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Anti-tax measure complicates California drought effort

Sarah Gardner Apr 21, 2015
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A California appeals court ruling has complicated water conservation efforts in the state. This week the 4th District Court of Appeal ruled the city of San Juan Capistrano’s tiered water rates violated Prop 218, an amendment to the state constitution. Tiered water rates discourage water waste by charging customers more as their water consumption goes up. They’re a key tool in California’s campaign to save water. At least two-thirds of water providers in the state use some form of tiered pricing.

When California voters passed Prop 218 in the mid-’90s, they had no clue it might gum up efforts to conserve water in a severe drought. The idea then was to plug what anti-tax groups saw as loopholes in Prop 13, the granddaddy of all California propositions. That one limits property taxes. Prop 218 limits certain property-related fees, from trash collection to water service.

Ellen Hanak, director of the Water Policy Center at the Public Policy Institute of California, says under Prop 218, those fees cannot exceed the cost of the service.

“Anybody who hears that will think, yeah, that sounds right,” she says. “Why should they be allowed to charge us more than the cost of the service they’re delivering?” She said the law provided more transparency to government fees and costs.

The court ruled San Juan Capistrano hadn’t shown that its higher rates for big water users were directly tied to the costs of delivering the water. Tim Quinn, executive director for the Association of California Water Agencies, says higher water rates are commonly used to force conservation, “not so much to cover cost of service.”

“If that tool is off the table,” Quinn says. “I don’t know what they’re going to do. It’s a very powerful tool, and it’s not clear to me that you’ll have an easy substitute.”

But Tom Ash, a water rates expert and senior environmental resource planner at Inland Empire Utilities Agency, emphasized that the California court didn’t invalidate conservation pricing. It simply clarified the rules. “I’m not afraid of any of those guidelines,” Ash says. “I think they help us set up transparent, equitable and very practical rates.”

Many California water agencies have had to hire water rate consultants to help them design tiered rates that stay within Prop 218 guidelines. “It’s a complex task and so it takes a complex, sophisticated rate design to do all of that – to be fair, yet recover the cost of service,” Ash says.

Brian Gray, a professor at UC Hastings College of Law, said Prop 218’s conflict with drought efforts may lead some groups in the state to try to pass yet another proposition that would “harmonize Prop 218 with the compelling water conservation needs that we have in the current drought.” It might authorize higher tiered water rates as penalties, rather than fees.

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