California Water Cold War Heats Up

MAY 10, 2011

By WAYNE LUSVARDI

Long gone are the hot wars of the 1920’s when Los Angeles Department of Water and Power’s William Mulholland took over Mono County and Owens Lake with his own shotgun militia. And local farmers resisted the taking of their water rights and land by dynamiting the Los Angeles Aqueduct.

But California’s perpetual water cold wars continue in the state Legislature. The most recent battle is between a coalition of environmentalists wanting to rip off control of the proposed 2012 water bond from urban water agencies and farmers by proposing an alternative statewide excise tax on all retail water usage.  Another coalition of advocates for low-income communities is trying to exempt themselves from the collateral damage of the water war by being granted immunity from water rate hikes under the guise of a “Human Right to Water” package of bills in the legislature.

California is effectively in a budget default and maxed out on bonds, especially after having spent $14 billion on five water bonds since 2000 with next to nothing to show for them. Contrary to newspaper headlines, the last three major statewide opinion polls show voter resistance to any more taxes. So now a shark-like coalition of environmentalists is sensing “blood in the water,” in that the $11.1 billion water bond proposed for the 2012 ballot may already be in trouble.

Public Goods Water Charge

In lieu of the proposed water bond, Delta environmental interests have formed a coalition to propose a “public goods charge” on retail water use in lieu of a water bond.  While the water bond would be financed by benefitted water users and controlled locally, the proposed “public goods” water excise tax would usurp local control and funding by the creation of a new super-water authority that would radically change the form of democratic government in California.

This new coalition proposes to shift the financing of water projects from bonds to a “pay-as-you-go” or all-cash system from statewide excise taxes on retail water use that has no guarantee of delivering any more than the prior bond water bonds. Half of the tax revenues collected would go toward the creation of a new State Water Commission and Delta Stewardship Council.

The proposal for a statewide “public goods” water excise tax would effectively grab dominant control of all new water projects statewide, and even land use in the Bay Area, by northern California environmental interests.  Conversely, the proposed water bond would be a conventional political power sharing arrangement where local water agencies could control the selection and funding of their own projects, but would have to comply with the California Environmental Quality Act (CEQA).

The proposed water bond would be financed on the principle of “beneficiary pays”; while the estimated $3.4 billion “Public Goods” water excise tax would be financed on the principle of “everyone pays but an unelected state body decides who benefits.”  And under a water excise tax, environmental goals would trump everything else, including the economy.

A Green-Red Coalition?

For Northern California environmental interests to form a possible winning coalition in the Legislature, they have apparently modeled part of their water excise tax on a redevelopment model to buy the votes of rural “red” county legislators.  As this writer wrote previously:

A Public Goods Water Charge would just shift about $3.4 billion from urban water ratepayers to “green redevelopment.” California urban tourism and retail mall development would be phased down or out, but rural tourism and water-related economic development would be phased in.

There is a possibility of this setting off a civil war between urban and rural redevelopment interests. It would be a reverse of the Owens Valley vs. Los Angeles “Little Civil War” of 1927, in which the Los Angeles Department of Water and Power grabbed water from Eastern California.

This time, wilderness and riparian areas would be grabbing money and water from big cities and farmers through a Public Goods Water Surcharge for “eco-tourism,” rustic recreation, the development of new water reservoirs and lakes and possibly fishing industry redevelopment.  A Public Goods Water Surcharge is sure to be controversial, as water and money would flow away from farmers and urban water users to rural wilderness and riparian areas where water, not carbon, would be “sequestered.”  California would be going backward to an economy of more than 150 years ago.

Whether legislators in highly gerrymandered districts would be able to get red counties to support a $3.4 billion “public goods” water excise tax remains to be seen, especially given that who benefits would not be within the control of local taxpayers in those state legislative districts. Who wants to pay a tax for no certain benefit?

Human Right to Water Package

Working class communities do not want to get caught in the collateral damage between two groups: the elite political interests in the state who want to fix the Delta no matter what the cost; and urban and farm interests that want more equitably to distribute the oversupply of rainfall that drops on California even in a dry year.

Thus, another coalition has formed in the Legislature under the umbrella of the “Human Right to Water Package” consisting of six bills that want clean water for working-class communities: AB 685 (Eng), AB 938 (V. Perez), AB 983 (Perea), AB 1187 (Fong), AB 1221 (Alejo) and SB 244 (Wolk).

What this package of bills apparently seeks is not necessarily clean water, but cheap water from local groundwater basins that are presently contaminated; the water would be in lieu of having to face the shock of water excise taxes.  In typical California fashion, they want cheap, clean water but want someone else to pay for the cleanup bill.

Probably the most controversial bill is AB 685 which, in this summary, would establish a state policy that guarantees every human a right to safe drinking water and requires the state to implement it — that is, pay for it.  While seemingly only a symbolic bill at this time, once enacted this legislation may morph into lower income communities being exempt from water rate hikes to pay for pricey environmental water restoration projects such as the Delta Plan.

“Socialized water costs for thee, but socialized water benefits for me” seems to be what they want.  This sounds a lot like the criticisms of federal banking policies during the meltdown of the national financial system in 2008: “socialized losses, but privatized profits.”  A “Human Right to Water” would not be very just.

Ironically, the Environmental Justice Coalition supports the Human Right to Water Package, as do the Unitarian Universalists.

Strangely, the Environmental Justice Coalition for Water lobbied against Proposition 23 (which would have suspended AB 32, the Global Warming Act of 2006) in last November’s election on the grounds that it would be bad news for Latino families. Actually, it would raise their energy costs and kill jobs they hold. About 20 percent of the price of wholesale water is the electrical pumping and treatment costs, which will rise because of AB 32.

In other words, when the water war starts getting hot by imposing excise taxes on top of already increased water rates, working class communities don’t want to pay their fair share of taxes to fund the war, but want any water that might be realized as a result.

In 2009, Gov. Arnold Schwarzenegger vetoed AB 1242, also called the Human Right to Water Bill. Reason: funding, not legal exemption from water rate hikes, would be preferable and more equitable. If such an exemption were granted, it would likely set a precedent for lower income communities to also opt out of the looming electricity rate hikes called for under AB 32. If low and moderate-income households were exempted from green water and power rate hikes, this would exempt about 14.5 million people, or about 40 percent of the state population, from water “rate shock.”

In such a scenario, the proposed water excise tax would almost double on the other 60 percent of the state’s households. By this writer’s estimate, that would reflect an added water rate hike of about $450 per year on middle-income households ($3.4 billion/[36,308,527 x 60 percent] X 2.91 persons per household).

The Human Right to Water may become like Obamacare, where many want to opt out of the system, thus indicating a flawed policy in the first place. Advocates for the Human Right to Water are hoping Gov. Jerry Brown will sign such a package of bills.  However, how many middle class residents, especially retirees, this package of bills would spur to move out of the state is unknown.

Water Agency “Social Justice”

Here’s something that apparently never occurred to the legislator-sponsors of the six “Human Right to Water” package of bills: If certain communities were able to opt out of any “public goods” water rate surcharges — water excise taxes — then wholesale water agencies would still have the discretion of eventually raising water rates on those communities if they wanted water during a drought.  And it is highly likely that wholesale water agencies would charge those cities that did not pay any water excise taxes the highest tier of the water rates (say, $911 per acre foot of water at Municipal Water District of Southern California Tier 2 Full Service Treated Cost).

If legislators were successful in some way in immunizing working class communities from water excise taxes, then it follows that such communities would also have no entitlement to the added water resources developed from such taxes and would have to pay a premium. It is doubtful that even a court could mandate cheap water rates for those who chose to be “free riders.”  Call it a zero sum game or water agency “social justice.” But politics is often a game of symbols not substance.

As 19th century Prussian military thinker von Clausewitz said, “War is a continuation of politics by other means.”  And the winners of the war will write their version of California’s water cold war into legislation only to have the spoils of war all taken back by local water suppliers.