Joseph Krist

Publisher

Merry Christmas and Happy New Year! Our next issue will be dated January 5, 2026. We will highlight what we expect to see in 2026 as the impacts of current economic policies, especially tariffs begin to come into sharper focus.

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WESTERN WATER

Westlands Water District has long been the poster child for agricultural water interests and their efforts to continue to rely on water shipped from the north. It has long been politically conservative and has been a leading voice in the battle between agricultural and domestic water users. It employs well connected lobbyists and is considered a major Trump supporter. Nevertheless, the so-called Valley Clean Infrastructure Plan remains a “survival strategy” as growers deal with increased restrictions on groundwater pumping.

Case in point: Six of the nine Westlands board members have already signed preliminary agreements to put panels on their own land. This year, Westlands growers fallowed 215,000 of the district’s 614,700 acres, despite two relatively wet back-to-back seasons that saw the federal government deliver 55 percent of its promised supplies.

The approval of the plan’s environmental review Tuesday paves the way for the company working with Westlands, Golden State Clean Energy, to start developing and then selling off the individual solar installations — as many as 20 gigawatts in all — that will fit into the region’s existing patchwork of fields and orchards.

Construction wouldn’t begin until 2028 at the earliest and continue for around a decade — meaning the solar installations are too far in the future to benefit from the federal tax credits that Congress and Trump decided to sunset.

Water flows into Lake Powell — which account for the lion’s share of the river’s inflows — were just 56 percent of average this year, according to a Bureau of Reclamation. state negotiators have been focusing on a short-term, “phase 1” deal that would cover only five years, in order to give states more time to adjust to a first round of water cuts. That plan would require the lower river states of Arizona, California and Nevada to make good on their offer to reduce their water use by 1.5 million acre-feet. Meanwhile, the upstream states of Colorado, Utah, New Mexico and Wyoming would launch a water conservation program.

Water flows into Lake Powell — which account for the lion’s share of the river’s inflows — were just 56 percent of average this year, according to a Bureau of Reclamation. State negotiators have been focusing on a short-term, “phase 1” deal that would cover only five years, in order to give states more time to adjust to a first round of water cuts. That plan would require the lower basin states of Arizona, California and Nevada to make good on their offer to reduce their water use by 1.5 million acre-feet. Meanwhile, the upper basin states of Colorado, Utah, New Mexico and Wyoming would launch a water conservation program.

WELCOME MR. MAYOR

The New York City Independent Budget Office (IBO) by law is required to conduct an independent analysis of what the Mayoral Administration presents. The November Plan outlines the City’s fiscal condition in anticipation for the Preliminary Budget in January. IBO’s 2026 revenue forecast is higher than what the Adams administration presented, as IBO updated its forecast to recognize a more stable economy than the City faced—both nationally and locally—in May.

IBO estimates that the City of New York will end the current fiscal year with a deficit of $380 million. Unlike past years, there is no fiscal cushion to help cover expenses beginning in the 2027 budget. New York City is required by law to have a balanced budget, which means the Preliminary Budget released in January will see this shortfall closed. IBO projects a budget gap of $6.5 billion for 2027 followed by larger gaps: $8.4 billion for 2028 and $8.2 billion for 2029. These amounts represent around 8%-10% of projected City revenues for each of those three years. The Adams administration is forecasting smaller gaps of $4.7 billion in 2027 and $6.3 billion annually from 2028 through 2029.

Some areas of the City’s budget must be fully funded, such as debt service, pensions, retiree health benefits, homeless shelters, and certain educational services. Policy and program areas that are not mandated are open to budget reorganization in the event of a shortfall in planned federal or State funding. Over time, operating surplus as a percent of tax revenues has decreased. Pre-pandemic, the City’s surplus hovered around 7-8% of City tax revenue.

In contrast to past analyses, IBO projects a deficit of $377 million for this year, using the City’s reserves to come to a balanced budget. Deficits for future years ranging from $6.5 billion in 2027 to more than $8.0 billion in 2028 and 2029 will present a challenge for the Mamdani administration, which will need to present a balanced budget for 2027 shortly after taking office. In this last budget put forth by the Adams administration, the City’s full-time workforce headcount was increased by over 1,000 for 2026, and adds 5,000 additional police officers by 2029. This increase, if implemented, would tie the hands of the incoming Mamdani administration, which will face a tighter budget than in recent years.

CHICAGO BUDGET

The Chicago City Council passed a budget by a vote of 30 to 18. The plan falls short of the 34 votes need to block a mayoral veto. In lieu of the head tax that the Mayor was holding out for, the budget passed by the City Council relies on new revenue by increasing the plastic bag tax and liquor taxes, and by adding advertising on city property.

The Civic Federation weighed in on the process this week. The Mayor’s budget was structurally imbalanced, and so is the Council’s alternative. The Council’s budget continues to rely heavily on borrowing for operating costs and one-time revenues, increasing future costs and fiscal risk. The largest one-time revenue source is a massive, destabilizing surplus declaration and sweep of Tax Increment Financing (TIF) accounts.

In Illinois, TIF districts like others across the country capture growth in property tax revenue to fund economic development within designated areas. State law requires that excess, uncommitted funds be released each year and redistributed to local governments. Under the Mayor’s initial proposal, Chicago would receive $232.6 million, while Chicago Public Schools would receive more than $550 million.

The unprecedented surplus reflects two primary drivers: rapidly growing revenue from aging TIF districts nearing the end of their life cycles, and a 2025 policy change that freed up previously held project funds. But these conditions are temporary. Beginning in the coming years, and accelerating after 2030, dozens of TIFs will expire, shrinking the annual surplus and eliminating a revenue source that has increasingly been used to support operating budgets.

The Federation is critical of the fact that neither the Mayor’s initial proposal nor the budget now advancing from the Council reflects meaningful burden sharing across stakeholders: non-union employees and senior executives will receive raises, and no concessions were even sought from labor unions in a heavily unionized city where labor is the largest expenditure category.

COAL IN THE STOCKINGS

The U.S. Department of Energy issued an emergency order requiring Unit 2 of the TransAlta Centrailia Generation plant power plant to keep running for the next 90 days. (Unit 1 was shut down in 2020.) Power plant owner TransAlta had planned to shutter Unit 2 this month, as part of an agreement in place since 2011 with Washington state. State law prohibits utilities from burning coal starting next year. Less than a week ago, TransAlta announced an agreement with utility Puget Sound Energy to convert Unit 2 to gas by late 2028 at a cost of about $600 million. The DOE order claims that ​“an emergency exists” in the Western U.S. grid that justifies this action under Section 202(c) of the Federal Power Act. 

About 27 gigawatts’ worth of coal-fired capacity is scheduled for retirement in the U.S. from now until the end of 2028, according to U.S. Energy Information Administration data, equal to roughly 15% of the nation’s fleet of coal generation.  

MARYLAND BRIDGES

The Maryland Transportation Authority Board voted to approve a proposal that would result in the construction of two new bridges to carry traffic over the Chesapeake Bay and remove the current spans. The approved plan would provide for the construction of two four-lane bridges over the bay, essentially doubling the capacity of the current spans. It would also provide for the widening of U.S. 50/301 to eight lanes to support traffic transitions to the new crossing.

The new bridges would have wider lanes and full shoulders, which could be used by emergency vehicles in the event of a crash. Whenever a new bridge is constructed, there is clamor for bicycle and pedestrian pathways and this plan was no exception. Officials estimated that path would add approximately $1 billion to the total cost. The project is estimated to cost between $15 billion and $17 billion. If all goes as planned, design of the project could begin in 2028 with construction potentially starting in the summer of 2032.

A new bay bridge would have 230 feet vertical clearance over the water, matching that of the Key Bridge when it’s completed.

THE NEW EV ENVIRONMENT

Ford Motor Co. will lay off about 1,500 workers in Kentucky as it converts a plant in Hardin County from making batteries for electric vehicles to making batteries for a new energy storage business. Ford plans to produce LFP prismatic cells, battery energy storage system modules and 20-foot DC container systems at this facility. 

Ford said production of a previously announced electric truck and universal electric vehicle platform to be built in Louisville continues to progress with production set to start in 2027. the terms of the state’s incentive agreement with Ford were being renegotiated. Kentucky had offered $250 million in public funding for the BlueOval SK operation.

OREGON TRANSIT TAX HITS ROADBLOCK

Increases to Oregon’s gas tax, vehicle registration fees and a transit-oriented payroll tax will not go into effect as scheduled next month. These main revenue-raising pieces of the overall bill which passed this Fall would increase the state’s 40-cent-per-gallon gas tax by 6 cents, temporarily double a payroll tax that funds public transit, double registration fees for most vehicles, and nearly triple titling fees.

Opponents of those changes submitted nearly 200,000 signatures to state elections officials in Salem, more than double the roughly 78,000 needed to refer the tax hikes to the November 2026 ballot. State elections officials have until Jan. 29 to determine whether the petition has enough valid signatures. ODOT is still facing a funding shortfall. Nearly 300 ODOT employees quit from July to the beginning of December, according to Communications Director Kevin Glenn, and ODOT has more than 600 vacant full-time positions.

DATA CENTER PUSHBACK

A bipartisan bill introduced Tuesday in the Michigan Legislature would repeal the state’s data center tax incentive laws, which, since their late 2024 approval, have helped attract over a dozen data center proposals. The existing data center laws provide sales and use tax exemptions for big tech companies like Google, Microsoft, Oracle and others that are behind many centers. 

Under an earlier version of the incentive, eligible data centers built between 2020 and 2024 avoided paying about $13 million in taxes, the the Detroit News reported. 

O, CANADA

Total crossings on the Ogdensburg International Bridge are currently down by roughly 25%, and revenue from tolls is down about one third, according to traffic figures discussed at the November meeting of the Ogdensburg Bridge and Port Authority. Traffic numbers remain below average, and revenues from bridge tolls have fallen short of budgeted projections as a consequence. Most recently, October crossing totals fell below numbers from Oct. 2024. There were 39,540 total crossings in October, and noted “that’s down 24% from the same month last year.”

Current numbers fall nearly 33% short of pre-pandemic crossing figures, which board members have regularly described as the most recent “normal” year for bridge traffic. Out of the total Oct. 2025 crossings, 34,588 were automobiles crossings, while 4,952 were trucks and buses, which Lawrence said represents “both falling about quarter year-over-year.” Bridge toll revenue for the month was $88,699, which he said represents a 33% decline from Oct. 2024. 

Out of the total Oct. 2025 crossings, 34,588 were automobiles crossings, while 4,952 were trucks and buses, which Lawrence said represents “both falling about quarter year-over-year.” Bridge toll revenue for the month was $88,699, which  represents a 33% decline from Oct. 2024. 

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