The Santa Clara Valley Water District is set to send out
residential groundwater bills this week, even though the local
Superior Court ruled the charges unconstitutional.
The Santa Clara Valley Water District is set to send out residential groundwater bills this week, even though the local Superior Court ruled the charges unconstitutional.
Morgan Hill resident and well owner Jon Persing said he will refuse to pay, even after the water district added about $45 in late fees and interest to his $88 bill for groundwater usage earlier this year.
Earlier this month, Great Oaks Water Co., a San Jose company, sued the water district for a full refund of about $4.6 million in groundwater charges the water retailer paid to the water district in 2005-06. In that ruling, Judge Kevin Murphy found that the charges levied by the water district violated Proposition 218 because the charges were not approved by the voters.
To Persing, that means he is due a refund as well, and he doesn’t have to pay the groundwater charges anymore because the public agency used the same process to determine his bill.
“It’s pure and simple,” Persing said. “I don’t know how they would fight that, knowing a judge has already ruled in favor of Great Oaks.”
The City of Gilroy will continue to pay its water bills and will wait “for the dust to settle in the Great Oaks lawsuit” before it decides how to move forward, Councilman Perry Woodward said.
“If we sue them now, we really don’t gain anything,” he said. “We don’t lose anything by waiting.”
Additionally, if the city stopped paying, the water district might sue the city, Woodward said.
The hope is that the strength of the decision in the Great Oaks case will allow Gilroy to reach a settlement with the water district, Woodward said. He estimated the value of the city’s refund to be more than $5 million and possibly closer to $10 million.
“Gilroy is owed a ton of money, probably considerably more than Great Oaks,” Woodward said.
That money, however will not go into the city’s general fund and cannot go to pay salaries. It would be restricted money dedicated to the maintenance of the city’s water infrastructure, Woodward said.
“In a perfect world,” the city would be able to go back to the day the water district started charging the “illegal” pumping tax to seek a refund, Woodward said. But the statute of limitations prevents that so the city entered into a “tolling” agreement with the water district, protecting the city’s ability to seek a refund going as many years back as statute will allow from the date the agreement was reached last summer.
That agreement saves the city from spending money on legal fees until it learns the outcome of the Great Oaks decision, which the water district will likely appeal, City Administrator Tom Haglund said. The city pays the district about $2.6 million annually in groundwater extraction charges, Haglund said.
Meanwhile, Persing has chosen a more aggressive path to hang on to his money, and the water district responded. In addition to the basic charge for water use last year, the water district has added a penalty of $8.80, a $35 administrative fee, and $3.52 in interest to Persing’s bill, bringing his total balance to $135.32. He said he has also received a letter from the water district stating that if he didn’t pay by Dec. 9 the agency would pursue legal action, though he said Monday he hasn’t heard anything since that deadline. He declined to say whether or not he has discussed the situation with an attorney.
“I was thinking I would donate the money to charity, and tell (the water district) to do the same with my refund,” Persing said.
Ultimately, the water district could take out a lien on Persing’s and other delinquent well owners’ properties, according to SCVWD spokeswoman Susan Siravo. That would happen only after “several” unanswered delinquent notices and lots of penalties and fees. If the well owner still refuses to pay, the water district could pursue legal action, which could add court costs to the bill. If the court rules in the water district’s favor, the district could put a lien on the well owner’s property.
Water district board of directors chair Sig Sanchez said the agency’s position remains that the groundwater charges are lawful, and the water district has complied with Proposition 218. They are likely to appeal the Great Oaks ruling, and have argued that the charges satisfy the terms of Proposition 218.
“This court action is ongoing,” Sanchez said. “I can’t believe the staff is going to do anything different than what it’s been doing.”
If the water district’s appeal fails, and if other lawsuits filed by Great Oaks end in the company’s favor, then refunds to the county’s 4,000 well owners could be in order. But that is likely not to be determined for at least another year, as the lengthy appeal process continues.
Santa Clara County Supervisor Don Gage said the court ruling could eliminate one of the water district’s key revenue sources. This year, the water district budgeted about $60 million in revenue from groundwater charges. The agency’s total budget is $305 million.
“If other people sue, I think it could get out of control,” said Gage, who plans to run for a seat on the water district’s board of directors in 2010. “It could mean millions of dollars.”
Siravo said water district staff are not aware of any other well owners who have refused to pay groundwater charges based on the Great Oaks ruling, and there is no litigation challenging the charges pending other than Great Oaks’ lawsuits.
Longtime water district critic and San Martin resident Bob Cerruti was pleased with the Great Oaks ruling, but he plans to play it safe and pay the groundwater charges until the water district exhausts all of its legal options. He is confident that the court of appeals, and even the state Supreme Court, will uphold Judge Murphy’s ruling, allowing him to eventually receive a refund.
Cerruti said he can’t afford to file a lawsuit similar to that of Great Oaks but he has tried to encourage the cities of Morgan Hill and Gilroy to jointly protest the groundwater charges on behalf of their constituents.
“I’m hoping we can see some restitution to what’s happened over the years. It sure would be nice if we could get a rebate,” Cerruti said.
The city of Morgan Hill serves about 12,000 water customers with local groundwater. Last year, the city paid the water district about $2.2 million in groundwater extraction charges. Morgan Hill City Manager Ed Tewes said Monday that the city hasn’t decided how to respond.
The water district sends out “statements” of payment, rather than invoices, to groundwater users, twice a year, Siravo said. Well owners are required to calculate groundwater charges based on those statements. Some well owners only receive annual statements, in June, if they are small-scale water consumers or if they are non-agricultural customers, Siravo said.
Reporter Sara Suddes contributed to this article.
