Public Finance Alert
California Senate Bill 231 (Hertzberg) (“SB 231”), signed into law by the Governor on October 6, 2017, is intended to provide local governments with increased flexibility when imposing or increasing property related fees and charges for the collection, treatment and disposal of surface or storm waters.
Since Proposition 218 was passed in 1996, local governments have faced heightened restrictions when imposing or increasing property related fees or charges. Specifically, Article XIIID of the California Constitution (“Article XIIID”), section 6(c) requires local governments to obtain a majority vote of the affected property owners or, at the option of the local government, a two-thirds vote of the electorate residing in the affected area before imposing or increasing certain property related fees and charges. Property related fees and charges for sewer, water and refuse collection services are specifically exempt from this election requirement. However, neither Article XIIID nor the Proposition 218 Omnibus Implementation Act (California Government Code section 53750 et seq.) (the “Implementation Act”) includes a definition of the word “sewer” and at least one California court has interpreted the word “sewer” for purposes of Article XIIID narrowly, holding that property related fees and charges for surface and storm water collection, treatment and disposal services are subject to the election requirements of Article XIIID, section 6(c).
SB 231 makes formal legislative findings regarding the correct definition of the word “sewer” for purposes of Article XIIID and adds a new definition of “sewer” to the Implementation Act that includes works, property, or structures necessary or convenient for the collection or disposal of surface or storm waters. SB 231 represents the California Legislature’s interpretation of the word “sewer” for purposes of Article XIIID and its attempt to overturn the court decision described in the previous paragraph. SB 231 is intended to allow local governments to impose or increase property related fees and charges for surface and storm water services in the same manner that property related fees and charges for other sewer or water services are imposed or increased and without the need to hold an election under Article XIIID, section 6(c).
While this change would significantly benefit local agencies in need of funding for surface and storm water management services and related infrastructure, it is likely to be met by legal opposition from groups opposed to increases in taxes and fees for government services. SB 231 will go into effect on January 1, 2018.
By: Justin Cooper and Brandon Dias