Reported / Citable
Background
The Sustainable Groundwater Management Act (SGMA), enacted in 2014, gives local groundwater sustainability agencies broad authority to regulate California’s critically over-drafted groundwater basins — including the power to impose fees to fund their programs. The Tehama County Flood Control and Water Conservation District became the groundwater sustainability agency for eleven subbasins underlying much of Tehama County. In June 2022 the District adopted a resolution imposing an annual well registration charge of $0.29 per acre on every legal parcel in the county — regardless of whether the parcel had a groundwater well or actually drew any groundwater. The charge was collected through the property tax rolls. The stated purpose was to fund the administrative costs of a new well registration program.
David Garst, as trustee of a trust owning 40 parcels in the county (only two of which had groundwater wells), noticed his tax bills had jumped by roughly $4,000 and traced the increase to the new charge. He filed a lawsuit in April 2023 challenging the charge as an unconstitutional tax under Propositions 26 and 218 — California’s constitutional amendments requiring voter approval for new taxes and limiting government fees to the reasonable cost of services actually provided to payors. The trial court agreed, invalidated the charge, and ordered the District to refund all amounts collected from all county taxpayers. The District appealed; the League of California Cities, the California State Association of Counties, and the California Special Districts Association filed amicus briefs in the District’s favor.
The central legal question was whether the well registration charge qualified as an exempt “regulatory fee” under California Constitution article XIII C, section 1, subdivision (e)(3) — Proposition 26’s regulatory fee carve-out — or was instead a “tax” requiring voter approval under Proposition 26.
The Court’s Holding
The Third Appellate District affirmed in part and modified in part. First, the court rejected the District’s procedural defenses — including claims that Garst failed to exhaust administrative remedies, did not timely sue, and could not challenge the charge without first paying it — concluding that those defenses did not bar Garst’s constitutional challenge.
On the merits, the court held the well registration charge was an unconstitutional tax. The Proposition 26 regulatory fee exception (art. XIII C, § 1(e)(3)) requires that a charge be imposed for a “specific government service or product provided directly to the payor that is not provided to those not charged.” The well registration charge failed that test because it was imposed on every parcel in the county, including the roughly two-thirds of parcels that had no groundwater wells at all. Those parcel owners received no specific government service from the well registration program — which was designed to register and monitor extraction facilities, not to benefit landowners who did not extract groundwater. Because the District could not show the fee was tied to a specific service provided to each payor, the charge was a tax, not a fee, and was unconstitutional without voter approval.
However, the court modified the trial court’s judgment to strike the refund order. Garst sought to recover amounts paid by all Tehama County taxpayers, but had not filed a government tort claim under the Government Claims Act before seeking that relief. The Government Claims Act is a mandatory prerequisite to any suit for money against a public entity in California; Garst’s failure to comply meant the court could not order monetary refunds, even for unconstitutional taxes.
Key Takeaways
- Groundwater sustainability agencies implementing SGMA may impose fees only on parties who actually receive a specific government service — a countywide per-acre charge imposed on all property, including parcels with no wells, does not qualify as a Proposition 26 regulatory fee and is an unconstitutional tax without voter approval.
- The Proposition 26 regulatory fee exception requires more than a general public benefit; the fee must fund a service delivered directly to the particular payors being charged.
- Landowners challenging an unconstitutional tax can obtain a writ of mandate invalidating the charge, but must first file a government tort claim under the Government Claims Act before seeking monetary refunds — failure to do so eliminates the refund remedy even if the tax itself is void.
- SGMA fees structured as flat per-acre charges on all parcels — rather than charges tied to actual groundwater use or well ownership — face substantial constitutional risk under Propositions 26 and 218.
- This ruling will affect groundwater sustainability agencies across California that have adopted or are considering broad-based “administrative” charges to fund SGMA compliance programs.
Why It Matters
California’s groundwater sustainability agencies are under pressure to fund expensive monitoring, data collection, and regulatory programs under SGMA — and many have turned to per-parcel or per-acre charges as a politically convenient way to spread costs broadly. This decision draws a hard constitutional line: a charge cannot reach landowners who do not use or extract groundwater and who therefore receive no service from a well registration program. Any agency that has imposed a similarly broad charge faces potential legal challenge, and those designing new fee structures must ensure charges are allocated only to the users who actually receive the regulatory service being funded.
For property owners — particularly ranchers, farmers, and rural landowners in groundwater-stressed counties — the ruling confirms that they can challenge district charges as unconstitutional taxes even when the district frames them as regulatory fees. The catch is procedural: you must file a government claims act notice before suing for refunds. Without that step, a successful legal challenge wins a court order stopping future collection but does not recover what was already paid. Landowners considering challenges to SGMA-related fees should consult counsel promptly about the claims-act filing deadline and other procedural requirements.