Country
United States of America
Sources
InforMEA
Tagging
Taxation, Permits, Property, Contract, Burden of Proof, Constitutional, Injunctive Relief, Inspections, Polluter Pays, Wildlife
Abstract
A group of California water rights holders challenged the constitutionality of a statutory and regulatory scheme that authorized the State Water Resources Control Board to collect annual fees from water rights’ holders. Plaintiffs argued that Water Code 1525 imposes an unconstitutional new ad valorem tax[ ] on real property since Proposition 13 prohibits this particular category of new taxes, regardless of legislative approval. (Cal. Const., art. XIII A, § 3.). The Court of Appeal held that Water Code section 1525 was constitutional on its face, but unconstitutional as applied to the SWRCB’s implementing regulations. It found the regulations were not proportional to their benefits, and hence were taxes rather than fees. The SWRCB requested the Supreme Court to review the Court of Appeal’s opinion. The issues were:1. Whether section 1525(a) imposes an unlawful tax (requiring 2/3 supermajority approval by the Legislature) or a lawful regulatory fee (requiring only majority approval by the Legislature)2. Whether the SWRCB regulation implementing section 1525(a) imposes an unlawful tax (requiring 2/3 supermajority approval by the Legislature) or a lawful regulatory fee (requiring only majority approval by the Legislature)3. Whether Water Code sections 1540 and 1560 impose an unlawful ad valorem tax on real property. 4. Whether Water Code sections 1540 and 1560 violate the Supremacy Cause by collecting funds for water permits from both federal and state sources—i.e. 5. Whether the SWRCB regulation implementing California Water Code sections 1540 and 1560 violates the Supremacy Clause by collecting funds for water permits from both federal and state sources. The Supreme Court held: 1 The Water Code amendments and their implementing regulations do not explicitly impose a tax and, therefore are not facially unconstitutional. The Water Code’s language was specifically intended to avoid a tax. Section 1525 permits the imposition of fees not for general revenue purposes but only for specific enumerated functions and activities: the recovery of costs that the SWRCB incurs for its annual supervision of water usage and the processing of applications for new or modified water permits and licenses. In setting its fee schedules, SWRCB ensures that the total amount of fees collected equals that amount necessary to recover costs incurred in connection with the Water Rights Division’s administration. The Court further noted that the statutes authorize the SWRCB to adjust the annual fees if the revenue collected during the prior year is greater than the amount set forth in the annual Budget Act. 2. The Water Code amendments and their implementing regulations may be unconstitutional as applied. Fees impose an unconstitutional tax if they are not reasonably apportioned. The record is unclear as to whether the fees were reasonably apportioned given the regulatory activity’s costs and the fees assessed. The trial court’s findings should assess whether the fees reasonably relate to the total budgeted cost of the Water Rights Division’s activity, remembering that a government agency should be accorded some flexibility in calculating the amount and distribution of a regulatory fee. 3. Section 1525 does not impose an ad valorem tax on real property. Arguing that section 1525, subdivision (a), is unconstitutional because it improperly imposes an ad valorem tax on real property falsely assumes that water rights are real property rights, and that the fee imposed by section 1525 is based upon the ownership of real property. Water rights are usufructuary, and thus do not provide a right to hold title as real property rights do. (holding and analysis amended by April 20, 2011 modified opinion). 4. Water Code sections 1540 and 1560 do not facially violate the Supremacy Clause. Moreover, these fees are imposed on the water rights of private contractors, not on the water rights of the United States. These fees can be charged to those contractors who receive water deliveries from the federal government even though the fees cannot be directly collected from the federal government under principles of sovereign immunity. The fees are fair because they are limited to the extent that a contractor has possessory use of property or benefits from it. 5. Conflicting factual assertions and an unclear record concerning the extent and value of federal contractors’ beneficial interests make it impossible to decide if Water Code sections 1540 and 1560 are unconstitutional as applied. The trial court should make findings as to whether the Board has fairly evaluated the federal contractors’ beneficial interest, such that water not actually under contract for delivery is fairly attributable to the value of the delivery contracts themselves.