Appropriations Committee: Water bill would mean loss of tax revenue to state

Proposed districts if the consolidation of Castaic Lake Water Agency and the Newhall County Water District are finalized via legislation.


Water officials waiting for a green light on the bill promising one new all-encompassing water district for the SCV, instead received a yellow light Wednesday from the legislative committee reviewing it’s cost and were told to wait until Sept. 1 to learn its fate.

Members of the Appropriations Committee reviewed Senate Bill 634 Wednesday and decided to place it in the suspense file until Sept. 1 when the committee resumes its scrutiny of the bill’s cost.

Bills go to the suspense file for review anytime there is a “fiscal impact of $150,000 or more.”

And on Wednesday, committee members determined that the bill would, in fact, cost at least $150,000 to implement.

“The bill has been placed in the Suspense file which sounds a lot worse than it is,” committee spokesman Jake Ferrera told The Signal Wednesday.

“It was designated as having costs $150,000 statewide, and so, put in the Suspense file,” he said.

“It doesn’t mean the bill is dead,” Ferrera said.

Committee members learned through a breakdown of costs measured by consultants that the bill would result in an “unknown loss of income tax revenues, potentially in the low hundreds of thousands (dollars)annually beginning in 2018-19.”

For more than a year, officials with the Castaic Lake Water Agency and the Newhall County Water District – SCV’s water wholesaler and one of its four local water retailers, respectively – have been hammering out details of a merger, eliciting input from the public at four public meetings.

In December, both the CLWA and NCWD signed a settlement agreement calling for legislation to be drafted and submitted.

In February, SB 634 was introduced by Senator Scott Wilk (R-Santa Clarita) to create one new all-encompassing water agency that would manage and distribute water throughout the Santa Clarita Valley.

When told of the Appropriations Committee decision, local water officials reacted with optimism about the legislative process.

“Assigning the bill to the suspense file is the normal next step in the process,” NCWD General Manager Steve Cole told The Signal. “This is the same step that was taken on the Senate side.”

CLWA General Manager Matt Stone was just as upbeat.

“We hope to clear the Appropriations Committee at its next meeting,” he said. “The Committee has a set dollar threshold criteria for fiscal impacts.”

Since SB 634 doesn’t involve the type of costs associated with building a bridge or installing pipes, both general managers were asked: “What sort of costs come with this bill that would push it over the $150,000 threshold?

The short answer: A loss in tax dollars normally paid to the state.

“The costs are actually in the form of local tax savings that will no longer be paid to the State once Valencia Water Company is part of the new water district,” Cole said.

Stone echoed the same perception, saying: “There would be a local savings in the form of state income and property taxes that ratepayers would no longer have to fund once Valencia Water Company is brought into the newly formed water district next year.”

Jennifer Swenson, an analyst for the Appropriations Committee crunched the numbers on SB 634’s fiscal impact and determined the state would have to pay Los Angeles County for lost tax revenue if the bill went through.

She characterizes the bill’s fiscal effect on the state as an “unknown loss of income tax revenues, potentially in the low hundreds of thousands annually beginning in 2018-19, as a result of the dissolution of the Valencia Water Company – a private entity – and transfer of its assets, property, and liabilities to a newly formed Santa Clarita Valley Water District – a public entity.

“There would also be an unknown loss of property tax revenues related to this action,” Swenson said in her analysis prepared for the Appropriations Committee.

“Approximately 47 percent of property tax revenues are allocated to schools in Los Angeles County,” she wrote in her report. “In general, any reduction in school property tax allocations must be back filled by the State General Fund.”

After sitting nearly a month in the in-box of the Appropriations Committee waiting to be addressed, legislators in Sacramento last week announced they would review the bill Wednesday as to how much it would cost if it was approved.

For the past month, the bill was a “candidate for the suspense file,” Ferrera said. On Wednesday, it was officially placed there by the committee.

The bill promises to make history as it remains poised to abandon the current paradigm of many water retailers buying water from SCV’s water wholesaler – the Castaic Lake Water Agency – and then selling that water to Santa Clarita Valley ratepayers.

At a breakfast meeting of SCV business leaders earlier this month, the bill’s author, Wilk, said the biggest hurdle standing in the way of a water bill creating one new all-encompassing water district in the SCV is the cost-scrutinizing appropriations committee.

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