ACWA and the California Municipal Utilities Association (CMUA) are sponsoring state legislation to create a Safe Drinking Water Trust. Instead of relying on a proposed statewide water tax, the Trust would be funded with General Fund dollars during one or more state budget surplus years. The net income from the Trust would create a durable funding source that will help community water systems in disadvantaged communities provide access to safe drinking water.
Why is there a need for safe drinking water funding in California?
- Most Californians have access to safe drinking water, but some disadvantaged communities do not
- Lack of access to safe drinking water is a public health issue the state must address
- A funding gap exists for operations & maintenance (O&M) costs for community water systems that treat water
- In general, O&M costs cannot be financed using existing state and federal drinking water funding sources
- In some situations, consolidation of a community water system may be the most effective solution
- A financial solution is needed for O&M and consolidation costs in disadvantaged communities that can complement existing federal and state funding sources for capital costs.
How would the ACWA/CMUA proposal for a Trust work?
- The Trust’s principal would be initially financed with a one-time infusion of General Fund dollars during a budget surplus year
- There is a record budget surplus for the 2019-2020 Fiscal Year, which makes it the perfect time to create and fund the Trust
- Funding the Trust via the General Fund serves as a progressive source of revenue, as taxpayers with higher income would contribute more, while lower income taxpayers would contribute less
- The Trust’s principal would be invested, and the net income would be transferred to a Safe Drinking Water Fund, which the State Water Board would administer
The governor and some legislators are proposing a statewide water tax on drinking water. How would that work?
- The state would levy a monthly tax on the water bills of more than 10 million water customers in California
- More than 3,000 local water agencies would serve as tax collectors for the state in collecting the tax on drinking water bills
- Local agencies would incur significant administrative and technology expenses associated with implementing new systems used for collecting water tax revenues from local water bills
- Revenues generated from the tax would be funneled through the State Water Resources Control Board, which would allocate funding to safe drinking water projects in the state
On Jan. 10, 2019, Gov. Gavin Newsom released his proposed budget for Fiscal Year 2019-’20 that includes a proposal for a Safe and Affordable Drinking Water Fund. Revenue for the fund would be collected through a statewide tax on drinking water and assessments on fertilizer sales and confined animal operations.
Assembly Member Eduardo Garcia is the author of a legislative bill that contains a proposed water tax.
AB 217 (E. Garcia) passed out of the Assembly Environmental Safety and Toxic Materials Committee on March 26 and is headed to the Assembly Appropriations Committee. The bill was most recently amended on March 28, and now proposes that a 50-cent “fee” will be assessed annually on each service connection for all public water systems. Public water systems would be required to remit to the State Water Board the amount of the “fee” for that system. For example, a public water system with 250,000 service connections would pay an annual “fee” of $125,000.
In addition to this water tax, the bill proposes agricultural assessments similar to those proposed in Gov. Brown’s proposed budget trailer bill language in 2018. These would be assessments on the sale of fertilizers and on confined animal operations. It also proposes a modified version of ACWA’s proposed Safe Drinking Water Trust. (The Trust was intended to be an alternative to water tax proposals.) Finally, it proposes an authority to allocate up to 20% of the safe drinking water funds received back to the region of the state in which they were generated.
In 2018, despite attempts to create a new water tax, the Legislature’s Budget Conference Committee rejected the statewide water tax proposed in the 2018 budget trailer bill and acted to include more than $25 million in General Fund revenue for safe drinking water in the 2018-2019 Fiscal Year State Budget. Also in 2018, California voters approved Proposition 68 with $250 million for safe drinking water and clean water projects that is prioritized for disadvantaged communities.
Californians Oppose a Drinking Water Tax
Tulchin Research conducted a statewide poll in early 2018 based on a previous drinking water tax proposal. That poll showed that 73% of likely voters oppose a new tax on drinking water, both initially and even after hearing more information.
Additionally, 74% would prefer using existing funding sources rather than establishing a new tax on drinking water.
For media inquiries, please contact ACWA Director of Communications Heather Engel at (916) 441-4545.
To learn more about the Safe Drinking Water Trust proposal or the proposed statewide water tax, please contact ACWA Deputy Executive Director for Government Relations Cindy Tuck at (916) 441-4545.