14 Pros and Cons of California’s Prop 72 (Taxes for Rainwater Capture Systems)

Proposition 72 was a proposal in California that went to the voters that would allow the legislature to permit rain-capture systems. It permitted the construction of this option without the requirement of a property tax reassessment if they were completed on private property on or after January 1, 2019. The fiscal impact is probably minor, with a slight decrease in revenues going to local governments because less utility water may be necessary to manage one’s property.

California voters overwhelmingly approved Prop 72, with yes votes accounting for 83.2% of the ballots cast.

The goal of the legislation was to eliminate the tax penalty that some homeowners faced when using water recycling programs on their property. It would work to preserve drinking water access throughout the state, help fish and wildlife management, and lower water bills for those who took advantage of this proposition.

List of the Pros of Prop 72

1. It promotes a higher level of water conservation throughout the state.
The water supplies in California can be severely limited in some years. Extensive drought in some regions has caused lakes to run dry. There is an extensive system to deliver water from the northern areas of the state where the mountains create more moisture so that the farms and public water systems in the south can support the population.

The amount of water available in these systems can be variable each year. If there is less rain and snow, then it can be a challenge to meet some of the local irrigation needs for the year. Prop 72 makes it possible for those in the south to preserve rainwater to reduce their utility needs, while it helps those in north ensure that what they need doesn’t get pumped away.

2. Rainwater systems collect water for use on site.
When a rainwater capture system is available on a property, then there is another way to create an additional supply of water. The recycling program captures the moisture that falls on the roof of a building or directly into a bucket. Pipes then direct the water to large storage tanks. Although this water is not potable without extensive filtering, it is useful for watering plants or flushing a toilet. That is how they can begin to reduce the demand for local water.

It only costs a few hundred dollars to install one of these systems on most properties. It may cost several thousand dollars to install a commercial application, but Prop 72 is intended more for the family farm than the corporate livestock production facility.

3. It follows the trend of other propositions that exclude specific property improvements.
The California property tax system is based on the purchase price of the property. When you buy a home, then your first property tax rate is based on the sales price. Then another 2% is added each year to the bill based on inflation until another sale occurs. Past propositions have told county assessors not to count the value of certain types of improvements, including fire sprinklers, earthquake safety upgrades, and solar panels. Water recycling systems work with this precedent to ensure property owners can improve the value of their land and conservation efforts to make life better.

4. Developers can install water recycling systems with Prop 72.
Homeowners and developers both have the opportunity to create water recycling systems to capture rainwater thanks to the language of Prop 72. That means there is the possibility of adding this option to a new construction project without it impacting the assessed value of the property. Even if the sales price of the system pushes the cost of the property upward, there may still be limitations on the value assessment that limit the tax liability for the owner.

5. Rainwater systems are very easy to maintain.
Using a rainwater harvesting system gives property owners a few advantages because it helps to reduce waste. The cost of these systems is much less than what it would cost to have a purification system or a pump installed on the property. Most systems use a simple bucket that connects to the gutter system of the structure to collect the rain. Keeping this system functioning property takes very little time or energy.

6. It reduces the amount of demand on ground water resources.
As population levels increase in California, the demand for water increases as well. That means there are residential areas that need water sometimes when there isn’t any to provide to the community. That outcome leads to the need to access ground water to meet the daily demands of the community. It is a process that has led to the depletion of ground water in many areas of the state.

Collecting rainwater makes it possible to reduce the demand levels on ground water because it is suitable for irrigation and similar needs. That means there are fewer issues with soil erosion to worry about, a lesser risk of flooding, and fewer water scarcity issues over time. You can wash clothes, cars, and take advantage of other non-drinking functions with this resource.

7. Prop 72 includes the cost of disinfection systems.
If you want to collect and store rainwater for drinking and you have a private water system, then you will need to install a disinfection system to ensure that your water is safe to drink. You may need to speak with your local or state health department for more information about what is expected from local building code requirements. You will need to use filters, UV light, and other products that will eliminate the threat of germs. Boiling your water before use may be necessary as well.

The good news is that the cost of your disinfection systems is typically covered by the language found in Prop 72. You won’t save money on the capital expense of your water recycling system, but it won’t impact the overall value of your property until at least 2028.

List of the Cons of Prop 72

1. It reduces the amount of money that would be available to local governments.
The local governments in California, which include special districts, schools, cities, and counties, have the authority to levy property taxes as a way to raise funds to meet local needs. This process includes a valuation of the assets that are on a property to give it a total value. Any improvements that occur, which would normally include a water recycling system, would create an increase in value that would reflect more tax responsibilities.

Prop 72 takes the authority away from local governments to increase the value of a property based on the installation of water recycling. More than $60 billion per year is raised through this process annually. The potential losses from the installation of these systems could total several million dollars.

2. The property tax exemption for Prop 72 is only temporary.
The language of Prop 72 allows for the construction of rainwater recycling systems starting in 2019 without an impact to the valuation of the property. This benefit is currently scheduled to expire in 2028. Although there is always to potential to extend the deadline with future legislation or propositions, it isn’t a permanent option.

The property tax exemption does not apply to systems that were installed before 2019 during the drought either. Although it may prevent future valuation issues, homeowners who were already saving rainwater proactively are still going to be paying the taxation penalties for this system.

3. Rainfall can be unpredictable.
It is challenging to predict how much rain is going to fall. When California was in the middle of the drought, there were extensive periods between precipitation events at times. That means there isn’t a predictable usage advantage that can come from Prop 72. Homeowners would still need to have access to a utility water source to ensure that all of their needs were met. Municipal supplies would be necessary for drinking water too unless there is a well that the homeowner could access.

4. Water recycling systems are not always cheap to install.
The initial capital cost for a water recycling system might only be a few thousand dollars at most for homeowners, but it can take a long time to recover from this investment. Harvesting systems may not pay for themselves for up to 15 years, depending on the amount of rainwater that the system collects.

You’ll also be performing regular maintenance on your system. Barrels can be prone to mosquitoes, algae, rodents, lizards, and various insects. If you leave open access to the standing water, then it can become a breeding ground for a lot of pests.

5. Not all rainwater systems are safe to use for irrigation.
When a rainwater recycling system is installed on a California property, there are specific roof types that are not suitable for this technology. Prop 72 does not address the viability of product installation – only the purpose of valuation for taxation. Some roof types can seep chemicals into the water that could kill your garden plants or make your produce unsafe to consume. Animal droppings on your shingles could seep into the supply and harm your plants as well. Insects and dirt could create problems as well.

6. Water recycling systems have storage limits to consider.
When homeowners install collection and storage units to process rainwater, then there are restrictions on how much you can gather. Although California doesn’t generally restrict the total amount you can use, the barrels and containers can only store a limited supply of precipitation. If there is a significant storm that drops a lot of moisture, your system may not be able to handle the total amount of liquid that comes to its containers.

There are also space requirements to consider with rainwater collection systems. You need to have enough room for the tank or barrel, the equipment that funnels water to the containers, and whatever distribution systems you may need. If there is not a whole lot of room on your land, then you might not be able to take advantage of the benefits that Prop 72 offers.

7. It only applies to the residents of California.
One of the more interesting aspects of U.S. law is that some of the states consider rainwater to be the property of the local government. You may find that if you start to follow the principles of Prop 72, but live outside of California, that there could be some legal issues that you encounter.

Rainwater is not as pure as people think. You cannot assume that it is safe to drink. It can carry parasites, viruses, bacteria, and chemicals that could make you sick, even if you collect it directly from the sky. Risks from rainwater can vary based on the season, your location, and other geographic issues.

Verdict on the Pros and Cons of Prop 72

California finally saw the end to a 6-year drought in 2018. Many property owners resorted to the collection of rainwater whenever they could because it was the worst shortage of precipitation that the region had seen in over 500 years. Residents were putting rain barrels in their yard, buckets in their showers, and even more complex systems.

Prop 72 changes the definition of a property improvement for this technology. The goal is to help fight future droughts or water shortages by preparing for those circumstances today.

The pros and cons of Prop 72 help homeowners and some businesses prepare for the next drought in California by telling assessors to ignore the installation as part of a property’s value. Because it will help to address future water shortages, no meaningful opposition organized in an attempt to defeat the measure.