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An unprecedented and fledgling statewide effort to shore up hundreds of struggling drinking water systems could face intense pressure from the novel coronavirus pandemic as the program is rolled out in coming months.
For almost a year now, the California Water Resources Control Board has been working to craft the program, and on Tuesday it approved a policy designed to guide the spending of $1.3 billion over 10 years to save some 300 water systems that are failing or at-risk of failing.
The struggling districts are among the smallest of the state’s roughly 7,400 public water systems and are often beset with inadequate budgets; high levels of contaminants in their water supplies; the presence of waterborne illness among ratepayers; are dependent on a single groundwater source; or primarily serve an economically disadvantaged community, among other things.
The board’s unanimous vote on Tuesday to approve the policy is part of its mandate to implement Senate Bill 200, which was passed in 2019. The fund will be administered through the Safe and Affordable Funding for Equity and Resilience Program, or SAFER.
The policy will guide the board’s discussion and passage of an actual spending plan that’s expected to come out in July. The bulk of the money will come from the state’s Greenhouse Gas Reduction Fund.
As part of the effort, and for the first time in California history, the board is required to conduct a comprehensive “needs assessment” to identify every failing and at-risk water system in the state.
But while the push to save these districts — which serve as many as 1 million Californians — has been hitting important milestones in recent months, the COVID-19 pandemic and efforts to slow its spread are potentially putting additional and intense pressure on their budgets and, unless addressed, could have dangerous consequences for their ability to deliver safe and affordable drinking water to hundreds of thousands of people.
“We knew this was going to be an incredible lift prior to the pandemic,” said Water Resources Control Board Chairman E. Joaquin Esquivel.
The state could see “an even larger number of systems that are going out of compliance or are struggling than what we were already assuming,” Esquivel said during the board’s Tuesday meeting, which was conducted via video conferencing in order to comply with the state’s COVID-19 stay-at-home order.
The policy includes language that allows the fund to be used to shore up “revenue shortfalls caused by a natural disaster” or to supplement other disaster-relief funds in the wake of a state or federally declared emergency.
Any potential increase in the number of systems struggling with budget issues, however, is compounded by the fact that state water experts believe the $130 million annual spending plan won’t be nearly enough to cover all of the potential revenue shortfalls that could flare up in the wake of COVID-19.
And while there is currently no comprehensive statewide data, a recent national study on the pandemic’s financial impacts says American water districts are likely facing about $14 billion in lost revenue this year alone due to the elimination of shutoffs for non-payment, increased numbers of unemployed ratepayers defaulting on bills, reduced commercial demand and a slow down in the growth of new hookups.
“On the residential side, with people unemployed and lacking the ability to pay, there’s going to be, and we’re already seeing it, higher levels of non-payment of households of their utility bills, including water bills,” said Max Gomberg, a climate and conservation manager with the water board.
The study, which came out on April 14, is based on a survey of more than 600 water districts around the country commissioned by the Association of Metropolitan Water Agencies and the American Water Works Association that found a nearly 343 percent increase in bill delinquencies due to virus-related unemployment among ratepayers.
“The numbers are staggeringly large,” Gomberg said.
At the beginning of April, in response to the pandemic, California Gov. Gavin Newsom issued an order forbidding public water systems from shutting off taps for lack of payment, but many districts had already implemented their own moratoriums in response to the stay-at-home order and ballooning unemployment numbers.
“It’s something that’s really evolving quickly,” said Dave Eggerton, executive director of the Association of California Water Agencies, which represents 450 water systems that together deliver 90 percent of the state’s water supply to homes and businesses, including agriculture.
“Agencies are going to have a better sense of it in the coming months as their billing cycles end,” Eggerton said. “They’re just starting to see some of the impacts.”
He added, however, that some water agencies are reporting that delinquency rates are doubling or tripling, and those numbers appear to be growing.
“Agencies are really trying to scrutinize their budgets to try to reduce cost,” Eggerton said.
The East Bay Municipal Utility District, which provides water to 1.4 million people, has seen a 75 percent increase in monthly applications for its customer-assistance program.
The district will have a better idea of bill defaults and water use data at the end of its current two-month billing cycle, but so far it’s been able to track a 3 percent increase in demand from residential customers and a 33 percent decline in demand from commercial and industrial users, said spokeswoman Andrea Pook.
“We will be seeing a financial impact,” Pook said.
And while it’s still unclear what that impact might be, the district has a healthy budget reserve in place that will help it get though the crisis, Pook said.
“We can weather difficult situations, hopefully including this,” she said.
Anticipating bill delinquencies
The Dublin San Ramon Services District, which provides water to nearly 25,000 accounts in the Tri-Valley area, is in a similar position and has built up a reserve that can cover eight months of expenses in times of financial difficulty.
“We do expect (bill delinquencies) to increase in the months ahead,” said DSRSD General Manager Daniel McIntyre. “I don’t have a sense of the scale of that, but we’re watching it very carefully.
“We think that without too much difficulty we can wait for people to catch up on their delinquencies,” McIntyre said.
While the potential pandemic-related risks to their revenue is real, neither EBMUD nor DSRSD is considered a failed or at-risk water system in need of access to the state’s new fund, dubbed the Safe and Affordable Drinking Water Fund.
The money is intended to shore up budget gaps and help water systems, chiefly small systems serving disadvantaged communities, find solutions to short- and long-term problems.
The money can be used for things like temporary water deliveries to districts with unsafe supplies, for example, or providing managerial and technical support to districts that have trouble hiring and retaining qualified staff, whereas currently the bulk of the state’s assistance is for construction projects, like system upgrades.
“The initial proposal for distribution we had was pre-COVID-19, and we understand that there could be potential revenue shortfalls,” said Joe Karkoski, assistant deputy director in the Water Resources Control Board’s Division of Financial Assistance.
Lobbyists working on behalf of the state’s water agencies have been trying to get Congress to include them in the next federal COVID-19 relief package, which could work in combination with any state funding the districts might be eligible for.
“We haven’t had available federal funding for special districts for agencies like ours. It’s very problematic,” said Eggerton.
“Direct assistance to rate-payers to help them be able to pay these bills, it would really help them and help the agencies to provide that essential service,” he said.
Kiley Russell reported this story with support from the 2019 Impact Fund, a program of the USC Annenberg Center for Health Journalism