by Jay Lund
Public health is every society’s and every drinking water system’s most fundamental objective. The prosperity and existence of civilizations rest on drinking water being safe, available and affordable.
Prosperity and democracy together seem almost essential to having near-universal safe drinking water supplies. Prosperity and democracy together bring effective social organization and resources needed to deliver safe and affordable drinking water. See Table 1.
Table 1. Countries with Near-Universal Safe Drinking Water
California’s failure to provide safe, affordable drinking water to the remaining roughly 1% of residents is probably the most solvable and affordable of California’s many difficult water problems. There will always be isolated small systems with vexing problems, but the number of Californians currently without access to safe affordable drinking water is embarrassing and irresponsibly high.
California’s entire water industry and the public share an interest in nearly ubiquitous availability of safe drinking water. The water industry, as professionals, have a special leadership interest in maintaining high public expectations for nearly ubiquitous drinking water safety and supplies. Such universally high expectations are fundamental to the industry’s professional reputation and success, as well as public faith that water systems are well-managed by elected and appointed leaders and the professions.
Much like rural electrification and phone service, most of California’s safe drinking water problem comes from the small size of rural water systems, which compounds their costs and organizational difficulties. California and the US have addressed other rural problems with additional general fees on electricity, phone, and postal service to provide basic service for rural residents.
Rural postal service is much more expensive than urban and suburban service, but is not charged more for deliveries. California’s Public Utilities Commission currently collects surcharges totaling 5.5% on customers by telecommunications carriers for various federal and state subsidies for the poor and disabled to access telecommunications and for 911 emergency services. CPUC also has rate surcharges on energy bills to fund programs for low-income customers (CARE program). These are things we pay for to help maintain civilization.
In recent years, public health and rural interests have developed and promoted proposals (SB 623 in 2017 and SB 844 and SB 845 in 2018) for fees to help support rural drinking water systems. Some proposed fees have been on agriculture to somewhat compensate for fertilizer and manure impacts to rural drinking water. Other fees are proposed on public drinking water system users, much like telephone and energy customer fees to support low-income and emergency connectivity. Governor Newsom recently endorsed such a fee.
Public health and rural community advocates strongly advocate for these proposals. California’s agriculture has largely supported these fees, which would be both modest and help avoid some state enforcement of regulations on nitrate contamination. However, most urban water agencies have opposed new additional fees, even though the 2018 proposals made some urban fees voluntary, allowing customers to opt out.
California’s urban water agencies publicly voiced two objections: a) having public water systems collect the fee was too administratively difficult (especially for small systems) and b) support for rural drinking water system safety should be from State general taxes, not water industry fees.
The first objection can be easily addressed by modifying urban fee proposals to exempt very small water systems (who tend to have high costs and few customers anyway) and delaying this requirement by 2-3 years so fee collection is included in the next utility billing software upgrade, minimizing burdens to utilities and customers. (A task force of local utilities and the state might lay out common standards for software implementation.)
The second objection is more fundamental, but understates the social compact between public utilities and the society. Some individual public water utilities see their social responsibilities as only local, and not necessarily industry-wide, yet they rely on broader public support and industry standards. Customer fees for telecommunication and energy use have long supported poorer and more rural customers – and doing so has made these industries and the public stronger. California’s urban water industry would see long-term benefits in public perception and trust from showing leadership in providing safe drinking water statewide, rather than only in their local service areas.
A third often unstated urban water agency objection is that one small fee on urban water users would establish precedence for additional larger fees on urban water users for other underfunded water problems (stormwater, flood control, ecosystem management, statewide infrastructure subsidies, etc.). This is a reasonable objection. Urban water users, facing growing costs for local infrastructure renewal, cannot have primary responsibility for funding solutions to all water problems.
To reduce this problem, a new proposal might include a “brake” on expanding urban water fees. Such a brake might have the state general fund be required to match funds raised from utility fees. (After all, the legislature now has $430 million/year fewer bond repayment obligations following failure of Proposition 3.) Such joint funding would encourage steady funding by both water utilities and the legislature. Expanding water fees under such a shared arrangement would bring legislative resistance to expanding general fund contributions. During recessions, legislative reductions in the general fund share would encounter rural and water utility resistance.
A limitation of recent proposals has been focus on supporting rural safe drinking water access. This is the most pressing problem, but another equity problem has been difficulties for drinking water agencies to support “lifeline” water rates for poorer customers under Proposition 218 requirements that customer water rates be proportional to services to the customer property, making it difficult for public agencies to subsidize lifeline rates with higher general water rates. Having the state require a fee (even a opt-out fee) to support local lifeline rates would help address both urban and rural access to affordable safe drinking water. Funding a more general lifeline rate program would require considerably more money, but would improve safe affordable drinking water access for both local water utilities and statewide. (The SWRCB is exploring a very extensive water rate assistance program.)
A final problem with funding safe affordable drinking water is the sometimes big difference between raising funds and making sure funds are effectively employed. An annual or biannual review of the state of safe drinking water availability accompanied by an external independent financial and effectiveness audit of funds would be important for maintaining subscriptions to voluntary fees as well as legislative support, and ensuring that solutions are effective. Programs and people tend to resist real accountability (every tenured professor knows this), so some arms-length, meaningful, and transparent accountability is needed. Some technical and financial support also is needed for county governments, which often must oversee struggling rural systems.
Local water utilities and the broad water industry benefit from broad commitment to supporting safe drinking water systems statewide. There are dangers to all water utilities from not supporting public water systems generally.
A modest proposal
A modified funding proposal to help address previous concerns might roughly include:
- $50 million/year from fertilizer and dairy manure charges (based on previously-proposed legislation, but at a little higher rate more commensurate with likely future drinking water costs from nitrate contamination)
- $0.3/month mandatory fee for all public drinking water system customers, raises ~$30 million/year (assuming 10 million connections statewide)
- $0.5/month opt-out voluntary fee (nudge) for all public drinking water system customers, raises ~$60 million/year
- Alternatively, a local utility might choose an equivalent charge based on the greatest difference in water use over the past 12 months (usually summer minus winter use). This would largely tax outdoor water use, which is a more consumptive of water and expensive to supply, and would further shift payments from poorer households.
- Deferring urban customer charges for 2-3 years would allow for upgrades to utility billing software and customer interface websites (for allowing opting out) and perhaps apply only to public drinking water system with more than 500 connections to ease implementation burdens on small systems.
- $60 million/year from legislature, matching utility fee revenues (The legislature now has $430 million/year not needed for paying off the Proposition 3 water bond. The interest cost on the $1.398 billion disadvantaged community portion of that bond alone would have been about $68 million /year.) Having a regular long-term general fund match program should allow greater efficiencies and accountability in the use of all funds.
- Total funds raised would be about $200 million/year. $100 million/year would be allocated based on need to support lifeline water rates statewide (reducing Prop. 218 problems for public water utilities). $100 million/year would be allocated to making safe drinking water supplies accessible in rural areas.
- Of the amount for rural systems, initially $40 million/year would be allocated for counties and water districts to fund small system consolidations. Consolidations often are the best way to permanently solve major rural drinking water system problems. Ideally consolidations occur by pipeline connections (often with additional small system upgrades). Where consolidation by connection is prohibitively expensive, administrative consolidations of distributed drinking water systems, perhaps under county-wide service districts, can provide more organized attention and administrative economies of scale.
Some Further reading
Canada, H., K. Honeycutt, K. Jessoe, M. W. Jenkins, and J. R. Lund. 2012. Regulatory and Funding Options for Nitrate Groundwater Contamination. Technical Report 8 in Addressing Nitrate in California’s Drinking Water with a Focus on Tulare Lake Basin and Salinas Valley Groundwater. Report for State Water Resources Control Board Report to the Legislature. University of California, Davis, Center for Watershed Sciences.
Ellis, R. (2018), “New bill proposes to fix water quality for less than pennies on the dollar”, The Sun-Gazette, August 29, 2018
Garibay, V. and C. Tuck (2018), “Pro-con: A new tax to provide clean water?,” CalMatters, Aug. 24, 2018
Hanif, M., “Let Them Drink Bottled Water,” New York Times, opinion, Nov. 23, 2018
Honeycutt, K., H. Canada, M. W. Jenkins, and J .R. Lund. 2012. Alternative Water Supply Options for Nitrate Contamination. Technical Report 7 in Addressing Nitrate in California’s Drinking Water with a Focus on Tulare Lake Basin and Salinas Valley Groundwater. Report for the State Water Resources Control Board Report to the Legislature. University of California, Davis, Center for Watershed Sciences.
Kasler, D., R. Sabalow, and A. Koseff “Gavin Newsom budget calls for drinking water tax to help poor communities,” Sacramento Bee, 11 January 2018. https://www.sacbee.com/news/politics-government/capitol-alert/article224239685.html
Lund, J. (2017) Nudging Progress on Funding for Safe Drinking Water, CaliforniaWaterBlog.com, December 24, 2017 (republished by Water Deeply)
SB 844 and SB 845 texts from 2018: https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180SB844 https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180SB845
Sabalow, R., L. Griswold and B. Anderson, “Did gas, homeless people and sick kids kill California’s water bond?,” Sacramento Bee, November 09, 2018
SWRCB, website on water rate assistance program. https://www.waterboards.ca.gov/water_issues/programs/conservation_portal/assistance/
Jay Lund is a Professor of Civil and Environmental Engineering and Director of the Center for Watershed Sciences at the University of California, Davis
Jay – your blog begs the unanswered question of what the actual need might be. The State Water Board only initiated last Friday the process to analyze and quantify what sort of capital and operating funding needs exist in water systems in California that can’t be met through existing SRF, bond and grant funding mechanisms. So, this whole water tax debate is premature – it’s a solution in search of problem that has yet to be quantified. That’s the main complaint from water agencies – plus the fact that having 400+ local water agencies get into the tax collection business for the state is not a very efficient or cost-effective solution. Your examples from other sectors are really not comparable – there are 3 electric utility IOUs and 4 mobile telephone service providers who collect taxes from millions of accounts. The administrative costs alone for water agencies would far surpass the amount of funding collected – hardly a wise investment for water ratepayers.
There will always be some uncertainty on the expense for solving small safe drinking water problems. In addition to some uncertainties in field conditions, these costs would also vary with different definitions of sufficiency and state expectations for local match. However, there are more than ample and longstanding studies of the rough magnitude of the problem. These include studies showing about $40-$60 million/year of problems for such systems only for nitrate contamination in Tulare and Salinas basins done at UC Davis in 2012. The broad estimates of the cost seem entirely reasonable and not at all premature. Although sympathetic to administrative burdens on small systems, addressed in the proposal above, I find it hard to believe that a reasonably implemented fee on sizable districts would be excessively expensive for enterprises which routinely pay a wide variety of fees, taxes, and expenses on a wide range of personnel, insurance, material acquisition, and facility management activities. Moreover, it seems to me that all water professionals and utilities have a civic duty and a self-interested obligation to maintain state and societal interest in the universal availability of safe, affordable drinking water.
Governor Newsom took his cabinet to a mobile home park in Stanislaus County a few days ago to promote his water tax. But the state had already paid to hook up the customers there to the water system in Ceres, with bond funding already provided by voters. Without an assessment of whether or not a water tax is actually needed, or if already-existing bond funds can pay for the solutions, a tax is premature. Part of the plan last year was to impose fees on fertilizer sales and dairy operations (in exchange for relief from liability for nitrate contamination), so there is no reason this plan couldn’t move forward, if, as you state, the cleanup needs have been characterized.
Those who work for the state’s public water supply agencies support addressing the problem of inadequate and contaminated water supplies, as I’m sure all thoughtful Californians do. But imposing a requirement that these agencies become collectors of a regressive tax is not a fair, efficient or equitable solution. I doubt that you would consider it appropriate to impose fees on wastewater treatment systems in the Bay Area to pay for cleaning up discharges in San Diego, or a tax on public works departments in Sacramento to pay for road repair in Fresno. On a related front, the State Water Resources Control Board has rejected as regressive and unworkable the imposition of a tax on water bills to provide support for low-income water customers – they propose instead a tax on a “bad” (bottled water sales) and a progressive income tax. The same rationale should apply here, as well.
Paul Helliker is correct in that a fee on utilities based on number of connections or total water production would be easier to assess.
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