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State Department of Finance v. Commission On State Mandates

California Court of Appeals, Second District, First Division

October 16, 2013

STATE DEPARTMENT OF FINANCE et al., Plaintiffs and Respondents,
COMMISSION ON STATE MANDATES, Defendant and Respondent COUNTY OF LOS ANGELES et al., Real Parties in Interest and Appellants.

Order Filed Date: November 14, 2013

APPEAL from a judgment of the Superior Court of Los Angeles County, No. BS130730 Ann I. Jones, Judge.

Burhenn & Gest, Howard Gest, David W. Burhenn, for Appellants and Real Parties in Interest County of Los Angeles, Cities of Bellflower, Carson, Commerce, Covina, Downey and Signal Hill.

John F. Krattli, County Counsel, and Judith Fries, Principal Deputy Counsel, for Appellant and Real Party in Interest County of Los Angeles.

Somach Simmons & Dunn, Theresa A. Dunham, Nicholas A. Jacobs for California Stormwater Quality Association, Santa Clara Valley Urban Runoff Pollution Prevention Program, Riverside County Flood Control and Water Conservation District and County of Riverside, the Alameda County Clean Water Program, and City/County Association of Governments of San Mateo County as Amici Curiae on behalf of Real Parties in Interest and Appellants.

Building Industry Legal Defense Foundation, Andrew R. Henderson, as Amicus Curiae on behalf of Real Parties in Interest and Appellants.

Kamala D. Harris, Attorney General, Douglas J. Woods, Senior Assistant Attorney General, Peter K. Southworth, Supervising Deputy Attorney General, and Kathleen A. Lynch, Deputy Attorney General, for Plaintiffs and Respondents State of California Department of Finance, State Water Resources Control Board, and California Regional Water Quality Control Board, Los Angeles Region.

No appearance for Defendant and Respondent Commission on State Mandates.



It is ordered that the opinion filed herein on October 16, 2013, be modified as follows:

On page 37, at line six of the first full paragraph, delete the word “unfettered” and replace it with the word “wide.”

This modification has no effect on the judgment.


In December 2001, the California Regional Water Quality Control Board, Los Angeles Region (Regional Board) issued a municipal stormwater sewer permit (Permit) to real parties in interest Los Angeles County and designated cities within the county, including the cities of Bellflower, Carson, Commerce, Covina, Downey and Signal Hill (collectively County). The Permit is governed by a complex state and federal statutory scheme regulating pollutant discharge into waterways under the federal Clean Water Act and the California Porter-Cologne Water Act. The Permit’s subvention status is subject to initial determination by the Commission on State Mandates (Commission). Real parties in interest filed a test claim before the Commission, seeking to determine whether four requirements of the Permit (to install trash receptacles at transit stops and to conduct inspections of commercial, industrial, and construction sites) constituted unfunded state mandates subject to reimbursement under the California Constitution, article XIII B, section 6 because although the Permit was governed by both federal law and state law, the County asserted the Permit contained additional state requirements not found in the governing federal statutes and regulations. The Commission agreed and found that the requirements constituted state mandates, although it concluded subvention was required only for the trash receptacles because the County had the ability to levy fees to pay for the inspections.

The Department of Finance filed a petition for writ of mandate in the trial court, seeking to overturn the Commission’s ruling, contending that the requirements were solely federal mandates because they implemented the directive of the federal statutes and regulations and thus were not subject to state subvention. The trial court agreed and found that the Commission erred in finding the Permit requirements were state mandates because it did not apply the applicable federal “maximum extent practicable” standard, and issued a writ of mandate ordering the Commission to vacate its decision.

On appeal, the dispute centers on whether the federal standard requiring the reduction of pollutants to the maximum extent practicable encompassed the specific four requirements of the Permit, given that the federal regulations at issue did not expressly spell out such requirements. The amici parties California Stormwater Quality Association et al. (collectively CSQA) join in the County’s arguments that the trial court erred in finding the maximum extent practicable standard controlled. The amicus party Building Association Legal Defense Foundation (Building Association) asserts that the issue is one of preemption, and the trial court erred in finding that the federal regulations governed the court’s mandate analysis. We agree with the trial court’s conclusion that the Commission failed to apply the controlling maximum extent practicable standard, that the Permit’s mandates implement the maximum extent practicable objective, and thus are federal mandates. We affirm the judgment.


A. Regulatory Structure

The Permit was issued as a “National Pollutant Discharge Elimination System” (NPDES) permit pursuant to the Clean Water Act, Title 33 United States Code section 1342. The 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 U.S.C. § 1342(p)(3)(B)(iii).) The Commission did not consider this standard in evaluating the Permit’s requirements, instead looking solely to whether the requirements were expressly set forth in the implementing federal regulation at 40 Code of Federal Regulations, part 122.26(d)(2)(iv)(A)–(D) (a copy of appendix A is attached).

1. Federal Framework

In 1972, Congress passed the Clean Water Act. (33 U.S.C. § 1251 et seq.) The Clean Water Act’s national goal was to eliminate discharge of pollutants into navigable waters of the United States by 1985. (PUD No. 1 of Jefferson County v. Washington Dept. of Ecology (1994) 511 U.S. 700, 704 [114 S.Ct. 1900, 128 L.Ed.2d 716]; City of Burbank v. State Water Resources Control Board (2005) 35 Cal.4th 613, 619–620 (City of Burbank).) To achieve this goal, the Clean Water Act “established restrictions on the ‘quantities, rates, and concentrations of chemical, physical, biological, and other constituents’” that could be discharged into the nation’s waterways. “[T]hese effluent limitations permit the discharge of pollutants only when the water has been satisfactorily treated to conform to federal water quality standards. (33 U.S.C. §§ 13111362(11).)” (City of Burbank, at p. 620.)

“The Clean Water Act employs the basic strategy of prohibiting emissions from ‘point sources, ’[1] unless the [emitter] obtains... an NPDES permit.” (Building Industry Assn. of San Diego County v. State Water Resources Control Bd. (2004) 124 Cal.App.4th 866, 872, fns. omitted (Building Industry).) NPDES permits are required for “a discharge from a municipal separate storm sewer system serving a population of 250, 000 or more.” (33 U.S.C. § 1342(p)(2)(C).) NPDES permits have “‘five components: technology-based limitations, water-quality based limitations, monitoring and reporting requirements, standard conditions, and special conditions.’” (WaterKeepers Northern California v. State Water Resources Control Bd. (2002) 102 Cal.App.4th 1448, 1452.)

Special rules apply to storm sewers. In 1987, Congress amended the Clean Water Act to require operators of “municipal separate storm sewer systems” (MS4)[2] to control or reduce the discharge of pollutants to the “maximum extent practicable” (MEP). [3] (33 U.S.C. § 1342(p)(3)(B)(iii).) Congress “clarified that the EPA [Environmental Protection Agency (EPA)] had the authority to fashion NPDES permit requirements to meet water quality standards without specific numerical effluent limits and instead to impose ‘controls to reduce the discharge of pollutants to the maximum extent practicable....’” (Building Industry, supra, 124 Cal.App.4th at p. 874; 33 U.S.C. § 1342(p)(3)(B)(iii).) Stormwater discharge is a significant source of water pollution, and contains suspended metals, sediments, algae-promoting nutrients, trash, used motor oil, raw sewage, pesticides, and other toxic contaminants. Sources of polluted stormwater discharge are “urban development, industrial facilities, construction sites, and illicit discharges and connections to storm sewer systems.” (Environmental Defense Center, Inc. v. U.S.E.P.A. (9th Cir. 2003) 344 F.3d 832, 840.) Unlike a sanitary sewer system, which transports sewage for treatment at a wastewater facility, MS4’s convey only stormwater. (Natural Resources Defense Council, Inc. v. County of Los Angeles (2013) 725 F.3d 1194, 1197, fn. 2.) As a result, the flexible maximum extent practicable standard is designed to permit MS4 dischargers to comply with such requirement on a permit-by-permit basis.

The EPA promulgated regulations to provide guidance to stormwater system permittees concerning requirements for MS4 permits. The regulations contain certain requirements, such as requiring MS4 permittees to include a program to monitor discharge from municipal landfills, hazardous waste treatment plants, but otherwise allow permittees to develop their own programs to meet the maximum extent practicable standard. (See 40 C.F.R. § 122.26(d)(2)(iv)(A)–(C).) Before an NPDES permit is issued, the federal or state regulatory agency must follow an extensive administrative hearing procedure. (See, e.g., 40 C.F.R. §§ 124.3, 124.6, 124.8, 124.10.)

2. State Framework

With respect to concurrent state regulation, “[t]he Clean Water Act anticipates a partnership between the States and the Federal Government, animated by a shared objective: ‘to restore and maintain the chemical, physical, and biological integrity of the Nation’s waters.’ [Citation.]” (Arkansas v. Oklahoma (1992) 503 U.S. 91, 101 [112 S.Ct. 1046, 117 L.Ed.2d 239].) The Clean Water Act permits states to adopt more stringent standards than those under the Clean Water Act itself. (33 U.S.C. § 1370.) “Nothing in this part precludes a State from: (1) Adopting or enforcing requirements which are more stringent or more extensive than those required under this part; (2) Operating a program with a greater scope of coverage than that required under this part.” (40 C.F.R. § 123.l(i).)

Under California law, the Porter-Cologne Water Quality Control Act (Porter-Cologne Act), enacted in 1969, predates the Clean Water Act and establishes a statewide program for water quality control. (Wat. Code, § 13000 et seq.) Nine regional boards, overseen by the State Water Resources Control Board (State Board), administer the state program in their respective regions. (Wat. Code, §§ 13140, 13200 et seq., 13240, 13301.) After enactment of the Clean Water Act, the Legislature “amended the Porter-Cologne Act to require the State Board and regional boards to issue discharge permits that ensure compliance with the Clean Water Act. (See Wat. Code, § 13370 et seq.)” (WaterKeepers Northern California, supra, 102 Cal.App.4th at p. 1452.) The Clean Water Act thus permits NPDES permits to be issued either by the EPA or an EPA-approved state. (33 U.S.C. § 1342(a)(1), (b); Wat. Code, §§ 13374, 13377.) The EPA has issued guidance documents discussing best management practices (BMP) to be included in MS4 permits. Under the Clean Water Act, the proper scope of the controls in an NPDES permit depends on the applicable state water quality standards for the affected water bodies. (See Communities for a Better Environment v. State Water Resources Control Bd. (2003) 109 Cal.App.4th 1089, 1092.) Thus, the Clean Water Act establishes a partnership between the EPA and the various states through the NPDES permit system for addressing pollution problems. The Clean Water Act envisions the use of both state and federal law to remedy pollution problems. (International Paper Co. v. Ouellette (1986) 479 U.S. 481, 490 [107 S.Ct. 805, 93 L.Ed.2d 883].)

Regional boards are authorized to issue NPDES permits for five-year periods. (33 U.S.C. § 1342(b)(1)(B); Wat. Code, § 13378; City of Rancho Cucamonga v. Regional Water Quality Control Bd. (2006) 135 Cal.App.4th 1377, 1381.) Thus, in California, wastewater discharge requirements established by the regional boards also serve as the NPDES permits required by federal law. (Wat. Code, § 13374; City of Burbank, supra, 35 Cal.4th at p. 621; Building Industry, supra, 124 Cal.App.4th at p. 875.) The state issuing a permit must insure it complies with federal requirements and provide for continued monitoring and inspection. (33 U.S.C. §§ 1342(b)(1), (b)(2), 1311, 1312, 1316, 1317.) When a permit is renewed, modified, or reissued, it must be at least as stringent as the prior permit. (33 U.S.C. § 1342(o).)

The EPA retains veto power over a state-issued NPDES permit if the EPA does not find compliance with any applicable federal requirements. (33 U.S.C. § 1342(d); 40 C.F.R. § 123.44.) Further, the EPA may withdraw its approval of a state NPDES program if it determines the state is not administering the program in compliance with the federal requirement. (33 U.S.C. § 1342(c)(3); 40 C.F.R. §§ 123.63, 123.64.) If a state repeatedly issues permits that are vetoed by the EPA, the EPA may find this constitutes grounds for withdrawal of the state’s program approval. (40 C.F.R. § 123.63(a)(2)(ii).)

B. The Commission on State Mandates

The California Constitution, article XIII B, section 6(a), provides, in relevant part: “Whenever the Legislature or any state agency mandates a new program or higher level of service on any local government, the state shall provide a subvention[4] of funds to reimburse that local government for the costs of such program or increased level of service....” (See also Gov. Code, § 17514.) The purpose of this provision “is to preclude the state from shifting financial responsibility for carrying out governmental functions to local agencies, which are ‘ill equipped’ to assume increased financial responsibilities because of the taxing and spending limitations that articles XIII A and XIII B impose. [Citations.]” (County of San Diego v. State of California (1997) 15 Cal.4th 68, 81.)

After the adoption of article XIII B by the voters in November 1979, the Legislature enacted a statutory and administrative scheme for implementing article XIII B, section 6, and resolving claims and disputes arising out of its provisions. (Gov. Code, § 17500 et seq.; Kinlaw v. State of California (1991) 54 Cal.3d 326, 331–333.) In 1984, the Legislature created the Commission as a quasi-judicial body to carry out a comprehensive administrative procedure to resolve disputes over the existence of state-mandated local programs. (Gov. Code, § 17500; California School Boards Assn. v. State (2009) 171 Cal.App.4th 1183, 1199–1200.) The Commission process uses a “test claim, ” which must be filed within one year of the effective date of the mandate or incursion of costs. (Gov. Code, § 17551, subd. (c); Grossmont Union High School Dist. v. State Dept. of Education (2008) 169 Cal.App.4th 869, 877.) The Commission acts on the test claim at a public hearing where evidence may be presented. (Gov. Code, § 17553.)

In order to qualify for subvention, the required activity or task must constitute a new program or higher level of service. (San Diego Unified School Dist. v. Commission on State Mandates (2004) 33 Cal.4th 859, 874.) The courts have defined a “program” subject to article XIII B, section 6, of the California Constitution, as one that carries out the governmental function of providing public services, or a law that imposes unique requirements on local agencies or school districts to implement a state policy, but does not apply generally to all residents and entities in the state. (San Diego Unified School Dist., at p. 874.) To determine if the program is new or imposes a higher level of service, the test claim legislation must be compared with the legal requirements in effect immediately before the enactment of the test claim legislation. A “higher level of service” occurs when the new “requirements were intended to provide an enhanced service to the public.” (Ibid.) Finally, the newly required activity or increased level of service must impose costs mandated by the state. (County of Fresno v. State of California (1991) 53 Cal.3d 482, 487.)

The subvention requirement does not extend to federally mandated programs. (Cal. Const., art. XIII B, § 9, subd. (b); Gov. Code, §§ 17513, 17556, subd. (c); City of Sacramento v. State of California (1990) 50 Cal.3d 51, 57–58 (City of Sacramento).) Further, even if the program requires a higher level of service, if the local agency has the authority to levy charges, fees, or assessments sufficient to pay for the program, it will not constitute a mandate within the meaning of article XIII B. (Gov. Code, § 17556, subd. (d).)

The Commission has the sole and exclusive authority to adjudicate whether a state mandate exists. (Redevelopment Agency v. Commission on State Mandates (1996) 43 Cal.App.4th 1188, 1192–1193.) The Commission’s authority is limited only by judicial review. “A claimant or the state may commence a proceeding in accordance with the provisions of Section 1094.5 of the Code of Civil Procedure to set aside a decision of the commission on the ground that the commission’s decision is not supported by substantial evidence....” (Gov. Code, § 17559, subd. (b).)

C. The Permit

1. Background

To obtain the permit, the County of Los Angeles, on behalf of itself and the cities, submitted on January 31, 2001 a Report of Waste Discharge (ROWD), which constituted a permit application, and a Stormwater Quality Management Program, which constituted the permittees proposal for best management practices that would be required in the permit. The ROWD contained a Storm Water Management Program as set forth in 40 Code of Federal Regulations, part 122.26(d), which in turn included a Storm Water Quality Management Program (SQMP).

The Regional Board issued notices to the permitees and interested agencies and persons of its intent to issue the Permit, and provided an opportunity for comment and recommendations. In addition, the Regional Board conducted public workshops to discuss drafts of the Permit, and held a public hearing at which it heard and considered all comments pertaining to the Permit’s requirements.

The Permit was issued pursuant to section 402 of the Clean Water Act (33 U.S.C. § 1342), and was originally adopted by the Regional Board on December 13, 2001 as NPDES Permit No. CAS004001, and amended on September 14, 2006 and August 9, 2007.[5] The Permit established waste discharge requirements for municipal storm water and urban runoff discharges within the County of Los Angeles and the incorporated cities therein, except the City of Long Beach.

The 72-page permit is divided into six parts. The County, the flood control district, and the 84 cities are designated in the permit as the permittees. The Permit incorporated the Regional Board’s factual findings regarding the nature of the harms occurring because of storm water discharge, surface water runoff, and pollutants. The Permit found “[t]he regulations require that permittees establish priorities and procedures for inspection of industrial facilities and priority commercial establishments. This permit, consistent with [EPA] policy, incorporates a cooperative partnership, including the specification of minimum expectations, between the Regional Board and the permittees for the inspection of industrial facilities and priority commercial establishments to control pollutants in storm water discharges (58 Fed. Reg. 61157).” Further, “Section 402 of the [Clean Water Act] (33 U.S.C. § 1342(p)) provides that MS4 permits must ‘require controls to reduce the discharge of pollutants to the maximum extent practicable, including management practices, control techniques and systems, design engineering methods and such other provisions as the [EPA] Administrator or the State determines appropriate for the control of such pollutants.’ The State Water Resources Control Board’s (State Board) Office of Chief Counsel (OCC) has issued a memorandum interpreting the meaning of MEP to include technical feasibility, cost, and benefit derived with the burden being on the municipality to demonstrate compliance with MEP by showing that a BMP [best management practice] is not technically feasible in the locality or that BMP[] costs would exceed any benefit to be derived....”

Separately, to facilitate compliance with federal regulations, the State Board has previously issued two statewide general NPDES permits for stormwater discharges: (1) for stormwater from industrial sites [NPDES No. CAS000001, General Industrial Activity Storm Water Permit (GIASP)] and (2) for stormwater from construction sites [NPDES No. CAS000002, General Construction Activity Storm Water Permit (GCASP)], originally issued in 1997 and 1999, respectively. Facilities discharging stormwater associated with industrial activities and construction sites of five acres or more of disturbed area were required to obtain individualized NPDES permits, or to be covered by a statewide general permit. The Permit sets forth that “[t]he USEPA guidance anticipates coordination of the state-administered programs for industrial and construction activities with the local agency program to reduce pollutants in storm water discharges to the MS4.”

The GCASP was issued to address effluent limitations promulgated under the Clean Water Act and as specified in the applicable federal regulations. Under the GCASP, the state requires inspections of construction sites prior to anticipated storm events to identify areas contributing to the discharge of stormwater, and to ensure that BMPs were properly installed and functioned adequately during the storm. In addition, the site must permit the Regional Board, the State Board, the EPA, and the operator of the storm sewer into which the site discharges stormwater to inspect the site. The GIASP was likewise issued to address effluent limitations promulgated under the Clean Water Act and as specified in the federal regulations applicable to the Clean Water Act. With respect to inspections, the GIASP has an extensive monitoring program that is facility-specific and requires visual inspections and water sampling and analysis. Under the GIASP, the facility operator may, if it meets certain conditions, certify compliance with the GIASP and reduce the number of sampling events. Preventative maintenance must also be conducted by the facility’s operators, and includes inspection of structural storm water controls (catch basins, oil/water separators, etc.) as well as other facility equipment and systems. In addition, there must be an inspection schedule of all potential pollutant sources. The site must also permit Regional Board, State Board, EPA and any local storm water agency to enter into the site for inspections. The GIASP specifically notes that it “does not preempt or supersede the authority of local agencies to prohibit, restrict, or control storm water discharges and authorized non-storm water discharges to storm drain systems or other water-courses within their jurisdictions as allowed by State and Federal law.” The Regional Board has the authority to enforce the GIASP and GCASP.

The Los Angeles County Flood Control District was designated as the principal permittee and was to, among other things, coordinate permit activities among the permittees and provide technical and administrative support.

2. Permit Requirements

The County challenged before the Commission parts 4C2a (inspections of commercial facilities), 4C2b (inspection of industrial facilities), 4E (inspection of construction sites) and 4F5c3 (installation of trash receptacles) of the Permit.

A. Commercial Facilities. (Part 4C2a)

Restaurants, automotive service facilities, retail gasoline stores and automotive dealerships were to be inspected by the permittees twice during the five-year term of the Permit, ...

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