Municipalities have to tap into limited funds to attend to improve- ments in stormwater maintenance. The idea of a water utility fee has been revived as a means to spark discussion about addressing long-standing water supply and water quality issues. “To fi ll the existing funding gaps, and to prevent new ones from forming, California will have to better align its funding laws with the goals of mod- ern water management,” according to Paying for Water in California, a March report by the Public Policy Institute of California (PPIC). “The Legislature will need to pass new special taxes and regulatory fees to tap a broader mix of funding sources.”


Speaking at PPIC’s April 10 conference on the report, one of its authors, Senior Fellow Ellen Hanak, said the drought “opens the window to reform” and “to do things besides putting bonds on the ballot.” PPIC estimates that an additional $12 to $20 per household per month could fi ll the current $2 billion to $3 billion funding gap for things like stormwater treat- ment and fl ood management. “Although this is a fi xable problem, it will not happen without a bold, con- certed effort on the part of California’s state and local leaders, who must con- vince California’s residents to support the necessary changes with their votes and pocketbooks,” the report says. But the need for more money runs into the reality of ratepayer backlash, which manifests as protest votes that sometimes block proposed fees that don’t have a direct connection to services rendered.


“I think rate setting has become more political,” said Kelly Salt, an attorney with Best Best & Krieger in San Diego who specializes in public fi nancing. “You just have individu- als who want to use as much water as they want to and others who are hit extremely hard … you no longer have lifeline rates for individuals, and that’s very troublesome.”


For years, local governing bodies


would periodically raise rates for water to help fi nance new projects or keep


May/June 2014


up with infrastructure needs. That all changed in 1996 with Prop. 218, which, among other things, requires “at cost” water pricing, meaning public water suppliers may not allow water rates to exceed the proportional cost of delivering water to homes. Prop. 218 requires that the fees for a “property-related” service be proportional to the costs of service to the property, and that property owners be charged only for services delivered to their properties. In 2010, vot- ers passed Prop. 26, which redefi ned many additional governmental fees as taxes. According to the PPIC, “there is considerable uncertainty about how the courts will interpret which actions constitute a ‘governmental activity’ that can be covered by a regulatory fee, rather than a tax.” Taxpayer advocates warn against trying to chip away at the law’s foundation. “We agree that water manage- ment is a critical issue that needs more attention, but decimating the taxpayer protections in Prop.13, Prop. 26 and Prop. 218 won’t fl y with taxpayers,” said David Kline, vice president of communications and research with the California Taxpayers Associa- tion. “Californians already pay very high taxes with the expectation that local government will use the money wisely for priority issues like water management. Rather than trying to gut taxpayer protections and lower the vote threshold for local special taxes, local governments should examine how they spend the money they get. Water agencies that demonstrate effi ciency will fi nd a more receptive audience if they later need to ask voters to approve tax increases to generate more funding.”


Besides assistance to low-income people, money is needed to help people in small rural areas where the water is often unsafe to drink. These small en- claves, typically adjacent to agricultural land, have a hard time paying the rates necessary to support the operations and maintenance of pumping, treatment and delivery of water.


“To fi ll the existing funding gaps, and to prevent new ones from forming, California will have to better align its funding laws with the goals of modern water management. The Legislature will need to pass new special taxes and regulatory fees to tap a broader mix of


funding sources.” – Paying for Water in


California, Public Policy Institute of California


Learn more about the BDCP in a Calwater video


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