On April 20, the 4th District Court of Appeal, Division 3, decided the case of Capistrano Taxpayers Association Inc. vs. City of San Juan Capistrano, in which the taxpayers sought to overturn the action of a local governmental body to impose, unilaterally without a vote, tiered rates not based on cost of service for the incremental levels of usage. The taxpayers argued that the city’s new rates violated Proposition 218, which requires public water agencies to base their rates on the actual costs of providing water at the various levels of usage. The trial court and the appellate court agreed with the taxpayers association on that issue.

On May 6, the city filed a petition for rehearing before the same court of appeal, but five days later the city requested withdrawal of its petition for rehearing, which the appellate court granted.

However, the court of appeal also took the opportunity to modify its opinion in several places, clarifying the avenues open to water agencies seeking to raise rates in tiers. The key modification was the insertion of the following paragraph:

“The way Proposition 218 operates, water rates that exceed the cost of service operate as a tax, similar to the way a ‘carbon tax’ might be imposed on the use of energy. But, we should emphasize: Just because such above-cost rates are a tax does not mean they cannot be imposed — they just have to be submitted to the relevant electorate and approved by the people in a vote. There is no reason, for example, why a water district or local government cannot, consistent with Proposition 218, seek the approval of the voters to impose a tax on water over a given level of usage — as we indicated earlier, that might be a good idea.

“However, if a local government body chooses to impose tiered rates unilaterally without a vote, those tiers must be based on cost of service for the incremental level of usage, not pre-determined budgets. (For the moment, of course, we need not decide whether such a proposed tax would constitute a general tax or special tax.)” (Capistrano Taxpayers Association, Inc. v. City of San Juan Capistrano, G048969, modified May 19, 2015, p. 27)

Consequently, any of our local water agencies who may seek to establish tiered rates, or raise existing ones, must either base the new rates on the cost of service for each tier or bring them before the people of the district for a vote.

One aside: We recently received an emphatic email from a disbarred attorney attempting to convince us, and presumably other newspapers, that decisions of the 4th District, Division 3, have no statewide application, but are limited to the geographical area of the 4th District, or perhaps even of Division 3 — in which Idyllwild is not. That contention is false.

It is elementary law that “[D]ecisions of every division of the District Courts of Appeal are binding upon all the justice and municipal courts and upon all the Superior Courts of this state, and this is so whether or not the Superior Court is acting as a trial or appellate court. Courts exercising inferior jurisdiction must accept the law declared by courts of superior jurisdiction. It is not their function to attempt to overrule decisions of a higher court.” (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455)

Consequently, a published 4th District opinion is binding on every trial court in California hearing a relevant water agency matter — and it will remain so binding unless and until a court of appeal of another appellate district renders a published decision to the contrary or the California Supreme Court decides the issue itself.