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Is Santa Paula’s Use of Water In-Lieu Fees Legal?

The Ventura County Taxpayers Association (VCTA) mission is to inform taxpayers and promote the wise use of public funds. On September 6, 2018 we sent the following letter to Santa Paula City Council and City Manager. The city has yet to respond.

At issue is the decision to use water in-lieu fees paid by developers to pay the city’s annual water bill - likely violating both state law and the city’s ordinance.

September 6, 2018

Council members and City Manager,

Ventura County Taxpayers Association noticed the Santa Paula City Council balanced the FY 2018-19 budget (pages 10, 132 and 133) by using $500,000 from the water in-lieu fund to pay the cities $600,000 annual groundwater bill.

Water in-lieu fees are collected by Santa Paula when a project comes in without the water to support it. Those fees are retained in a separate account and shall be used for capital projects that will generate additional water resources for the city.

We believe the Council’s decision to authorize using water in-lieu fees to pay annual groundwater bills is likely a violation of both state law and the city’s ordinance.

Santa Paula Municipal Code section 52.021 states, “The purpose of the fee is to provide funds for projects to develop or acquire additional water rights or water resources to mitigate the added water demand caused by ... land development.” (SPMC § 52.021(A).) Later in that same code section it states, “The proceeds of the fees shall be retained in a separate account and shall be used for capital projects, including associated engineering, environmental review, legal and administrative costs, that will generate additional water resources or water rights for use by the Water Enterprise. Those projects may include, but are not limited to, the purchase of water rights, construction of projects to import State water or other water, construction of projects to increase groundwater recharge, [or] construction of projects to use reclaimed water in lieu of existing water demand.” (SPMC § 52.021(E).)

Paying the city’s annual groundwater bill served none of the purposes listed in the city’s ordinance.

Besides the city’s own ordinance, VCTA believes state law places limits on what fees a city may charge as a condition of development, and what the city may do with that revenue. Government Code section 66001 provides that, if a city is going to collect a fee as a condition of development, it must “identify the purpose of the fee,” and “identify the use to which the fee is to be put.”

Government Code section 66006 provides that, if a fee is collected for capital improvements (such as waterworks), then “the local agency receiving the fee shall deposit it with the other fees for the improvement in a separate capital facilities account or fund in a manner to avoid any commingling of the fees with other revenues and funds of the local agency… and expend those fees solely for the purpose for which the fee was collected.”

Government Code section 66008 similarly provides, “A local agency shall expend a fee [collected] for public improvements … solely and exclusively for the purpose or purposes … for which the fee was collected. The fee shall not be levied, collected, or imposed for general revenue purposes.”

Paying the city’s annual water bill seems to violate these state statutes. A lawsuit challenging this practice could potentially seek reimbursement from the city’s general fund to the city’s water in-lieu fund.

Ventura County Taxpayers Association requests that you clarify your position on how water in-lieu fees should be spent. We also ask that you revise the FY2018-19 budget to reflect your compliance with state statutes.

Thank you

David Grau

President - Ventura County Taxpayers Association

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