Burgeoning environmental concerns are complicating efforts to enhance California's water supply, a state official told municipal market participants at a meeting in San Francisco last week.

"People are laying claim to tremendous amounts of water for environmental reasons," Robert Potter, deputy director of the California Department of Water Resources, said at a Standard & Poor's Corp. conference on water and solid waste issues in California.

Mr. Potter said there is a long-cherished saying in California that enough water exists to meet demand as long as it can be transmitted to population centers, but now "it is tougher and tougher to say there is plenty to go around" when pressure is growing to preserve large amounts of supply for environmental reasons.

Major unresolved environmental issues include the amount of freshwater flows necessary to protect the San Francisco Bay and to preserve fish habitats, Mr. Potter noted.

Localities also face financial challenges adjusting to the state's integrated waste management program, which the Legislature adopted in 1989 to divert garbage from landfills and encourage other approaches, such as recycling and composting.

Water and waste bills for consumers will rise to reflect new capital and operating needs, conference participants noted, and Standard & Poor's officials cautioned that the potential for credit erosion is high as local agencies adapt to growing water and waste, management challenges.

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