Proposition 218, enacted in 1996, amended the California Constitution to establish stricter voter approval requirements for special taxes and assessments, aiming to protect taxpayers from excessive local government revenue collection without consent. The Brooktrails Township Community Services District was created to provide water and sewer services to approximately 6,500 parcels near Willits, California. Currently, around 1,536 parcels are connected to the water system and 1,490 to the sewer system, while undeveloped parcels incur annual fees. Connection fees are charged at hookup, followed by fixed monthly rates and usage-based charges for water, but not for sewer service.
Appellant David Paland, who connected his property to the District's services in 1986, historically faced prorated charges when he temporarily discontinued service. Until 2003, the District did not charge base rates for inactive connections. However, due to a moratorium on new connections imposed by the state Department of Health Services, the District's Board decided to implement monthly base rates for all parcels with established connections, regardless of usage. This policy change was communicated to Paland and other affected property owners, prompting Paland to protest the new charges.
Paland challenged the Board's authority to impose monthly base rates on inactive water connections, contending this practice constituted a "standby fee" and violated Proposition 218 and due process. Although the Board did not change its policy, Paland did not take legal action initially because he was unaware that it had been enacted as an ordinance. After falling behind on payments in late 2006, Paland's water service was cut off, and he communicated his financial struggles and inability to pay ongoing base rates due to unemployment. By January 2007, he had settled his arrears up to November but continued to be charged monthly base rates without actual water usage. On May 17, 2007, he filed a lawsuit against the Board for declaratory and injunctive relief, arguing that the base rates charged during times when his service was off were "standby charges" requiring compliance with Proposition 218's owner voting requirements. The court focused on whether these charges constituted a property assessment subject to approval or a fee exempt from such requirements. It determined that the imposition of minimum monthly rates on connected but inactive parcels fell under fees or charges for a service that must be immediately available to the property owner. Paland argued that since his service was inactive, it was not immediately available, as the District needed to unlock his water meter, which would only occur upon payment of his past-due bills. He maintained that unless he could directly access the water service, the charges should be classified as assessments, thus subject to assessment approval protocols under Proposition 218.
The court analyzed the terms 'immediately available' and 'potential or future use of a service' within the context of a utility initiative, noting their relative and imprecise nature. It clarified that 'immediately available' should be understood as focusing on the agency's actions rather than the property owner's choices. Specifically, if the utility agency has provided necessary service connections to a property, service is considered 'immediately available' unless the property owner voluntarily chooses to terminate or forgo the service. In Paland's case, he had already paid for the connection and had access to water and sewer services, which were available whenever he chose to use them. The court asserted that a property owner could not unilaterally avoid charges by not using the service, as doing so would create an unfair situation where some property owners could evade fees without a vote, while others could not.
The court referenced the Richmond case, establishing that for a charge to qualify as an assessment or fee under Proposition 218, it must apply to identifiable parcels in advance. Since the decision to discontinue service is at the property owner's discretion, the District cannot predict which parcels will be affected by a fee for inactive connections, thereby excluding such fees from Proposition 218 requirements. Paland subsequently proposed Measure D, which aimed to prevent the Brooktrails Township Community Services District from charging for water or sewer services more than two days after a customer requests service discontinuation.
Parcel owners are not required to give up their water or sewer connections when discontinuing service, and the District cannot charge more than the reasonable cost for reinstating those services. Charges cannot be imposed solely for having pipes connected to the District's system. Voter approval is necessary for changes, and Measure D passed in the November 2, 2010 election with a simple majority. Proposition 26, adopted concurrently, redefined what constitutes a "tax" and aimed to prevent evasion of Proposition 218. It specifies that a local government charge is not a tax if it provides specific benefits or services directly to the payer without exceeding reasonable costs. The local government must demonstrate that any charge is not a tax and is reasonably related to the benefits received. Proposition 26 also amended article XIII A concerning ad valorem taxation and highlighted ongoing increases in local taxes despite Proposition 218’s requirements for voter approval. In response, the District has filed a lawsuit against the Mendocino County Board of Supervisors and County Clerk, seeking a declaration that Measure D is unconstitutional and did not achieve the necessary two-thirds majority as mandated by Proposition 26.
Paland was permitted to intervene as a defendant but not to file a cross-complaint against the District. The Board of Supervisors and Clerk informed the court they would not defend the action and were neutral on the matter. After a two-day bench trial, the trial court upheld the District's claim that Measure D, which allowed property owners to "go inactive," effectively increased the base rates for remaining connected property owners, constituting a "tax" under the new definition established by Proposition 26. Paland subsequently appealed the judgment, raising several issues, including the exclusion of evidence and misinterpretation of state and federal Constitutions. The trial court's decision did not address the trend of local governments disguising new taxes as "fees" to bypass constitutional voting requirements.
The appeal resolution centers on whether Proposition 26 applies to this case. Proposition 26, a statewide initiative, took effect the day after voter approval and cannot be applied retroactively to overturn an election result that occurred before its enactment. Retroactivity of constitutional amendments is presumed to be prospective unless explicitly stated or clearly intended by voters, neither of which applies here. Although Proposition 26 contains a retroactivity clause for certain state taxes, it does not apply to the local provisions relevant to this case, indicating that the intent was not to retroactively affect local government tax definitions.
Subsequent amendments have maintained the use of specific chronological designations. The relevant provisions apply to replacement dwellings purchased or constructed after November 5, 1986, excluding those before November 9, 1988. Proposition 218, enacted in November 1996, stipulated that its provisions would take effect the day after the election unless stated otherwise, with compliance required for all assessments from July 1, 1997. However, Proposition 26 did not introduce new requirements for the validity of existing assessments, fees, or charges.
In interpreting an initiative, its language is considered with ordinary meaning, and ambiguity leads to a presumption of voter intent based on the text. There is no indication of intent for retroactive application in Proposition 26's language or ballot arguments. Two key elements arise from this interpretation: First, Paland I determined that the District's water and sewer operations complied with Proposition 218; the fees imposed did not require a two-thirds or even a simple majority vote. Thus, Proposition 218 did not hinder Paland from modifying the District's fee structure. Second, Proposition 218 affirms that the initiative power allows for the reduction or repeal of local taxes, assessments, fees, or charges, which was exercised by Paland and the majority of voters through Measure D.
The District's argument regarding the timing of Measure D's effectiveness in relation to Proposition 26's effective date was dismissed, as the court recognized that retroactive statutes affect rights or obligations established before their enactment. The legal context analyzed in Paland I would be fundamentally altered by Proposition 26. The exact date of Measure D's effectiveness was not established, only that it occurred in November 2010.
The judgment was reversed, with the opinion modified for publication. The trial court was the Mendocino County Superior Court, and the trial judge was Honorable John A. Behnke. The involved parties included various attorneys representing the intervenor, appellant, plaintiff, and defendants.
