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TO:
FROM:
CITY OF
NEWPORT BEACH
City Council Staff Report
April 23, 2019
Agenda Item No. 12
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
Mark Vukojevic, Utilities Director - 949-644-3011,
mvukojevic@newportbeachca.gov
PREPARED BY: Mark Vukojevic, Utilities Director,
mvukojevic@newportbeachca.gov
PHONE: 949-644-3011
TITLE: City's Position in Opposition to a State Drinking Water Tax; Support
for Alternative State Legislative Measures SB 414 and SB 669
ABSTRACT:
The Governor and the State Legislature are considering a supplemental tax for all water
utility customers known as a Drinking Water Tax to help fund non-compliant water
systems. The water industry has partnered with some legislators to develop two
alternative legislative measures that provide funding and repair the governance for
non-compliant water systems. Staff is asking for City Council consideration on these
items.
RECOMMENDATION:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA)
pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because
this action will not result in a physical change to the environment, directly or indirectly;
b) Oppose a State Drinking Water Tax and authorize the City Council and staff to
communicate with legislators and join coalition letters in opposition to new water taxes;
and
c) Support alternative State Legislative measures SB 669 Safe Drinking Water Trust and
SB 414 Small System Water Authority Act; and authorize the City Council and staff to
communicate with legislators and join coalition letters in support of these measures.
FUNDING REQUIREMENTS:
There is no fiscal impact related to this item. However, should a water tax bill pass, there
will be a cost increase to all water utility customers and there will be a financial and
administrative impact to the City.
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City's Position in Opposition to a State Drinking Water Tax;
Support for Alternative State Legislative Measures SB 414 and SB 669
April 23, 2019
Page 2
DISCUSSION:
The Governor's proposed budget and Assembly Bill AB 217, Safe Drinking Water for All
Act are proposing a tax on nearly 3,000 public water systems to collect monthly taxes of
varying rates on each water meter. The proposed taxes would be used to provide
financial assistance to approximately 300 non-compliant water systems among other
things. Arguments in support of the Drinking Water Tax revolve around the needs to
assist small water providers with their costs to provide drinking water, as it is the right of
every Californian to have safe, clean, affordable, and accessible water, and that the tax
amount is small and nominal on a per user basis. Arguments in opposition to the Drinking
Water Tax revolve around the inequities and regressive nature of the tax, the tax does
not solve the root cause of the problems with non-compliant water systems, the
non-compliant systems already receive grants and subsidies, other solutions exist and in
general, essential items such as food, medicine and water should not be taxed. There
is also a concern that this new tax institutes a new mechanism to levy taxes.
Alternatively, some legislators and the water industry have developed two alternative
measures that focus on solutions towards the root of the problems with non-compliant
water systems. SB 414 (Caballero) — Small System Water Authority Act authorizes the
creation of small system water authorities that will absorb, improve, and competently
operate non-compliant public water systems. SB 414 creates additional tools for the State
by allowing the merger of non-compliant small water systems (less than 3,000
connections or less than 10,000 people) into larger and more robust public water systems
that can take advantage of improved economies of scale, streamlined managerial
functions and enhanced financial capacity.
Arguments in opposition to SB 414 primarily revolve around a lack of an immediate
funding source to pay for ongoing operations and maintenance. Arguments in support of
SB 414 revolve around the support to repair governance issues with non-compliant water
systems, reducing overhead costs for non-compliant water agencies, providing additional
grant opportunities for non-compliant water systems and as a better solution than a
drinking water tax. Eastern Municipal Water District is the co-sponsor of the measure
and further information can be found at www.emwd.org/bettersolution.
Also, in conjunction with SB 414, legislators and the water industry have developed
alternative measure SB 669 (Caballero) — Safe Drinking Water Trust. This measure
solves the problem of non-compliant water systems by providing operation and
maintenance funding for disadvantaged communities using surplus State General Fund
dollars this year without a new tax on water. SB 669 only requires a one-time
appropriation of General Fund dollars into a trust that will provide ongoing maintenance.
Arguments in opposition to SB 669 primarily revolve around the viewpoint that a tax on
water meters provides the most consistent form of funding needed to bring non-compliant
systems back into compliance, the General Fund surplus could be used for other needs
and that money invested in the trust is subject to the rise and fall of the stock market.
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City's Position in Opposition to a State Drinking Water Tax;
Support for Alternative State Legislative Measures SB 414 and SB 669
April 23, 2019
Page 3
Arguments in support of SB 669 revolve around the thought that with a budget surplus,
this is the perfect year to create and fund the trust, this is a better approach than a
continuous drinking water tax, the proposed tax is regressive, coupled with SB 414, this
lowers the administrative costs to the State and water providers. The Association of
California Water Agencies (ACWA) is the co-sponsor of the measure and further
information can be found at www.acwa.com/our-work/delivering-safe-drinking-water/no-
water-tax. Additional information is also available at www.emwd.org/SB669.
The City is a member and participant of ACWA, which is the largest statewide coalition of
public water agencies in the country. The mission of ACWA is to help members promote
the development, management and use of good quality water at the lowest practical cost
and in an environmentally responsible manner. ACWA serves the water industry and the
public by promoting local agencies as the most efficient means of providing water service;
sharing reliable scientific and technical information; tracking and shaping state and
federal water policy; advocating for sound legislation and regulation; and facilitating
cooperation and consensus among all interest groups.
The Orange County Water District, the Metropolitan Water District of Orange County and
other surrounding cities and districts have taken positions in opposition to a new water
tax and in support of these alternative measures.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California
Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not
result in a direct or reasonably foreseeable indirect physical change in the environment)
and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA
Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no
potential for resulting in physical change to the environment, directly or indirectly.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the item).
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