State may have to pay local water agencies millions

The state may have to pick up the tab for many millions of dollars spent by local water agencies, including some in the Bay Area, to inspect sites for storm drain pollution and clean up any debris, based on a ruling Monday by the California Supreme Court.

The 4-3 decision left some disputes between the state and various local agencies unresolved but rejected state officials’ main argument against reimbursement: that they ordered the local cleanup efforts to comply with federal law. Although the federal Clean Water Act requires states to reduce water pollution as much as they can, the court majority said the law allows states to set their own standards, and California has done so.

The case involved a disagreement between state and local water agencies in Los Angeles County over the costs of inspecting commercial and industrial sites for water pollution and installing trash bins at transit stops to keep garbage out of storm drains. But a lawyer for 38 agencies in Alameda and San Mateo counties, which have their own reimbursement claims pending with the state, said the ruling could affect hundreds of millions of dollars in costs statewide.

The court “believes the state Constitution requires the state to help cities and counties fund programs to reduce storm water pollution,” said the attorney, Gregory Newmark.

H.D. Palmer, spokesman for the state Finance Department, said officials were reviewing the ruling.

The case arises from limits on taxing and spending imposed by California voters. Proposition 13, in 1978, slashed property taxes and limited the authority of both state and local governments to raise other taxes. A follow-up ballot measure in 1979, sponsored by Prop. 13 co-author Paul Gann, restricted state and local government spending and required the state to reimburse local governments for the costs of any new programs or services mandated by the state.

Reimbursement is not required, however, when federal law has required the state to order the new local programs.

In this case, the court said, California could have stepped aside and allowed the U.S. Environmental Protection Agency to enforce the Clean Water Act by setting rules for local water agencies in the state. Instead, the court said, the state chose to issue its own permits, through regional water boards, and imposed standards for inspecting commercial sites and installing trash bins that federal law did not require.

The federal law directed state boards “to issue permits with conditions designed to reduce pollutant discharges to the maximum extent practicable,” Justice Carol Corrigan said in the majority opinion. But she said California “was not compelled by federal law to impose any particular requirement,” and instead had been given leeway by federal regulations “to determine which specific controls were necessary” to meet the federal standard.

Dissenting justices, the court’s three Democratic appointees, said the ruling would discourage the state from taking part in federal pollution-control programs.

The regional water board reasonably determined that its rules were needed to comply with the Clean Water Act, said Justice Mariano-Florentino Cuéllar. If the state has to pay the costs of any rules not spelled out by federal law, he said, “it might think twice about entering into such arrangements of cooperative federalism.”

The case is Dept. of Finance vs. Commission on State Mandates, S214855.

Bob Egelko is a San Francisco Chronicle staff writer. Email: begelko@sfchronicle.com Twitter: @egelko