BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 2403
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          ASSEMBLY THIRD READING
          AB 2403 (Rendon) 
          As Amended  May 15, 2014
          Majority vote 

           LOCAL GOVERNMENT    9-0                                         
           
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          |Ayes:|Achadjian, Levine, Alejo, |     |                          |
          |     |Bradford, Gordon,         |     |                          |
          |     |Melendez, Mullin, Rendon, |     |                          |
          |     |Waldron                   |     |                          |
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          SUMMARY  :  Expands the definition of "water" in the Proposition  
          218 Omnibus Implementation Act.  Specifically,  this bill  :  

          1)Makes changes to the Proposition 218 Omnibus Implementation  
            Act of 1996 to add "from any source" to the current definition  
            of "water."  

          2)Finds and declares that this act is declaratory of existing  
            law, including the decision of the Sixth District Court of  
            Appeal in Griffith v. Pajaro Valley Water Management Agency  
            (2013) 220 Cal.App.4th 586 and Howard Jarvis Taxpayers  
            Association v. City of Salinas (2002) 98 Cal.App.4th 1351.  

          3)Makes other technical and conforming changes.  

          4)Finds and declares that the provisions of the Proposition 218  
            Omnibus Implementation Act shall be liberally construed to  
            effectuate its purposes of limiting local government revenue  
            and enhancing taxpayer consent.  

           EXISTING LAW  :

          1)Defines, for purposes of Article XIII C and Article XIII D of  
            the California Constitution and the Proposition 218 Omnibus  
            Implementation Act, "water" to mean "any system of public  
            improvement intended to provide for the production, storage,  
            supply, treatment, or distribution of water".  

          2)"Recycled water" means, pursuant to the Water Code, "water  
            which, as a result of treatment of waste, is suitable for a  
            direct beneficial use or a controlled use that would not  








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            otherwise occur and is therefore considered a valuable  
            resource."  

          3)Provides notice, protest, hearing, and election procedures for  
            the levying of new or increased assessments or  
            property-related fees or charges by local government agencies  
            pursuant to Proposition 218.  

           FISCAL EFFECT  :  None

           COMMENTS  :   

          1)Current law and purpose of this bill.  The Proposition 218  
            Omnibus Implementation Act, currently defines "water" to mean  
            "any system of public improvement intended to provide for the  
            production, storage, supply, treatment, or distribution of  
            water."  Under this bill the definition of water is "any  
            system of public improvement intended to provide for the  
            production, storage, supply, treatment or distribution of  
            water from any source."  This bill is author-sponsored.  

          2)Author's statement.  According to the author, "This bill would  
            put the new Griffith decision into statute and allow public  
            agencies to apply the simpler protest process to their  
            approval of stormwater management fees, where the management  
            programs address both water supply and water quality.  

            "In 2002, the [Sixth District] Court of Appeal interpreted  
            this exception for water/sewer rates to exclude costs for  
            stormwater drains.  The service in the 2002 case emphasized  
            flood control, moving water to the ocean as quickly as  
            possible.  That program had nothing to do with water supply.   
            Those fees had developed to address the water quality  
            challenges presented by stormwater.  Stormwater management has  
            changed since 2002.  Since Proposition 218 passed in 1996,  
            managing stormwater has become more about water supply, as  
            agencies develop methods to 'capture' stormwater, clean it,  
            and recharge groundwater aquifers for water supply.  In 2013,  
            the Court of Appeals again considered stormwater in a  
            Proposition 218 context, for a program that charged fees for  
            groundwater recharge, including stormwater capture.  

            "This bill offers one alternative to address the evolving  
            nature of California's stormwater management programs,  
            especially the growing development of 'stormwater recapture'  








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            programs for recharging groundwater aquifers."

          3)Proposition 218 Omnibus Implementation Act.  Proposition 218  
            Omnibus Implementation Act distinguishes among taxes,  
            assessments and fees for property-related revenues, and  
            requires certain actions before such revenues may be  
            collected.  Counties and other local agencies with police  
            powers may impose any one of these options on property owners,  
            after completing the Proposition 218 Omnibus Implementation  
            Act process.  Special districts created by statute, however,  
            must have specific authority for each of these revenue  
            sources.  

            The California Constitution defines a fee (or charge) as any  
            levy other than an ad valorem tax, special tax, or assessment  
            that is imposed by a local government on a parcel or on a  
            person as an incident of property ownership, including a user  
            fee for a property-related service.  The fee imposed on any  
            parcel or person cannot exceed the proportional cost of the  
            service that is attributable to the parcel.  Prior to imposing  
            or increasing a property-related fee, the local government is  
            required to identify the parcels, mail a written notice to all  
            the property owners subject to the fee detailing the amount of  
            the fee, the reason for the fee, and the date, time, and  
            location of a public hearing on the proposed fee.  No sooner  
            than 45 days after mailing the notice to property owners, the  
            agency must conduct a public hearing on the proposed fee.  If  
            a majority of owners of the identified parcels provide written  
            protests against the fee, it cannot be imposed or increased by  
            the agency.  

            Additionally, Article XIII D Section 6 subdivision (c) of the  
            California Constitution, provides election requirements,  
            "Except for fees or charges for sewer, water, and refuse  
            collection services, no property-related fee or charge shall  
            be imposed or increased unless and until that fee or charge is  
            submitted and approved by a majority vote of the property  
            owners of the property subject to the fee or charge or, at the  
            option of the agency, by a two-thirds vote of the electorate  
            residing in the affected area."  The election for the fee is  
            required to be conducted no less than 45 days following the  
            public hearing.  

            The definition of "water" under the Proposition 218 Omnibus  
            Implementation Act is significant because the election  








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            requirements are on fees for services other than water, sewer,  
            and trash services.  
             
           4)Griffith v. Pajaro Valley Water Management Agency.  Prior to  
            the appellate decision in Griffith v. Pajaro Valley Water  
            Management Agency, the issue of whether a charge for  
            groundwater augmentation was considered a water service and  
            therefore exempt from the election requirements was contested.  
             Under Griffith the court relied on the definition of "water"  
            in Proposition 218 Omnibus Implementation Act narrowly  
            construing an earlier decision in Howard Jarvis Taxpayers  
            Association v. City of Salinas, which did not apply the Act's  
            definitions to a storm water charge dispute.  The Griffith  
            decision found that a groundwater augmentation charge is a fee  
            for "water service".   

             According to the Griffith decision, "Moreover, the Legislature  
            has endorsed the view that water service means more than just  
            supplying water.  The Proposition 218 Omnibus Implementation  
            Act, enacted specifically to construe Proposition 218 Omnibus  
            Implementation Act, defines 'water' as 'any systems of public  
            improvements intended to provide for the production, storage,  
            supply, treatment, or distribution of water'.  Thus, the  
            entity who produces, stores, supplies, treats, or distributes  
            water necessarily provides water service.  Defendant's  
            statutory mandate to purchase, capture, store, and distribute  
            supplemental water therefore describes water service."  The  
            Court made several other decisions regarding Proposition 218  
            Omnibus Implementation Act, however, the portions of the case  
            that discuss "water service" are especially pertinent to this  
            bill.   
                 
             The Legislature may wish to consider following the appellate  
            decision in Griffith which has provided more guidance on  
            several issues under Proposition 218 Omnibus Implementation  
            Act's provisions regarding water, sewer, trash, and other  
            property-related fees if it is helpful for the Legislature to  
            amend the definition of "water."  The Legislature may wish to  
            consider if it is the best policy to let stakeholders continue  
            to rely on the court's decision in light of the clarity  
            provided by Griffith.  
           
           5)Arguments in support.  Supporters argue that while  
            California's drought and efforts to provide a continued, safe,  
            reliable supply of water presents many challenges, that the  








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            clarifying language in this bill provides an opportunity to  
            remove any confusion that may exist and will enable all of our  
            communities to get one step closer to attaining a sustainable  
            water future.  

          6)Arguments in opposition.  None on file.
           

          Analysis Prepared by  :    Misa Yokoi-Shelton / L. GOV. / (916)  
          319-3958                                               


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