Joseph Krist
Publisher
WESTERN WATER
According to Arizona state water officials, the federal government has proposed a plan for the drought stricken Colorado River that could cut up to 40% of current supplies to Arizona, California and Nevada. Under the 10-year plan, which will be finalized in June, the annual amount of water delivered to Arizona, California and Nevada could be reduced by as much as 3m acre-feet.
The actual level of water cuts across the three lower-basin states would be based on the “priority of the law of the river”. That law, the 1922 Colorado River Compact, gives California the highest priority for water use. Two weeks ago, California, Arizona and Nevada announced their own proposal for voluntary water reductions up to 3.25m acre-feet through 2028. Under their offer, Arizona’s water flow would be slashed by 760 acre-feet, California by 440 acre-feet and Nevada by 50 acre-feet.
Hoover Dam is receiving approximately $52 million for investments in critical infrastructure. A significant portion of the funding will be used to purchase and replace up to three older turbines with wide-head turbines, which are designed to operate at lake elevations below 1035’. These turbines are expected to restore at least 160 megawatts of hydropower capacity and will help mitigate impacts caused by the ongoing drought. Due to the unprecedented drought, generation has decreased by about 30 percent.
The impacts of the drought are not only impacting human demand for water. In order to preserve endangered fish populations downstream, Glen Canyon Dam in northern Arizona is proposing to do what is known as a “cool mix flow,” where cold water is released from deep in its reservoir to cool the river downstream. If the cool water release is approved, it would likely happen from June to October through jet tubes, bypassing the turbines near the warmer surface.
Significant power generation is lost during the cooling process. During the cool water releases in 2024, nearly 900,000 acre-feet of water bypassed the generators, costing $19 million in replacement energy costs, according to the Bureau of Reclamation. Those costs are spread among a customer base of some 155 electric utilities across the Southwest and California.
ALASKA TAX PROPOSAL
In Alaska. a special legislative session is underway to consider tax incentives for a long-proposed pipeline to carry natural gas from the North Slope to Gulf of Alaska ports. The governor has called lawmakers into a special session to pass a bill imposing major changes in the property tax system that has been the main source of revenue for several Alaska local governments.
Under his proposal — which lawmakers took up but failed to approve before the end of the just-concluded regular session — the state and local governments would eliminate 90% of the property tax that would be levied on pipeline-related infrastructure. In exchange, the bill would replace state and local petroleum property taxes with an “alternative volumetric tax” on natural gas that would eventually flow through the pipeline.
The proposal is being driven by one corporate interest – a pipeline developer. The project is presented as being a quite profitable venture but that is only if the project does not have to pay the taxes. The claim is that potential investors would not be attracted if the project had to pay property taxes. What is glossed over is the shift of risk to the local governments in that if the tax is paid based on flow volumes and there is no flow, there are no revenues. It replaces a level of certainty with real risk to the governments.
DATA CENTERS
In 2024, a state sales tax exemption for data centers cost Ohio about $555 million in revenue. For facilities that cost $100 million or more to build, the exemption allows developers to avoid up to 100% of Ohio’s 5.75% sales tax for up to 15 years. It had been previously estimated that the amount of revenue foregone would be $136 million. Now, data centers are multiplying across the state. In 2025, the exemption cost $1.6 billion. That is according to the state Department of Taxation.
In the most recent budget legislation, lawmakers voted to end the data center tax break to help finance another round of income tax cuts. Gov. Mike DeWine vetoed the proposal, insisting the tax exemption is needed to lure data center developers to the state. After the veto, the Governor suspended the tax exemption for new data centers. He directed the chair of the Ohio Tax Credit Authority to temporarily halt consideration of new data center tax exemption requests while the Ohio General Assembly “studies the growth” of data centers in the state.
Use of the exemption started in 2016. It was in a period when states thought they were taking care of the problem. Unfortunately, development at this scale and volume was not anticipated. Local sales taxes – another $166.8 million in lost revenue in 2024 – are a direct hit to host localities. Many states facing efforts to limit these tax breaks fall into that category or to declare a moratorium on new data center approvals.
BAY AREA TAX BALLOT
A proposed regional sales tax measure for public transit collected 305,895 signatures across five Bay Area counties. That is well in excess of the 186,000 required to place it on this year’s ballot. Voters in the counties of Alameda, Contra Costa, San Mateo, San Francisco, and Santa Clara will vote this November on the sales tax measure Senate Bill 63 — more commonly known as the Connect Bay Area Act.
In California, a voter-approved regional measure for a new sales tax would normally require a two-thirds majority approval if the Legislature directly places it on a ballot. Transit advocates, however, chose to collect signatures to make the sales tax a citizen-initiated ballot measure that would lower the threshold to a simple majority of votes cast.
FLORIDA PROPERTY TAXES
The Florida legislature has been considering a series of bills to limit, if not lower, local property taxes. Final legislation has been difficult to enact so now the Governor is asking for a special legislative session to consider his proposals to lower property taxes. As proposed by Governor DeSantis, the Save Our Homes proposal includes five major components to provide immediate and permanent relief.
The plan exempts the first $250,000 of a homestead’s value from taxation and requiring, through law, a schedule for full elimination; requires local governments to use remaining property taxes solely for core public needs including public safety, education and schools, infrastructure, and natural resources.
It also limits future property tax assessments on businesses and creates a more stable tax environment for local businesses; requires any person who establishes Florida residency after January 1, 2027, to maintain Florida residency for up to five years prior to receiving the increased homestead exemption; establishes a trust fund to provide grants to local governments to assist with the continuation of core local services.
DETROIT
S&P Global Ratings raised its long-term rating to ‘BBB+’ from ‘BBB’ on Detroit’s previously issued unlimited tax general obligation bonds. The outlook is stable. The stable outlook reflects a view that Detroit’s strong fiscal discipline and robust planning efforts, coupled with its strong budget position, capacity to cut costs, and substantial reserves, will help sustain the city’s credit conditions in line with the ‘BBB+’ rating against a backdrop of an uncertain federal policy and geopolitical environment that could lead to weaker economic trends over the outlook period.
Moody’s has upgraded the City of Detroit, MI’s issuer and general obligation unlimited tax ratings to A3 from Baa1. The outlook was maintained at stable. They said the upgrade to A3 reflects the city’s strengthened financial resilience on par with A3 peers, supported by consistently solid operating performance, strong reserves, low leverage and good governance practices. These characteristics will provide financial flexibility amid slow revenue growth in fiscal 2026 and heightened economic uncertainty.
Both ratings also acknowledge the continuing trend of population declines and high levels of poverty. They also cite concerns about the auto industry. Those have been highlighted by the federal efforts to slow if not halt electric vehicle production. Nevertheless, the improvement in the City’s financial condition continues.
NEW YORK STATE BUDGET
Some 57 days into the 2027 New York State fiscal year, a budget has finally been enacted. It includes record spending of some $269 billion. The budget includes a tax on second homes in NYC with values in excess of $1 million market value. It also includes pension funding changes which will cost NYC more in the future than is saved currently. It effectively reverses pension reforms enacted some 15 years ago.
It is clearly a budget which reflects the reality that 2026 is a particularly contentious election year in NY. Lawmakers set aside $1 billion to send relief checks to New Yorkers in order to help residents cope with the state’s high gas and electric bills this past winter. They also eliminated the income tax on tipped wages and created a 100 percent property tax exemption for disabled veterans.
Lawmakers agreed to scale back some of the state’s climate mandates under the Climate Leadership and Community Protection Act. It comes after the State’s difficult winter where substantially lower daily temperatures drove spikes in customer bills. A bill would eliminate regulatory mandates related to New York’s 2030 emissions goal and it would push previously set deadlines to enact additional clean energy requirements.
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