At a Special Meeting on Wednesday, December 5, 2018 the Board of Directors of the Santa Clara Valley Water District will consider a letter from the attorney for the City of Palo Alto about the State Water Project tax that SCVWD imposes on parcels in the District. The letter states in part,
The purpose of this letter is to reassert the City’s position that the Santa Clara Valley Water District’s longstanding practice of taxing property owners in Palo Alto and other parts of Santa Clara County who do not receive water from the SWP to pay for the entirety of the District’s SWP contractual obligations, rather than attempting to fund those costs from rate payers who use SWP water, is clearly inequitable and legally tenuous.
Local water districts that undertake SWP funding in the same manner as the District are susceptible to legal challenge by taxpayers, advocacy groups, and public agencies. The City is aware of at least one citizen-initiated effort in another part of the state to redress such unfair taxation, and the impetus to challenge these practices will become greater if SWP costs increase substantially as anticipated.
Under Proposition 26, there is a mandatory nexus between fees and cost of service. For water districts such as Palo Alto and Purissima Hills that rely on water from Hetch-Hetchy, the connection between Santa Clara Valley Water District’s SWP parcel tax and water supply costs is tenuous at best. The SCVWD staff are recommending that the Board not implement the California WaterFix portion of the State Water Project tax until DWR’s CWF bond validation action is successful. The staff powerpoint indicates that the District is also planning to establish grants to water agencies that serve communities in which 85% of water supply is not District-managed up to amount of the State Water Project tax paid.