Analysis: Proposed California Water Tax Would Add More Pressure on Rising Monthly Bills

A prominent credit rating service warns that a proposal to enact a tax on Californians’ water bills to fund drinking water projects would impact consumers’ pocketbooks amid other competing priorities.

Fitch Ratings, in an analysis, said Senate Bill 623 “is unlikely to tip the balance in the near term but adds to the pressure incrementally,” noting that ratepayers also will help fund the Delta tunnels WaterFix after having faced rate increases in recent years during California’s long drought.

“California water utilities have enjoyed solid rate flexibility, but Fitch believes the margin of that flexibility is decreasing and will likely be tested in the years ahead. … Ratepayers have thus far shown a willingness and ability to absorb higher rates and most California utilities have ratepayer bases able to bear the estimated increases,” the analysis said.

The tax would set a precedent in the state and add to the upward pressure on water bills, Fitch said.

SB 623 would create a new Safe and Affordable Drinking Water Fund to provide an ongoing financing source for grants aiding long-term drinking water system improvements in affected communities and emergency water assistance when necessary.

Beginning in 2020, SB 623 would assess fees starting at 95 cents per month for most water customers. Californians living at less than 200 percent of the federal poverty level would be exempt from the monthly fee.

CMUA has joined a large coalition opposing the proposed water tax and SB 623 as currently written. CMUA continues to fully support SB 623’s goal to make certain every Californian has access to safe drinking water at the tap in their home, while proposing a better, more equitable funding mechanism: state general funds or state/local bond funds.

CMUA also notes the water tax was amended into SB 623 last week without moving through a policy committee or full public process that enables input and debate. The water tax also could create an avenue for future tax increases for other State-identified social issues.