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September 2001

MMWD's Duty to Fuel Growth

By Louis Nuyens

The Marin Municipal Water District (MMWD) Board of Directors has recently been under pressure to commit to establishment of a new pipeline that would bring more Russian River water to MMWD customers via increased purchases from the Sonoma County Water Agency (SCWA). Under scrutiny from all sides-including environmentalists, rate-payers, pro-growth interests, and the SCWA itself-the MMWD Board has, as is legally required of it, begun a careful examination of it options, including alternative sources for expanded supply, and the ramifications of the proposed Russian River pipeline.

The MMWD Board also wished to seek clarification on its legal requirements in terms of its duty to serve existing customers, and beyond that, to meet the demand of new customers, and on its own powers of discretion in execution of those duties.

On 25 July 2001, the MMWD heard a report it had commissioned with the firm of Duane Morris and Hecksher LLP, entitled "Report to the Marin Municipal Water District Regarding its Responsibilities to Provide Water Sufficient to Meet the Needs of its Service Area." The Report, presented by attorney Thomas Berliner of Duane Morris, is a dense, meandering amalgamation and analysis of laws, ordinances, policies and case-law that delineate MMWD's required duties and its powers.

The report concludes, in essence, that, "If a water district has surplus or additional water available it has a duty to provide such water to existing and, in most cases, new customers," and that the district must "exert every reasonable effortÉ to meet increasing demands," but leaves open the question of whether, conceivable in the current situation, a situation might exist that would legally justify a permanent moratorium on new service by MMWD.

The following is an overview of key aspects of the report.

Water As Growth Control Measure

Water districts have great freedom in discretionary decisions within their very narrow role of securing and delivering water to meet demand. Factors a water district may consider include the quality of the supply, the financial feasibility of supply source options, the rights of existing customers (related to water use), reliability of supply, limitations due to environmental regulations on from where and to what degrees it may draw its supply where it may run delivery lines, etc.

Concerns outside the water district's immediate charge are not a valid basis for water district decisions. A specific example is that of growth: a water district cannot impose a moratorium on new hook-ups or water delivery in order to limit growth. Since the pros or cons of growth or sprawl are not directly related to the concerns of the water district in meeting demand (whether or not demand is affected by growth), a water district decision based on a desire to limit or stimulate growth would be considered arbitrary by the courts-therefore, it is said that a water district's policies may not be set up as a growth control measure. A water district may take an action that ultimately limits or stimulates growth, but, whatever its actions, the justifications must be stated in terms of issues within the water district's purview.

MMWD's Duty to Expand

"A federal court ruled that because potential water is not a property right, a potential water user 'cannot complain that it has been deprived of property, with or without compensation or due process.' However, if an agency has, or could have under reasonable circumstances, surplus water available to it, a compensable claim may arise."

The court generally views it as the responsibility of the water agency to meet all demand, including projected demand, unless no reasonable options are available for doing so. Therefore a compensable claim may arise if the water district denies service while it has surplus water available to it, including water that might be gained through reasonable efforts to expand supply.

The fundamental basis of the view that water district must seek all reasonable means to serve new customers was not presented in the report, which acknowledged that the term "reasonable" has not been well-defined in this context. The report failed to thoroughly resolve apparently contradictory views, in which the state has "no duty or obligation to 'prod' districts to expand their systems or develop new water sources" and "A decision to add new customers is within the discretion of the board of directors of a districtÉ 'in the absence of any regulatory order'," yet the courts also assert that all reasonable avenues must be pursued to expand supply to meet any demand.

Measure V and Pipeline Options

Measure V increases the pressure on MMWD to increase its water supply by allocating funds for that purpose "as needed." The term, "as needed," has not been clearly defined and is a frequent topic of debate; it would be difficult, at this point, to argue that the intention of the electorate (at the end of the long drought which preceded the Measure V vote) was or was not solely to ensure adequate supply for existing customers, rather than to enable increased possibilities for significant growth at the demand of development interests.

At its discretion, MMWD may substitute alternatives to options presented in Measure V.

The report concluded that MMWD would not likely have its discretion challenged regarding a decision to pursue or not to pursue any particular alternative, provided the decision was not arbitrary, but assumes continued "due diligence" in seeking other water sources.

Therefore, had desalination, for example, proven more cost efficient or beneficial, in the view of the district board, the board may, at its discretion, substitute construction of a desalination plant for construction of the new pipeline.

Existing Customers vs. New Customers

Property owners are not entitled to access to water supplies as a property right; merely owning property does not allow the owner a right to water supplied by a public agency, whereas a public utility may not discontinue service to existing customers dependent on that service. Therefore, when supply is limited, a water district's first duty is to existing customers: "'When there is barely enough water to service present users, refusal to inconvenience them by adding additional burdens on the water system surely cannot be termed arbitrary and discriminatory.'"

The report asserts that a water district cannot take on new customers to the necessary injury of existing customers. But, "injury" is not well defined. There is not a per person usage standard to indicate the level at which limitations in supply would begin to be burdensome. Adequacy of supply is also not well defined; the water district has a great deal of freedom of discretion in its determination, and may require that supply be sufficient in rare circumstances, such as drought conditions, power outages, delivery system damage (such as in an earth quake) as well as normal operating standards.

The report did not indicate at what point, if any, the financial burden of supporting a water district in augmentation of its supply primarily to service new customers might be considered an economic 'injury' to existing users.

Tiered water rate structures that charge customers at higher rates who use more water have been supported in the courts as conservation measures. However, under existing law, rates in the same area cannot be different for different customers.

While not addressed in the MMWD report, an ongoing discussion in some circles has been the idea of a ballot initiative along the lines of Prop. 13, the 1978 property tax initiative in which property tax rate increases were capped at 2% per year for existing homeowners, but not for new purchasers, shifting the bulk of property tax burden to new purchasers. To shift the financial burden for seeking new water sources to weigh more heavily on developers of new properties than on existing customers, one might imagine an initiative structured to fix water rate increases for customers on existing hook-ups, with the water district free to set initial rates for new customers at the time of initial connection.

Moratoriums

A water district has the power to impose a moratorium, but has a duty, once the moratorium is enacted, to immediately investigate all potentially reasonable paths to augment supply. A water district cannot permanently and arbitrarily fail to seek to meet increases in demand, whether demand is from new or existing customers. The water district can only deny service requested by new users if its reason for doing so is not capricious or arbitrarily discriminatory.

Permanent and Long-term Moratoriums

What constitutes a 'reasonable' alternative for increased supply has not been fully defined. Likewise, it appears that the range of circumstances in which a permanent moratorium on extensions of new service would stand through legal challenge has not been fully defined or explored. Cost is not necessarily an excuse for not pursuing additional sources of water during a moratorium-Berliner speculated that a judge could demand that the district float a bond measure or raise rates in order to secure the new water source.

If MMWD's board of directors deems that no source is available that is, at this time, of reasonable feasibility, reliability, and quality, it may choose to impose a moratorium until such a time, if any, that those concerns can be simultaneously satisfied. In that case, MMWD would need to act with strength of conviction, for it is certain MMWD's position, even if appropriate, would be challenged by pro-growth interests; and there is little case law to help anticipate the outcome.

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A scanned copy of the article may be viewed on the Coastal Post website (www.coastalpost.com).

 

 

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