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CORRECTION: CLWA's water rate increase thrown out

‘Special tax’ ruled illegal; agency ordered to refund Newhall district, customers

Posted: July 14, 2014 2:00 a.m.
Updated: July 14, 2014 2:00 a.m.

Editor's note: This version corrects the previous, which incorrectly stated the agency to which he referred in his "cheap shot" quote.

A Superior Court judge has ordered the Castaic Lake Water Agency, Santa Clarita Valley’s water retailer, to rescind an illegal “special tax” imposed on Santa Clarita Valley water retailers, who passed that rate on to customers.

The Newhall County Water District — which buys water from Castaic Lake and provides water to customers in Newhall and parts of Canyon Country, Saugus and Castaic — sued the water retailer over the special tax.

“We’re happy with the decision,” Newhall County Water District General Manager Steve Cole told The Signal Sunday.

“We had asked the (Castaic Lake) agency for changes to the rate hike and that they needed to design a rate that treated customers fairly,” Cole said. “One that recognized our customers’ historical investment in groundwater.”

On Thursday, Los Angeles County Superior Court Judge James C. Chalfant ruled Castaic Lake Water Agency must rescind an illegal “special tax” imposed on local water retailers in July 2013.

Agency General Manager Dan Masnada on Sunday called a Newhall County Water District news release on the ruling - which repeatedly called the rate hike a "special tax" - “a cheap shot, inappropriate and uncalled for.”

“The judge ruled against us, but they’ve just won this battle,” he said of Newhall County Water District. “The war is not over yet.

“There are multiple ways to respond to the court decision,” Masnada said. Appealing the judge’s decision in court is one of the options the agency’s board of directors is expected to review soon in closed session.”


As part of the ruling, the judge said Castaic Lake Water Agency must refund about $61,000 in money paid by the Newhall County Water District and its customers.

“Any savings generated as a result of the ruling will be passed through to the district’s customers,” said Cole.
Masnada, however, called the refund “a short-term financial gain” for the district.

Special tax

Cole pointed out Sunday that calling the agency’s rate change a “special tax” is a term coined by the judge.

The district challenged the rate hike in court after warning the agency it had violated state law, he said, claiming the rate change would almost double imported water costs for the district’s 45,000 customers.

If left in place, the agency’s “special tax” could have cost the district’s customers about $1 million — or $75 per customer — every year.

“This is an outstanding victory for our customers,” district Board President B.J. Atkins said. “Simply put, this was an unfair tax and we are pleased the courts have required the agency to return to a more equitable, lawful way of doing business.”

The agency, according to Cole, tried to charge each of Santa Clarita Valley’s water retailers a fixed rate for imported water. However, this fixed rate was charged regardless of the amount of imported water needed or used by customers of the retailers, he said.

The district is one of four water retailers, the others being Valencia Water Co., the Santa Clarita Water Division and Los Angeles County Waterworks District 36.

Prop 26

Judge Chalfant determined the agency’s approach had “no reasonable relationship” to the services it provided to its retail customers and deemed it a special tax. As a tax, the agency’s new rate violated Proposition 26 — a voter-approved provision of the state Constitution that requires a vote of the people to enact special taxes and certain kinds of fees.

The agency was ordered to rescind the tax and revert to the previous structure until new, lawful rates are adopted.

“(The agency’s new rates) are special taxes not approved by the voters and must be put aside,” Chalfant said in his judgment.

Masnada, however, defended the rates that went into effect July 1, 2013. The tax was approved by the agency’s Board of Directors in a 10-1 vote in January 2013.

“The new rate structure achieved revenue stability for us as an agency,” he said. “It provided more cost certainty for the retailers with respect to fixed costs.

“The new rate structure is more fair and promotes conjunctive use of water,” he said.

Atkins, who sits on both the district board and the agency board, argued vehemently against the rate change when it was debated last year.

“This tax made no sense,” Atkins said after Chalfant’s ruling.

“In any business, customers expect to pay for the cost of services they use — nothing more, nothing less,” he said. “Despite our warnings, the agency board ignored this basic principle. But I am pleased with the judge’s decision and hope it leads to more commonsense and fairness in how the agency charges for water.”

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