By Craig W. Anderson
“The state Legislature authorized additional fees to be paid by water rights holders but it’s a tax grab,” said San Joaquin Farm Bureau Executive Director Bruce Blodgett. “Farm Bureau’s legal staff has been pursuing this for years.”
Decision due in March
As time ticks away on the final decision from the Supreme Court, which is scheduled to be handed down on or before March 7, more than three years have passed since the California Farm Bureau Federation filed briefs to have the State Water Resources Control Board stop assessing the “fee” which is actually a tax, according to Farm Bureau.
The annual permit fees are assessed by the Board of Equalization which collects the money and turns it over to the State Water Resources Control Board (SWRCB).
“Fee” is a tax and both are illegal
The problem with this process is, Farm Bureau said, that the “fee” is actually a back-door tax designed to skirt Proposition 13 which was passed in 1978 and mandates the state Legislature must have a two-thirds majority vote to enact new taxes. Farm Bureau also sees a violation of the U.S. Constitution’s Supremacy Clause because both California and federal water permit holders are required to pay the state.
The state Legislature’s insatiable thirst for funding sources, in this case via permit fees pumped from water right permit holders, appeared in Senate Bill 1049 which was passed in 2003. The bill charged the SWRCB with recovering the costs of its Water Rights Division beginning June 1, 2004, and continuing forever.
The SWRCB did not establish fees for actual services rendered by the division, instead imposing a three-cents an acre-foot fee – with a $100 minimum – on every water right permit and license. The SWRCB took the money whether or not they provided any service to the rights holders and the fee is based on the amount of water authorized for diversion whether that water is actually used or not.
Farm Bureau said the fee is unconstitutional because the amount charged is not used to benefit those paying the fee/“tax.”
The issue is coming to a head both in the Supreme Court and among water rights holders who received their “fee” bills early in December covering the fiscal year 2010-2011.
Pay fee or not; file petition
Farm Bureau has recommended in prior years that a bill recipient “should file a protest with the SWRCB which might enhance the ‘fee’ payer’s ability to get a refund of the ‘fees’ paid if they are ultimately declared invalid by the Supreme Court,” said Carl Borden, CFBF associate counsel. “Because of the court’s 90-day period to reach an opinion after hearing oral arguments, we’re now expecting the opinion to be issued by March 7.”
If the “fee” is found to be unconstitutional, those who’ve paid it over the years would be eligible for a refund. However, a “Petition for Reconsideration,” a protest of the fee, must be submitted in order to receive any potential refund. Should refunds happen, Borden said it would be the first time the water board would be compelled to “grant the protests and relieve water rights holders from having to pay” in the future.
Farm Bureau and Borden are also suggesting those receiving “fee” billings consider not paying their bill but still file a “Petition for Reconsideration” with the SWRCB on or before Wednesday, Jan. 5.
The petition form is available on the CFBF website via a link under “Special Focus” on the home page at www.cfbf.com.
“Remember, the petition must be received by the SWRCB – not the Board of Equalization,” Borden said. “Only Payments go to the Board of Equalization.”
The state fights Farm Bureau
As expected, the state doesn’t agree with Farm Bureau’s stand on the issue and, said Molly Mosley, a deputy state attorney general, the fees are a “legitimate regulatory charge levied on an industry for benefits received.”
About the “fee,” Mosley said that, in general, “It’s a necessary evil to have regulation in the world.” She also said the water contractors are “legal users” and thus subject to the “fee” and don’t fall under the protection of Proposition 13.
“We’re just passing through the cost of regulating them,” Mosley said, adding, “This is a classic regulatory fee.”
Recently passed by the voters, Proposition 26 specifically says a two-thirds legislative vote is required for any new taxes or fees that are not used to directly regulate the entity paying the tax … or “fee” and this proposition should keep Farm Bureau attorneys and the state busy arguing for the foreseeable future.