By Wayne Lusvardi

The expression “don’t throw the baby out with the bathwater” means avoiding throwing something out that is good when trying to get rid of something bad.  In two separate recent California court cases dealing with attempts to expand the definition of storm water as polluted water, federal courts have thrown out the bad definitions and kept the essential.

The first case, Virginia Department of Transportation vs. EPA, came down on Jan. 3. The Virginia Federal District Court ruled that the federal EPA could not force the Virginia Department of Transportation to use sediment as a substitute or “proxy” measure of water pollution.  The federal Clean Water Act regulates pollutants, not water flows. As a summary by the Pacific Legal Foundation put it, “Rivers are rivers.”

The second case was Los Angeles County Flood Control District vs. the National Resources Defense Council and was decided on Jan. 8 by the U.S. Supreme Court. It ruled that the NRDC could not force the district to regulate the flow of polluted water from a concrete-lined river into a natural watercourse as a “discharge of pollutants.”  As Tony Francois of the Pacific Legal Foundation summed up the case, “A river does not discharge (water) to itself.”  The L.A. County case involved confirmed pollution by monitoring stations in river channels, but where there is currently no way to determine who polluted it.

This is what the law conventionally calls “nexus” — a legally determined connection between the source and the resulting pollution.  Without nexus there is no pollution discharge because it is presently impossible to determine the source of the pollution or who is liable for it.  In other words, you can’t make an innocent industry or homeowner that may not have polluted the water responsible for cleaning up the pollution.

Proposed L.A. County rain water clean up program

The Los Angeles County case has been watched carefully because in 2010 the California Legislature passed Assembly Bill 2554 that forces the county to clean up all rainwater as pollution.  To comply with AB 2554, the county is asking voters to approve mega-millions of dollars in additional taxes for its “Clean Water–Clean Beaches” program.

But the county is already spending hundreds of millions of dollars in storm water cleanup.  The County’s storm water cleanup program would install catchment basins for about every 100 acres of urban land area, or every 350 homes.  This would total 18,086 new storm water catchment basins to trap rainwater from seven watersheds that flow into the Los Angeles River, San Gabriel River, Dominguez Channel and the Santa Clara River.

The U.S. Supreme Court has limited the Obama Administration’s EPA and the NRDC from trying to expand the definition of what is polluted water and what is a discharge of polluted rain water.  The Los Angeles County case has been returned to the lower courts for now.

The proverbial baby has not been thrown out with the dirty bathwater yet.

But don’t expect the push to expand the definition of rainwater as pollution to go away.  Babies can’t vote. But Los Angeles property owners will have an opportunity to vote on the County’s “Clean Water–Clean Beaches” program through a mail-in ballot in 2013.

This is Part 2 of a three-part series. Part 1 is here.

Dec. 4, 2012

By Wayne Lusvardi

In Part 1 of this series, I explained how an $8 billion tax storm soon will swamp Los Angeles property owners. The tax storm will be:

* A jobs program disguised as a storm water clean up tax;

* Politically risky use of eminent domain;

* Out-of-control land acquisition costs for new storm water catch basins;

* A possible staggering loss of property tax base;

* Added taxes that will hit public schools, big box retailers and downtown Los Angeles commercial properties the hardest;

* The eclipse of representative government by unelected and self-dealing Storm Water Groups that will capture at least 50 percent of the taxes.

This tax is on a fast track to be enacted in Los Angeles County come hell or high water.  But is there an alternative that local cities could lobby the state legislature for to prevent such a “perfect storm” from happening?

A market alternative for storm water cleanups

Enter stage right into this political theater of tax controversy economist Bowman Cutter of Pomona College, U.C. Riverside professor of environmental policy Kenneth Baerenklau and water resources engineer Joong Gawng Lee.  Their policy paper, “Capturing Urban Stormwater Runoff: A Decentralized Market-Based Alternative,” may offer an option for policy makers to consider.

The conventional method of storm water capture is to route runoff to a large regional detention basin or settling basin to percolate into the groundwater.  Rainwater runoff is diverted into concrete-lined flood control channels located on top of natural river beds that flow to the ocean.

In the dense Los Angeles urban basin, it is difficult and extraordinarily costly to assemble land for new storm water retention basins.  The U.C. Riverside study indicated the following values for land (exclusive of any eminent domain court adjudication costs):

* Commercial land from $2.57 million to $5.44 million per acre;

* Industrial land from $1.13 to $2.00 million per acre;

* Residential land from $2.65 to $7.27 million per acre.

Typical retention basin sizes range from one acre to 25 acres, depending on rainfall, water shed capture area, permeability of soils and other factors.  A one-acre catch basin could cost from $2 million to $7.27 million; a 10-acre catch basin could cost $20 million to $70.27 million, depending on land availability.

Not only would expected land acquisition costs be substantial and the use of eminent domain undesirable and unnecessary.  There also would be a reduction of property tax base. Tax loss would run from $20,000 to $702,700 per year for each new catch basin, depending on size and the value of the land acquired. Construction and maintenance costs also are substantial factors.

Rather than fixed subsidies funded by taxes, Cutter has proposed a landowner competitive bid process for installing onsite storm water capture facilities. Cutter’s analysis indicates that a market competitive method of storm water capture would be 39 percent cheaper than the conventional alternative.  And with the California’s funding formula under AB 2554, the expected costs would be much higher. This is because 50 percent of the tax proceeds would flow to watershed groups for green jobs.

Market example

Cutter provides the following example of how a market-driven system of storm water capture might work:

“For example, a landowner might bid to install 1500 square-feet of porous pavement for a $1000 annual payment over 30 years. Thus the landowner’s decision to participate in the program is similar to the decision to invest in a financial instrument that pays a fixed annual dividend over some known time horizon.”

Cutter’s formula is conservative and does not include the offsetting value of groundwater captured for local water basins. Groundwater typically costs about $120 per-acre foot of rainwater that percolates into underground water basins.  The avoided cost of not having to pay for imported treated water is about $500 per acre-foot.

So the cost savings from a competitive bid process might be as high as 50 percent of a conventional storm water retention basin.  This would depend on how much rainwater could be infiltrated into groundwater basins instead of flowing to the ocean or evaporating at each local watershed.

Cutter’s study indicated that even a low cost competitive bid method would pay for only 38 percent of the typical construction cost of a storm water retention facility.  In other words, storm water capture is uneconomic from a groundwater generation perspective.  And it would possibly be double or triple uneconomic under the State’s green jobs subsidy component under AB 2554.

In an email, Cutter clarified: “The cost of storm water capture is a curve not a number.  Capturing the first, say, 10 percent of yearly rainfall is pretty cheap, the next 10 percent is a lot more expensive and so on.  There are also opportunities for inexpensive capture in the foothills where rainfall and infiltration is high.”

While there may be less costly opportunities to capture water at the base of the foothills, most of the contamination comes from roof and street gutters filled with decaying vegetative material mainly from deciduous city street trees located below the foothills on the alluvial fans and lower land basins.

Least cost alternatives not considered

However, it should be pointed out that there has been no apparent cost-benefit study conducted by the state or county of their specific storm water capture policy.

Nevertheless, Cutter further said, “The point of urban storm water capture is mainly water quality goals, so judging it by its water supply per acre foot cost is the wrong metric.  You have to judge it relative to other measures that achieve the same water quality goals.  That’s the point of the paper. It asks: If you are going to have these water quality goals, what is the most cost-effective way to meet them?”

But water quality goals can lead to out-of-control costs. For example, the Peck Road Park Lake in Arcadia adjacent to the San Gabriel River is cited as negatively impacted by pollution from runoff. The lake is an 80-acre former gravel pit that was converted to a park and lake that is stocked with trout for recreational fishing.  Would it be more cost effective to just close the lake, or turn it into a local catch basin?  There is no way of knowing without a cost-benefit study.

Another example would be the purported polluted “dead zone” at the outlet of the San Gabriel River near Long Beach.  The L.A. County Department of Public Works website states that water pollution causes fish and shellfish to suffocate from oxygen deficiency.

But it isn’t that the ecology is devoid of all fish or marine life.  Even the L.A. County website acknowledges that worms, jellyfish, spot fish and anchovies can live in low-oxygen environments.  There are organisms such as plankton and insects that eat undesirable algae blooms.

The environment can work either way as a low- or high-oxygen ecosystem. The choice of ecosystem has to do with cultural and political values — not science, pollution, “fish kills,” or endangered species only.  Shellfish are pretty and jellyfish can sting.  Cleaning up beaches and man-made inland lakes in former gravel pits will likely lead to a greater number of natural predators for other fish or marine life species.

Politicians only cherry pick beautiful or desirable marine species to justify their preservation policies and green jobs programs. The county’s so-called “Clean Beaches” program under AB 2554 may be effective in protecting shellfish or surfers in Surfside beach, but the environmental tradeoffs and least-costly alternatives are never disclosed.

Moreover, without an impartial cost-benefit study, the public has no idea how cost ineffective it is to clean up the watersheds.  There needs to be a way to determine the least costly alternative, even if storm water cleanups are uneconomic.

Storm water supermajority tax tyranny

As can be seen, AB 2554 is structured as another jobs program and out-of-control wealth transfer tax.

Janet Daley has pointed out a similar trend in Great Britain, where the Eurozone is headed for economic dictatorship.  As she describes it: “Many of the Left will finally have got the economy of their dreams – or rather, the one they have always believed in.  At last, we will be living with that fixed, unchanging pie which must be divided up ‘fairly’ if social justice is to be achieved.  Instead of a dynamic, growing pot of wealth and ever-increasing resources, which can enable larger and larger proportions of the population to become prosperous without taking away anything from any other group, there will indeed be an absolute limit on the amount of capital circulating in society.  The only decisions to be made will involve how that given, unalterable sum is to be shared out — and those judgments will, of course, have to be made by the state since there will be no dynamic economic force outside of government to enter the equation. Wealth distribution will be the principal — virtually the only — significant function of political life.”

California’s version of the taxation “tyranny of the majority” in Los Angeles County under AB 2554 will be cloaked in environmental laws. The laws will replace representative government with tax-sharing programs run by unelected, unaccountable and self-dealing sub-regional councils. It would be the beginning of the end of the California Republic and its replacement by a socialized democracy.  But is this inevitable?

For all of the above-discussed drawbacks to the currently structured storm water cleanup law in Los Angeles County, a market-based system should be considered as an alternative.  Such a market incentive system would avoid the drawbacks of use of eminent domain, lost tax base, and out-of-control costs.

Storm water capture is not economically feasible (costs exceed economic benefits on a water cost basis).  Nevertheless, the land cost advantage of a market bidding system offers substantial advantages over the current policy of storm water pollution clean up at nearly any cost.

Los Angeles County Watersheds

This is Part 1 of a three-part series

Dec. 3, 2012

By Wayne Lusvardi

The tax climate forecast for Los Angeles County has turned gloomy. There is an $8 billion annual tax storm that is coming in 18 months. It will rain on every property owner in the county.

But the tax monies will mainly flow to a few politically connected groups and unions.  To comply with new state law, the Los Angeles County Department of Public Works is proposing an annual parcel tax of $8 to $83 per single-family home.

Big box retailers will get a tax bill for $15,000 per year, in addition to their existing property taxes.  And commercial properties in downtown Los Angeles on impervious clay soils will get socked with a $200,000 added tax per year for storm water capture projects.

The parcel tax is being called necessary to comply with unfunded mandates of the federal Clean Water Act to prevent the downstream pollution of flood control outlets to beaches and artificial recreation lakes along flood control channels.  However, in 2010 the California Legislature enacted its own storm water cleanup law only for Los Angeles County, Assembly Bill 2554.

The remainder of the state has no such law.  This tips off voters that the real intent of the legislature is to create green jobs in L.A. County’s distressed unincorporated areas, which overlap the watershed area zones in the county’s storm water capture program.

Los Angeles County is complying with this new state law with its “Clean Water — Clean Beaches” Measure.  However, calling it a tax “measure” is a misnomer because there are no suitable limits or control mechanisms on how much would be spent under the current law.

Green Jobs Program Disguised as Storm Water Cleanup

On Nov. 9, the Los Angeles Regional Water Quality Control Board passed Municipal Separate Storm Sewer System Order MS4. It requires all 88 cities in the county to develop storm water clean up projects within the next 18 months.

The proposed $5 to $8 billion project will mandate that property owners pay a flat parcel tax unconnected with the market value of their property (not ad valorem or added value tax).  The tax is purportedly for many water detention basins to be constructed in unincorporated watershed areas and in each city instead of on a regional basis as they are today.

Fifty percent of the $8 billion in taxes will go to nine unelected watershed groups in the following watersheds to divvy up the proceeds for green jobs: Ballona Creek, Dominguez Channel, Upper Los Angeles River, Lower Los Angeles River, Rio Hondo, Upper San Gabriel River, Lower San Gabriel River, Santa Clara River, and Santa Monica Bay watersheds.

The Dominguez Watershed isn’t even a watershed, as it is supplied by imported treated water.  In other words, self-dealing tax lobbying groups will get half of the taxes and unelected regional forms of government will circumvent elected representative government.

The stated purpose of creating Watershed Groups is to provide jobs to residents in unincorporated areas with high proportions of low-income households. Funding shall be in the same proportion as the fees collected in each watershed area. The watershed groups will also constitute an additional layer of unnecessary government.

Los Angeles County Watersheds

Features

Anticipated controversial features of the proposed storm water parcel tax law include:

1. Forty percent of the tax proceeds will go to cities within the boundaries of the watershed district and to the County of Los Angeles for undefined water quality projects. Funding shall be proportional to the funds collected in each city.

Cities can also form Watershed Groups if they choose to do so. Ten percent of the tax proceeds will go toward planning and administration costs of the County Flood Control District. The 50-40-10 funding allocation of AB 2554 seems to be double the cost alternative to implement the project. Stated differently, only about half the $8 billion in taxes would probably go toward actual storm water cleanup facilities. The other half would go to unneeded artificial jobs programs.

2. Watershed Oversight Boards shall be created under Section 18.10 of the proposed County storm water ordinance to be composed of water quality experts drawn from academia, professional societies, and non-governmental agencies. In other words, a coalition of experts and alleged victims of water pollution shall be allowed to align against middle class taxpayers who will have to pay for the bulk of the tax.

3. The Flood Control District will be granted the power of eminent domain and be able to issue bonds backed by the tax revenues.

4. Sec. 2, Article 15 of the authorizing law grants power “to preserve, to enhance and to add recreational features to its properties.” The central mission of the county’s storm water program is to “promote the creation of green jobs.”

In other words, this will be another grab of money for green jobs programs and parks and recreation projects under the pretense of cleaning up contaminated water sources. The Santa Clara River Watershed is mostly in a natural state and is 57 percent open space and national forest.

5. There is no consideration in the tax for rainfall zones. Those who live in moderate rainfall zones — such as Long Beach — will be taxed just as much as those who live in, say, Pasadena and Altadena, located in higher rainfall zones near the San Gabriel Mountains. Pasadena gets 21 inches of rainfall on average each year.  This is eight more inches of rainfall than Long Beach, which gets about 13 inches.  Palmdale in the Santa Clara River Watershed gets about 7 inches of rainfall on average.

6.  Section 18.02 of the County’s proposed ordinance specifies a minimum tributary area of at least 100-acres in size (reflecting an area of about 350 homes). This suggests that storm water catch basins will be from 1-acre to 10-acres in size, depending on the imperviousness of the soils and the depth of the constructed basin.

A one-acre catch basin would take about four residential lots in land area; a 10-acre catch basin would take about 43 urban lots in area.  It will be difficult to find one to 10 acres of available land, except possibly existing parkland in critical catchment areas. A depressed area of a park can doubly serve as a catch basin.

But then this may raise the issue of creating toxic dumps in parks where children play. So privately owned lands will be more desirable. For example, a small 5.76-acre drainage area in urban San Diego required a 0.11-acre catch basin, which is about the size of one typical residential lot (65 feet by 110 feet).  The County’s 100-acre drainage areas would be at least 900 times larger and thus might have to take 900 residential lots (all engineering aspects considered the same).

7. Assuming an average home price of $350,000, a one-acre catch basin would result in about $1.5 million in property acquisition cost and $15,000 in lost tax base per year. A 10-acre catch basin would reflect $15 million in property acquisition cost and $150,000 in lost tax base per year. Taking vacant commercial land for catch basins would be about three times more costly and thus would reduce the tax base about three times greater.

8. There is no provision in the law for a tax appeal on the grounds that a specific property has no rainfall runoff as can be certified by a civil engineer.

9. A major source of bacterial contamination has been shown to be wet decaying vegetative material in roof rain gutters and street gutters.  City street trees are one of the main sources of this contamination. Deciduous ficus trees, with their shedding berries, seeds and leaves, are one of the worst offenders.

By contrast, evergreen trees and oak trees with waxy leaves and magnolia trees are examples of trees that shed fewer leaves but still provide a shade canopy.  Yet there are no projects proposed to reduce high-leaf shedding trees in storm water cleanup programs and replace them with trees that shed less.

And there is no provision to file for a tax exemption on the basis that a property owner has obtained a certificate from a third-party rain gutter maintenance company that their gutters have been cleaned annually (just like homeowners comply with brushfire weed abatement mandates).

10. If the L.A. County Board of Supervisors voted to pass the storm water tax, then it would mail a ballot to every property owner in the county.  This would comply with the requirements of Proposition 218 for voter approval of any tax increase.  All property owners of public record would receive ballots. The Board of Supervisors may consider rejecting the tax if they receive a petition opposing the tax from 51 percent of property owners — which is unlikely due to cost and logistics.

11. There is no provision in the county’s law of long-term funding for the maintenance and removal of toxic substances that will accumulate in each storm water retention basin.

12. The county’s tax formula calls for higher taxes on properties with impervious soil where the water cannot percolate into the water table.

County officials stonewall

Officials of the Los Angeles County Department of Public Works refused to confirm, deny or clarify any of the above features of the pending storm water parcel tax that are undisclosed on their website, but contained in AB 2554.

The key radical concept AB 2554 — unelected watershed councils of government replacing representative government — was shot down at the ballot box by the defeat of Proposition 31 on Nov. 6 by a 61 to 39 percent vote.

AB 2554 passed the state Senate on a 23 to 11 vote and passed the Assembly by a 50 to 27 vote in 2010, both by Democratic Party majorities. The sponsor of AB 2554 in 2010 was State Senator Julia Brownley, D-Oak Park.  She was elected as U.S. Representative for the 28th Congressional District on Nov. 6.

Storm Water Tax Schedule — Los Angeles County

In Part 2 of this series, a market alternative will be proposed to the big government jobs program and the tax and land grab of the county’s storm water parcel tax. Part 3 will update the legal issues of the proposed storm water tax now pending for a hearing by the U.S. Supreme Court on Dec. 6.