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LA WATCHDOG - The politically appointed Board of Directors of the Metropolitan Water District of Southern California is proposing to increase its Special Property Tax by 71% over the next three years, from 0.007% to 0.018% of the Assessed Value of $4.1 trillion in its 5,200 square mile service territory. This is after doubling the rate in 2024. Since 2024, the rate of taxation will have increased by over five times, from 0.0035% to 0.018%.
To put this in simpler terms, the annual tax on a million dollar house will increase from $35 in 2024 to $180 in 2028. The total MWD haul will increase from $136 million in 2024 to $859 million in 2028, an increase of 6.3 times when factoring in the annual increase in the Assessed Value, and almost $1 billion in 2030.
Over the same period, MWD will raise the rates it charges to its 26 agencies it serves by an average of 4.5% over the next eight years.
Underlying the property tax and rate increases is the need to finance current operations and an ambitious $11 billion capital expenditure program over the next ten years. There is also the argument over who foots the bill, MWD’s customers (which are then passed through to their water districts or directly to the Ratepayers) or the property owners in MWD’s service territory.
In 2024, MWD increased its rates by 8.5% for the next two years (2025 and 2026) and an additional 11.5% for the following two years (2027 and 2028). But that created an awkward situation for several agencies who were concerned about criticisms from their constituents. Hence, the policy to hide the increase by hitting up property owners, even though it would not be in the best interests of several of the large agencies and their ratepayers, including those in San Diego and Orange County, where their percentage of the Assessed Value exceed their percentage of purchased water.
One disadvantage of burying the increase of the cost of water in property taxes is that ratepayers do not see that true cost of water. This sends the wrong price signal, discouraging conservation.
It is also not in the best interests of the Department of Water and Power and its Ratepayers because our percentage of the Assessed Value exceeds our percentage usage of MWD delivered water. And this disadvantage will increase because DWP’s Water System will continue to invest in conservation, stormwater capture, groundwater recharge, indirect potable reuse, spreading grounds, and direct potable reuse, including Pure Water Los Angeles that the potential to supply 40% of our drinking water.
There are also significant questions about whether this Special Property Tax is legal since it has not been approved by the voters. Rather it relies on legislation approved in 1960, that was subsequently amended after the passage of Prop 13 in 1968. MWD will argue that this tax is essential to Metropolitan’s fiscal integrity, and it may well be. But this does not mean it is legal.
Going forward, MWD needs to demonstrate that the Special Property Tax is essential for its well-being. This will require detailed projections over the next ten years and public hearings. Incidentally, it is also very difficult to find the necessary information on MWD’s hard to navigate website which some say it is by design.
In addition, the DWP, the Water System, the Ratepayer Advocate, and the City Administrative Officer need to do a deep dive into the Special Property Tax and its legality and the finances of MWD to make sure that Angelenos are not paying a disproportionate share of MWD’s expenses, especially since the Water System is making substantial investments to conserve water and develop alternative sources of supply over the next two decades.
(Jack Humphreville writes the LA Watchdog column for CityWatch, where he covers city finances, utilities, and accountability at City Hall. He is President of the DWP Advocacy Committee, serves as the Budget and DWP representative for the Greater Wilshire Neighborhood Council, and is a longtime Neighborhood Council Budget Advocate. With a sharp focus on fiscal responsibility and transparency, Jack brings an informed and independent voice to Los Angeles civic affairs. He can be reached at [email protected].)
