Court: Voter referendum can’t block water rate hike

Once a local water board approves a rate increase, voters cannot prevent it from taking effect by circulating a referendum, though they can seek to reduce it later, the state Supreme Court ruled Monday.

A referendum ordinarily blocks implementation of a new law once it qualifies for the ballot until voters decide whether to approve the law. But the court said the California Constitution exempts laws from a referendum challenge if they impose taxes for “usual current expenses” of the state or local government.

That exemption applies to water rates and other assessments to fund “essential government operations,” Justice Leondra Kruger said in the unanimous ruling.

Dunsmuir, a small city in Siskiyou County, “depends on water charges to provide water to residents and to maintain the infrastructure necessary to do so,” Kruger said. Suspending those charges, even temporarily, to await a public vote could “impair the city’s ability to carry out one of its most basic and essential functions,” she said.

The ruling would not prevent local voters from trying to reduce water rates by circulating an initiative after the increase took effect — a procedure attempted, unsuccessfully, by opponents of the Dunsmuir water rates. But Michael Colantuono, a lawyer for Dunsmuir, said the city could obtain a bond to finance its costs and keep the new rates in place at least as long as it took to pay off the bond.

The case required the court to weigh the needs of state and local governments against policies set forth in ballot initiatives to limit lawmakers’ ability to raise taxes and require voter approval in some cases. The justices will face a similar conflict shortly if they take up a challenge to a 2018 San Francisco tax on businesses to fund services for the homeless. A state appeals court ruled in

June that because the measure was placed on the local ballot by a voter initiative, it did not require the twothirds majority normally needed for tax increases.

Dunsmuir, a community of less than 1,600 just south of Mount Shasta, prides itself on a water supply drawn from mountain springs. But a city assessment in 2014 found numerous leaks in aging water pipes and a need to upgrade a 105yearold water storage tank to maintain water pressure and fire protection.

The City Council’s approval in 2016 of a fiveyear, $15 million upgrade, funded by ratepayers, was challenged by Leslie

Wilde, a former councilwoman. She tried, but failed, to collect enough signatures from property owners to legally block the increase, and local voters rejected an initiative she sponsored in November 2016 to set lower rates.

But she had also gathered enough signatures for a local referendum, and argued that it should have prevented the new rates from taking effect until another public vote. The court disagreed, saying California law, despite initiatives requiring voter approval of most new local taxes, does not mandate such approval or authorize a referendum on taxes that pay for water, sewer and garbage collection services.

Rejecting a lowercourt ruling that the water rate was a “fee” rather than a tax, Kruger said the law defines taxes broadly to include “any contribution imposed by government upon individuals, for the use and service of the state,” including water delivery.

Wilde said Monday that the court had “missed an opportunity to protect vulnerable populations of California ratepayers.”

The case is Wilde vs. Dunsmuir, S252915.