Big Court Win for Taxpayers: Proposition 218 Means What It Says

Although it received very little press attention taxpayers recently won a huge victory in the California Supreme Court. The ruling in Bighorn-Desert View Water Agency v. Beringson has created shockwaves throughout the state among those concerned with local taxation.

To fully appreciate the importance of this ruling we must travel back to 1978 when Proposition 13 was overwhelmingly approved by voters. Californians understand that Proposition 13 effectively limited our property taxes. It still does. But Proposition 13 also imposed a two-thirds voter approval requirement for other local taxes.

It was this provision that was immediately attacked by the tax-and-spend lobby. Like termites on wood they ate away at Prop 13’s voter requirements greatly weakening them. Twice taxpayers counter-attacked against this assault on Prop 13 with successful statewide ballot measures in 1986 and 1996. In the latter year taxpayers passed the powerful Right to Vote on Taxes Act (Proposition 218) to close several court-created loopholes in Proposition 13. These loopholes had been conjured up by local governments to impose a myriad of "fees" "charges" and "assessments" on property owners without their approval. But even with strong language requiring voter or property owner approval of new "levies" local governments continued to fight back.

That brings us to the court case.

In June 2003 the Bighorn-Desert View Water Agency placed Measure L before its voters to reinstate certain fees they had previously eliminated due to a suit brought by HJTA. Bighorn promised rate relief if the voters passed Measure L. The voters dutifully passed Measure L. Instead however the Agency substantially jacked up its water rates.

One frustrated ratepayer E.W. Kelley collected enough signatures to qualify yet another initiative that would roll back consumption rates to a reasonable level. The Agency then filed suit against the County Registrar to keep Kelley’s initiative off the ballot.

In a two-pronged decision against taxpayers the Court of Appeal held that despite the expanded initiative power under Proposition 218 metered water rates are not subject to Proposition 218 and thus cannot be adjusted by the people using their initiative power. As authority for its holding that metered water rates are not subject to Proposition 218 the Court cited Howard Jarvis Taxpayers Assn. v. City of Los Angeles a case we lost in 2000.

The Los Angeles decision was horrible and directly contrary to the clear language we had placed in Proposition 218. In essence the Court of Appeal had concluded that water rates are not "property related" and thus not subject to 218’s limitations.

Although we won subsequent cases against the cities of Roseville and Fresno that held water rates are subject to Proposition 218 the Los Angeles case has nonetheless been a thorn in our side for six years as cities counties and special districts throughout California have taken cover behind that case to justify not following Proposition 218’s rules for rate-setting.

In our brief to the Supreme Court in the Bighorn case we explained the conflict between Los Angeles Roseville and Fresno: "The conflict is causing confusion as illustrated by the present case. To eliminate this confusion Jarvis v. Los Angeles should be overruled." Understand that it is a big deal to ask the Supreme Court to overrule a precedent that has been on the books for several years especially if it is a case where the Supreme Court previously denied review.

On July 24th the Supreme Court answered our request with a big Yes. The Court held that the lower court had erred both in limiting the scope of the people’s initiative power and in holding that metered water rates are not subject to Proposition 218. In the Court’s words Proposition 218 applies to "charges for a property-related service whether the charge is calculated on the basis of consumption or is imposed as a fixed monthly fee." In a footnote the Court ruled "Howard Jarvis Taxpayers Assn. v. City of Los Angeles … is disapproved insofar as it is inconsistent with this conclusion."

The importance of this ruling cannot be overstated. Water rates sewer rates and other property related fees are now subject to Proposition 218’s "cost of service" requirements. What that means is that the hundreds of millions of dollars transferred to cities’ general funds from enterprise funds is now illegal.

Let the games begin.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest taxpayer organization — which is dedicated to the protection of Proposition 13 and promoting taxpayers’ rights. Tim Bittle is HJTA’s director of legal affairs.

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