshire Supreme Court was asked to consider whether
the City of Concord could charge the State certain “sewer
rents” based on “ ‘the metered consumption of water on the
premises connected with the sewer system, the number and
kind of plumbing fixtures connected with the sewer system,
the number of persons served by the sewer system or upon
any other equitable basis.” (Jd., at p. 766.) The funds
raised by such charges were to be used for, among other
things, the construction and repair of the sewer system
including treatment and disposal facilities. (Jbid.)
Responding to the argument that the sewer rents
constituted a special assessment for which the state was
impliedly exempt, the court responded that “the difficulty
with this contention, as here applied, lies in the fact that the
price which the city charges for sewer service is in no sense
a special assessment.” (Jd., at p. 767.) In support of its
conclusion, the court cited a major treatise in the field:
.. Another form of a charge which is in
substance a contract is to be found where a
municipality, under authority conferred by
Statute, imposes a charge upon property owners
who connect their land with a sewer system
constructed by the city, the owner being free to
avoid liability by refraining from making such
connection. Such charge may be a fixed sum for
the privilege of making the connection, or it may
be a charge based upon the amount of sewage
discharged from the premises into the sewer. Such
a charge is not ord.aarily regarded as a local
assessment.’ Page & Jones, Taxation by Assess-
ment, § 6.” (Jbid. (emphasis added); to the same
effect, see also Louisville and Jefferson County
B-17
Met. Sewer D. v. Barker (Ky. 1948) 212 S.W.2d
122)?
Opinion of Justices was cited with approval by the court
in Hayes v. City of Albany (Ore.App. 1971) 490 P.2d 1018.
The Hayes court validated a sewer connection charge
which ranged from $255 for a single family dwelling to as
much as $400,000 for a major industrial plant. Of particular
interest is the fact that Hayes also relied on a California
Supreme Court decision in support of its holding. In
Associated Homebuilders v. City of Livermore (1961) 56
Cal.2d 847, the city imposed a $150-per-dwelling-unit sewer
connection charge designed to defray the cost of capital
improvements to the sewer system. Relying on Health and
Safety Code section 5471 (ante, p. 4), the court sustained
the charge against a challenge by builders and developers
that imposition of the charge exceeded the city’s taxing
power:
“In any given case the charge prescribed by the
subject ordinances is measured by the use to
which the property (and consequentially the city’s
sewer system) will be put, including the number
and type of plumbing fixtures to be installed.
Accordingly, it does not constitute an assessment
on the value of the property . . . but rather is in the
nature of an excise tax imposed on all persons
thereafter applying for building permits for the
privilege of connection to (and is reasonably
commensurate with the burden to be imposed on)
? Interestingly, both Opinion of Justices and Barker were heavily
relied on in 19 Ops. Cal.Atty.Gen. 195, the same Attorney General’s
Opinion relied on by the court in Riverside, supra, 84 Cal.App.3d ad
p. 660 to support its conclusion that public agencies could not be charged
for sewer services at rates different from private persons. (See ante, p. 7.)
B-18
the facilities of defendant’s sewer system.” (/d., at
pp. 852-853 (emphasis added).).)
We are not totally sure what the Supreme Court meant
by a charge “‘in the nature of an eacise tax.” We suspect the
court had in mind the type of analysis it employed in City
of Glendale v. Trondsen (1957) 48 Cal.2d 93, 102-103
where it validated a city’s rubbish collection fee alterna-
tively characterized as a “excise tax” and “service
charge”.!° In any event, it seems clear the Livermore court
did not view the sewer connection charge as a special
assessment.!!
10 Under California law, an “excise tax” is generally considered to be
any charge imposed pursuant to the government’s taxing power other
than a property or poll tax. (City of Glendale v. Trondsen, supra, 48
Cal.2d at pp. 103-104; accord 16 McQuillin, Municipal Corporations (3d
ed. 1984) § 44.190, 0. 619.) Thus, even if sewer capacity and connection
fees are characterized as excise taxes, the School District would be hard-
pressed to argue it is exempt from such taxes based on the constitutional
provision which exempts it from paying property taxes. (See ante, fn. 3.)
'! Although the Livermore court did not focus on it, our heading of
Health and Safety Code section 5471 suggests the Legislature possessed
a similar view. That section, pursuant to which the Water District’s
capacity fee was imposed, authorizes the collection of ‘“‘fees, tolls, rates,
rentals or other charges .. for services and facilities furnished by the
sewer district] ...” (Emphasis added.) The statute further specifically
provides that revenue from such charges may be used to acquire or
construct sewer facilities (i.e., capital improvements). In view of the
specific contemplation of capital costs, we think it highly significant the
Legislature omitted the term ‘“‘assessments” from the generic list of
charges. Implicit in the wording of the statute, we believe, is the
Legislature’s understanding that a user charge does not become a special
assessment merely because it is used to defray the cost of capital
improvements.
B-19
Vv
We are thus faced with a situation in which the rationale
of a series of three recent Court of Appeal opinions, with
which we have already expressed our concern, is
inconsistent with the weight of authority from other states
and is arguably inconsistent with language in a California
Supreme Court decision. Significantly, neither Riverside
nor either of the Regents decisions discuss the out-of-state
authority or cite the Supreme Court’s opinion in Livermore.
Under such circumstances, we think it appropriate to
briefly analyze the rationale underlying the rule which
generally exempts public agencies from special assessments.
As previously noted, the special assessment exemption
derives by analogy from the constitutional exemption from
property taxation enjoyed by public agencies. That rule
arose at a time when there were far fewer local agencies
whose boundaries much less frequently overlapped. The
exemption of public property from taxation was viewed as
avoiding the necessity of a municipality assessing its own
property. (See Holbrook & O’Neill, California Property
Tax Trends: 1850-1950 (1951) 24 So.Cal.L.Rev. 252, 268.)
To the extent local agency boundaries did overlap, the
transaction costs associated with inter-entity tax payments
were apparent!y perceived as outweighing any theoretical
advantages in terms of tax equity.'*
12 The theoretical inequity of the tax exemption can be illustrated if
we assume a small public entity located entirely within a considerably
larger public entity. We can further assume the large entity owns
significant amounts of property within the small entity’s boundaries but
that the small entity owns very little property. Normally we would
expect that any burdens created by a public agency will be borne equally
by all its taxpayers. But if the large entity’s property is exempt from
It is because special assessments are viewed as being
within the government’s taxing power (see Inglewood v.
County of Los Angeles, supra, 207 Cal. at p. 703) and are
clearly levied on property that the analogy to the property
tax exemption developed. While there is a clear difference
between a tax for general governmental purposes imposed
on ability-to-pay principles and an assessment for a specific
improvement levied on benefit principles, the facial
similarity has been seen as sufficient to justify the implied
exemption. (/d., at pp. 703-704.)
Where there is no necessary relationship between the
amount of a tax and the amount of benefits received from
governmental services (i.e., where a tax is imposed on an
ability-to-pay principle), it is arguable that the transaction
costs associated with assessing public agencies do not justify
the results, especially in view of the theoretical difficulties
involved in determining the “‘ability-to-pay” of a govern-
mental body. Even in the case of a special assessment,
where the benefits received are solely related to increases in
the value of the subject property, such a benefit is perhaps
less useful to a public agency which is not in business to
make a profit. But where the benefit to the public entity is
direct, defined as in the present case in terms of use of a
service, there is no more reason to exempt the agency from
payment of the charge than there is to exempt it from
paying private businesses for goods delivered and services
rendered.
taxation, the tax burden on the small entity’s taxpayers must be
correspondingly increased. This results in a situation where small entity
taxpayers effectively subsidize large entity taxpayers who do not also
reside within the small entity.
B-21
VI
The general rule with respect to tax exemptions is that
they should be strictly construed against the person or
entity claiming the exemption. (See Cedars of Lebanon
Hosp. v. County of LA. (1950) 35 Cal.2d 729, 734.) While
this general rule has been held inapplicable to exemptions in
favor of public agencies (see Pasadena v. County of Les
Angeles (1920) 182 Cal. 171, 174), this rule of liberalized
construction has only been invoked where a tax exemption
is express. Where a tax exemption is created neither by
constitution nor statute but is rather a creature of judicial
interpretation (see ante, fn. 3), we believe the general rule is
more appropriate and the implied exemption must be
strictly construed. So construed, and in view of the
abundant precedent from other states sustaining similar
sewer capacity charges coupled with the supportive
language in the Supreme Court’s Livermore opinion, we
conclude the School District is to impliedly exempted from
paying the Water District’s capacity fee. The capacity fee
does not constitute a special assessment for the purposes of
the implied exemption because it is not assessed against all
property benefited by the sewer system but is only imposed
on users of the system whose use gives rise to the need for
additional sewer capacity.'?
'3 The School District argues that even if the capacity fee is not
properly characterized as a special assessment, the Water District has
failed to demonstrate that the amount of the fee “‘does not exceed the
reasonable cost of providing the service or regulatory activity for which
the fee is charged...” within the meaning of Government Code
section 50076. (See Beaumont Investors v. Beaumont-Cherry Valley
Water Dist. (1985) 165 Cal.App.3d 227.) Accordingly, it suggests that
the capacity fee, lacking a two-thirds voter approval, is an invalid
“special tax” under article XIII A, section4 of the California
B-22
We do not reach this conclusion lightly. We recognize
that it places us in conflict with the holdings of at least two
other division of the Court of Appeal. Despite our respect
for the principle of state decisis, however, we believe those
courts’ failure to consider the arguments and precedent we
have discussed here mandates our taking a fresh look at the
question. Our contrary conclusion is a function of those
different arguments and additional precedent. !4
DISPOSITION
Judgment affirmed.
CERTIFIED FOR PUBLICATION
/8/ WIENER, J.
I CONCUR:
/s/ BUTLER, J.
Constitution. (/bid.)
The School District’s contention is raised for the first time on this
appeal. The Water District had no opportunity to make a record on this
issue in the trial court. Our holding here that the capacity fee is not an
invalid special assessment should not be read to preclude a subsequent
challenge to the fee based on section 50076. As a footnote, however, we
observe that special assessments do not constitute “special taxes” within
the meaning of article XIII A, section 4. (See J. W. Jones Companies v.
City of San Diego (1984) 157 Cal.App.3d 745, 753-754.)
'4 In view of our conclusion that its capacity fee does not constitute a
special assessment, we need not reach the Water District’s additional
contentions that the Legislature has specifically authorized its collection
from public agencies so as to negate any implied exemption. (See ante,
pp. 5-6.)
B-23
I respectfully dissent.
The issue presented in this case is whether the San
Marcos Water District (Water District) may impose on the
San Marcos Unified School District (School District) a
“sewer capacity right fee” which is used by the Water
District to fund capital improvements.
The majority refuses to follow the clear reasoning and
the general rule found in the California Supreme Court
decision of Inglewood v. County of Los Angeles, 207 Cal.
697, 703-704.! The majority would in effect overrule three
precisely-in-point appellate decisions, Regents of Univers-
ity of California v. City of Los Angeles, 100 Cal.App.3d
547 (hg. den.) (Regents I); Regents of University of
California v. City of Los Angeles (Regents II), 148
cal.App.3d 451 (hg. den.); and County of Riverside v.
Idyllwild County Water Dist. 84 Cal.App.3d 655, that rely
on Inglewood, supra, as the foundational authority. The
majority ignores, refuses to follow two well-reasoned
opinions of the Attorney General, 19 Ops. Cal.Atty.Gen.
195, and 67 Ops. Cal.Atty.Gen 13. The reasoning
underlying this abandonment of controlling long-standing
precedent as well as a fundamental constitutional aversion
to allow one taxing body to assess another taxing body
(without express legislative authority) for capital improve-
ment is difficult to grasp and evaluate. Learned discourse
on economic philosophy or out-of-state cases resting on
different statutory-constitutional judicial concepts, while of
academic interest, have little to no persuasive value. Our
' “While publicly owned and used property is not exempt from special
assessments under the constitution or statutory law of this state, there is
an implied exemption of such property from burdens of that nature.”
(Inglewood v. County of Los Angeles, supra, at p. 703, italics added.)
B-24
own Constitution, as interpreted by the California Supreme
Court, binds us, controls our decisions.
The parties’ stipulated statement of facts shows Water
District and School District serve roughly the same
community. School District is larger but all of its school
sites are located within Water District’s boundaries. Water
District has been handling sewage for the property involved
here since 1971.
Water District charges School District and its other
customers three types of fees: (1) a connection fee when the
customer’s property is initially connected to the district’s
sewer system; (2) a monthly sewer service charge computed
based on an estimated amount of sewage discharged
monthly; and (3) a one-time capacity fee computed based on
anticipated sewage discharge. 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.” (San
Marcos Water District Ordinance, No. 47-6, art. X, § 4.)
The School District disputes only the applicability of the
capacity fee.
Under the California Constitution, public schools are
exempt from property taxation. (Cal. Const., art. XIII, § 3.)
The California Supreme Court has held there exists also an
implied exemption for public property from _ special
assessments. (Inglewood v. County of Los Angeles, supra,
207 Cal. 697, 703.) Unless the Legislature has expressly
authorized a special assessment, publc property is exempt.
B-25
(County of Riverside v. Idyllwild County Water Dist.
supra, 84 Cal.App.3d 655, 659-660.)
A special assessment is a charge imposed on property
owners in a limited area to help pay for a local improvement
designed to enhance property value in that area. (Regents
of University of California v. City of Los Angeles, supra,
100 Cal.App. 3d 547, 549.) Whether a charge is a special
assessment depends on the purpose of the disputed charge,
not on whether the charge is calculated based on actual use
rather than property value. (Regents of University of
California v. City of Los Angeles, supra, 148 Cal.App. 3d
451, 455.) Similarly, it is irrelevant that the public entity
benefits from the capital improvements; it is exempted from
property taxations and special assessments and is not
required to contribute to its capital costs. (Regents II,
supra, 148 Cal.App.3d 451, 456.) A sewage fee, used to
provide capital for sewer construction, is a_ special
assessment which may not be imposed on state or local
government property absent express legislative authori-
zation. (Regents II, supra, 148 Cal.App.3d 451; Regents I,
supra, 100 Cal.App.3d 547; County of Riverside v.
Idyllwild County Water Dist, supra, 84 Cal.App.3d 650,
655.)
II
Water District contends the capacity fee is authorized by
the Education Code?
The Education Code requires a school district to consider
“waste disposal facilities” when evaluating potential school
2 All statutory references are to the Education Code unless otherwise
specified.
B-26
sites (§ 39002) and to provide “water closets” for its
students (§ 39612). The code also permits a school district
to enter into an agreement with a water district for the
installation charges for sewer service (§ 39011), to dedicate
land or grant an easement for sewers (§ 39540), to construct
sewers on or in close proximity to school property (§ 39606)
and, without regard to proximity, to construct adequate
systems “‘to treat and/or dispose of sewage and drainage”
or “acquire adequate disposal rights in systems constructed
or to be constructed by others for these purposes.”
(§ 39613.)
Water District asserts section 39613’s language permit-
ting a school district to “acquire disposal rights in systems
constructed or to be constructed by others” (emphasis
added) is the express legislative authorization for its
capacity fee.
The Legislature enacted section 39613’s predecessor
(§ 15811) as an urgency measure in 1950 in response to the
rapid growth of schools and attendant sewage disposal
problems. Prior to its enactment, school districts lacked
explicit authority to use their funds, including building
funds,’ to construct sewage treatment and disposal facilities
and were limited to constructing sewers on or adjacent to
their property. (See § 39606 (former Ed. Code (1959)
§ 15804, Ed. Code (1943) § 18003); Los Angeles City School
Dist v. Payne, 219 Cal. 106.) Section 39613 was designed to
alleviate these problems, i.e., to allow sclhivol districts to use
their funds to construct sysiems either exclusively for their
3 In the original section, school districts were required to use only
building funds for sewage treatrnent and disposal systems. In 1959, the
Legislature amended this section to make the use permissive rather than
mandatory.
B-27
own use or in conjunction with orders without regard to
proximity.
Contrary to Water District’s assertion, the authorization
to “acquire disposal rights in systems constructed or to be
constructed by others” does not equate with an authori-
zation to impose a capacity fee. Rather, the Legislature
intended by this language to permit a school district the
option of using its buildings funds to acquire an ownership
interest in a system with others, an alternative that might
provide for sewage disposal in a more economical manner
than either constructing its own system (§ 36913) or
contracting with a water district (§ 39011). This sentiment
is echoed in Water Code section 31049 which permits a
water district and public entity to enter a contract “for the
joint construction, acquisition, disposition or operation of
any property or works of a kind which might be
constructed, acquired, disposed of or operated by the
district.”
Moreover, the Legislature in Education Code section
39609 (former Ed. Code (1959) § 15806, Ed. Code (1943)
§ 18005), expressly authorized school districts to
“appropriate money to pay assessments, for the improve-
ment of streets.” (Italics added.) Had the Legislature
intended school districts to be subject to assessments for
sewage treatment facilities, it could have easily have said so,
as it did for street improvements in section 39609. The fact
it did not authorize such an assessment in section 39011 or
39613 while it did so in section 39609 supports the
conclusion the omission was intentional. (Inglewood v.
County of Los Angeles, supra, 207 Cal. 697, 707-708.)
B-28
III
Alternatively, Water district argues its capacity fee is
authorized by the Water Code.
Water District points to Water Code sections authorizing
it to contract with any public agency for sewer outfall
facilities (§ 31100), to “prescribe, revise and collect rates or
other charges for [its] services and facilities” (§ 31101, italics
added), to enter into an agreement with a public agency for
the “‘joint construction, acquisition, disposition or operation
of any property or works” which a water district might
construct or operate (§ 31049), and to “supply sewage and
waste services to property not subject to district taxes at
special rates, terms, and conditions as are determined by the
board for the services (§ 31101.5). ‘
While these sections may authorize a water district to
enter into contracts with public agencies for sewage
treatment or for joint ownership and generally allow the
assessment of fees for improvements, none of the sections
expressly authorize a water district to impose such fees
against public property. The California Supreme Court
made it clear that a general grant of authority to assess real
property for improvement of sewer facilities will not be read
to authorize such an assessment of public property.
(Inglewood v. County of Los Angeles, supra, 207 Cal. 697,
707-708.)
IV
Water District contends School District signed a contract
to pay the capacity fees and is bound by it. This argument
was disposed of in County of Riverside vy. Idyllwild County
Water Dist., supra, 84 Cal.App.3d 655, 659, where the court
B-29
reasoned “whether the [tax-exempt entity] can agree to pay
the charge depends upon whether the district has the power
to impose it.” If the District does not have the authority to
impose the charge, then the tax-exempt entity’s agreement
“to pay [the] invalid charge would amount to a gift of public
funds in contravention of article XVI, section 6, of the
California Constitution.” (Id., at p. 660). The court
concluded: **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.”
(I[bid.)
Nor does the doctrine of equitable estoppel apply since
there is a strong public policy against one public entity
taxing or assessing another public entity (see Eisley v.
Mohan, 31 Cal.2d 637, 642; Inglewood v. County of Los
Angeles, supra, 207 Cal. 697, 703-704; Regents II, supra,
148 Cal.App. 3d 451, 454, fn. 2) and estoppel will not be
applied against the government if it would annul a strong
rule of public policy (City of Long Beach v. Mansell, 3
Cal.3d 462, 493).
I would reverse the judgment.
CERTIFIED FOR PUBLICATION.
/s/ STANIFORTH, ACTING PJ.
APPENDIX C
FILED
Robert D. Zumwalt, Clerk
JAN 31, 1984
BY
SMITH & PELTZER, A.P.C.
Attorneys at Law
751 E. Rancheros Drive, Suite 2
Vista, California 92083
(619) 744-7125
Attorneys for Plaintiff
IN THE SUPERIOR COURT OF CALIFORNIA
COUNTY OF SAN DIEGO
NORTH COUNTY JUDICIAL DISTRICT
In the Matter of the No. N24145
Agreed Case Between
SAN MARCOS COUNTY JUDGMENT ON
WATER DISTRICT, AGREED CASE
Plaintiff,
and
SAN MARCOS UNIFIED
SCHOOL DISTRICT,
Defendant.
The above-named parties have submitted a controversy
on Agreed Case, duly verified by a declaration as required
by Section 1138 of the Code of Civil Procedure. On
C-2
January 13, 1984, in Department A of the above-entitled
court the Honorable F.V. LOPARDO, Judge of the
Superior Court after examining the Agreed Case, after
hearing oral argument from VERNON A. PELTZER,
Attorney for Plaintiff and LINDA M. WOOLCOTT,
Attorney for Defendant, and after due deliberation, finds on
the facts submitted that:
1. Pursuant to the Education Code, particulary Section
39613, Defendant SAN MARCOS UNIFIED SCHOOL
DISTRICT has a duty to provide sewerage service to
schools and has entered into a contract with the SAN
MARCOS COUNTY WATER DISTRICT for the
disposal of sewage including the payment of sewage
capacity fees.
Education Code § 39613 provides:
Sewers and Drains
“In addition to the other powers granted the
governing board of each school district may
provide sewers and drains adequate to treat
and/or dispose of sewage and drainage on or
away from each school property. For this purpose
it may construct adequate systems or aquire
adequate disposal rights in systems constructed or
to be constructed by others for these purposes
without regard to their, proximity. The cost
thereof may be paid from the building fund,
including any bond moneys therein. (Stats.1976,
c. 1010§ 2, operative April 30, 1977.)
C-3
2. Although the Court’s ruling is based upon the
authority provided in the Education Code, the Court also
finds that Water Code § 31101.5 is not applicable until
January 1, 1983 and this section now gives the SAN
MARCOS COUNTY WATER DISTRICT the right to
impose the fees it has imposed.
IT IS HEREBY ADJUDGED AND ORDERED that
Plaintiff SAN MARCOS COUNTY WATER DISTRICT
have judgment against Defendant SAN MARCOS UNI-
FIED SCHOOL DISTRICT for all amounts owing as
capacity fees billed but unpaid together with interest at 7%
per annum up to the time of Judgment and 10% per annum
on said amount thereafter until paid.
Dated: JAN 31 1984
F.V. LOPARDO
Judge of the Superior Court
Approved as to form and content:
Dated : , 1984
HIGGS, FLECTHER & MACK by
LINDA M. WOOLCOTT, Attorneys for
SAN MARCOS COUNTY UNIFIED
SCHOOL DISTRICT
APPENDIX D
IN THE SUPREME COURT
OF THE STATE OF CALIFORNIA
SAN MARCOS COUNTY L.A. No. 32134
WATER DISTRICT,
Plaintiff and Respondent,
Vv.
SAN MARCOS UNIFIED
SCHOOL DISTRICT,
Defendant and Appellant.
PETITION FOR REHEARING
SMITH & PELTZER, A.P.C.
VERNON A. PELTZER, Esq.
JEFFREY G. SCOTT, Esq.
Attorneys at Law
751 East Rancheros Drive, Suite 2
San Marcos, California 92069
(619) 744-7125
Attorneys for Plaintiff / Respondent
SAN MARCOS COUNTY
WATER DISTRICT
D-2
TABLE OF CONTENTS
Pe TIT witicvanevnmsassrchansininthiunibabsiniibhasadbissintuinansiansnnice 7
POINT ONE
THE DECISION MANDATES A VIO-
LATION OF THE FIFTH AMENDMENT
OF THE UNITED STATES CONSTITU-
TION AND ARTICLE I, SECTION 19 OF
THE CONSTITUTION OF THE STATE
CF ee ETE dlsusecechasnistsneonuianntnnenssttneeniancsnensse 8
A
THE DECISION MANDATES A
TAKING OF PRIVATE PROPERTY IN
VIOLATION OF THE FIFTH AMEND-
MENT OF THE FEDERAL CONSTITU-
Te EUs shamtenicseventasnnianddianinalihidadhabbanpnadkineduiisaletiectanniain 8
B
THE DECISION MANDATES A VIO-
LATION OF THE CALIFORNIA CON-
STITUTION AS IMPLEMENTED BY
Fe PERE, III: palasaicinerehsnintakapscsabsarscnnsiiconseve 9
POINT TWO
THE DECISION MANDATES A VIO-
LATION OF THE EQUAL PROTEC-
TION CLAUSE OF THE UNITED
STATES CONSTITUTION AND ARTI-
CLE I, SECTION 7 OF THE STATE
EE UE TURNED iiarasisinstine dngndcnnsactadbeteainipaklilatiacioiniveas 10
Page
A
REQUIREMENT OF EQUAL PROTEC-
TEs scicdbnokanctnnkinnsasasetsinsapbasceniidensaniasnsscasrensicinesenesenes 10
B
THE CLASSIFICATION .........cccccccssesccccceeeeeeeeseees 12
&
THE CLASSIFICATION FAILS THE
EQUAL PROTECTION TEST. .....cccccccessessesseeeeees 12
POINT THREE
THE BURDEN IS ON THE SCHOOL
DISTRICT TO DEMONSTRATE THAT
PUBLIC ENTITIES ARE EXEMPT
FROM PAYMENT OF USER FEES. ...........:00 16
CONCLUSION crccccsssscscssescsssssccsscscssccscsscsssscsssorosesssonsvevceseess 17
D-4
TABLE OF AUTHORITIES
Page
CASES
Beaumont Investors v. Beaumont Cherry
Valley Water District
CRM BUS GI LE rece cintxscasecsencivacicncseseve 15
Cedars of Lebanon Hosp. v. County of Los Angeles
CR tO ibateasttccretscchdecesssescavkiassccsaines 16
City of Cleburne v. Cleburne Living Center
Ce can) is is, RP es SIO viskisanscccacesscanieons 10
City of Inglewood v. County of Los Angeles
CF Pe SAR ME sicccdvtaisntciacccssddsencs . fs 36,07
Eisley v. Mohan
CRIP Pe NE WS iciei ca ddcentcaccecstvimncivesacecssaruns 14
“F.S.” Royster Guano Co. v. Virginia
I anc uecteciestcenssvrecorstncessseneinante 11
Hoffman v. United States
767 Pea. 2a 143i (Sth Cie. 1985) ...................... 13
Pacific Gas & Electric Co. v.
Superior Court of Trinity County;
Hayfork Valley Public Utility District
CRUD Fae SB FI raisins vccscicsvcccsssesccseses 10
School Finance Cases (Placentia Unified
School District, et al) v. Riles
(May 15, 1986) 86 Daily journal D.A.R.
I Seiler ab ih aeeercch dia bin Alonanisccuhigvevebuednwsbatietbcpsecdesss 17
Serrano v. Priest (1976)
Oe SO HIN is chin istesssliidoeenspnctcdvaseneiniclacs Laceaincesie 3, 47
ER SPOT hn
=
D-5
Page
Tyler v. Doe
(1982) 451 U.S. 202 wneccerccrcrceeseseeecerseesseeeeneenesnens 11
United State of America v. 129.4 Aces of Land
572 Fed.2d 1385 (9th Cir. 1978) .......cceccseseesereeees 8
United States of America v. 129.4 Acres of Land
and Yuma Mesa Irrigation and Drainage
District
789 Fed.2d 715 (9th Cir. 1986) 0.0... cesses 8, 9
Young v. Haines
(June 5, 1986) 86 Daily Journal D.A.R.
I a Let oe eas Samana baseaknbdabniptmpecauaes 11
STATUTES
California State Constitution
Article I, Section 7(a) ..........scccssssereceesssscoees 10, 11
Article I, Section 19 ..............cccccccccssssssrersees 8, 9, 17
Article 13, Section 3 ...........sccccccccseserecssercesssscssees 16
I i cisunadacanscvecsinseanastossutnasesbancetionhs 15
I I ar. ccacknndvinsdescucsudntvessdesasesteceneckeenseats 15
Code of Civil Procedure
ED iso coscisnnavscocatensoansscsehsgunescsasetaneases 10
I I . . ,ccscasaescnuauenecnentaevaneuctatenheetens 10
BD pacavvnncsnderssesctarsccsssivessceesseccunacsonsness 10
I o, cdiscsanssunienstucensacessacknansndsderebebpies 10
Section 1240.510, et Seq. ...........ccccccrcscesserreeeeesess 10
Section 1240.610, et Seq. .......ccccserreeesssserreesesees 10
Section 1255.010, et Seq. ....cccccscssrreeessererreesseeees 10
Section 1263.010, et Seq. ......ccccssssrreerseseeeeeserers 10
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D-6
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Education Code
Ss AIRE ee ee mT Lae Te Gre LS 14
Government Code
I URINE skis tsascvansisnasiadsnccestenatsdeamipnasiactuls sanieaien 16
SE eae ae mee eo 15
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OTHER
California Law Revision Com. com.
to Code of civil Procedure § 1235.170 wo... 10
State of California Annual Report
1984-85 Fiscal Year, pp. A-8 and A-9 2.00.0... 15
State Water Control Board Letter
IT te a as 16
Clean Water Grant Bulletin
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i ll
D-7
To the Honorable ROSE BIRD, Chief Justice, and to the
Honorable Associate Justices of the Supreme Court of the
State of California, the SAN MARCOS COUNTY
WATER DISTRICT (“WATER DISTRICT’) requests a
rehearing and reargument and offers the following points
and authorities on eminent domain, equal protection and
burden of proof to assist the Court in reevaluating the legal
issues previously presented.
THE DECISION
The issue on appeal before the Supreme Court is whether
the SAN MARCOS UNIFIED SCHOOL DISTRICT
(“SCHOOL DISTRICT”) is obligated to pay sewer
capacity fees charged by the WATER DISTRICT. The
capacity fees are used by the WATER DISTRICT to fund
capital improvements. In the decision the Court concluded
that the SCHOOL DISTRICT is not required to pay
because the capacity fee is an assessment which has not
authorized by the Legislature, and that the SCHOOL
DISTRICT is not bound to pay the fee by either contract or
promissory estoppel. The Court held that private customers
must pay the school’s (public entity) share, viz:
“Our conclusion does not mean that the water
district cannot collect money for capital improve-
ments from its customers; it simply means that the
private customers will pay the entire cost of
capital improvements. Public entities, such as the
school district, will not be required to allocate
their limited tax revenues to pay for capital
improvements built by the sewer district.”
Decision, p. 2.
D-8
POINT ONE
THE DECISION MANDATES A VIOLATION
OF THE FIFTH AMENDMENT OF THF
UNITED STATES CONSTITUTION AND
ARTICLE I, SECTION 19 OF THE CONSTI-
TUTION OF THE STATE OF CALIFORNIA.
A
THE DECISION MANDATES A TAKING OF
PRIVATE PROPERTY IN VIOLATION OF
THE FIFTH AMENDMENT OF THE FEDER-
AL CONSTITUTION.
The Fifth Amendment provides in part:
“(Nor shall private property be taken for public
use, without just compensation.”
In United States of America y. 129.4 Acres of Land and
Yuma Mesa Irrigation and Drainage District 789 Fed. 2d
715 (9th Cir. 1986), the Court held that when the United
States takes benefited property by eminent domain and
makes use of the facilities benefiting the property, the
United States must pay the related assessments imposed for
operation, maintenance, and capital costs. The failure to pay
would decrease the assessment base and shift the added cost
to other users in violation of the Fifth Amendment. Ibid. In
‘United States of America v. 129.4 Acres of Land 572
Fed.2d 1385 (9th Cir. 1978), the Court held that a special
district must be compensated for the decrease in the
assessment base caused by the condemnation.
Assuming arguendo that the fee in this case is an
assessment, to allow the SCHOOL DISTRICT to take
(confiscate) capacity rights, paid for by private users
without payment of the assessment, would be contrary to
the Constitution as expounded in the United States v. 129.4
Acres of Land cases supra. and is in violation of the Fifth
Amendment.
The incompatibility and lack of viability of City of
Inglewood v. County of Los Angeles (1929) 207 Cal. 697
(which did not address this constitutional issue) with the
Ninth Circuit Fifth Amendment decisions was raised in the
supplemental authorities and the response to SCHOOL
DISTRICT’s late submission at the hearing and also stated
in oral argument in response to a question from Justice
Mosk.
B
THE DECISION MANDATES A VIOLATION
OF THE CALIFORNIA CONSTITUTION AS
IMPLEMENTED BY THE LEGISLATURE.
The California State Constitution, Article I, Section 19
provides in part:
“private property may be taken or damaged for
public use only when just compensation, .. . has
first been paid to, . . . the owner.”
This section and the Fifth Amendment to the United
States Constitution guarantee the right not to have property
taken without just compensation. The SCHOOL DIS-
TRICT, by utilizing capacity and capital improvements of
the WATER DISTRICT’S sewer system and not paying, is
taking property paid for by private users (the contract right
to discharge sewage into the WATER DISTRICT'’s system)
without just compensation. For eminent domain purposes,
‘‘property” includes any type of right, title, or interest in
real or personal property that may be acquired for public
use. Cal. Law Revision Com. com. to Code of Civil
Procedure § 1235.170; CCP § 1235.170 and § 1240.1 10.
Under California law, a taking by one public entity of the
property of another public agency is a condemnation
regulated by statute. CCP §§ 1240.6 10, et seg. The Statute
provides for taking for either a compatible or a more
necessary use. CCP §§ 1240.5 10, et seg. and §§ 1240.6 10, et
seq. Payment is required. CCP §§ 1255.010, et seq;
§§ 1263.010, et seq. A failure to follow proper procedures
(more necessary public use) is fatal to the eminent domain
action. Pacific Gas & Electric Co. v. Superior Court of
Trinity County; Hayfork Valley Public Utility District
(1986) 180 Cal.App.3d 770. A school is a “public entity”’.
CCP §§ 1235.150 and 1235.190
POINT TWO
THE DECISION MANDATES A VIOLATION
OF THE EQUAL PROTECTION CLAUSE OF
THE UNITED STATES CONSTITUTION
AND ARTICLE I, SECTION 7 OF THE
STATE CONSTITUTION.
A
THE REQUIREMENT OF EQUAL PROTEC-
TION.
The equal protection clause of the Fourteenth Amend-
ment of the United States Constitution commands that no
State shall deny any person the equal protection of the laws.
City of Cleburne v. Cleburne Living Center __ U.S. — 105
S.Ct. 3249, 3254 (1985). This requires that “all persons
similarly circumstanced shall be treated alike.” Tyler v. Doe
451 U.S. 202, 216 (1982); “F.S.” Royster Guano Co. v.
Virginia 253 U.S. 412, 415 (1920). Article I, Section 7 (a) of
the California Constitution provides for due process and
equal protection of the law.
As recently stated by this Court in Young v. Haines
(June 5, 1986), 86 Daily Journal D.A.R. 2033, 2034:
“As the United States Supreme Court recently
phrased the federal constitwtional standard:
‘The Equal Protection Clause ... den(ies) to
States the power to legislate that different
treatment be accorded to persons placed by a
statute into different classes on the basis of
criteria wholly unrelated to the objective of that
statute. A classification “must be reasonable, not
arbitrary, and must rest upon some ground of
difference having a fair and substantial relation to
the object of the legislation, so that all persons
similarly circumstanced shall be treated alike.” °
(Quoting Reed v. Reed (1971) 404 US. 71, 75-76,
and other citations.) Thus, when a statute provides
that one class shall receive different treatment
from another, our constitutional provisions de-
mand more ‘than nondiscriminatory application
within the class . . . establish (ed) . . . . (They) also
(impose) a requirement of some rationality in the
nature of the class singled out.’ (Citations)”
(Brown v. Merlo, supra, 8 Cal.3d at pp. 861-862.
emphasis omitted.) The equal protection clause of
the California Constitution (Cal.Const., art. I, sec.
7) also requires some rational relationship
between the legislative goal and the class singled
out for unfavorable treatment. (Brown, supra at
pp. 861, 882.)
A statutory classification “must involve some-
thing more than mere characteristics which will
serve to divide or identify the class. There must be
inherent differences in situations related to the
subject-matter of the legislation. .. .” (Heckler vy.
Conter (Ind. 1933) 187 N.E. 878, 879.)
B
THE CLASSIFICAT'ON
The Court’s decision mandates that “private customers”
ofthe area served by the WATER DISTRICT are subject
to discrimination — they must pay taxes to support the
schools; pay capacity fees for their own use and an override
for the entire cost of capital improvements provided by the
WATER DISTRICT to the SCHOOL DISTRICT.
Persons residing outside the water district who use the
school (public hospital, prison, etc.) do not pay the override.
There is no rational basis for the difference. It rests on
chance, the place of residence, and the situs of the public
entity. This is contrary to the constitutional doctrine of
equal protection of the laws.
Cc
THE CLASSIFICATION FAILS THE EQUAL
PROTECTION TEST,
The requirement to pay the override is not based on
ability to pay. It is not levied statewide on a uniform basis. It
imposes costs on the local community which, as mandated
by this Court in Serrano v. Priest (1976) 18 Cal.3d 728, is
the responsibility of the State to obviate local financing as a
violation of equal protection in education. The cost of
building and operating schools is a State, not local,
responsibility. As subsequently noted, the State has the
funds and system to meet this duty.
To justify the difference in classification between those
who must pay the override and those not paying the
surcharge, there must be a rational basis for the difference.
This requires (1) a legitimate purpose and (2) a
classification which promotes the purpose. Hoffman v.
United States 767 Fed.2d 1431, 1436-1437 (9th cir. 1985).
At bench the lynchpin for the decision is application of
the Inglewood, supra. case decided in 1929. The Court did
not reevaluate that decision. That case has been drained of
all vitality by subsequent events, including the Ninth Circuit
decisions discussed in POINT ONE and the absence of any
discussion of Federal and State Eminent Domain Law. The
comprehensive State Eminent Domain Law was operative
on July 1, 1976, after the Inglewood decision.
The purpose of the Court created (not a legislative
creation) Inglewood assessment implied exemption is to
avoid impairment of the exercise of government powers.
The historical basis for a tax or assessment exemption is
the prohibition against enforcing a lien on public property
(selling the property to enforce the lien). Amicus Chico
Brief, pp. 11-14. That rational has no application to a sewer
capacity fee. Ibid, pp.13-14. A user fee is not a basis for a
lien.
A public agency is not subject to a mechanic’s lien, Ibid.,
pp. 12-13, but a public agency does not get capital
improvement benefits for free; a ‘‘stop notice’’ is used to
D-14
extract payment, not a lien. CCP §§-3179-3214. The stop
notice does not become a lien merely by serving the same
purpose — to enforce payment. The fallacious “purpose”
test is not accepted by drafters of comprehensive legislation
or the Legislature.
The other reason for an exemption from ad valorem
taxation is that the object of taxation is revenue and none
results from State taxation of its own property. Eisley vy.
Mohan (1948) 31 Cal.2d 637, 642. That is not the issue here.
At the bench the question is which residents are the source
of funds to pay the capacity fee for the SCHOOL
DISTRICT. i
Factually there is no impairment of the school function |
in this case. There is no attempt to regulate or impose liens
or levy an ad valorem tax on the school. There is aid, not
impairment, for education by providing sewer facilities at
far less cost than the school could provide the facilities, the
alternative required by the Education Code § 39613. The
SCHOOL DISTRICT paid fees from 1971 to 1979 without
impairing education and then stopped payment on a legal,
not factual impairment, basis. The Appellate Court decision
demonstrates conclusively that sister States pay user-impact
fees and the functioning of their government is not
impaired.
There are no facts in this record showing that education
(or other government functions) will be impaired by paying
user (capacity) fees. The belated $66.24 Million self- serving
cost statement, by the Los Angeles Unified School District,
is unaudited and based on speculation and conjecture. It is
not based on the Los Angeles capacity fee nor related to
incremental payments over a period of time. It is not in the
Agreed Case or subject to judicial notice and is not properly
before this Court as a basis for decision any more than the |
es
D-15
comparable cost-fee relationship excluded by the Court.
Decision, p. 2 1-22.
There being no valid purpose served by the classification
into payers of the override and nonpayers of the surcharge,
there is a denial of equal protection of the laws as defined
by the Ninth Circuit (and the United States and California
Supreme Courts).
An attempt to surcharge private users to pay the
SCHOOL DISTRICT’s fee would be a forbidden special
tax. Government Code §§ 50076 and 54992 (charges
exceeding the reasonable cost of providing the service is a
“special tax” requiring a two-thirds voter approval).
Becumont Investors v. Beaumont Cherry Valley Water
District (1985) 165 Cal.App.3d 287; California Constitu-
tion, Articles 13A and 13B.
This is not a case of exchanging tax dollars between
public agencies, but a case of which citizens — consistent
with the Federal and State Constitution and State statutes
— must pay the bill.
There is no need for (or purpose served by) this
classification. The State has funding sources of a magnitude
not applicable to the WATER DISTRICT or residents of
the WATER DISTRICT. Illustratively, the State has an
excellent bond rating and the ability to spread costs over a
wide population base. The State is responsible for funding
education. In addition to the Lottery, the State has a fund
balance, as of June 30, 1985 of $1,400,210,818.00, State of
California Annual Report, 1984-85 Fiscal Year, pp. A-8 and
A-9 (Exhibits A-1 and A-2), an_ increase from
$490,62 1,849.00 at the begining of period, June 30, 1984.
(This impartial source is not a party to this litigation, as is
the self-serving speculation of Amicus Los Angeles Unified
School District cited by the Court in Footnote 2, p.4).
POINT THREE
THE BURDEN IS ON THE SCHOOL DISs-
TRICT TO DEMONSTRATE THAT PUBLIC
ENTITIES ARE EXEMPT FROM PAYMENT
OF USER FEES.
California Constitution Article 13, Section 3 exempts
public entities from ad valorem property taxes only. The
Legislature did not create an exemption from assessments.
This is a Court created implied exemption . Inglewood,
supra. The burden is not on the WATER DISTRICT to
demonstrate specific legislative authorization for payment
of the user fee, the burden is on the SCHOOL DISTRICT
to demonstrate an exemption. Exemptions are strictly
construed, and the public entity claiming the exemption has
the burden of showing clear entitlement. Cedars of
Lebanon Hosp. v. County of Los Angeles (1950) 35 Cal.2d
729 at 734-735.
At bench the Court has expanded the defunct Inglewood
decision to include user fees, despite the fact that Federal
and State eminent domain and equal protection laws
precludes that course of action. POINTS ONE and TWO.
The WATER DISTRICT is required to employ user fees by
State law. Government Code § 16270. The WATER
DISTRICT, as a member of Encina, is required to employ
user fees, and users include “institutional users” [schools].
State Water Control Board Letter dated September 5, 1985
and Clean Water Grant Bulletin, April 20, 1980, Exhibits
B1, B-2, and B-3, attached.
The opinion does not hold that a “user fee” is an
“assessment”. The opinion could not reach that conclusion
considering the different characteristics, including but not
limited to, voluntary-involuntary, impact-value benefit.
Instead, the Court, contrary to the rule against expanding
exemptions, includes user fees in the exemption as a matter
of expedience (to avoid easy manipulation, Decision, p. 15).
The “policy” of the Inglewood exemption (whatever that
may be) is not legislative, it is not served, it is contrary to the
Federal and State Constitutions, POJ NTS ONE and TWO,
and this Court’s Serrano decisions, and is unnecessary since
the State has the funds to pay the cost, POINT TWO, and
the State has the mechanism for removing /ocal wealth-
related disparities for School financing, School Finance
Cases (Placentia Unified School District, et al) v. Riles
(May 15, 986) 86 Daily Journal D.A.R. 1702.
CONCLUSION
It is respectfully requested that the Court grant a
rehearing and reargument in this case. There are issues
which deserve more consideration and explanation by the
Court for the guidance of public entities involved in
municipal finance.
The Court did not address the issue of whether the use of
the WATER DISTRICT’S sewer capacity by the SCHOOL
DISTRICT violates the Fifth Amendment of the Federal
Constitution and Article I, Section 19 of the State
Constitution which prohibit taking of property without
compensation. The Court did not address the issue of the
denial of Equal Protection of the private customers who
will have to pay both their own costs and the entire costs of
capital improvements which are used by the SCHOOL
DISTRICT. The decision also did not address the issue that
the SCHOOL DISTRICT had the burden of demonstrating
an exemption from user fees or the total absence of any
need for the exemption which forces a local community to
discharge an obligation of the State.
With the exception of the annual report (not previously
available) and the State Water Resources Control Board
materials (both subject to judicial notice) no new facts are
added to support the issues previously raised but left
unresolved.
Neither the trial court nor the Appellate Court, having
based their decisions on contract and user fees, respectively,
were required to resolve the constitutional issues which
must be resolved in the decision of this Court.
Respectfully Submitted,
SMITH & PELTZER, A.P.C.
By: /s/ VERNON A. PELTZER
Attorneys for Plaintiff /Respondent
SAN MARCOS COUNTY
WATER DISTRICT
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STATE OF CALIFORNIA (Letterhead)
RECEIVED
Sep 09 1985
EWPCF
In Reply Refer
to: 550: FP
STATE WATER RESOURCES CONTROL BOARD
DIVISION OF CLEAN WATER GRANTS
PAUL R. BONDERSON BUILDING
xxx P STREET
P.O. Box 100
SACRAMENTO, CALIFORNIA 95801
Sep 5 1985
Mr. Richard W. Graff
General Manager
Encina Water Pollution Control Facility
6200 Avenida Encinas
Carlsbad, CA 92008-0171
Dear Mr. Graff:
REVENUE PROGRAM APPROVAL FOR WATER
POLLUTION CONTROL GRANT NO. C-06-1016-210,
220, 230, 240, 250 AND 270, VISTA SANITARY
DISTRICT
The final Revenue Program for the subject project is hereby
approved for compliance with State and Federal regulations
for User Charges. Therefore, progress payments, as they
relate to the requirements of 40 CFR 35.2208, are
authorized beyond 90 percent of the Federal share of your
Step 3 grant.
EXHIBIT B-1
D-24
Upon completion of the project, implementation and
maintenance of the user charge system becomes a condition
of the grant. 40 CFR 35.2208 requires that the user charge
system and sewer use ordinance be implemented for the
useful life of the treatment works. The California State
Water Resources Control Board, Division of Clean Water
Grants, must be notified when either of these
ordinances/resolutions is changed. Your agency will be
subject to the provisions of 40 CFR 30.430 of Chapter 1 of
the Federal Regulations in the event of non-compliance
with these requirements. In addition, your agency must
maintain records necessary to document compliance with
these requirements.
Any questions you may have regarding the contents of this
letter should be referred to Frank E. Peters of the
California State Water Resources Control Board, Division
of Clean Water Grants, at (916) 322-6558.
Sincerely,
/S/ Kurt Wassermann, Chief
Engineering Branch
Clean Water Grant Program
D-25
CLEAN WATER GRANT PROGRAM
BULLETIN
STATE WATER RESOURCES CONTROL
BOARD
Division of Water Quality
Raymond Walsh, Chief
Manager, CLEAN WATER GRANT
PROGRAM
P.O. Box 100 Sacramento, California 95801
April 24, 1980
NO. 54B - REVENUE PROGRAM GUIDELINES FOR
WASTEWATER AGENCIES
Attached for your information and use is the final edition of
the Revenue Program Guidelines adopted by the State
Water Resources Control Board on April 17, 1980.
There is a moratorium on the collection of Industrial Cost
Recovery (ICR), described on page 3, until June 30, 1980.
During this period, grantees must calculate ICR, but are
not required to collect it until July 1, 1980. The Division of
Water Quality will notify all grantees when ICR is
reinstituted. See 40 CFR 35.928-4 for more detailed
information on the moratorium.
Clean Water Grant Bulletin 54A, dated February 14, 1978,
is superseded. EXHIBIT B-2
D-26
Any questions should be directed to Frank Peters, Financial
Management Unit, at (916) 322-6558.
/s/ Raymond Walsh
Division Chief
Manager - Clean Water Grant Program
Attachment
D-27
Section 3 - Identification of Users
After the annual revenue requirements are determined, the
users of the treatment works and the characteristics of their
wastewater must be identified. Flows and loadings (BODs5
and SS) must be documented for the user groups listed below, so
that proportional costs can be calculated. The methods for
allocating the annual costs to various types of users is described in
Section 4 of this Article.
A.
B.
Industrial Users. Industrial users subject to ICR must
have costs allocated individually.
Residential Users. Individual cost allocations need not
be made for various type of residential users. However,
grantees may wish to divide residential users into single-
family, multiple-family, or mobile home sub-groups to
allow for more refined cost allocations.
Commercial Users. Because of great variability in
waste characteristics, the commercial group should be
divided into sub-groups defined in Appendix F. The
flow and loads given in Appendix F need not be used if
the grantee has supportable data relating to other
specific flows and loads. Large commercial users
subject to ICR must have costs allocated individually.
D-28
D. Institutional Users. Costs may be allocated to indi- i
vidual users or to user groups, such as public or private
hospitals, convalescent homes, schools, colleges, correc-
tional facilities, etc. Institutional users subject to ICR
must have costs allocated individually.
E. Septage. If septage is received at the treatment works,
this category must be listed as a user class with the
corresponding flows and loads. The charges established
for septage dumpings must be based on its contributing
loadings. Generally a 1000 gallon dumping contains 45
lbs of BOD and 100 Ibs of suspended solids. Unless
other loadings are documentable, these should be
utilized.
F, Water Reclamation. Beneficiaries of the reclaimed
water must be identified for projects involving water
reclamation. Beneficiaries may be users of the reclaimed
water or indirect beneficiaries, such as potable waters
users that benefit by the increase in total water supply.
A narrative describing the basis for classifying the types
of beneficiaries should be included. A table listing the
beneficiaries, the type (direct and indirect), description
of benefit, and projected use of the reclaimed water
should also be included.
D-29
DECLARATION OF SERVICE BY MAIL
(Code of Civil Procedure, §§ 1013(a), 2015.5)
I, the undersigned, say: I am a citizen of the United
States, over 18 years of age, employed in San Diego County,
California, in which County the within-mentioned mailing
occurred, and not a party to the subject cause. My business
addres. is 751 East Rancheros Drive, Suite 2, San Marcos,
California 92069. I served the attached:
PETITION FOR REHEARING
by placing » copy thereof in a separate envelope for each
addressee named hereafter, addressed to each such
addressee respectively as follows:
See Attachment “A”
Each envelope was then sealed and with the postage
thereon full prepaid, deposited in the United States mail by
me at San Marcos, California on July 31, 1986.
I declare under penalty of perjury that the foregoing is
true and correct: July 31, 1986, San Marcos, California.
/s/ Sharon I. Heafey
2 Dea le eer Sane
Attachment “A” 5
Clerk, Court of Appeal
Fourth Appellate District
Division One
1350 Front Street, Room 6010
San Diego, California 92101
Lynn R. McDougal, Esq.
McDougal, Meloche, Love & Eckis
460 North Magnolia
Drawer 1466
El Cajon, California 92022-1466
Clerk, San Diego County
San Diego Superior Court
County Courthouse
220 West Broadway
San Diego, California 92101
George Marchand, Esq.
Office of the General Counsel
Regents of the University of California
590 University Hall
Berkeley, California 94720
Honorable F. V. Lopardo
Judge of the Superior Court
North County Branch
325 South Melrose Drive
Vista, California 92083
D-31
Art Kidman, Esq.
David B. Cosgrove, Esq.
Routan & Tucker
611 Anton Boulevard
Suite 1400
Costa Mesa, California 92628
John Haggerty, Esq.
Los Angeles, County City Attorney
200 North Main Street, Room 1800
Los Angeles, California 90012
Robert G. Boehm, City Attorney
Office of the City Attorney
196 East Fifth Street
Post Office Box 3420
Chico, California 94927
B. Richard Marsh
Knapp, Grossman, Marsh & Jones
Manulife Plaza, Suite 1240
515 South Figueroa Street
Los Angeles, California 90071
Ada Treiger, Esq.
Legal Advisors Office
Los Angeles School District
450 North Grand Avenue, room A337
Los Angeles, California 90012
APPENDIX E
E-1
RECEIVED
JUN 17 1986
Clerk Supreme Court
IN THE SUPREME COURT
OF THE STATE OF CALIFORNIA
L.A. No. 32124
SAN MARCOS COUNTY No. D0001951
WATER DISTRICT, (Sup. Ct. No. N24145)
Plaintiff and Respondent,
We
SAN MARCOS UNIFIED
SCHOOL DISTRICT
Defendant and Appellant.
RESPONDENT SAN MARCOS COUNTY WATER
DISTRICT’S REPLY TO PETITIONER’S SUPPLEMENTARY
AUTHORITY SUBMITTED AT ORAL ARGUMENT
SMITH & PELTZER, A.P.C.
VERNON A. PELTZER, Esq.
JEFFREY G. SCOTT, Esq.
Attorneys at Law
751 East Rancheros Drive, Suite 2
San Marcos, California 92069
(619) 744-7125
Attorneys for Plaintiff /Respondent
SAN MARCOS COUNTY
WATER DISTRICT
E-2
INTRODUCTION
Pursuant to the permission of the Supreme Court, the
SAN MARCOS COUNTY WATER DISTRICT submits
this response to Petitioner’s (SAN MARCOS UNIFIED
SCHOOL DISTRICT) Supplementary Authority filed with
the Court at the time of oral argument. The Supplementary
Authority submitted by the SCHOOL DISTRICT is 67
Ops. Cal. Atty. Gen. 13, January, 1984).
DISCUSSION
A
THE ATTORNEY GENERAL OPINION IS
BASED ON REASONING REJECTED BY
THE COURT OF APPEAL AND WAS
REACHED WITHOUT THE BENEFIT OF
THE ANALYSIS IN THE BRIEFS BEFORE
THIS COURT.
The problem with accepting the 1984 Attorney General
Opinion, as a means to decision in this case, is that the
Attorney General did not have the benefit of the majority
opinion (Justice Weiner with Justice Butler concurring) in
the case of San Marcos [County] Water District vy. San
Marcos Unified School District (1985) 171 Cal.App.3d 223
which, after critical and detailed analysis, rejected the same
reasoning advanced by the Attorney General as contrary to
basic tenets of municipal finance, logic, and cases decided by
sister states, as well as California precedent. The majority
held that a public agency must pay a uniform nondiscrimi-
natory capacity (user-impact) fee, the same as any other
user of a public sewer system. Without the benefit of that
E-3
Court’s reasoning and the briefs submitted to this Court, set
in juxtaposition to the authorities cited by the Attorney
General, his opinion becomes an uncritical, superficial,
repetition of the same, mistaken analysis rejected by the
Court of Appeal in the case before this Court. The absence
of any perceptive analysis by the Attorney General is stated
below.
The issue with respect to the hospital involved in the
Attorney General Opinion, and the issue in the case before
this Court for a school, is not whether a hospital or school
should function, and not whether or not they should
function with or without sewer service. It is a fact of life
that the efficient operation of the educational system, the
efficient operation of hospitals, and the efficient operation
of a sewer system are essential to modern society.
Further, the question is not who is going to pay the sewer
bill. The ultimate payor is the public who pays a variety of
taxes, assessments, and fees to finance government
operations and facilities. The ultimate question is how the
money to finance these facilities is channeled and accounted
for.
The SCHOOL DISTRICT and the Attorney General are
advocating a basic proposition that the schools and the
hospital will pay for all on-site sewer facilities, the kitchens,
the cafeterias, the bathrooms, the laboratories, and other
waste-generating facilities, and will collect and channel that
waste into the public sewer system, and at that point there is
absolutely no responsibility for further payment for the cost
of sewage disposal, that cost is to be shifted to the
unfortunate other customers of the sewering agency who
happen to live in the same area with that facility and use the
same sewer system. Thus, the true cost of operating the
hospital, or school, or university (or prison) is concealed
from the public and this burden is unfairly shifted to these
other, unfortunate citizens.
It is of no consequence to the Attorney General or to the
SCHOOL DISTRICT that some or all of the people who
use the university, or the school, or the hospital (or a prison)
contribute nothing to pay for that cost. It is axiomatic that
someone must bear the cost. For the Attorney General and
the SCHOOL DISTRICT that is a cost that must be borne
by other local sewer users.
That proposition is devoid of any basis in logic or reason.
The classification of payors without a fair substantial basis
violates the Constitutional principle of Equal Protection.
Haman v. County of Humboldt (1973) 8 Cal.3d 922 [cited in
SCHOOL DISTRICT Reply Brief, p. 4].
The Federal cases also cited by SCHOOL DISTRICT
(Reply Brief, p. 4) require application of “equal protection”
to the taxing power even though the latitude of Federalism
applies to the Federal-State relation.
In any event, that shift of cost burden is not permitted by
the Federal Constitution; the government must pay for the
benefit taken and used. United State of America y. 129.4
Acres of Land and Yuma Mesa Irrigation Drainage
District (9th Cir. 1986) 86 Daily Journal DAR 1582. Under
California law, a taking by one public entity of the property
of another public agency is a condemnation regulated by
Statute. CCP § 1240.610 et seq. The statute provides for
compatible use by public agencies. CCP § 1240.510.
Payment is required. CCP § 1255.010, et seq.; § 1263.010,
et seq. A failure to follow proper procedures (more
necessary public use) is fatal to the eminent domain action.
Pacific Gas & Electric Co. v. Superior Court of Trinity
County, Hayfork Valley Public Utility District (1986) 180
Ca!l.App.3d 770.
The WATER DISTRICT, on the other hand, contends
that if a prison, school, university, or hospital
This text is long and has been trimmed here. Open the source document for the complete record.
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