Governor Schwarzenegger has signed SB 376, a bill by Senator Soto (D – Pomona) authorizing the Three Valleys Municipal Water District to adopt an assessment including a schedule of annual adjustments, and to make those adjustments in the same manner as allowed for taxes, fees, and charges that are not considered increases under Proposition 218. 

Soto said her bill was necessary for water assessment charges to be equally and fairly distributed to all property owners in the District, and not just the current water ratepayers.

Soto’s bill prohibits the assessment from exceeding $29.41 per equivalent dwelling unit, and requires that the revenue is used exclusively to fund the readiness-to-serve charge, its equivalent, or related administrative costs imposed upon Three Valleys by the Metropolitan Water District of Southern California (MWD).

SB 376 also requires Three Valleys to adjust its water rates to its retail agencies by an amount necessary to prevent surplus funding of the readiness-to-serve charge imposed upon the District by MWD.

According to the non-partisan Legislative Analyst's Office, the intent of Proposition 218 was to ensure that all taxes and most charges on property owners are subject to voter approval.  In addition, Prop. 218 seeks to curb some perceived abuses in the use of assessments and property related fees, specifically the use of these revenue raising tools to pay for general governmental services rather than property-related services.

Most water districts can impose standby charges on property owners, regardless of whether they currently receive water service. Districts use these revenues to build enough capacity into their water systems to serve undeveloped properties; the facilities are on standby until development occurs.  Prop. 218 requires local officials to treat standby charges as if they were benefit assessments.

The District provides wholesale water services to the Pomona Valley, the Walnut Valley, and the eastern portion of the San Gabriel Valley. Three Valleys spans 133 square miles and contains about 600,000 residents.  Three Valleys is a member of MWD.

In 1991, to maintain its current system and to accommodate future growth, MWD assessed its member agencies a readiness-to-serve (standby) charge to pay for reservoirs, aqueducts, and pipelines.  In July 1996, before Prop. 218 passed, the District adopted its own standby charge, averaging $5.92 per parcel, to pay for MWD's charges.  It also adopted scheduled increases to cover MWD's projected increases.  Because Prop. 218 treats standby charges as assessments, Three Valleys can't change higher standby charges unless the affected property owners approve.

There is a $600,000 gap between what MWD charges Three Valleys and the revenue the District gets from its current standby charges.  Three Valleys makes up the shortfall by charging higher water rates to its wholesale customers.  Those water purveyors, in turn, pass along the increased charges to their retail customers.  Three Valleys believes that increasing the standby charges as originally scheduled on all properties is more equitable than raising water rates on existing retail customers.

When the voters passed Prop. 218, they exempted or grandfathered many existing levies.  The statutes implementing Prop. 218 also grandfathered some scheduled increases in existing taxes and fees.  Because of disagreements, existing scheduled increases in benefit assessments did not receive the same treatment.  Three Valleys has maintained that state law should treat the scheduled increases in benefit assessments that it approved before Prop. 218 the same as those grandfathered increases for taxes and fees.

Just because Prop. 218 doesn't allow local officials to implement scheduled benefit assessment increases, it does not stop a local agency from proposing increases.  Prop.  218 and its implementing statute spell out the notice, hearing, and protest procedures for imposing or increasing benefit assessments.  Increased benefit assessments require the weighted ballot approval of the affected property owners.  If local property owners want to see the increased charges on their property tax bills rather than on their water bills, they can approve the increased assessments. 

Three Valleys officials argued that going to the ballot would be too costly for the District.  They estimate that it would cost them $500,000 to conduct the election and provide voter education on the issue prior to the election.