Californians won’t have water service turned off for unpaid bills during coronavirus crisis, Newsom says

SACRAMENTO —  Californians won’t have their water turned off due to unpaid bills during the coronavirus crisis, and those who already had it turned off will have their service restored, under action taken Thursday by Gov. Gavin Newsom.

The governor’s directive comes in response to calls from environmental justice organizations for assistance to low-income residents facing mounting financial pressures.

“This executive order will help people who have been financially impacted by the COVID-19 pandemic by ensuring they have water service,” Newsom said in a written statement after hinting at the action during an event broadcast online. “Water is critical to our very lives, and in this time it is critically important that it is available for everyone.”

The decision also requires that residential water service be restored to those who had it turned off for lack of payment since March 4, when the statewide coronavirus emergency went into effect.

“People are under enormous pressure economically and the last thing they need to worry about now is not having access to water,” said Steve Fleischli, senior director of water initiatives at the Natural Resources Defense Council.

More than 100 private and public water agencies had already offered help to customers unable to pay their bills, according to Newsom’s office.

Governors in several other states, including Michigan, Ohio and North Carolina, have issued similar orders ensuring that water service won’t be denied to those who don’t pay their bills.

Fleischli said that while the decision by Newsom is welcome news, it won’t help those struggling Californians who had water service shut off due to unpaid bills prior to the public health crisis.

“We think everyone should be connected,” he said. Nor does it address the needs of rural communities that rely on bottled supplies because of contaminants in tap water.

The financial impact to water agencies remains unclear, as does whether the state government might agree to replace lost operating dollars.

Newsom’s order includes small businesses in the moratorium for water shutoffs, though that would likely only apply to those following state or local directives permitting only “essential” businesses to remain open. On Wednesday, Los Angeles Mayor Eric Garcetti approved water shutoffs to nonessential businesses that refuse to close their doors.

The governor also announced on Thursday an additional boost to small business owners, granting them a one-year delay in paying up to $50,000 in sales taxes — money paid by customers and normally sent every month to government officials.

“In essence, it is a bridge loan,” the governor said of the new effort during his webcast. “The money that you’ve already collected, you will not have to pay the state for 12 months. No penalties, no interest — de facto a loan.”

Newsom issued an executive order on Monday that gave businesses until the end of July to comply with sales tax filings. The action taken Thursday pushes out the requirements to a full year. Only businesses that have $5 million or less in taxable sales would be eligible.

But the relief for some business owners could come at the expense of local services. A sizable portion of sales taxes, though sent by businesses to the state, is later returned to cities and counties across California. Dozens of communities have enacted their own local sales taxes, either to pay for basic programs such as public safety or to boost other government services.

A 2018 report by the independent Legislative Analyst’s Office found that slightly more than half of all annual sales and use taxes goes back to local needs.

Newsom’s decision to allow a business to hold onto $50,000 of those tax revenues could mean reduced funds in the coming months for a variety of vital city and county services.

“It’s unclear how this initiative will be implemented, but it simply cannot occur in a manner that redirects county funding and erodes the very services most in need,” Graham Knaus, executive director of the California State Assn. of Counties, said in a written statement. “Counties face dire cash flow challenges due to COVID-19 costs to protect communities and cannot absorb a significant loss of sales tax revenue that would directly impact funding for public safety, public health and behavioral health services.”

A spokesman for the California Department of Finance said there was no immediate plan to replace the delayed local funds with an equal amount of state tax revenue. Newsom has allocated some, but not all, of the $1 billion in emergency response funds approved by the Legislature last month.