Several legal principles and codes address the concept of prepaid inherent capacity in existing infrastructure, particularly when the infrastructure is not owned by the utility but was built and paid for with initial capacity fees. These principles align with the reasoning that fees should not be imposed when existing infrastructure can accommodate additional usage without exceeding its design capacity. Here are the relevant laws and arguments:

1. Government Code § 66013 – Capacity Fees Nexus

This code mandates a nexus between capacity fees and the costs incurred to provide additional capacity. If the built-in capacity of existing laterals or infrastructure has already been paid for, adding additional Drainage Fixture Units (DFUs) without exceeding its capacity does not justify imposing new capacity fees.

Key Clause:
“(b) A fee for capacity shall not exceed the estimated reasonable cost of providing the service for which the fee is charged.”
Application:
If the capacity of a lateral has already been paid for and is not exceeded by the addition of new DFUs, imposing a new capacity fee violates this principle. No new service or capacity is being provided.

2. Proposition 218 – Proportionality Requirement

Key Clause:
Under Proposition 218, any fee must be proportional to the cost of the service provided. When no additional capacity is required, a capacity fee is disproportionate and invalid.

“Revenues derived from the fee or charge shall not exceed the funds required to provide the property-related service.”

Application:
If the infrastructure’s inherent capacity can accommodate the new DFUs without further modifications or service expansions, a capacity fee would exceed the cost of providing service, violating Proposition 218.

3. Public Utilities Code § 1501 et seq. – Fairness and Reasonableness

This code requires that public utilities ensure rates and charges are fair and reasonable. Charging capacity fees for pre-existing infrastructure that has sufficient paid-for capacity may constitute an unreasonable charge.

Key Principle:
“Charges must be based on the cost of the service provided.”

Application:
If the utility is charging fees unrelated to actual costs incurred due to the addition of DFUs, this could be challenged as unfair and unreasonable.

4. Case Law: Nollan/Dolan Takings Clause Precedents

The Takings Clause requires that exactions, including capacity fees, have a clear nexus and proportionality to the impact of the project. If a property owner can demonstrate that the DFUs fall within the existing infrastructure’s inherent capacity, there is no nexus or proportionality to justify new capacity fees.

Relevant Precedent:
“An exaction must be related in nature and extent to the impact of the proposed development.” (Dolan v. City of Tigard, 512 U.S. 374, 1994)

Application:
Charging capacity fees when the existing lateral has sufficient inherent capacity would fail the proportionality test.

5. Government Code § 66016 – Fee Justification and Transparency

This section requires agencies to justify fees with detailed data on how the fees are calculated and the costs they are intended to recover. If the lateral’s inherent capacity is already paid for, the utility cannot justify a new capacity fee without proving additional capacity is required.

Key Clause:
“Any action adopting or increasing a fee shall include the evidence necessary to demonstrate that the fee does not exceed the estimated reasonable cost.”

Application:
When no additional capacity is required, this justification cannot be met, and the fee is invalid.

6. California Government Code § 65008 – Equal Treatment and Non-Discrimination

This code ensures that fees and charges are applied fairly and equally among property owners. If other property owners with similar laterals are not charged capacity fees when adding DFUs, but you are, this constitutes unequal treatment.

7. Historical Capacity Fee Prepayment

Many utilities use capacity fees to fund initial infrastructure construction and reserve future capacity for property owners. When these fees were paid at the time of development, they inherently covered the capacity of the laterals installed.

Legal Argument:
“Imposing additional fees for the same infrastructure capacity that has already been prepaid constitutes double charging and violates the purpose of capacity fees.”