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Demand for Water Rebates in Santa Monica Drying Up  

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By Niki Cervantes
Staff Writer

March 28, 2017 -- Despite the ongoing drought, demand for once popular water-conservation rebates has seen a dramatic drop largely due to a recent change in tax write-offs, according to a new City report.

In Fiscal year 2015-16, the City-funded rebates totaling $1,525,000 for more than 400 customers and helped Santa Monica cut water usage by 20 percent, the state-mandated reduction imposed as California struggled through the historic drought.

In the current fiscal year, which ends June 30, 108 customers have received rebates totaling $433,340, officials said. That's less than one third of last year's total rebates heading into the final quarter.

Most of the blame belongs to the Internal Revenue Service (IRS), which determined the rebates were taxable income, the March 17 report from the Office of Public Works Director Susan Cline said.

As a result, the City and other water agencies started requiring federal W-9 forms from applicants.

By mid-2016, total applications in Santa Monica for the rebates had dropped by 50 percent, Cline said.

The City-funded rebates can total more than $8,000 per customer. Both homeowners and businesses can apply.

Cline said the generous rebates for homeowners in particular encouraged replacing water-thirsty lawns and sprinklers with sustainable landscaping. City officials said this has resulted in the removal of 962,561 square feet of turf since April 2015.

Rebates also are given to customers who install more water-efficient plumbing devices, such as toilets and clothes washers.

Taxing the rebates reduces their values, Cline said, “and can act as a disincentive or barrier to customers taking voluntary measures to reduce water use.”

In a motion on the City Council’s agenda Tuesday, staff recommends that the City join in the coalition of water agencies asking Congress to exempt water conservation and storm water/rainwater management rebates from taxation.

The U.S. Treasury Department endorsed the proposed exemptions in its 2016 tax-code recommendations to Congress, she said.

Moreover, she said, “the Congressional Joint Tax Committee has determined that the impact on the federal budget would be ‘negligible.’”

The drop in demand for rebates is tied to other factors, as well.

Included, Cline said, is a dearth of available landscapers in Santa Monica to do the work, which discourages applicants who must finish their projects within a given time frame (rebate programs run July 1 through May 1, upon Council budget approval).

Water conservation rebates have been popular since the state started demanding that water agencies cut usage to fight the drought, which is entering its fifth year in much of Southern California.

High demand for lawn-replacement rebates from the giant Metropolitan Water District prompted the agency to add another $340 million to fund them in 2015. But all the money was quickly used up.

Santa Monica, which had voted in 2014 to fund a long list of water rebates, did not flinch. In fact, it publicized that the City was still fully funding its rebates.

“Santa Monica is committed to helping everyone save water during this statewide drought,” said Constance Farrell, a City spokesperson.

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