This paper measures potential inefficiency in California's drinking water infrastructure and investigates its causes and welfare consequences, drawing on a novel dataset that integrates drinking water investments, system performance, local politics, and housing market.  Using eligibility thresholds for federal funds, we demonstrate that weak electoral accountability contributes to infrastructure underinvestment and diminishes the effectiveness of federal funding programs. We then build a dynamic model of local officials' infrastructure investment decision-making, which reveals that investment inefficiencies can arise when officials prioritize certain constituencies and when residents have varying preferences for water quality, particularly under the constrained rate structures common to water and many regulated utilities. We estimate residents' valuations of water quality improvements and officials' preferences over constituents, and using the estimated model, we quantify the extent of investment inefficiencies and assess the potential impacts of policy solutions.