County of Orange v. Santa Margarita Water District

The Santa Margarita Water District (SMWD) buried water and sewerage lines underneath the Santa Margarita Parkway, a county highway, pursuant to an encroachment permit issued by the County of Orange (the County). The permit provided that SMWD would remove and relocate its pipes, at its own expense, if they interfered with the “improvement” of the highway. The Foothill/Eastem Transportation Corridor Agency (FETCA), a joint powers agency which includes the county as a member, is constructing a regional transportation toll road which intersects the highway. At that intersection, FETCA built a grade-separated interchange which allows access to the toll road from the highway. The highway, which was reconstructed as a bridge, remains at its original elevation, while the toll road runs underneath it.

Construction of the interchange required relocation of SMWD’s water and sewerage lines. Relying on the encroachment permit, the County notified SMWD it would have to relocate its pipes at its own expense. SMWD refused, and filed this action for declaratory relief, alleging FETCA should bear the relocation costs because it was the governmental entity specifically formed to finance…