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LA WATCHDOG - The Metropolitan Water District of Southern California is sending the wrong price signal to its 26 agencies that it serves by “socializing” $424 million of its costs through a tax on property owners in its 5,200 square mile, six county service territory. This pricing structure discourages conservation of a scarce resource because it lowers rates by an estimated 20%. It also creates winners and losers because of the discrepancy between the volume of water delivered and the Assessed Value on which this tax is levied.
Four of the “winners” who pay less are the Eastern, Calleguas, Three Valley, and West Basin Municipal Water Districts whose water bills would have been $46 million higher if rates were based only on the volume of water delivered. [See below for information on these districts.]
The differential is because these four districts consume 26% of the water delivered by MWD but have only 16% of the Assessed Value of property in the MWD service territory.
Three of the “losers” who pay more are the water districts in San Diego and Orange Counties and the Central Basin Municipal Water District. These three water districts are paying $44 million more than if their bills were based only on the volume of water delivered.
Here the differential is the opposite of the four winners. The three losers only consume 29% of the water but have 39% of the Assessed Value.
Of interest, the MWD directors who represent the losers voted for the property tax even though this results in a higher end cost for their residents. Underlying this contrary vote is that these three water districts, who like MWD are wholesalers, sell water to over 100 agencies who then deliver water to the actual ratepayers who are sensitive to price increases. But in the end, when the property tax is factored in, these ratepayers pay more.
It turns out that the appointment of directors to the MWD Board is heavily influenced by the elected or appointed directors of these three water districts. It is easier for the MWD directors to claim they support lower rates while unsuspecting residents get smacked with higher taxes that are buried in their annual tax assessment.
MWD justifies the property tax because it is “essential to its financial integrity.” Baloney. MWD has not demonstrated why it is essential, especially since it has massive reserves, the ability to borrow billions, and considerable pricing flexibility. A review and analysis of the impact of the property tax would increase the level of transparency and accountability.
In developing its biennial budget, MWD should eliminate the property tax and increase its rates in its effort to encourage conservation of our scarce water resources.
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The Eastern Municipal Water District (EMWD) is the water, wastewater service and recycled water provider to nearly one million people living and working within a 682-square mile service area in western Riverside County and northern San Diego County.
The Calleguas Municipal Water District serves most of the residents of Ventura County and has its headquarters in Thousand Oaks.
The Three Valleys Municipal Water District has its headquarters in Claremont and serves 500,000 residents in its 133 square mile territory.
The West Basin Municipal Water District is a wholesale water agency that serves nearly one million people in 17 cities and unincorporated areas in Los Angeles County and has headquarters in Carson.
The Central Basin Municipal Water District serves a population of nearly 2 million people living within 24 cities in southeast Los Angeles County as well as unincorporated County areas. Its headquarters are in Cerritos.
The Los Angeles Department of Water and Power is opposed to the property tax. It has 21% of the Assessed Value but only consumes, on average, 20% of MWD’s deliveries. DWP also has the benefit of the Los Angeles Aqueduct that transports water from the Eastern Sierras.
(Jack Humphreville writes the LA Watchdog column for CityWatch, where he covers city finances, utilities, and accountability at City Hall. He is President of the DWP Advocacy Committee, serves as the Budget and DWP representative for the Greater Wilshire Neighborhood Council, and is a longtime Neighborhood Council Budget Advocate. With a sharp focus on fiscal responsibility and transparency, Jack brings an informed and independent voice to Los Angeles civic affairs. He can be reached at [email protected].)
