MWD clears path for property tax hikes to backstop Delta Tunnel funding

MWD clears path for property tax hikes to backstop Delta Tunnel fundingThe Metropolitan Water District of Southern California has approved a measure to bypass a statutory limit on its ad valorem property tax revenue for the next decade. The move shores up the utility’s fixed revenues as water sales decline but faces criticism for paving the way to fund the multi-billion-dollar Delta Conveyance Project.

The MWD board voted to find its ad valorem property tax rate limitation 'not applicable' for fiscal years 2026/27 through 2035/36.

The decision is officially justified as 'essential to Metropolitan's fiscal integrity' and is aligned with its 10-year financial forecast.

Critics, including the Sierra Club, argue the move is designed to fund MWD's estimated $10.1 billion share of the Delta Conveyance Project.

Ad valorem tax revenues are legally restricted for State Water Project-related expenses, directly linking the funds to the Delta project.

Opponents question the fairness of raising property taxes on consumers who are using less water and dispute MWD's cost estimates for the tunnel project.

The Metropolitan Water District of Southern California (MWD) has taken a decisive step to secure long-term funding for its capital-intensive agenda, voting on 18 November 2025 to bypass a statutory limitation on its ability to collect property taxes for a ten-year period. The board approved a resolution finding that the ad valorem property tax rate limitation under MWD Act Section 124.5 is 'not applicable' for fiscal years 2026/27 through 2035/36. The official justification, as read into the record from the finance committee's recommendation, is that collecting taxes in excess of the limitation is 'essential to Metropolitan's fiscal integrity'. This move provides the wholesale giant with a more stable and predictable revenue stream as income from volumetric water sales becomes increasingly volatile due to conservation and declining demand. The decision, however, was met with sharp criticism from environmental groups who see it as a clear maneuver to fund the district's share of the controversial Delta Conveyance Project (DCP), also known as the Delta Tunnel. During the public hearing, Katie Wagner of the Sierra Club directly challenged the utility's motives and financial assumptions. 'Ad valorem taxes can only be used for State Water Project related expenses,' Wagner noted, adding, 'this effectively means these funds could be used to advance the Delta Conveyance Project, a project the public has repeatedly shown it does not support.' The financial stakes are immense. Wagner pointed out a significant discrepancy in cost projections, noting that while MWD's presentation slides estimate its share of the DCP at $10.1 billion, her analysis suggests the actual cost to the district could be between $28 billion and $47 billion, based on MWD taking a 47% share of a total project cost she estimates at $60-100 billion. 'Meeting those levels of spending would require unprecedented increases in both property taxes and water rates,' she warned. The board's action formalizes a key component of its long-term financial strategy, which has been under discussion as part of its 'Camp for Water' initiative to reassess the district's business model. The core challenge is balancing fixed costs for massive infrastructure against variable revenues. By leaning more heavily on property taxes—a fixed revenue source—MWD can better insulate its budget from the impacts of fluctuating water sales. The debate also touched on fairness and equity. 'If water sales are declining because overall water use is going down, is it fair to ask people to pay more in property taxes when they are using less water?' Wagner asked the board. Her comments underscore a growing tension for utilities rewarding conservation while needing to maintain revenue stability to operate and invest in infrastructure. The board action, designated as Item 8-2, was passed by the board following a recommendation from its Finance, Affordability, Asset Management and Efficiency Committee. The resolution passed with broad support as part of a block vote on several action items. While the move shores up MWD's financial foundation, it also politically commits the district further down the path of major capital investment in the State Water Project system. The decision comes shortly after MWD's general manager reported a positive financial development: the receipt of a $75 million payment from the California Department of Water Resources to settle long-standing protested charges under the State Water Contract. While a significant sum, it is dwarfed by the long-term funding commitments implied by the property tax decision. By clearing this fiscal hurdle, MWD has strengthened its ability to finance its share of the Delta tunnel, shifting the funding debate from a question of 'if' to 'how', and placing property owners across its vast service area in line to foot a significant portion of the bill.