Walker v. Marin Mun. Water Dist.

ANNE WALKER, Plaintiff and Respondent, v. MARIN MUNICIPAL WATER DISTRICT, Defendant and Appellant.

A152048

COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION ONE

March 26, 2019

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Marin County Super. Ct. No. CIV-1501914)

Respondent Anne Walker, a resident served by appellant Marin Municipal Water District (District), challenges the formula the District uses to calculate residential water rates. The trial court dismissed her complaint on the basis that she had failed to exhaust her administrative remedies, but it later granted her motion for a new trial after the Fourth Appellate District decided Plantier v. Ramona Municipal Water Dist. (2017) 12 Cal.App.5th 856 (Plantier). Because we agree with Plantier that ratepayers are not required to exhaust administrative remedies before challenging formulas used to calculate rates imposed under Proposition 218, we affirm.

I.

FACTUAL AND PROCEDURAL

BACKGROUND

California voters in 1996 passed Proposition 218, which added articles XIII C and XIII D to the California Constitution. (Paland v. Brooktrails Township Community Services Dist. Bd. of Directors (2009) 179 Cal.App.4th 1358, 1365.) Article XIII D limits the ability of local governments to impose assessments, fees, and charges. (Pajaro Valley Water Management Agency v. Amrhein (2007) 150 Cal.App.4th 1364, 1378.) Section 6 of Article XIII D (hereafter "section 6") provides a detailed procedure that local government agencies, including water districts such as the District, must follow to impose or increase "[p]roperty [r]elated [f]ees and [c]harges." (See also art. XIII C, §§ 1, subd. (b), 2, subd. (d).) As set forth in further detail below, subdivision (a) of section 6 provides a procedure for imposing new or increased fees and charges. Subdivision (b) of section 6 imposes requirements for new and increased fees and charges, as well as fees and charges that existed at the time of the passage of Proposition 218.

To promote water conservation, the District uses a four-tiered rate system for residential customers that charges more per unit as a customer's usage increases. Although the tiered-water structure and the merits of Walker's challenge to this structure are complex, the facts underlying the current dispute are straightforward and undisputed.

In 2011 and 2012, the District imposed across-the-board rate increases but did not change the underlying tiered-rate structure. The parties agree that the District complied with the procedural requirements of section 6, subdivision (a), in imposing these increases and that Walker did not attend any of the public hearings held under the statute or protest the increases in any way.

In April 2015, Walker filed a claim against the District challenging the constitutionality of the District's tiered-rate structure because the rates are allegedly not based on cost of service as required by section 6, subdivision (b)(1). The District rejected the claim the following month, and Walker filed this class action lawsuit in August 2015. In it, she sought a petition for a writ of mandate and a declaration that the District's rate structure violates Article XIII D and that the District failed to comply with section 6, subdivision (b). In its answer, the District asserted that Walker had failed to exhaust her administrative remedies.

After the District certified the administrative record, Walker filed a memorandum supporting her claims. In its opposition, the District argued that Walker had failed to exhaust her administrative remedies and that her action therefore was barred. The trialcourt agreed with the District, denied the petition for a writ of mandate, and entered judgment in the District's favor on April 21, 2017.

Walker filed a motion for a new trial. While the motion was pending, Division One of the Fourth Appellate District filed Plantier, supra, 12 Cal.App.5th 856, which held that ratepayers challenging the method of calculating wastewater service fees (as opposed to the amount of fees) were not required to exhaust administrative remedies under section 6 before filing suit. (Id. at pp. 859-860.) Following Plantier, the trial court granted Walker's motion for a new trial. The District appealed, and Walker filed a protective cross-appeal from the original judgment.

The Supreme Court granted review in Plantier on September 13, 2017 (S243360). The District filed a motion in this court requesting a stay until Plantier was decided, the court denied the request, and briefing proceeded. The Howard Jarvis Taxpayers Association filed an amicus curiae brief in support of Walker; and the Association of California Water Agencies, the California Association of Sanitation Agencies, the California Special Districts Association, the California State Association of Counties, and the League of California Cities filed an amicus curiae brief in support of the District.

II.DISCUSSION

The sole question we must decide is whether this action is barred because Walker failed to exhaust her administrative remedies, a question we review de novo. (Plantier, supra, 12 Cal.App.5th at p. 865.) We agree with Plantier that a challenge to the method of calculating rates is not barred by a failure to exhaust administrative remedies under section 6, and we therefore affirm the trial court's motion granting a new trial.

Because Plantier is directly on point and disposes of the issue raised on appeal, we quote it at length: "When an applicable statute, ordinance, or regulation provides an adequate administrative remedy, a party must exhaust it before seeking judicial relief. [Citations.] 'Exhaustion requires "a full presentation to the administrative agency upon all issues of the case and at all prescribed stages of the administrative proceedings." ' " (Plantier, supra, 12 Cal.App.5th at p. 865.) "The exhaustion requirement is subject toexceptions, one of which is where the administrative remedy is inadequate. [Citation.] The statute, ordinance, regulation, or other written policy establishing an administrative remedy must provide clearly defined procedures for the submission, evaluation, and resolution of disputes. [Citations.] A policy that only provides for the submission of disputes to a decision maker without stating whether the aggrieved party is entitled to an evidentiary hearing or the standard for reviewing the prior decision is generally deemed inadequate. [Citation.] An administrative remedy that fails to satisfy these and other requirements need not be exhausted." (Id. at p. 866.)

To determine whether Walker was required to exhaust her administrative remedies in connection with her challenge to the District's four-tier system to determine water fees, we look at the language of section 6. Subdivision (a) is titled "Procedures for New or Increased Fees and Charges." It provides that before an agency may impose or increase any fee or charge, it must identify the parcels upon which a fee or charge is proposed; calculate the amount of the fee or charge; provide written notice by mail of the proposed fee or charge to the record owner of each identified parcel, the basis upon which the amount of the proposed fee or charge was calculated, the reasons for the fee or charge, and the date, time, and location of a public hearing on the proposed fee and charge; conduct a public hearing on the proposed fee or charge not fewer than 45 days after mailing notice; and consider all protests against the proposed fee or charge at the hearing. (§ 6, subd. (a)(1)-(2).) "If written protests against the proposed fee or charge are presented by a majority of owners of the identified parcels, the agency shall not impose the fee or charge." (§ 6, subd. (a)(2).) The District recounts at length in its opening brief the steps it took to comply with section 6, subdivision (a), when it raised water rates in 2011 and 2012, but Walker does not claim the District failed to comply with subdivision (a).

Section 6, subdivision (b), is titled "Requirements for Existing, New or Increased Fees and Charges." It sets forth five requirements for all fees or charges that an agency extends, imposes, or increases: (1) revenues from the fee or charge shall not exceed the funds required to provide the property-related service, (2) revenues from the fee or chargeshall not be used for any purpose other than that for which it was imposed, (3) the amount of a fee or charge imposed as an incident to property ownership shall not exceed the proportional cost of the service attributable to the parcel, (4) the fee or charge may not be imposed for a service unless the service is actually used by, or immediately available to, the property owner, and (5) the fee or charge may not be imposed for a general governmental service (such as police, fire, or library services) if the service is available to the public at large in substantially the same manner as it is to property owners. (§ 6, subd. (b)(1)-(5).) Walker's lawsuit alleges that the four-tier rate structure violates three of the foregoing requirements: The higher rates for the upper tiers mean that the District receives more from the higher paying customers than what is required to recover the District's costs of service (§ 6, subd. (b)(1)), the revenues the District collects are used for purposes other than that for which the fees were imposed (§ 6, subd. (b)(2)), and the inequality between the rate tiers is unrelated to the proportional cost of the service attributable to each parcel (§ 6, subd. (b)(3)).

The District asserts that Walker failed to participate in the hearings held on its rate increases in 2011 and 2012, and the District claims that this failure...