How to finance California’s water projects
Jan 1, 2010
Gov. Arnold Schwarzenegger and the Legislature recently placed an $11.1 billion bond measure on next November’s ballot to finance water-related projects. The Tax Reform Initiative provides a common-sense method of paying off these bonds.
Los Angeles Times correspondent George Skelton quotes California Treasurer Bill Lockyear and writes as follows:
“Farmers essentially want subsidized water — subsidized by the rest of the state,” says Lockyer, a longtime legislator from the east side of San Francisco Bay before being elected attorney general and then treasurer. “Guess I don’t blame them for asking, but shouldn’t users pay, then add it to the cost of their products?”
The agriculture lobby argues that much of the bond money would be spent for “public benefits,” such as Delta environmental restoration. Even so, under the bond provisions, taxpayers could wind up paying for up to half the cost of building new dams that would store water mostly for farmers.
http://www.latimes.com/news/local/politics/la-me-cap17-2009dec17,0,5941984.column
Construction of these water projects will raise land values — both its rental value and its selling value — tremendously in the areas benefiting from the new water supply. Collection of 75% of this increase in rental value will recoup much, perhaps all, of the construction cost involved. This is the revenue that should be used to pay off the bonds sold to raise the funds necessary to build the project.
The water itself could be sold in auction-style bidding to water districts which, in turn, will charge their customers for the water. The proceeds of the sale of the water should more than pay for the operating costs of the project and will likely also cover much of the interest on the bonds. Even when landowners must pay for water they receive, an assured supply of water makes possible many uses of the land which are not possible in the absence of a reliable water supply, thereby greatly increasing both its productivity and its value.
If much of the increase in land value resulting from the construction of the water projects financed by the people of California is not collected by means of a tax on land values, the owners of the land benefitting from the new water supply will be enriched at public expense. The 75% tax on the rental value of land proposed by Prosper California will collect the largest portion of the land value created by all public services (law enforcement & public safety, education, parks, libraries) and publicly-financed infrastructure (water projects, roads, highways & bridges, ports, airports, etc.). Without these publicly financed services and infrastructure projects, California’s land would have little value rather than its enormous current value.
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