Opinion ID: 2629200
Heading Depth: 1
Heading Rank: 2

Heading: the capacity charge

Text: To determine whether the District's $3,176 capacity charge, imposed only on applicants for new service connections, violates article XIII D's restrictions on assessments, we must interpret our state Constitution. The principles of constitutional interpretation are similar to those governing statutory construction. ( Thompson v. Department of Corrections (2001) 25 Cal.4th 117, 122, 105 Cal.Rptr.2d 46, 18 P.3d 1198.) The aim of constitutional interpretation is to determine and effectuate the intent of those who enacted the constitutional provision at issue. ( Ibid. ) To determine that intent, we begin by examining the constitutional text, giving the words their ordinary meanings. ( Ibid.; accord, Leone v. Medical Board (2000) 22 Cal.4th 660, 665, 94 Cal.Rptr.2d 61, 995 P.2d 191.) Section 2 of article XIII D defines an assessment as any levy or charge upon real property ... for a special benefit conferred upon the real property.... (Art. XIII D, § 2, subd. (b).) It defines special benefit as a particular and distinct benefit over and above general benefits conferred on real property located in the district or to the public at large.... ( Id., § 2, subd. (i).) Section 4 of article XIII D establishes procedures and requirements for assessments. A local public agency may not impose an assessment, as defined in article XIII D, unless: (1) the agency identifies all parcels which will have a special benefit conferred upon them and upon which an assessment will be imposed (art. XIII D, § 4, subd. (a)); (2) the agency obtains an engineer's report that supports the assessment ( id., § 4, subd. (b)); (3) the assessment does not exceed the reasonable cost of the proportional special benefit conferred on the affected parcel ( id., § 4, subds. (a) & (f)); and (4) after giving notice to affected property owners and holding a public hearing, the agency does not receive a majority protest based on ballots weighted according to the proportional financial obligation of the affected property ( id., § 4, subds. (c)-(e)). To determine what constitutes an assessment under article XIII D, it is necessary to consider not only article XIII D's definition of an assessment, but also the requirements and procedures that article XIII D imposes on assessments. Article XIII D requires that an agency imposing an assessment identify all parcels which will have a special benefit conferred upon them and upon which an assessment will be imposed. (Art. XIII D, § 4, subd. (a), italics added.) The agency then must give written notice of the proposed assessment to the owners of these identified parcels ( id., § 4, subd. (c)) and provide an opportunity for a protest using ballots weighted according to the proportional financial obligation of the affected property ( id., § 4, subd. (e)). Because the capacity charge is imposed only on property owners who apply for a new service connection, the District cannot identify the parcels upon which the capacity charge will be imposed. Here, the District estimated that there would be 240 new connection applications, but the District did not and could not identify the specific parcels for which new connection applications would be made. At most, the District can identify the parcels within its boundaries on which the capacity charge would be imposed if the owners applied for a service connection. But the matter is more complex, because many existing undeveloped parcels would likely be subdivided into an indeterminable number of smaller parcels, for each of which a connection might be requested, thus making it impossible to now determine the proportional financial obligation of the affected property. And even this understates the problem, because owners of property outside the District's boundaries may seek service connections by applying for annexation of their property into the District. Therefore, it is impossible for the District to comply with article XIII D's requirement that the agency identify the parcels on which the assessment will be imposed and provide an opportunity for a majority protest weighted according to the proportional financial obligation of the affected property. We agree with the Court of Appeal that the proper conclusion to be drawn from this impossibility of compliance is that an assessment within the meaning of article XIII D must not only confer a special benefit on real property, but also be imposed on identifiable parcels of real property. Because the District does not impose the capacity charge on identifiable parcels, but only on individuals who request a new service connection, the capacity charge is not an assessment within the meaning of article XIII D. This construction is consistent with settled rules of constitutional interpretation. Courts construe constitutional phrases liberally and practically; where possible they avoid a literalism that effects absurd, arbitrary, or unintended results. ( Carman v. Alvord (1982) 31 Cal.3d 318, 327, 182 Cal.Rptr. 506, 644 P.2d 192; see also California Correctional Peace Officers Assn. v. State Personnel Bd. (1995) 10 Cal.4th 1133, 1147, 43 Cal.Rptr.2d 693, 899 P.2d 79 [a practical construction is preferred].) Construing article XIII D's definition of assessment as applying only to charges imposed on identifiable parcels avoids the probably unintended result of prohibiting local water districts from imposing capacity charges, no matter how modest or reasonable, for new connections because of the inherent impossibility of identifying in advance the parcels for which new connections would later be requested. This construction is also consistent with article XIII D's definition of an assessment as a levy or charge upon real property .... (Art. XIII D, § 2, subd. (b), italics added.) [2] The District does not impose the capacity charge on real property as such, but on individuals who apply for new service connections. It is the applicant who must pay, and the District may not impose a lien or otherwise have recourse to the property to compel payment. Rather, the District simply does not initiate water service until the charge is paid. A charge that operates in this way cannot be described as a charge upon real property, within the meaning of article XIII D. Finally, this construction is consistent with the aim of Proposition 218 to enhance taxpayer consent. Here, the District proposed to divide the costs of new capital improvements between users receiving service through existing connections and users applying for new connections. This case concerns only imposition of costs on new connections. Presumably, any costs imposed on customers receiving service through existing connections would be subject to article XIII D's voter approval requirements, and thus their consent. Customers who apply for new connections give consent by the act of applying. Moreover, water connection fees are already subject to significant constraints under Government Code section 66013. [3] Plaintiffs rely on this court's decision in San Marcos Water Dist. v. San Marcos Unified School Dist. (1986) 42 Cal.3d 154, 228 Cal.Rptr. 47, 720 P.2d 935 ( San Marcos ). The issue there was whether a provision of the state Constitution exempting public entities from payment of property taxes (Cal. Const., art. XIII, § 3, subd. (b)) applied to a local water district's capacity fee, used to fund capital improvements to the water system. The constitutional property tax exemption for public entities had been construed to include special assessments, but not user fees, and thus the issue presented to this court was whether the capacity charge was more properly characterized as a special assessment or as a user fee for purposes of this constitutional provision. We concluded that a capacity charge was a hybrid, in the sense that it had some characteristics of a user fee and some characteristics of an assessment. ( San Marcos, supra, at p. 163, 228 Cal.Rptr. 47, 720 P.2d 935.) We concluded also, however, that the fee should be considered an assessment for purposes of the public entity property tax exemption. We established a bright-line rule that a fee aimed at assisting a utility district to defray costs of capital improvements will be deemed a special assessment from which other public entities are exempt. ( Id. at pp. 164-165, 228 Cal.Rptr. 47, 720 P.2d 935.) [4] San Marcos, supra, 42 Cal.3d 154, 228 Cal.Rptr. 47, 720 P.2d 935, is not on point here. We were not there construing the term assessment as used in article XIII D; instead, we were construing the constitutional provision exempting public entities from property taxes (Cal. Const., art. XIII, § 3, subd. (b)), a provision in which the term assessment does not appear. In deciding what constituted an assessment in San Marcos, we sought to determine and effectuate the constitutional purpose for exempting public entities from property taxes, a purpose that plays no role in interpreting the provisions of article XIII D that are at issue here. The characteristic that we found determinative for identifying assessments in San Marcos  that the proceeds of the fee were used for capital improvements  forms no part of article XIII D's definition of assessments. For each of these reasons, we agree with the Court of Appeal that San Marcos is not helpful, much less controlling, in this strikingly different context. (See Ginns v. Savage (1964) 61 Cal.2d 520, 524, fn. 2, 39 Cal.Rptr. 377, 393 P.2d 689 [Language used in any opinion is of course to be understood in the light of the facts and the issue then before the court, and an opinion is not authority for a proposition not therein considered.]; People v. Woodhead (1987) 43 Cal.3d 1002, 1008, 239 Cal.Rptr. 656, 741 P.2d 154 [a word may have different legal meanings in different contexts]; In re Marriage of Buol (1985) 39 Cal.3d 751, 757, fn. 6, 218 Cal.Rptr. 31, 705 P.2d 354 [same].) Plaintiffs invoke the rule that when a term has been given a particular meaning by a judicial decision, it should be presumed to have the same meaning in later-enacted statutes or constitutional provisions. (See People v. Hurtado (2002) 28 Cal.4th 1179, 1188-1189, 124 Cal.Rptr.2d 186, 52 P.3d 116; Arnett v. Dal Cielo (1996) 14 Cal.4th 4, 19, 56 Cal.Rptr.2d 706, 923 P.2d 1.) Plaintiffs argue that San Marcos, supra, 42 Cal.3d 154, 228 Cal.Rptr. 47, 720 P.2d 935, gave the term assessment a precise legal meaning as applying to capacity charges used to fund capital improvements, and therefore the term assessment in article XIII D, enacted after San Marcos, must be construed to have the same meaning. But the rule that plaintiffs invoke does not apply when, as here, the statute or constitutional provision contains its own definition of the term at issue: If the Legislature has provided an express definition of a term, that definition ordinarily is binding on the courts. ( Curle v. Superior Court (2001) 24 Cal.4th 1057, 1063, 103 Cal.Rptr.2d 751, 16 P.3d 166.) Here, article XIII D provides both an express definition of assessment and an implied qualification of that definition through the requirement that the agency identify the specific parcels on which the assessment will be imposed. Plaintiffs next rely on the definition of assessment in Government Code section 53750, part of the Proposition 218 Omnibus Implementation Act (Gov.Code, §§ 53750-53753) that the Legislature enacted in 1997. (Stats.1997, ch. 38, § 5.) Government Code section 53750 states that [f]or purposes of Article XIII C and Article XIII D of the California Constitution an assessment means any levy or charge by an agency upon real property that is based upon the special benefit conferred upon the real property by a public improvement or service, that is imposed to pay the capital cost of the public improvement, the maintenance and operation expenses of the public improvement, or the cost of the service being provided. (Gov.Code, § 53750, subd. (b).) As plaintiffs point out, this definition does not distinguish between charges imposed only in response to a request for service and charges imposed on previously identified parcels. In this respect, the statutory definition is no different from the constitutional definition in section 2, subdivision (b), of article XIII D. But the statutory provisions implementing article XIII D, like article XIII D itself, assume that assessments are imposed only on identified parcels. Under Government Code section 53753, subdivision (b), before levying a new or increased assessment, an agency must give notice to the record owner of each identified parcel. Government Code section 53750, subdivision (g), defines an identified parcel as a parcel of real property that an agency has identified as having a special benefit conferred upon it and upon which a proposed assessment is to be imposed.... Because the statutory provisions merely reflect the constitutional provisions, they do not alter our conclusion that under article XIII D an assessment is a charge imposed on previously identified parcels, and not a charge imposed only as a condition of extending service through a new service connection. Arguing that a charge imposed only on property owners who voluntarily seek a governmental service or approval may properly be characterized as an assessment, plaintiffs call our attention to the Integrated Financing District Act (Gov. Code, § 53175 et seq.), under which local agencies may establish contingent assessments payable only when a landowner applies for development approval. (See id., § 53187.) As plaintiffs point out, the Integrated Financing District Act includes notice and majority protest provisions for owners of property subject to the contingent assessment ( id., § 53183). (See Southern Pacific Pipe Lines, Inc. v. Board of Supervisors (1992) 9 Cal.App.4th 451, 461-462, 11 Cal.Rptr.2d 745.) We agree that the District's capacity charge is similar to a contingent assessment under the Integrated Financing District Act, but this observation does not assist plaintiffs. Unlike article XIII D, the Integrated Financing District Act does not require a local agency to identify in advance the particular parcels that will be subject to the assessment. Instead, the notice of intention to impose a contingent assessment goes to all owners of property within the proposed assessment zone, and the assessment cannot be imposed if protested by the owners of more than one-half of the area of the property within the proposed ... district which is proposed to be subject to the contingent assessment immediately or in the future.... (Gov.Code, § 53183, subd. (d).) Thus, under the Integrated Financing District Act, in contrast to article XIII D, all owners of property potentially subject to a charge are entitled to notice and a weighted vote. Article XIII D could have been written, like the Integrated Financing District Act, to cover contingent assessments as well as assessments imposed only on previously identified parcels. But it was not written in that manner, and we remain persuaded that a capacity charge contingent on some voluntary action by the property owner is not an assessment within the meaning of article XIII D. Plaintiffs argue that the Court of Appeal erred in characterizing the District's capacity charge as a development fee. Observing that development fees are imposed only if a property owner elects to develop ( Loyola Marymount University v. Los Angeles Unified School Dist. (1996) 45 Cal.App.4th 1256, 1267, 53 Cal.Rptr.2d 424), the Court of Appeal reasoned that the District's capacity charge, because it was imposed only in response to a property owner's voluntary decision to request a service connection, should be considered a development fee and thus exempt from the requirements of article XIII D under its section 1, subdivision (b), stating that [n]othing in this article ... shall be construed to ... [a]ffect existing laws relating to the imposition of fees or charges as a condition of property development. Plaintiffs insist that the District's capacity charge cannot be a development fee because the District has no authority to approve or disapprove property development, and because a property owner may request a new service connection without proposing any new development, such as when the owner of a previously developed residential parcel decides to use the District's water instead of water from an existing well on the property. We agree with plaintiffs that the District's capacity charge is not a development fee. It is similar to a development fee in being imposed only in response to a property owner's voluntary application to a public entity, but it is different in that the application may be only for a water service connection without necessarily involving any development of the property. (See Utility Cost Management v. Indian Wells Valley Water Dist., supra, 26 Cal.4th at p. 1191, 114 Cal.Rptr.2d 459, 36 P.3d 2 [noting that a capacity charge might apply regardless of whether a development project is at issue]; Capistrano Beach Water Dist. v. Taj Development Corp. (1999) 72 Cal.App.4th 524, 530, 85 Cal.Rptr.2d 382 [concluding that a capacity charge is not a development fee under the Mitigation Fee Act (Gov.Code, § 66000 et seq.)].) Our agreement that the capacity charge is not a development fee does not assist plaintiffs, however, because it does not mean that the capacity charge is an assessment within the meaning of article XIII D. The capacity charge is neither an assessment nor a development fee under article XIII D. We conclude, as did the trial court and the Court of Appeal, that the District's capacity charge is not an assessment under article XIII D.