Presentation reviews the GSA fee authorities granted in SGMA, looks at the various fees enacted by some GSAs, and a case study of how one GSA set their fees
As Groundwater Sustainability Agencies (GSAs) work to develop their Groundwater Sustainability Plans (GSPs), funding the development of those plans will become essential. The Sustainable Groundwater Management Act (SGMA) grants specific fee authorities to GSAs, making a distinction between fees that can be charged prior to adoption of a GSP, and those fees that can be charged after the GSP is adopted.
At the American Groundwater Trust conference held in February, 2019, Attorney Jena Shoaf Acos reviewed the statutory provisions of SGMA as it relates to GSA fee authorities; Attorney Mack Carlson reviewed the fees that have been put in place by other GSAs; and fee consultant Mark Hildebrand walked through a case study of how a GSA determined what fee they would charge.
JENA SHOAF ACOS: Funding Options for development and implementation of Groundwater Sustainability Plans
Jena Shoaf Acos is an associate at Brownstein Hyatt Farber Schreck’s Santa Barbara office where she specializes in natural resources and water law, as well as public agency law. In her presentation, she went over the details of the fee authority as granted to Groundwater Sustainability Agencies (GSAs) in the Sustainable Groundwater Management Act (SGMA).
SGMA divides GSA fee authority into pre and post Groundwater Sustainability Plan (GSP) adoption. Before the adoption of a GSP, Water Code Section 10730 controls pre-GSP fees; after adoption of the GSP, Water Code Section 10730.2 controls post-GSP fee authority.
“The main difference here is that post-GSP adoption fees are required to comply with the requirements for Prop 218, except for the voter approval requirement,” said Jena Shoaf Acos. “As this session will focus on the SGMA fee authority, it’s important to remember that a GSA retains any separate fee authority granted to it by any other law. For example, many water districts are created by the California Water District Law or any other water code provision and often will have specific fee authority in that creating statute.”
PRE-GSP FEE AUTHORITY
The pre-GSP fee authority is defined in Water Code 10730 under the title, ‘Regulatory Fees Authority.’ The statue authorizes a GSA to impose pre-GSP fees on groundwater extraction, including permit fees and fees on ‘other regulated activity’ (to be defined at a later point in the presentation.)
Pre-GSP fees can be used for a wide variety of costs, including developing and implementing a Groundwater Sustainability Program which includes preparation and adoption of a GSP, investigations, inspections, compliance assistance, enforcement, and general program administration, including a prudent reserve.
With respect to pre-GSP fees and the GSA’s pre-GSP authority, Ms. Acos noted that there’s been a lot of discussion about whether pre-GSP fees can continue to be imposed after the adoption of a groundwater sustainability plan. “We think that they can, but only for the purposes called out in this specific section,” she said. “There is a lot of overlap between SGMA’s pre and post GSP fee authority, and specifically in the areas of administration, operation, maintenance, and building a prudent reserve. Generally I consider this more the administration of the groundwater sustainability program.”
She also pointed out that pre-GSP fees cannot be used for any capital improvement projects. “Those would be the types of projects that you’d identify in your GSP as being necessary for putting the basin back into sustainable balance,” she said. “Keep that in mind if you are working with a GSA as that GSA starts to consider adopting fees because the idea of continuity could be important.”
The statute says that pre-GSP fees cannot be imposed on de minimis extractors unless those de minimis users are ‘regulated pursuant to this part.’ A de minimis user is defined in the statute as a person who extracts for domestic purposes 2 acre-feet a year or less. ‘Regulated pursuant to this part’ refers to SGMA part 2.74 of the water code.
“This is where it gets a little tricky because in order to regulate a user pursuant to SGMA, you have to call on one of the GSA’s powers or authorities that is also called out in SGMA and that falls under Chapter 5, which is titled, ‘A GSA’s Powers and Authorities,’” explained Ms. Acos. “But the first section of that chapter specifies that a pre-condition to a GSA’s exercise of any of the powers or authorities described in the chapter is conditioned upon the GSA first adopting and submitting a GSP. So when you read SGMA and these different sections together, this tells us that GSA cannot use water code section 10730, the pre-GSP fees to impose fees on de minimis users until after it adopts and submits a GSP.”
So while there does not seem to be a way to impose pre-GSP fees on de minimis users, the statute specifies for domestic use, so a GSA could potentially impose fees on agricultural users who are pumping 2 AF or less, she noted.
One of the powers and authorities also set forth in Chapter 5 that doesn’t go into effect until a GSA adopts a GSP is the authority for the GSA to require metering, so unless a GSA has some sort of separate or independent authority to require their water users within the basin to install meters, it’s going to be really difficult to figure out who is and isn’t a de minimis user per SGMA’s definition, she said.
With respect to monitoring wells, Ms. Acos says it’s arguable that a GSA could use pre-GSP fees to install monitoring wells because that is a cost of administering the groundwater sustainability program. “It’s not necessarily a capital project because in order to determine what sorts of projects you need to implement, you need to have the monitoring wells in place so you have the data,” she said. “You’d have a good argument for that. But it’s not clarified in the statute.”
Although SGMA itself does not identify compliance with specific substantive approval requirements, the California Constitution imposes approval requirements on a wide variety of fees and charges imposed by government agencies, so to determine what type of approval requirements are required for pre-GSP fees, the fee or charge needs to be considered under both Prop 26 and Prop 218. She noted that while the legislation specified that post-GSP fees specifically call out the need to comply with Prop 218, there is no parallel requirement or statement for pre-GSP fee authority.
Prop 26 regulates and defines general and specific taxes and the exemptions to those general and specific taxes; Prop 218 applies to assessments and property related fees. So for pre-GSP fees, Ms. Acos said she would focus on analyzing the pre-GSP fee authority under Prop 26 which she thinks provides the correct analysis.
Prop 26 defines a tax and requires certain approval requirements unless the fee or charge falls into one of the provision’s seven enumerated exemptions as highlighted on the slide.
“Although the first two exemptions, the specific benefit and the specific service exemption, sound promising with the benefit or service being groundwater management, it’s unlikely that either of these exemptions would apply because SGMA prohibits a GSA from imposing pre-GSP fees on de minimis users, and this inability to charge de minimis users who pump groundwater and thus benefit from the management of the basin, would violate the requirement in both of these exemptions that the specific benefit not be provided to those not charged,” Ms. Acos said.
The seventh exemption applies to Prop 218 property-related fees, and although the fee would not have to comply with Prop 26 if it fell within this exemption, it would have to comply with the approval requirements under Prop 218, which doesn’t make it easy to pass fees with less hurdles. “Another thing is if we’re looking at statutory interpretation, it’s odd that the legislature would have identified compliance with Prop 218 in the post-GSP fee authority and not in the pre-GSP fee authority, and really intended that Prop 218 be followed in both of those,” she said.
The regulatory fee exemption, the third one listed on the slide, is the one Ms. Acos thinks is correct for the pre-GSP fee authority falls for several reasons. “First, unlike in the water code authorizing post-GSP fees, SGMA is silent regarding compliance with constitutional approval requirements for pre-GSP fees,” she said. “Second, there’s a good argument that pre-GSP fees fall into the regulatory cost exemption because the fee statute itself, water code section 10730, is actually titled regulatory fees authority, and this indicates that the legislature intended for these pre-GSP fees to be considered charges for regulatory costs and thus exempt from Prop 26 under this category. Third, unlike fees and charges for a specific benefit or a specific service, regulatory fees do not become a tax just because the fee is disproportionate to the service or benefit rendered to an individual taxpayer, so what this means is that its immaterial that a GSA could not impose the fee on de minimis users.”
However, this is not settled law and it hasn’t been tested yet, she noted, and pointed out that there is conflicting case law. “For example, in Pajaro, the groundwater extraction fee in this case was considered a property related fee, subject to Prop 218. Then in 2017 we had a case out of Ventura County where the court found that the groundwater extraction fee in this case was not a property-related fee and suggested the parties go back and analyze that fee under the specific benefit exemption of Prop 26, so this is not settled and a lot of it does depend on the specifics of the fee and it is a very fact-specific analysis.”
Ms. Acos also reminded that any fee that does not satisfy any of the exemptions in Prop 26 would be subject to a two-thirds majority voter approval requirement for special taxes under Prop 26. These would be special taxes rather than general taxes because they be being used for a very specific purpose – for groundwater management.
The procedural requirements for pre-GSP fees are governed by the water code. SGMA requires that a GSA hold a public meeting and give members of the public an opportunity to make oral and written comments prior to imposing a fee. Notice for the meeting must be provided in three different ways and must include the time and the place of the meeting, the general description of the subject matter, and a statement or report that the data upon which the decision is based is available to the public. The data for the report has to be available to the public at least 20 days before the meeting.
“We advise our clients to engage a fee consultant specifically to prepare this very technical report and also to provide an independent third-party stamp of approval on the analysis and on the data that underlies the fees that are being imposed,” Ms. Acos said.
Following the notice and public hearing, the GSA can impose or increase a fee by adopting an ordinance or resolution at a public hearing.
POST-GSP FEE AUTHORITY
The GSA’s post-GSP fee authority is not triggered until a GSA adopts and submits its GSP to the Department of Water Resources. The GSA’s post-GSP authority is governed by water code 10730.2 which authorizes a GSA to impose fees on extraction of groundwater from the basin.
“It’s interesting to note that the legislation specifically identifies and calls out groundwater extractions as the only activity that a GSA could a post-GSP fee on,” said Ms. Acos. “Contrast that with SGMA’s broader pre-GSP fee authority, which also authorizes a GSA to impose fees on other regulated activities, whatever those are, which is still an open question.”
Post-GSP fees can be used to fund the costs of groundwater management such as administration, operation, and maintenance, including a prudent reserve. She noted these are similar and overlap with the pre-GSP fee authority. They can also be used for the acquisition of lands or other property, facilities and services, supply, production, treatment or distribution of water; these are focused more on the implementation of a GSP and capital improvement projects. Post-GSP fees can also be imposed on ‘any other fees necessary or convenient to implement the GSP’ which is a ‘catch-all’ category for anything else post-GSP adoption that is reasonably necessary to implement the GSP, she said.
For post-GSP fees, SGMA also identifies the types of fees that can be imposed and limits those types to different variations of groundwater extraction fees. “Here it’s important to note that it does not appear under the post-GSP authority that a GSA could impose land or parcel-based fees or assessments,” she said. “That’s significant because in terms of continuity, if a GSA were to want to go the assessment route under pre-GSP authority, they would then have to go through a totally different fee process post-GSP. That’s not the end of the world, but it is additional work and additional analysis.”
Post-GSP fees are also explicitly required to comply with the substantive and procedural requirements of Prop 218. However, Ms. Acos noted that Water Code section 10730.2, subsection C only requires groundwater extraction fees to comply sections A and B of Prop 218, and not with section C of Prop 218.
“This is important, because it means that SGMA only requires compliance with Prop 218’s majority protest requirement, not with the two-thirds majority voter approval requirement,” she said. “So the argument here is that the SGMA legislature made the decision that post-GSP fees should be treated like normally property related utility fees and decided that voter approval was not required. That in itself is a large hurdle that you can bypass if you follow the post-GSP fee authority in SGMA.”
Prop 218 also includes numerous substantive requirements related to adoption of property related fees. For example, revenues derived from the fee or charge shall not exceed the funds required to provide the property related service and should not be used for any purpose other than that for which the fee was imposed; the fee shall not exceed the proportional cost of service attributable to that parcel; and and the fee may not be imposed for a service unless the service is actually used by or immediately available to the owner of the property. “This shouldn’t be a problem because I would hope that all property in the GSA’s boundary overlies groundwater basin and thus has the ability, whether or not they have a well installed, to pump water,” she said.
General services are also ineligible, so that means that no fee can be imposed for general governmental services and the GSA imposing the fee or charge has the burden to demonstrate compliance with these standards, she said, noting that applies for both pre-GSP fees and post-GSP fees, so if there is a challenge, the GSA is going to have that burden.
Prop 218 also includes procedural requirements; under Prop 218, a GSA is required to identify parcels upon which imposition of a fee is imposed, they have to calculate the fee proposed to be imposed on each parcel, they have provide written notice by mail to the record owner of each identified parcel, and that notice has to include the amount of the fee, the basis upon which the proposed fee was calculated, the reason for the fee, and the date, time, and location of the public hearing. A GSA also then must hold a public hearing at least 45 days after mailing the written notice to all the landowners. It has to consider all protests it receives, and cannot adopt a fee if it receives a written protest from a majority of the record owners.
“The 45 day period is important as it will extend the timeline to adopt the fee, so that’s something to consider when the GSA is complying with Prop 218 for the post-GSP fee authority or even if they decide to go the Prop 218 fee authority route for pre-GSP fees,” she said.
Responding the question of what if the fee is protested and cannot be passed, Ms. Acos said that the whole idea of SGMA was to give locals control. “If locals aren’t going to vote to finance or fund having control, then the state’s going to have to come in. I think we all know it’s not like the state isn’t going to charge anyone; they are probably going to charge more to manage that basin.”
Stakeholder engagement is an important part of SGMA. “It’s getting stakeholders engaged and getting them to buy into the process,” she said. “I think that is difficult for GSAs and public agencies because no one wants to pay more money. All of sudden, people have been able to pump groundwater for free, and now they are being asked to pay for it. It’s going to be an uphill battle, but I do think starting stakeholder advisory groups, starting outreach, some sort of public education campaign, that’s all going to be very important in helping the GSAs get over the line in terms of being able to adopt and impose fees.”
MACK CARLSON: Pre-GSP fee adoption case studies
Mack Carlson is a member of Brownstein Hyatt Farber Shreck’s Santa Barbara office in their Natural Resources Department. Prior to attending law school, he was a hydrogeologist in California and Utah, where he worked for an international mining company and an investor-owned water utility. In his presentation, he reviewed how five GSAs took different approaches to implement their pre-GSP fees.
Mr. Carlson noted that each one of the GSAs listed on the slide relied on a different fee authority to enact their fees. The Indian Wells Valley Groundwater Authority only relied on Water code 10730; Kings River East cited both the Water Code and Prop 26 and declared their fee exempt as a regulatory cost; McMullin area GSA followed the Prop 218 for a property related water service charge, and the North Fork and the South Fork Kings relied on Prop 218 for assessments. Other basins around the state have relied on each of these different processes as well, so there’s a variety of what different GSAs are trying to do to enact their pre-GSP fees, he said.
INDIAN WELLS VALLEY GROUNDWATER AUTHORITY
The Indian Wells Valley Groundwater Authority (IWVGA) is a high priority critically overdrafted basin who had the wherewithal and the need to get the fees in place early.
IWVGA elected to only rely on the Water Code 10730. They passed an ordinance through a traditional process where the ordinance had a first reading, a second reading, and then went into effect 30 days following the second reading. They started charging on a monthly basis effective September 2018, enacting a fee of $3 per .1 acre-feet or $30 per acre-feet. The fee was designed to fund $930,000 worth of the development of the GSP. They used historic pumping data, extrapolating how much people are pumping and how much the fee would raise based on the historic numbers. The fee is reported and collected monthly. The ordinance exempted federal interests in the area in the basin in order to avoid potential conflicts with the federal government.
In terms of measuring the groundwater extractions, the preferred option of the GSA is to have a flow meter installed; they also offer well owners the ability to report based on electrical records and pump efficiency calculations. Agricultural interests can also report by crop type and demand coefficients, residences are allowed a number of persons per household in demand coefficients, and there are some mutually agreed upon options for industry groups, he said.
“As of the end of January 10, 2018, they were still about $120,000 behind budget in their collections under this fee authority, so there’s definitely a compliance issue in this basin, he said. “Not everybody is paying the fees as they are required to do, so something to consider when you are designing an approach, if you’re going to go with an assessment, whether you want to go with a monthly assessment or something that’s easier to administer.”
KINGS RIVER EAST GSA
The Kings Basin is another critically overdrafted basin; the Kings River East GSA is one of seven GSAs for the basin and is shown in pink on the map. This basin doesn’t have any federal interests. This GSA took the approach of adopting a Prop 26 exempt regulatory cost fee after a pretty substantial fee study by an external consultant. They held a community outreach forum and considered 9 different options before going with the adopted approach. They developed a groundwater extraction fee of $1.45 per acre-foot and a flat fee per year for member agencies of the GSA with no significant impact on groundwater.
“This agency took an interesting approach in which they have targeted certain actors or agencies and unincorporated areas in their basin as sort of the responsible parties for the overdraft and imposed the per acre-foot fee on them, and then relied on a flat fee for the other agencies,” Mr. Carlson noted. “There’s arguments on either side on why this was a valid approach or not.”
The table on the slide on the lower right outlines the different entities and what their responsibilities are for payment. He noted that the water districts pass on the fees; they are very low. They started in March of 2018; a bill was issued in January 2019 and a bill will be issued in January 2020. They allowed for prepayment so pumpers could base their payments on prior year extraction fees and pay those forward through the end of the three year billing cycle.
“Through the end of the year, there were about $108,000 in fees outstanding, so they are behind by about $100,000 worth of fees,” he said. “That’s why they are looking to adopt a miscellaneous fee schedule which is a penalty program and administrative cost program for those that are not reporting on time and those that are not paying their fees. The proposed penalty is about 3% on the outstanding amount.”
McMULLIN AREA GSA
The McMullin Area GSA is also part of the Kings Basin, shown in purple on the map. The McMullin Area GSA is the major area responsible for overdraft in the basin – about 70% of the overdraft is from this one area, Mr. Carlson said.
They adopted the 218 property related fee; they mailed a notice, held a public hearing, and then absent the protest, they adopted the fee. Only two written protests were received; there would have needed about 647 written protests for the fee to fail.
The fee is $19 per acre and it excludes small parcels of 2 acres or less. “I think they elected to do that because the small parcels were only a small fraction of what they could potentially raise,” he said. “I think it excluded a lot of people that didn’t have the ability to pay, and so were less likely to protest.”
Because this is an assessment on the tax rolls, there’s no information on implementation yet. It went out in January 2019 for payment on the tax rolls. Fresno County is collecting the money and will then provide that money to the GSAs, so that does simplify the administrative costs for the GSAs implementing the assessment approach.
Mr. Carlson noted that many basins are providing graphs like on the slide on the lower right that compares the proposed state fees if the GSA does not implement a GSA against the fee being proposed by the GSA.
“Just for context, the state calculation is $300 per well as a flat fee, and then they multiply, based on the condition of the basin, the acre-feet per year x$25 for an unmanaged area, $40 for a probationary area, or $55 if it’s under a state interim plan,” he said. “There’s also a 25% late fee for non-payment, so that’s why when the agencies are proposing $10 per acre foot or $1.45 per acre-foot, it looks a lot better than what’s the state’s proposing, so the state fees are definitely a motivating factor. No one’s really interested in dealing with the state backstop.”
NORTH FORK KINGS GSA and SOUTH FORK KINGS GSA
The North Fork Kings GSA and the South Fork Kings GSA both adopted Prop 218 fees. They are relying on a property assessment rather than a water charge. “Instead of doing the protest election, they did a weighted votes by acreage election where the majority has to carry the vote,” he said. “These are adjoining basins, one is in Tulare Lake and the other is up in Kings. They enacted similar approaches. It is stark to see Mc Mullin, Kings East, and Kings North Fork all have different approaches in this same basin area.”
Because these fees are on the tax rolls, both counties are collecting taxes and are awaiting the first deposits in their account. “One thing to note about the assessment approach is both of these fees passed in the summertime, and they are waiting all the way until now basically to start collecting on these fees, so there is a time lag when you pass the assessment, you have to wait until the assessor’s office begins the next round of collection,” he said. “Because of that, in the North Fork, the agencies are floating money to the GSA to cover, and they have repayment agreements once these fees start coming in.”
He also noted that with the South Fork Kings GSA, the City of Lemoore has incorporated the fees into their rate structure, so the city pays the fees for everyone in its service area, and the ratepayers reimburse the city for the fees.
IN SUMMARY …
Mr. Carlson there were three big takeaways from reviewing the different approaches. “There were a variety of tactics that different groups are using, and it’s all in the spirit of local management priority and what works best for your basin,” he said. “They are depending on what is the most equitable process that they want to take on while still making sure that they hit their deadline for development of their GSP.”
“Compliance and receipt of the payments is not immediate,” he continued. “It’s better to start early as it’s going to take some time for these fees to come in and for your agency to be receiving money and for the deadlines rapidly approaching, it’s better to start early. And finally, state intervention is a motivating tool. As we saw from the graph, the state fees are much higher than most of these basins are going to be charging their customers or well users, so highlighting that throughout the stakeholder process encourages cooperation as opposed to resistance.”
MARK HILDEBRAND: The nuts and bolts of fee setting
Mark Hildebrand is a financial and management consultant specializing in utility rate-setting with 18 years of experience in helping local governments, federal agencies, special district, private companies, and NGOs bridge funding gaps and find strategic solutions to their business needs. He discussed the process he went through to set rates for a GSA in their groundwater basin.
The basin is rather small with a lot of agricultural users and some municipal pumpers as well. The majority of the groundwater pumping is by the municipal agencies that provide domestic water, but there are quite a few growers in the area. The chart on the right is showing acres, so there is a lot more acreage in the agriculture; the agricultural accounts are heavily weighted towards acreage and less so towards actual water usage. He noted that this will play into the discussion in terms of the decisions of how to set rates and the measurement approaches used to set the fees.
They started by establishing goals for what they want to achieve with the rates:
The fees need to be fiscally responsible. They need to make sure that development of the GSP is funded.
The fees need to be equitable and legally defensible. They want the fees to be equitable towards all who will be paying these fees, and that goes hand in hand with being legally defensible, he said, noting that a lot of legal requirements are founded on the concept that you need to be equitable amongst the people who are paying the fee.
The fees need to be implementable; the data must be available to charge the fees being imposed. Certain types of fees would be nice to charge but there isn’t the necessary data, he noted.
The fees must have buy-in from the stakeholders. A lot of these communities are really close-knit, particularly agricultural communities, and it helps to have stakeholders on board. “A lot of these processes of adoption involve a lot of engagement with the stakeholders and if you can have them showing up to the meetings in support and understanding that handing it over to the state could be worse than just adopting the fees, then that engagement can go a long ways.”
Mr. Hildebrand said that the financial plan they developed for the pre-GSP fees is simple – just administration and development of the plan. The development of the plan will be a one-time known cost, and the range of cost for the plans is measurable and known. The only complicating factor was grant revenue – when are the grants going to come in, are they going to come in?
“The financial plan for pre-GSP fees is pretty simple,” he said. “The post-GSP will get more complicated as basins might have capital spending needs and might need to issue debt, so that could get more involved.”
He presented a slide showing the legal vehicles that were available to the GSA for charging the fees, noting that Ms. Acos covered these in the presentation. “The underlying code or legal authority for charging the rates would be the water code,” he said. “Even within that code, there is some ambiguity about which statutes will be the basis for the rate, so it’s really between Prop 26, which defines what a tax is and exemptions to that tax of what fees can be imposed without actually going through a voting process, or is it going to be through Prop 218, which talks about property-related fees. The water code doesn’t speak to which of those two statutes should be utilized, so there’s a certain amount of judgement that goes into it.”
He then detailed the six fee structures that were considered:
Metered extraction fees: This would be a fee that would be based on actual water users water usage from the various wellhead owners in the basin. This type of fee requires meter data on every well, a way to collect that data, and then charge on actual usage.
One advantage is that of all the fees, this is the most equitable because it considers actual water usage which is the whole point of the groundwater extraction fee. It’s also a good long-term solution because these are what the fees are going to based on post-GSP adoption.
The disadvantages are that unless meters are already installed, it can be very expensive to implement, as either the GSA needs to purchase the meters and install them which they don’t have any revenue to do yet, or they could ask the well owners to do it and it’s expensive for them. It would also take some time to roll that program out, and there’s some questions about whether the GSA is even authorized to do that pre-GSP. “You could interpret the water code as saying that the GSA is not authorized to require metering until after the GSP has been written and adopted,” Mr. Hildebrand said.
Estimated usage extraction fee: This is the same idea as metering except usage is based on an estimate using best available data. He noted that this is the option chosen by the GSA he was working with. To get the data for this, they first took the meter data where it was available – the municipal agencies meter their groundwater and some farmers and growers meter their water and report that to the state. Those with recently installed wells can self-report their water usage. For the vast majority of the wells that were not metered, they looked at the land use and land area, trying to infer how much water is probably used from that well based on the type of crop and the amount of acreage that is associated with that well. Between those three data points, they can compile the data.
One of the benefits is that the data can be obtained, and it’s much more timely than trying to get meters installed. Another benefit is stakeholder engagement, because if you engage with the pumpers you are estimating for and ask them to help substantiate the usage being estimated, it’s an important step towards educating them on the process and allowing them to participate in that process.
“If it’s not too large of a service area and you can do that, it could be very powerful,” said Mr. Hildebrand. “In some of these larger basins, it might be unfeasible to reach out to that many customers or that many pumpers, but it is beneficial if you can.”
The disadvantages are that the self-reporting is imperfect and the estimates are imperfect, but since it is a short-term solution, we did determine it to be the best solution for our project, he said.
Flat parcel fee: This fee would be just look at acreage and ignores actual water usage. This option might be used when one doesn’t feel confident with the water estimates, so one could identify how many acres are associated with every well that is out in the basin. With this option, the data is easier to collect as rather than trying to estimate water usage, it’s simply tying land area with wells. Timing is easier. Disadvantages are that it is much less equitable, identifying the number of acres associated with a well is not necessarily an exact science, and potentially it would be hard to defend.
“If you’re supposed to be setting fees based on a benefit that’s conferred or costs drivers for groundwater management, it’s not a perfect argument that simply because somebody owns a lot of acres and they don’t necessarily irrigate them, that they are somehow driving the costs of your groundwater management plan,” he said. “An argument could be made that just because they are not irrigating now, doesn’t mean that they might not irrigate it in the future, but it becomes a little bit less defensible than when you actually look at water usage.”
Voluntary contributions from member agencies: This is a good short-term solution to funding; a lot of basins are using this to provide short-term funding for expenses while they work on longer-term options for fees. In some cases, there may even be an agreement where those agencies will be reimbursed later by all the water users in the basin. This approach is quick, low effort, and doesn’t really require data. However, it’s rather inequitable, he acknowledged.
“Those costs will eventually fall on water ratepayers, because the member agencies are going to be your municipal agencies usually, and where they get their money is from water ratepayers so the people who are paying for those contributions are the municipal retail customers, and it doesn’t fall at all on the growers or anyone who is off of the municipal system,” he said. “It’s probably not defensible in the long term, and it’s certainly not sustainable, but it is a good short-term solution, particularly if you’re at an impasse on what rates to adopt.”
Special tax: This option would fall under Prop 26 where voter approval is required. The GSA proposes a special tax to be assessed in a specific way on landowners, and the GSA takes it to a vote. It’s a specific tax so it requires a two-thirds majority vote. The benefit is that if it’s passed, it’s a very stable source of revenue. The disadvantage is that it’s a high level of effort; there’s a lot of outreach and education, and ultimately, it might not pass, and could be a big waste of time and money.
Special assessment: A special assessment is similar to a special tax; it falls under Prop 218 and it requires a vote as well, but only a majority vote. Votes are weighted based on the financial obligation of the people paying, so for a grower who has a lot of acreage and who would be paying more, their vote would count more than for a single family home whose fee would be significantly less because they live on a small parcel. The vote is weighted and it passes with a majority.
Mr. Hildebrand said he was surprised that North Fork Kings GSA and South Fork Kings GSA went the Prop 218 and it passed easily. “In one case, it was a 93% approval, the other case was a 60% approval,” he said. “I was surprised to come across that example because it does run some special risks. I’m assuming that they understood their basin, they understood the sentiment, it was probably a tight-knit community where they spoke and decided it was the best route to go, and they had a high degree of certainty that it would pass.”
With any fee that the GSA develops, SGMA requires noticing of the meeting where the board will be discussing and ultimately voting on whether or not to adopt the fee. It will need to be adopted by an ordinance. Once the fee is adopted, the two options available to the basin Mr. Hildebrand was working with were to either put it on the property tax bill, or to send out individual bills. If it is collected from the property taxes, the collection rate will likely be high, as most people pay their property taxes. In the case of the GSA Mr. Hildebrand was working with, they decided there were so few pumpers, they would send out individual bills on a quarterly basis; it was easy enough to handle managed by administrative staff and they decided a billing system would not be necessary.