Exhaustion of Administrative Remedies Not Required for Challenge to Municipal Sewer and Trash Fees

The Court of Appeal held that petitioners challenging a city’s sewer and trash fees were not required to pay fees under protest or otherwise exhaust administrative remedies. Carachure v. City of Azusa, 110 Cal.App.5th 776 (2025).

The Carachures filed suit alleging that the City of Azusa violated Proposition 218 by charging sewer and trash fees that exceeded the cost of providing those services and by transferring the excess revenue into the City’s general fund. They sought a writ of mandate requiring the City to stop the allegedly unconstitutional practices and to restore improperly transferred funds.

The City argued that the Carachures failed to exhaust administrative remedies under Health and Safety Code section 5472, which requires ratepayers to pay utility fees under protest and file an administrative refund claim before bringing suit. The trial court agreed, concluding that even though the plaintiffs did not expressly seek refunds, their challenge necessarily attacked the legality of the fee collection and therefore required exhaustion. 

The Court of Appeal held that section 5472 and the related refund procedures apply only to actions expressly seeking refunds, not to suits seeking prospective equitable relief or constitutional review of municipal fee practices. The court explained that administrative refund procedures are not designed to adjudicate the constitutional validity of a city’s overall fee structure and revenue-transfer practices. Because the statutory scheme provides a mechanism only for monetary refunds—not systemic constitutional challenges—the exhaustion doctrine did not apply.

In so holding, the court rejected the City’s claim that the relief sought—the restoration to the sewer and waste funds of all revenues improperly transferred to the general fund during the previous three years—would result in lower rates and operate as a de facto refund to all ratepayers. The court reasoned that a prospective rate reduction or fund reallocation is legally distinct from a refund of previously paid fees. Because the Carachures did not seek a refund of any fees they had paid, the protest requirements were not triggered, and their Proposition 218 claims could proceed on the merits.