Palo Alto objects to paying property taxes to water district


For the past four decades, Palo Alto residents have been paying taxes to a water district without getting a drop of water in return.

The property tax, known as the "State Water Project" tax, is one of three that Palo Alto residents pay to the Santa Clara Valley Water District, the county's primary water agency. The other two taxes pertain to the "Clean Safe Creeks" program that county voters approved in 2000 and for flood control. Because the water district is the county's chief steward of creeks and main flood-protection agency, the city doesn't dispute either of these taxes.

The state-water-project tax is another matter. Palo Alto gets its water from the San Francisco Public Utilities Commission, rather than the water district. This has made the tax for the water infrastructure difficult to swallow for city Utilities Department officials, who have long been urging the water district to revise its funding structure. The City Council is set to dive into the issue later this month, when it holds a public discussion on the topic and then follows up with a closed session to consider potential litigation against the water district.

According to a recent Utilities Department report, Palo Alto residents pay about $1.6 million in property taxes to the district every year for the water project. At the same time, Palo Alto's water rates are going up because of the rising cost of getting water from San Francisco, which relies on the Hetch Hetchy system. That system is currently undergoing its own expensive upgrade, with the city paying its share of the cost. With the price of wholesale water on the rise, the city's rates are expected to increase by 12 percent again this year, according to the most recent projections.

Given these costs, Palo Alto officials have argued for the past five years that the local residents should not also be paying the Santa Clara Valley Water District tax to offset the costs that should be borne by other cities. Gary Kremen, a Palo Alto resident and the founder of who last year won a seat on the water district's board of directors, is leading the charge to eliminate what he considers an unfair arrangement.

On Feb. 4, Kremen took his argument to a meeting of the city's Utilities Advisory Commission, where he found many sympathetic ears.

"Imagine you were living in Palo Alto and you paid your property taxes, but no one allowed your kids to go to JLS or Nixon or Terman (middle schools)," Kremen said. "That's kind of the case here. No one is allowing us to get water from the Santa Clara Valley Water District."

He noted that the northern part of the county has "only 14 percent of the population and we're paying over 25 percent for the state water tax for water we're not given and for these de minimis benefits," which mostly relate to conservation programs.

The utilities commission didn't take any formal actions, but several members were more than a little surprised to learn about the long-standing arrangement.

"I don't know how I was living in Palo Alto for all of these years and didn't know that I was paying a tax for which I wasn't getting any tangible benefits," Commissioner James Cook said during the Feb. 4 discussion. "If it's true, it's totally outrageous to me."

Palo Alto isn't the only city grappling with this dilemma. Steve Jordan, a board member at the Purissima Hills Water District (which like Palo Alto gets its water from San Francisco), expressed a similar frustration. The Purissima district, Jordan told the utilities commission, also shares "the joy of paying the state water budget tax and not getting any water." He also noted that several years ago, when the district's needs exceeded its allocation from the SFPUC, it requested water from the county water district and was denied.

Jordan said that his water district would be happy to work with Palo Alto's attorneys on the issue.

State law gives the county water district the right to levy property taxes to pay for its obligations for the water infrastructure. But the district's decision to use this mechanism to pay for 100 percent of these obligations has continuously rankled officials who believe that at least some portion of the costs should be collected through the water rates. That way, it's the communities that rely on the water district's water that foot the supply costs.

So far, the city has little to show for its years of complaints. In 2011, Utilities Director Valerie Fong brought up the issue in a letter to the district. She noted that much like the local water district, the San Francisco Public Utilities Commission will also be upgrading its infrastructure and expecting its customers to pay their proportionate shares.

"It is troubling to imagine a situation where the citizens and businesses of Palo Alto might bear a disproportionate share of the burden by paying both via property taxes and SFPUC rates," Fong said.

City Manager James Keene made a similar point last month in a letter he submitted to the water district. The Feb. 10 letter urges the district to revise its rates to "address the inequities in assessing North County taxpayers the full cost of a system that they cannot and do not use, while similarly situated South County taxpayers are exempted and the remainder of water customers disproportionately benefit through subsidized rates."

James Fiedler, chief operation officer for the Santa Clara Valley Water District, defended the practice and told the commission that Palo Alto benefits from the district's programs, even if it's not a water customer. One project that the district is looking at is the creation of an intertie linking the Hetch Hetchy system with the water district's system on the west side of the county. This way, each supplier would be able to serve as backup for the other.

"There may be some potential benefit for Palo Alto and to Purissima Hills if such a system were put in place," Fiedler said.

He stressed that the tax can only be used to pay for the district's obligations for water received from the State Water Project, a system approved by voters in 1960. He also highlighted the district's role in recharging the county's groundwater basin and in spearheading water-recycling programs. The district's imported water can be used to recharge groundwater, reducing the probability of surface subsidence and ensuring that there are groundwater supplies available for emergencies.

Palo Alto has consistently countered that it doesn't pump groundwater from its wells and hasn't done so since the 1960s, when it began its arrangement with San Francisco. A recent report from Jane Ratchye, assistant director at the Utilities Department, also emphasized that the city owns its own emergency-supply wells, including the one recently built at El Camino Park.

At the Feb. 4 meeting, Fiedler defended the district's use of the tax and invited Palo Alto officials for discussions about recycled-water projects for which the city's funds can be used.

"We believe there is a benefit that Palo Alto citizens receive from that tax," Fiedler told the commission. "But nonetheless, our board is committed to having an ongoing dialogue to help cost-share the expansion of recycled water in Palo Alto as a way to really provide some equalizer that helps address some of your concerns and stability of water usage."

Keene told the Weekly that the city has a great relationship with the water district, particularly on things like flood control, clean creeks and water recycling. On Feb. 25, Keene, Mayor Karen Holman and utilities staff met with water-district officials, and there was a clear interest, Keene said, in moving ahead with water-recycling efforts and other projects that would be "of benefit to Palo Alto."

But while Keene said the meeting ended "positively," there wasn't a "substantive shift" in the district's stance on the tax.

"It's still problematic for us that the tax levied on our citizens is for something that we don't receive," Keene told the Weekly.

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14 people like this
Posted by Elizabeth
a resident of Midtown
on Mar 13, 2015 at 11:47 am

Well done, Kremen! Way to look out for our costs and benefits. Glad you won the election!

4 people like this
Posted by Lisa Acherman
a resident of Mayfield
on Mar 13, 2015 at 6:16 pm

I don't mind at all, and I know I am non unique for pay for fair taxes. This tax is so stupid. I did not vote for Kremen but now I see that was a mistake. Finally someone who is doing something.

3 people like this
Posted by Counterclockwise
a resident of University South
on Mar 13, 2015 at 10:38 pm

So what would happen if Palo Alto didn't pay the tax? Would they cut off the water they don't deliver? Horrors.

Somebody's all wet -- at city hall.

2 people like this
Posted by Chopper
a resident of College Terrace
on Mar 13, 2015 at 10:46 pm

Counterclockwise -- here is the issue. The tax is on our property tax individually. If you do not pay, they take your house!!


1 person likes this
Posted by Counterclockwise
a resident of University South
on Mar 14, 2015 at 4:29 pm

Taxation without remittance, eh? Isn't that how those revolting colonists got that way?

How do we remove these leeches with max disgrace (to them, that is) and get our money back?

2 people like this
Posted by Victor Johnson
a resident of Barron Park
on Mar 15, 2015 at 10:49 am

I had no idea we are paying property taxes for other people's water! Seems like Gary Kremen is doing a great job here

1 person likes this
Posted by SteveU
a resident of Barron Park
on Mar 15, 2015 at 3:43 pm

SteveU is a registered user.

Paying tax on something you CAN NOT use seems wrong

You pay road tax on Gasoline that is used to maintain state and federal roads (right!). You may never drive over the pothole YOUR TAX paid for, but YOU could.

Paying for a disconnected drinking water system in some other city means you could NEVER use that water.
Demand that the interconnect be installed, EVEN IF you never open the valve. It is all about Availability

Palo Alto switched to a 'Meter charge' on the water bill. Even if you do not use a drop, you pay some fee to maintain that 'availability'
SCWD, we paid the fee, make it availabls!

Like this comment
Posted by The Shadow knows.....
a resident of Crescent Park
on Mar 16, 2015 at 1:25 pm

Hmmm - this one's a mixed bag. The City's back up water supply system - in the event a major earthquake disrupts the delivery of Hetch Hetchy water in those pipelines that run across all the major fault lines - is in fact wells drawing from the ground water supply.

So, while we don't use it routinely, we do in fact depend on ground water being available as a reliable secondary supply. I believe those wells are "exercised" and maintained so as to be available on short notice.

I don't think this one is as bad as it sounds on first blush, once all the facts are known. It seems like there ought to be some sort of middle ground on this one......

1 person likes this
Posted by Gary Bradski
a resident of Greenmeadow
on Oct 26, 2015 at 9:36 am

Nothing done on this that I know of since March. I calculate that $24M dollars would buy us a desalination plant that would more than cover each resident's use of water in Palo Alto. Lets have them build that as a backup system, along with a pipe to sell water to others when we don't need it.

How's that for an actual benefit for our taxes?

1 person likes this
Posted by Counterclockwise
a resident of University South
on Oct 26, 2015 at 11:07 am


The water district recharges the aquifer only in the South County. We are on our own. That's why the city should stop allowing the insane pumping of groundwater for needless private basements.

1 person likes this
Posted by Tread
a resident of Another Palo Alto neighborhood
on Oct 27, 2015 at 7:32 am

There might have been an argument by the district if they had given Los Altos Hills the water when they requested it. But they got no water.

Saying we might in the future possibly get some benefit for the tax we pay that has not resulted in anybenefit fir decades is ridiculous. I hope officials will press for a full refund, to be paid in a surcharge over time in usage by those whose water has been subsidized all this time (prorated by income, so as not to soak the poor).

On the other hand we personally pay far more to the school district to educate other people's kids but can't send our own because they are so messed up with little recourse by parents. My politics never swung toward vouchers, but now I truly wish someone would pursue them. In the meantime, a refund for the water district we don't seem to actually belong to except to be soaked to pay is in order.

Like this comment
Posted by Thomas Busse
a resident of another community
on Jul 11, 2017 at 2:08 am

Is this an AB8 allocation or a Water district GO bond override tax? If it's an AB8 allocation, the legislature can change it. If it's a bond override, Paulo Alto should go to the LAFCO and adjust the water district boundary.

Sorry, but further commenting on this topic has been closed.

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