State, not municipalities, financially responsible for stormwater mandates exceeding federal standards

By Rebecca Andrews, Best Best & Krieger.

Local public agencies realized an important victory in a more-than-decade-long, who-should-foot-the-stormwater-bill battle — a battle focused on a permit issued by the Los Angeles Regional Water Quality Control Board to the County of Los Angeles and more than 80 local agencies, or “co-permittees.”

The lengthy battle was not over the requirements themselves or whether state agencies had the authority to issue them. At the crux of the conflict was the question: Who’s picking up the check?

The answer from the California Supreme Court — California — is welcome news to local agencies.

The Supreme Court reversed an appellate ruling that the co-permittees could not recover certain costs associated with implementing their stormwater programs. The lower court determined these costs were federal, not state, mandates. The High Court overturned this decision, instead placing the cost burden on the state unless local agencies have the ability to fund the costs themselves.

State Mandates Law and Clean Water Laws

Under the California Constitution, if a state agency or the Legislature requires a local government to provide new programs or higher levels of service, then the agency is eligible for reimbursement of the associated costs unless the agency has other means to pay for the mandates.

The State is not required to pay, however, if these mandates are required under federal law.

The federal Clean Water Act (CWA) and state Porter-Cologne Water Quality Control Act require municipalities to obtain permits to discharge stormwater from storm drain systems. Measures to reduce the discharge of pollutants in stormwater are included in each permit — known as an MS4 permit.

With U.S. Environmental Protection Agency approval, California issues its own National Pollution Discharge Elimination System (NPDES) permits through the State Water Resources Control Board and its nine Regional Water Quality Control Boards. Valid for five year terms, these permits become increasingly onerous for municipal governments with each permit renewal. Added requirements, which the State has been relatively unfettered in doling out, lead to ever-increasing costs for cities.

While the challenged permit provisions are specific to Los Angeles County and the 80-plus cities within the County, the implications of the Court’s decision will affect permitting and funding actions statewide.

The Trash Can Debate

Los Angeles County’s MS4 permit was issued by the Regional Water Quality Control Board (Los Angeles Region) in 2001.

Within the Board’s approved permit were requirements that trash cans be installed and maintained at each mass-transit stop in the co-permittees’ jurisdictions. The co-permittees’ were also required to routinely inspect commercial, industrial and construction sites to ensure compliance with local pollution laws.

The County and some co-permittees sought reimbursement for associated costs. The Commission on State Mandates — the state agency created to determine reimbursement claims — partially approved the claims, finding both permit requirements were mandated by state rather than federal law.

However, it also determined that co-permittees could levy fees to cover the inspection requirements and therefore, the inspection requirements were not unfunded state mandates.

The State opposed the Commission’s determination, challenging the state-mandated determination and arguing trash cans and inspections were necessary to fulfill federal CWA requirements. As such, the State argued, they were federal mandates. The trial and appellate court affirmed this argument.

The Supreme Court, however, found the State failed to prove the conditions were federally mandated.

“No regulation cited by the State required trash receptacles at transit stops,” Justice Carol Corrigan wrote for the majority. “There was evidence that the EPA had issued permits to other municipal storm sewer systems … that did not require trash receptacles at transit stops. The fact the EPA itself had issued permits in other cities, but did not include the trash receptacle condition, undermines the argument that the requirement was federally mandated.”

The same reasoning supported the Supreme Court’s determination that inspection requirements are not compelled by federal law. While the federal government granted the state authority to issue stormwater permits and the discretion to determine necessary system controls, it did not require the State to impose the challenged conditions, the Court held.

Mandates Moving Forward

Dissatisfied with the Supreme Court’s holding, the State filed a petition for rehearing. The Supreme Court denied rehearing but made slight modifications to the decision without changing the judgment. As a result, the implications of this ruling will likely be widespread.

On remand, the trial court will take up the issue of whether or not the co-permittees have authority to collect fees to fund the permit’s inspection requirements.

Claims pending with other reviewing bodies will also be affected by this decision.

More than a dozen test claims, which were on hold while the Supreme Court considered the matter — with both the Commission and the state Court of Appeal — will now see new life. Each claim calls on the State to reimburse costs of implementing requirements imposed under state law.

The courts and Commission will now examine whether the permit conditions constitute state or federal mandates and whether there is a local funding source to cover costs.

With stormwater prescriptions varying based on the board that issued the permit, review of these claims will take time. The Commission on State Mandates has scheduled a hearing on the first pending claim in January 2017 and anticipates holding hearings on the remaining claims through 2018.

Agencies concerned with the outcome the Commission’s decisions may submit comments in the hearings as an interested party.

Looking ahead to future permits, the State will have to present much stronger arguments that permit conditions fall under federal — not state — law. This means good advocacy on behalf of local agencies will become even more important during administrative permit adoption proceedings.

In the end, if the State is unable to prove that permit requirements are compelled by federal law, the State has indicated it may stop administering its own NPDES program.

An obvious alternative to suspending the State-administered program is to provide local agencies with a source of funding to meet MS4 permit requirements. For various reasons, recent attempts to provide such funding have failed. Perhaps, when faced with the prospect of losing State control over water quality, future attempts to fund permit requirements will be successful.

Ultimately, if California exercises the discretion granted by federal law in a way that prescribes which actions local agencies must take to protect water quality, the State will have to pick up the bill for costs surpassing federally set standards or provide a means of funding those mandates.

Either way, the funding horizon for local agencies in California appears to be brighter.

[divider] [/divider]

andrews_rebecca-c2Rebecca Andrews, an associate in Best Best & Krieger LLP’s Municipal and Environmental Law practice groups, assists public agencies in solving water quality challenges arising under state and federal law. She also helps municipalities and special districts navigate, obtain and comply with water quality permits issues by state regulatory agencies. Reach her at