GREAT OAKS WATER CO. v. SANTA

Transcription

1 GREAT OAKS WATER CO. v. SANTA S Supreme Court of California January 19, 2016 Reporter 2016 CA S. Ct. Briefs LEXIS 45 GREAT OAKS WATER COMPANY, Plaintiff and Respondent, vs. SANTA CLARA VALLEY WATER DISTRICT, Defendant and Petitioner, Type: Petition for Appeal Counsel [*1] HANSON BRIDGETT LLP, Adam Hofmann (SBN: ), San Francisco, CA, SANTA CLARA VALLEY WATER DISTRICT, Stanly T. Yamamoto (SBN: 92381), San Jose, CA, GREINES, MARTIN, STEIN & RICHLAND LLP, Timothy T. Coates (SBN: ), Alan Diamond (SBN: ), Los Angeles California, Attorneys for PETITIONER SANTA CLARA VALLEY WATER DISTRICT. Title Petition for Review Text QUESTIONS PRESENTED FOR REVIEW This case involves a challenge by a large water company to fees imposed by a local water district on the water company s extraction of groundwater for resale on the ground that the fees violate Proposition 218. This petition presents the following issues, which are of state-wide importance not only to petitioner but to water districts and other local government entities throughout California, and which have been answered in contrary ways by the Sixth District in this case and by the Second District in City of San Buenaventura v. United Water Conservation District, now pending in this Court as Case No. S226036:. Do fees imposed by a local water district on the activity of groundwater extraction for commercial purposes fall outside Proposition 218?. IsApartment Ass n of Los Angeles County, Inc. v. City of Los Angeles (2001) 24 Cal.4th 830 [*2] still binding precedent on what constitutes a fee governed by Proposition 218? INTRODUCTION This Petition arises from a direct conflict between two appellate decisions interpreting Proposition 218 as embodied in Article 13D of the California Constitution. The Second District decision in City of San Buenaventura v. United Water Conservation District (2015) 235 Cal.App.4th 228, 185 Cal.Rptr.3d 207 ( San Buenaventura ) held that fees imposed on

2 2016 CA S. Ct. Briefs LEXIS 45, *5 Page 2 of 12 the extraction of groundwater for commercial resale do not come within Proposition 218. The Sixth District s decision in this case (the Opinion ) holds that they do. 1 This Court has already granted review in San Buenaventura. 2 Petitioner Santa Clara Valley Water District (the District )-whose water extraction fees have now been found to be subject to Proposition 218-requests that this Court grant [*3] review in this case as well. The Court of Appeal panel in each case reached directly conflicting results on substantively identical facts, largely because they differed on the fundamental issue of whether Apartment Ass n of Los Angeles County, Inc. v. City of Los Angeles (2001) 24 Cal.4th 830 ( Apartment Association ) remains binding precedent on the scope of Proposition 218. The Second District follows Apartment Association; the Sixth District does not. The Sixth District s flight from Apartment Association began in Pajaro Valley Water Management Agency v. Amrhein (2007) 150 Cal.App.4th 1364 ( Amrhein ), which held that fees on groundwater extraction for domestic use were within Proposition The court initially followed Apartment Association [*4] in holding that those fees were not governed by Proposition 218. However, this Court then decided in Bighorn-Desert View Water Agency v. Verjil (2006) 39 Cal.4th 205 ( Bighorn ) that a fee for the passive receipt of water for domestic use through an existing connection was within Proposition 218, and made no mention of Apartment Association in its decision. To the Amrhein court, that signaled that Bighorn had effectively overruled Apartment Association. Amrhein acknowledged it could not have subjected the groundwater extraction fees to Proposition 218 so long as Apartment Association remained controlling precedent. It was because of Bighorn s supposed sub silencio overruling of Apartment Association, and only for that reason, that the Amrhein court felt compelled to change its mind and hold [*5] that the fees fell within Proposition 218. The assumption that Bighorn had implicitly overruled Apartment Association is even more central to the Court of Appeal s opinion here than it was in Amrhein. Amrhein involved a landowner s extraction of groundwater for residential purposes, whereas the present case involves the extraction of groundwater for commercial resale, facts that even Amrhein recognized were squarely within Apartment Association. The Court of Appeal here went even further than Amrhein, effectively removing any remaining vestige of Apartment Association. Amrhein had left open the possibility that Apartment Association might retain vitality in a case where the delivery of water [is] for irrigation or other nonresidential purposes. (Amrhein, supra, 150 Cal.App.4th at & fn. 18.) However, by its ruling, the Court of Appeal s opinion here shut that door. It also explicitly rejected Apartment Association s foundational holding that by its plain language, Proposition 218 places restrictions only on fees imposed upon a parcel or upon a person as an incident of property ownership, [*6] not on an incident of property ownership, and thus only restricts fees imposed directly on property owners in their capacity as such, and not by virtue of [the] ownership of a business. (Apartment Association, supra, 24 Cal.4th at , , first emphasis added.) The Court of Appeal s departure from Apartment Association in and of itself warrants review by this Court. However, as this Court recognized in granting review in San Buenaventura, the application of Proposition 218 to water exaction fees is an issue of critical, statewide importance that requires resolution by this Court. The need for this Court s intervention is further underscored by the directly conflicting opinions of the Second District in San Buenaventura, and the Sixth District in this case. Thus, this Court should grant plenary review and decide the matter in conjunction with San Buenaventura, or, alternatively, grant review and hold the matter pending disposition of San Buenaventura. STATEMENT OF THE CASE A. The District s Legislatively-Mandated Water Conservation Responsibilities. 1 To avoid confusion, we cite hereafter to the California Reporter citation for San Buenaventura and to the Slip Opinion in this case. 2 Supreme Court case No. S The Court lists one of the issues presented as: Do the District s ground water pumping charges violate Proposition 218 or Proposition 26? 3 The San Buenaventura opinion refers to the case as Pajaro I; because the Opinion refers to it as Amrhein, we follow the Sixth District s usage.

3 2016 CA S. Ct. Briefs LEXIS 45, *6 Page 3 of The Legislature creates the District to provide for the [*7] management and conservation of water. The Santa Clara Valley Water District had been plagued by groundwater depletion, causing the subsidence of land (resulting in the disruption of roads and structures) and the intrusion of salt water into groundwater acquifiers. The Legislature addressed this problem in what is now known as the Santa Clara Valley Water District Act (the District Act ) 4 by creating Petitioner Santa Clara Valley Water District, giving it jurisdiction coextensive with the County of Santa Clara and charging it with the responsibility, as the court itself highlighted, to [p]rovide for the conservation and management of water for beneficial and useful purposes ; to [p]rotect, save, store, recycle, distribute, transfer, exchange, manage, and conserve in any manner any of the waters ; to [i]ncrease and prevent the waste or diminution of the water supply in the district ; and to [o]btain, retain, protect, and recycle drainage, stormwater, floodwater, or treated wastewater, or other water from any sources, within or outside the watershed in which the district is located for any beneficial uses within the district. (Opn. 2-3, quoting District [*8] Act, 4.) 2. The Legislature empowers the District to levy and collect a groundwater charge to fund its activities in protecting and augmenting groundwater supplies. The District Act grants the District the power to levy and collect a ground water charge for the production of water from the ground water supplies within a zone or zones of the district which will benefit from the recharge of underground water supplies or the distribution of imported water in such zone or zones. (Opn. 4, quoting District Act, 26.) It states that such charges are in furtherance of district activities in the [*9] protection and augmentation of the water supplies for users within a zone or zones of the district which are necessary for the public health, welfare and safety of the people of this State, and authorizes their imposition upon the production of ground water from all water-producing facilities, whether public or private, within said zone or zones of the district for the benefit of all who rely directly or indirectly upon the ground water supplies of such zone or zones and water imported into such zone or zones. (Opn. 4, quoting District Act, 26.3; see also Opn , fn. 23.) B. The Groundwater Charges At Issue In This Case. The District has established two zones, designated W-2 and W-5, the former comprising approximately 240 square miles in the northern part of the county; the latter consisting of about 14 square miles in the southern part. They are sometimes referred to as the North County zone and the South County zone, respectively. (Opn. 5.) On or about March 1, 2005, the District mailed a notice of hearings on groundwater charges for to about 4,500 well owners in the county. (Opn. 6.) The written report required by section 26.5 of the Act was duly [*10] prepared, and was delivered to the clerk of the board on March 22, (Ibid.) The board thereafter held hearings on the proposed rates on April 5, April 11, and April 19. (Ibid.) On April 19, 2005, the board adopted Resolution setting groundwater charges for (Ibid.) For extractions in Zone W-2, the per-acre-foot charge was $ 420 for non-agricultural use and $ 42 for agricultural use. (Ibid.) In Zone W-5, the respective charges were $ 215 and $ (Ibid.) C. Respondent Great Oaks, A Water Retailer With Multiple Wells, Objects To The Groundwater Fees And Submits A Pre-Suit Claim To The District. Great Oaks Water Company is a major water retailer which, at the time of trial, operated 19 wells, 16 in Zone W-2 and three in Zone W-5. (Opn. 1, 5.) It submitted a claim to the District under Government Code sections 900 et seq. on the sole ground that the District violated the District Act, and sought a refund of the amount which it was overcharged for the pump tax and request[ed] that the [District] lower the pump tax and modify its uses of pump tax revenues to come into conformity with the Act. (Opn. 6.) The District took no action [*11] on the claim, causing its rejection by operation of law. (Ibid.) D. The Litigation 1. The pleadings and pretrial proceedings. 4 Stats. 1951, ch. 1405, pp et seq., West s Ann. Wat.-Appen. (1999 ed.) ch. 60, pp. 354 et seq. The District Act was originally entitled Santa Clara County Flood Control and Water District Act, with the District named accordingly. Both were later renamed to omit the reference to flood control. (Stats. 1963, ch. 1941, 1, 2, pp ; Stats 1973, ch. 56, pp , 1, 2.) (Opn. 1, 3 & fn. 3.)

4 2016 CA S. Ct. Briefs LEXIS 45, *11 Page 4 of 12 The case was tried on an amended complaint alleging violations of the District Act and Article 13 of the California Constitution. (Opn. 7-8.) Neither the amended complaint nor the joint case management statement referred to Article 13D which the trial court ultimately determined was the actual provision that Great Oaks was suing under. (Opn. 7-8 & fn. 5.) In the joint case management statement, the case was divided into two phases, Phase I dealt with threshold issues and Phase II with remedies. (Opn. 8.) In its trial brief, Great Oaks referred to Article 13D, arguing the groundwater charge was unlawful in that it was imposed on an incident of property ownership and was thus subject to the requirements imposed on such charges by Article 13D, and that the District had violated that provision by failing to secure voter approval for the charge and failing to give notice and hearing conforming to the article s requirements. (Opn. 9.) It also contended that the charge violated the substantive constraints of Article 13D, section 6, subd. (b)(1) [*12] by exceeding both the proportionate cost attributable to Great Oaks, including charges for services not used by or immediately available to Great Oaks, and the sum required to provide the property-related service on which it was assessed. (Ibid.) Great Oaks further contended that for numerous reasons the charges violated the District Act. (Opn ) 2. The trial court s amended statement of decision on Phase I. The trial court concluded that the groundwater charge was subject to Article 13D because it was remarkably similar to the one held subject to that article in Amrhein, rejecting the District s contention that the charge fell outside Article 13D insofar as Great Oaks incurred it due to a business activity and holding that it did not serve a significant regulatory purpose. (Opn. 10.) The court also rejected the District s contention that the charge was one for water services and thus exempt from Article 13D s voter approval requirement. (Ibid.) It concluded the District had violated Article 13D by failing to give the notice prescribed in that provision and by failing to secure the prescribed approval by voters or affected owners. (Ibid.) 5 [*13] 3. Phase two: The Judgment. Trial proceedings concluded on February 2, 2010, with issuance of a judgment awarding Great Oaks a refund of groundwater charges in the amount of $ 4,623, plus interest. (Opn. 11.) The judgment also awarded $ 1,306,830 under the District Act, but recited that the two awards were made in the alternative, such that Great Oaks could recover one or the other, but not both. (Ibid.) The judgment included a declaration stating, inter alia, that the District was required to comply with Article 13D before imposing the groundwater charge, having failed to secure proper voter approval by failing to comply with proper notice requirements and failing to obtain ballot affirmation. (Ibid.) 6 The court declined to issue an injunction or writ of mandate. (Ibid.) [*14] E. The Sixth District Court of Appeal Reverses The Judgment Against The District But Holds Its Fee On Groundwater Extraction Falls Within Proposition 218. Following briefing and oral argument, on December 18, 2015, the Court of Appeal, after two grants of rehearing that resulted in only minor changes, reversed the judgment and remanded, holding as follows: We have concluded that (1) the charge was indeed property-related for purposes of Article 13D; (2) the charge was one for water service and thus exempt from the voter ratification requirement; and (3) while the charge was subject to the 5 The trial court rejected many of Great Oaks s claims concerning violations of the District Act, but held that the District abused its discretion and violated the District Act when it based the groundwater charge not upon a cost-of-service analysis but on suppositions, which the court considered inflated, about the benefits conferred. (Opn. 10.) The court also concluded the District improperly used groundwater revenue for activities not within the scope of Section 26.3 of the District Act. (Opn ) It also held the pre-suit claim submitted by Great Oaks complied with both the Government Code and Section 30 of the District Act. (Opn. 11.) 6 The court further declared that the District violated the District Act by not basing the groundwater charge on the costs of service in accordance with Section 26.3 and by abusing its discretion under the District Act when it improperly used groundwater revenue for activities not within the scope of Section 26.3 of the District Act and when it commingled groundwater revenues with other monies. (Opn. 11.)

5 2016 CA S. Ct. Briefs LEXIS 45, *14 Page 5 of 12 notice-and-hearing requirement, the procedures followed by the District satisfied that requirement. Accordingly, the trial court s conclusion that the charge violates Article 13D cannot be sustained. (Opn. 13.) The Opinion traced its holding that Proposition 218 applied to the groundwater charge to the earlier Sixth District cases of Armhein and Griffith v. Pajaro Valley Water Management Agency (2013) 220 Cal.App.4th 586 ( Griffith ) that had contended with the issue of Article 13D s applicability to groundwater extraction charges resembling the one [*15] at issue here. (Opn. 15.) 7 According to the Opinion, the decision in Griffith was presaged by our decision in Amrhein, which in turn rested on this Court s reasoning in Bighorn and Richmond v. Shasta Community Services Dist. (2004) 32 Cal.4th 409 ( Richmond ), in which cases this Court had concluded that the direct delivery of water to users was a property-related service such that charges for such delivery must comply with Article 13D. (Opn. 26.) 8 The Opinion stated that Amrhein and Griffith linked their facts to Bighorn and Richmond by asserting that the groundwater extraction charges at issue in Amrhein and Griffith were conceptually indistinguishable from the charges on the direct delivery of water in Bighorn and Richmond. (Opn ) [*16] The Opinion admitted that those four cases concerned only water used for domestic purposes, whereas the vast majority of water extracted by Great Oaks is not put to beneficial use upon its own land, but is sold to others for their (presumably beneficial) use. (Opn. 17, 28.) It further admitted that Amrhein had left open the possibility [*17] that delivery of water for non-residential purposes is not a property-based service, and that charges for it are not incidental to the ownership of property and recognized that the juxtaposition of this Court s decisions in Apartment Association and Bighorn could support such a conclusion, which might be further supported by a clearly established regulatory purpose (Opn , quoting Amrhein, supra, 150 Cal.App.4th at , emphasis omitted.) However, having noted Amrhein s suggested limit on the scope of its own decision, the Opinion proceeded to reject Amrhein s core point that fees on water used for commercial purposes might on that basis alone fall outside Proposition 218, thus implicitly disapproving what remained of Apartment Association in the Sixth District. In Apartment Association, this Court had held that Proposition 218 places restrictions only on fees imposed upon a parcel or upon a person as an incident of property ownership, and not on an incident of property ownership, and thus only restricts fees imposed directly on property owners in their capacity as such, and not by virtue of [the] ownership [*18] of a business. (Apartment Association, supra, 24 Cal.4th at , , first emphasis added.) The Opinion rejected this, and thus cut out the heart of Apartment Association. Upon what it claimed was its further study of the matter, the Opinion held that any charge on the extraction of groundwater will typically place a direct burden on an interest in real property and is thus incidental to property ownership, because the very fact that the extraction is by a business, to wit, a longtime extractor like Great Oaks, is almost certain to involve the exercise of a right in real property. Since a charge on that activity directly burdens the exercise of that right, it must be deemed incidental to it, and thus to ownership of real property. (Opn , emphasis added.) However, the Opinion did preserve Amrhein s conclusion that a regulatory purpose might exempt fees on water use from Proposition 218, even as it rejected Amrhein s larger point that fees on the commercial use of water might be outside Proposition 218, and a regulatory purpose might provide further support[] for that conclusion. 7 Griffith simply followed Amrhein in holding that a fee on groundwater extraction was within Proposition 218, but also held that those charges are fees for water service within the meaning of article 13D, section 6(c), and thus exempt from the voter approval requirements of Proposition 218. (220 Cal.App.4th at ) 8 In Richmond, this Court held that [a] fee for ongoing water service through an existing connection is imposed as an incident of property ownership because it requires nothing other than normal ownership and use of property, but that is not the case with a fee for making a new connection to the system... because it results from the owner s voluntary decision to apply for the connection. (32 Cal.4th at 427.)Bighorn reaffirmed that a fee for the passive receipt of water for domestic use through an existing connection was within the meaning of fee and charge in article 13D, and thus also within the meaning of those terms in article 13C of the California Constitution. (Bighorn, supra, 39 Cal.4th at 216.)

6 2016 CA S. Ct. Briefs LEXIS 45, *18 Page 6 of 12 The Opinion expanded on Amrhein s [*19] reference to a clearly established regulatory purpose, explaining that what that case meant to hold open and free from Proposition 218 s strictures were fees structured in such a way as to regulate, through market forces, the consumption or use of a scarce or protected commodity or service. (Opn. 29.) The Opinion also claimed to find the source of this exemption in Proposition 218 s purpose as gleaned from the ballot materials, which was to regulate exactions that operate as de facto taxes, i.e., to produce revenue, in circumvention of the restrictions on taxation imposed by other initiatives. (Ibid.) The Opinion expanded on Amrhein by holding that a fee could be argued to fall outside this purpose, and thus outside the restrictions imposed by Article 13D, if it were designed predominantly not to secure revenues but to directly regulate the burdened activity-in essence, to deter excessive consumption-through price signals. (Ibid.) However, the Opinion concluded that nothing in the record permitted a finding that the District s extraction fee falls within the regulatory purpose hypothesis Amrhein posited. (Opn ) 9 [*20] WHY REVIEW IS NECESSARY THIS COURT SHOULD GRANT REVIEW AND EITHER HEAR THIS CASE ON THE MERITS OR HOLD IT PENDING ITS DECISION IN SAN BUENAVENTURA SO AS TO RESOLVE THE CONFLICT BETWEEN THE SECOND AND SIXTH DISTRICTS ON WHETHER A FEE IMPOSED BY WATER DISTRICTS ON THE EXTRACTION OF GROUNDWATER FOR COMMERCIAL PURPOSES FALLS OUTSIDE PROPOSITION 218. A. Having Granted Review In San Buenaventura, This Court Should Grant Review Here As Both Cases Involve Identical Facts And Raise Identical Issues Of Statewide Importance While Reaching Contrary Conclusions As To Whether Fees On The Extraction Of Groundwater For Resale Fall Within Proposition 218 And Whether Apartment Association Remains Binding Authority On That Issue. In San Buenaventura, the Court of Appeal for the Second District held that a fee imposed by a water district on a city pumping groundwater for resale to residential customers was not property-related and thus fell outside Proposition 218 s strictures. Relying on Apartment Association, which it held remained binding authority, the appellate court concluded that without regard to whether the pumping was for commercial or residential use [*21] or whether the fee on pumping had a clear regulatory purpose, a charge on groundwater extraction is not imposed as an incident of property ownership. (San Buenaventura, supra, 185 Cal.Rptr.3d at ) The Court of Appeal s Opinion here held the polar opposite of San Buenaventura. Dismissing Apartment Association as no longer authoritative, it held that a fee imposed by a local water district on a large water company s extraction of groundwater for resale was governed by Proposition 218. As noted above, in granting review in San Buenaventura, this Court listed as an issue presented the question of whether the District s ground water pumping charges violate Proposition 218 or Proposition 26? (See p. 2, fn. 2.) The Petition here raises the same issue on the same facts regarding the applicability of Proposition 218. B. Review Is Necessary To Resolve The Conflict Between The Second District And The Sixth District Concerning Whether Apartment Association Remains Controlling Precedent. 1. This Court s decision in Apartment Association. Article 13D of the California Constitution, added in 1996 by the passage of Proposition 218, provides, [*22] as pertinent, that [n]o tax, assessment, fee, or charge shall be assessed... upon any parcel of property or upon any person as an incident of property ownership except [f]ees or charges for property related services as provided by this article. (Article 13D, 3, subd. (4).) Proposition 218 defines fee or charge as any levy other than an ad valorem tax, a special tax, or an assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership, including a user fee or charge for a property related service. (Id., 2, subd. (e).) It also defines [p]roperty-related service as a public service having a direct relationship to property ownership. (Id., 2, subd. (h).) Proposition 218 did not, however, expressly define the phrase imposed... upon a person as an incident of property ownership. This Court supplied the definition when it applied the phrase in Apartment Association. At issue there was an 9 In reversing, the Court of Appeal set the matter at large, presumably for retrial on issues it did not decide. (Opn , 78.)

7 2016 CA S. Ct. Briefs LEXIS 45, *22 Page 7 of 12 inspection fee imposed on the owners of residential rental properties. The trial court held that the fee fell outside Proposition 218 as the fee was imposed only on a subset of owners who rent apartments and the proceeds [*23] were used only to pay for regulating such rentals. (Apartment Association, supra, 24 Cal.4th at ) The appellate court reversed, holding that nothing in Proposition 218 exempts regulatory fees imposed on residential rental properties, and it adds nothing to say that the fees are not imposed upon property owners in general, but only those who voluntarily engage in the business of renting, generate the risks of slum housing, and specially benefit from regular inspections as they contribute to the overall reputability and safety of the housing provided. (Id. at 834, internal quotation marks omitted.) This Court reversed the Court of Appeal. It based its decision on what it termed the definitive language (id. at 839), the plain language (id. at 844) and the plain meaning (id. at 842) of Proposition 218, to wit: fees are within Proposition 218 only when they are imposed upon a parcel or upon a person as an incident of property ownership. It stressed that this definitive language does not refer to fees imposed on an incident of property ownership, but on a parcel or a person [*24] as an incident of property ownership, and held that the distinction is crucial. (Id. at 840.) Thus, taxes, assessments, fees, and charges are subject to the constitutional strictures when they burden landowners as landowners. The ordinance does not do so: it imposes a fee on its subjects by virtue of their ownership of a business-i.e., because they are landlords. What plaintiffs ask us to do is to alter the foregoing language-changing as an incident of property ownership to on an incident of property ownership. But to do so would be to ignore its plain meaning-namely, that it applies only to exactions levied solely by virtue of property ownership. (Id. at 842, emphasis added and in original, footnote omitted.) In short, if the fee is imposed on a property owner s use of the property, such as to make money by renting it, it is not imposed as an incident of property ownership. As the Court stated, the fee is imposed on landlords not in their capacity as landowners, but in their capacity as business owners. (Id. at 840.) Moreover, the Court stressed that to come within Proposition 218 s restrictions, the fee [*25] must be levied solely by virtue of property ownership or imposed on a person or on property strictly as an incident of property ownership. (Id. at 842.) If, as Apartment Association instructs, Proposition 218 did not intend to bring within its purview fees on landowners using their property for reasons distinct from the mere ownership of land, then fees on the use of land for groundwater extraction, particularly when done for commercial resale, must be outside Proposition 218. Therein lies the key conflict between the Opinion and San Buenaventura. Indeed, as shown below, the Opinion cannot stand if Amrhein cannot stand, and Amrhein itself admits it cannot stand if Apartment Association is still good law. 2. Prior to the Opinion, no case had held that a fee on commercial groundwater extraction was governed by Proposition 218, and Amrhein had strongly suggested such a fee was not within the initiative. In Amrhein, the Sixth Circuit, relying on Apartment Association and Richmond, initially held that a fee imposed on mostly residential groundwater extraction was not within Proposition 218, as, inter alia, (1) the charge [*26] is not imposed as an incident of property ownership [citation] because it is imposed not on property owners as such, or even well owners as such, but on persons extracting groundwater from the basin ; and (2) the fee could be incurred only through voluntary action, i.e., the pumping of groundwater, and could be mitigated or avoided altogether by refraining from that activity. (Amrhein, supra, 150 Cal.App.4th at 1385.) Thus, the court concluded, the charge burdens those on whom it is imposed not as landowners but as water extractors. (Id. at 1386.) However, following a petition for rehearing, Amrhein abandoned its initial holding and held instead that a fee on groundwater extraction for domestic use was within Proposition 218, because it believed this Court s decision in Bighorn compelled it to do so. (Id. at 1370, 1386.) The fee at issue in Bighorn was a charge for ongoing domestic water delivery. (39 Cal.4th 205.)Richmond had already held, citing Apartment Association and following its logic, that whereas a fee for making a new connection for water service is outside Proposition [*27] 218 because it results from the owner s voluntary decision to apply for the connection, [a] fee for ongoing water service through an existing connection is imposed as an incident of property ownership because it requires nothing other than normal ownership and use of property. (Richmond, supra, 32 Cal.4th at 427.)Bighorn merely confirmed that as charges for ongoing water delivery are within the meaning of fee and charge in article 13D, as

8 2016 CA S. Ct. Briefs LEXIS 45, *27 Page 8 of 12 Richmond had held, so they are within the meaning of those terms as used in article 13C of the California Constitution. (Bighorn, supra, 39 Cal.4th at 216.) Nonetheless, Amrhein found that Bighorn had a far greater significance, compelling Amrhein to reverse its original holding that fees on residential groundwater extraction were not within Proposition 218. Amrhein based this conclusion on the fact that Bighorn did not mention [Apartment Association] at all in its decision, even though (Amrhein surmised) it seems highly relevant to the question whether monthly delivery charges, and especially consumption-based charges, fail within Article 13D. (Amrhein, supra, 150 Cal.App.4th at 1370, 1386, ) [*28] And that omission, Amrhein concluded, raises questions about the reach, if not the vitality, of Apartment Association. (Id. at 1389.) However, Amrhein took care to suggest that there might be sufficient vitality left to Apartment Association so that when juxtaposed with Bighorn, it might confine Amrhein s holding to fees on water used for domestic purposes. Thus, Amrhein stated that its decision left open the possibility that delivery of water for irrigation or other nonresidential purposes is not a property-based service, and that charges for it are not incidental to the ownership of property. (Id. at ) After all, the court stressed that both in Richmond and Bighorn, this Court was clearly concerned only with charges for water for domestic use. (Id. at 1389.) In addition, the decision suggested that the voluntary nature of water use might still be a factor in exempting a fee from Proposition 218 if the use is for commercial purposes. Thus, Amrhein stated that [u]nder Bighorn, a homeowner or tenant who uses extracted water for bathing, drinking, and other domestic [*29] purposes cannot be compared to a businessman who, as described in Apartment Association, elects to go into the residential landlord business. (Id. at 1390, emphases added.) Lastly, Amrhein implied that if the fee had a clearly established regulatory purpose, a finding to that effect might further support[] the conclusion that such a fee is not imposed as an incident of property ownership. (Ibid.) Believing itself constrained by Bighorn, however, Amrhein couldn t accept the argument that there was a distinction between extracting water and having it delivered, even though it felt obliged to state that Apartment Association s distinction between a charge imposed on a person because he owns land and because he engages in certain activity on his land is a distinction far from frivolous. (Id. at 1391, fn. 18.) 3. The Opinion improperly extinguishes the last vestiges of Apartment Association, including its vital distinction between on an incident and as an incident, as well as other pertinent distinctions between water delivery and extraction, commercial and domestic water use, and passive and [*30] active uses of land. As shown above, the Opinion concluded that a fee imposed on groundwater extraction for purely commercial purposes came within Proposition 218. To reach that conclusion, the Opinion did the following:. It gave no credence to Apartment Association as binding precedent on the issue before it. Amrhein had made clear that its holding rose or fell on the question of whether Apartment Association was still binding law. It acknowledged that if Apartment Association were still binding precedent, a fee on groundwater extraction would not fall within Proposition 218, even if extracted for domestic use. If Apartment Association were unimpaired, a fee on commercial groundwater extraction would even more clearly be outside Proposition 218 s strictures. And the Opinion did involve commercial use, as it acknowledged that the vast majority of water extracted by Great Oaks is not put to beneficial use upon its own land, but is sold to others for their (presumably beneficial) use. (Opn. 17, 28.) Given all of that, the Opinion needed to proceed as if Apartment Association were essentially wiped from the law books, and that is what it did. [*31] It mentioned the case only three times in a 79 page opinion: twice for the uncontroversial proposition that the question is one of law subject to de novo review (Opn. 14) and once quoting Amrhein to the effect that if Apartment Association and Bighorn were juxtaposed, a charge on water delivery for non-residential purposes might fail outside Proposition 218 as a charge not imposed as an incident of property ownership (Opn. 28). However, the Opinion disregarded Amrhein s suggestion that Apartment Association s capacity-based analysis [might] retain vitality in that circumstance. (Amrhein, supra, 150 Cal.App.4th at 1390.). It turned Apartment Association on its head by treating Proposition 218 s as an incident language as meaning on an incident. Thus, the Opinion held that [o]ur further study of the matter has led us to conclude that any charge on the extraction of groundwater will typically place a direct burden on an interest in real property and is thus incidental to property ownership. This is because any extraction of groundwater by a longtime extractor like Great Oaks is almost certain

9 2016 CA S. Ct. Briefs LEXIS 45, *31 Page 9 of 12 to involve the exercise of a right [*32] in real property. Since a charge on that activity directly burdens the exercise of that right, it must be deemed incidental to it, and thus to ownership of real property. (Opn , emphases added.) In short, under that standard, the initiative could apply to nearly any use of property, including the use involved in Apartment Association, the containment provided by the as an incident language having been undone.. Contrary to Apartment Association and even to Amrhein, it effectively rejected nearly all sets of facts that might exempt a fee from Proposition 218, such as that a fee is imposed on landowners for using their land for (1) the activity of extracting groundwater for any purpose; or (2) the commercial purpose of extracting groundwater for resale.. It appeared to accept the suggestion in Amrhein that a fee that serves a regulatory purpose may fall outside Proposition 218. (Opn ) However, it followed Amrhein in imposing, and even tightened, the conditions under which a water district could successfully argue that a fee had a regulatory purpose, insisting any such fee be structured in such a way as to regulate, through market [*33] forces, the consumption or use of a scarce or protected commodity or service, and that that intention, rather than securing revenues, had to be its predominant[] purpose, and clearly established as such. (Opn. 29.) Neither Amrhein nor the Opinion cited any authority in support of such conditions. At any rate, the Opinion held that nothing in the record permitted a finding that the District s fee on groundwater extraction met the conditions. (Opn ) 4. San Buenaventura affirms that Apartment Association is binding precedent and holds that it compels the conclusion that fees on commercial groundwater extraction fall outside Proposition 218. As noted, San Buenaventura raises the same issues as the Opinion. In San Buenaventura, the City of San Buenaventura (the City ) pumped groundwater for resale to residential customers, and United Water Conservation District ( UWCD ) collected fees based on the amount of water pumped. The City contended the fees were governed by Proposition 218. Believing itself constrained to follow Amrhein, the trial court agreed. (San Buenaventura, supra, 185 Cal.Rptr.3d at , 216, 218.) The Court [*34] of Appeal reversed, finding multiple grounds on which to distinguish Amrhein s holding that a fee on groundwater extraction was imposed as an incident of property ownership and thus within Proposition 218. Those grounds apply at least equally to the Opinion, and render it and San Buenaventura polar opposites. First, the appellate court stressed the unique set of facts in Amrhein, where the vast majority of property owners in the Pajaro Valley obtained their water from wells and had no feasible alternative sources, in contrast to UWCD, where the number of residents who pump water for domestic use is insubstantial relative to the number of residential customers receiving delivered water. (Id. at ) That, the court held, is far from the case here. (Id. at 221.) It is also far from the case presented by the Opinion. Second, the court noted that the City uses the water it pumps for commercial rather than residential purposes, i.e., it sells the water to residential customers. (Id. at 221 & fn. 8, 223.) The court further noted that Amrhein considered this fact significant given that it construed Bighorn as leaving open the possibility [*35] that delivery of water for... nonresidential purposes is not a property-based service, and that charges for it are not incidental to the ownership of property. (Id. at 222.) As noted, though a commercial-use case, the Opinion rejected Amrhein s possibility entirely. Third, the court noted that Amrhein, using its own invented test for determining regulatory purpose, had found it significant that the agency s pump charge did not serve a regulatory purpose. (Ibid.) San Buenaventura quoted Amrhein s test, but did not adopt it, holding that it was sufficient that the trial court found that the groundwater extraction fees serve the valid regulatory purpose of conserving water resources. (Ibid.) As shown, the Opinion essentially adopted Amrhein s test, and, indeed, made it stricter and more baroque. Notably, however, the District s fee here likely would have satisfied the San Buenaventura standard, as the Opinion admitted that the fee as a whole may be intended in part to influence the consumption of groundwater, but was insufficient under Amrhein s structuring requirement. (Opn ) Fourth, the court completely rejected Amrhein s [*36] conclusion that Bighorn s failure to cite Apartment Association signal[ed] that case s implicit overruling. (185 Cal.Rptr.3d at 223.) The court found Bighorn s omission unsurprising, as Apartment Association was only marginally relevant to what was at issue in Bighorn, because Bighorn merely confirmed what Richmond had decided-that charges for ongoing water delivery were within the terms fee and charge in article 13D. (Ibid.)

10 2016 CA S. Ct. Briefs LEXIS 45, *36 Page 10 of 12 Fifth, having reaffirmed the vitality of Apartment Association in relation to the facts before it, the San Buenaventura court went on to confirm that Apartment Association applied so as to exempt a fee from Proposition 218 [e]ven if there were no factual record regarding the relative number of residential versus commercial well owners and a clear regulatory purpose. (Id. at 222.) This is so, the court held, because a pump fee is better characterized as a charge on the activity of pumping than a charge imposed by reason of property ownership. (Ibid.) It followed, the court continued, that even where pumping is not a business operation, and is done by the individual household that [*37] elects to pump water for its own consumption, a fee on such an activity is outside Proposition 218, which applies only to charges on an activity that requires nothing other than normal ownership and use of property. (Id. at 223.) Ironically, Amrhein made the same point in stating that Apartment Association s distinction between a charge imposed on a person because he owns land and one imposed because he engages in certain activity on his land is a distinction far from frivolous. (150 Cal.App. 4th at 1391, fn. 18.) Even if the San Buenaventura case were not already before the Court, the Sixth District s departure from the binding precedent of Apartment Association-started in Armheim, and completed by the Court of Appeal s most recent decision here-would require intervention by this Court. The direct conflict between two appellate districts construing Apartment Association s continued vitality further underscores the need for review by the court. Either Apartment Association remains binding precedent, or it does not. The Court has granted review of a decision applying Apartment Association, and should now grant review [*38] of a decision rejecting Apartment Association, and decide the matters together, or at the very least grant review and hold this case pending disposition of San Buenaventura. CONCLUSION For all the foregoing reasons, the Petition for Review should be granted. Dated: January 19, 2016 Respectfully submitted, HANSON BRIDGETT LLP Adam Hofmann SANTA CLARA VALLEY WATER DISTRICT Stanley T. Yamamoto GREINES, MARTIN, STEIN & RICHLAND LLP Timothy T. Coates Alan Diamond By: /s/ [Signature] Alan Diamond Attorneys for PETITIONER SANTA CLARA VALLEY WATER DISTRICT CERTIFICATE OF COMPLIANCE Counsel of Record hereby certifies that pursuant to Rule 8.204(c)(l) of the California Rules of Court, the enclosed Petition for Review is produced using 13-point Roman type including footnotes and contains approximately 6511 words, which is less than the total words permitted by the rules of court. Counsel relies on the word count of the computer program used to prepare this brief. Dated: January 19, 2016 /s/ [Signature] Alan Diamond

11 2016 CA S. Ct. Briefs LEXIS 45, *38 Page 11 of 12 Trial Court: Santa Clara County Superior Court Superior Court No.: CV Trial [*39] Judge: The Honorable Kevin J. Murphy Attorneys for Defendant and Appellant Santa Clara Valley Water District: Hanson Bridgett Joseph M. Quinn Adam Hofmann Office of District Counsel Santa Clara Valley Water District Stanly T. Yamamoto Attorneys for Plaintiff and Respondent Great Oaks Water District: Silicon Valley Law Group Jeffrey S. Lawson Johnson & James Robert K. Johnson Omar F. James Great Oaks Water Company Timothy S. Guster Attorney for Amicus Curiae Association of California Water Agencies: Daniel S. Hentschke PROOF OF SERVICE STATE OF CALIFORNIA, COUNTY OF LOS ANGELES: I am employed in the County of Los Angeles, State of California. I am over the age of 18 and not a party to the within action; my business address is 5900 Wilshire Boulevard, 12th Floor, Los Angeles, California On January 19, 2016, I served the foregoing document described as PETITION FOR REVIEW on the interested parties in this action by placing a true copy thereof enclosed in sealed envelopes as stated below. BY MAIL: I caused such envelope to be deposited in the mail at Los Angeles, California. [*40] The envelope was mailed with postage thereon fully prepaid as follows: Silicon Valley Law Group Jeffrey S. Lawson, Esq. 50 W. San Fernando Street Suite 750 San Jose, CA 95113

12 2016 CA S. Ct. Briefs LEXIS 45, *40 Page 12 of 12 Attorneys for Great Oaks Water Company Great Oaks Water Company Timothy S. Guster 20 Great Oaks Boulevard Suite 120 San Jose, CA Attorneys for Great Oaks Water Company Sixth District Court of Appeal West Santa Clara Street Suite 1060 San Jose, CA Johnson & James Robert K. Johnson 311 Bonita Drive Aptos, CA Attorneys for Great Oaks Water Company The Honorable Kevin J. Murphy Department 22 Santa Clara County Superior Court 191 N. First Street San Jose, CA (via U.S. Mail only) I am readily familiar with firm s practice of collection and processing correspondence for mailing. It is deposited with U.S. postal service on that same day in the ordinary course of business. I am aware that on motion of party served, service is presumed invalid if postal cancellation date or postage meter date is more than 1 day after date of deposit for mailing in affidavit. Executed on January 19, 2016, at Los [*41] Angeles, California. /s/ [Signature] Violetta Price [SEE OPINION DECEMBER 08, 2015 IN ORIGINAL] [SEE OPINION DECEMBER 08, 2015 IN ORIGINAL]