The outcome of an ongoing lawsuit against the Santa Clara Valley
Water District could have vast implications, in the form of
millions of dollars, on the water wholesaler and 4,000 property
owners throughout the county.
The outcome of an ongoing lawsuit against the Santa Clara Valley Water District could have vast implications, in the form of millions of dollars, on the water wholesaler and 4,000 property owners throughout the county.
Great Oaks Water Company, a retail water provider that serves 100,000 customers in San Jose, will be asking for about $5 million in refunds for groundwater charges it paid to the district when the trial for “phase two” of its current complaint begins Nov. 9.
Great Oaks says it is entitled to the full reimbursement of “pump taxes” it paid to the district in 2005-2006, because the charges were collected unconstitutionally. The water company will also ask the judge to order the district to either stop collecting water extraction charges from Great Oaks, or to comply with California Prop 218 by securing voter approval to impose the charges.
The trial will pick up where the Santa Clara County Superior Court left off April 23.
At that time, Judge Kevin Murphy ruled that the water district violated Prop 218 by imposing the charges without gaining approval from voters. Plus, the district violated the Water District Act, a state law that created the public agency, by using revenues from groundwater rates for unauthorized purposes.
“Since the court determined the groundwater charges were collected in violation of Prop 218, we expect that a full refund of groundwater charges paid by Great Oaks will be ordered,” Great Oaks’ attorney Tim Guster said.
Although the current case only applies to Great Oaks and to a single year, the water company has similar cases pending – one for each year since, up to the current year, Guster said. Those cases are on hold until the conclusion of the current case.
“We feel the outcome of this case has great bearing on the outcome of the other cases,” Guster noted.
Furthermore, the judge’s April ruling could equally apply to all of the county’s well owners, the city of Morgan Hill among them, and a refund for Great Oaks could mean a refund for other well owners if they decide to litigate. The water district declined to comment on the upcoming proceedings due to their ongoing nature, but following the April ruling a staff attorney said the district has used the same process to determine and collect groundwater extraction charges for all well owners. They have continued to do so up until the current fiscal year which started July 1, with no plans to change the process in the future.
The district filed a petition asking the Sixth Appellate District Court of Appeal to consider “certain legal issues” prior to the phase two proceeding, but that petition failed, district spokesperson Susan Siravo said. The petition was “summarily denied” Oct. 19, according to the Sixth Appellate District Web site.
If the court rules in Great Oaks’ favor after phase two, the water district will likely appeal the decision.
Great Oaks also has two “reverse validation” claims pending in Santa Clara County Superior Court – one for each of the last two years, Guster said. Those cases could have a more direct effect on other well owners without requiring them to file their own claims. Those claims argue that, based on the same violations of
Prop 218 cited in the current case, the ordinance that allows the district to collect groundwater extraction charges is invalid and a full refund
is due.
The outcome of those claims will apply to everyone who paid groundwater charges in the fiscal years 2008-2009 and 2009-2010, Guster said. In 2008-2009, the district collected about $72 million in groundwater charges, and staff projects this year it will collect about $61 million. In fiscal year 2008-09, Morgan Hill paid about $2.2 million.
The reverse validation claims are scheduled to be heard in court in March 2010. Great Oaks could not file similar claims for previous years because the statute of limitations has expired.
The current charge for groundwater in South County is $275 per acre-foot. North County well owners pay $520 per acre-foot, and agricultural customers pay $17.50 per acre-foot.
The April ruling also said the district did not comply with the District Act by incorrectly calculating the fees it charged for different users. The judge ruled that because of the widely varying rates for different customers, the higher-paying ones are unfairly subsidizing the lower rate payers.
“The plaintiff was overcharged because of subsidies made for treated water and discounts given to agricultural users,” Murphy’s ruling says.
The judge’s ruling did support the water district’s argument that its groundwater management practices are necessary to maximize the efficient use and preservation of drinking water. The district’s methods are also effective in preventing dangerous sinkholes.
The water district provides water supply and flood protection for 1.8 million Santa Clara County residents. Its annual budget is $305 million and it employs about 750 people.
The ongoing and upcoming litigation comes amid a barrage of criticism levied at the district. Most recently, in April the Santa Clara County Civil Grand Jury compiled a report that harshly criticized the district for wasteful spending and a lack of oversight by its board of directors.
