Blogs

By: @Madison Datus, CSDA Law Clerk 

A recent decision by the First District Court of Appeal held that legal challenges to new or increased water or wastewater rates must be brought through specified validation proceedings and must be brought within the 120-day statute of limitations enacted by SB 323 (2022) provided that the agency follows specific notice procedures. The published decision provides clarity around the application of the newly enacted Gov. Code § 53759 and enhances protections for an agency’s ability to set rates under Proposition 218.

CSDA has closely tracked this case in support of water and wastewater agencies, including filing an amicus brief (prepared by Eric Robinson and Andreya Woo Nazal from Kronick, Moscovitz, Tiedemann & Girard) in support of Marin Municipal Water District in 2025 as well as submitting a request to the court of appeal to publish the opinion, after it initially opted to issue an unpublished decision. The court subsequently published the opinion on June 2nd.

In Hiller v. Marin Municipal Water District (“MMWD”), a water service customer brought a class action against MMWD challenging the agency’s rate ordinance and seeking a refund of water charges. Under Proposition 218, a public agency must follow specific steps to impose or change property-related fees, taxes, and other assessments. MMWD conducted the proper substantive and procedural steps to increase water service rates as required under the proposition. Pursuant to authority enacted under SB 323, upon the adoption of the new water rates, the District initiated a court action to validate the rate ordinance and alerted potentially interested parties by posting in a local newspaper as required. This type of validation action is authorized under Gov. Code § 53759 within 120 days of the effective date or of the date of the final passage, adoption, or approval of an ordinance, whichever is later. There was no opposition brought within the required time and therefore, the court entered a default judgement verifying the ordinance.

Hiller later brought the class action alleging violations of Proposition 218 and seeking refunds along with both declaratory and injunctive relief. The District filed a demurrer alleging that the claims brought in the class action were barred by the prior judgement affirming the validity of the water rates. Additionally, the District argued that the claims should have been brought forth in a reverse validation action rather than a class action. The court agreed with the District and sustained the demurrer finding that the claim was blocked by the prior validation judgement.

On appeal, the First District held that legal challenges to water rates must be “brought under the existing validation statues, subject to the 120-day statute of limitations” in Gov. Code § 53759. The court affirmed that there is no conflict between Proposition 218 and Gov. Code § 53759 because the statute of limitations imposed in the latter only begins after the procedures in Proposition 218 are completed. Therefore, the appropriate time for the plaintiff to have brought a challenge to the water rate ordinance was during MMWD’s validation action or by filing a reverse validation action within the 120-day statute of limitations. Additionally, the court affirmed that the published notice via newspaper satisfied any notice requirements and rejected the plaintiff’s due process claims.

Impact on Special Districts

This decision provides helpful guidance for water and wastewater special districts subject to Proposition 218 on how to utilize Gov. Code § 53759, thereby strengthening protections around an agency’s ability to set water and wastewater rates. By affirming that claimants are subject to the 120-day statute of limitations and must bring challenges under the validation statutes, the court provided some clarity for agencies on how to ensure that their rates will not be subject to litigation years after ordinances have been adopted and validated. Special districts should ensure that they work closely with legal counsel to develop a strategy that protects their water and wastewater rates.

CSDA will continue to monitor this case for additional updates. For more information on Proposition 218, please see the Propositions 26 and 218 Guide for Special Districts.