Court overturns fees charged to water rights holders

» January 18, 2007 «

Family farmers who were wrongfully required to pay a state water rights fee may have their money refunded as a result of an appeals court ruling. After a four-year legal battle, the 3rd District Court of Appeal in Sacramento decided in favor of farmers and ranchers who protested imposition of a new and unconstitutional state fee that resulted in a total collection of more than $20 million.

Water rights fees were levied on about 7,000 water rights holders beginning in 2004. The court agreed with the California Farm Bureau Federation that those fees were invalid and unconstitutional.

The California Farm Bureau Federation, along with the Northern California Water Association, Central Valley Project Water Association, Imperial Irrigation District and about 200 water users, led the legal challenge to the yearly fee. The court determined the fees far exceeded any benefits to people with water rights, and were used to fund other activities of the State Water Resources Control Board's Water Rights Division.

"Farm Bureau had serious concerns, not just about the constitutionality of the fee, but also about the hasty adoption of the fee provision, lack of budget analysis and the collection of far more money than is needed to administer existing small water rights," said Carl Borden, CFBF associate counsel.

Farm Bureau took legal action after the Legislature passed Senate Bill 1049 in 2003 and directed the board to recover the full costs of its Water Rights Division from Jan. 1 to June 30, 2004, and each year thereafter. SB 1049 passed with a simple majority vote of the Legislature.

Rather than establish fees for actual services provided by its Water Rights Division, the SWRCB instead imposed a 3 cents per-acre-foot fee, with a $100 minimum, on all water rights permits and licenses, regardless of whether the SWRCB provides any service to these water rights holders. The fees have been imposed annually on the amount of water authorized to be diverted under a permit or license, whether the water is actually used or not.

Borden outlined four possible courses of action for bill recipients:

Pay the fee to the BOE by Jan. 18, without filing a protest.
By paying the fee in a timely manner, the recipient would avoid the imposition of interest and the non-payment penalty. However, a court may, as argued by the state, determine that fee payers who did not file a protest are not entitled to a refund despite a subsequent court decision that the fee is invalid.

"In other words, you might not get a refund if we win our case," Borden said.

Don't pay the fee and take no other action.
In this case, interest at the rate of 8 percent per year and a 10 percent penalty would be added to the fee.

"Before our lawsuit is resolved, the BOE could seek to collect the unpaid amount by, for example, attaching your wages and placing a lien on your real property," Borden said. "And if a court ultimately were to uphold the fees, you would still owe the amount you were billed plus interest and the penalty.

"Also, the State Water Resources Control Board may revoke the permit or license of a holder who failed to pay the annual fee for five years."

Don't pay the fee for now but mail a Petition for Reconsideration with a copy of the bill or bills to the State Water Resources Control Board--not to the Board of Equalization.
A written protest and bill copies must reach the SWRCB by the 30th day after the date of the recipient's Notice of Determination--that is, by Jan. 18. The protest procedure is described in the bill under "Information concerning Determinations." A sample protest form that Farm Bureau members can use is posted on the Farm Bureau's Web site.

"That protest form requires only that you fill in your name and address and date, sign and mail it along with a copy of your bill or bills to the water board," Borden said. "If you do that, you need not pay the fee until the water board has denied your protest and 30 days after the BOE has issued a Notice of Redetermination that the fee is due. While interest will be due in addition to the fee, a non-payment penalty will not be due if the 'fee' plus interest is paid within 30 days after the issuance of the Notice of Redetermination.

"This could take up to several months to occur. But the important thing is that filing a protest may enhance your ability to get a refund of fees paid if they are ultimately declared invalid," Borden said. "If you already paid your bill or bills or if, for whatever reason, you want to pay now, you should still consider filing a protest with the water board to enhance your odds of getting a refund.

"If you decide to exercise this option, keep a copy of everything you mail to the SWRCB. Again, this option requires immediate action, as the SWRCB must receive your protest by the due date."

Mail your protest and bill copies to: State Water Resources Control Board, P.O. Box 2000, Sacramento CA 95812-2000.

Pay the fee to the BOE now and mail a protest with a copy of the bill(s) to the SWRCB as described in the prior option.
"If you have already paid the bill or bills or if, for whatever reason such as the avoidance of interest charges, you decide to pay the bills now, you can still file a protest with the SWRCB," Borden said. "Again, doing so may enhance your chances of getting a refund if the fees are later held invalid."

Borden said letters containing this information are being mailed now to Farm Bureau members with water rights permits or licenses.