A long-standing dispute over millions of dollars in water fees ended Wednesday as the California Supreme Court let stand a lower court ruling that the charges were illegally imposed without a public vote.

The decision leaves the Pajaro Valley Water Management Agency on the hook for potentially millions of dollars in customer refunds and threatens a series of projects aimed at keeping water flowing to farms.

"The impact appears to be catastrophic," said John Eiskamp, an agency board member who's opposed the fees. "The agency simply does not have enough money to pay for its current activities."

The agency has several projects in the works or under construction to solve a decades-old water deficit, including a $63 million, 10-mile long network of pipes to distribute water to coastal farms and a sewage plant that will provide a blend of fresh and treated water for irrigation.

To pay for the projects, the agency has collected $8 million annually through the augmentation fee ruled invalid in May by the 6th District Court of Appeals in San Jose, a judgment the state highest's court declined to review Wednesday.

"The court of appeals decision is what we're going to have to live with," said Tony Condotti, the agency's lawyer. It doesn't mean the agency can't move forward with the augmentation charge, but it will have to give the public the opportunity to vote, he said.

Condotti also said the case will likely be sent back to the Superior Court to answer the question of reimbursement to customers who paid the illegal charge.

But lawyer Omar James, who represented foes of the fee, said there's no doubt the money's owed to customers.

"The decision clearly implies that," James said. "You collected money you weren't authorized to collect."

The board also has been exploring its options and plans to hold a series of community forums to discuss water issues and funding, said Dennis Osmer, the board's newest member. He acknowledged that the agency has alienated many in the community and will have to do a better job at community outreach to win support for future funding measures.

"My hope is that [the forums] will break the cycle of extreme polarization that's been a hallmark of the agency," he said.