Court: San Juan Capistrano’s Tiered Water Rates Unconstitutional

In a move that could hinder drought-fighting efforts across California, a state appeals court has ruled that tiered water rates in the City of San Juan Capistrano violate the state’s Constitution.

The tiered system charges different rates based on water usage to combat excessive use. But that plan was struck down Monday by a three-judge panel for the state's 4th District Court of Appeal.

In a 29-page opinion, the judges ruled that the system violates voter-approved Proposition 218, which prevents government agencies from charging more for a service than the cost of providing it.

"We do hold that above-cost-of-service pricing for tiers of water service is not allowed by Proposition 218 and in this case, [the city] did not carry its burden of proving its higher tiers reflected its costs of service," the court said.

In order for the tiered system to be legal, the agency would have to show that each rate is directly related to the cost of providing the water. In this case, the court said, the agency failed to do so and instead “merely allocated all its costs among the price tier levels, based not on costs, but on pre-determined usage budgets."

Monday’s ruling potentially jeopardizes a system which is used in some form by at least two-thirds of California water providers, and which is seen as an important tool to combat the state’s crippling drought. Governor Jerry Brown responded to the decision with incredulity, saying it places "a straitjacket on local government at a time when maximum flexibility is needed.”

Read more about Monday’s ruling and its potential impact here.