http://www.cfbf.com/agalert/2004/10_13_04_3_aa.cfm

Water rights holders face new fee hikes

Issue Date: October 13, 2004

By Kate Campbell
Assistant Editor

The illegal imposition of so-called "fees" on those California landowners and agencies holding water rights continues. The State Water Resources Control Board has issued an emergency regulation that includes a new schedule of fees for the 2004-05 fiscal year, which started July 1.

This action follows similar rulemaking last December that set a fee schedule for the second half of the 2003-04 fiscal year, which ended June 30.

The new schedule adopted for 2004-05 imposes a $100 minimum annual fee on each water-rights permit or license, plus an additional fee of 2.5 cents per acre-foot in excess of 10 acre-feet.

This compares to the already billed annual fees for 2003-04, which call for water rights holders to pay three cents per acre-foot or a minimum of $100. For stockpond registrations, the assessed fee is $100 per pond every five years.

"The new fee schedule is just as bad and, in some respects, worse than the scheme adopted for the 2003-04 fiscal year," said California Farm Bureau Federation Associate Counsel Carl Borden. "It greatly increases the fees for some larger water rights holders, which in reality are illegally imposed taxes."

For example, Borden said the annual fee for a permit covering 3,010 acre-feet will increase from $100 to $175. Previously water rights holders had not been charged by the state.

Article XIIIA of the California Constitution, which was added by Proposition 13, requires legislation resulting in new or increased taxes be approved by a two-thirds vote of each house of the Legislature. As that requirement was not met, the resulting exactions are invalid, Borden said.

CFBF filed comments with the board objecting to the new regulation and continues to pursue litigation over the imposition of fees for the previous fiscal year that Farm Bureau also contends really are taxes.

Farm Bureau told the board in a recent letter that it needs to revisit this issue (of program funding) with the Legislature and the governor as soon as possible. Farm Bureau pointed out that the Legislature continues to assume arbitrarily that state regulatory functions can be wholly subsidized by the regulated community, regardless of their ability to pay or the lack of benefits they receive relative to the payments.

"We're asking the court to let us challenge the new fee schedule and regulation along with the current litigation we've initiated that's related to the imposition of fees for the 2003-04 fiscal year," Borden explained. "After all, the issues are essentially identical, and it would not be judicially economical for them to be determined in duplicate actions."

The Board of Equalization, on behalf of the State Water Resources Control Board, sent notices to about 13,000 water rights holders telling them they owe a new fee for the holding of water rights. Payments for the 2003-04 water rights fees were due Feb. 9.

In some cases the payment notices for fiscal year 2003-04 were for thousands of dollars. When landowners and permit holders got the unexpected bills they called Farm Bureau offices around the state. Bills for the 2004-05 fiscal year have not yet been sent to water rights holders, but experts fear they could be for even larger amounts of money.

Fees for holding water rights were imposed as a result of passage of Senate Bill 1049, a budget trailer bill enacted in October 2003 that not only called for new and bigger fees for water rights, but also increased or added new fees for dam safety inspections and fire protection in state responsibility areas.

The fire-protection fees, which Farm Bureau also challenged in court, were repealed last summer. These so-called fees have been devised so that those receiving permits or being regulated will cover the full cost of operating the associated state programs.

For the second half of fiscal year 2003-04, the amount needed by the Water Resources Control Board to operate its water rights division has been pegged at $4.4 million, of which $670,000 is to cover the costs of having the state Board of Equalization bill and then collect the fees.

"The ironic thing about this situation is that water-rights holders throughout the state already have contributed more than the amount needed to cover the 2003-04 program costs," said CFBF Director of Water Resources Tony Francois.

Francois said the department set the illegal fees with the expectation that only about 60 percent of water rights holders would actually pay, but as it turns out a much greater percentage has paid, many sending checks with accompanying letters of protest.

For fiscal year 2004-05, fee revenue amounting to about $9.7 million is needed to administer the water rights program, according to discussions last week at the State Water Resources Control Board's meeting.

For the 2003-04 fiscal year, the board has already collected $7.4 million in water-rights fees and water quality certification fees associated with water-right actions. This is $2.8 million more than the $4.6 million specified in the Budget Act of 2003. The board's 2004-05 budget assumes that the Water Right Fund will have a balance of $891,000 at the end of the fiscal year.

In a letter objecting to the 2003-04 fiscal year proposal, Francois told the state water board that Farm Bureau is "cognizant that the board finds itself in a difficult situation, and the state's fiscal affairs are in disarray. Unfortunately, we can only view the Legislature's failure to responsibly fund the division as tantamount to resolving a hostage crisis by shooting the hostages.

"It's not the fault of the state's water users and rights owners that the state's General Fund is stretched too thin. The solution to the problem lies within state government.

"Simply handing the burden over to those who didn't cause it in the first place, and without proper legal authority, will not stand," said Francois. "We have no choice but to continue to pursue this matter through the courts to protect the interests of our members."

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