Paying for Water in California

TITLE: Paying for water in California

AUTHOR(S): Hanak E, Gray B, Lund J, Mitchell D, Chappelle C, Fahlund A, Jessoe K, Medellín-Azuara J, Misczynski D, Nachbaur J, Suddeth R.

YEAR: 2014

 California’s water system spends more than US$30 billion annually and is in deep financial crisis. This report seeks to identify the specific financial problems, and assess how various water management goals are being met. The state’s water supply and wastewater providers are performing rather well: they are almost entirely locally funded and have been able to raise rates to address new treatment requirements and replace infrastructure. However, California’s Proposition 218 (1996) requires that fees be linked to specific services for each property – this limits conservation programmes and also utilities’ ability to provide discounts to low-income households. This also has knock-on effects on rural water systems, flood protection, stormwater pollution and water management. The funding shortfall is around $2 billion - $3 billion per year. 

This report from the Public Policy Institute of California recommends that the state legislature should pass new special taxes and regulatory fees to tap a broader mix of funding sources. Relative to current spending, Californians need to raise another 7-10% annually to fill critical gaps.