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object(Timber\Post)#3742 (44) { ["ImageClass"]=> string(12) "Timber\Image" ["PostClass"]=> string(11) "Timber\Post" ["TermClass"]=> string(11) "Timber\Term" ["object_type"]=> string(4) "post" ["custom"]=> array(5) { ["_wp_attached_file"]=> string(14) "R_1016EH2R.pdf" ["wpmf_size"]=> string(6) "103736" ["wpmf_filetype"]=> string(3) "pdf" ["wpmf_order"]=> string(1) "0" ["searchwp_content"]=> string(14529) "Paying for WaterPPIC WATER POLICY CENTER Successful water management requires adequate, reliable funding California’s water system supplies water to cities and farms; prevents pollution of lakes, rivers, and coastlines; protects people and businesses from floods; and supports freshwater ecosystems. Numerous local, state, and federal agencies oversee this system and raise revenues from a variety of sources. Identifying funding gaps—and finding the best ways to fill them—are perennial concerns. Most public attention has focused on state general obligation bonds—voter-approved debt reimbursed with General Fund taxes. Six such bonds were approved between 2000 and 2006, providing roughly $15 billion for water projects. In November 2014, voters approved Proposition 1—a $7.5 billion bond that extends this support. State bonds are important, but they actually play a minor role in funding California’s water. Bonds provide at most $1 billion of the more than $30 billion in annual water-related spending. Local revenue—from water and sewer bills to taxes—provides the lion’s share, 84 percent. The state contributes 13 percent and the federal government 3 percent. California’s urban water and wastewater agencies face challenges, including how to balance their checkbooks during droughts when they collect less revenue. But overall they are in reasonably good fiscal health. Other areas face critical gaps totaling $2–3 billion annually—a result of legal constraints on local funding, a shrinking federal contribution, and unreliable state support. In California’s $2.5 trillion economy, this problem is manageable. But dealing with it requires a focused effort. Looking beyond bonds to fill funding gaps should be a top priority. LOCAL UTILITIES RAISE MOST OF THE MONEY SPENT ON WATER IN CALIFORNIA 20 15 10 5 0 Water supply $2.2 $10.1 $17.5 < $1< $1 Annual water system spending (2012–14) Water quality Flood management Aquatic ecosystems GO debt service Federal (3%) State (13%) Local (84%) Billions of 2014 $ per year SOURCE: Updated from Ellen Hanak et al., Paying for Water in California (PPIC 2014). NOTES: The figure reports average spending for 2012–14. Local expenditures exclude grants from higher levels of government. The water quality category includes management of wastewater and approximately $500 million for polluted stormwater and other runoff. GO debt service is repayment of state general obligation bonds. Constitutional changes have harmed local water finance Local finance is the lifeblood of California’s water system. But a series of constitutional amendments approved by voters—Propositions 13 (1978), 218 (1996), and 26 (2010)—have made raising funds for local water services more difficult than ever. • T he changes have increased accountability, but with unintended consequences. Proposition 218’s rate-setting reforms have improved transparency and public accountability. But they have also imposed overly simplistic cost recovery requirements that inhibit local agencies from investing in new supplies— including recycled water and conservation—and in pollution controls, such as stormwater capture and treatment. OCTOBER 2016 • Stricter voter requirements impede delivery of some essential water services. For flood and stormwater management, a majority of landowners or a two-thirds majority of all local voters must now approve new fees and assessments. Before Proposition 218, these could be approved by elected governing boards. In addition, new local taxes for water programs must now get two-thirds voter approval—a much higher hurdle than the simple majority required for local general taxes or state ballot measures. Proposition 1— enacted in November 2014 by what was widely considered to be a landslide with a 67.1 percent approval vote—would barely have squeaked by under the rules governing local tax measures. Urban water and sewer systems are performing reasonably well Unlike flood and stormwater agencies, water supply and sewer service are exempt from Proposition 218’s two-thirds voter approval requirement. These utilities have generally been able to get the funds needed to replace aging infrastruc - ture and to comply with new treatment requirements. Investments since the 1990s in conservation, water reuse, and local conveyance and storage have been invaluable in preparing cities for the latest drought. • Utilities face looming legal uncertainties. Proposition 218’s cost-recovery requirement specifies that rates cannot exceed the cost of providing a service. Some courts have interpreted this requirement narrowly, jeopardizing the implementation of important programs such as conservation-oriented water rates. During the latest drought this was an issue, as utilities struggled to adjust their rates to promote conservation. Recent decisions have ruled that utilities may charge for the costs of groundwater management, recycled wastewater, and other nontraditional supplies, regardless of whether each customer actually receives water from these sources. But Proposition 218’s constraints on water rates remain highly uncertain. • Keeping water affordable for low-income households will be a challenge. Water and sewer bills have been rising to keep pace with investment needs. For most Californians, these charges are a small share of income. For low-income households, however, affordability is a growing concern. Proposition 218 restricts the ability of water utilities to provide them with “lifeline” discounts. Such discounts have helped make energy and telephone billing systems more equitable. California’s water system has multiple fiscal orphans California is failing to adequately fund five services that protect public health and safety and the environment: safe drinking water in small, disadvantaged communities; flood protection; control of stormwater and other polluted runoff; management of aquatic ecosystems; and integrated water management. • Safe water is unaffordable in some rural communities. Providing safe and reliable drinking water is a special challenge in small, disadvantaged rural communities, where costs per household are high and local funding resources are scant. The drought highlighted this challenge, with shortages in more than 100 small water systems and more than 2,000 dry domestic wells. • Federal funding for flood projects has been inadequate. Federal policy authorizes matching grants of up to 65 percent of project costs for flood protection. But this authori - zation is mostly unfunded, leading to a large investment backlog. And federal contributions are shrinking because of budgetary restrictions. Voters in some communities have approved modest local cost shares, but it will be much more difficult to pass the larger charges needed to fill the gap. • Stormwater agencies have been hit hardest by constitutional changes. Stormwater management once focused solely on draining streets after storms. Over the past two decades, mandates have expanded to prevent pollution of rivers, lakes, and beaches by limiting discharges and cleaning runoff before it enters waterways. It is especially difficult to persuade local voters to approve funds for cleanup that mainly benefits downstream communities. • Most ecosystem management programs lack a reliable funding base. Funding is usually straightforward for ecosystem investments that are a mandatory part of new projects. But most environmental problems result from past water- and land-use practices, and financial responsibility for fixing them PPIC.ORG/WATER is frequently disputed. Some communities have approved taxes to support their watersheds. However, this approach is limited by the requirement to have special taxes approved by two-thirds of the voters. • Integrated water management is hard to fund locally, despite its benefits. Integrated water management involves collaboration among agencies with different responsibilities to improve overall system performance. Proposition 218’s cost-recovery requirements make it hard for water and wastewater agencies to share the costs of activities that extend beyond their mandates, and financially weaker partners over - seeing flood, stormwater, and ecosystem programs have trouble coming up with their share. • State bonds have helped fill gaps, but they also have drawbacks. Since 2000, state bonds have helped fund all five gap areas, and Proposition 1 extends some of that support. But bonds are not a reliable long-term funding source, and they generally don’t cover operating costs. In addition, bonds are repaid from the state General Fund. During economic downturns, bond repayment can take funds from other important budget areas such as higher education and health and human services. • Other funding sources are needed to pay for fiscal orphans. To close funding gaps, California needs a broader, more reliable mix of state and local funding sources, including new fees and taxes. Some examples are parcel taxes, small surcharges on water and chemical use, and small incre - ments to the sales tax. Such measures are already used in some California communities and in other states. CALIFORNIA NEEDS TO GO BEYOND BONDS TO CLOSE FUNDING GAPS Gap area Annual gap ($ millions) Onetime infusion from Prop 1 ($ millions) Other long-term funding options Safe drinking water in small rural systems $30 –160 $260* ƒ Statewide surcharges on water, chemical use Flood protection $800–1,000$395 ƒ Developer fees ƒ Property assessments ƒ Special state, local taxes Stormwater management $500–800$200 ƒ Developer fees ƒ Property assessments ƒ Special state, local taxes ƒ Surcharges on water, chemical, or road use Aquatic ecosystem management $400–700 $2,845** ƒ Special state, local taxes ƒ Surcharges on water use, hydropower production Integrated management $200–300$510 ƒ Special state, local taxes ƒ Surcharges on water use SOURCES: Ellen Hanak et al., Paying for Water in California (PPIC 2014), and bill text for AB 1471, the Water Quality, Supply, and Infrastructure Improvement Act of 2014, approved by the voters as Proposition 1. * These funds are available for communities of all sizes. Another $260 million is available for small community wastewater systems. ** This includes the $1.495 billion earmarked for ecosystem investments and $1.35 billion from water storage project matching funds set aside for ecosystem benefits. Looking ahead California must fill a critical $2–3 billion annual funding gap across a number of essential functions: ensuring clean drinking water for all residents; protecting residents from flooding; keeping beaches, rivers, and lakes safe for recreation; safeguarding threatened aquatic ecosystems; and fostering integrated water management. Action is also needed to avoid funding problems for urban water and wastewater systems, given the uncertain legal status of financing these services. Use new bond funds to fill real gaps. Proposition 1 will inject $7.5 billion into the water system. The legislature and state agencies should make sure these state funds are not simply substituting for local funds. PPIC.ORG/WATER The PPIC Water Policy Center spurs innovative water management solutions that support a healthy economy, environment, and society—now and for future generations. The Public Policy Institute of California is dedicated to informing and improving public policy in California through independent, objective, nonpartisan research. We are a public charity. We do not take or support positions on any ballot measure or on any local, state, or federal legislation, nor do we endorse, support, or oppose any political parties or candidates for public office. Research publications reflect the views of the authors and do not necessarily reflect the views of our funders or of the staff, officers, advisory councils, or board of directors of the Public Policy Institute of California. Public Policy Institute of California 500 Washington Street, Suite 600 San Francisco, CA 94111 T 415.291.4400 F 415.291.4401 PPIC.ORG/WATER PPIC Sacramento Center Senator Office Building 1121 L Street, Suite 801 Sacramento, CA 95814 T 916.440.1120 F 916.440.1121 READ MORE PAYING FOR WATER THE COLORADO RIVER CLIMATE CHANGE AND WATER THE SACRAMENTO –SAN JOAQUIN DELTA PREPARING FOR FLOODS MANAGING DROUGHTS S TO R I N G WAT E R PROTECTING HEADWATERS WATER FOR CITIES WATER FOR FARMS WATER FOR THE ENVIRONMENT CONTACT A PPIC EXPERT CONTACT THE RESEARCH NETWORK Ken Baerenklau ken.baerenklau@ucr.edu Ellen Hanak hanak@ppic.org Brian Gray gray@ppic.org Jay Lund jrlund@ucdavis.edu Dean Misczynski misczynski@ppic.org Katrina Jessoe, kkjessoe@ucdavis.edu David Mitchell, mitchell@mcubed-econ.com This series is supported by funding from a diverse group of sponsors. ENERGY AND WATER Caitrin Chappelle chappelle@ppic.org Look beyond bonds. One legislative priority should be to help local agencies raise needed funds. For example, the legislature could expand local funding authority and provide guidance to the courts on how their interpretations of Proposition 218 may affect water program financing. Another priority is to enact new state fees and taxes to boost funding for fiscal orphans. Adjust local water rates to cope with drought. New strategies—including rate structure adjustments and drought surcharges—are needed to reduce the fiscal effects of conservation and encourage continued urban investment in drought resilience. During droughts, customers are often unprepared for the rate increases needed to offset revenue losses from water use restrictions. Utilities must effectively communicate the reasons for rate changes. They must also build strong administrative records of ratemaking decisions to meet potential Proposition 218 court challenges. Clarify constitutional requirements. To solidify local funding bases for water services, voters may need to approve several constitutional changes that address the unintended consequences of previous amendments—while retaining transparency and accountability requirements. These might include clarifying Proposition 218’s cost-recovery require - ments (to allow for conservation and lifeline rates) and stipulating that flood and stormwater programs should be treated like water and wastewater programs. There has been a growing awareness of the need to address these aspects of Proposition 218, but the process is still under way." } ["___content":protected]=> string(106) "

R 1016EH2R

" ["_permalink":protected]=> string(79) "https://www.ppic.org/publication/californias-water-paying-for-water/r_1016eh2r/" ["_next":protected]=> array(0) { } ["_prev":protected]=> array(0) { } ["_css_class":protected]=> NULL ["id"]=> int(8947) ["ID"]=> int(8947) ["post_author"]=> string(1) "1" ["post_content"]=> string(0) "" ["post_date"]=> string(19) "2017-05-20 02:42:22" ["post_excerpt"]=> string(0) "" ["post_parent"]=> int(4427) ["post_status"]=> string(7) "inherit" ["post_title"]=> string(10) "R 1016EH2R" ["post_type"]=> string(10) "attachment" ["slug"]=> string(10) "r_1016eh2r" ["__type":protected]=> NULL ["_wp_attached_file"]=> string(14) "R_1016EH2R.pdf" ["wpmf_size"]=> string(6) "103736" ["wpmf_filetype"]=> string(3) "pdf" ["wpmf_order"]=> string(1) "0" ["searchwp_content"]=> string(14529) "Paying for WaterPPIC WATER POLICY CENTER Successful water management requires adequate, reliable funding California’s water system supplies water to cities and farms; prevents pollution of lakes, rivers, and coastlines; protects people and businesses from floods; and supports freshwater ecosystems. Numerous local, state, and federal agencies oversee this system and raise revenues from a variety of sources. Identifying funding gaps—and finding the best ways to fill them—are perennial concerns. Most public attention has focused on state general obligation bonds—voter-approved debt reimbursed with General Fund taxes. Six such bonds were approved between 2000 and 2006, providing roughly $15 billion for water projects. In November 2014, voters approved Proposition 1—a $7.5 billion bond that extends this support. State bonds are important, but they actually play a minor role in funding California’s water. Bonds provide at most $1 billion of the more than $30 billion in annual water-related spending. Local revenue—from water and sewer bills to taxes—provides the lion’s share, 84 percent. The state contributes 13 percent and the federal government 3 percent. California’s urban water and wastewater agencies face challenges, including how to balance their checkbooks during droughts when they collect less revenue. But overall they are in reasonably good fiscal health. Other areas face critical gaps totaling $2–3 billion annually—a result of legal constraints on local funding, a shrinking federal contribution, and unreliable state support. In California’s $2.5 trillion economy, this problem is manageable. But dealing with it requires a focused effort. Looking beyond bonds to fill funding gaps should be a top priority. LOCAL UTILITIES RAISE MOST OF THE MONEY SPENT ON WATER IN CALIFORNIA 20 15 10 5 0 Water supply $2.2 $10.1 $17.5 < $1< $1 Annual water system spending (2012–14) Water quality Flood management Aquatic ecosystems GO debt service Federal (3%) State (13%) Local (84%) Billions of 2014 $ per year SOURCE: Updated from Ellen Hanak et al., Paying for Water in California (PPIC 2014). NOTES: The figure reports average spending for 2012–14. Local expenditures exclude grants from higher levels of government. The water quality category includes management of wastewater and approximately $500 million for polluted stormwater and other runoff. GO debt service is repayment of state general obligation bonds. Constitutional changes have harmed local water finance Local finance is the lifeblood of California’s water system. But a series of constitutional amendments approved by voters—Propositions 13 (1978), 218 (1996), and 26 (2010)—have made raising funds for local water services more difficult than ever. • T he changes have increased accountability, but with unintended consequences. Proposition 218’s rate-setting reforms have improved transparency and public accountability. But they have also imposed overly simplistic cost recovery requirements that inhibit local agencies from investing in new supplies— including recycled water and conservation—and in pollution controls, such as stormwater capture and treatment. OCTOBER 2016 • Stricter voter requirements impede delivery of some essential water services. For flood and stormwater management, a majority of landowners or a two-thirds majority of all local voters must now approve new fees and assessments. Before Proposition 218, these could be approved by elected governing boards. In addition, new local taxes for water programs must now get two-thirds voter approval—a much higher hurdle than the simple majority required for local general taxes or state ballot measures. Proposition 1— enacted in November 2014 by what was widely considered to be a landslide with a 67.1 percent approval vote—would barely have squeaked by under the rules governing local tax measures. Urban water and sewer systems are performing reasonably well Unlike flood and stormwater agencies, water supply and sewer service are exempt from Proposition 218’s two-thirds voter approval requirement. These utilities have generally been able to get the funds needed to replace aging infrastruc - ture and to comply with new treatment requirements. Investments since the 1990s in conservation, water reuse, and local conveyance and storage have been invaluable in preparing cities for the latest drought. • Utilities face looming legal uncertainties. Proposition 218’s cost-recovery requirement specifies that rates cannot exceed the cost of providing a service. Some courts have interpreted this requirement narrowly, jeopardizing the implementation of important programs such as conservation-oriented water rates. During the latest drought this was an issue, as utilities struggled to adjust their rates to promote conservation. Recent decisions have ruled that utilities may charge for the costs of groundwater management, recycled wastewater, and other nontraditional supplies, regardless of whether each customer actually receives water from these sources. But Proposition 218’s constraints on water rates remain highly uncertain. • Keeping water affordable for low-income households will be a challenge. Water and sewer bills have been rising to keep pace with investment needs. For most Californians, these charges are a small share of income. For low-income households, however, affordability is a growing concern. Proposition 218 restricts the ability of water utilities to provide them with “lifeline” discounts. Such discounts have helped make energy and telephone billing systems more equitable. California’s water system has multiple fiscal orphans California is failing to adequately fund five services that protect public health and safety and the environment: safe drinking water in small, disadvantaged communities; flood protection; control of stormwater and other polluted runoff; management of aquatic ecosystems; and integrated water management. • Safe water is unaffordable in some rural communities. Providing safe and reliable drinking water is a special challenge in small, disadvantaged rural communities, where costs per household are high and local funding resources are scant. The drought highlighted this challenge, with shortages in more than 100 small water systems and more than 2,000 dry domestic wells. • Federal funding for flood projects has been inadequate. Federal policy authorizes matching grants of up to 65 percent of project costs for flood protection. But this authori - zation is mostly unfunded, leading to a large investment backlog. And federal contributions are shrinking because of budgetary restrictions. Voters in some communities have approved modest local cost shares, but it will be much more difficult to pass the larger charges needed to fill the gap. • Stormwater agencies have been hit hardest by constitutional changes. Stormwater management once focused solely on draining streets after storms. Over the past two decades, mandates have expanded to prevent pollution of rivers, lakes, and beaches by limiting discharges and cleaning runoff before it enters waterways. It is especially difficult to persuade local voters to approve funds for cleanup that mainly benefits downstream communities. • Most ecosystem management programs lack a reliable funding base. Funding is usually straightforward for ecosystem investments that are a mandatory part of new projects. But most environmental problems result from past water- and land-use practices, and financial responsibility for fixing them PPIC.ORG/WATER is frequently disputed. Some communities have approved taxes to support their watersheds. However, this approach is limited by the requirement to have special taxes approved by two-thirds of the voters. • Integrated water management is hard to fund locally, despite its benefits. Integrated water management involves collaboration among agencies with different responsibilities to improve overall system performance. Proposition 218’s cost-recovery requirements make it hard for water and wastewater agencies to share the costs of activities that extend beyond their mandates, and financially weaker partners over - seeing flood, stormwater, and ecosystem programs have trouble coming up with their share. • State bonds have helped fill gaps, but they also have drawbacks. Since 2000, state bonds have helped fund all five gap areas, and Proposition 1 extends some of that support. But bonds are not a reliable long-term funding source, and they generally don’t cover operating costs. In addition, bonds are repaid from the state General Fund. During economic downturns, bond repayment can take funds from other important budget areas such as higher education and health and human services. • Other funding sources are needed to pay for fiscal orphans. To close funding gaps, California needs a broader, more reliable mix of state and local funding sources, including new fees and taxes. Some examples are parcel taxes, small surcharges on water and chemical use, and small incre - ments to the sales tax. Such measures are already used in some California communities and in other states. CALIFORNIA NEEDS TO GO BEYOND BONDS TO CLOSE FUNDING GAPS Gap area Annual gap ($ millions) Onetime infusion from Prop 1 ($ millions) Other long-term funding options Safe drinking water in small rural systems $30 –160 $260* ƒ Statewide surcharges on water, chemical use Flood protection $800–1,000$395 ƒ Developer fees ƒ Property assessments ƒ Special state, local taxes Stormwater management $500–800$200 ƒ Developer fees ƒ Property assessments ƒ Special state, local taxes ƒ Surcharges on water, chemical, or road use Aquatic ecosystem management $400–700 $2,845** ƒ Special state, local taxes ƒ Surcharges on water use, hydropower production Integrated management $200–300$510 ƒ Special state, local taxes ƒ Surcharges on water use SOURCES: Ellen Hanak et al., Paying for Water in California (PPIC 2014), and bill text for AB 1471, the Water Quality, Supply, and Infrastructure Improvement Act of 2014, approved by the voters as Proposition 1. * These funds are available for communities of all sizes. Another $260 million is available for small community wastewater systems. ** This includes the $1.495 billion earmarked for ecosystem investments and $1.35 billion from water storage project matching funds set aside for ecosystem benefits. Looking ahead California must fill a critical $2–3 billion annual funding gap across a number of essential functions: ensuring clean drinking water for all residents; protecting residents from flooding; keeping beaches, rivers, and lakes safe for recreation; safeguarding threatened aquatic ecosystems; and fostering integrated water management. Action is also needed to avoid funding problems for urban water and wastewater systems, given the uncertain legal status of financing these services. Use new bond funds to fill real gaps. Proposition 1 will inject $7.5 billion into the water system. The legislature and state agencies should make sure these state funds are not simply substituting for local funds. PPIC.ORG/WATER The PPIC Water Policy Center spurs innovative water management solutions that support a healthy economy, environment, and society—now and for future generations. The Public Policy Institute of California is dedicated to informing and improving public policy in California through independent, objective, nonpartisan research. We are a public charity. We do not take or support positions on any ballot measure or on any local, state, or federal legislation, nor do we endorse, support, or oppose any political parties or candidates for public office. Research publications reflect the views of the authors and do not necessarily reflect the views of our funders or of the staff, officers, advisory councils, or board of directors of the Public Policy Institute of California. Public Policy Institute of California 500 Washington Street, Suite 600 San Francisco, CA 94111 T 415.291.4400 F 415.291.4401 PPIC.ORG/WATER PPIC Sacramento Center Senator Office Building 1121 L Street, Suite 801 Sacramento, CA 95814 T 916.440.1120 F 916.440.1121 READ MORE PAYING FOR WATER THE COLORADO RIVER CLIMATE CHANGE AND WATER THE SACRAMENTO –SAN JOAQUIN DELTA PREPARING FOR FLOODS MANAGING DROUGHTS S TO R I N G WAT E R PROTECTING HEADWATERS WATER FOR CITIES WATER FOR FARMS WATER FOR THE ENVIRONMENT CONTACT A PPIC EXPERT CONTACT THE RESEARCH NETWORK Ken Baerenklau ken.baerenklau@ucr.edu Ellen Hanak hanak@ppic.org Brian Gray gray@ppic.org Jay Lund jrlund@ucdavis.edu Dean Misczynski misczynski@ppic.org Katrina Jessoe, kkjessoe@ucdavis.edu David Mitchell, mitchell@mcubed-econ.com This series is supported by funding from a diverse group of sponsors. ENERGY AND WATER Caitrin Chappelle chappelle@ppic.org Look beyond bonds. One legislative priority should be to help local agencies raise needed funds. For example, the legislature could expand local funding authority and provide guidance to the courts on how their interpretations of Proposition 218 may affect water program financing. Another priority is to enact new state fees and taxes to boost funding for fiscal orphans. Adjust local water rates to cope with drought. New strategies—including rate structure adjustments and drought surcharges—are needed to reduce the fiscal effects of conservation and encourage continued urban investment in drought resilience. During droughts, customers are often unprepared for the rate increases needed to offset revenue losses from water use restrictions. Utilities must effectively communicate the reasons for rate changes. They must also build strong administrative records of ratemaking decisions to meet potential Proposition 218 court challenges. Clarify constitutional requirements. To solidify local funding bases for water services, voters may need to approve several constitutional changes that address the unintended consequences of previous amendments—while retaining transparency and accountability requirements. These might include clarifying Proposition 218’s cost-recovery require - ments (to allow for conservation and lifeline rates) and stipulating that flood and stormwater programs should be treated like water and wastewater programs. There has been a growing awareness of the need to address these aspects of Proposition 218, but the process is still under way." 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