Department of Finance v. Commission on State Mandates

Filed 8/29/16

IN THE SUPREME COURT OF CALIFORNIA

DEPARTMENT OF FINANCE et al., )
)
Plaintiffs and Respondents, )
) S214855
v. )
) Ct.App. 2/1 B237153
COMMISSION ON STATE MANDATES, )
) Los Angeles County
Defendant and Respondent; ) Super. Ct. No. BS130730
)
)
COUNTY OF LOS ANGELES et al., )
)
Real Parties in Interest )
and Appellants. )
____________________________________)

Under our state Constitution, if the Legislature or a state agency requires a
local government to provide a new program or higher level of service, the local
government is entitled to reimbursement from the state for the associated costs.
(Cal. Const., art. XIII B, § 6, subd. (a).) There are exceptions, however. Under
one of them, if the new program or increased service is mandated by a federal law
or regulation, reimbursement is not required. (Gov. Code, § 17556, subd. (c).)
The services in question here are provided by local agencies that operate
storm drain systems pursuant to a state-issued permit. Conditions in that permit
are designed to maintain the quality of California‘s water, and to comply with the
federal Clean Water Act. The Court of Appeal held that certain permit conditions

SEE CONCURRING AND DISSENTING OPINION
were federally mandated, and thus not reimbursable. We reverse, concluding that
no federal law or regulation imposed the conditions nor did the federal regulatory
system require the state to impose them. Instead, the permit conditions were
imposed as a result of the state‘s discretionary action.
I. BACKGROUND
The Regional Water Quality Control Board, Los Angeles Region (the
Regional Board) is a state agency. It issued a permit authorizing Los Angeles
County, the Los Angeles County Flood Control District, and 84 cities
(collectively, the Operators) to operate storm drainage systems.1 Permit
conditions required that the Operators take various steps to reduce the discharge of
waste and pollutants into state waters. The conditions included installing and
maintaining trash receptacles at transit stops, as wells as inspecting certain
commercial and industrial facilities and construction sites.
Some Operators sought reimbursement for the cost of satisfying the
conditions. The Commission on State Mandates (the Commission) concluded

1 The cities involved are the Cities of Agoura Hills, Alhambra, Arcadia,
Artesia, Azusa, Baldwin Park, Bell, Bellflower, Bell Gardens, Beverly Hills,
Bradbury, Burbank, Calabasas, Carson, Cerritos, Claremont, Commerce,
Compton, Covina, Cudahy, Culver City, Diamond Bar, Downey, Duarte, El
Monte, El Segundo, Gardena, Glendale, Glendora, Hawaiian Gardens, Hawthorne,
Hermosa Beach, Hidden Hills, Huntington Park, Industry, Inglewood, Irwindale,
La Cañada Flintridge, La Habra Heights, Lakewood, La Mirada, La Puente, La
Verne, Lawndale, Lomita, Los Angeles, Lynwood, Malibu, Manhattan Beach,
Maywood, Monrovia, Montebello, Monterey Park, Norwalk, Palos Verdes Estates,
Paramount, Pasadena, Pico Rivera, Pomona, Rancho Palos Verdes, Redondo
Beach, Rolling Hills, Rolling Hills Estates, Rosemead, San Dimas, San Fernando,
San Gabriel, San Marino, Santa Clarita, Santa Fe Springs, Santa Monica, Sierra
Madre, Signal Hill, South El Monte, South Gate, South Pasadena, Temple City,
Torrance, Vernon, Walnut, West Covina, West Hollywood, Westlake Village, and
Whittier.

2
each required condition was a new program or higher level of service, mandated
by the state rather than by federal law. However, it found the Operators were only
entitled to state reimbursement for the costs of the trash receptacle condition,
because they could levy fees to cover the costs of the required inspections. (See
discussion, post, at p. 12.) The trial court and the Court of Appeal disagreed,
finding that all of the requirements were federally mandated.
We granted review. To resolve this issue, it is necessary to consider both
the permitting system and the reimbursement obligation in some detail.

A. The Permitting System
The Operators‘ municipal storm sewer systems discharge both waste and
pollutants.2 State law controls ―waste‖ discharges. (Wat. Code, § 13265.)
Federal law regulates discharges of ―pollutant[s].‖ (33 U.S.C. § 1311(a).) Both
state and later-enacted federal law require a permit to operate such systems.
California‘s Porter-Cologne Water Quality Control Act (Porter-Cologne
Act or the Act; Wat. Code, § 13000 et seq.) was enacted in 1969. It established
the State Water Resources Control Board (State Board), along with nine regional
water quality control boards, and gave those agencies ―primary responsibility for
the coordination and control of water quality.‖ (Wat. Code, § 13001; see City of
Burbank v. State Water Resources Control Bd. (2005) 35 Cal.4th 613, 619 (City of
Burbank).) The State Board establishes statewide policy. The regional boards

2 The systems at issue here are ―municipal separate storm sewer systems,‖
sometimes referred to by the acronym ―MS4.‖ (40 C.F.R. § 122.26(b)(19)
(2001).) A ―municipal separate storm sewer‖ is a system owned or operated by a
public agency with jurisdiction over disposal of waste and designed or used for
collecting or conveying storm water. (40 C.F.R. § 122.26(b)(8) (2001).) Unless
otherwise indicated, all further citations to the Code of Federal Regulations are to
the 2001 version.

3
formulate and adopt water quality control plans and issue permits governing the
discharge of waste. (Building Industry Assn. of San Diego County v. State Water
Resources Control Bd. (2004) 124 Cal.App.4th 866, 875 (Building Industry).)
The Porter-Cologne Act requires any person discharging, or proposing to
discharge, waste that could affect the quality of state waters to file a report with
the appropriate regional board. (Wat. Code, § 13260, subd. (a)(1).) The regional
board then ―shall prescribe requirements as to the nature‖ of the discharge,
implementing any applicable water quality control plans. (Wat. Code, § 13263,
subd. (a).) The Operators must follow all requirements set by the Regional Board.
(Wat. Code, §§ 13264, 13265.)
The federal Clean Water Act (the CWA; 33 U.S.C. § 1251 et seq.) was
enacted in 1972, and also established a permitting system. The CWA is a
comprehensive water quality statute designed to restore and maintain the
chemical, physical, and biological integrity of the nation‘s waters. (City of
Burbank, supra, 35 Cal.4th at p. 620.) The CWA prohibits pollutant discharges
unless they comply with: (1) a permit (see 33 U.S.C. §§ 1328, 1342, 1344); (2)
established effluent limitations or standards (see 33 U.S.C. §§ 1312, 1317); or (3)
established national standards of performance (see 33 U.S.C. § 1316). (33 U.S.C.
§ 1311(a).) The CWA allows any state to adopt and enforce its own water quality
standards and limitations, so long as those standards and limitations are not ―less
stringent‖ than those in effect under the CWA. (33 U.S.C. § 1370.)
The CWA created the National Pollutant Discharge Elimination System
(NPDES), authorizing the Environmental Protection Agency (EPA) to issue a
permit for any pollutant discharge that will satisfy all requirements established by
the CWA or the EPA Administrator. (33 U.S.C. § 1342(a)(1), (a)(2).) The federal

4
system notwithstanding, a state may administer its own permitting system if
authorized by the EPA.3 If the EPA concludes a state has adequate authority to
administer its proposed program, it must grant approval (33 U.S.C. § 1342(b)) and
suspend its own issuance of permits (33 U.S.C. § 1342(c)(1)).4
California was the first state authorized to issue its own pollutant discharge
permits. (People of St. of Cal., etc. v. Environmental Pro. Agcy. (9th Cir. 1975)
511 F.2d 963, 970, fn. 11, revd. on other grounds in Environmental Protection
Agency v. California (1976) 426 U.S. 200.) Shortly after the CWA‘s enactment,
the Legislature amended the Porter-Cologne Act, adding chapter 5.5 (Wat. Code,
§ 13370 et seq.) to authorize state issuance of permits (Wat. Code, § 13370, subd.
(c)). The Legislature explained the amendment was ―in the interest of the people
of the state, in order to avoid direct regulation by the federal government of
persons already subject to regulation under state law pursuant to [the Porter-
Cologne Act].‖ (Ibid.) The Legislature provided that Chapter 5.5 be ―construed to
ensure consistency‖ with the CWA. (Wat. Code, § 13372, subd. (a).) It directed
that state and regional boards issue waste discharge requirements ―ensur[ing]
compliance with all applicable provisions of the [CWA] . . . together with any
more stringent effluent standards or limitations necessary to implement water
quality control plans, or for the protection of beneficial uses, or to prevent
nuisance.‖ (Wat. Code, § 13377, italics added.) To align the state and federal

3 For a state to acquire permitting authority, the governor must give the EPA
a ―description of the program [the state] proposes to establish,‖ and the attorney
general must affirm that the laws of the state ―provide adequate authority to carry
out the described program.‖ (33 U.S.C. § 1342(b).)
4 The EPA may withdraw approval of a state‘s program (33
U.S.C. § 1342(c)(3)), and also retains some supervisory authority: States must
inform the EPA of all permit applications received and of any action related to the
consideration of a submitted application (33 U.S.C. § 1342(d)(1)).

5
permitting systems, the legislation provided that the term ― ‗waste discharge
requirements‘ ‖ under the Act was equivalent to the term ― ‗permits‘ ‖ under the
CWA. (Wat. Code, § 13374.) Accordingly, California‘s permitting system now
regulates discharges under both state and federal law. (WaterKeepers Northern
California v. State Water Resources Control Bd. (2002) 102 Cal.App.4th 1448,
1452; accord Building Industry, supra, 124 Cal.App.4th at p. 875. )
In 1987, Congress amended the CWA to clarify that a permit is required for
any discharge from a municipal storm sewer system serving a population of
100,000 or more. (33 U.S.C. § 1342(p)(2)(C), (D).) Under those amendments, a
permit may be issued either on a system- or jurisdiction-wide basis, must
effectively prohibit non-storm water discharges into the storm sewers, and must
―require controls to reduce the discharge of pollutants to the maximum extent
practicable.‖ (33 U.S.C. § 1342(p)(3)(B), italics added.) The phrase ―maximum
extent practicable‖ is not further defined. How that phrase is applied, and by
whom, are important aspects of this case.
EPA regulations specify the information to be included in a permit
application. (See 40 C.F.R. § 122.26(d)(1)(i)-(vi), (d)(2)(i)-(viii).) Among other
things, an applicant must set out a proposed management program that includes
management practices; control techniques; and system, design, and engineering
methods to reduce the discharge of pollutants to the maximum extent practicable.
(40 C.F.R. § 122.26(d)(2)(iv).) The permit-issuing agency has discretion to
determine which practices, whether or not proposed by the applicant, will be
imposed as conditions. (Ibid.)

B. The Permit in Question
In 2001, Los Angeles County (the County), acting for all Operators, applied
for a permit from the Regional Board. The board issued a permit (the Permit),

6
with conditions intended to ―reduce the discharge of pollutants in storm water to
the Maximum Extent Practicable‖ in the Operators‘ jurisdiction. The Permit
stated that its conditions implemented both the Porter-Cologne Act and the CWA.
Part 4 of the Permit contains the four requirements at issue. Part 4(C)
addresses commercial and industrial facilities, and required the Operators to
inspect certain facilities twice during the five-year term of the Permit. Inspection
requirements were set out in substantial detail.5 Part 4(E) of the Permit addresses
construction sites. It required each Operator to ―implement a program to control
runoff from construction activity at all construction sites within its jurisdiction,‖
and to inspect each construction site of one acre or greater at least ―once during
the wet season.‖6 Finally, Part 4(F) of the Permit addresses pollution from public
agency activities. Among other things, it directed each Operator not otherwise
regulated to ―[p]lace trash receptacles at all transit stops within its jurisdiction,‖
and to maintain them as necessary.

5 As to commercial facilities, Part 4(C)(2)(a) required each Operator to
inspect each restaurant, automotive service facility, retail gasoline outlet, and
automotive dealership within its jurisdiction, and to confirm that the facility
employed best management practices in compliance with state law, county and
municipal ordinances, a Regional Board resolution, and the Operators‘ storm
water quality management program (SQMP). For each type of facility, the Permit
set forth specific inspection tasks.
Part 4(C)(2)(b) addressed industrial facilities, requiring the Operators to
inspect them and confirm that each complied with county and municipal
ordinances, a Regional Board resolution, and the SQMP. The Operators also were
required to inspect industrial facilities for violations of the general industrial
activity stormwater permit, a statewide permit issued by the State Board that
regulates discharges from industrial facilities. (See discussion, post, at pp. 24-25.)
6 Part 4(E)(4) required inspections for violations of the general construction
activity stormwater permit, another statewide permit issued by the State Board.
(See discussion, post, at pp. 24-25.)

7
 C. Local Agency Claims

1. Applicable procedures for seeking reimbursement
As mentioned, when the Legislature or a state agency requires a local
government to provide a new program or higher level of service, the state must
―reimburse that local government for the costs of the program or increased level of
service.‖ (Cal. Const., art. XIII B, § 6, subd. (a) (hereafter, section 6).)7
However, reimbursement is not required if ―[t]he statute or executive order
imposes a requirement that is mandated by a federal law or regulation and results
in costs mandated by the federal government, unless the statute or executive order
mandates costs that exceed the mandate in that federal law or regulation.‖ (Gov.
Code, § 17556, subd. (c).)
The Legislature has enacted comprehensive procedures for the resolution of
reimbursement claims (Gov. Code, § 17500 et seq.) and created the Commission
to adjudicate them. (Gov. Code, §§ 17525, 17551.) It also established ―a test-
claim procedure to expeditiously resolve disputes affecting multiple agencies.‖
(Kinlaw v. State of California (1991) 54 Cal.3d 326, 331 (Kinlaw).)
The first reimbursement claim filed with the Commission is called a test
claim. (Gov. Code, § 17521.) The Commission must hold a public hearing, at
which the Department of Finance (the Department), the claimant, and any other
affected department or agency may present evidence. (Gov. Code, §§ 17551,
17553.) The Commission then determines ―whether a state mandate exists and, if

7 ― ‗Costs mandated by the state‘ means any increased costs which a local
agency or school district is required to incur . . . as a result of any statute enacted
on or after January 1, 1975, or any executive order implementing any statute
enacted on or after January 1, 1975, which mandates a new program or higher
level of service of an existing program within the meaning of Section 6 of Article
XIIIB of the California Constitution.‖ (Gov. Code, § 17514.)

8
so, the amount to be reimbursed.‖ (Kinlaw, supra, 54 Cal.3d at p. 332.) The
Commission‘s decision is reviewable by writ of mandate. (Gov. Code, § 17559.)

2. The test claims
The County and other Operators filed test claims with the Commission,
seeking reimbursement for the Permit‘s inspection and trash receptacle
requirements. The Department, State Board, and Regional Board (collectively, the
State) responded that the Operators were not entitled to reimbursement because
each requirement was federally mandated.
The Department argued that the EPA had delegated its federal permitting
authority to the Regional Board, which acted as an administrator for the EPA,
ensuring the state‘s program complied with the CWA. The Department
acknowledged the Regional Board had discretion to set detailed permit conditions,
but urged that the challenged conditions were required for the Permit to comply
with federal law.
The State and Regional Boards argued somewhat differently. They
contended the CWA required the Regional Board to impose specific permit
controls to reduce the discharge of pollutants to the ―maximum extent
practicable.‖ Thus, when the Regional Board determined the Permit‘s conditions,
those conditions were part of the federal mandate. The State and Regional Boards
also argued that the challenged conditions were ―animated‖ by EPA regulations.
In support of the trash receptacle requirement, they relied on 40 Code of Federal
Regulations part 122.26(d)(2)(iv)(A)(3).8 In support of the inspection

8 40 Code of Federal Regulations part 122.26(d)(2)(iv)(A) provides that the
proposed management plan in an operator‘s permit application must be based, in
part, on a ―description of structural and source control measures to reduce
pollutants from runoff from commercial and residential areas that are discharged
from the municipal storm sewer system that are to be implemented during the life
(footnote continued on next page)

9
requirements, they relied on 40 Code of Federal Regulations part
122.26(d)(2)(iv)(B)(1),9 (C)(1),10 and (D)(3).11

(footnote continued from previous page)

of the permit, accompanied with an estimate of the expected reduction of pollutant
loads and a proposed schedule for implementing such controls,‖ and that, at a
minimum, that description shall include, among other things, a ―description of
practices for operating and maintaining public streets, roads and highways and
procedures for reducing the impact on receiving waters of discharges from
municipal storm sewer systems, including pollutants discharged as a result of
deicing activities.‖ (40 C.F.R. § 122.26(d)(2)(iv)(A), (A)(3).)
9 40 Code of Federal Regulations part 122.26(d)(2)(iv)(B) provides that the
proposed management plan in an operator‘s permit application must be based, in
part, on a ―description of a program, including a schedule, to detect and remove . .
. illicit discharges and improper disposal into the storm sewer,‖ and that the
proposed program shall include a ―description of a program, including inspections,
to implement and enforce an ordinance, orders or similar means to prevent illicit
discharges to the municipal separate storm sewer system.‖ (40 C.F.R.
§ 122.26(d)(2)(iv)(B), (B)(1).)
10 40 Code of Federal Regulations part 122.26(d)(2)(iv)(C) provides that the
proposed management plan in an operator‘s permit application must be based, in
part, on a ―description of a program to monitor and control pollutants in storm
water discharges to municipal systems from municipal landfills, hazardous waste
treatment, disposal and recovery facilities, industrial facilities that are subject to
section 313 of title III of the Superfund Amendments and Reauthorization Act of
1986 (SARA), and industrial facilities that the municipal permit applicant
determines are contributing a substantial pollutant loading to the municipal storm
sewer system,‖ and that the program shall ―[i]dentify priorities and procedures for
inspections and establishing and implementing control measures for such
discharges.‖ (40 C.F.R. § 122.26(d)(2)(iv)(C), (C)(1).)
11 40 Code of Federal Regulations part 122.26(d)(2)(iv)(D) provides that the
proposed management plan in an operator‘s permit application must be based, in
part, on a ―description of a program to implement and maintain structural and non-
structural best management practices to reduce pollutants in storm water runoff
from construction sites to the municipal storm sewer system,‖ which shall include,
a ―description of procedures for identifying priorities for inspecting sites and
enforcing control measures which consider the nature of the construction activity,
(footnote continued on next page)

10
 The Operators argued the conditions were not mandated by federal law,
because nothing in the CWA or in the cited federal regulations required them to
install trash receptacles or perform the required site inspections. They also
submitted evidence showing that none of the challenged requirements were
contained in their previous permits issued by the Regional Board, nor were they
imposed on other municipal storm sewer systems by the EPA.
As to the inspection requirements, the Operators argued that state law
required the state and regional boards to regulate discharges of waste. This
regulatory authority included the power to inspect facilities and sites. The
Regional Board had used the Permit conditions to shift those inspection
responsibilities to them. They also presented evidence that the Regional Board
was required to inspect industrial facilities and construction sites for compliance
with statewide permits issued by the State Board (see ante, p. 7, fns. 5, 6). They
urged that the Regional Board had shifted that obligation to the Operators as well.
Finally, the Operators submitted a declaration from a county employee indicating
the Regional Board had offered to pay the County to inspect industrial facilities on
behalf of the Regional Board, but revoked that offer after including the inspection
requirement in the Permit.
The EPA submitted comments to the Commission indicating that the
challenged permit requirements were designed to reduce the discharge of
pollutants to the ―maximum extent practicable.‖ Thus, the EPA urged the
requirements fell ―within the scope‖ of federal regulations and other EPA

(footnote continued from previous page)

topography, and the characteristics of soils and receiving water quality.‖ (40
C.F.R. § 122.26(d)(2)(iv)(D), (D)(3).)

11
guidance regarding storm water management programs. The Bay Area
Stormwater Management Agencies Association, the League of California Cities,
and the California State Association of Counties submitted comments urging that
the challenged requirements were state, rather than federal, mandates.

3. The commission’s decision
By a four-to-two vote, the Commission partially approved the test claims,
concluding none of the challenged requirements were mandated by federal law.
However, the Commission determined the Operators were not entitled to
reimbursement for the inspection requirements because they had authority to levy
fees to pay for the required inspections. Under Government Code section 17556,
subdivision (d), the constitutional reimbursement requirement does not apply if the
local government has the authority to levy fees or assessments sufficient to pay for
the mandated program or service.

4. Petitions for writ of mandate
The State challenged the Commission‘s determination that the requirements
were state mandates. By cross-petition, the County and certain cities challenged
the Commission‘s finding that they could impose fees to pay for the inspections.
The trial court concluded that, because each requirement fell ―within the
maximum extent practicable standard,‖ they were federal mandates not subject to
reimbursement. It granted the State‘s petition and ordered the Commission to
issue a new statement of decision. The court did not reach the cross-claims
relating to fee authority. Certain Operators appealed.12 The Court of Appeal

12 The appellants are County and the Cities of Artesia, Azusa, Bellflower,
Beverly Hills, Carson, Commerce, Covina, Downey, Monterey Park, Norwalk,
Rancho Palo Verdes, Signal Hill, Vernon, and Westlake Village.

12
affirmed, concluding as a matter of law that the trash receptacle and inspection
requirements were federal mandates.
II. DISCUSSION

A. Standard of Review
Courts review a decision of the Commission to determine whether it is
supported by substantial evidence. (Gov. Code, § 17559.) Ordinarily, when the
scope of review in the trial court is whether the administrative decision is
supported by substantial evidence, the scope of review on appeal is the same.
(County of Los Angeles v. Commission on State Mandates (1995) 32 Cal.App.4th
805, 814 (County of Los Angeles).) However, the appellate court independently
reviews conclusions as to the meaning and effect of constitutional and statutory
provisions. (City of San Jose v. State of California (1996) 45 Cal.App.4th 1802,
1810.) The question whether a statute or executive order imposes a mandate is a
question of law. (Ibid.) Thus, we review the entire record before the Commission,
which includes references to federal and state statutes and regulations, as well as
evidence of other permits and the parties‘ obligations under those permits, and
independently determine whether it supports the Commission‘s conclusion that the
conditions here were not federal mandates. (Ibid.)

B. Analysis
The parties do not dispute here that each challenged requirement is a new
program or higher level of service. The question here is whether the requirements
were mandated by a federal law or regulation.

1. The federal mandate exception
Voters added article XIII B to the California Constitution in 1979. Also
known as the ―Gann limit,‖ it ―restricts the amounts state and local governments
may appropriate and spend each year from the ‗proceeds of taxes.‘ ‖ (City of

13
Sacramento v. State of California (1990) 50 Cal.3d 51, 58-59 (City of
Sacramento).) ―Article XIII B is to be distinguished from article XIII A, which
was adopted as Proposition 13 at the June 1978 election. Article XIII A imposes a
direct constitutional limit on state and local power to adopt and levy taxes.
Articles XIII A and XIII B work in tandem, together restricting California
governments‘ power both to levy and to spend for public purposes.‖ (Id. at p. 59,
fn. 1.)
The ―concern which prompted the inclusion of section 6 in article XIII B
was the perceived attempt by the state to enact legislation or adopt administrative
orders creating programs to be administered by local agencies, thereby transferring
to those agencies the fiscal responsibility for providing services which the state
believed should be extended to the public.‖ (County of Los Angeles v. State of
California (1987) 43 Cal.3d 46, 56.) The reimbursement provision in section 6
was included in recognition of the fact ―that articles XIII A and XIII B severely
restrict the taxing and spending powers of local governments.‖ (County of San
Diego v. State of California (1997) 15 Cal.4th 68, 81 (County of San Diego).) The
purpose of section 6 is to prevent ―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.‖ (County of San Diego, at p.
81.) Thus, with certain exceptions, section 6 ―requires the state ‗to pay for any
new governmental programs, or for higher levels of service under existing
programs, that it imposes upon local governmental agencies.‘ ‖ (County of San
Diego, at p. 81.)
As noted, reimbursement is not required if the statute or executive order
imposes ―a requirement that is mandated by a federal law or regulation,‖ unless
the state mandate imposes costs that exceed the federal mandate. (Gov. Code,

14
§ 17556, subd. (c).) The question here is how to apply that exception when federal
law requires a local agency to obtain a permit, authorizes the state to issue the
permit, and provides the state discretion in determining which conditions are
necessary to achieve a general standard established by federal law, and when state
law allows the imposition of conditions that exceed the federal standard. Previous
decisions of this court and the Courts of Appeal provide guidance.
In City of Sacramento, supra, 50 Cal.3d 51, this court addressed local
governments‘ reimbursement claims for the costs of extending unemployment
insurance protection to their employees. (Id., at p. 59.) Since 1935, the applicable
federal law had provided powerful incentives for states to implement their own
unemployment insurance programs. Those incentives included federal subsidies
and a substantial federal tax credit for all corporations in states with certified
federal programs. (Id. at p. 58.) California had implemented such a program.
(Ibid.) In 1976, Congressional legislation required that unemployment insurance
protection be extended to local government employees. (Ibid.) If a state failed to
comply with that directive, it ―faced [the] loss of the federal tax credit and
administrative subsidy.‖ (Ibid.) The Legislature passed a law requiring local
governments to participate in the state‘s unemployment insurance program. (Ibid.)
Two local governments sought reimbursement for the costs of complying
with that requirement. Opposing the claims, the state argued its action was
compelled by federal law. This court agreed, reasoning that, if the state had
―failed to conform its plan to new federal requirements as they arose, its
businesses [would have] faced a new and serious penalty‖ of double taxation,
which would have placed those businesses at a competitive disadvantage against
businesses in states complying with federal law. (City of Sacramento, supra, 50
Cal.3d at p. 74.) Under those circumstances, we concluded that the ―state simply
did what was necessary to avoid certain and severe federal penalties upon its

15
resident businesses.‖ (Ibid.) Because ―[t]he alternatives were so far beyond the
realm of practical reality that they left the state ‗without discretion‘ to depart from
federal standards,‖ we concluded ―the state acted in response to a federal
‗mandate.‘ ‖ (Ibid., italics added.)
County of Los Angeles, supra, 32 Cal.App.4th 805, involved a different
kind of federal compulsion. In Gideon v. Wainwright (1963) 372 U.S. 335, the
United States Supreme Court held that states were required by the federal
Constitution to provide counsel to indigent criminal defendants. That requirement
had been construed to include ―the right to the use of any experts that will assist
counsel in preparing a defense.‖ (County of Los Angeles, at p. 814.) The
Legislature enacted Penal Code section 987.9, requiring local governments to
provide indigent criminal defendants with experts for the preparation of their
defense. (County of Los Angeles, at p. 811, fn. 3.) Los Angeles County sought
reimbursement for the costs of complying with the statute. The state argued the
statute‘s requirements were mandated by federal law.
The state prevailed. The Court of Appeal reasoned that, even without Penal
Code section 987.9, the county would have been ―responsible for providing
ancillary services‖ under binding Supreme Court precedent. (County of Los
Angeles, supra, 32 Cal.App.4th at p. 815.) Penal Code section 987.9 merely
codified an existing federal mandate. (County of Los Angeles, at p. 815.)
Hayes v. Commission on State Mandates (1992) 11 Cal.App.4th 1564
(Hayes) provides a contrary example. Hayes involved the federal Education of the
Handicapped Act (EHA; 20 U.S.C. § 1401 et seq.). EHA was a ―comprehensive
measure designed to provide all handicapped children with basic educational
opportunities.‖ (Hayes, at p. 1594.) EHA required each state to adopt an
implementation plan, and mandated ―certain substantive and procedural

16
requirements,‖ but left ―primary responsibility for implementation to the state.‖
(Hayes, at p. 1594.)
Two local governments sought reimbursement for the costs of special
education assessment hearings which were required under the state‘s adopted plan.
The state argued the requirements imposed under its plan were federally
mandated. The Hayes court rejected that argument. Reviewing the historical
development of special education law (Hayes, supra, 11 Cal.App.4th at pp. 1582-
1592), the court concluded that, so far as the state was concerned, the requirements
established by the EHA were federally mandated. (Hayes, at p. 1592.) However,
that conclusion ―mark[ed] the starting point rather than the end of [its]
consideration.‖ (Ibid.) The court explained that, in determining whether federal
law requires a specified function, like the assessment hearings, the focus of the
inquiry is whether the ―manner of implementation of the federal program was left
to the true discretion of the state.‖ (Id. at p. 1593, italics added.) If the state ―has
adopted an implementing statute or regulation pursuant to the federal mandate,‖
and had ―no ‗true choice‘ ‖ as to the manner of implementation, the local
government is not entitled to reimbursement. (Ibid.) If, on the other hand, ―the
manner of implementation of the federal program was left to the true discretion of
the state,‖ the local government might be entitled to reimbursement. (Ibid.)
According to the Hayes court, the essential question is how the costs came
to be imposed upon the agency required to bear them. ―If the state freely chose to
impose the costs upon the local agency as a means of implementing a federal
program then the costs are the result of a reimbursable state mandate regardless
whether the costs were imposed upon the state by the federal government.‖
(Hayes, supra, 11 Cal.App.4th at p. 1594.) Applying those principles, the court
concluded that, to the extent ―the state implemented the [EHA] by freely choosing
to impose new programs or higher levels of service upon local school districts, the

17
costs of such programs or higher levels of service are state mandated and subject
to‖ reimbursement. (Ibid.)
From City of Sacramento, County of Los Angeles, and Hayes, we distill the
following principle: If federal law compels the state to impose, or itself imposes, a
requirement, that requirement is a federal mandate. On the other hand, if federal
law gives the state discretion whether to impose a particular implementing
requirement, and the state exercises its discretion to impose the requirement by
virtue of a ―true choice,‖ the requirement is not federally mandated.
Division of Occupational Safety & Health v. State Bd. of Control (1987)
189 Cal.App.3d 794 (Division of Occupational Safety) is instructive. The federal
Occupational Safety and Health Act (Fed. OSHA; 29 U.S.C. § 651 et seq.)
preempted states from regulating matters covered by Fed. OSHA unless a state
had adopted its own plan and gained federal approval. (Division of Occupational
Safety, at p. 803.) No state was obligated to adopt its own plan. But, if a state did
so, the plan had to include standards at least as effective as Fed. OSHA‘s and
extend those standards to state and local employees. California adopted its own
plan, which was federally approved. The state then issued a regulation that,
according to local fire districts, required them to maintain three-person firefighting
teams. Previously, they had been permitted to maintain two-person teams.
(Division of Occupational Safety, at pp. 798-799.) The local fire districts sought
reimbursement for the increased level of service. The state opposed, arguing the
requirement was mandated by federal law.
The court agreed with the fire districts. As the court explained, a Fed.
OSHA regulation arguably required the maintenance of three-person firefighting
teams. (Division of Occupational Safety, supra, 189 Cal.App.3d at p. 802.)
However, that federal regulation specifically excluded local fire districts. (Id. at p.
803.) Had the state elected to be governed by Fed. OSHA standards, that

18
exclusion would have allowed those fire districts to maintain two-person teams.
(Division of Occupational Safety, at p. 803.) The conditions for approval of the
state’s plan required effective enforcement and coverage of public employees.
But those conditions did not make the costs of complying with the state regulation
federally mandated. ―[T]he decision to establish . . . a federally approved [local]
plan is an option which the state exercises freely.‖ (Ibid.) In other words, the
state was not ―compelled to . . . extend jurisdiction over occupational safety to
local governmental employers,‖ which would have otherwise fallen under a
federal exclusion. (Ibid.) Because the state ―was not required to promulgate [the
state regulation] to comply with federal law, the exemption for federally mandated
costs does not apply.‖ (Id. at p. 804.)13
San Diego Unified School Dist. v. Commission on State Mandates (2004)
33 Cal.4th 859 (San Diego Unified) provides another example. In Goss v. Lopez
(1975) 419 U.S. 565, the United States Supreme Court held that if a school
principal chose to recommend a student for expulsion, federal due process
principles required the school district to give that student a hearing. Education
Code section 48918 provided for expulsion hearings. (San Diego Unified, at p.
868.) Under Education Code section 48915, a school principal had discretion to
recommend expulsion under certain circumstances, but was compelled to
recommend expulsion for a student who possessed a firearm. (San Diego Unified,
at p. 869.) Federal law at the time did not require expulsion for a student who
brought a gun to school. (Id. at p. 883.)

13 In the end, the court held that the challenged state regulation did not
obligate the local fire district to maintain three-person firefighting teams.
Accordingly, the state regulation did not mandate an increase in costs. (Division
of Occupational Safety, supra, 189 Cal.App.3d at pp. 807-808.)

19
 The school district argued it was entitled to reimbursement of all expulsion
hearing costs. This court drew a distinction between discretionary and mandatory
expulsions. We concluded the costs of hearings for discretionary expulsions
flowed from a federal mandate. (San Diego Unified, supra, 33 Cal.4th at pp. 884-
890.)14 We declined, however, to extend that rule to the costs related to
mandatory expulsions. Because it was state law that required an expulsion
recommendation for firearm possession, all hearing costs triggered by the
mandatory expulsion provision were reimbursable state-mandated expenses. (Id.
at pp. 881-883). As was the case in Hayes, the key factor was how the costs came
to be imposed on the entity that was required to bear them. The school principal
could avoid the cost of a federally-mandated hearing by choosing not to
recommend an expulsion. But, when a state statute required an expulsion
recommendation, the attendant hearing costs did not flow from a federal mandate.
(San Diego Unified, supra, 33 Cal.4th at p. 881.)

2. Application
Review of the Commission‘s decision requires a determination as to
whether federal statutory, administrative, or case law imposed, or compelled the
Regional Board to impose, the challenged requirements on the Operators.
It is clear federal law did not compel the Regional Board to impose these
particular requirements. There was no evidence the state was compelled to
administer its own permitting system rather than allowing the EPA do so under the
CWA. (33 U.S.C. § 1342(a).) In this respect, the case is similar to Division of

14 To the extent Education Code section 48918 imposed requirements that
went beyond the mandate of federal law, those requirements were merely
incidental to the federal mandate, and at most resulted in ―a de minimis cost.‖
(San Diego Unified, supra, 33 Cal.4th at p. 890.) The State does not argue here
that the costs of the challenged permit conditions were de minimis.

20
Occupational Safety, supra, 189 Cal.App.3d 794. Here, as in that case, the state
chose to administer its own program, finding it was ―in the interest of the people
of the state, in order to avoid direct regulation by the federal government of
persons already subject to regulation‖ under state law. (Wat. Code, § 13370, subd.
(c), italics added.) Moreover, the Regional Board was not required by federal law
to impose any specific permit conditions. The federal CWA broadly directed the
board to issue permits with conditions designed to reduce pollutant discharges to
the maximum extent practicable. But the EPA‘s regulations gave the board
discretion to determine which specific controls were necessary to meet that
standard. (40 C.F.R. § 122.26(d)(2)(iv).) This case is distinguishable from City of
Sacramento, supra, 50 Cal.3d 51, where the state risked the loss of subsidies and
tax credits for all its resident businesses if it failed to comply with federal
legislation. Here, the State was not compelled by federal law to impose any
particular requirement. Instead, as in Hayes, supra, 11 Cal.App.4th 1564, the
Regional Board had discretion to fashion requirements which it determined would
meet the CWA‘s maximum extent practicable standard.
The State argues the Commission failed to account for the flexibility in the
CWA‘s regulatory scheme, which conferred discretion on the State and regional
boards in deciding what conditions were necessary to comply with the CWA. In
exercising that discretion, those agencies were required to rely on their scientific,
technical, and experiential knowledge. Thus, the State contends the Permit itself
is the best indication of what requirements would have been imposed by the EPA
if the Regional Board had not done so, and the Commission should have deferred
to the board‘s determination of what conditions federal law required.
We disagree that the Permit itself demonstrates what conditions would have
been imposed had the EPA granted the Permit. In issuing the Permit, the Regional
Board was implementing both state and federal law and was authorized to include

21
conditions more exacting than federal law required. (City of Burbank, supra, 35
Cal.4th at pp. 627-628.) It is simply not the case that, because a condition was in
the Permit, it was, ipso facto, required by federal law.
We also disagree that the Commission should have deferred to the Regional
Board‘s conclusion that the challenged requirements were federally mandated.
That determination is largely a question of law. Had the Regional Board found,
when imposing the disputed permit conditions, that those conditions were the only
means by which the maximum extent practicable standard could be implemented,
deference to the board‘s expertise in reaching that finding would be appropriate.
The board‘s legal authority to administer the CWA and its technical experience in
water quality control would call on sister agencies as well as courts to defer to that
finding. The State, however, provides no authority for the proposition that, absent
such a finding, the Commission should defer to a state agency as to whether
requirements were state or federally mandated. Certainly, in a trial court action
challenging the board’s authority to impose specific permit conditions, the board‘s
findings regarding what conditions satisfied the federal standard would be entitled
to deference. (See, e.g., City of Rancho Cucamonga v. Regional Water Quality
Control Bd. (2006) 135 Cal.App.4th 1377, 1384, citing Fukuda v. City of Angels
(1999) 20 Cal.4th 805, 817-818.) Resolution of those questions would bring into
play the particular technical expertise possessed by members of the regional board.
In those circumstances, the party challenging the board‘s decision would have the
burden of demonstrating its findings were not supported by substantial evidence or
that the board otherwise abused its discretion. (Rancho Cucamonga, at p. 1387;
Building Industry, supra, 124 Cal.App.4th at pp. 888-889.)
Reimbursement proceedings before the Commission are different. The
question here was not whether the Regional Board had authority to impose the
challenged requirements. It did. The narrow question here was who will pay for

22
them. In answering that legal question, the Commission applied California‘s
constitutional, statutory, and common law to the single issue of reimbursement. In
the context of these proceedings, the State has the burden to show the challenged
conditions were mandated by federal law.
Section 6 establishes a general rule requiring reimbursement of all state-
mandated costs. Government Code section 17556, subdivision (c), codifies an
exception to that rule. Typically, the party claiming the applicability of an
exception bears the burden of demonstrating that it applies. (See Simpson Strong-
Tie Co., Inc. v. Gore (2010) 49 Cal.4th 12, 23; see also, Long Beach Police
Officers Assn. v. City of Long Beach (2014) 59 Cal.4th 59, 67.) Here, the State
must explain why federal law mandated these requirements, rather than forcing the
Operators to prove the opposite. The State‘s proposed rule, requiring the
Commission to defer to the Regional Board, would leave the Commission with no
role to play on the narrow question of who must pay. Such a result would fail to
honor the Legislature‘s intent in creating the Commission.
Moreover, the policies supporting article XIII B of the California
Constitution and section 6 would be undermined if the Commission were required
to defer to the Regional Board on the federal mandate question. The central
purpose of article XIII B is to rein in local government spending. (City of
Sacramento, supra, 50 Cal.3d at pp. 58-59.) The purpose of section 6 is to protect
local governments from state attempts to impose or shift the costs of new
programs or increased levels of service by entitling local governments to
reimbursement. (County of San Diego, supra, 15 Cal.4th at p. 81.) Placing the
burden on the state to demonstrate that a requirement is federally mandated, and
thus excepted from reimbursement, serves those purposes.
Applying the standard of review described above, we evaluate the entire
record and independently review the Commission‘s determination the challenged

23
conditions were not federal mandates. We conclude the Commission was correct.
These permit conditions were not federally mandated.

a) The inspection requirements
Neither the CWA‘s ―maximum extent practicable‖ provision nor the EPA
regulations on which the State relies expressly required the Operators to inspect
these particular facilities or construction sites. The CWA makes no mention of
inspections. (33 U.S.C. § 1342(p)(3)(B)(iii).) The regulations required the
Operators to include in their permit application a description of priorities and
procedures for inspecting certain industrial facilities and construction sites, but
suggested that the Operators would have discretion in selecting which facilities to
inspect. (See C.F.R. § 122.26(d)(2)(iv)(C)(1).) The regulations do not mention
commercial facility inspections at all.
Further, as the Operators explained, state law made the Regional Board
responsible for regulating discharges of waste within its jurisdiction. (Wat. Code,
§§ 13260, 13263.) This regulatory authority included the power to ―inspect the
facilities of any person to ascertain whether . . . waste discharge requirements are
being complied with.‖ (Wat. Code, § 13267, subd. (c).) Thus, state law imposed
an overarching mandate that the Regional Board inspect the facilities and sites.
In addition, federal law and practice required the Regional Board to inspect
all industrial facilities and construction sites. Under the CWA, the State Board, as
an issuer of NPDES permits, was required to issue permits for storm water
discharges ―associated with industrial activity.‖ (33 U.S.C. § 1342(p)(3)(A).) The
term ―industrial activity‖ includes ―construction activity.‖ (40 C.F.R.
§ 122.26(b)(14)(x).) The Operators submitted evidence that the State Board had
satisfied its obligation by issuing a general industrial activity stormwater permit
and a general construction activity stormwater permit. Those statewide permits

24
imposed controls designed to reduce pollutant discharges from industrial facilities
and construction sites. Under the CWA, those facilities and sites could operate
under the statewide permits rather than obtaining site-specific pollutant discharge
permits.
The Operators showed that, in those statewide permits, the State Board had
placed responsibility for inspecting facilities and sites on the Regional Board. The
Operators submitted letters from the EPA indicating the State and regional boards
were responsible for enforcing the terms of the statewide permits. The Operators
also noted the State Board was authorized to charge a fee to facilities and sites that
subscribed to the statewide permits (Wat. Code, § 13260, subd. (d)), and that a
portion of that fee was earmarked to pay the Regional Board for ―inspection and
regulatory compliance issues.‖ (Wat. Code, § 13260, subd. (d)(2)(B)(iii).)
Finally, there was evidence the Regional Board offered to pay the County to
inspect industrial facilities. There would have been little reason to make that offer
if federal law required the County to inspect those facilities.
This record demonstrates that the Regional Board had primary
responsibility for inspecting these facilities and sites. It shifted that responsibility
to the Operators by imposing these Permit conditions. The reasoning of Hayes,
supra, 11 Cal.App.4th 1564, provides guidance. There, the EHA required the state
to provide certain services to special education students, but gave the state
discretion in implementing the federal law. (Hayes, at p. 1594.) The state
exercised its ―true discretion‖ by selecting the specific requirements it imposed on
local governments. As a result, the Hayes court held the costs incurred by the
local governments were state-mandated costs. (Ibid.) Here, state and federal law
required the Regional Board to conduct inspections. The Regional Board
exercised its discretion under the CWA, and shifted that obligation to the
Operators. That the Regional Board did so while exercising its permitting

25
authority under the CWA does not change the nature of the Regional Board‘s
action under section 6. Under the reasoning of Hayes, the inspection requirements
were not federal mandates.
The State argues the inspection requirements were federally mandated
because the CWA required the Regional Board to impose permit controls, and the
EPA regulations contemplated that some kind of operator inspections would be
required. That the EPA regulations contemplated some form of inspections,
however, does not mean that federal law required the scope and detail of
inspections required by the Permit conditions.15 As explained, the evidence
before the Commission showed the opposite to be true.

b) The trash receptacle requirement
The Commission concluded the trash receptacle requirement was not a
federal mandate because neither the CWA nor the regulation cited by the State
explicitly required the installation and maintenance of trash receptacles. The State
contends the requirement was mandated by the CWA and by the EPA regulation
that directed the Operators to include in their application a ―description of
practices for operating and maintaining public streets, roads and highways and
procedures for reducing the impact on receiving waters of discharges from
municipal storm sewer systems.‖ (40 C.F.R. § 122.26(d)(2)(iv)(A)(3).)
The Commission‘s determination was supported by the record. While the
Operators were required to include a description of practices and procedures in

15 The State also relied on a 2008 letter from the EPA indicating that the
requirements to inspect industrial facilities and construction sites fell within the
maximum extent practicable standard under the CWA. That letter, however, does
not indicate that federal law required municipal storm sewer system operators to
inspect all industrial facilities and construction sites within their jurisdictions.

26
their permit application, the issuing agency has discretion whether to make those
practices conditions of the permit. (40 C.F.R. § 122.26(d)(2)(iv).) No regulation
cited by the State required trash receptacles at transit stops. In addition, there was
evidence that the EPA had issued permits to other municipal storm sewer systems
in Anchorage, Boise, Boston, Albuquerque, and Washington, D.C. that did not
require trash receptacles at transit stops. The fact the EPA itself had issued
permits in other cities, but did not include the trash receptacle condition, fatally
undermines the argument that the requirement was federally mandated.

c) Conclusion
Although we have upheld the Commission‘s determination on the federal
mandate question, the State raised other arguments in its writ petition. Further, the
issues presented in the Operators‘ cross-petition were not addressed by either the
trial court or the Court of Appeal. We remand the matter so those issues can be
addressed in the first instance.
III. DISPOSITION
We reverse the judgment of the Court of Appeal and remand for further
proceedings consistent with our opinion.
CORRIGAN, J.

WE CONCUR:

CANTIL-SAKAUYE, C. J.
WERDEGAR, J.
CHIN, J.

27
 CONCURRING AND DISSENTING OPINION BY CUÉLLAR, J.

A local government is entitled to reimbursement from the state when the
Legislature or a state agency requires it to provide new programs or increased
service. (Cal. Const., art. XIII B, § 6, subd. (a).) But one crucial exception
coexists with this rule. It applies where the new program or increased service is
mandated by a federal statute or regulation. (Gov. Code, § 17556, subd. (c).) We
consider in this case whether certain conditions to protect water quality included in
a permit from the Regional Water Quality Board, Los Angeles Region (Regional
Board or Board) — specifically, installation and maintenance of trash receptacles
at transit stops, as well as inspections of certain commercial and industrial
facilities and construction sites — constitute state mandates subject to
reimbursement, or federal mandates within the statutory reimbursement exception.
What the majority concludes is that federal law did not compel imposition
of the conditions, and that the local agencies would not necessarily have been
required to comply with them had they not been imposed by the state. In doing so,
the majority upholds and treats as correct a decision by the Commission on State
Mandates (the Commission) that is flawed in its approach and far too
parsimonious in its analysis. This is no small feat: not only must the majority
discount any expertise the Regional Board might bring to bear on the mandate
question (see maj. opn., ante, at pp. 22-24), but it must also overlook the
Commission‘s reliance on an overly narrow analytical framework and prop up the
Commission‘s decision with evidence on which the agency could have relied,
rather than that on which it did (see id. at pp. 24-27).
Moreover, when the majority considers whether the permit conditions are
indeed federally mandated, it purports to apply de novo review to the
Commission‘s legal determination. (See maj. opn., ante, at pp. 13, 22, 24.) What
it actually applies seems far more deferential to the Commission‘s decision —
something akin to substantial evidence review — despite the Commission‘s own
failure in affording deference to the Regional Board and, more generally, its
reliance on the wrong decision-making framework. (Cf. People v. Barnwell
(2007) 41 Cal.4th 1038, 1052 [―A substantial evidence inquiry examines the
record in the light most favorable to the judgment and upholds it if the record
contains reasonable, credible evidence of solid value upon which a reasonable trier
of fact could have relied in reaching the conclusion in question‖].) Indeed, what
the majority overlooks is that the Commission itself should have considered the
effect of the evidence on which the majority now relies in deciding whether the
challenged permit conditions were necessary to comply with federal law. And in
doing so, the Commission should have extended a measure of deference to the
Regional Board‘s expertise in administering the statutory scheme. (See County of
Los Angeles v. Cal. State Water Resources Control Bd. (2006) 143 Cal.App.4th
985, 997 (State Water Board).)
Because the Commission failed to do so, and because the Commission‘s
interpretation of the federal Clean Water Act (the CWA; 33 U.S.C. § 1251 et seq.)
failed to account for the complexities of the statute, I would reverse the Court of
Appeal‘s judgment and remand with instructions for the Commission to reconsider
its decision. So I concur in the majority‘s judgment reversing the Court of
Appeal, but dissent from its conclusion upholding the Commission‘s decision
rather than remanding the matter for further proceedings.

2
 I.
To determine whether it is the state rather than local governments that
should bear the entirety of the financial burden associated with a new program or
increased service, the Commission must examine the nature of the federal scheme
in question. That scheme is the CWA, a statute Congress amended in 1972 to
establish the National Pollutant Discharge Elimination System (the NPDES) as a
means of achieving and enforcing limitations on pollutant discharges. (See EPA v.
State Water Resources Control Bd. (1976) 426 U.S. 200, 203-204.) The role
envisioned for the states under the NPDES is a major one, encompassing both the
opportunity to assume the primary responsibility for the implementation and
enforcement of federal effluent discharge limitations by issuing permits as well as
the discretion to enact requirements that are more onerous than the federal
standard. (See 33 U.S.C. §§ 1251(b), 1342(b).)
But states undertaking such implementation must do so in a manner that
complies with regulations promulgated by the Environmental Protection Agency
(the EPA), as well as the CWA‘s broad provisions (including the ―maximum
extent practicable‖ standard (33 U.S.C. § 1342(p)(3)(B)(iii))), and subject to the
EPA‘s continuing revocation authority (see id., § 1342(c)(3)). Despite the breadth
of the requirements the statute imposes on states assuming responsibility for
permitting enforcement and the expansive nature of the EPA‘s revocation
authority, neither the statute nor its implementing regulations include a safe harbor
provision establishing a minimum level of compliance with the federal standard —
an absence the majority tacitly acknowledges. (See maj. opn., ante, at p. 21 [―the
Regional Board was not required by federal law to impose any specific permit
conditions‖].) Instead, implementation of the federal mandate requires the state
agency — here, the Regional Board — to exercise technical judgments about the

3
feasibility of alternative permitting conditions necessary to achieve compliance
with the federal statute.
With no statutory safe harbor that the Regional Board could have relied on
to ensure the EPA‘s approval of the state permitting process, the Board interpreted
the federal standard in light of the statutory text, implementing regulations, and its
technical appraisal of potential alternatives. In discharging its own role, the
Commission was then bound to afford the Regional Board a measure of ―sister-
agency‖ deference. (See Yamaha Corp. of America v. State Bd. of Equalization
(1998) 19 Cal.4th 1, 7 [explaining that ―the binding power of an agency‘s
interpretation of a statute or regulation is contextual: Its power to persuade is both
circumstantial and dependent on the presence or absence of factors that support the
merit of the interpretation‖].) In this case, the Regional Board informed localities
that, in its view, the various permit conditions it imposed would satisfy the
maximum extent practicable standard. The EPA agreed the requirements were
within the scope of the federal standard. The Regional Board‘s judgment that
these conditions will control pollutant discharges to the extent required by federal
law is at the core of the agency‘s institutional expertise. That expertise merits a
measure of deference because the Regional Board‘s ken includes not only its
greater familiarity with the CWA (relative to other entities), but also technical
knowledge relevant to judgments about the water quality consequences of
particular permitting conditions relevant to the provisions of the CWA. (See, e.g.,
33 U.S.C. § 1342(p)(3)(B)(iii) [requiring that permits include ―management
practices, control techniques and system, design and engineering methods, and
such other provisions as . . . the State determines appropriate for the control of
such pollutants‖].) Casting aside the Regional Board‘s expertise on the issue at
hand, the majority nonetheless upholds the Commission‘s ruling.

4
 Remand to the Commission would have been the more appropriate course
for multiple reasons. First, the Commission applied the wrong framework for its
analysis. It failed to consider all the evidence relevant to whether the permit
conditions were necessary for compliance with federal law. The commission
compounded its error by relying on an interpretation of the CWA that
misconstrues the federal statutory scheme governing the state permitting process.
In particular, the Commission treated the problem as essentially a simple
matter of searching the statutory text and regulations for precisely the same terms
used by the Regional Board‘s permit conditions. Unless the requirement in
question is referenced explicitly in a federal statutory or regulatory provision, the
Commission‘s analysis suggests, the requirement cannot be a federal mandate.
With respect to trash receptacles, the Commission stated: ―Because installing and
maintaining trash receptacles at transit stops is not expressly required of cities or
counties or municipal separate storm sewer dischargers in the federal statutes or
regulations, these are activities that ‗mandate costs that exceed the mandate in the
federal law or regulation.‘ ‖ And with respect to industrial facility inspections, the
Commission said this: ―Inasmuch as the federal regulation (40 CFR § 122.26 (c))
authorizes coverage under a statewide general permit for the inspections of
industrial activities, and the federal regulation (40 CFR § 122.26 (d)(2)(iv)(D))
does not expressly require those inspections to be performed by the county or
cities (or the ‗owner or operator of the discharge‘) the Commission finds that the
state has freely chosen to impose these activities on the permittees.‖ (Fn. omitted.)
Existing law does not support this method of determining what constitutes a
federal mandate. Instead, our past decisions emphasize the need to consider the
implications of multiple statutory provisions and broader statutory context when
interpreting federal law to determine if a given condition constitutes a federal
mandate. (See City of Sacramento v. State of California (1990) 50 Cal.3d 51, 76

5
(City of Sacramento); see also San Diego Unified School Dist. v. Commission on
State Mandates (2004) 33 Cal.4th 859, 890 [―challenged state rules or procedures
that are intended to implement an applicable federal law — and whose costs are,
in context, de minimis — should be treated as part and parcel of the underlying
federal mandate‖ (italics added)].) In contrast, the Commission‘s overly narrow
approach to determining what constitutes a federal mandate risks creating a
standard that will never be met so long as the state retains any shred of discretion
to implement a federal program. It cannot be that so long as a federal statute or
regulation does not expressly require every permit term issued by a state agency,
then the permit is a state, rather than a federal, mandate. But this is precisely how
the Commission analyzed the issue — an analysis that, remarkably, the majority
does not even question. Instead, the majority combs the record for evidence that
could have supported the result the Commission reached. In so doing, the
majority implicitly acknowledges that the Commission‘s approach to resolving the
question at the heart of this case was deficient.
But if the Commission applied the wrong framework for its analysis, the
right course is to remand. Doing so would obviate the need to cobble together
scattered support for a decision by the Commission that was premised, in the first
instance, on the Commission‘s own misconstrual of the inquiry before it. Instead,
we should give the Commission an opportunity to reevaluate its conclusion in light
of the entire record and to, where appropriate, solicit further information from the
parties to shed light on what permit conditions are necessary for compliance with
federal law.
The potential consequences of allowing the Commission to continue on its
present path are quite troubling. For if the law were as the Commission suggests,
the state would be unduly discouraged from participating in federal programs like
the NPDES — even though participation might otherwise be in California‘s

6
interest — if the state knows ex ante that it will be unable to pass along the
expenses to the local areas that experience the most costs and benefits from the
mandate at issue. Our law on unfunded mandates does not compel such a result.
Nor is there an apparent prudential rationale in support of it.
The Commission‘s approach also fails to appreciate the EPA‘s role in
implementing (through its interpretation and enforcement of the CWA) statutory
requirements that the CWA describes in relatively broad terms. Indeed, what may
be ―practicable‖ in Los Angeles may not be in San Francisco, much less in Kansas
City or Detroit. (See Building Industry Assn. of San Diego County v. State Water
Resources Control Bd. (2004) 124 Cal.App.4th 866, 889 (Building Industry Assn.)
[explaining that ―the maximum extent practicable standard is a highly flexible
concept that depends on balancing numerous factors, including the particular
control‘s technical feasibility, cost, public acceptance, regulatory compliance, and
effectiveness‖].) It also suggests a lack of understanding of two interrelated
matters on which the Regional Board likely has expertise: the consequences of the
measures included as permit conditions relative to any alternatives and the
interpretation of a complex federal statute governing regulation of the
environment.
Second, beyond failing to consider all the relevant evidence bearing on the
necessity of the imposed permit conditions, the Commission failed to extend any
meaningful deference to the Regional Board‘s conclusions — even though such
deference was warranted given that the nature of the decisions involved in
interpreting the CWA included evaluating appropriate alternatives and
determining which of those were necessary to satisfy the federal standard. (See
State Water Board, supra, 143 Cal.App.4th at p. 997 [―we defer to the regional
board‘s expertise in construing language which is not clearly defined in statutes
involving pollutant discharge into storm drain sewer systems‖]; City of Rancho

7
Cucamonga v. Regional Water Quality Control Bd. (2006) 135 Cal.App.4th 1377,
1384 (Rancho Cucamonga) [―consideration [should be] given to the [regional
board‘s] interpretations of its own statutes and regulations‖]; Building Industry
Assn., supra, 124 Cal.App.4th at p. 879, fn. 9 [―we do consider and give due
deference to the Water Boards‘ statutory interpretations [of the CWA] in this
case‖]; see also Cal. Building Industry Assn. v. Bay Area Air Quality Management
Dist. (2015) 62 Cal.4th 369, 389-390 [explaining that ―an agency‘s expertise and
technical knowledge, especially when it pertains to a complex technical statute, is
relevant to the court‘s assessment of the value of an agency interpretation‖].) In
the direct challenge to the permit at issue here, the local agencies argued that the
Regional Board exceeded even those requirements associated with the maximum
extent practicable standard, an argument the appellate court rejected in an
unpublished section of its opinion. Because of its failure to afford any deference
to the Regional Board or to conduct an analysis more consistent with the relevant
standard of review, the Commission essentially forces the Board to defend its
decision twice: once on direct challenge and a second time before the
Commission.
Conditions as prosaic as trash receptacle requirements initially may not
seem to implicate the Regional Board‘s expertise. Yet its unique experience and
technical competence matter even with respect to these conditions, because the use
of such conditions implicates a decision not to use alternatives that might require
greater conventional expert judgment to evaluate. Moreover, the Regional Board
is likely to accumulate a distinct and greater degree of knowledge regarding issues
such as the reactions of stakeholders to different requirements, and related factors
relevant to determining which conditions are necessary to satisfy the CWA‘s
maximum extent practicable standard.

8
 The Commission acknowledged that the State Water Resources Control
Board — as well as the EPA — believed the permit requirements did not exceed
this federal standard. ―The comments of the State Water Board and U.S. EPA,‖
the Commission noted, ―assert that the permit conditions merely implement a
federal mandate under the federal Clean Water Act and its regulations.‖ But the
Commission afforded these conclusions no clear deference in determining whether
the requirements were state mandates.
Nor is the majority correct in suggesting that the Commission had only a
limited responsibility, if it had one at all, to extend any deference to the Regional
Board. (See maj. opn., ante, at pp. 22-24.) The Regional Board‘s judgment as to
whether the imposed permit conditions were necessary to comply with federal law
was a prerequisite to the Commission‘s own task, which was to review the Board‘s
determination in light of all the relevant evidence. To the extent ambiguity exists
as to whether the Regional Board‘s conclusions incorporated any findings that
these conditions were necessary to meet the federal standard (see id. at pp. 22-23),
remand to clarify the Board‘s position is in order. By instead simply upholding
the Commission‘s conclusion without remand, the majority displaces any
meaningful role for the Regional Board‘s expert judgment.
The majority does so even though courts have routinely emphasized the
pivotal role regional boards play in interpreting the CWA‘s intricate mandate.
(See State Water Board, supra, 143 Cal.App.4th at p. 997; Rancho Cucamonga,
supra, 135 Cal.App.4th at p. 1384.) And for good reason: If the Regional Board‘s
judgment is that the trash receptacle and inspection requirements are necessary to
control pollutant discharges to the maximum extent practicable, such a conclusion
is well within the purview of its expertise. Unsurprisingly, then, we have never
concluded that the technical knowledge relevant to interpreting the requirements
of the CWA — a statute that lacks a safe harbor and where discerning what

9
phrases such as maximum extent practicable mean given existing conditions and
technology is complex — lies beyond the ambit of the Regional Board‘s expertise,
or otherwise proves distinct from the sort of expertise that merits deference.
Third, the Commission devoted insufficient attention in its analysis to the
role of states in implementing the CWA, and to how that role can be harmonized
with the significant protections against unfunded mandates that the state
Constitution provides. (See Cal. Const., art. XIII B, § 6, subd. (a).) By allowing
states to assume such an important role in implementing its provisions, the CWA
reflects principles of cooperative federalism. (See 33 U.S.C. §§ 1251(b), 1342(b);
see also Boise Cascade Corp. v. EPA (9th Cir. 1991) 942 F.2d 1427, 1430 [―The
federal-state relationship established by the [Clean Water] Act is . . . illustrated in
Congress‘ goal of encouraging states to ‗assume the major role in the operation of
the NPDES program‘ ‖].) In accordance with the CWA‘s express provisions,
California chose to assume the responsibility for implementation of the NPDES
program in the state — a role that requires further specification of permitting
conditions. (See 33 U.S.C. § 1342(c)(3) [states must administer permitting
programs ―in accordance with requirements of this section,‖ including compliance
with the maximum extent practicable standard].) In the process, the state must
comply with the constitutional protections against unfunded mandates requiring
reimbursement of localities if permit conditions exceed what is necessary to
comply with the relevant federal mandate. But given the nature of the relevant
CWA provisions — and particularly the maximum extent practicable standard —
it is wrong to assume that the conditions at issue in this case exceed what is
necessary to comply with the CWA simply because neither the statute nor its
regulations explicitly mention those conditions. The consequence of that
assumption, moreover, risks discouraging the state from assuming cooperative
federalism responsibilities — and may even encourage the state to withdraw from

10
administering the NPDES. Indeed, counsel for the state indicated at oral argument
that if the Commission‘s reasoning were upheld — and the state were required to
foot the bill for any conditions not expressly mentioned in the applicable federal
statutes or regulations — it might think twice about entering into such
arrangements of cooperative federalism.
In light of these concerns with the Commission‘s approach to this case, it is
difficult to see the basis for — or utility of — upholding the Commission‘s
decision, even under the inscrutable standard of review the majority employs.
(See California Youth Authority v. State Personnel Bd. (2002) 104 Cal.App.4th
575, 586 [substantial evidence review requires that all evidence be considered,
including evidence that does not support the agency‘s decision]; see also Sierra
Club v. U.S. Army Corps of Engineers (2d Cir. 1983) 701 F.2d 1011, 1030 [―the
court may properly be skeptical as to whether an [agency report‘s] conclusions
have a substantial basis in fact if the responsible agency has apparently ignored the
conflicting views of other agencies having pertinent expertise‖].) The better
course, in my view, would be for us to articulate the appropriate standard for
evaluating the question whether these permit conditions are state mandates and
then remand for the Commission to apply it in the first instance.
II.
The Commission relied on a narrow approach that only compares the terms
of a permit with the text of the CWA and its implementing regulations. Instead,
the Commission should have employed a more flexible methodology in
determining whether the permit conditions were federally mandated. Such a
flexible approach accords with our prior case law. (See City of Sacramento,
supra, 50 Cal.3d at p. 76 [whether local government appropriations are federally
mandated and therefore exempt from taxing and spending limitations under
section 9, subdivision (b), of article XIII B of the California Constitution depends

11
on, inter alia, the nature and purpose of the federal program, whether its design
suggests an intent to coerce, when state or local participation began, and the legal
and practical consequences of nonparticipation or withdrawal].) Moreover, it
would have the added benefit of not discouraging the state from participating in
ventures of cooperative federalism.
The majority may be correct that the facts of City of Sacramento are
distinguishable. (See maj. opn., ante, at p. 21.) In that case, the state risked
forsaking subsidies and tax credits for its resident businesses if it failed to comply
with federal law requiring that unemployment insurance protection be extended to
local government employees. (Id. at p. 15.) Here, in contrast, the negative
consequences of failing to comply with federal law may seem less severe, at least
in fiscal terms: the EPA may determine that the state is not in compliance with the
CWA and reassert authority over permitting. (See 33 U.S.C. § 1342(c)(3).) But
City of Sacramento nonetheless remains relevant, even though a precisely
comparable level of coercion may not exist here. The flexible approach we
articulated in that case remains the best way to ensure that some weight is given to
the Regional Board‘s technical expertise, and the conclusions resulting therefrom,
while also taking account of the cooperative federalism arrangements built into the
CWA.
So instead of adopting an approach foreign to our precedent, the
Commission should have begun its analysis with the statutory and regulatory text
— and then it should have considered other relevant materials and record evidence
bearing on whether the permit conditions are necessary to satisfy federal law.
Crucially, such evidence includes how the federal regulatory scheme operates in
practice. The Commission could have examined, for instance, previous permits
issued by the EPA in similarly situated jurisdictions, comparing them to the
inspection and trash receptacle requirements the Regional Board imposed here and

12
giving due consideration to the EPA‘s conclusion that the maximum extent
practicable standard is applied in a highly site-specific and flexible manner in
order to account for unique local challenges and conditions. (See 64 Fed. Reg.
68722, 68754 (Dec. 8, 1999).) The Commission could also have considered
whether, instead of identifying permitting conditions necessary to comply with the
CWA, the state shifted onto local governments responsibility to conduct
inspections or provide trash receptacles. The majority wisely notes that these are
factors the Commission could have examined. (See maj. opn., ante, at pp. 24-27.)
But the Commission mentioned this evidence only briefly, failing to grapple in
any meaningful way with its implications for the issue at hand. We should allow
the Commission an opportunity to do so in the first instance.
The Commission should have also accorded appropriate deference to the
Regional Board‘s conclusions regarding how best to comply with the federal
maximum extent practicable standard. One way to ensure that such deference is
given would be to place on the party seeking reimbursement the burden of
demonstrating that the challenged permit conditions clearly exceed the federal
standard, or that they were otherwise unnecessary to reduce pollutant discharges to
the maximum extent practicable. Doing so would make sense where the state is
implementing a federal program that envisions routine state participation, the
federal program does not itself define the minimum degree of compliance
required, and the state‘s implementing agency reasonably determines in its
expertise that certain conditions are necessary to comply with the applicable
federal standard.
* * *
The Commission‘s decision — and the approach that produced it — fails to
accord with existing law and with the nature of the applicable federal scheme.
The state is not responsible for reimbursing localities for permit conditions that are

13
necessary to comply with federal law, a circumstance that renders interpretation of
the CWA central to this case. A core principle of the CWA is to facilitate
cooperative federalism, by allowing states to take on a critical responsibility in
exchange for compliance with a set of demanding standards overseen by a federal
agency capable of withdrawing approval for noncompliance. (See Arkansas v.
Oklahoma (1992) 503 U.S. 91, 101 [―The 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‘ ‖]; Shell Oil Co. v. Train (9th Cir. 1978) 585 F.2d 408, 409
[―Shell‘s complaint must be read against the background of the cooperative
federal-state scheme for the control of water pollution‖].) The Commission failed
to interpret the statute in light of nuances in its text and structure. And it failed to
offer even a modicum of deference to the Regional Board‘s interpretation, despite
the Board‘s clear expertise that the technical nature of the questions necessary to
interpret the scope of the CWA demands.
Accordingly, I would remand the matter to the Court of Appeal with
directions that it instruct the Commission to reconsider its decision. On
reconsideration, the Commission should appropriately defer to the Regional
Board, consider all relevant evidence bearing on the question at hand, and ensure
the evidence clearly shows the challenged permit conditions were not necessary to
comply with the federal mandate. This is the standard that most thoroughly
reflects our existing law and the nature of the CWA. Any dilution of it
exacerbates the risk of undermining the nuanced federal-state arrangement at the
heart of the CWA.
CUÉLLAR, J.
WE CONCUR:
LIU, J.
KRUGER, J.

14
See last page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Department of Finance v. Commission on State Mandates
__________________________________________________________________________________

Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted XXX 220 Cal.App.4th 740
Rehearing Granted

__________________________________________________________________________________

Opinion No. S214855
Date Filed: August 29, 2016
__________________________________________________________________________________

Court: Superior
County: Los Angeles
Judge: Ann I. Jones

__________________________________________________________________________________

Counsel:

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

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

Meyers, Nave, Riback, Silver & Wilson, Gregory J. Newmark, John D. Bakker; Morrison & Foerster,
Robert L. Falk and Megan B. Jennings for Alameda Countywide Clean Water Program, City/County
Association of Governments of San Mateo County and Santa Clara Valley Urban Runoff Pollution
Prevention Program as Amici Curiae on behalf of Real Parties in Interest and Appellants.

Somach Simmons & Dunn, Theresa A. Dunham, Nicholas A. Jacobs; Pamela J. Walls and Gregory P.
Priamos, County Counsel (Riverside), Karin Watts-Bazan, Principal Deputy County Counsel, and Aaron C.
Gettis, Deputy County Counsel, for California Stormwater Quality Association, Riverside County Flood
Control and Water Conservation District and County of Riverside as Amici Curiae on behalf of Real
Parties in Interest and Appellants.

Nicholas S. Chrisos, County Counsel (Orange), Ryan M.F. Baron and Ronald T. Magsaysay, Deputy
County Counsel, for County of Orange as Amici Curiae on behalf of Real Parties in Interest and
Appellants.

Best Best & Krieger, Shawn Hagerty and Rebecca Andrews for County of San Diego and 18 Cities in San
Diego County as Amici Curiae on behalf of Real Parties in Interest and Appellants.

Thomas E. Montgomery, County Counsel (San Diego) and Timothy M. Barry, Chief Deputy County
Counsel, for California State Association of Counties and League of California Cities as Amici Curiae on
behalf of Real Parties in Interest and Appellants.
Page 2 – S214855 – counsel continued

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

Best Best & Krieger and J. G. Andre Monette for City of Aliso Viejo, City of Lake Forest and City of Santa
Ana as Amici Curiae on behalf of Real Parties in Interest and Appellants.

Michael R.W. Houston, City Attorney (Anaheim) for City of Anaheim as Amicus Curiae on behalf of Real
Parties in Interest and Appellants.

Richards, Watson & Gershon and Candice K. Lee for City of Brea, City of Buena Park and City of Seal
Beach as Amici Curiae on behalf of Real Parties in Interest and Appellants.

Baron J. Bettenhausen for City of Costa Mesa and City of Westminster as Amici Curiae on behalf of Real
Parties in Interest and Appellants.

Aleshire & Wynder, Anthony R. Taylor and Wesley A. Miliband for City of Cypress as Amicus Curiae on
behalf of Real Parties in Interest and Appellants.

Rutan & Tucker and Richard Montevideo for City of Dana Point as Amicus Curiae on behalf of Real
Parties in Interest and Appellants.

Jennifer McGrath, City Attorney (Huntington Beach) and Michael Vigliotta, Chief Assistant City Attorney,
for City of Huntington Beach as Amicus Curiae on behalf of Real Parties in Interest and Appellants.

Rutan & Tucker and Jeremy N. Jungreis for City of Irvine, City of San Clemente and City of Yorba Linda
as Amici Curiae on behalf of Real Parties in Interest and Appellants.

Woodruff, Spradlin & Smart and M. Lois Bobak for City of Laguna Hills and City of Tustin as Amici
Curiae on behalf of Real Parties in Interest and Appellants.

Terry E. Dixon for City of Laguna Niguel as Amicus Curiae on behalf of Real Parties in Interest and
Appellants.

Mark K. Kitabayashi for City of Mission Viejo as Amicus Curiae on behalf of Real Parties in Interest and
Appellants.

Aaron C. Harp for City of Newport Beach as Amicus Curiae on behalf of Real Parties in Interest and
Appellants.

Wayne W. Winthers for City of Orange as Amicus Curiae on behalf of Real Parties in Interest and
Appellants.

Kamala D. Harris, Attorney General, Douglas J. Woods, Assistant Attorney General, Peter K. Southworth,
Kathleen A. Lynch, Tamar Pachter and Nelson R. Richards, Deputy Attorneys General, for Plaintiffs and
Respondents.

No appearance for Defendant and Respondent.
Counsel who argued in Supreme Court (not intended for publication with opinion):

Howard Gest
Burhenn & Gest
624 South Grand Avenue, Suite 2200
Los Angeles, CA 90017
(213) 688-7715

Nelson R. Richards
Deputy Attorney General
455 Golden Gate Avenue, Suite 11000
San Francisco, CA 94102-7004
(415) 703-5559