I don't understand the financial concern at all. How could increasing the water supply increase the price? It only makes sense to me if the price is artificially low right now.
Environmental damage by a desalinization plant couldn't possibly be worse than overdrawing the acquifer -- the defacto solution.
Because desalination is not economically feasible, the water is more expensive and this extra subsidy raises the cost of the water bill.
This is how it works for the facility in San Diego County.
Building a desalination facility is economically hard to justify because the break-even point seems far away. It also assumes the state won’t eventually create a state-wide solution, which would benefit from a state-level economy of scale that a city/county effort might not.
How would a state-level solution to who deserves water more benefit from economies of scale? This is about as core of an example of where you don't want central planning as you can find.