Tax Reform

By Paul Rogers
Posted: 07/22/2014 07:15:34 PM PDT3 Comments
Updated: 07/22/2014 08:09:01 PM PDT

Major water districts in California are quietly considering using property taxes — and possibly raising them without a vote of the public — to help fund Gov. Jerry Brown’s $25 billion plan to build two massive tunnels through the Sacramento-San Joaquin River Delta.

Most property tax hikes require a two-thirds vote, as required under California’s landmark Proposition 13, which voters passed in 1978. But the water agencies contend they are not bound by that requirement.

They say they were given the authority to raise property taxes to pay for the State Water Project, a vast system of dams and canals, in both a 1959 law and a year later in a statewide ballot measure. And those predate Proposition 13.

The Santa Clara Valley Water District, which serves 1.8 million customers in Silicon Valley, this month discussed raising property taxes from $36 a year to $60 a year on the average assessed residential property over the next decade to help pay some of the $228 million it expects to contribute to the Delta tunnels project between now and 2024.

“Because this is a tax that was already voted on, it was a pre-Prop. 13 measure,” said Jim Fiedler, the district’s chief operating officer. “Because it was adopted by voters prior to that date, it doesn’t qualify for the two-thirds requirement.”

Asked if there was any limit to how much higher property taxes could be raised if the Delta tunnels project has cost overruns, similar to the Bay Bridge or high-speed rail projects, Fiedler said he didn’t know.

“That’s a good question. That’s a decision our board would make,” he said. “But it would be in public hearings, not behind closed doors.”

Until now, it had been assumed that water agencies supporting the tunnels project would be raising water rates to pay for the tunnels.

As word has trickled out about the property tax strategy, anti-tax activists, environmental groups and even other water agencies are raising concerns.

The Metropolitan Water District of Southern California, which provides water to 19 million people in and around Los Angeles, is also discussing using that agency’s property tax authority to help pay its share of the cost.

But its property tax rate, now about $10 a year on the average home in Southern California, wouldn’t be increased, said general manager Jeff Kightlinger.

“If there are cost overruns, water rates would go up,” he said. “It has been a policy of our board to not raise property taxes.”

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