Water Company’s Santa Clara Refund Canceled

SAN JOSE, Calif. (CN) - A water company cannot get a refund on the millions it paid in fees to draw from Santa Clara Valley wells, a California appeals court ruled.

Great Oaks Water Co. filed its complaint in November 2005 after the Santa Clara Valley Water District adopted a resolution setting charges for the extraction of its groundwater.

A trial finally concluded in early 2010 with Great Oaks winning a full refund of the $4.6 million it paid in groundwater charges.

While the water district appealed that award, the company challenged the court's refusal to award it another $2.9 million in attorneys' fees.

Great Oaks had contended that the district violated its own regulations and the California Constitution, but a three-judge appellate panel reversed Wednesday for the district.

Critical to the appeals court's judgment was its finding that water-service charges, such as those at issue here, are exempt from a state law requiring voter ratification of fees imposed by local public entities.

In trying to prove otherwise, Great Oaks had emphasized that the charge "is not based at all on the delivery of water, but is instead based solely upon the 'production' or extraction of groundwater for beneficial use."

The distinction failed to sway the appeals court.

"It is true that the charge is occasioned and measured by the pumping of groundwater," Judge Conrad Rushing wrote for the court (emphasis in original). "This fact might be critical if the water service exemption were defined in terms of a charge on specified activities. But it instead applies to 'fees or charges for sewer, water, and refuse collection services.' The question is thus not what triggers a charge, or what activity it directly burdens, but what it is 'for,' i.e., where the proceeds go."

The district also gave Great Oaks proper notice of the charge, and it held a public hearing on the matter, the 86-page ruling states.

In accusing the district of increasing the rates to fund unauthorized expenditures, Great Oaks claiming that the charges imposed did not correspond to actual costs.

The appeals court undercut those allegations, however, by finding that the practice an expert for Great Oaks had identified was a proper use of groundwater proceeds.

"It is difficult to conceive how [the district] could function without such forward budgeting," Rushing wrote.

The ruling rendered the water company's appeal for attorneys' fees moot.

Officials for the Great Oaks Water District did not return a request seeking comment.

Adam Hofmann, an attorney for the Santa Clara Valley Water District with Hanson Bridgett of San Francisco, did not answer a request for comment.

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