California wildfire dilemma: Can the state keep bailing out counties ravaged by disaster?

May 02-- May 2--As embers were dying from the cataclysmic 2018 wildfire season, Gov. Gavin Newsom and California legislators rushed in with tens of millions of dollars in bailout funds for Butte and other counties to keep fire-ravaged areas afloat until they can rebuild their tax base.

It was the humanitarian thing to do, officials said. Now, more Butte County leaders have shown up at the Capitol asking for cash, and describing post-fire woes that are both dramatic and worrisome.

The Paradise water district is asking for $22 million to avoid bankruptcy while it cleans cancer-causing benzene the fire deposited in its pipes, a shocking problem detailed last month in The Sacramento Bee. The Paradise school district is asking for financial help to bus students up the hill to schools in town this fall, though few people will be living there for some time.

The city of Chico, which was not burned, wants $3 million to help it deal with a spike in crime, car crashes, mental health issues and sewage after thousands of fire refugees flocked to town. Oroville is similarly asking for $2 million. Another Butte water district has requested $4 million. An adult day care center in Chico wants $500,000.

It's prompting new questions at the Capitol: How far should the state go to make local governments whole? What other financial requests are lurking around the corner next year and in the following years as California continues to face the threat of destructive wildfires?

"We expect this to happen again," said Lourdes Morales of the Legislative Analyst's Office. "What is the state's role? The state has to figure out what it is going to pay for. That involves policy choices for the legislature: How much? How long? And for what activities?"

Compared to the billion-dollar-plus cost of fighting fires and cleaning up after them, the "backfill" requests for lost revenue from communities are a pittance so far. But the requests are becoming broader. And the state budget won't always be so flush.

Assemblyman James Gallagher, R-Yuba City, who is among those leading the push for state funds, said rebuilding a more modern and resilient Paradise is a must.

Paradise was the biggest town in the West without a sewer system before the fire, officials there say. Gallagher and others want to see one installed, at least in the core area, which could encourage more dense development away from the forested fringes of town.

"Look, every place in California has risk," Gallagher said. "The Bay Area has earthquakes. There is flooding in the Valley. We (can't) say don't build at all. We say: 'How do we build smarter, more resilient and more sustainably?'"

Newsom and the legislature have been benevolent so far. In addition to the January agreement to supply backfill money to some counties (Butte alone will get $24 million over three years), the state also agreed to pay local counties' shares of the debris clean-up bills, which could amount to more than $100 million for just the Camp Fire and Southern California's November Woolsey Fire.

But as Newsom pushes to prepare for and reduce the chances of wildfires, the state is still just learning what wildfire aftermath looks like, what its costs are, and how to deal with it.

The city of Chico presents a dramatic and perhaps unique example of unexpected post-fire issues after the Camp Fire destroyed more than 18,000 buildings and killed 85 residents in the Butte County hills.

City Manager Mark Orme estimates that as many 10,000 to 15,000 former hillside residents are still squeezed into living quarters in Chico six months after the fire. Traffic congestion and car crashes are up, he said. Crime reports and mental health cases are as well. Garbage tonnage and sewage have jumped dramatically.

"Our infrastructure is overwhelmed," Orme said. "I don't think there has ever been an instance like this, where most of one city relocated to one other city. There are all these unanticipated costs. It's a question nobody has an answer to."

An analysis in December suggests extra costs in Chico could amount to more than $6 million this year, and the same next year, but Orme said city officials don't want to demand too much from the state when Paradise and other hill towns need it more. A Chico resident has anonymously given the city $500,000 to hire another police officer, Orme said, a sign that residents are not just looking for state handouts.

The Paradise Irrigation District, which supplied water to nearly 11,000 structures, is in a precarious position as well. The agency has discovered its pipe system is tainted with benzene. But that is not the water agency's only problem. It may not even be its biggest problem.

The district has lost all but 10 percent of its paying customers, and that means 90 percent of it operating budget revenue is gone, leaving it a few months from insolvency. If there is no active water company in Paradise, the city cannot rebuild.

Water officials have asked the state to make their budget whole for the next three years. But state officials have not yet agreed. Instead, they have challenged the agency to explain what it plans to do to remain viable in year four and beyond, given that as many as two-thirds of its former customers may not return or rebuild. Paradise water officials are, in response, drawing up plans for how they could sell water to other users in the state in future years.

The state could require other local governments in fire-damaged areas to conduct similar reinvention exercises, Pepperdine University public policy professor Mike Shires said.

"I don't think there is any sense the state can bail out every local government and hold it harmless," Shires said. "The state needs to be specific, lay out its role: 'Here are the things we will do. You should plan around that.'"

Nicholas Reksten, a University of Redlands economics professor studying climate change, says it may mean some local communities plan to downsize after a disaster. "The state is wary of creating an issue of moral hazard, where simply topping up local operating budgets encourages irresponsible behavior and poor planning, and they would ideally start to develop some processes with this in mind.

"Officials may in some cases need to make a decision not to rebuild infrastructure, which could leave them to adjust to a permanently lower tax base."

On the hillsides of Butte County, officials are unsure how many people will return in the next five or 10 years. The Paradise population was 27,000 until the fire wiped out most of the town. A recent congregational survey at the Paradise Alliance Church found that about two-thirds of burned-out members do not plan to return. That includes many of the congregation's older residents and young families.

Sen. Jim Nielsen, R-Gerber, who is working with Gallagher and other legislators on backfill fund requests, said he also sees an important emerging state role that he calls "front-filling," involving spending money befoe fires on managing and clearing forests and wildlands.

The governor's May budget proposal could offer early clues on the state's approach to financing rebuilds.

A Newsom spokesman last week said the administration is reviewing possibilities. "It is broader than an issue to be viewed just through a fiscal lens," H.D. Palmer, Department of Finance spokesman, said. "Those are broader longer-term issues that will involve a lot of thought at the local level."

Lake County may serve as an example. A whopping 60 percent of the county's land mass was burned in a series of wildfires between 2015 and 2018. The Ranch, River, Pawnee, Rocky, Valley, Jerusalem, Sulpher and Clayton fires destroyed nearly 2,000 homes as well as some tourism businesses, and caused taxpaying residents to flee.

Like Butte, Lake County was struggling back from the recent recession when the fires hit. The state has given the county millions of dollars in bailout funds to help. Lake County officials say they are grateful, but the amount isn't enough to deal with "all of the needs brought by our series of disasters," a county spokesman said. The county tried a sales tax measure in 2018, but it was turned down by voters. Meanwhile, only 17 percent of homes burned in recent fires have been rebuilt.

Lake County has put together a "fiscal crisis management plan" that includes what its executives say are draconian budget cuts. Lake County Administrator Carol Huchingson said the county, which already was operating at 80 percent levels, will reduce permanent position funding another 18 percent by 2022.

Meanwhile, the county has set up a 10-year vision plan to reinvent itself as the Bay Area's last frontier, focusing on its natural environment, its lake, low-cost housing and wineries in hopes of drawing new businesses, workers and residents.

Lake County Supervisor Moke Simon, in an email to The Bee, said backfill payments from the state "are just one piece of the puzzle."

"Recovery means healing as a community," he said. "As we rebuild, we have a real chance to rethink who we are as a county, and what kind of county we want to become. We are taking that chance, and moving forward every day."

Still, county residents' biggest fear, articulated at a series of community forums, is unsurprising: More fires.

Not all counties suffer the fate of Lake or Butte after wildfires. Shasta County Auditor-Controller Brian Muir said his county and the city of Redding have largely maintained their financial equilibrium after the Carr Fire. His county is expecting a backfill from the state of less than $300,000.

Michael Coleman, a local government finance expert and adviser to the League of California Cities, is among those who say any state decisions should be made with the understanding that aid for rebuilding local economies is good for everyone.

"It is a critical function of government to play the humanitarian role," he said, but also, "from a cold cost/benefit analysis, this is a sensible return on investment. This is not money that is going to go down a rabbit hole."

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