San Diego UT: Twin-tunnel allies want an open tax spigot

Twin-tunnel allies want an open tax spigot

Water agencies may be able to raise property taxes without a vote

This Feb. 22, 2006 file photo shows houses located in the Pocket Area of Sacramento, Calif. along the Sacramento River. California water officials are set to release the revisions of the first four draft chapters of a $23 billion plan to restore and protect the Sacramento-San Joaquin Delta ecosystem and guarantee a stable water supply for millions of Californians. The Bay Delta Conservation Plan, known as the BDCP for short, is a federal and state initiative financed by California's water contra — AP

 — Gov. Jerry Brown’s plan to drill two tunnels underneath the Sacramento-San Joaquin Delta to provide more reliable water supplies downstream has long been controversial for the scant details the administration has provided about how it plans to fund the $25-billion project. Now as more funding details emerge, the plan is likely to spark even more controversy.

Some local water agencies claim they can raise property taxes without a public vote to help pay their share of the project — and various public documents show that water agencies already are setting the stage to do just that. Most observers figured that water rates would go up to fund the project, known as the Bay Delta Conservation Plan, but it’s clear now that property taxes may go up, too.

Proposition 13, passed by voters in 1978, capped local property taxes at 1 percent of a property’s value, and required supermajority votes of the people to fund local bond initiatives. But the initiative had an exemption for tax increases related to preexisting debt.

The Legislative Analyst’s Office concluded in 2012 that state water agencies can levy property taxes above the 1 percent limit “to pay their annual obligations for water deliveries ….” The State Water Project was created before 1978. The delta tunnel project would be considered part of this system.

In May, the Santa Clara Valley Water District in the San Jose area unanimously approved a resolution supporting an “override tax” that exceeds Proposition 13 limits to help fund its part of the tunnel project. The San Jose Mercury News reports that the district might raise its property tax rate by almost 70 percent in the next decade under this rule.

It reports on a recent plan to underwrite bonds for the tunnel project, in which Goldman Sachs requires that water contractors be able to levy property taxes as necessary to repay the bonds. It’s difficult to sell bonds at decent interest rates unless there are ironclad repayment promises — and there are few things more ironclad than an agency’s ability to raise taxes.

“They’ll (raise taxes) as quietly as they can,” said Jerry Cadagan, a veteran water-policy activist based in Northern California, who is critical of the delta plan. “This is taxation without representation or taxation without any forewarning.”

Delta supporters insist that their plan is the only sensible fix. Because a small number of endangered Delta Smelt are killed in the pumping station at Tracy, judges often call for those pumps to slow down. The result has been an inconsistent supply of water from the delta region to farms in the San Joaquin Valley and water users in Los Angeles and San Diego. Tunneling underneath the delta would address that problem — and eliminate the state’s reliance on an aging system of levies.

But it’s not clear that a project this big would actually fix the delta ecosystem. And while it might improve water reliability, many critics note that the plan won’t necessarily send more water southward. Foes say there are less costly ways to address the problem.

The Metropolitan Water District of Southern California is an advocate for the project, but some other water agencies throughout the state have been less thrilled with it. Not every water agency thinks that tapping into property taxes is a good idea, either.

“It is ... highly questionable whether the financing of BDCP can be — or should be — backed by taxing authority that was authorized by voters decades ago, when the program was much different than is being discussed today,” wrote the San Diego County Water Authority in a 2013 letter to the California Natural Resources Agency. The authority called for a thorough legal analysis of the idea.

And Jon Coupal, president of the Howard Jarvis Taxpayers Association, which is dedicated to preserving Proposition 13, told me he is looking at possible litigation. State Water Project debt has long been retired, he said. That preexisting debt exemption wasn’t mean to give agencies “a revolving line of credit.”

State officials told the Mercury News that they are “agnostic” on the funding stream. But that’s the problem, isn’t it? The governor seems so eager to build this infrastructure project that he’s not so concerned about how we’re going to pay for it — or how much higher Californians’ taxes may go.

Greenhut is the California columnist for U-T San Diego.