Having learned its lessons years ago that it is best to lay out just how much money trouble it faces, the city of San Diego is warning investors it will have to come up with nearly $4 billion over two decades to comply with regulations on how it handles stormwater runoff.
In its newly released Comprehensive Annual Financial Report , city officials are acknowledging they can’t see any way to comply with clean water requirements that does not involve up to $3.96 billion in new costs through 2031. That’s up from $2.7 billion the city told  investors it may have to pay in July .
The money will have to come from the same fund that pays for police, fire protection, parks and other core services. And the compliance will also require private builders to step up their game as well, increasing construction costs.
City officials have been talking about the issue but haven’t presented the long-term problem this starkly in a warning to investors who might purchase city debt. The city has finally learned the full extent of a new pollution permit it received in May from the San Diego Regional Water Quality Control Board.
Essentially, the federal government, the state and this regional agency are interpreting the Clean Water Act  and forcing the city and many others to overhaul how they control for water pollution. The city will have to modify most of the buildings and public assets it owns, while passing on tough new regulations to private developers as well.
The city’s five-year financial outlook  released in November forecast that the city would need to spend $882 million through 2019 to comply.
“These expenditures are mostly unfunded through FY 2019 and there is not a current plan to fully fund these requirements,” the five-year outlook warned. Andrea Tevlin, the City Council’s independent budget analyst, said the city does not know how it will come up with about $547 million of that.
The money will likely have to come from the city’s general fund.
“Every street will have to become a green street,” said Bill Harris, a city spokesman on water issues.
I asked Tevlin how this obligation compares to long-term financial liabilities like what we owe on city employee pensions and health care. “It’s on the same level,” she said.
Unlike pensions, however, a regulatory agency can force the city to act or pay dearly. If the city does not reduce the bacteria entering local waters by a specific amount by 2018, for instance, the Regional Water Quality Control Board could force San Diego to pay a fines of $10,000 per day. The city might also expose itself to lawsuits.
Tevlin said the stormwater liability will have to be part of any discussion about a new megabond  proposal — the infrastructure investment and potential tax increase interim mayor Todd Gloria highlighted in his State of the City address.
“Yes, there are many other needs in the city but this could lead to fines and penalties so it has to be a priority,” she said.
City officials think they might be able to avoid some of this cost but they’re being very cautious.
“These numbers can only go down,” Harris said. “The city is working with the Regional Water Quality Control Board to refine the measurement requirements included in the permit in hopes of adopting different ways of determining what level of pollution a watershed can tolerate. It is possible that we could shave hundreds of millions off our compliance costs. Nonetheless, the city is still looking at a multibillion-dollar potential cost for stormwater compliance over the next 20 years.”
And nobody knows where they’ll find the money.