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58 <br />imposing or increasing such fees. The California Supreme Court denied the City of Fresno's <br />petition for review of the Court of Appeal's decision on June 15, 2005. <br />In July 2006 the California Supreme Court, in Bighorn-Desert View Water Agency v. Verjil <br />(2006) 39 Cal.4th 205, addressed the validity of a local voter initiative measure that would have <br />(a) reduced a water agency’s rates for water consumption (and other water charges), and (b) <br />required the water agency to obtain voter approval before increasing any existing water rate, fee, <br />or charge, or imposing any new water rate, fee, or charge. The court adopted the position <br />indicated by its statement in Richmond that a public water agency’s charges for ongoing water <br />delivery are “fees and charges” within the meaning of Article XIIID, and went on to hold that <br />charges for ongoing water delivery are also “fees” within the meaning of Article XIIIC’s mandate <br />that the initiative power of the electorate cannot be prohibited or limited in matters of reducing or <br />repealing any local tax, assessment, fee or charge. Therefore, the court held, Article XIIIC <br />authorizes local voters to adopt an initiative measure that would reduce or repeal a public <br />agency’s water rates and other water delivery charges. (However, the court ultimately ruled in <br />favor of the water agency and held that the entire initiative measure was invalid on the grounds <br />that the second part of the initiative measure, which would have subjected future water rate <br />increases to prior voter approval, was not supported by Article XIIIC and was therefore invalid.) <br />The court in Bighorn specifically noted that it was not holding that the initiative power is <br />free of all limitations; the court stated that it was not determining whether the electorate’s initiative <br />power is subject to the statutory provision requiring that water service charges be set at a level <br />that will pay for operating expenses, provide for repairs and depreciation of assets, provide a <br />reasonable surplus for improvements, extensions, and enlargements, pay the interest on any <br />bonded debt, and provide a sinking or other fund for the payment of the principal of such debt as <br />it may become due. <br />In August 2013, an Orange County Superior Court judge ruled that the tiered pricing model <br />of the City of San Juan Capistrano, which charges higher rates to customers who use more water, <br />violates Proposition 218. The City of San Juan Capistrano appealed the decision, to the Fourth <br />District Court of Appeal, which published its decision on April 20, 2015. The court’s decision <br />found that the City of San Juan Capistrano’s tiered rates were not sufficiently cost-justified, but <br />that the Constitution does allow for tiered rates. In July 2015, the California Supreme Court denied <br />a request to depublish the case. <br />In July 2024, the Fourth District Court of Appeal ruled on an appeal from a San Diego <br />County case involving a class action against Otay Water District. The trial court judge determined <br />that, based on the record in that case and an evaluation of the expert witness testimony presented <br />by both parties, Otay Water District failed to demonstrate that its tiered water rates, which were <br />based on “peaking factors” (i.e., ratios meant to capture peak versus average demand), comply <br />with Proposition 218. The Fourth District Court of Appeal upheld the trial court judgment as to <br />liability and the availability and existence of damages but ordered a new trial to determine a refund <br />amount. <br />The Otay Water District decision was based on the facts and expert testimony presented <br />in that case, and as such, cannot be directly applied to the City’s rate structure. However, the <br />City believes that its rate structure is consistent with Proposition 218 and distinguishable from the <br />rate structures deemed unconstitutional in both the San Juan Capistrano and Otay Water District <br />cases because the City’s tiered rates were designed to reflect the City’s actual costs of providing <br />water to customers at the various tier levels. Moreover, even if a court were to determine that the <br />City’s tiered rates do not comply with Proposition 218, such a decision would only impact the <br />8.A. - Page 72 of 255 <br />700