A water district may enter into a reimbursement agreement with a developer for the construction of oversized infrastructure to support anticipated growth, the state Attorney General’s Office has concluded.

State law provides specific authority only to cities and counties to sign reimbursement agreements. However, the ability to approve such agreements with developers is an implied power that water districts may exercise, Deputy Attorney General Susan Duncan Lee wrote in a formal opinion.

Under a reimbursement agreement, a developer builds infrastructure with more capacity than is required to serve his project. Future developers pay back the developer who built the infrastructure.

Assemblywoman Barbara Matthews (D-Tracy) requested the opinion on behalf of the San Luis Water District. Since its formation shortly after World War II, the district has provided irrigation water for agriculture in the Los Banos area. In recent years, however, the district has begun providing drinking water and wastewater services for a few dozen new homes. More importantly, the district projects that 60,000 to 100,000 people will move into areas south of Santa Nella within the next few decades, said Gary Sawyer, general counsel for the agency.

“The district has been exploring options for how to finance the substantial infrastructure that is going to have to be constructed,” Sawyer said. “The district wants to do it right, which means they want to do it regionally.”

When considering the district’s financing options, Sawyer said he could not tell from reading state law whether reimbursement agreements were available to the water district. If the district were to sign such an agreement and lose a subsequent legal challenge, the district could be liable for tens of millions of dollars of debt, he explained. So the district requested the attorney general’s opinion.

In her opinion, Lee stated that nothing in the California Water District Law (Water Code §§ 34000-38501) expressly authorizes water districts organized under the Water District Law to enter into reimbursement agreements. In contrast, the Subdivision Map Act does authorize cities and counties to sign such agreements, and the Public Contract Code permits county waterworks districts to sign similar agreements, Lee noted.

Despite the lack of express authority, “we believe that these statutory schemes governing other public entities serve to validate the proposed agreements in question. They indicate the Legislature’s support for the use of such agreements to address the growing needs of a community in a reasonable and practical manner,” Lee wrote. “We do not view the lack of express authority in the Act [California Water District Law] as indicating that the Legislature contemplated and then deliberately rejected granting such authority. Rather, it was considered unnecessary to include it.”

“The implied powers of a special district are those ‘necessary for the due and efficient administration of powers expressly granted by statute’,” Lee wrote, citing Dickey v. Raisin Proration Zone No. 1, (1944) 24 Cal.2d 796, 810. “Here, the powers expressly granted by the Act are both broad enough and specific enough to give a district the legal authority to enter into the proposed agreements.”

Many special districts were anxiously anticipating the attorney general’s opinion. Some have already signed and are implementing development reimbursement agreements. A negative opinion could have cast doubt on those contracts.

Sawyers said he was not questioning other districts’ contracts; he was only taking a conservative approach in determining his client’s options. As it now stands, the San Luis Water District is likely to use other financing arrangements, he said.

“It’s not as though we were waiting for the AG’s opinion to come out so that we could sign a bunch of reimbursement agreements,” Sawyers said.

The opinion issued October 12 is No. 05-307 and may be found at 05 C.D.O.S. 9016 and 2005 DJDAR 12239.