In what may be an illegal tax increase, the board of the Metropolitan Water District just approved a two-year budget that doubles the property tax it collects in its six-county service area.
MWD is a water wholesaler with 26 cities and water retailers as its customers. Through those entities, MWD supplies water to about 19 million people in Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura counties.
The new budget raises the wholesale rates by 8.5% in 2025 and then by 8.5% again in 2026. The rates for treated water will go up 11% and then 10%.
Metropolitan said it has to raise rates and taxes to cover its operating costs because they’ve been selling less water, first because of drought, and then because of rain.
They order you to use less water, and then they raise prices because you’re not buying enough water.
The rate hikes are bad enough, but I’ll bet you’re wondering how it can be legal for the Metropolitan Water District to raise property taxes.
In its press release, MWD referred to the “voter-approved property tax” it levies, explaining, “Property taxes have been collected for decades to fund Metropolitan’s State Water Project costs, as approved by voters.”
Here’s what they left out: yes, voters approved bonds to build the State Water Project, but that was in 1960.
How long does it take to pay these things back?
In fact, Metropolitan will charge property owners forever, because the law has been interpreted to allow these extra charges on property tax bills to cover the cost of maintaining and operating the State Water Project. Now the fight is on over the interpretation of “State Water Project.” Metropolitan has expressed a view that massive new infrastructure projects, such as the Delta tunnel, should be seen as part of the State Water Project, even though no plans have been approved and no one knows what it would ultimately cost.
Somehow, in the opinion of the MWD, voters in 1960 approved whatever it is and whatever it costs.
The Howard Jarvis Taxpayers Association, where I’m on staff as VP of Communications, vehemently disputes this interpretation.
When Proposition 13 passed in 1978, it cut the property tax rate to 1%, but it allowed previously voter-approved bonds to override that limit. The bonds that were approved in 1960 fell into this category. Of course, the expectation was that these bonds would eventually be paid off and the extra charges would come off the property bills at that time.
The law has apparently evolved to allow Metropolitan and other wholesalers that are customers of the State Water Project to raise property taxes in their service areas if it is “essential to the fiscal integrity of the district” and/or if it is “necessary” to raise revenue “sufficient to provide for all payments under the contract” with the State Water Project.
However, they can’t just say so. They can’t arbitrarily choose from a made-up menu of rate hikes and tax increases and pick their favorite balance, which is what the Metropolitan board did.
They chose to double the current property tax rate of .0035% to .007%. For a home with an assessed value of $805,600 (cited as the median value in L.A. County) the tax will go up from $28.60 to $56.39.
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But this is only the beginning. The MWD’s press release explained that there are hugely expensive infrastructure projects ahead because of, you guessed it, climate change. The chair of MWD’s board said, “we need to rethink our business model, so we can fund these major investments.” The old model relied on selling water to fund operations. Will the new model rely on tax increases without voter approval?
In a March 11 comment letter on the pending budget, the MWD board members from the city of Los Angeles said Metropolitan has not demonstrated that the property tax increase is “necessary to maintain fiscal integrity” and offered a list of suggestions, including “cost containment,” that could be implemented in order to “exhaust all other options to collect sufficient revenue.”
That sounds like a lawsuit could be on the horizon. Certainly everybody in Los Angeles, and not just Los Angeles, is tired of getting soaked.
Write Susan@SusanShelley.com and follow her on Twitter @Susan_Shelley
