Even with tax and rate hikes, water in SoCal is a bargain
It’s the most frustrating part of conservation. To save water, you rip out your lawn, shorten your shower time, collect rainwater for the flowers and stop washing the car. Your water use plummets.
And for all that trouble, your water supplier raises your rates. Why? Because everyone is using so much less that the agency is losing money.
That’s the dynamic in play with Southern California’s massive wholesaler, the Metropolitan Water District, despite full reservoirs after two of history’s wettest winters. The Met, as it is known, acquires and stores water to sell to 12 districts and 14 cities that serve about 19 million people in Southern California.
It has one additional revenue hammer that its member agencies, which resell the water to consumers, lack: It can raise property taxes without getting approval from voters.
Under a budget adopted April 6 by the Met’s board, both taxes and rates will go up next year.
The rates charged to water agencies and cities will rise by 8.5% in 2025 and another 8.5% in 2026. Ratepayers in cities such as Los Angeles that have their own water supplies may not notice, because they will need relatively little Met water after the wet winter. Compton and other cities that buy no Met water won’t be affected by the rate increase. Beverly Hills and other cities that get almost all their water from Met will be affected right away.
But all property owners in the Met’s sixcounty area will see a tax hike, although it will amount to well less than $100 a year for most.
Should water users be happy about these increases? The answer is a counterintuitive “yes.” Costs would be higher and water scarcer in the future without modest hikes now.
Southern California’s water rates and taxes are byproducts of the 20th century, an era with vastly different climate and economic conditions from today. When the Met was created in the 1920s to bring Colorado River water to Los Angeles, Orange and four other counties, California was abnormally wet, although no one knew it at the time. They still didn’t know it decades later, when the State Water Project was built to ship Northern California water south.
Seemingly endless population and economic growth led to the expectation that water costs could be covered by future generations, which would be ever larger and thirstier, with more end-users paying water bills.
Those days are over. Even with periodic wet winters, the customer base has stabilized, while the supply has become less predictable. Climate change and severe multiyear droughts make matters worse. We need to build new facilities to capture stormwater and recycle wastewater.
Simultaneously, the old pumps, pipes, transformers and other equipment are aging and need to be replaced. These capital projects represent fixed costs that don’t diminish as water use and revenue decline.
If these costs are not covered, Met will have to import more water from elsewhere, at even higher costs, or tap ever-scarcer (and therefore more expensive) water from existing sources. So the choice is not whether to pay more. The choice is whether whatever higher rates and taxes we pay will cover a consistently reliable supply or an increasingly sporadic and unpredictable supply. Reliability, obviously, is the better option.
The remaining decision was how to divide up the increase between rates and property taxes. Met board members from the city of Los Angeles opposed the formula on the grounds that higher property taxes will increase housing costs. But housing simply won’t be sustainable for renters if water costs are piled onto rates. This is a fairer structure because it shares the burden between renters and property owners.
In addition to increasing costs for housing and water, regulators are trying to balance the burden of electric bills as the state urges Californians to adopt electric appliances and vehicles. The Public Utilities Commission has proposed a formula for electricity that’s somewhat similar to the Met’s increases for water: part fixed cost, part rate increase.
The idea is to encourage careful use of resources without letting anyone carry an unfair portion of the burden.
Over the decades, Southern California’s residents may have come to think of cheap water as a birthright. But it will take additional investments to keep the water flowing. Even with higher costs passed down to consumers, water in this increasingly arid region remains a bargain.