The Third District Court of Appeal held that a groundwater well registration charge imposed on all parcels in Tehama County was an unconstitutional tax.
Garst v. Tehama County Flood Control and Water Conservation District, 2026 WL 1862122 (June 29, 2026). The charge could not qualify as a regulatory charge under Proposition 26 because it was imposed on landowners regardless of whether they engaged in groundwater extraction or otherwise created a regulatory burden on the district.
The Tehama County Flood Control and Water Conservation District serves as a groundwater sustainability agency under the Sustainable Groundwater Management Act. In 2022, the district adopted a well registration program and imposed an annual charge of $0.29 per acre on every legal parcel in the county for three years to fund the program’s administrative costs. The charge applied regardless of whether a parcel contained a groundwater well and was collected through the property tax rolls.
The parties disputed whether the charge should be analyzed under Proposition 218 or Proposition 26, but the court found it unnecessary to resolve that question. To survive constitutional scrutiny, the charge had to qualify either as a property-related service fee under article XIII D or as a regulatory charge under article XIII C. The parties agreed that the charge was not a property-related service fee because it did not pay for a service provided to particular parcels. The question therefore became whether it qualified for Proposition 26’s exception for fees or charges imposed to recover reasonable regulatory costs.
The court explained that regulatory charges traditionally are imposed on persons whose activities create the need for regulation or who pay for governmental services allowing them to operate in a regulated sphere. Agencies may, for example, require businesses responsible for pollution or other impacts to bear the costs of regulating or mitigating those impacts. The required connection is between the regulated activity and the governmental costs for which the charge is imposed.
The district’s well registration charge lacked that connection. It was compulsory and applied to all landowners without regard to whether they undertook an activity that burdened the district or received a particular regulatory benefit. The court rejected the district’s contention that “actual or potential use of groundwater” supplied the necessary regulated activity, noting that the record contained no evidence that all affected landowners had or could install groundwater extraction facilities. The district therefore could not shift the costs of its well registration program from owners and operators of groundwater extraction facilities to landowners generally and still characterize the levy as a regulatory charge.
The court acknowledged the important public purposes served by sustainable groundwater management but held that those purposes could not overcome Proposition 26’s constitutional limitations. Because the charge had no nexus to governmental services allowing the affected landowners to operate in a regulated sphere, it did not qualify for the regulatory charge exception and was therefore an unconstitutional tax.
Garst underscores that a legitimate regulatory purpose does not itself convert a revenue measure into a regulatory charge. Under Proposition 26, an agency must tie the charge to persons whose activities occasion the regulatory costs or who receive governmental services associated with participation in the regulated activity. A broadly imposed charge used to fund a regulatory program risks classification as a tax where it reaches persons who neither engage in the regulated activity nor create the burden the program is designed to address.
