Time to Dust Off California Water Law On Development Moratoria

As the California drought continues, the state’s need for a solution intensifies.  Last month Governor Brown signed into law a series of bills creating a new regulatory program for groundwater extraction.  In November, the electorate will vote on Proposition 1, a $7.5 billion bond issuance for state water supply infrastructure projects.  In addition, many local water agencies have implemented mandatory water conservation measures.  While these measures will help the state manage the drought, if the situation continues to worsen water districts could soon begin adopting moratoria on new water service.  Under California law, water districts have broad discretion to deny water connections and service to new applicants and to issue moratoria in the event of a declared water shortage emergency, but that discretion has limits.

In Swanson v. Marin Municipal Water District (1976) 56 Cal.App.3d 512, a property owner filed a petition for writ of mandate, seeking to compel the water district to extend a pipeline and provide service to his proposed new home.  The trial court granted judgment in favor of the property owner, and issued a writ compelling the water district to grant the pipeline extension and provide water service to the property.  The court of appeal reversed.

The court of appeal held that “a potential water user does not possess any absolute right to be afforded water service and . . .the Constitution does not require that he be treated in the same manner as established users of the water system.”  Id. at 522.  In Swanson, the water district had previously adopted a moratorium in response to a perceived imbalance between its water supply and demand.  Where such a situation exists, the water district has a rational basis for implementing a moratorium on new service.  The court of appeal did, however, recognize some limits to a water district’s authority to deny applications.

“. . [W]e are not unmindful of the somewhat dire consequences which flow from our decision in this matter.  Politically, the power to ‘cut off one’s water’ by the simple expedient of imposing a moratorium such as the one here involved is a potent weapon in effecting a no-growth policy within a community.  Since District has neither the power nor the authority to initiate or implement such a policy, the imposition of any restriction on the use of its water supply for that purpose would be invalid.  We hasten to point out, however, that, as indicated by our decision, we find no evidence in the record before us of any such abuse of authority.  Nevertheless, we do foresee a continuing obligation on the part of a District to exert every reasonable effort to augment its available water supply in order to meet increasing demands.”  Id. at 524 (emphasis added).

The duty and limitations articulated in Swanson were put to the test by petitioners in Building Industry Association of Northern California v. Marin Municipal Water District (1991) 235 Cal.App.3d 1641.  In that case, petitioners sued to invalidate an ordinance adopted by the water district, prohibiting new water connections in the district.  The trial court sustained the district’s demurrer to the petitions without leave to amend and dismissed the action.  The court of appeal affirmed.

The district’s ordinance was taken in response to its own declaration of a “water shortage emergency condition” under Water Code 350.  When a water district finds and determines that the ordinary demands and requirements of water consumers cannot be satisfied without depleting the water supply to the extent that there would be insufficient water for human consumption, sanitation, and fire protection, it may declare a water shortage emergency condition.  Wat. Code, §350.  These conditions may be either immediate emergencies or threatened long-term water shortages.  BIA v. Marin Muni. Water Dist., supra, 235 Cal.App.3d at 1646.  When a water district has declared the existence of a water shortage emergency condition, it must adopt regulations and restrictions “as will in the sound discretion of such governing body conserve the water supply for the greatest public benefit with particular regard to domestic use, sanitation, and fire protection.”  Id. at 1647 (citing Wat. Code, §353)(emphasis added).  Water Code section 356 explicitly authorizes a ban on new service connections.  Id. at 1647.  Thus, the court of appeal concluded that water districts have no duty to grant potential domestic users priority or preference over non-domestic users in the implementation of a ban on new connections.  Id. at 1648.

The court of appeal also failed to find any duty of a water district to provide service to applicants within its district.  Even the duty recognized in Swanson, to “exert every reasonable effort to augment its water supply,” was considerably downplayed by the court in BIA.  The court ultimately held that the district satisfied whatever duty it had by commencing studies of water supply options.  Id. at 1649.  The net result of this opinion is that water districts have broad discretion to implement measures to conserve water supply for the greatest public benefit and to decide what is in the best interest of the population it serves.  Id. at 1646-1649.

Other cases have demonstrated the courts’ deference to municipal decisions to implement moratoria and deny service as well.  See Kawaoka v. City of Arroyo Grande (9^th Cir. 1994) 17 F.3d 1227, 1237-1238 (city’s one-year development moratorium did not violate due process rights under the U.S. Constitution because city’s estimates demonstrated that it did not have adequate water supply for all pending development applications);  Getz v. Pebble Beach Community Service District (1990) 219 Cal.App.3d 229 (community service district properly denies sewer connection permit because senior housing units not included within local land use plan).

Yet municipalities and water districts do not get a free pass to enact development moratoria based on alleged water shortages.  In Lockary v. Kayfetz (9^th Cir. 1990) 917 F.2d 1150, owners of undeveloped land sued a public utility district in federal district court alleging that the utility district’s refusal to grant water hookups to their properties constitutes a regulatory taking of their property and violated their constitutional rights to due process and equal protection.  The district court granted summary judgment in favor of defendants and dismissed the case.  The court of appeals reversed.

The court of appeals found that the water district’s refusal to grant plaintiffs water hookups may deny them all economically viable use of their land, thereby resulting in a taking of the land.  Further, plaintiffs offered evidence sufficient to create a triable issue of fact regarding whether the utility district’s assertion of a water shortage was a mere pretext upon which to base its development moratorium.  This evidence tended to show that since the utility district implemented the development moratorium, water consumption had increased 70%, storage capacity had increased 1100%, the utility district had provided water for secondary units and swimming pools, the utility district had voluntarily relinquished rights to certain water resources, and the utility district’s leakage rate was at least double that of accepted norms.  Thus, the court concluded that summary judgment in favor of the utility district was improper because the plaintiffs had at least created a triable issue that sufficient water existed to support additional development.

Accordingly, when water districts do not have enough supply to satisfy demand they may declare water shortage emergency conditions and issue moratoria on new service connections.  Denial of water service may be challenged in court, however, and is particularly vulnerable to challenge when it can be shown to be a pretext to a no-growth policy, or when it is done arbitrarily or discriminatorily.