Capistrano Tax Payers Assoc v. City of San Juan Capistrano: “straitjacket” or solution?
On Monday, the 4th District Court of Appeal made a big splash with the publication of its opinion invalidating the City of San Juan Capistrano’s tiered-rate program for water service. Met famously by Governor Brown’s claim that the court’s opinion puts “a straitjacket on local government at a time when maximum flexibility is needed,” the case – and its potential impact on California’s attempts to manage water during this extended and extreme drought – has rapidly entered the universe of spin, politics, and hysteria that flow prodigiously from this drought. Another example; the LA Times suggests that 66-80% of all public water agencies have tiered rates that may be invalidated by the case.
But when we step back from the hype and look at the case, we see a much different picture. Rather than putting a “straitjacket” on local government, Judge Bedsworth and his co-panelists go to great length to provide a straight path towards establishing tiered rate programs that do not violate the requirements of Prop 218, which amended Article XIII of the California Constitution.
Simply put, the Constitution requires that public water agencies must charge rates that reflect the actual “cost of service” to a given customer. This means that a public agency can’t calculate the total costs of providing water and then create classes (or tiers) that reward low (i.e. conserving) users but penalize higher (and presumably wasteful) users. This is essentially what the City tried to do in this case.
Does this mean that we can’t use rates to incentivize conservation, as the Governor’s response to the case suggests? No. The Court was clear, the Constitutions says nothing that prohibits tiered pricing, it just requires that such pricing be based on cost of service.
Does this beg the question? The Court spells out the answer: if excessive users force a public agency to tap expensive, new sources of water, then the public agency can pass those costs onto those users and still satisfy Prop 218. If Santa Barbara must take its desalination plant out of mothball, or San Juan Capistrano must build a water recycling plant, or San Diego must purchase water from IID, then to the extent that those projects are necessitated by excessive use of some of its consumers, the costs of those projects can be passed on to those excessive users through a tiered-rate structure.
“We see nothing in article XIII, section 6, subdivision (b)(3) of the California Constitution that is incompatible with water agencies passing on the true, marginal cost of water to those consumers whose extra use of water forces water agencies to incur higher costs to supply that extra water.”