Horton Matt
Matt Horton
Associate Director, Center for Regional Economics
Matt Horton is an associate director of the Milken Institute Center for Regional Economics. In that capacity, he interacts with government officials, business leaders, and other key stakeholders to provide outreach and support for California research and policy efforts while developing programming and coordinating Forums, briefings, and stakeholder meetings. He also monitors policy...
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Beyond the bond: How to manage water in California

By: Matt Horton
August 21, 2014

More than 80 percent of California is facing severe drought conditions, yet half of water customers in Sacramento pay a flat rate no matter how much water they use. Last month, a 93-year-old water main burst in Los Angeles, losing an estimated 8 million to 10 million gallons in four hours. Before we invest significantly more money in California’s water infrastructure, we first need to manage it properly. Our outdated, crumbling system depends upon it. 

The first step in water management is crystal clear­—measure use. As the population rises and climate change makes rainfall less predictable, water scarcity is a real threat to California’s livelihood. Yet there are still 255,000 homes and businesses that do not have meters to track use. These 42 communities guzzle 40 percent more water per capita than the state average, yet pay only $20 to $35 a month for unlimited use. To manage water effectively, we have to measure everyone’s consumption.

Strides have been made towards closing this gap. A law signed by Gov. Arnold Schwarzenegger in 2005 mandated that every home and business will be metered by 2025. Yet given our multiyear drought, can we really wait another decade for these communities to catch up? Legislators should provide financial incentives now to ensure that metering every customer is a top priority in these communities. Metering alone has already produced gains. For example, Fresno saw a 20 percent decrease in water use a year after installing the last meter in 2012.

The next step: pricing. Every city and water agency in California should adopt a tiered water-pricing system. If you use more, you pay more. Although increasingly efficient in its use, California’s multibillion-dollar agriculture industry still soaks up 80 percent of the state’s water.  Effective pricing of both urban and agricultural water use would incentivize conservation while creating a reliable revenue stream for maintaining and expanding the state’s infrastructure.


Sources: Public Policy Institute of California, CA Department of Finance, Bureau of Economic Analysis, Milken Institute.

Over the next 21 years, the population in Southern California–including Orange, Imperial, Los Angeles, Riverside, San Bernardino, San Diego, and Ventura counties–is forecast to reach 22 million by 2035, an increase of almost 5 million people. That would be equivalent to adding nearly double the population of Chicago[1] to Southern California. As the data above suggest, any increase in regional population means residents would be forced to contend for the limited urban water supplies. When you also factor in how population growth increases the stress on ailing local infrastructure, the need for conservation is clear.

The third step in this process relies on our approach to infrastructure investments. By some accounts, California will need to invest in excess of $765 billion on such improvements over the next 10 years, $21.7 billion of that toward water infrastructure alone. On a local level, Los Angeles officials recently raised the idea of asking voters to consider a half-cent sales tax and a separate bond measure to raise more than $4 billion to fix the city’s rapidly degrading infrastructure. Both proposals failed to garner the necessary political support, which bodes ill for the future. But the cost of putting one’s head in the sand politically is high. According to City Councilman Mitch Englander, improvement costs are estimated to double each decade, underscoring the need for efficiency in allocating capital to the task.

This is not to say that accommodating potential growth and associated infrastructure costs will be a simple matter. Failing to address these challenges, however, may precipitate a reduction in anticipated growth over the long term while guaranteeing the further erosion of a once-vibrant economy. Viewed from the perspectives of both physical infrastructure and political feasibility, our conservation challenge can be addressed through state investments in capital improvements along with the treatment of water as an increasingly scarce commodity.

Before we get hasty and support the claim that people be forced to flee their homes because California will revert to a vast desert state, let’s first consider these practical solutions for our water infrastructure needs and management challengeswhile planning for a future that can accommodate all Californians.

1. SCAG 2012 Regional Transportation Plan and Sustainable Communities Strategy:; and SANDAG: