Filed 3/26/15

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SIXTH APPELLATE DISTRICT

GREAT OAKS WATER COMPANY,

Plaintiff and Respondent,

 v.

SANTA CLARA VALLEY WATER 

DISTRICT,

Defendant and Appellant.

 H035260

 (Santa Clara County

 Super. Ct. No. CV053142)

Plaintiff Great Oaks Water Company (Great Oaks), a water retailer, brought this 

action challenging a groundwater extraction fee imposed on water it draws from wells on 

its property. The power to impose such a fee is vested in defendant Santa Clara Valley 

Water Management District (the District), under the Santa Clara County Water District 

Act (Stats. 1951, ch. 1405, pp. 3336 et seq., West’s Ann. Wat.—Appen. (1999 ed.) 

ch. 60, pp. 354 et seq.) (District Act or the Act). Among the District’s major 

responsibilities is preventing depletion of the acquifers from which Great Oaks extracts 

the water it sells. The trial court awarded a complete refund of the charges paid by Great 

Oaks, and in the alternative a partial refund, on the grounds that the charge violated the 

provisions of both the District Act and Article XIII D of the California Constitution 

(Article 13D), which imposes procedural and substantive constraints on fees and charges 

imposed by local public entities. We hold that (1) the fee is a property-related charge for 

purposes of Article 13D, and thus subject to some of the constraints of that enactment; 
2

(2) however, it is also a charge for water service, and as such exempt from the 

requirement of voter ratification; (3) the pre-suit claim submitted by Great Oaks did not 

preserve any monetary remedy against the District for the violations of Article 13D found 

by the trial court; and (4) the trial court failed to apply a properly deferential standard of 

review to the question whether the District’s setting of the fee, or its use of the resulting 

proceeds, complied with the District Act. Accordingly, we will reverse the judgment. 

BACKGROUND

A. The District Act

Prior to adoption of the District Act, the Santa Clara Valley was plagued by 

overdraft of the underlying groundwater basin, causing among other things the 

subsidence of land—with resulting disruption of roads and structures—and the intrusion 

of salt water into groundwater acquifers.1 A similar pattern marked much of the 

American settlement of California.2 Over the years the Legislature created numerous 

 

1

 According to a 1987 report submitted below by the District, “[g]roundwater 

pumpage increased from 40,000 acre-feet per year in 1915 to 180,000 acre-feet per year 

in 1960’s,” resulting in a lowering of the “artesian head” from “near ground surface” to 

some 150-200 feet in depth. “This drawdown caused a maximum of almost 13 feet of 

irreversible land subsidence in San Jose by 1969.” Saline groundwater, reflecting 

seawater intrusion, was detected near Palo Alto in 1910, and by 1987 extended east to 

Milpitas and “south along the Guadalupe River to the San Jose Municipal Airport.” 

2

 The casebooks, new and old, are full of dramatic examples of groundwater 

depletion. (See Pajaro Valley Water Mgmt. Agency v. Amrhein (2007) 150 Cal.App.4th 

1364, 1370 (Amrhein); City of Pasadena v. City of Alhambra (1949) 33 Cal.2d 908, 930; 

Burr v. Maclay Rancho Water Co. (1908) 154 Cal. 428, 437-438.) A striking example is 

City of San Bernardino v. City of Riverside (1921) 186 Cal. 7, 11-13, which describes a 

time when the mere drilling of a well would bring water to the surface over the San 

Bernadino groundwater basin. By the time that decision was rendered, several thousand 

such wells had been drilled and the pressure had dropped so that many were no longer 

capable of producing water without artificial pumping. (Id. at p. 13.) This marked the 

close of an era which was described nearer its beginning—and nearer to home for 

purposes of this case—in an 1871 newspaper report that there were then some 400 

artesian wells in the Santa Clara Valley, “which owes a considerable part of its wealth to 
3

local districts and agencies to address this and other water management issues. As 

pertinent here, the Legislature created the District in 1951 by adopting the District Act.

3

 

(Stats.1951, ch. 1405, pp. 3336 et seq.) The District’s territory is coextensive with the 

County of Santa Clara. (District Act, § 2.) The Act recites the intention that the District 

will, among other things, “(3) Provide for the conservation and management of . . . 

water . . . for beneficial and useful purposes, including spreading, storing, retaining, and 

causing the waters to percolate into the soil within the district. [¶] (4) Protect, save, 

store, recycle, distribute, transfer, exchange, manage, and conserve in any manner any of 

the waters. [¶] (5) Increase and prevent the waste or diminution of the water supply in 

the district. [¶] (6) Obtain, retain, protect, and recycle drainage, stormwater, floodwater, 

or treated wastewater, or other water from any sources, within or outside the watershed in 

which the district is located for any beneficial uses within the district.” (District Act, 

§ 4.) 

The Act empowers the District to establish zones of benefit within its boundaries 

and to “institute zone projects for the specific benefit of such zones.” (District Act, § 3.) 

It empowers the District to levy property taxes and assessments to pay its general 

operating costs and activities “of common benefit to the district.” (Id., § 13, subd. (1).) 

It also grants the District the power “to levy and collect a ground water charge for the 

 

them.” (CDNC, Daily Alta California (Feb. 14 , 1871) vol. 23, no. 7633, p. 2 

<http://cdnc.ucr.edu/cgi-bin/cdnc?a=d&d=DAC18710214.2.24#> (as of Mar. 11, 2015.) 

Thirteen years before that, a report in a scientific journal described several wells in Santa 

Clara county that were observed to “throw up jets some five feet in h[e]ight.” (Scientific 

American, Artesian Wells in California (Feb 27, 1858), vol. 13, iss. 25 

<http://www.scientificamerican.com/article/artesian-wells-in-california-1858-02-27/> (as 

of Mar. 11, 2015.)

3

 The Act was originally entitled “Santa Clara County Flood Control and Water 

District Act,” with the District named accordingly. (Stats.1951, ch. 1405.) Both were 

later renamed to omit the reference to flood control. (Stats. 1963, ch. 1941, §§ 1, 2,

pp. 3993-3994; Stats 1973, ch. 56, pp. 92-93, §§ 1, 2.)
4

production of water from the ground water supplies within a zone or zones of the district 

which will benefit from the recharge of underground water supplies or the distribution of 

imported water in such zone or zones.” (Id., § 26.) The Act declares such charges to be 

“in furtherance of district activities in the protection and augmentation of the water 

supplies for users within a zone or zones of the district which are necessary for the public 

health, welfare and safety of the people of this State,” and authorizes their imposition 

“upon the production of ground water from all water-producing facilities, whether public 

or private, within said zone or zones of the district for the benefit of all who rely directly 

or indirectly upon the ground water supplies of such zone or zones and water imported 

into such zone or zones.” (Id., § 26.3 (§ 26.3).) The proceeds of such charges are to be 

used “exclusively” for four enumerated purposes, discussed in greater detail below. 

(Ibid.; see fn. 23, post.)

The Act requires the District to issue an annual report containing “a 

recommendation as to whether or not a groundwater charge should be levied in any zone 

or zones of the district during the ensuing water year and, if any groundwater charge is 

recommended, a proposal of a rate or rates per acre-foot for agricultural water and a rate 

or rates per acre-foot for all water other than agricultural water for the zone or zones.”4 

(District Act, § 26.5, subd. (a).) The District is required to publish the report by the first 

Tuesday of April, and to hold a hearing on it on the fourth Tuesday of April, following 

notice to the public with “an invitation to all operators of water-producing facilities . . . 

and to any person interested in the district’s activities . . . to call at the offices of the 

district to examine the report.” (Id., § 26.6.) At the hearing, any operator of a waterproducing facility, or other interested person, may “appear and submit evidence 

 

4

 The Act also provides for mid-year adjustments to the charge, following similar 

procedures, “whenever the board determines that the imposition or adjustment of the 

charge is necessary.” (District Act, § 26.7, subd. (b)(1).)
5

concerning the subject of the written report.” (Id., § 26.6.) Before the end of a “[w]ater 

year,” defined as July 1 through June 30 (id., § 26.1), the board is to “determine whether 

or not a groundwater charge should be levied in any zone or zones” (id., § 26.7, 

subd. (a)(1)), and if so, “shall levy, assess, and affix the charge or charges against all 

persons operating groundwater-producing facilities within the zone or zones during the 

ensuing water year” (id., § 26.7, subd. (a)(2)). The rate within a given zone is to be 

uniform, except that the rate for agricultural extractions “shall not exceed one-fourth of 

the rate” for non-agricultural extractions. (Id., § 26.7, subd. (a)(3)(D).)

The Act declares that monetary claims against the District “are governed by Part 3 

(commencing with Section 900) and Part 4 (commencing with Section 940) of Division 

3.6 of Title 1 of the Government Code, except as provided therein. Claims not governed 

thereby or by other statutes or by ordinances or regulations . . . shall be prepared and 

presented to the governing body, and all claims shall be audited and paid, in the same 

manner and with the same effect as are similar claims against the county.” (District Act,

§ 30.)

B. District’s Zones

Although we are directed to no competent evidence on this point, Great Oaks 

asserted in its trial brief—and the District has never denied—that the District has only 

two permanent zones, designated W-2 and W-5. Great Oaks described Zone W-2 as 

comprising approximately 240 square miles in the northern part of the county, while W-5 

consists of about 14 square miles in the southern part. They are sometimes referred to as 

the North County zone and the South County zone, respectively. 

At the time of trial, Great Oaks operated 19 wells of which 16 were located in 

Zone W-2, and three in Zone W-5. 
6

C. Notice and Hearings on 2005-2006 Charge

On or about March 1, 2005, the District mailed a “notice of hearings on 

groundwater charges for 2005-2006” to about 4,500 well owners in the county. (See 

pt. I(F)(1), post.) According to later recitals by the board, the accuracy of which is not 

contested, the written report required by section 26.5 of the Act was duly prepared, and 

was delivered to the clerk of the board on March 22, 2005. The board thereafter held 

hearings on the proposed rates on April 5, April 11, and April 19. On April 19, 2005, the 

board adopted Resolution 05-28 setting groundwater charges for 2005-2006. For 

extractions in Zone W-2, the per-acre-foot charge was $420 for non-agricultural use and 

$42 for agricultural use. In Zone W-5 the respective charges were $215 and $21.50. 

D. Pre-Suit Claim

On May 20, 2005, Great Oaks submitted a claim to the District under Government 

Code sections 900 et sequitur. The sole stated ground for recovery was that District was 

“illegally using pump tax revenues for purposes outside the four (4) statutorily specified 

uses, and that to cover those unauthorized expenditures the amount of the pump tax is 

excessive.” It was further asserted that the District had “damaged Great Oaks by 

requiring it to pay more than necessary for the pump tax,” such that the District was 

“indebted to Great Oaks for the amount it charged over and above what was necessary to 

fulfill the statutorily listed uses for pump tax revenues.” The claim concluded with the 

statement, “Great Oaks hereby makes a claim for the refund of the amount which it was 

overcharged for the pump tax and requests that the [District] lower the pump tax and 

modify its uses of pump tax revenues to come into conformity with the Act.” The 

District took no action on the claim, causing its rejection by operation of law on July 5, 

2005. (See Gov. Code, § 912.4, subds. (a), (c).)
7

E. Proceedings Below

Great Oaks filed this action on November 22, 2005. The matter was tried on an 

amended complaint, filed January 26, 2006, asserting eight causes of action: 

(1) “Demand for Refund,” in that the District was (a) using charges for purposes not 

authorized by § 26.3, including flood control and revenue pooling; (b) including costs of 

treated water in the groundwater charge; and (c) imposing an improper tax “in violation 

of California Constitution Article XIII [sic]”; (2) “Improper Pooling of Groundwater 

Charges” in a common fund with other revenues, in alleged violation of section 26 of the 

District Act; (3) “Failure to Assess and Collect Groundwater Charge Revenue” from 

dewatering facilities, in alleged violation of section 26.1 of the Act; (4) “Unfair 

Competition,” in that the District was “setting and collecting groundwater charges to 

encourage the purchase of its treated surface water”; (5) “Injunction” prohibiting the 

District from (a) spending groundwater proceeds for uses not authorized by the Act; 

(b) failing to prohibit the waste of water; (c) using groundwater proceeds to subsidize 

production of treated water; and (d) failing to obtain voter approval for increases “as 

required by Article XIII [sic5] of the California Constitution”; (6) “Declaratory Relief” 

regarding “the appropriate components of the groundwater charge and the requirements 

for an affirmative public vote on groundwater charge or tax assessments proposed by the 

District in excess of [District Act] Section 26 limits”; (7) “Petition for Writ of Mandate” 

in that the District had abused its discretion “(a) in collecting groundwater charges in 

excess of the benefits provided to Great Oaks; (b) in creating groundwater charge zones 

 

5

 As most clearly illustrated by this reference, Great Oaks repeatedly referred to 

“Article 13” of the California Constitution—which governs the power to tax generally—

when it might more cogently have referred to other provisions of the constitution 

specifically restricting taxation—in particular article 13D, which the trial court ultimately 

found the District had violated. The joint case management statement, in which the 

parties purported to limit the “threshold issues” to be considered, made no mention of any 

claim under article 13D. 
8

without consideration of whether Great Oaks uses treated surface water; (c) in not 

collecting groundwater charges as described above; (d) [in] failing to regularly obtain a 

favorable vote of zone residents before increasing groundwater charges, and (e) in 

spending the monies collected by the groundwater charge for purposes not authorized by 

§26.3 of the [District] Act, including but not limited to flood control and revenue 

pooling”; and (8) “Request for Attorneys Fees . . .” in that Great Oaks was prosecuting 

the action on behalf of ratepayers, and was thus entitled to fees under Code of Civil 

Procedure section 1021.5. 

A demurrer by the District was sustained without leave to amend as to the unfair 

competition cause of action, and was otherwise overruled. The District answered the 

remaining causes of action, generally denying them and asserting 46 affirmative 

defenses, including failure to give timely and proper notice of all claims under 

Government Code sections 905 et sequitur. 

On June 12, 2008, the parties filed a joint case management statement requesting 

trial in two phases, the first addressing specified “threshold issues” and the second 

concerning “appropriate remedies, and any remaining non-substantive issues.” The 

issues to be addressed in “Phase I” were: “(a) Whether the District has violated the 

District Act, including whether the District abused its discretion, or the Act, in the 

manner in which it accounts for the collection, use and allocation of groundwater 

charges; [¶] (b) Whether the District has violated Article XIII of the California 

Constitution [sic; see fn. 5, ante]; [¶] (c) Whether the District is required under the 

District Act to prevent the waste of water under the Water Code and collect groundwater 

charges for dewatering wells in Santa Clara County.” The statement set forth a briefing 

schedule for these issues, and recited the parties’ agreement that “with respect to the 

issues above, to the extent that Great Oaks does not address in its opening brief a specific 

expenditure or allocation, or other specific budget item, it will be barred from challenging 
9

that item in this case; and to the extent that the District does not raise a defense in its 

opposition brief, it will be barred from asserting that defense as to the issues tried in 

Phase 1.”

Great Oaks filed a trial brief arguing that the groundwater charge was unlawful in 

several respects. The first five specifications posited that the charge was imposed on an 

incident of property ownership and was thus subject to the requirements imposed on such 

charges by Article 13D. Great Oaks contended that the District had violated that 

provision by failing to secure voter approval for the charge and failing to give notice and 

hearing conforming to the article’s requirements. It also contended that the charge 

violated the substantive constraints of Article 13D in that it exceeded the proportionate 

cost attributable to Great Oaks, included charges for services not used by or immediately 

available to Great Oaks, and exceeded the sum required to provide the property-related 

service on which it was assessed. (See Article 13D, § 6, subd. (b)(1).) Great Oaks 

further contended that the charge violated the District Act in numerous respects, 

including the District’s alleged failure to define zones according to benefits received, as 

contemplated by the District Act; failure to tie the groundwater charge to benefits 

actually conferred on groundwater supplies; inclusion in the groundwater charge of costs 

for treating surface water, although Great Oaks received no benefit from such treatment; 

use of groundwater charges for purposes other than those authorized by the District Act, 

including “water utility enterprise functions” and watershed projects; use of Water Utility 

Enterprise funds, including groundwater charge proceeds, to cover a loss of revenues 

occasioned by the state’s interception of $51 million in property taxes; use Water Utility 

Enterprise funds, including groundwater charge proceeds, to pay about one-sixth of 

“general fund overhead,” which in turn was applied to such projects as a child care 

center, solar energy project, residential property, and marketing; reliance on a “pooling 

policy,” in violation of the District Act’s restrictions on the use of groundwater charge 
10

revenues and in excess of the District’s powers under the Act; and failure to assess the 

groundwater charge on extractions for dewatering purposes, in violation of section 26.1 

of the District Act, which requires that the charge be levied on all water producing 

facilities. 

By stipulation, the parties submitted thousands of pages of documentary evidence 

including declarations and deposition excerpts, as well as live testimony, in support of 

their respective positions. (See pt. II(B)(3), post.) On June 9, 2009, the court issued an 

amended statement of decision on Phase 1. The court concluded that the groundwater 

charge was subject to Article 13D because it was “remarkably similar” to the one that this 

court held subject to that article in Amrhein, supra, 150 Cal.App.4th 1364. The court 

rejected the District’s contention that the charge was one for water services and thus 

exempt from Article 13D’s voter approval requirement. It also rejected the contention 

that the charge fell outside Article 13D insofar as Great Oaks incurred it due to a business 

activity. It found that the charge did not serve “a significant regulatory purpose.” 

Therefore, the court concluded, the District had violated Article 13D by failing to give 

the notice prescribed in that provision and by failing to secure the prescribed approval by 

voters or affected owners.

The court rejected many of Great Oaks’s claims concerning violations of the 

District Act. However it found persuasive Great Oaks’s contentions that the District 

abused its discretion and violated the District Act when it based the groundwater charge 

not upon a cost-of-service analysis but on suppositions, which the court considered 

inflated, about the benefits conferred. The court noted that the District had failed to 

change its ratesetting methodology despite an independent audit in 2000 which concluded 

that the revenue recovered from some classes of customers might be subsidizing others, 

and which recommended that the District “review its agricultural water pricing practice 

for adequacy and fairness.” The court also concluded that the District “improperly used 
11

groundwater revenue for activities not within the scope of Section 26.3 of the District 

Act,” “unwisely commingled groundwater revenue with other monies,” and overbudgeted for specific items, then failed to credit the resulting surpluses back to Great 

Oaks.

The court rejected the District’s contention that Great Oaks had failed to exhaust 

its administrative remedies, finding that the pre-suit claim submitted by Great Oaks 

“complied with both the Government Code and Section 30 of the District Act.” 

For reasons that will appear, it is unnecessary to recapitulate the proceedings in 

Phase II. Trial proceedings concluded on February 2, 2010, with issuance of a judgment 

awarding Great Oaks “a refund of groundwater charges in the amount of $4,623,095.52 

plus interest.” The judgment also awarded $1,306,830 “under the District Act,” but 

recited that the two awards were made “in the alternative,” such that Great Oaks could 

recover one or the other, “but not both.” The judgment included a declaration that 

“(1) The District was required to comply with Article XIII D before imposing the 

groundwater charge. The District imposed the groundwater charge without complying 

with Art XIII D, Section 6, including the failure to secure proper voter approval both by 

failing to comply with proper notice requirements and failing to obtain ballot affirmation; 

(2) The Defendant violated the District Act by not basing the groundwater charge on the 

costs of service in accordance with §26.3. As a result, the Plaintiff was overcharged 

because of, inter alia, subsidies made for treated water, over-budgeting for employees, 

cost of equipment and water contract purchases; and, (3) the Defendant abused its 

discretion under the District Act when it improperly used groundwater revenue for 

activities not within the scope of Section 26.3 of the District Act and when it commingled 

groundwater revenues with other monies.” The court declined to issue an injunction or 

writ of mandate (see pt. II(B)(2), post). It reserved the issues of costs and attorney fees. 

District filed a timely notice of appeal. 
12

F. Attorney Fees

On or about April 5, 2010, Great Oaks filed a motion for reasonable attorney fees 

under Code of Civil Procedure section 1021.5. The motion asserted that Great Oaks had 

incurred fees of some $1.45 million, which should be multiplied by a lodestar of two to 

yield an award of about $2.9 million. By order made and entered on July 19, 2010, the 

court denied the motion, finding that Great Oaks had “failed to demonstrate that the 

financial burden of private enforcement was such as to make the award appropriate.” 

Great Oaks filed a timely notice of appeal. We will dispose of that appeal by separate 

opinion. (See Great Oaks Water Co. v. Santa Clara Valley Water District, No. H035885.)

DISCUSSION

I. Article 13D

A. Introduction

Article 13D was adopted in 1996 as part of Proposition 218. It limits the power of 

local public entities to impose “assessments, fees, and charges.” (Article 13D, § 1.) It is 

not suggested here that the groundwater charge constitutes an assessment, so the question 

is whether it constitutes a “ ‘[f]ee’ or ‘charge.’ ” The two terms are interchangeable for 

purposes of Article 13D, which defines them to mean “any levy other than an ad valorem 

tax, a special tax, or an assessment, imposed by an agency upon a parcel or upon a person 

as an incident of property ownership, including a user fee or charge for a property related 

service.”6 (Article 13D, § 2, subd. (e), italics added.) The applicability of the article thus 

 

6

 It has not been suggested that the groundwater extraction charge is imposed 

“upon a parcel.” By the terms of the District Act, the charge is imposed “against . . . 

persons operating groundwater-producing facilities.” (District Act, § 26.7, subd. (a)(2).) 

Great Oaks suggested below that the District relied on parcel maps in imposing the 

charge and that this favored a finding that the charge fell within Article 13D. (See 

Article 13D, § 6, subd. (b)(5).) However the trial court found no “particular relevance” 

in the District’s occasional use of parcel maps to help identify pumpers, because the 

District offered testimony “that it relies primarily on the well records” for that purpose. 

The court noted our observation in Amrhein, supra, 150 Cal.App.4th at pp. 1382-1383, 
13

turns on whether the groundwater extraction charge is imposed on Great Oaks “as an 

incident of property ownership.”

If Article 13D applied, it subjects the charge to three requirements. First, it 

required the District to give advance notice of the proposed charge to affected owners and 

to conduct a hearing at which owners could submit protests; if a majority of owners 

lodged such protests, the charge could not go into effect. (Article 13D, § 6, subd. (a).) 

Second, unless the charge was for “sewer, water, [or] refuse collection services,” it could 

not take effect unless it was ratified by a majority of voters or, at District’s option, by 

two-thirds of affected owners. (Id., § 6, subd. (c).) Finally, the charge had to satisfy a 

number of substantive constraints, essentially to the effect that it be tailored to the benefit 

conferred on each affected parcel or owner. (Id., § 6, subd. (b).)

The trial court found that the extraction charge was a property-related charge and 

that the District failed to comply with the notice-and-hearing requirement or the voterratification requirement.7

 We have concluded that (1) the charge was indeed propertyrelated for purposes of Article 13D; (2) the charge was one for water service and thus 

exempt from the voter ratification requirement; and (3) while the charge was subject to 

the notice-and-hearing requirement, the procedures followed by the District satisfied that 

requirement. Accordingly, the trial court’s conclusion that the charge violates Article 

13D cannot be sustained. 

 

that an agency’s consultation of parcel maps “to determine who owned the land on which 

wells were situated” did not establish that the charge was assessed on real property.

7

 Because the trial court granted declaratory relief on this point, we must address 

it even though, as we conclude below, Great Oaks failed to preserve a claim to monetary 

relief on these grounds. (See pt. I(H), post.)
14

B. Standard of Review

The characterization of a fee or charge for purposes of Article 13D presents “ ‘a 

question of law for the appellate courts to decide on independent review of the facts.’ ” 

(Apartment Ass’n of Los Angeles County, Inc. v. City of Los Angeles (2001) 24 Cal.4th 

830, 836 (Apartment Ass’n), quoting Sinclair Paint Co. v. State Bd. of Equalization

(1997) 15 Cal.4th 866, 874; see California Farm Bureau Federation v. State Water 

Resources Control Board (2011) 51 Cal.4th 421, 436 (Farm Bureau); cf. Greene v. 

Marin County Flood Control and Water Conservation Dist. (2010) 49 Cal.4th 277, 287, 

citing Apartment Ass’n, supra, at p. 836 [“We review questions of law about the meaning 

of Proposition 218, as other questions of law, de novo.”]; see Griffith v. Pajaro Valley 

Water Management Agency (2013) 220 Cal.App.4th 586, 590 (Griffith); Howard Jarvis

Taxpayers Assn. v. City of Salinas (2002) 98 Cal.App.4th 1351, 1354-1359; Silicon 

Valley Taxpayers Assn, Inc. v. Santa Clara County Open Space Authority (2008) 44 

Cal.4th 431, 449-450 (Silicon Valley).)

Great Oaks agrees that we should “employ a de novo standard of review when 

examining the District’s assertions of error under Article XIIID, exercising [our] 

independent judgment in reviewing the District’s levy and collection of groundwater 

charges.” However, Great Oaks emphasizes that Article 13D “shift[s] the burden of 

proof of procedural and substantive compliance with Article XIIID to the local agency.” 

(Emphasis omitted.) It thus alludes to, but does not cite, Article 13D, section 6, 

subdivision (b)(5), which states, “In any legal action contesting the validity of a fee or 

charge, the burden shall be on the agency, to demonstrate compliance with this article.” 

(Superfluous comma in original.) The plain meaning of this language is that once a 

charge is found to be subject to Article 13D’s constraints, the agency has the burden of 

demonstrating that it in fact conforms to those constraints. (See Farm Bureau, supra, 51 

Cal.4th at p. 436 [challenger has burden of proof “to establish a prima facie case showing 
15

that the fee is invalid”].) Here we are addressing the threshold question whether the trial 

court properly found the charge subject to Article 13D’s constraints. Article 13D does 

not purport, by its terms, to dictate a burden of proof, let alone a standard of review, on 

that question. However, as the authorities cited in the previous paragraph establish, the 

distinction seems to be without practical significance, because a de novo standard of 

review applies in either case. (See Silicon Valley, supra, 44 Cal.4th at p. 450, fn. omitted 

[parallel provision concerning assessments was intended to eliminate judicial deference 

to agency action; “courts should exercise their independent judgment in reviewing 

whether assessments that local agencies impose violate article XIIID”].)

Of course, application of an independent standard of review does not require or 

permit us to substitute our judgment for that of the trial court on purely factual questions 

as to which the trial court’s finding is supported by substantial evidence. (See Morgan v. 

Imperial Irrigation Dist. (2014) 223 Cal.App.4th 892, 917, review denied May 14, 2014

[“Silicon Valley . . . does not change the substantial evidence standard of review and does 

not allow us to independently resolve issues of disputed fact already decided by the trial 

court.”].) It does not appear, however, that the trial court’s imposition of liability under 

Article 13D depends on any such factual issues.

C. Property-Related Charge

In two previous opinions we have contended with the issue of Article 13D’s 

applicability to groundwater extraction charges resembling the one at issue here. (See 

Amrhein, supra, 150 Cal.App.4th 1364; Griffith, supra, 220 Cal.App.4th 586.) Our 

further study of the matter has led us to conclude that any charge on the extraction of 

groundwater will typically place a direct burden on an interest in real property and is thus 

incidental to property ownership. This is because any extraction of groundwater by a 

longtime extractor like Great Oaks is almost certain to involve the exercise of a right in 
16

real property. Since a charge on that activity directly burdens the exercise of that right, it 

must be deemed incidental to it, and thus to ownership of real property.

Under California law, a right to extract groundwater typically falls into one of 

three categories: overlying, appropriative, or prescriptive.8 (City of Barstow v. Mojave 

Water Agency (2000) 23 Cal.4th 1224, 1240 (Barstow).) Prescriptive rights need not 

concern us here, but it is clear that overlying and appropriative rights are rights in real 

property. 

An overlying right is the right of the owner of land to extract as much of the water 

lying under it as can be beneficially used on it. (Barstow, supra, 23 Cal.4th at p. 1240.) 

Such a right is incidental to property ownership in two senses: First, “ ‘it is based on the 

ownership of the land and is appurtenant thereto’ ” (Ibid, quoting California Water 

Service Co. v. Edward Sidebotham & Son (1964) 224 Cal.App.2d 715, 725 (California 

Water Service)); second, its exercise directly benefits—indeed it can only be exercised to 

benefit—the overlying land (see Barstow, supra, at p. 1240 [right is “ ‘to take water from 

the ground underneath for use on [owner’s] land within the basin or watershed’ ” and is 

“restricted to a reasonable beneficial use”]). As an appurtenance to land such a right is 

itself a form of real property. (See Civ. Code, § 658.) That it is incidental to ownership 

of the property also follows from the statutory definition of “appurtenant” as a synonym 

of “incidental.” (Civ. Code, § 662 [“A thing is deemed to be incidental or appurtenant to 

land when it is by right used with the land for its benefit, as in the case of a way, or 

watercourse, or of a passage for light, air, or heat from or across the land of another.”].) 

 

8

 For the most part, rights to groundwater resemble those to surface water in this 

regard, and the same terminology is employed, with the exception that the right to take 

surface water for use on adjacent land is labeled “riparian,” while the comparable right to 

groundwater is labeled “overlying.” 
17

It follows that any charge imposed upon the exercise of an overlying right directly 

burdens, and must be considered incidental to, the ownership of property. 

An appropriative right differs from an overlying right in that it does not depend on 

ownership of overlying land.9 It consists of a right to extract water for beneficial use on 

any land to which the appropriator may choose to conduct it. “Any water not needed for 

the reasonable beneficial use of those having prior rights is excess or surplus water and 

may rightly be appropriated on privately owned land for non-overlying use, such as 

devotion to public use or exportation beyond the basin or watershed [citation].’ ” 

(Barstow, supra, 23 Cal.4th at p. 1241, quoting California Water Service Co. v. Edward 

Sidebotham & Son, supra, 224 Cal.App.2d at p. 725; see People v. Shirokow (1980) 26 

Cal.3d 301, 307 [“The appropriation doctrine contemplates the diversion of water and 

applies to ‘any taking of water for other than riparian or overlying uses.’ ”]; United States 

v. State Water Resources Control Bd. (1986) 182 Cal.App.3d 82, 101 [“The appropriation 

doctrine confers upon one who actually diverts and uses water the right to do so provided 

that the water is used for reasonable and beneficial uses and is surplus to that used by 

riparians or earlier appropriators.”].) 

This of course describes nearly all of the extractions at issue here. In a 

supplemental letter brief, Great Oaks asserted somewhat vaguely that some of the water it 

extracts is reserved for its own use. No thanks to it, we have found some comparably 

vague evidence to similar effect in the record. It is undisputed, however, that the vast 

majority of water extracted by Great Oaks is not put to beneficial use upon its own land, 

but is sold to others for their (presumably beneficial) use. The right thus exercised—and 

burdened by the extraction charge—is that of an appropriator, not an overlying owner.

 

9

 As a practical matter, of course, one cannot extract groundwater without 

occupying enough surface land to operate a well. But this might be accomplished by 

lease or license, without any ownership interest in the surface land.
18

We have nonetheless found authority to the effect that when a landowner operates 

a waterworks for commercial distribution of water to persons beyond his or her property, 

both the works and any distribution system connected to it are appurtenances to the 

owner’s property. (Trask v. Moore (1944) 24 Cal.2d 365, 370; see Garden Water Corp. 

v. Fambrough (1966) 245 Cal.App.2d 324, 327 [trial court properly found water system 

for distribution to subdivision homes was real property] ; Harper v. Buckles (1937) 19 

Cal.App.2d 481, 484-485 [cited and followed in Trask, supra, 24 Cal.2d 365].) To the 

extent these suggestions are correct, it would seem to follow that the appropriative water 

right being exercised by such an owner, if not severed by some intervening act, is also 

appurtenant to the land where the works are situated. To the extent appropriative rights 

are appurtenant to specific parcels of land, any charge directly burdening their exercise 

must be considered incidental to property ownership for the same reasons we have cited 

with respect to extraction for overlying use.10

 

10

 Some cases contain language that might be understood to mean that all

appropriative rights are necessarily appurtenant to land. (See, e.g., Nicoll v. Rudnick

(2008) 160 Cal.App.4th 550, 558, quoting Fullerton v. State Water Resources Control 

Bd. (1979) 90 Cal.App.3d 590, 598 [“ ‘The concept of an appropriative water right is a 

real property interest incidental and appurtenant to land.’ ”]; Senior v. Anderson (1903) 

138 Cal. 716, 723.) Such a proposition is difficult to harmonize with general principles 

of property law. It is of course often the case that an appropriative right has been 

exclusively devoted to the benefit of particular land, and has thereby become appurtenant 

to that land. (See, e.g., cf. Wright v. Best (1942) 19 Cal.2d 368, 377 [appropriative right, 

“by successive conveyances” had “become appurtenant” to specified ranch]; Nicoll v. 

Rudnick, supra, 160 Cal.App.4th 550, 554 [earlier judgment “indicated that the individual 

water rights adjudicated therein were appurtenant to each party’s real estate on which the 

appropriated water was used for beneficial purposes”]; Senior v. Anderson, supra, 138 

Cal. At p. 723 [where water was “originally appropriated” by homesteader “for use on his 

land,” right “thus became appurtenant thereto”]; Stanislaus Water Co. v. Bachman (1908) 

152 Cal. 716, 724 [“when acquired,” contractual right to delivery of water to irrigate 

specific land “became an easement appurtenant to the land” which passed with land on 

foreclosure of mortgage]; Farmer v. Ukiah Water Co. (1880) 56 Cal. 11, 15 [water right 

granted to landowner and used on specific parcel was conveyed with transfer of parcel 

despite absence of specification to that effect in deed]; Hudson v. Ukiah Water & Imp. 
19

More basically, however, it appears that an appropriative right, in and of itself, is a

kind of real property for at least some purposes, whether or not it is appurtenant to a 

particular dominant estate. (See Wright v. Best, supra, 19 Cal.2d at p. 380 [“a water right 

by appropriation is independent of ownership and possession of land and subject to sale 

 

Co. (1918) 177 Cal. 498, 502 [later case involving same property: “It is because the 

water was used with the land for its benefit that it was held to be appurtenant to the land 

in question.”]; Graham v. Pasadena Land & Water Co. (1908) 152 Cal. 596, 597 [where 

bylaws of grantee growers’ association provided that water rights conveyed to plaintiff 

should be used on his land, right was “clearly appurtenant” to land].)

But appurtenance to specific land is neither intrinsic nor necessary to the existence 

of an appropriative right. (See Nicoll v. Rudnick, supra, 160 Cal.App.4th at p. 560, 

quoting Davis v. Gale (1867) 32 Cal. 26, 34, italics removed [upon acquiring 

appropriative right, owner “ ‘becomes entitled to the use of the quantity which he has 

appropriated at any place where he may choose to convey it, and for any useful and 

beneficial purpose to which he may choose to apply it’ ”]; City of San Bernardino v. City 

of Riverside, supra, 186 Cal. 7, 28-29 [appropriator may “change the place of use thereof, 

or the character of the use, without affecting his right to take it” and “may change the 

place from whence the water is taken out of the source, provided others are not injured by 

such change]; id. at p. 29 [“neither the particular place of use, the character of the use, 

nor the place of taking is a necessary factor” in acquiring right]; Barstow, supra, 23 

Cal.4th at p. 1244 [“In California surplus water may rightfully be appropriated on 

privately owned land for nonoverlying uses, such as devotion to a public use or 

exportation beyond the basin or watershed”]; Orange County Water Dist. v. City of 

Riverside (1959) 173 Cal.App.2d 137, 194-195 [appropriator “ ‘may at his discretion 

alienate his right as such’ ”]; Alpaugh Irr. Dist. v. Kern County (1952) 113 Cal.App.2d 

286, 294 [property tax assessment properly included value both of irrigation district’s 

land and of appropriative rights it exercised by extracting groundwater for export to 

district; water rights were separately assessable interest because they “did not arise from 

mere ownership of the lands and were not a part and parcel of it”]; see id. at p. 295 [water 

rights, “[b]eing the product of appropriation and prescription as against the rights of 

surrounding landowners whose interests they affected . . . [were] not appurtenant to nor a 

part or parcel of appellant’s lands and consequently could not be classified as 

improvements thereto.”]; Wright v. Best, supra, 19 Cal.2d 368, 380 [noting, as premise of 

argument by party, that “a water right by appropriation is independent of ownership and 

possession of land and subject to sale separately from it”]; id. at p. 381 [“Kennedy was 

the owner of an appropriative right, severable and alienable from the land to which it is 

appurtenant”].)
20

separately from it”]; id. at p. 381 [party’s predecessor “was the owner of an appropriative 

right, severable and alienable from the land to which it is appurtenant”]; id. at p. 382 

[“An appropriative right constitutes an interest in realty . . . . It can therefore 

appropriately serve as a servient estate to which an easement may be annexed.”].)

The applicability of this principle to the question before us presents a question that 

is far from simple. In City and County of San Francisco v. Alameda County (1936) 5 

Cal.2d 243 (CCSF), the question was whether a county could continue to collect property 

taxes on water rights a city in another county had purchased from a water company, 

which had itself acquired them by purchase or condemnation from riparian owners in the 

taxing county. The city asserted that the rights were governed by the general rule 

exempting public property from taxation. (Former Cal. Const., art. XIII, § 1, repealed 

Nov. 5, 1974; see now Cal. Const., art. XIII, § 3.) The county argued that they fell under 

a 1914 constitutional amendment permitting the taxation of “lands and . . . 

improvements” owned by a local public entity outside the taxing county’s borders, 

provided the rights were subject to taxation when the entity acquired them. (Former Cal. 

Const., art. XIII, § 1, repealed Nov. 5, 1974; see now Cal. Const., art. XIII, § 11.) The 

dispositive question, wrote the court, was “whether the water rights acquired by [the city] 

by purchase from the . . . [w]ater [c]ompany were included within the term ‘land’ as used 

in the constitutional amendment, and, as such, therefore separately assessable in Alameda 

county.” (CCSF, supra, at p. 246.) Relying heavily on the purpose of the amendment 

(discussed below), the court answered this question in the affirmative.

A similar question was presented in Waterford Irr. Dist. v. Stanislaus County

(1951) 102 Cal.App.2d 839 (Waterford), where a county sought to tax an irrigation 

district’s right to divert water from a river. As a municipal corporation, the district was 

protected by the exemption noted above except insofar as the right fell within the 

exception for lands and improvements outside its borders. The district contended that 
21

“the water right, being an appropriative right and not riparian to nor appurtenant to any 

land, does not constitute land nor improvement on land within the meaning of those terms 

as used in the constitutional provisions.” (Id., at p. 842.) The court agreed that the origin 

of the rights at issue distinguished CCSF, the holding in which “was primarily based 

upon the stipulated fact that the water rights there taxed were riparian in origin; and the 

holding that they were embraced within the meaning of the word ‘land’ as used in the 

Constitution was arrived at by considering the original nature of those rights as having 

been part and parcel of the riparian lands.” (Id. at p. 843-844.) It concluded, however, 

that despite this distinction, the rights before it also remained taxable. It quoted at length 

from a treatise declaring that appropriative water rights are themselves a species of real 

property: “ ‘A water-right of appropriation is real estate, independent of the ditch for 

carrying the water, and independent of ownership or possession of any land and 

independent of place of use or mode of enjoyment, whereby the appropriator is granted 

by the government the exclusive use of the water anywhere so long as he applies it to any 

beneficial purpose . . . .’ ” (Id., at p. 844, quoting 1 Wiel, Water Rights in the Western 

States (3d ed. 1911), § 288, p. 304.) The same author cited authorities holding that 

“ ‘The right to the flow and use of water, being a right in a natural resource, is real estate. 

[Citation.] . . . The statute of frauds, concerning conveyances of real estate, applies to it, 

and transfers must be by deed. [Citations.] The statute of limitations concerning land 

applies to it. [Citation.] So do the recording statutes, as between successive 

conveyances. [Citations.] The right to have water flow from a river into a ditch is real 

property. [Citation.] . . . The right to take water from a river and conduct it to a tract of 

land is realty. [Citation.] The right to have water flow through a pipe from a reservoir to 

and upon a tract of land is an appurtenance to the land. [Citation.] An undivided interest 

in a ditch and in the right to water flowing therein is real property. [Citation.] And 

where one person has a right to the flow of water and another has the right to have a part 
22

of such water flow to his land for its irrigation, the right of the latter is real property. 

[Citations.] Ditches and water-rights may be sold on execution as real property. 

[Citation.] . . . And an action to settle rights is one to quiet title to realty. [Citation.] . . . . 

[¶] That the usufructuary right to the flow and use of a natural stream by appropriation is 

real property is fully recognized . . . . ’ ” (Waterford, supra, at pp. 844-845, quoting 1 

Wiel, supra, § 283, pp. 298-300.) The author had further declared that “ ‘[a] water-right 

by appropriation is not only real estate, but has all the dignity of and is an estate of fee 

simple, or a freehold.’ ” (Waterford, supra, at p. 845, quoting 1 Wiel, supra, § 285, 

p. 301.) The court explained that these passages were presented not as dispositive in 

themselves, but as evidence of “the common concept as to the nature of appropriative 

water rights” when the 1914 amendment was adopted. (Waterford, supra, at p. 845.)

These cases suggest that the rights burdened by a groundwater extraction charge 

are themselves a species of real property, whether or not the charge is “incidental” to the 

ownership of any overlying or other property. Because the parties had not addressed the 

applicability of these decisions, we asked them to do so. The District pointed out quite 

correctly that neither Waterford nor CCSF rested solely or even primarily on the 

technical niceties of property law; both courts cited the policy objectives that apparently 

led voters to adopt the 1914 constitutional amendment limiting the exemption of public 

property from taxation. In CCSF the court noted that the “undoubted purpose of the 

amendment was primarily to safeguard the tax revenues of smaller counties wherein large 

municipal corporations had purchased, or would acquire, extensive holdings and which 

would, except for the amendment, be exempt from local taxation.” (CCSF, supra, 5 

Cal.2d at pp. 245-246.) Without such a limitation, the exemption of public property from 

taxation could result in “serious financial embarrassment” for the disadvantaged counties. 

(Id. at p. 246.) The argument made to voters when they adopted the amendment had 

forecast “impending disaster” to “smaller counties” from the loss of revenue caused by 
23

larger counties’ acquisition of “lands and water rights” to augment the cities’ municipal 

water supplies.11 (Ibid.) In the situation before it, the water rights at issue had been, 

prior to their acquisition from riparian owners, “part [and parcel] of the land itself” and 

had significantly enhanced its taxable value. (Id. at p. 247.) Once stripped of those 

rights, “the valuation of the land for purposes of taxation was or might be materially 

reduced.” (Ibid.) Therefore, “taking into consideration the objects and purposes of the 

constitutional amendment,” the right must “be deemed to retain those characteristics 

[they possessed] when owned by the plaintiff’s predecessor in interest,” so as to be 

subject to taxation. (Ibid.)

In Waterford, as we have noted, the court acknowledged the historical differences 

between the appropriative rights before it and the rights, originally riparian, at issue in 

CCSF. However, after reviewing the above treatise and other cases discussing the policy 

of the amendment, the court reached the same result as in CCSF: “[B]earing in mind the 

purposes of the amendment and what we believe to be the common concept of the nature 

of appropriative water rights, we conclude that they constitute land, as that term is used in 

the Constitution.” (Waterford, supra, 102 Cal.App.2d at p. 847.)

Here too the technical status of appropriative rights would seem to invite a simple 

answer to the question whether the constitutional provision before us applies: Since an 

appropriative water right is itself real property, the charge in question directly burdens the 

exercise of that right, and the charge must therefore be deemed to be “imposed . . . upon” 

Great Oaks “as an incident of property ownership.” (Art. 13D, § 2, subd. (e).) For the 

same reasons as in Waterford and CCSF, however, the applicability of Article 13D to the 

 

11

 The court acknowledged that the amendment would sometimes operate outside 

this big-vs.-small paradigm, but found that effect to be “but an incident [that] cannot 

disturb the manifest and general operation of the amendment.” (CCSF, supra, 5 

Cal.App.2d at p. 246.)
24

charge before us cannot depend entirely or even primarily on the technical nature of the 

burdened right. The ultimate question is not how legal scholars might view the rights in 

question, but whether the voters intended to extend Article 13D’s reach to such a charge. 

As in the foregoing cases, this question must be answered by consulting other evidence of 

the voters’ intent.

In contrast to the constitutional provision at issue in CCSF and Waterford, 

Article 13D does not appear to address a narrowly conceived problem. Nor can a readily 

cabined intention be drawn from the materials before the voters when they adopted it. 

According to the Legislative Analyst’s “Overview” of the enactment, its chief effects 

would be to “[r]educe the amount of fees, assessments, and taxes that individuals and 

businesses pay,” and “[d]ecrease spending for local public services.” (Ballot Pamp., Gen. 

Elec. (Nov. 5, 1996), analysis of Prop. 218 by Legis. Analyst, p. 73.) Assuming these to 

be the intended purposes of the enactment, they provide far too vague a guide to 

determine what exactions were intended to fall within its restrictions. The Legislative 

Analyst suggested a somewhat more concrete guideline by describing affected “[f]ees” as 

charges assessed by local governments for “services to their residents,” some of which 

are assessed to “pay for service to property, such as garbage collection and sewer 

service.” (Ibid.) The targeted fees were described as “usually” reflected in “monthly 

bills to property owners,” although “some fees are placed on the property tax bill.” 

(Ibid.) 

The argument in favor of the proposition could be understood to attribute a 

relatively narrow scope to the measure’s operation. It opened with a statement that the 

proposition “guarantees your right to vote on local tax increases—even when they are 

called something else, like ‘assessments’ or ‘fees’ imposed on landowners.” (Ballot 

Pamp., Gen. Elec. (Nov. 5, 1996), argument in favor of Prop. 218, p. 76.) It alluded 

repeatedly to the desirability of requiring voter approval to “raise taxes,” and to some 
25

assessments and fees as a euphemism for new or increased taxes. (See ibid. [“politicians 

created a loophole in the law that allows them to raise taxes without voter approval by 

calling taxes ‘assessments’ and ‘fees.’ ”].) While the argument appeared largely devoted 

to assessments—and indeed, failed to distinguish in any coherent way between an 

assessment and, say, a monthly charge for water delivery—it consistently characterized 

all offending exactions as, in reality, “tax increases.” (Ibid.) It may, however, have 

reflected an intent to reach monthly charges for services when it asserted that “[n]onvoted taxes on electricity, gas, water, and telephone services hit renters and homeowners 

hard.” (Ibid.) It then appeared to return to the theme of assessments by stating, “To 

confirm the impact of fees and assessments on you, look at your property tax bill.” 

(Ibid.)

This background hardly provides the overall guidance the courts were able to draw 

from the circumstances surrounding the provision at issue in CCSF and Waterford. As 

potentially applicable here, however, the voter pamphlet provides strong evidence that 

the voters expected, and thus intended, that the article would reach charges for water 

service. The Legislative Analyst opined that the measure would “probably” apply to 

“[f]ees for water . . . service.” (Ballot Pamp., Gen. Elec. (Nov. 5, 1996), analysis of 

Prop. 218 by Legis. Analyst, p. 73.) Most critically, the text of the article itself seems to 

leave little doubt that the drafters viewed charges for water service as property-related 

fees. This at any rate is the seemingly compelling implication arising from the reference 

to “fees or charges for sewer, water, and refuse collection services” in Article 13D, § 6, 

subdivision (c), which exempts these kinds of charges from the voter ratification 

requirement to which all other property-related charges are subject. There would of 

course be no need to except these charges from that requirement unless it were expected 

that they would be viewed as “property related fee[s] or charge[s].” (Ibid.) It follows 
26

that if the charge here is for “water service,” it is indeed a property-related charge subject 

to Article 13D, though exempt from the voter ratification requirement.

D. Water Service 

That the charge is one for water service follows directly from our decision in 

Griffith, supra, 220 Cal.App.4th 586, 595. It was undisputed there that the charge at 

issue—the 2010 version of the groundwater augmentation charge we considered in 

Amrhein, supra, 150 Cal.App.4th 1364—was property-related. The defendant district 

had implicitly conceded as much by seeking to comply with Article 13D’s requirement of 

advance notice and a public hearing on the charge. (Griffith, supra, 220 Cal.App.4th at p. 

593; see Art. 13D, § 6, subd. (a).) The charge was nonetheless challenged on the ground 

that the District should also have complied with the voter ratification requirement of 

Article 13D, section 6, subdivision (c). We observed that this argument “necessarily 

fail[ed] if the augmentation charge f[ell] within the express exemption” from the 

ratification requirement “for sewer, water, and refuse collection services.” (Griffith, 

supra, at p. 594.) We concluded that the charge was imposed “for water service within 

the meaning of Proposition 218,” and as such, was “expressly exempt from the fee/charge 

voting requirement.” (Id. at p. 596.) 

This conclusion was presaged by our decision in Amrhein, which in turn rested on 

the Supreme Court’s reasoning in Bighorn-Desert View Water Agency v. Verjil (2006) 39 

Cal.4th 205 (Bighorn), and Richmond v. Shasta Community Services Dist. (2004) 32 

Cal.4th 409. In those cases the Supreme Court concluded, as relevant here, that the direct 

delivery of water to users was a property-related service such that charges for such 

delivery must comply with Article 13D. In Amrhein we essentially concluded that the 

groundwater augmentation charge there was conceptually indistinguishable, for purposes 

of property-relatedness, from the charges in those two cases. 
27

In Griffith we took the further step of acknowledging that the indirect delivery of

water to groundwater extractors—whether by replenishment of the groundwater basin, or 

by measures reducing demands on it—was conceptually indistinguishable from the direct 

delivery of water. The challengers there sought to distinguish between groundwater

management services and “water service” as contemplated in Article 13D. Describing 

this as a “distinction without a difference,” we said, “Domestic water delivery through a 

pipeline is a property-related water service within the meaning of Proposition 218. 

(Bighorn[, supra,] 39 Cal.4th 205, 217, 46 Cal.Rptr.3d 73, 138 P.3d 220.) And we have 

held that, for purposes of Proposition 218, the augmentation charge at issue here does not 

differ materially ‘from a charge on delivered water.’ (Amrhein, supra, 150 Cal.App.4th 

at pp. 1388–1389, 59 Cal.Rptr.3d 484.) If the charges for water delivery and water 

extraction are akin, then the services behind the charges are akin. Moreover, the 

Legislature has endorsed the view that water service means more than just supplying 

water. The Proposition 218 Omnibus Implementation Act, enacted specifically to 

construe Proposition 218, defines ‘water’ as ‘any system of public improvements 

intended to provide for the production, storage, supply, treatment, or distribution of 

water.’ (Gov.Code, § 53750, subd. (m).) Thus, the entity who produces, stores, supplies, 

treats, or distributes water necessarily provides water service. Defendant’s statutory 

mandate to purchase, capture, store, and distribute supplemental water therefore describes 

water service.” (Griffith, supra, 220 Cal.App.4th at p. 595.)

Great Oaks argues that the charge cannot be viewed as one for water service 

because it “is not based at all on the delivery of water, but is instead based solely upon 

the ‘production’ or extraction of groundwater for beneficial use.” It is true that the 

charge is occasioned and measured by the pumping of groundwater. This fact might be 

critical if the water service exemption were defined in terms of a charge on specified 

activities. But it instead applies to “fees or charges for sewer, water, and refuse 
28

collection services.” The question is thus not what triggers a charge, or what activity it 

directly burdens, but what it is “for,” i.e., where the proceeds go. 

Here the District Act states that the charge is levied upon extraction facilities 

within affected zones “for the benefit of all who rely directly or indirectly upon the 

ground water supplies of such zone or zones and water imported into such zone or 

zones.” (District Act, § 26.3) It then declares that the proceeds of the charge shall be 

used for importing, treating, and distributing water, as well as replenishing the 

groundwater basin. (District Act, § 26.3) We see no material distinction between these 

purposes and the purposes that, as we held in Griffith, made the charge in that case one 

for water service. Accordingly, the charge was generally subject to Article 13D, but was 

exempt from the requirement of voter ratification. To the extent the trial court’s finding 

of a violation of Article 13D rested on the absence of such ratification, it was error.

E. Regulatory Purpose

The District suggests that even if the extraction charge is property-related, it falls 

outside the contemplation of Article 13D because it serves a regulatory purpose. This 

suggestion appears to be based on a passage in Amrhein, where we wrote, “The 

juxtaposition of [Apartment Association, supra, 24 Cal.4th 830] with Bighorn[, supra,

39 Cal.4th 205] suggests the possibility that a fee falls outside Article 13D to the extent 

it is charged for consumption of a public service for purposes or in quantities exceeding 

what is required for basic (i.e., residential) use of the property. In Richmond and Bighorn

the court was clearly concerned only with charges for water for ‘domestic’ use. 

[Citation.] This leaves open the possibility that delivery of water for irrigation or other 

nonresidential purposes is not a property-based service, and that charges for it are not 

incidental to the ownership of property. A finding that such a fee is not imposed as an 

incident of property ownership might be further supported by a clearly established 

regulatory purpose, e.g., to internalize the costs of the burdened activity or to conserve a 
29

supplied resource by structuring the fee in a manner intended to deter waste and 

encourage efficiency.” (Amrhein, supra, 150 Cal.App.4th at p. 1389-1390, fn. omitted, 

second italics added.) The charge at issue here, asserts the District, is just such a fee. 

The possibility we meant to hold open in Amrhein is that Article 13D might not be 

intended to foreclose the imposition of fees—or perhaps more precisely their 

structuring—in such a way as to regulate, through market forces, the consumption or use 

of a scarce or protected commodity or service. The quoted passage contemplated a 

hypothetical fee that was “structur[ed]” in such a way as to operate in this manner. The 

most obvious example would be a fee that scales up as consumption of the public service 

increases, or is triggered only after a certain threshold quantity has been taken. While we 

do not mean to suggest that this is the only way a fee might fall within our hypothetical 

“regulatory” rubric, we did indicate that any such regulatory purpose would have to be 

“clearly established.” 

The underlying rationale for such an exception would be that Article 13D is 

intended to regulate exactions that operate as de facto taxes, i.e., to produce revenue, in 

circumvention of the restrictions on taxation imposed by other initiatives. (See Ballot 

Pamp., Gen. Elec. (Nov. 5, 1996), argument in favor of Prop. 218, p. 76 [“After voters 

passed Proposition 13, politicians created a loophole in the law that allows them to raise 

taxes without voter approval by calling taxes ‘assessments’ and ‘fees.’ ”]; id., rebuttal to 

argument against Prop. 218 [“Proposition 218 simply gives taxpayers the right to vote on 

taxes and stops politicians’ end runs around Proposition 13.”].) We sought only to 

acknowledge the possibility that a fee could be argued to fall outside this purpose, and 

thus outside the restrictions imposed by Article 13D, if it were designed predominantly 

not to secure revenues but to directly regulate the burdened activity—in essence, to deter 

excessive consumption—through price signals.
30

The District directs us to nothing in the record that would compel or even permit a 

finding that the extraction fee here falls within the “regulatory purpose” hypothesis we 

posited in Amrhein. While the fee as a whole may be intended in part to influence the 

consumption of groundwater, it is not “structured” in the sense contemplated above. Nor 

does anything in the District Act “clearly establish[]”that it has a regulatory purpose. 

Nothing in the notice to owners explaining the basis for the fee alluded to any such 

objective. The trial court expressly found that the charge “does not serve a significant 

regulatory purpose.” We detect no error in that finding.

F. Notice and Hearing 

1. Background

Article 13D requires an agency proposing to impose or increase a property-related 

charge to “provide written notice by mail of the proposed fee or charge to the record 

owner of each . . . parcel upon which the fee or charge is proposed for imposition.” (Art. 

13D, § 6., subd. (a)(1).) The notice must set forth “the amount of the fee or charge 

proposed to be imposed upon each [parcel], the basis upon which the amount of the 

proposed fee or charge was calculated, the reason for the fee or charge, together with the 

date, time, and location of a public hearing on the proposed fee or charge.” (Ibid.) The 

notice must be given at least 45 days before the hearing. (Id., § 6, subd. (a)(2).) At the 

hearing, “the agency shall consider all protests against the [written] fee or charge. If 

written protests against the proposed fee or charge are presented by a majority of owners 

of the identified parcels, the agency shall not impose the fee or charge.” (Ibid.)

The trial court found that the District “fail[ed] to comply with proper notice 

requirements” under Article 13D. It did not specify in what way the District’s procedures 

were deficient. We detect no such deficiency.

The undisputed facts are these: On or about March 1, 2005, the District mailed a 

“notice of hearings on groundwater charges for 2005-2006” to about 4,500 well owners 
31

in the county. One version of the notice concerned “Zone W-2 (North County),” while 

the other concerned “Zone W-5 (South County).” The Zone W-2 notice set out 

“minimum” and “maximum” proposed rates, per acre foot, of $40.50 and $43.50 for 

agricultural use, and $405.00 and $435.00 for other uses. The corresponding numbers for 

zone W-5 were $20.00, $24.00, $200.00, and $240.00. The notice invoked the District’s 

authority to levy the charge and stated that it would be used to “fund the District’s 

activities to protect and augment water supplies for the public health, welfare and safety 

of the community.” The notice specified that the charge would be used to “[p]ay the 

costs of importing water to recharge the groundwater basin,” to “[o]perate and maintain 

the pipelines and pumping plants that distribute imported water throughout our service 

area,” to “[o]perate and maintain the District’s reservoirs and recharge ponds which help 

replenish the groundwater basin,” to “[p]lan and construct improvements to pipelines and 

reservoirs,” to “[c]onduct groundwater protection programs such as the district’s Well 

Ordinance program, and programs to detect and protect groundwater from perchlorate, 

nitrate and other contaminants,” to “[o]ffer water-efficiency programs, such as the 

Mobile Lab and Irrigation Technical Assistance programs, toilet rebates and free 

household water audits,” and to “[d]evelop recycled water to boost water supply 

reliability and conduct special studies to research the feasibility of using advanced 

treatment of recycled water to improve quality[.]” 

The notice for Zone W-5 stated that public hearings on the proposed rates would 

take place on April 1 and 19 in San Jose, and on April 11 in Morgan Hill. The notice for 

Zone W-2 referred only to the April 1 and 19 dates. The chief executive officer for Great 

Oaks declared below that the District did not disclose a fixed proposed rate until March 

22, 2005, when it made available for public inspection a report apparently specifying the 

agricultural and non-agricultural rates ultimately adopted, i.e., $42.00/$420.00 for Zone 
32

W-2, and $21.50/$215.00 for Zone W-5.12 He declared that “different proposed rates 

were discussed at the hearing, but the actual rate was not imposed until after the hearing 

was closed to the public.” On April 19, the board of directors for the District adopted 

Resolution No. 05-28, setting the charge at the rates as fixed on March 22.

2. Timeliness of Notice

In finding that the District’s procedures did not comply with Article 13D’s noticeand-hearing requirements, the trial court presumably adopted all or some of Great Oaks’s 

arguments on that subject. Great Oaks asserted in its trial brief that the March 1 notices 

were deficient for failure to “(1) set forth the amount of the fee or charge proposed to be 

charged (versus providing a range of possible rates), (2) set forth the basis upon which 

the amount of the proposed fee or charge was calculated, or (3) set forth a mechanism to 

protest the fee.” On appeal Great Oaks also asserts that the District violated Article 13D 

by having two hearings less than 45 days after the March 1 notice—even though the last 

scheduled hearing was more than 45 days after that date, and the charge was not adopted 

until that hearing had concluded. None of these contentions identifies a fatal defect in the 

District’s notice.

Nothing in Article 13D prohibits a public agency from conducting public hearings 

within the 45 days following notice of a proposed increase in a charge or fee, provided it 

conducts at least one noticed hearing at least 45 days after the notice. The operative 

provisions state that the agency shall “(1) . . . provide written notice by mail of the 

proposed fee or charge . . . together with the date, time, and location of a public hearing 

 

12

 Deficiencies in the record and the briefs compel us to rely on the cited 

averment, rather than any primary document. Apparently the fixed rate, as ultimately 

adopted, would have been set out in a 2005 “Preliminary Water Utility Enterprise 

Report,” which was apparently made public on March 22 of that year. Neither party has 

cited this seemingly critical document. Indeed, as far as we can tell, it is absent from the 

record. Instead our search of the 55-volume appendix has discovered a later, “final” 

version of that report, as well as similar reports from three other years. 
33

on the proposed fee or charge,” and “(2) . . . conduct a public hearing upon the proposed 

fee or charge not less than 45 days after mailing the notice . . . .” (Art. 13D, § 6, 

subd. (a).) At the hearing, the agency shall “consider all protests against the proposed fee 

or charge,” and if written protests are received from a majority of owners, “shall not 

impose the fee or charge.” (Id., § 6, subd. (a)(2).) Nothing in this language prohibits the 

agency from giving notice of, and conducting, additional hearings. Great Oaks’s 

suggestion to the contrary is put forth only obliquely, with no argument or authority 

offered in its support.

The District gave timely notice of the hearing preceding imposition of the charge, 

as contemplated by the above provisions of Article 13D.

3. Notice of Proposed Charge

Great Oaks suggests that the March 1 notice was defective because it set forth a 

range of possible rates instead of a single, fixed proposed rate. Again the underlying 

premise—that a range of rates offends Article 13D—is never straightforwardly 

advocated, but is simply put forth by necessary implication. We reject it.

Article 13D requires that the agency give “written notice by mail of the proposed 

fee or charge.” (Art. 13D, § 6, subd. (a)(1).) To the extent any argument on this point 

can be inferred from Great Oaks’s brief, it appears to rest entirely on Article 13D’s 

requirement that the notice set forth “the proposed fee or charge.” (Ibid.) This use of the 

singular article can hardly be understood to preclude a notice stating a range of possible 

charges. Such a notice states in effect that the agency “propose[s]” to impose “the” 

maximum rate set forth, while reserving the option to select a lower rate. The disclosure 

of such an intention does not offend the letter of the cited requirement. Nor does it 

offend its purpose, which it to ensure that owners are notified of the financial burdens to 

which a proposed charge may expose them, so that they can decide whether to oppose it. 

This function is fully served by disclosing the maximum financial burden contemplated 
34

by the propounding agency. Should the agency elect to impose a lower rate than the one 

specified in the notice, no harm is done to the owners or to the constitutional requirement, 

and no ground appears to question the validity of the charge. (See Morgan v. Imperial 

Irrigation Dist., supra, 223 Cal.App.4th 892, 902, 922-923 [water agency did not violate 

Article 13D by adopting rates below those specified in notice of hearing].) This 

conclusion is not altered by an agency’s expressly reserving the option of imposing a 

lower rate, or by specifying a minimum rate as well as a maximum one. In either case the 

notice merely imparts the further information that the burden ultimately imposed may be 

less onerous than the maximum expressed in the notice.

Any owner who objects to a charge above a given level is free to lodge an 

objection to that effect, and if a majority of owners do so they can effectively set a ceiling 

on the charge. By objecting to the minimum stated, they can effectively prevent the 

imposition of any charge. In no way is the purpose of the provision subverted by a notice 

such as was given here.

In so viewing this requirement we are apparently joined by the Legislature, which 

has expressly authorized an agency, when voter ratification of a charge is required, to 

“state a range of rates or amounts,” and upon ratification, to impose any charge within the 

specified range. (Gov. Code, § 53739, subd. (a).) We can think of no reason that a more 

stringent rule should govern the notice mandated by Article 13D, section 6, 

subdivision (a)(1).

We conclude that the notice mailed on March 1 adequately notified owners of the 

“proposed fee or charge.”

4. Basis of Calculation

Great Oaks also faulted the March 1 notice for failing to “set forth the basis upon 

which the amount of the proposed fee or charge was calculated.” It made no attempt to 

elaborate upon or otherwise substantiate this objection in its trial brief, and in its brief 
35

here it merely alludes to the language of Article 13D while citing our summary of the 

article’s requirements in Amrhein, supra, 150 Cal.App.4th at page 1385. 

Article 13D contemplates that an agency giving notice of a proposed charge will, 

after identifying the parcels subject to the charge, “calculate[]” the “amount of the fee or 

charge proposed to be imposed upon each parcel.” (Art. 13D, § 6, subd. (a)(1).) Having 

done so, the agency is to give notice to each parcel’s owner of “the proposed fee or 

charge . . . the amount of the fee or charge proposed to be imposed upon each, the basis 

upon which the amount of the proposed fee or charge was calculated, the reason for the 

fee or charge, together with the date, time, and location of a public hearing on the 

proposed fee or charge.” (Ibid., italics added.) 

The requirement that the agency disclose the “basis” for the charge is thus tied 

directly to the specific “amount” to be charged to each parcel or owner, and is separate 

from the requirement that the agency disclose the “reason” for the charge. The 

underlying conception of a single charge against an identified parcel is of course 

underinclusive, since the fees and charges covered by the article are not limited to such 

assessments but extend to consumption-based charges like the one before us. 

Nonetheless the manifest intent of requiring the agency to disclose the “basis” for the 

charge is to include in the notice the method of calculation, meaning the unit by which, 

and the rate at which, the charge is determined. Thus a notice might state that the rate is 

$2.00 per foot of street frontage, that the addressee’s parcel has 50 feet of street frontage, 

and the amount of the charge on that parcel is thus $100.00. (See, e.g., Dahms v. 

Downtown Pomona Prop. (2009) 174 Cal.App.4th 708, 713 [assessment for new business 

improvement district was based on weighted combination of street frontage, building 

size, and lot size, from which each parcel’s assessment was calculated “as a portion of the 

total cost of the services” to be provided].) This enables the owner to ascertain, among 
36

other things, that the relevant characteristics of the parcel have been accurately measured 

by the agency.

When a charge depends in part on an unknowable variable such as consumption, 

all the agency can reasonably be expected to provide in a notice of the proposed charge 

are the known variables, i.e., the rate and the unit of measure. The amount actually due 

will consist of the the rate times the units the addressee ultimately consumes. Here, by 

disclosing the rate and the unit of measure, the District disclosed all that possibly could 

be disclosed of the “basis upon which the amount of the proposed fee or charge [would 

be] calculated.” (Art. 13D, § 6., subd. (a)(1).) Nothing in Great Oaks’s presentation on 

this point suggests that this did not satisfy the letter and purpose of the cited provision.

5. Mechanism To Protest Fee

Great Oaks also suggested below that the District’s procedures were defective for 

failure to “set forth a mechanism to protest the fee.” This seems to hint at two distinct 

concepts: failure to notify owners of their power to nullify the proposed fee by majority 

protest; and failure to provide an adequate procedure for lodging objections toward that 

end. 

Again Great Oaks failed to marshal any coherent argument in support of the 

implicit premise, i.e., that the District was under a duty to explicitly notify owners of 

their collective power to nullify the charge by objecting to it in writing. The relevant 

argument in Great Oaks’s brief consists entirely of a statement that “at no time did the 

District notify property owners they had the right to protest the groundwater charge, or 

provide majority protest procedures, as required by Article XIIID, Section 6(a)(2).” 

(Italics added.) Nothing in the cited provision requires an agency either to notify owners 

of their rights in this regard, or to “provide majority protest procedures” to facilitate their 

doing so. Rather the relevant provision states that the agency shall conduct a hearing at 

which it is to “consider all protests against the proposed fee or charge. If written protests 
37

against the proposed fee or charge are presented by a majority of owners of the identified 

parcels, the agency shall not impose the fee or charge.” (Art. 13D, § 6, subd. (a)(2).)

Had the voters wished in 1996 to require express notification to owners of their 

nullification rights, or to prescribe a mechanism for the exercise of those rights, they were 

more than capable of doing so, as they demonstrated in the parallel provisions governing 

assessments. There they provided that the notice of a proposed assessment shall include 

(1) a ballot in prescribed form (Art. 13D, § 4, subd. (d)), and (2) “a summary of the 

procedures applicable to the completion, return, and tabulation of the ballots . . . , 

including a disclosure statement [sic] that the existence of a majority protest, as defined 

in subdivision (e), will result in the assessment not being imposed” (id., subd. (c)). In the 

Omnibus Proposition 218 Implementation Act, the Legislature adopted elaborate 

procedures for carrying out these provisions, including means of notice, protest, and 

balloting.13 (Gov. Code, § 53753.)

These provisions, however, are expressly limited to assessments. Neither the 

voters nor the Legislature saw fit to impose similar requirements with respect to the 

adoption of property-related fees and charges. This disparity in treatment can be readily 

explained by the fact that, as a class, property-related fees and charges are farther 

removed than assessments from the avowed purpose of Article 13D, which is to prevent 

de facto tax increases in the guise of other exactions. Further, in contrast to assessments, 

such fees are usually not imposed unconditionally but typically depend on, and are 

calibrated according to, the payer’s use of some provided service. The voters and 

legislators could quite reasonably have feared the potential fiscal and administrative 

 

13

 Most pertinently, the notice of hearing on the assessment must enclose a ballot 

(Gov. Code, § 53753, subd. (c)), and must include “a statement that the assessment shall 

not be imposed if the ballots submitted in opposition to the assessment exceed the ballots 

submitted in favor of the assessment, with ballots weighted according to the proportional 

financial obligation of the affected property” (id., subd. (b)).
38

consequences if every increase in a service-related fee subjected the agency to the burden 

and expense of the full-blown balloting procedure prescribed for assessments. 

Given the seemingly deliberate difference between the procedures required for 

assessments and those imposed on property-related fees and charges, we cannot insert 

terms into the latter provisions based upon a mere surmise that voters failed to say what 

they meant. We are particularly loath to adopt such an approach where its effect is to 

impose unwritten procedural requirements on public agencies, increasing their 

administrative overhead and ultimately either reducing the services delivered by them, or 

increasing the fiscal burden on the public,. (See Morgan v. Imperial Irrigation Dist., 

supra, 223 Cal.App.4th 892, 920-922 [failure to disclose protestors’ identifications did 

not offend requirement of public hearing, where nothing in Article 13D, § 6(a)(2), 

required disclosure].) If the provisions of Article 13D are indeed deficient in this regard, 

the remedy lies at the polls or in the Legislature.

We have no doubt that an agency imposing a property-related charge must afford a 

fair and reasonable opportunity for owners to express their opposition and, most 

importantly, to lodge their written objections. But Great Oaks made no attempt to show 

that the procedures employed here fell short of that standard. It apparently offered no 

evidence concerning the manner in which any of the public hearings were conducted. 

The only indication we have found on this subject is the statement in Great Oaks’s trial 

brief—unsupported by any citation to the voluminous accompanying documentation—

that the District’s governing board adopted the charge “[a]fter the public meeting was 

closed.” Assuming this is true, it has no tendency to show that the District provided 

insufficient opportunity to be heard or to lodge objections to the charge.14

 

14

 Nothing in this record indicates that Great Oaks or any other owner notified the 

District of any claim that its procedures might violate Article 13D in this or any other 

respect. There is much to be said for a requirement that any purely procedural objection 

to a charge of this kind be brought to the agency’s attention before it is too late for the 
39

No deficiency appears in the notice and hearing procedures employed by the 

District. Accordingly, the trial court erred by finding that the District had “fail[ed] to 

comply with proper notice requirements.” 

G. Substantive Compliance 

Article 13D, section 6, subdivision (b), imposes several substantive limitations on 

property-related fees and charges. In its trial brief Great Oaks argued that the 

groundwater extraction charge violated three of these limitations. The trial court did not 

address these contentions. Nor does Great Oaks offer them as alternative grounds to 

affirm the judgment. Accordingly we make no attempt to address them here. As 

discussed in the following sub-part, however, these contentions may be revisited upon 

remand.

H. Sufficiency of Pre-Suit Claim

1. Background

The District contends that even if the trial court had properly found a violation of 

Article 13D, it was precluded from awarding monetary relief on that basis because no 

such claim was ever communicated to the District by a pre-suit claim. We might seem to 

have mooted this contention by concluding, as we do in parts I(D) and I(F), ante, that the 

District did not violate the procedural requirements of Article 13D. However, our 

unqualified reversal of the judgment will set the matter “ ‘at large’ ” in the trial court, 

opening the possibility of a retrial or other further proceedings. (9 Witkin, Cal. 

Procedure (5th ed. 2008) Appeal, § 869, p. 928; see id., § 870, p. 929.) At that time it 

may be open to Great Oaks to attempt to bolster its claims of procedural deficiency—at 

 

agency to cure it. To invalidate such a fee after the fact in favor of one objecting party 

effectively deflects the costs to other payers of the fee, past and future. As discussed 

below (pt. I(H)), the first notice the District received of any claimed deficiency under 

Article 13D apparently came in the form of Great Oaks’s complaint in this matter.
40

least in the notice and hearing aspects of the District proceedings. Moreover the trial 

court never reached Great Oaks’s claims that the groundwater charge failed to satisfy the 

substantive limitations imposed by Article 13D on local fees and charges. Since either of 

these theories is sure to be met by a renewal of the District’s assertion of deficiencies in 

the pre-claim notice, we deem it expedient to resolve so much of that question as may be 

determined on the present record.

Insofar as the claimed violation of Article 13D concerns the District’s notice and 

hearing procedures, monetary relief is indeed foreclosed by the failure to hint at any such 

cause of action or theory of relief in the pre-suit claim. It is undisputed that any monetary 

claims Great Oaks might pursue against the District were subject to the requirements of 

the Government Claims Act (Gov. Code, §§ 900 et seq.) (GCA). (See District Act, § 30 

[requiring any claim against District for “money or damages” to comply with the GCA].) 

Among the GCA’s key provisions is the requirement that, with stated exceptions, “all 

claims for money or damages against local public entities” must be presented in 

accordance with its terms.15 (Gov. Code, § 905.) Government Code section 945.4 

provides that “no suit for money or damages may be brought against a public entity on a 

cause of action for which a claim is required to be presented . . . until a written claim 

therefor has been presented to the public entity and has been acted upon by the board, or 

has been deemed to have been rejected by the board . . . .”

Great Oaks submitted a claim to the District on May 20, 2005. However its sole 

stated grounds for recovery were that the District was violating the District Act in fixing 

 

15

 None of the exceptions has been invoked here. The most nearly applicable 

appears to be for “[c]laims under the Revenue and Taxation Code or other statute

prescribing procedures for the refund, rebate, exemption, cancellation, amendment, 

modification, or adjustment of any tax, assessment, fee, or charge or any portion thereof, 

or of any penalties, costs, or charges related thereto.” (Gov. Code, § 905, subd. (a).) It 

has not been suggested here that any statute “prescribe[es] procedures” for Great Oaks’s 

monetary claims against the District.
41

the groundwater charge, which it called a “pump tax,” and in spending the proceeds 

thereof. Great Oaks alleged that the District was “illegally using pump tax revenues for 

purposes outside the four (4) statutorily specified uses,” that “to cover those unauthorized 

expenditures the amount of the pump tax is excessive,” and conversely, that it had 

“charged and continues to charge an excessive pump tax and that those excessive pump 

tax revenues are used for purposes which are not expressly authorized by the Act.” The 

claim further asserted that the District had “damaged Great Oaks by requiring it to pay 

more than necessary for the pump tax. Consequently, [District] is indebted to Great Oaks 

for the amount it charged over and above what was necessary to fulfill the statutorily 

listed uses for pump tax revenues. Great Oaks hereby makes a claim for the refund of the 

amount which it was overcharged for the pump tax and requests that the [District] lower 

the pump tax and modify its uses of pump tax revenues to come into conformity with the 

Act.” (All italics added.)

The claim made no mention of the provisions of Article 13D. Nor did it refer to 

the notice of the proposed charge, the hearing on that subject, or any other procedural 

aspect of the matter. Further, there was no suggestion that Great Oaks claimed a right to 

a complete refund of the groundwater charge, as distinct from recovery to the amount by 

which it was “overcharged.” 

2. Procedural Noncompliance

The claim submitted by Great Oaks cannot sustain an award of monetary relief 

based on defects in the procedure by which the charge was imposed. 

“The purpose of [the claims] statutes is ‘to provide the public entity sufficient 

information to enable it to adequately investigate claims and to settle them, if appropriate, 

without the expense of litigation.’ [Citation.] Consequently, a claim need not contain the 

detail and specificity required of a pleading, but need only ‘fairly describe what [the] 

entity is alleged to have done.’ [Citations.] As the purpose of the claim is to give the 
42

government entity notice sufficient for it to investigate and evaluate the claim, not to 

eliminate meritorious actions [citation], the claims statute ‘should not be applied to snare 

the unwary where its purpose has been satisfied’ [citation].” (Stockett v. Association of 

California Water Agencies Joint Powers Ins. Authority (2004) 34 Cal.4th 441, 446 

(Stockett).) 

At the same time, where a claimant seeks to pursue multiple causes of action 

resting on distinct facts, it is not enough that some of them were presaged in a pre-suit 

claim. “If a plaintiff relies on more than one theory of recovery against the State, each 

cause of action must have been reflected in a timely claim.” (Nelson v. State of 

California (1982) 139 Cal.App.3d 72, 79.) “[S]ection 945.4 requires each cause of action 

to be presented by a claim complying with section 910 . . . . [T]he facts underlying each 

cause of action in the complaint must have been fairly reflected in a timely claim. 

[Citation.] ‘. . . [T]he complaint is vulnerable to a demurrer if it alleges a factual basis for 

recovery which is not fairly reflected in the written claim.’ [Citation.] [¶] The claim, 

however, need not specify each particular act or omission later proven to have caused the 

injury. [Citation.] A complaint’s fuller exposition of the factual basis beyond that given 

in the claim is not fatal, so long as the complaint is not based on an ‘entirely different set 

of facts.’ [Citation.] Only where there has been a ‘complete shift in allegations, usually 

involving an effort to premise civil liability on acts or omissions committed at different 

times or by different persons than those described in the claim,’ have courts generally 

found the complaint barred. [Citation.] Where the complaint merely elaborates or adds 

further detail to a claim, but is predicated on the same fundamental actions or failures to 

act by the defendants, courts have generally found the claim fairly reflects the facts pled 

in the complaint. [Citation.]” (Stockett, supra, 34 Cal.4th at p. 447.)

Here the trial court’s award of damages under Article 13D rests on facts—failure 

to give adequate notice and hearing, and failure to secure voter ratification—that were not 
43

fairly reflected, or even hinted at, in the pre-suit claim. The facts underlying the award 

were “ ‘entirely different’ ” from those asserted in the claim, i.e., spending funds on 

unauthorized activities and improperly inflating the charge to cover those expenditures. 

(Stockett, supra, 34 Cal.4th at p. 447.) This represented a “ ‘complete shift in 

allegations,’ ” seeking to predicate liability on “ ‘acts or omissions committed at different 

times [and] by different persons than those described in the claim.’ ” (Ibid.) 

Great Oaks asserts that “[b]oth the government claim and the complaint are based 

upon the same set of facts: the District’s improper use of groundwater charge revenues.” 

(Underlining omitted.) This statement is only partly accurate. It is accurate, if vague, as 

a description of the pre-suit claim; but it is at best an incomplete characterization of the 

causes of action pursued by Great Oaks under Article 13D in the trial court.16 Most 

importantly, it does not at all describe the factual basis on which the trial court grounded 

its ultimate award of damages under Article 13D. The award rested in part on the 

allegation, which first appeared in the complaint, that the District had to “submit[] its 

increases of groundwater charges to a vote of the public.” The court also found that the 

District failed to satisfy Article 13D’s requirements concerning notice and hearing—a 

theory of relief mentioned in neither the claim nor the complaint.

The trial court could not properly impose monetary liability on grounds that were 

wholly unheralded in the pre-suit claim. Such a lacuna between the facts asserted in a 

claim and those ultimately adopted as grounds for liability “defeats the purpose of the 

statute, which is to give the public entity the opportunity to evaluate the merit and extent 

of its liability and determine whether to grant the claim without the expenses of 

 

16

 The matter is complicated by the fact that even the operative complaint alludes 

to only one of the several violations of Article 13D that Great Oaks pressed at trial. 

Apparently that pleading was superseded in this regard by the trial brief in which Great 

Oaks articulated these theories, with no apparent objection from the District that they 

strayed outside the pleadings. 
44

litigation.” (Crow v. State of California (1990) 222 Cal.App.3d 192, 202.) In the case 

just cited, a student filed a claim charging a state university with tort liability based on an 

assault by a fellow student. The court refused to permit him to later assert additional 

facts as grounds for liability in contract. Based on the claim, the university “might well 

have concluded it had no liability for injuries in a fracas to one who was either an offcampus student or a mere visitor, while the new facts of a contractual guarantee of safety

conceivably might have changed its position.” (Ibid.)

Here too the District could have concluded that its imposition of the groundwater 

charge and use of the proceeds complied with the District Act, while the “new facts” of 

procedures allegedly violating Article 13D “might have changed its position.” A claim 

of the latter type had the potential to completely invalidate the challenged fee and require 

a refund of the entire sum paid by Great Oaks. No such consequence was presaged by 

the pre-suit claim, which asserted only that the District was indebted to Great Oaks for 

“the amount which it was overcharged for the pump tax.” Recognizing this limitation, 

the trial court awarded some $1.3 million as “damage[s]” under the District Act, 

including “the overcharge” and other unspecified elements. Yet on the Article 13D claim 

the court directed the District to refund the entire $4,623,095.52 paid by Great Oaks 

during the year the charge was in effect. Nothing in the claim alerted the District that it 

was exposed to any such liability.

Great Oaks urges us to defer to the trial court’s ruling on the sufficiency of the 

claim because that question was vested in the trial court’s discretion. Most of the cases it 

cites for this proposition concern the entirely distinct question of whether a claimant is 

entitled to relief from a failure to file a timely claim. (See Powell v. City of Long Beach

(1985) 172 Cal.App.3d 105, 109; Renteria v. Juvenile Justice, Department of Corrections 

and Rehabilitation (2006) 135 Cal.App.4th 903, 910; Ramariz v. County of Merced

(1987) 194 Cal.App.3d 684, 689; Hernandez v. Garcetti (1998) 68 Cal.App.4th 675, 682-
45

683.) Others involve pleading issues of no relevance here. (See Fall River Joint Unified 

School Dist. v. Superior Court (1988) 206 Cal.App.3d 431, 435 [denial of judgment on 

pleadings as to count asserting new theory of relief was an abuse of discretion remediable 

by extraordinary writ]; Donohue v. State of California (1986) 178 Cal.App.3d 795, 800, 

801 [no abuse of discretion in granting judgment on pleadings after earlier objections on 

same ground were overruled].) Slightly closer to the mark is In re Shafter-Wasco Irr. 

Dist. v. Westenberg (1943) 57 Cal.App.2d 90, 99, which considered whether a claim, 

though deficient, constituted “substantial compliance” with a statute setting forth 

requirements for a petition to dissolve an irrigation district. On that subject the court 

wrote, “The judgment of what is a substantial compliance with the statute is to be 

exercised in the first instance by the trial court. If the case is one where a requirement of 

the statute has not been entirely disregarded, its determination of the question of 

substantial compliance ought to be controlling in the absence of an abuse of discretion.” 

(Ibid.)

The concept of substantial compliance, however, has little if any bearing on the 

question at hand. That concept applies when the question is whether a claim conforms to 

statutory requirements. No one here suggests that the claim here was defective. Rather 

the question is whether it adequately apprised the District of the grounds on which Great 

Oaks ultimately sought, and the trial court decided, to impose monetary liability on the 

District. “[A]ny contention of substantial compliance ‘is unavailing where the plaintiff 

seeks to impose upon the defendant public entity the obligation to defend a lawsuit based 

upon a set of facts entirely different from those first noticed. Such an obvious subversion 

of the purposes of the claims act, which is intended to give the governmental agency an 

opportunity to investigate and evaluate its potential liability, is unsupportable.’ ” (Turner 

v. State of California (1991) 232 Cal.App.3d 883, 891, quoting Fall River Joint Unified 

School Dist. v. Superior Court, supra, 206 Cal.App.3d at pp. 435-436.) 
46

The question is thus one of variance between the pre-suit claim and the grounds 

for relief ultimately asserted—in this case successfully—at trial. The leading case on this 

subject is probably Stockett, supra, 34 Cal.4th 441, where the Supreme Court reinstated a 

verdict for the plaintiff after the Court of Appeal had reversed it based on a variance 

between the assertions in the plaintiff’s pre-suit claim and the grounds on which liability 

was ultimately imposed. The claim alleged that the defendant agency had acted on three 

improper motives in discharging the plaintiff from employment. (Id. at p. 444.) The 

ensuing complaint, as amended, alleged three motives, two of which differed somewhat 

from those stated in the claim. (Id. at pp. 444-445.) The matter went to the jury on these 

theories, resulting in a judgment for the plaintiff, which the Court of Appeal reversed, 

holding that the trial court had “ ‘allowed the Stocketts to present a very different case’ ” 

from the one set out in their pre-suit claim. (Id. at p. 445.)

In challenging this conclusion before the Supreme Court, the plaintiff argued that 

he was “not precluded from raising additional reasons at trial for his termination because 

he was not required, in order to comply with section 910, to claim more than that [the 

defendant’s] agents wrongfully terminated him, while giving the basic circumstances of 

that occurrence.” (Stockett, supra, 34 Cal. at p. 446.) The Supreme Court agreed that his 

claim had been “sufficient . . . to give [the defendant] notice of all theories of wrongful 

termination.” (Ibid.) In essence, the court concluded that the variant facts were 

subsidiary to the single underlying cause of action for wrongful termination; as such they 

were not essential to the presentation of a sufficient claim and any divergence from them 

in the pleadings or at trial was not fatal. (See id. at p. 447 [“these theories do not 

represent additional causes of action and hence need not be separately presented”]; id. at 

p. 447, fn. 3 [defendant conceded that plaintiff’s “claim of dismissal in violation of public 

policy constitutes only a single cause of action even though his dismissal allegedly 

violated several public policies”].) The court contrasted the situation to that in Fall River
47

Joint Unitified School Dist. v. Superior Court, supra, 206 Cal.App.3d 431, which held a 

complaint barred because “the factual divergence between claim and complaint was too 

great; the complaint alleged liability ‘on an entirely different factual basis than what was 

set forth in the tort claim.’ ([Fall River Joint Unitified School Dist. v. Superior Court, 

supra,] at p. 435.) Stockett’s complaint, in contrast, alleged liability on the same 

wrongful act, his termination, as was stated in his notice of claim.” (Stockett, supra, 34 

Cal.4th at p. 448, fn. omitted, italics added.) “In comparing claim and complaint,” the 

court wrote, “ ‘we are mindful that “[s]o long as the policies of the claims statutes are 

effectuated, [the statutes] should be given a liberal construction to permit full 

adjudication on the merits.” ’ [Citations.] If the claim gives adequate information for the 

public entity to investigate, additional detail and elaboration in the complaint is 

permitted.” (Id. at p. 449.) By notifying the defendant of the acts causing his injury and 

naming those agents believed to be responsible for them, the plaintiff’s claim “provided 

sufficient information for [the defendant] to investigate and evaluate its merits.” (Ibid.) 

A reasonable investigation would not simply consist of dispelling the specific improper 

reasons for termination identified in the claim but “would have included questioning 

members of the committee to discover their reasons for terminating Stockett and an 

evaluation of whether any of the reasons proffered . . . constituted wrongful 

termination.”

17

 (Ibid.)

Here, nothing in the pre-suit claim notified the District that liability might be 

predicated on an asserted failure to give notice and conduct a hearing pursuant to 

Article 13D, or on failure to secure voter ratification. All the claim called upon the 

 

17

 Counsel for Great Oaks recapitulates some of the principles stated in Stockett, 

but describes them as elaborations on the concept of “substantial compliance.” The court 

never used that term, but twice referred to the issue at hand as one of “variance.” 

(Stockett, supra, 34 Cal.4th at pp. 445, 448.) 
48

District to investigate or consider was the extent to which it might be found to have 

expended revenues from the charge on activities for which the charge was not authorized 

under the District Act. Nor did anything apprise it that it might be exposed to a judgment 

ordering the refund of the entire sum paid by Great Oaks for a year, as opposed to a 

judgment based on the excess of the charge over the expenses it could properly use the 

charge to defray. The claim failed entirely to anticipate such an award on such a basis, 

and therefore could not sustain monetary relief.

Great Oaks observes in passing that the District “presented no evidence in 

support” of the defense that the pre-suit claim was insufficient to sustain all of the causes 

of action on which Great Oaks sought damages. The “evidence” relevant to the defense 

consisted entirely of the pre-suit claim as compared to the pleadings and the grounds of 

liability asserted by Great Oaks at trial. The District placed the claim before the court at 

or before the time it submitted its trial brief on Phase I. We are directed to no objection 

or other suggestion of evidentiary deficiency in the trial court. 

Great Oaks also alludes without further elaboration to the absence of evidence that 

the District “conducted an investigation into Great Oaks’ claim, that any investigation 

was in any way limited by the precise wording of Great Oaks’ government claim or that 

the District was either misled or prejudiced in its investigation with respect to Great 

Oaks’ government claim.” Whatever the intended import of this statement, it suggests no 

basis for affirmance. There is no requirement that an agency demonstrate prejudice in 

order to assert the inadequacy of a pre-suit claim to sustain all or part of a judgment. 

Even if prejudice were a relevant consideration, it would be absurd to say, in a case like 

this one, that an agency was not prejudiced “in its investigation” merely because there is 

no evidence that it conducted an investigation. Contrary to the seeming implication of 

such a contention, an agency’s failure to investigate an omitted ground of relief is fully 

consistent with the agency’s having examined the claim as submitted, concluded that it 
49

was meritless, and for that reason having taken no further action, including investigation. 

It cannot be supposed that the same agency, faced with a more colorable claim, would not 

have investigated it.

Nor would there be any reason, if prejudice were a relevant consideration, to 

confine the inquiry to the agency’s investigation of the claim. The claim requirement is 

also intended to provide the agency with an opportunity to settle or take other corrective 

action in response to a claim. (See Doe 1 v. City of Murrieta (2002) 102 Cal.App.4th 

899, 920; Shoemaker v. Myers (1992) 2 Cal.App.4th 1407, 1426.) An agency whose fee 

or charge is challenged as having been adopted without observing constitutionally 

prescribed procedures might well conclude that the challenge is well taken, in which case 

it might seek not only to settle the claim but to reenact the fee in compliance with the 

previously omitted procedures. It is not for claimants or the courts to speculate about 

what an agency might or might not have done if presented with a timely claim adequately 

disclosing colorable grounds for objection. (See People ex rel. Lockyer v. Sun Pacific 

Farming Co. (2000) 77 Cal.App.4th 619, 642 [district was prejudiced by failure to raise 

certain objections to plan “prior to its implementation, when the District could have 

addressed [objector]’s concerns and still made changes”].) 

For all these reasons, we conclude that the pre-suit claim is insufficient to sustain 

monetary relief based upon deficiencies in the procedures utilized in the adoption of the 

2005-2006 groundwater extraction fee.

3. Substantive Noncompliance

This leaves the question whether the claim submitted by Great Oaks would 

support a monetary award under Article 13D on the ground that the groundwater charge 

did not comply with the substantive limitations of Article 13D. This theory does not 

clearly appear in the complaint, but was asserted in Great Oaks’s trial brief. It does not 

appear that the District objected to this theory as outside the pleadings. It therefore 
50

appears to have been properly before the trial court. (See 9 Witkin, supra, Appeal,

§§ 407 pp. 466-468, 410, pp. 469-470.) Judging from its statement of decision, however, 

the court did not reach this theory—presumably because the court found it unnecessary to 

do so once it found that the charge violated Article 13D’s procedural provisions. Now 

that we have foreclosed a monetary award on the latter ground, it will presumably remain 

open to Great Oaks on remand to reassert the claim that the charge does not conform to 

the substantive limitations of Article 13D. It therefore also remains open to the District 

to contend that such a theory cannot support monetary relief, because liability on that 

basis was not asserted in the pre-suit claim. 

Nothing in the pre-suit claim apprised the District of any potential liability, on any 

factual basis, under Article 13D. But under the cases discussed in the previous section, 

the foremost question is not whether a claim fully delineates the legal theories on which 

liability may be imposed but rather whether it sufficiently notifies the public entity of the 

operative facts, with particular emphasis on the acts or omissions by the entity on which 

an award of damages may be predicated. (See Stockett, supra, 34 Cal.4th at p. 446 [claim 

“need only ‘fairly describe what [the] entity is alleged to have done’ ”].)

Here the pre-suit claim rested on two acts by the District: using groundwater 

proceeds for purposes outside those specified in section 26.3 of the District Act; and 

setting the charge at an excessive level in order to defray these improperly incurred 

expenses. In its trial brief, Great Oaks alleged that the District had violated the 

substantive limitations of Article 13D by (1) charging a disproportionate part of the fee to 

non-agricultural users (see Art. 13D, § 6, subd. (b)(3)), as reflected in the differential in 

rates as between agricultural and non-agricultural extractions;18 (2) charging Great Oaks 

 

18

 Great Oaks acknowledged that this differential was mandated by the District 

Act. (See District Act, § 26.7, subd. (a)(3)(D).) It contended, however, that this mandate 

“must fall in the face of [Article 13D’s] subsequent constitutional requirement.” (Citing 

Silicon Valley, supra, (2008) 44 Cal.4th 431.)
51

for services not used by or immediately available to it (see Art. 13D, § 6, subd. (b)(3)), in 

that extractors were required to pay for treated and imported water that they did not use; 

and (3) charging more than was required to provide the property related service on which 

the charge was predicated (see Art. 13D, § 6, subd. (b)(3)), in that the charge “ha[d] no 

relation to and exceed[ed] the costs of providing” whatever service the District provided 

to Great Oaks. 

Nothing in the pre-suit claim presaged an attempt to impose liability based on the 

differential in rates between agricultural and non-agricultural extractions. Nor does the 

claim hint at the possibility that the District had exposed itself to liability by charging for 

services not readily available to the extractor. It follows that no monetary relief can be 

predicated on either of these theories. 

However, the factual predicate for the third theory noted above closely resembles 

the factual predicate for the District Act claims asserted by Great Oaks prior to suit. The 

pre-suit claim asserted that the District was overcharging extractors by assessing them for 

activities not authorized by the District Act; the third Article 13D theory asserted that the 

District was overcharging extractors by assessing them more than was required to provide 

the property-related services the District rendered to them. The only difference between 

the two theories is that the first posited charges for activities beyond those permitted to be 

financed by the charge, while the second posited charges beyond those actually provided 

to extractors by the District. Given the complex context of these charges, we cannot say 

that the factual variance between these two theories is so great as to flatly preclude 

monetary relief based on Article 13D. Much may depend on the actual facts that might 

be found in support of this theory. The trial court made no pertinent findings, but we 

cannot say that it would be categorically foreclosed on remand from finding facts 

sustaining this theory and nearly enough resembling the facts set forth in the pre-suit 
52

claim to permit monetary relief. Monetary relief appears to be foreclosed, however, on 

the other theories of liability suggested by Great Oaks under Article 13D.

II. District Act

A. Introduction

As noted above, the only objection originally asserted by Great Oaks was that the 

District had violated the District Act by spending proceeds of the groundwater fee on 

activities for which the Act did not authorize such expenditures, and by overcharging 

extractors in order to defray these unauthorized expenses. (See Background pt. A, ante.) 

This theory was pursued through trial on the basis of multiple subsidiary allegations, 

most of which the court found “not supported by the evidence.” The court was 

persuaded, however, that “the District abused its discretion, and violated Section 26.3 of 

the District Act, when fixing the Plaintiff’s groundwater charges,” in that the charges 

were not based upon cost of service, and that a “disparity” existed “between actual cost 

of benefits conferred on Great Oaks and the charges imposed” on it. It cited expert 

testimony as well as an April 2000 independent audit report “which indicated that the 

‘District’s cost of service calculations may no longer be valid especially with respect to 

servicing North vs. South County . . . the revenue recovered from one or more of the 

District’s customer classes may be subsidizing those from other classes . . . the District 

should review its agricultural water pricing practice for adequacy and fairness.’ ” The 

court noted that the District “did not change its policy” despite this report. 

The court also found that the District had abused its discretion “with regards to 

spending.” Specifically, the District (1) “improperly used groundwater revenue for 

activities not within the scope of Section 26.3 of the Act”; (2) “unwisely commingled 

groundwater revenue with other monies”; and (3) overcharged Great Oaks by (a) overbudgeting for “employees, cost of equipment and water contract purchases,” (b) “placing 
53

the excess money in its reserve fund,” and (c) failing to credit these surpluses back to 

Great Oaks “when appropriate.” 

B. Standard and Scope of Review

1. Background

In its Phase I trial brief the District argued that the court was obliged to apply a 

highly deferential standard of review to Great Oaks’s claims that the District had violated 

the District Act in fixing the groundwater charge and spending the proceeds. It 

contended that these actions could only be overturned if Great Oaks demonstrated that 

they were “so palpably unreasonable and arbitrary as to indicate that [the District] abused 

its discretion as a matter of law.” It asserted that the matter was governed by the 

principles applicable to “judicial review of a legislative or quasi-legislative action,” 

which is to be conducted “under ordinary mandamus, and . . . limite[d to] an examination 

of the proceeding to determine whether the agency’s action was arbitrary, capricious, or 

entirely lacking in evidentiary support, or whether the agency has failed to give the 

notices and follow the procedures required by law.” (Citing Harris v. Civil Service Com.

(1998) 65 Cal.App.4th 1356, 1363.) In addition, the District asserted, Great Oaks “ha[d] 

the burden to show that no substantial evidence supported the District’s determination of 

the groundwater rates.” 

In its reply to the District’s trial brief, Great Oaks failed to meet these assertions 

squarely. Rather, in a section of the brief purporting to address the applicable standard of 

review, it asserted that under authority applying Article 13D, courts are to exercise their 

independent judgment on the question “whether assessments, fees and charges are 

proportional to the benefits received by those paying the assessment, fee or charge.” 

(Citing Silicon Valley, supra, 44 Cal.4th 431.) It then offered this sentence: “Because 

the groundwater charge involves Proposition 218 application, neither the substantial 

evidence test nor the arbitrary and capricious test applies in determining whether the 
54

District has complied with its Act.” It completed its evasion of the issue by observing 

that matters of statutory construction raise only questions of law, followed by a recitation 

of rules of statutory construction. 

The trial court gave no indication of the standard of review it applied to the 

District Act claims other than to declare that the District had abused its discretion in 

fixing the charge and in spending the revenues received from it.

2. Rule of Decision in Trial Court

The District was quite correct to tell the trial court that the District Act claims 

were challenges to quasi-legislative acts and, as such, should be evaluated under the 

“arbitrary and capricious” standard of review. An administrative agency’s decision to 

impose a fee, charge, or other exaction is a quasi-legislative act. (See Homebuilders 

Ass’n of Tulare/Kings Counties, Inc. v. City of Lemoore (2010) 185 Cal.App.4th 554, 561 

[city’s adoption of development impact fees was quasi-legislative act]; Shapell Indus.,

Inc. v. Governing Bd. (1991) 1 Cal.App.4th 218, 231 (Shapell Industries) [same, school 

district’s adoption of facilities fee]; Balch Enterprises, Inc. v. New Haven Unified Sch. 

Dist. (1990) 219 Cal.App.3d 783, 791 [same]; Carlton Santee Corp. v. Padre Dam Mun. 

Water Dist. (1981) 120 Cal.App.3d 14, [rules and rates for water and sewer service]; 

Kahn v. East Bay Mun. Util. Dist. (1974) 41 Cal.App.3d 397, 409, quoting City Council 

v. Superior Court (1960) 179 Cal.App.2d 389, 393 [“ ‘The fixing or refixing of rates for a 

public service is legislative, or at least quasi legislative.’ ”].) 

An agency also exercises quasi-legislative power when it decides how to manage 

and spend the funds under its control. (See California Assn. of Professional Scientists v. 

Department of Finance (2011) 195 Cal.App.4th 1228, 1232, quoting Tirapelle v. Davis

(1993) 20 Cal.App.4th 1317, 1323 [state personnel department’s authority to set salaries 

described as “ ‘quasi-legislative’ ”]; SN Sands Corp. v. City and County of San Francisco

(2008) 167 Cal.App.4th 185, 191 [agency’s award of contract, and acts leading up to it, 
55

are quasi-legislative]; Carmel Valley Fire Protection Dist. v. State (2001) 25 Cal.4th 287,

302 [challenged budget measures were “an expression of the Legislature’s essential duty 

to devise a reasonable budget”]; Scott v. Common Council (1996) 44 Cal.App.4th 684, 

688 [trial court’s order invalidating city council’s elimination of funding for city 

attorney’s investigators raised “the question of the power of the trial court to interfere 

with the legislative process of adopting a budget”]; Association for Retarded Citizens v. 

Department of Developmental Services (1985) 38 Cal.3d 384, 390-391 [applying 

standard of review for quasi-legislative action to spending directives issued by 

department director; holding them void as beyond statutory authority]; American Canyon 

Fire Protection Dist v. County of Napa (1983) 141 Cal.App.3d 100, 106 [distribution of 

funds by county board was quasi-legislative]; Board of Supervisors v. California 

Highway Commission (1976) 57 Cal.App.3d 952, 960 [in determining when highway 

project should “funded and constructed ,” highway commission “acted as a legislative 

body, exercising quasi-legislative powers”].) 

The quasi-legislative actions of administrative agencies are generally reviewed by 

a proceeding in ordinary mandate, in which judicial review is constrained by several 

principles. Foremost of these is that the judicial inquiry is generally “ ‘ “confined to the 

question whether the classification is ‘arbitrary, capricious, or [without] reasonable or 

rational basis.’ ” ’ ” (American Coatings Assn., Inc. v. S. Coast Air Quality Dist. (2012) 

54 Cal.4th 446, 460 (American Coatings).)19 

As noted above, the District duly invoked this deferential standard of review in its 

trial brief, while Great Oaks evaded the issue. On appeal Great Oaks contends that this 

 

19

 A quasi-legislative act will also be invalidated if it exceeds the authority 

delegated by the Legislature (see Diageo-Guinness USA, Inc. v. State Bd. of Equalization

(2012) 205 Cal.App.4th 907, 915) or if the delegation itself is constitutionally infirm (see 

Kasler v. Lockyer (2000) 23 Cal.4th 472, 491-492). Neither party appears to have 

alluded to either of these potential grounds of invalidation.
56

standard does not apply here because “this is not a review of a proceeding in mandamus, 

but is instead the review of the trial court’s decisions on issues and procedures agreed and 

consented to by the District.” This highly ambiguous statement suggests two possible 

grounds for holding the above standard of review inapplicable: first, that the trial court 

did not grant relief in mandamus—in fact it expressly denied such relief; and second, that 

the parties’ agreed method of trying the case excused the court from applying this 

standard of review. Neither premise is sound.

It is true that the District stipulated to certain procedures that appear unusual in a 

proceeding of this kind. (See discussion in next sub-part.) But we see no indication that 

it waived the deferential standards ordinarily limiting judicial review of quasi-legislative 

actions. Nor is there any sign that the court believed the principles governing review by 

mandate were wholly inapplicable. The court apparently accepted as a rule of decision 

that the District could be liable only if found to have abused its discretion; to that extent 

the court’s statement of decision echoes the general principles governing proceedings in 

mandate. (See American Coatings, supra, 54 Cal.4th at p. 460.) So far as we can tell, the 

court simply overlooked the more stringent test applied in the present context to 

determine whether an abuse of discretion occurred.

Nor does the court’s denial of relief in mandate exempt this action from these 

limitations on judicial review. In the first place, the court’s decision not to grant writ 

relief seems to rest on the premise that as framed by Great Oaks, the prayer for such relief 

was moot. In its cause of action for a writ of mandate, Great Oaks alleged that the 

District had “abused its discretion” in five particulars, and prayed for a writ directing the 

District to take or refrain from six specified actions.20 The court explained its denial of 

 

20

 Great Oaks prayed that the District be directed (a) to “limit future assessment of 

groundwater charges against Plaintiff to only the amount necessary to fund the specific 

purposes authorized by the [District] Act,” (b) to “limit spending of groundwater charge 

monies to the purposes set forth in § 26.3 of the Act,” (c) to “acknowledge that the setting 
57

writ relief by stating that “the illegal fee collection activity . . . has already occurred.” 

The court apparently viewed the writ as appropriate only for prospective relief. In this 

regard the court appeared to equate writ relief with injunctive relief—which it also 

denied, at the same time and on the same grounds.

The court may also have concluded that writ relief was inappropriate because an 

adequate remedy at law existed in a simple award of damages. (See Civ. Code, § 1086 

[“The writ must be issued in all cases where there is not a plain, speedy, and adequate 

remedy, in the ordinary course of law.”].) In fact, however, no legal basis for such an 

award has ever been identified. Apparently it never occurred to the parties or the court to 

inquire into the availability of a simple money judgment against the District based upon 

claimed violations of the Act. Yet when it comes to awarding damages against public 

entities, sovereign immunity is the rule and liability is the exception. (See In re 

Groundwater Cases (2007) 154 Cal.App.4th 659, 689 [public entity defendants could be 

held liable for alleged violations of water safety standards “only if there is a statute 

subjecting them to civil liability. [Citation.] In the absence of such a statute, . . . 

sovereign immunity bars the suit.”]; ibid., quoting Legis. Com. com., 32 West’s Ann. 

Gov.Code (1995 ed.) foll. § 815, p. 167 [“Government Code section 815 . . . ‘abolishes 

all common law or judicially declared forms of liability for public entities, except for 

such liability as may be required by the state or federal constitution[.]’ ”].) 

 

of groundwater charge rates to encourage the purchase of treated water is a violation of 

Section 26.3 of the Act,” to (d) “not use groundwater charges to provide treated surface 

water; alternately, . . . to revise the Groundwater Charge zones to reflect the specific 

purposes of Section 26.3 of the Act, including but not limited to the distinction between 

[those] who benefit and those who do not benefit from treated surface water,” (e) to 

“collect groundwater charges and fines from all persons producing groundwater in strict 

accordance with the Act,” and (f) to “obtain a favorable vote of zone residents before 

increasing groundwater charges.” 
58

Although the parties have described this action at various times as an action for a 

refund, they have never offered statutory or other authority for entering a money 

judgment in such an action. In such circumstances the appropriate remedy appears to be 

a writ of mandate directing the District to refund all or part of the charges paid, and the 

action is governed by the standards of review described above. (See Balch Enterprises, 

Inc. v. New Haven Unified School Dist., supra, 219 Cal.App.3d 783, 791 [action for 

refund of school facility fees, “[a]s an action challenging a quasi-legislative action,” was 

“one of ordinary mandamus . . . governed by more limited standards of review”]; Shapell 

Industries, supra, 1 Cal.App.4th at p. 225 [affirming issuance of mandate directing 

refund of school facility fee]; Warmington Old Town Associates v. Tustin Unified School 

Dist. (2002) 101 Cal.App.4th 840, 867 [same]; Frost v. Trustees of Cal. State University 

and Colleges (1975) 46 Cal.App.3d 225, 228 [“Mandamus is the proper remedy to 

compel the Trustees of the California State University and Colleges to pay back salary 

wrongfully withheld from a state university academic employee.”]; Western/California, 

Ltd. v. Dry Creek Joint Elementary Sch. Dist. (1996) 50 Cal.App.4th 1461, 1473, 1492 

[reversing, on substantive grounds, writ directing refund of facility fee]; cf. Schoderbek v. 

Carlson (1980) 113 Cal.App.3d 1029, 1037 [mandate not available to secure refund of 

property taxes where statutory action for refund supplied adequate remedy at law], 

disapproved on another point in Woosley v. State of California (1992) 3 Cal.4th 758, 

792.)

Thus, while the trial court apparently denied writ relief in favor of a monetary 

judgment, it appears that the judgment can only be upheld if viewed as a grant of writ 

relief directing payment of money. Great Oaks’s contention that we are not 

“review[ing] . . . a proceeding in mandamus” is thus revealed as only superficially 

correct, at best. In substance that is exactly what we are doing.
59

Finally, and most fundamentally, the standard of review in an action seeking to 

overturn the quasi-legislative acts of an administrative agency does not depend on the 

form in which the challenge is framed, or on the nature of the relief prayed for. In Lewin 

v. St. Joseph Hosp. of Orange (1978) 82 Cal.App.3d 368 (Lewin), a doctor argued that a 

decision to exclude him from a hospital staff must be reviewed under the more searching 

standards governing administrative mandate (see Code Civ. Proc., § 1094.5) because it 

amounted to an adjudication of his rights. The court rejected this contention because the 

decision rested on a policy decision by the hospital to maintain a closed staff. 

“ ‘Generally speaking, a legislative action is the formulation of a rule to be applied to all 

future cases, while an adjudicatory act involves the actual application of such a rule to a 

specific set of existing facts.’ ” [Citations.] . . . . What was involved was the 

formulation, or to be more precise, the retention of a rule of general application, not the 

application of a rule to a specific set of facts or a particular individual. [¶] . . . [W]e are 

confident the limited judicial review applicable to the quasi-legislative actions of a 

governmental administrative agency is also appropriately applied to judicial review of 

rule-making or policy-making actions of a nonprofit hospital corporation.” (Lewin, 

supra, 82 Cal.App.3d at pp. 383-384; see id. at p. 385, citing Ascherman v. St. Francis 

Memorial Hosp. (1975) 45 Cal.App.3d 507, 511-512 [noting that restrictive scope of 

review in cited case “was in no way based on mandate considerations”].) 

In other words, here as in so much of the law, substance must prevail over form. 

This is necessary to effectuate the fundamental policy concerns—in part, structural 

constitutional concerns—restricting judicial review of quasi-legislative actions. “The 

courts exercise limited review of legislative acts by administrative bodies out of 

deference to the separation of powers between the Legislature and the judiciary, to the 

legislative delegation of administrative authority to the agency, and to the presumed 

expertise of the agency within its scope of authority.” (California Hotel & Motel Assn. v. 
60

Industrial Welfare Com. (1979) 25 Cal.3d 200, 211-212, fn. omitted; see Shapell 

Industries, supra, 1 Cal.App.4th at p. 230; Western States Petroleum Assn. v. Superior 

Court (1995) 9 Cal.4th 559, 572 (Western States Petroleum).) Those concerns do not 

shrink, let alone disappear, simply because a challenge takes a form other than a petition 

for mandate. Here the Legislature has delegated to the District the authority to fix a 

groundwater extraction fee according to specified criteria, and to spend the proceeds of 

that fee within given guidelines. For a court to simply substitute its own judgment for the 

judgment of the body thus charged with legislative power would violate the separation of 

powers and infringe upon the Legislature’s prerogative to delegate its authority to duly 

constituted administrative entities.

We conclude that the question whether the charge complies with the District Act 

should have been determined in accordance with the restrictive principles generally 

governing judicial review of quasi-legislative action. 

3. Extrinsic Evidence

Although we see no sign that the District forfeited the restrictive standard of 

review described above, the same cannot be said for the principle, first cited in its 

opening brief here, that judicial review of quasi-legislative acts “is ordinarily limited to 

the administrative record.” (Citing Western States Petroleum, supra, 9 Cal.4th 559, 575-

576; see American Coatings, supra, 54 Cal.4th 446, 460.) The District’s failure to invoke 

this principle in the trial court, its active participation in the rule’s wholesale disregard, 

and its failure to produce or identify an administrative record, preclude application of this 

rule at this late date.

First, the District has never identified an administrative record to which review 

should or can be confined. Indeed, as we have previously mentioned, at least some 

crucial documents that apparently led up to the adoption of the 2005-2006 groundwater 

extraction rates appear to be absent from the appellate record. (See fn. 12, ante.) In 
61

addition, an administrative record would ordinarily include some record of the hearings 

leading up to the adoption of the challenged rates and any objections or other submissions 

placed before the District in connection with those hearings. We see no such materials in 

the record.

Since the administrative record is an unknown quantity in this matter, and the rule 

confining review to that record seems never to have been pressed upon the trial court, it is 

impossible to say that the trial court erred by failing to limit review to such a record. 

Further, any error in this regard was clearly invited by both parties when they joined in 

stipulating, prior to the commencement of Phase I of trial, to the admission of “the 

declarations, deposition testimony and exhibits” accompanying their respective trial 

briefs as well as to additional declarations to be submitted by both parties, with each 

reserving the right to cross-examine the other’s declarants. Based on this stipulation, 

Great Oaks offered several newly prepared declarations as well as 144 additional 

documents comprising some 13 volumes of the appellate transcript. The District 

responded with its own declarations and nearly 200 documents spanning 33 volumes and 

some 9,500 pages. The trial court itself placed seven exhibits on the record, spanning 

two volumes and taking up some 323 pages. The resulting 55-volume appendix 

comprises 15,621 pages including not only trial testimony but deposition excerpts and 

other materials apparently produced in discovery. Both parties also called live witnesses 

at trial, producing some four days of testimony in Phase I, with neither side objecting to 

this procedure. At the conclusion of the Phase I trial, the attorneys stipulated in open 

court that all exhibits that had been marked for identification were admitted into 

evidence. 

The District thus actively participated in trying this case entirely free of the rule it 

now seeks to invoke on appeal. Under the circumstances we must conclude that to the 
62

extent the trial court’s admission of such evidence was error, it was invited. (See 9 

Witkin, supra, Appeal, § 389, p. 447.) 

However, the fact that the court cannot be faulted for admitting this evidence does 

not mean that it was free to depart from all constraints on judicial review of quasilegislative actions. Regardless of the evidence before it, “[a] court reviewing a quasilegislative act cannot reweigh the evidence or substitute its own judgment for that of the 

agency.” (Plastic Pipe & Fittings Assn. v. California Building Standards Com. (2004) 

124 Cal.App.4th 1390, 1406.) Even when extra-record evidence has been received, “the 

determination whether the decision was arbitrary, capricious or entirely lacking in 

evidentiary support must be based on the ‘evidence’ considered by the administrative 

agency.” (Lewin , surpa, 82 Cal.App.3d 368, 387, fn. 13, citing Brock v. Superior Court

(1952) 109 Cal.App.2d 594, 607, 608.) “If courts were to independently weigh 

conflicting evidence in order to determine which side had a preponderance of the 

evidence, this would indeed usurp the agency’s authority and violate the doctrine of

separation of powers.” (See Western States Petroleum, supra, 9 Cal.4th at p. 576.) Thus, 

while the parties’ stipulation entitled the trial court to consider the evidence before it for 

purposes of illuminating the controversy, it should have confined itself to the question 

whether the challenged actions were arbitrary, capricious, or wholly unsupported by the 

evidence before the District.

Certainly the District’s actions could not be invalidated based solely or primarily 

on the basis that expert witnesses, testifying after the fact, expressed disagreement with 

the District’s approach to the issues at hand. The Supreme Court has indicated that while 

courts may admit evidence to establish that an agency has “adequately considered all 

relevant factors,” they cannot allow the issue to become “whether the decision was wise 

or scientifically sound in light of the extra-record evidence,” because “such questions are 

not for the courts to answer.” (Western States Petroleum, supra, 9 Cal.4th at p. 577.) 
63

Here, given the parties’ mutual agreement to try the matter in an unorthodox manner, the 

testimony of such witnesses might reasonably be consulted on matters such as industry 

practice or applicable accounting concepts. But testimony merely taking issue with the 

suitability of the District’s methodology could not sustain a determination that the 

District’s actions were arbitrary, capricious, or entirely unsupported by evidence.

C. Application

1. Introduction

In analyzing any challenge to quasi-legislative action, the first step is to clearly 

identify the manner or manners in which the action is claimed to infringe the law, and the 

legal principle or principles it infringes. It is not enough for a challenger to say that some 

ruling by the agency was unlawful; it is necessary to clearly delineate how the action was 

unlawful, i.e., what rule, standard, or provision of prescriptive law it is alleged to have 

transgressed. Only then is it possible to ascertain the rule of decision applicable to the 

claim. For these purposes, it is useful to subdivide the potentially relevant issues into the 

three familiar categories: questions of law, questions of fact, and questions entrusted to 

the decisionmaker’s discretion.

A determination in the third of these categories—a purely discretionary 

determination—requires the highest degree of judicial deference. Such a determination 

will often include a large normative component; an example would be whether a 

particular methodology is fair or reasonable. Such a question is likely to call most 

heavily upon the agency’s presumptive expertise, meaning essentially its familiarity with 

the competing interests, risks, benefits, and other concerns that must go into any reasoned 

policy assessment. Such determinations are also likely to lie nearest the heart of the 

power entrusted to the agency by the Legislature. In both of these senses, the competence

of the agency is squarely implicated, and the court’s presumptive relative lack of 

competence poses the most acute hazard.
64

For determinations in the second category—administrative findings of fact—the 

basic rule is that an agency’s finding must be sustained unless it is “ ‘entirely lacking in 

evidentiary support.’ ” (American Coatings, supra, 54 Cal.4th 446, 460; Fullerton Joint 

Union High School Dist. v. State Bd. of Education (1982) 32 Cal.3d 779, 786, abrogated 

on another point in Board of Supervisors v. Local Agency Formation Com. (1992) 3 

Cal.4th 903, 917-918.) This “ ‘is not the same as a substantial evidence test.’ ” 

(American Coatings, supra, 54 Cal.4th at p. 461, quoting Golden Drugs Co., Inc. v. 

Maxwell-Jolly (2009) 179 Cal.App.4th 1455, 1466, and citing Shapell Industries, supra, 

1 Cal.App.4th at p. 232.) It is not, however, so abjectly deferential as to amount to no 

review at all. (See Shapell Industries, supra, at p. 232.) Essentially the question is 

whether the evidence before the agency afforded a rational basis for the challenged 

finding. If it did, any further inquiry must end and the finding must be accepted for 

purposes of judicial review.

In reviewing an agency’s determinations on questions of law, courts employ a less 

deferential standard than in either of the other two categories. This reflects the fact that 

our tripartite system of government charges the judiciary, not the legislative or executive 

branches, with the final responsibility to determine the meaning of laws. (See Yamaha 

Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1, 11, fn. 4 (Yamaha 

Corp.), citing Whitcomb Hotel, Inc. v. Cal. Emp. Com. (1944) 24 Cal.2d 753, 757.) Some 

deference to an agency’s interpretation of applicable law is nonetheless warranted, or at 

least may be warranted, depending on context. In particular, if the agency is “interpreting 

a statute within its administrative jurisdiction, it may possess special familiarity with 

satellite legal and regulatory issues. It is this ‘expertise,’ expressed as an interpretation 

(whether in a regulation or less formally . . .), that is the source of the presumptive value 

of the agency’s views. An important corollary of agency interpretations, however, is 

their diminished power to bind. Because an interpretation is an agency’s legal opinion, 
65

however ‘expert,’ rather than the exercise of a delegated legislative power to make law, it 

commands a commensurably lesser degree of judicial deference.” (Yamaha Corp., supra, 

19 Cal.4th at p. 11.) 

2. Miscalculation of Charge

The trial court first found that the District had “abused its discretion, and violated 

Section 26.3 of the District Act, when fixing the Plaintiff’s groundwater charges.” This 

statement conveys not how the District is thought to have abused its discretion, but when 

it did so. The ensuing discussion of the evidence suggests that the abuse of discretion 

consisted of (1) failing to “levy charges based on a cost of service analysis” and 

(2) relying on a “determination of the cost of benefits to Great Oaks” that was 

“excessive.” These subsidiary findings were expressed somewhat obliquely, i.e., by 

attribution to Thomas O’Rourke, a forensic accountant called by Great Oaks, whose 

opinions the court apparently meant to adopt, in part, as its own. This is an unfortunate 

mode of proceeding, particularly because the tenor of the findings thus adopted is not 

entirely clear. The court explicitly rejected the O’Rourke testimony insofar as it rested 

on the testimony of another Great Oaks expert, James Ulrick, who had testified in essence 

that due to hydrological barriers between some District projects and the wells operated by 

Great Oaks, the costs of those projects could not properly be assessed to Great Oaks. In 

rejecting that opinion, the court also rejected the O’Rourke testimony depending on it. 

The court presumably made some effort to quantify the effects of this partial rejection 

before it awarded “damages” to Great Oaks. Its methodology in doing so, however, is 

not apparent.

Further, we detect considerable tension between the assertion that the District “did 

not levy charges based on a cost of service analysis” and the immediately ensuing 

statement that “the determination of cost of benefits to Great Oaks was excessive.” The 

first statement seems to posit that the District failed entirely to take costs of service into 
66

account in fixing the groundwater charge. But the second statement posits that the 

District had in fact “determin[ed] . . . the cost of benefits to Great Oaks,” but had 

overstated them. If the District did not base the charge on cost of service, it had no 

apparent occasion to determine those costs. 

The tension between these findings can be traced, in part at least, to the court’s 

failure—and an underlying failure by O’Rourke and Great Oaks—to distinguish among 

three potential faults in the District’s determination of the groundwater charge: 

(1) failing to base the charge on costs (i.e., basing it on something else); (2) basing the 

charge on cost items not properly attributable to groundwater extractors; and 

(3) overstating costs otherwise properly attributed to extractors.

The conflation of these three concepts pervades O’Rourke’s testimony.21 Thus he 

appeared to suggest on the one hand that the District had wholly failed to base the 

groundwater charge on an assessment of costs, declaring that it “does not levy its 

groundwater charges in accordance with any cost-of-service analysis,” and that it had 

failed to comply with “standard accounting and costing principals [sic],” which “call for a 

fair matching of revenue and expenses for measuring performance or pricing with the 

service activities of the governmental unit.” It elsewhere appeared, however, that his 

primary criticism was the District’s asserted failure to properly define the costs it sought 

to recoup through the charge. The “underlying assumption” of the District’s policies, he 

testified, was that “there will be a general averaging of the cost of water across the entire 

Water District.” In his view, a proper cost-of-service methodology would be based 

 

21

 Much of O’Rourke’s testimony at trial is at best only semi-intelligible, perhaps 

due to mistranscription. An example is this pronouncement: “Cost of service obligations 

require you to keep some contract as to what the nexus or the correlation between the cost 

of recurred activity and the useful application of those incurred costs apply.” Fortunately 

the testimony appeared to largely track the opinions he expressed in a declaration, which 

was also before the court. 
67

entirely on the cost of directly replacing groundwater: “[Y]ou need to be able to establish 

a local area cost of providing injection service; in order to establish how much service—

how much water is flowing as a replacement of groundwater.”22

This last quotation seems to reflect a central point of O’Rourke’s testimony: that 

the District was violating the District Act by charging groundwater extractors for 

services other than direct recharge of the groundwater basin. He expressed this opinion 

most clearly in the following passage of his declaration: “In accordance with § 26.3 of 

the District Act groundwater charges are to be levied and spent to pay for the cost of 

services that benefit all who rely directly or indirectly on the groundwater supplies of the 

zone or zones. In other words, the groundwater charges can be levied in order to recoup 

the [District’s] costs in maintaining and recharging the groundwater basins. However, 

[the District] does not levy its groundwater charges in accordance with any cost-ofservice analysis.” (Italics added.) He opined that “it would be both customary and 

appropriate for [the District] to separately account for groundwater charge money so that 

it is spent only in accordance with the requirements of the District Act.” Instead, he 

declared, the District was using groundwater revenues to finance “projects” that were 

“not within the scope of § 26.3,” including to pay for “any activity of the entire Water 

Utility Enterprise, even if it does not relate to groundwater supplies.” (Italics original.) 

The District, he declared, failed to “separately account for the groundwater charge money 

so that it is spent only in accordance with the requirements of the District Act.” Further, 

“[w]hile it [wa]s possible for [the District] to account for revenues and related 

expenditures, determine cost of service[,] and properly budget its activities and projects 

to be fully consistent with its duties and obligations under Section 26.3, [the District] 

 

22

 Later O’Rourke asserted that the District engaged in various budgeting 

practices that resulted in the exaggeration of certain projected cost items, producing 

oversized reserves; we discuss this aspect of his testimony in the following section.
68

does not do so.” In contrast to a provision of the Act permitting the use of ad valorem tax 

revenues to pay general District expenses, he continued, “[s]ection 26.3 . . . does not 

permit groundwater charges to be used for such general expenses.” Groundwater charges 

were also “com[m]ingled in the Water Utility Enterprise Fund and used for non 

groundwater supply uses. Also, groundwater charge proceeds are used for Watershed 

Funds purposes. Theses [sic] are not purposes covered by §26.3.” 

Given this pervasive reliance on O’Rourke’s interpretation of the District Act, and 

particularly section 26.3, it is not surprising that in a document entitled “Citation to 

Evidence,” Great Oaks cited O’Rourke as the “Source” for the “Fact” that “[t]o comply 

with the groundwater provisions of the Act there should be separate accounting to insure 

groundwater charge funds are only spent on projects authorized under §26.3 of the Act.” 

But of course the meaning of the District Act is not a “fact” subject to evidentiary 

proof. It is a pure question of law. It is a matter, furthermore, as to which the witness 

was never shown to possess any expertise, or for that matter competence. He was an 

accountant, not an attorney, and he gave no testimony of a type that an accountant might 

give bearing on the meaning of a statute—such as how similar statutes, if any, were 

understood or applied in contexts with which he was familiar. So far as the record shows, 

he simply took it upon himself—or had it given to him by Great Oaks—to give an 

interpretation of section 26.3 and to base much of his own opinion on that interpretation, 

which in turn furnished a foundation for many if not most of the challenges sustained by 

the court.

The trial court gave no explanation for its adoption of O’Rourke’s interpretation of 

the District Act in preference to that implicitly adopted and applied by the District. It 

simply declared itself “convinced” by his testimony. Of course the meaning and effect of 

the statute was ultimately a question for the courts, and to that extent the District’s 

interpretation could not bind the trial court. (See Murphy v. Kenneth Cole Productions, 
69

Inc. (2007) 40 Cal.4th 1094, 1106, fn. 7 [“[w]hile the [agency’s] construction of a statute 

is entitled to consideration and respect, it is not binding and it is ultimately for the 

judiciary to interpret this statute”].) But it was a matter presumptively within the 

District’s competence and expertise, such that the trial court should have accorded it 

“ ‘ “great weight and respect.” ’ ” (American Coatings, supra, 54 Cal.4th 446, 461, 

quoting Yamaha Corp., supra, 19 Cal.4th 1, 12.) There is no indication that the court did 

so. 

In all these respects the trial court’s treatment of the issue might be dismissed as 

harmless if it were clear that the construction of section 26.3 put forward by Great Oaks 

in the guise of expert accounting testimony was correct. But by treating that question as 

a matter of evidentiary proof, the parties excused themselves from presenting more 

relevant data, such as legislative history, bearing on the purely legal question of what 

costs could properly be assessed to groundwater extractors under section 26.3 This 

leaves us with nothing to work from except the text of the statute. We find nothing there 

compelling the conclusion that, as O’Rourke’s declared, “The groundwater charge is 

intended [only] to compensate the District for its direct costs of providing injection or 

infiltration services to augment the takes from specific areas of groundwater pumping.” 

(Italics added.) Or as he put it at trial, “[Y]ou need to be able to establish a local area 

cost of providing injection service[] in order to establish how much service—how much 

water is flowing as a replacement of groundwater.” 

Without foreclosing the possibility that this interpretation, or something like it, is 

correct, we note that it appears to require reading language into the statute that does not 

appear there. Section 26.3 of the District Act enumerates four “purposes” for which the 

“proceeds” of the groundwater charge “are authorized and shall be used exclusively.” 

The first three are to “pay the costs” of (1) facilities for importing water, (2) purchases of 

imported water, and (3) “facilities which will conserve or distribute water within such 
70

zone or zones, including facilities for ground water re-charge, surface distribution, and 

the purification and treatment of such water.” (District Act, § 60-26.3, subds.(1) - (3).) 

The fourth permitted purpose is to discharge indebtedness incurred for any of the first 

three. (District Act, § 60-26.3, subd.(4).)23 Nothing in the language of this provision 

limits the application of proceeds to activities resulting directly in recharge of the 

groundwater basin, as distinct from conservation and maintenance of groundwater 

 

23

 As pertinent here, section 26.3 provides: “Ground water charges levied 

pursuant to this act are declared to be in furtherance of district activities in the protection 

and augmentation of the water supplies for users within a zone or zones of the district 

which are necessary for the public health, welfare and safety of the people of this State. 

The ground water charges are authorized to be levied upon the production of ground 

water from all water-producing facilities, whether public or private, within said zone or 

zones of the district for the benefit of all who rely directly or indirectly upon the ground 

water supplies of such zone or zones and water imported into such zone or zones.

“The proceeds of ground water charges levied and collected upon the production 

of water from ground water supplies within such zone or zones of the district are 

authorized and shall be used exclusively by the board for the following purposes:

“1. To pay the costs of constructing, maintaining and operating facilities which 

will import water into the district which will benefit such zone or zones, including 

payments made under any contract between the district and the State of California, the 

United States of America, or any public, private or municipal utility.

“2. To pay the costs of purchasing water for importation into such zone or zones, 

including payments made under contract to the State of California, the United States of 

America, or any public, private or municipal utility.

“3. To pay the costs of constructing, maintaining and operating facilities which 

will conserve or distribute water within such zone or zones, including facilities for 

ground water re-charge, surface distribution, and the purification and treatment of such 

water.

“4. To pay the principal or interest of any bonded indebtedness or other 

obligations incurred by the district on behalf of such zone or zones for any of the 

purposes set forth in paragraphs 1, 2 and 3 of this section.
71

supplies—or indeed, of overall water supplies.24 On the contrary, the opening sentence 

declares that the charge is intended to further “the protection and augmentation” (italics 

added) not merely of groundwater, but of “the water supplies . . . of the district.” 

(§ 26.3.) By its terms the Act authorizes the expenditure of groundwater revenues not 

only to build facilities for water importation, and to pay for imported water, but also to 

“conserve or distribute water within such zone or zones, including facilities for ground 

water re-charge, surface distribution, and the purification and treatment of such water.” 

(Id., subd. (3), italics added.) In the absence of a more cogent showing than Great Oaks 

has thus far attempted, this language seems to express an intention that direct recharge of 

the groundwater basin is not the sole activity to which groundwater revenues may 

properly be applied, but that they may also be spent on all forms of “conserv[ation] or 

distribut[ion] [of] water within [a] zone,” including “surface distribution” and water 

“purification and treatment.” (Ibid.) On its face this language furnishes a complete 

answer to the recurring theme of the O’Rourke testimony that the charge was improperly 

predicated on the District’s costs in generating and distributing treated water.

Indeed, the foregoing language may be read as a ratification of the District’s

“conjunctive use” policy, which treated all forms of water as “fungible” and sought to 

equalize pricing accordingly. Elsewhere in its opinion the trial court appeared to 

conclude that this policy was not in itself a violation of the District Act. It declared that 

“Great Oaks is advantaged” by the policy, which “involves the coordinated management 

 

24

 Nor, incidentally, does this provision by its terms mandate or prohibit any 

particular methodology for fixing the charge; it regulates only the uses to which the 

proceeds are actually put. While this may amount to the same thing in practice, the 

statute provides no apparent basis for the attempt by Great Oaks to distinguish between a 

cost-of-service approach and one based on “revenue requirements.” The question is not 

whether the actuating financial necessity is designated a “cost” versus a “requirement,” 

but whether it is an expenditure of a type to which groundwater charge proceeds may be 

applied.
72

of both surface and groundwater in order to maximize the efficient use and preservation 

of the resource.” It then proceeded to cite only the District’s activities in direct recharge 

of groundwater. But it seems equally apparent that the provision of alternative supplies 

of water serves the long-term interests of extractors by reducing demands on the 

groundwater basin and helping to prevent its depletion. It is of course true that the shortterm interests of water retailers might be best served by maximizing demand, and thus by 

lower prices; but this merely reflects the reality that here as in many other situations, 

different policies may produce different kinds of benefits, sometimes of a competing or 

mutually exclusive nature. We see nothing in the record that would make it arbitrary, 

capricious, or irrational for the District to conclude that reduced demands on groundwater 

supplies benefit retailers by preserving the commodity on which their long-term viability, 

if not survival, may depend.25

This same reasoning casts doubt on the suggestion in the O’Rourke testimony and 

the trial court’s statement of decision that groundwater proceeds could not lawfully be 

applied to “subsidize” treated water. Again, without intending to foreclose legal 

arguments that the parties have not yet elected to make, we see nothing in the District Act

that requires the District to limit the extent to which groundwater proceeds may be

applied to treating and distributing surface water. Section 26.3 explicitly contemplates 

that groundwater revenues can be expended on such water. It explicitly contemplates that 

groundwater recharge is not the exclusive purpose to which the charge may be applied. 

This appears to vest in the District the discretion to determine how much groundwater 

revenue should be applied to such purposes. Accountant O’Rourke objected to the 

District’s apparently having selected a rate based in part on the intention to price treated 

 

25

 We are reminded of the song lyric from a half-century ago: “You don’t miss 

your water / Till your well runs dry.” (William Bell, “You Don’t Miss Your Water” 

(Universal Music Pub. Group 1961).) 
73

water competitively with groundwater, thus further reducing market pressures on the 

latter, and helping to preserve it. But if the Act permits the use of groundwater proceeds 

to “subsidize” treated water, the question of how much to do so seems one which the 

District is preeminently competent to answer, and the courts are not.

We have structured our discussion largely around the O’Rourke testimony because 

the trial court’s finding of violations of the District Act appears to have depended most 

heavily on that testimony. However the court also quoted the statement in a 2000 

independent audit that “ ‘[the] District’s cost of service calculations may no longer be 

valid especially with respect to servicing [n]orth vs. [s]outh County [customers] . . . the 

revenue recovered from one or more of the District’s customer classes may be 

subsidizing those from other classes . . . . the District should review its agricultural water 

pricing practice[s] for adequacy and fairness.’ ” (Italics added; bracketed material added 

to conform to quoted source.) The court noted that the District had failed to “change its 

policy in spite of the audit.” According to the quoted language, however, the audit was 

merely raising possibilities and questions about the District’s pricing practices, not 

condemning them.26 In an apparent attempt to address those questions, the District 

engaged another firm that prepared a lengthy study on the subject. While that report 

suggested that the District might consider various “further refinements” in its 

methodology, it is far from clear that anything in it points to an abuse of discretion in the 

District’s then-practices—let alone in the rates it adopted four or five years later. 

The trial court apparently relied largely on the studies just described for its 

conclusion that Great Oaks was “overcharged because of . . . discounts given to 

 

26

 The court omitted some language further indicating the tentative nature of the 

audit’s conclusions: “[T]he revenues recovered from one or more of the District’s 

customer classes may be subsidizing those from other classes, creating an inequitable 

situation. If this assertion is valid, it is not surprising, in light of the considerable growth 

in Santa Clara County and the evolving environmental mandates.” (Italics added.)
74

agriculture water users.” But the Act requires such “discounts,” declaring that the charge 

for agricultural water “shall not exceed one-fourth of the rate for all water other than 

agricultural water.” (District Act, § 26.7.) To be sure, the rates adopted by the District 

went well beyond this ratio; the 2005-2006 extraction charge for agricultural use was 

one-tenth of the charge for other extractors. The District defends this differentiation on 

the ground that, apart from the statutory mandate, “agricultural use puts less demands, 

including reliability demands, on the water supply.” We will not attempt to evaluate this 

rationale except to observe that it appears never to have been challenged by Great Oaks 

on any basis distinct from that of its challenge to the “subsidy” of treated water. 

The District Act manifestly vested the District with discretion to determine what 

the “discount” for agricultural extractions should be when it decreed a ratio “not 

exceed[ing]” a specified fraction. We see nothing in the record sustaining a conclusion 

that the District’s ten-to-one ratio was arbitrary, capricious, or irrational. Great Oaks 

offers no cogent criticism of the ratio adopted by the District, instead quoting the 

advisory reports while mysteriously asserting that the agricultural rate “is not at issue 

here.” The most cogent evidence on the reasonableness of the District’s ratio may be 

Great Oaks’s own schedule of rates, under which it charged agricultural customers less

than one-tenth of what it charged residential customers—$0.162 and $1.723 per 100 

cubic feet, respectively. While this is hardly conclusive, it casts still more doubt on the 

trial court’s conclusions, which apparently rested on recommendations of a purely 

suggestive and tentative character. We see no basis to conclude that the District acted 

arbitrarily or capriciously, or in defiance of the evidence, in adopting the ratio it adopted.

In sum, nothing we have found in this record supports a determination that the 

District’s adoption of the 2005-2006 groundwater extraction charge was arbitrary, 

capricious, or unsupported by evidence.
75

3. Misuse of Proceeds

The trial court also found that the District abused its discretion in spending the 

proceeds of the groundwater extraction charge. Although stated as a distinct finding, and 

based upon distinct aspects of the District’s conduct, this misuse-of-funds theory seems 

conceptually to be merely the other side of the miscalculation-of-costs theory discussed 

above. The chief distinction between the two seems to be remedial: an overcharge might 

warrant a refund, while the expenditure of funds on activities in violation of restrictions 

on their use might more logically trigger some other remedy, such as a prohibition of 

future such misapplications, or perhaps a transfer of funds from unauthorized activities to 

authorized activities, perhaps with a corresponding reduction in groundwater charges. 

Suffice it to say that this is another point on which proper analysis was impeded by the 

parties’ treatment of the matter as a garden-variety civil action, without focusing on the 

true nature of the obligations Great Oaks sought to enforce and the remedial 

consequences that flowed from such an analysis.

The court explained its misapplication-of-funds finding as follows: “The District 

improperly used groundwater revenue for activities not within the scope of Section 26.3 

of the Act. The District unwisely commingled groundwater revenue with other monies. 

The [District] over budgeted for employees, cost of equipment and water contract 

purchases to the detriment of Great Oaks by placing the excess money in its reserve fund, 

thus the Plaintiff was overcharged for groundwater fees and not credited back when 

appropriate.”

This finding also appears to rest largely on the testimony of Great Oaks 

accounting expert O’Rourke, who described several practices by which the District had 

built a large reserve fund at the expense of ratepayers. He first described a practice 

involving what he called “phantom employees,” whereby the District would budget an 

anticipated hire from the beginning of the financial period even though the position might 
76

not be filled, and the District might not intend to fill it, until months later. “[T]he person 

who’s budgeted wasn’t there the full budget period. So the net difference goes to 

reserves or becomes an increment of profit. Since they’re [a] ‘non for profit entity’ it 

builds up their cash balance.” He appeared to say that the District had about 90 such 

“phantom employees,” which was roughly 10 percent of its total workforce. O’Rourke 

described this practice as a product of “the way the District calculates their budget,” 

which “encourages them to set the budget amount as high as possible[,] [s]o that when 

they make the computation for the rate for groundwater[,] they’ve got that amount 

recovered. In subsequent budgets there is no refund of prior year over recoveries or over 

budget amounts.” 

Similarly, he testified, the District had a practice of assigning excessive charges, 

which he said had been so declared by the county auditor’s office, for interdepartmental 

equipment use. This practice too operated to fund a “very large reserve surplus” and 

violated “both State Controller and . . . U.S. Controller’s Office . . . regulations.” A third 

practice involved relying on initial estimated prices for State Water Project water, while 

ignoring any subsequent downward adjustments in the actual price paid. 

By means such as these, O’Rourke testified, the District had amassed reserves of 

some $110 million prior to imposition of the 2005-2006 groundwater charge. He 

compared this sum to the District’s annual revenues of about $100 million. He opined 

that the District used these reserve funds to finance “discretionary” investments, using 

them as “an alternative to borrowing funds.” This had the effect of “front[-]load[ing] the 

expenditure” for projects, so that they were paid for by current users, in contrast to an 

investment financed with borrowed funds which would be repaid over the life of the asset 

by users actually benefiting from it. Insofar as the groundwater charge is used for such 

purposes, he opined, it “includes amounts for potential or future services or use.” 
77

While we do not wish to minimize the character of the practices thus described, 

we are once again left to guess at what evidence or rule of law supports the conclusion 

that they violated the District Act. Section 26.3 authorizes the District to use 

groundwater proceeds for specified activities. It does not forbid the District from 

attempting to estimate the cost of such activities prior to engaging in them; indeed, it is 

difficult to conceive how it could function without such forward budgeting. Nor does it 

place any express limits on how far in advance of planned activities the District may 

begin to accumulate funds for eventual application to them. There may be some 

applicable rule, custom, or other norm making it an abuse of discretion not to allocate 

surplus funds to present activities so as to reduce the burden on payers of the 

groundwater charge or other rates. But apart from the bald conclusions of an expert 

witness, nothing before us supplies any foundation on which to make such a declaration. 

We do not believe the acts of a public agency exercising the delegated power of the 

Legislature may be so lightly overturned.

We conclude that the trial court’s findings of violations of the District Act cannot 

be sustained on the present record.

III. Capacity Charge

Finally we will briefly acknowledge the District’s contention that the challenged 

charge is, at least in part, a capacity charge, and thus subject to the Mitigation Fee Act, 

Government Code sections 66000 et sequitur. If accepted, this proposition would bar any 

challenge to the fee—or at least to the portion constituting a capacity charge—pursuant to 

Government Code section 66022, which provides that any judicial challenge to a capacity 

charge must be filed within 120 days after the charge is adopted.27 The trial court 

 

27

 As in effect when the present charge was imposed, the statute provided in 

relevant part, “(a) Any judicial action or proceeding to attack, review, set aside, void, or 

annul an ordinance, resolution, or motion adopting a new fee or service charge, or 

modifying or amending an existing fee or service charge, adopted by a local agency, as 
78

appears not to have specifically addressed this question, which the District raised in 

Phase 2, but which Great Oaks argued—and continues to argue—was forfeited by the 

District’s failure to raise it in Phase I.

It is impossible on the present state of the case to resolve the many issues the 

parties have raised in connection with this defense. The defense is at most a partial one, 

requiring that some basis be found for determining how much of the groundwater charge, 

if any, satisfies the definition of a capacity charge. (See Gov. Code, § 66013.) For that 

reason we do not believe that it was waived by the District’s failure to raise it in Phase I, 

which was supposed to be limited to issues of liability, reserving issues of remedy—

including the allowable monetary relief—to Phase 2. In any event, as previously noted 

our reversal of the judgment will set the matter at large, presumably for retrial, and these 

issues can be addressed anew if the parties again elect to place them before the trial court. 

We decline to issue an advisory opinion on a subject so fraught with untried and as-yet 

unfocused subsidiary issues.

 

defined in Section 66000, shall be commenced within 120 days of the effective date of 

the ordinance, resolution, or motion. [¶] . . . [¶] (c) This section shall apply only to fees, 

capacity charges, and service charges described in and subject to Sections 66013 and 

66014.” (Former Gov. Code, § 66022, as in effect through Dec. 31, 2006.)
79

DISPOSITION

The judgment is reversed for further proceedings consistent with this opinion. 

This disposition renders moot the companion appeal, in which Great Oaks challenged the 

trial court’s order denying its motion for attorney fees. Accordingly, that order will be 

affirmed by separate opinion. (See Great Oaks Water Co. v. Santa Clara Valley Water 

District, No. H035885.) 

______________________________________

RUSHING, P.J.

WE CONCUR:

 

____________________________________

PREMO, J.

____________________________________

ELIA, J.
80

Trial Court: Santa Clara County Superior Court

Superior Court No.: CV053142

Trial Judge: The Honorable Kevin J. Murphy

Attorneys for Defendant and Appellant Hanson Bridgett 

Santa Clara Valley Water District:

Joseph M. Quinn

Adam Hofmann

Office of District Counsel

Santa Clara Valley Water District

Stanly T. Yamamoto

Attorneys for Plaintiff and Respondent Silicon Valley Law Group

Great Oaks Water District:

Jeffrey S. Lawson

Johnson & James

Robert K. Johnson

Omar F. James

Great Oaks Water Company

Timothy S. Guster

Attorney for Amicus Curiae Daniel S. Hentschke

Association of California Water Agencies: