San Diego grapples with $5.5B stormwater infrastructure funding gap

San Diego grapples with $5.5B stormwater infrastructure funding gapA new five-year capital planning outlook reveals that stormwater needs dominate the city's infrastructure deficit, prompting officials to weigh new dedicated revenue streams and environmental impact bonds.

Stormwater makes up $5.5 billion of the city's $12.82 billion identified capital needs over the next five years, an increase of $1.4 billion from the previous year.

The funding gap is largely driven by aging drainage assets and water quality regulatory deadlines coming due in FY 2031.

City officials highlighted the difficulty of financing projects without a dedicated revenue source, noting the city's stormwater fee is currently just 98 cents per month.

The city has reserved $150 million over the five-year period for anticipated emergency stormwater projects due to reactive maintenance needs.

The City Council also approved the issuance of up to $150 million in water revenue bonds to finance capital improvements.

San Diego's five-year capital infrastructure planning outlook for fiscal years 2027-2031 has identified a staggering $5.5 billion need for stormwater infrastructure, making it the city's largest single asset type need and the primary driver of its $7.8 billion general fund funding gap. The Office of the Independent Budget Analyst (IBA) reported that stormwater needs increased by $1.4 billion compared to last year's report. This surge is attributed to aging drainage assets passing their useful life and impending water quality regulatory deadlines due in FY 2031. Flood resilience alone accounts for nearly $1 billion of the increase. With proactive maintenance underfunded, the city is relying heavily on reactive measures. The capital improvement program (CIP) outlook includes $150 million—or $30 million annually—reserved for anticipated emergency stormwater projects. During public comment, a representative from San Diego Coastkeeper noted that emergency spending is an inefficient use of capital, pointing out that the city's emergency stormwater spending surged from $8.9 million in FY 2021 to $93.6 million in FY 2025. Funding for stormwater is expected to drop after FY 2028 due to the planned exhaustion of the city's existing WIFIA loan funds. While the city anticipates $665 million in general fund financing, most of that will be allocated to ensure compliance with the terms of the already executed stormwater WIFIA loan. The core issue, according to city officials, is the lack of a dedicated funding source. Director of Stormwater Todd Snyder explained that without a dedicated fee bringing in consistent revenue, it is difficult to utilize creative financing mechanisms like environmental impact bonds. Currently, stormwater must compete with police, fire, and libraries for general fund dollars. Councilmember Jennifer Campbell highlighted the root of the revenue shortfall, noting that the city's stormwater fee is currently just 98 cents a month—a rate that has not been significantly updated in decades. While acknowledging the political difficulty of raising fees, Campbell stressed that the 98-cent rate is insufficient to close the $5 billion gap and indicated that future fee increases will be necessary to achieve structural balance. In separate consent actions, the City Council approved the issuance of up to $150 million in water revenue bonds to finance capital improvements to the water system. The council also authorized a time extension through October 2027 for the Sewer and AC Water Group 763 Project construction contract with TC Construction, Inc., and extended an as-needed remediation agreement with Luth and Turley, Inc. for water main breaks and sewer backups through June 2028.