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Court of Appeal Issues Narrow Opinion on Subvention for Municipal Stormwater Permit Requirements

The California Court of Appeal recently issued the first published decision that adjudicates a municipal stormwater test claim on the merits.  In State Department of Finance et al. v. Commission on State Mandates, the Court of Appeal held that municipal stormwater requirements in a Los Angeles County National Pollutant Discharge Elimination System (“NPDES”) permit to install trash receptacles at transit stops and to conduct inspections of commercial, industrial, and construction sites are not unfunded state mandates as a matter of law.  The Los Angeles County permittees, therefore, are not entitled to reimbursement for implementing these specific requirements under the California Constitution, article XIII B, section 6.   The Court of Appeal largely relied on the “highly flexible” “maximum extent practicable” standard of the Clean Water Act in ruling that these requirements are federal mandates, but limited its ruling to the specific mandates at issue.  As a result, public agencies that own and operate municipal separate storm sewer systems in California may still seek subvention for other NPDES permits with requirements that exceed the “maximum extent practicable” standard.

The federal Clean Water Act requires operators of municipal separate storm sewer systems to obtain NPDES permits that contain controls to “reduce the discharge of pollutants to the maximum extent practicable.”  (33 USC 1342(P)(3)(B)(iii).)  The Los Angeles Regional Water Quality Control Board (“Regional Board”) issued an NPDES permit to the County of Los Angeles and numerous cities within the County (collectively, “Permittees”) to control discharges of municipal stormwater, which included requirements to install trash receptacles at transit stops and to inspect commercial and industrial facilities and construction sites. The Permittees filed a test claim with the Commission on State Mandates to determine whether the trash receptacle installation and inspection requirements qualified for subvention as unfunded state mandates.  According to the Court of Appeal’s opinion, the Commission found that the requirements constituted state mandates because the Clean Water Act did not expressly contain such requirements. The Commission nonetheless concluded that subvention only applied to trash receptacles because the Permittees could levy fees to pay for inspections.

Upon the Department of Finance and the State and Regional Water Boards’ petition for administrative mandamus, the trial court overturned the Commission’s decision.

The Court of Appeal affirmed the trial court’s decision.   Noting the practical realities and unique issues presented by large municipal storm sewer systems, the Court of Appeal ruled that the “maximum extent practicable” standard provides the State with the flexibility to achieve its goals of reducing stormwater pollution under the Clean Water Act.  The opinion stated that application of the maximum extent practicable standard requires balancing various factors, such as the particular control’s technical feasibility, cost, public acceptance, regulatory compliance, and effectiveness.  The Court concluded that the NPDES permit requirements at issue did not exceed the maximum extent practical standard under federal law.  As a result, the Court held that the trash receptacle and inspection requirements were federal mandates, not state mandates, which are not subject to subvention. (i.e., reimbursement).  However, the Court’s decision is explicitly narrow:  “[G]iven the flexibility and mutability of the maximum extent practicable standard, of necessity our decision is limited to the specific mandates addressed here.”

Significantly, the Court did not adopt the argument urged by the State and Regional Water Boards that even permit requirements exceeding the maximum extent practicable should still be considered federal mandates.  Rather, the Court used the maximum extent practicable standard as the threshold beyond which subvention is required.  The Court explained that not everything included in an NPDES permit should be considered a federal mandate:  “this is not to say that any action requirement that might advance the objectives of the Clean Water Act is automatically within the maximum extent practicable standard.”  (Italics in original.)

Due to the Court’s limited ruling, public agencies are not foreclosed from seeking subvention for other NPDES permits with requirements that exceed the maximum extent practicable standard.  However, these issues may not yet be settled.  Stormwater agencies await the outcome of another stormwater test claim arising out of San Diego County, which is currently pending before the Third Appellate District Court of Appeal, Case No. C070357.