California Farm Bureau Federation vs. State Water Resources Control Board
Senate Bill 1049, a budget trailer bill, took effect on January 1, 2004. It imposed new or increased “fees” in several areas. One of those areas is water rights administered by the Division of Water Rights (DWR) within the State Water Resources Control Board (SWRCB). As required by the bill, the SWRCB has set for each fiscal year starting with FY 2003-04 a “fee” schedule designed so that the total amount of “fees” collected would equal the amount necessary to fully fund the DWR’s operations.
In February 2004, CFBF, for itself, its 53 member county Farm Bureaus and eight water rights holders, filed with the SWRCB a Petition for Reconsideration, asserting the FY 2003-04 “fee” was in fact an illegal tax and seeking refunds with interest for all who paid it. One legal basis for the challenge was that Article XIII A of the California Constitution, which was added by Proposition 13, requires legislation resulting in new or increased taxes be approved by a two-thirds vote of each house of the Legislature. As that requirement was not met, the resulting exaction is invalid. The second basis was that because the “fee” it mandated is really a tax based on the value of water rights, the bill violated the constitutional prohibition against the enactment of new ad valorem taxes.
As expected, the SWRCB denied that petition. CFBF then filed with the Sacramento County Superior Court in April 2004 a petition for a writ of mandate seeking the same relief. The court consolidated CFBF’s case with a similar action filed by the Northern California Water Association and Central Valley Project Water Association. In April 2005, the court ruled against CFBF and its allies, which then appealed to the 3rd District Court of Appeal.
In January 2007, the appellate court ruled that while the statute itself is not unconstitutional, the schedule adopted by the SWRCB was invalid, in that it that bore an unfair and unreasonable relationship to the payers’ burdens on and benefits from the regulatory program. The court gave the SWRCB 180 days to write and issue a valid regulation and allowed the board to keep amounts that have been collected until then. Excessive amounts would be refunded only then.
Both sides filed petitions for review with the California Supreme Court, which granted them in April 2007. Briefing by the parties was completed in July 2007.
In addition, six amicus curiae briefs, including ones by Howard Jarvis Taxpayers Association, California Chamber of Commerce, and California Taxpayers’ Association, were filed in support of the positions of CFBF and the water associations. The Legislature filed an amicus curiae brief in support of the State’s position, as did a trio of environmental groups—the Planning and Conservation League, Natural Resources Defense Council and Sierra Club.
It is hoped that oral argument will occur in 2010, followed by the issuance of an opinion within 90 days after that.
Kate Campbell, Asst. Editor
Ag Alert/California Country
2300 River Plaza Dr.
Sacramento, CA 95833