By Keeley Webster, The Bond Buyer
February 2, 2015
The $7.5 billion in bond authority California voters approved in November represents a fraction of what is needed to fund water projects in the state, experts told state lawmakers this week.
"The bond is a down payment on what needs to be done in California," Lester Snow, executive director of the California Water Foundation, told a bond oversight hearing Tuesday held by the Assembly's Water, Parks and Wildlife Committee.
"It gets us started, but it would be a mistake for anyone to think that now that we've passed this bond, our worries are over," said Snow, a former head of the California Natural Resources Agency.
Snow estimated the state would need $6 billion to $12 billion annually for water infrastructure projects.
The committee is charged with mapping out guidelines to deploy the money efficiently and with sufficient accountability to make sure the projects accomplish the bond's goals, according to Assemblymember Marc Levine, who chairs the committee.
"We agree that we need to be smart about the investments, but the money needs to get out the door," said Cindy Tuck, deputy executive director of the Association of California Water Agencies. "We think efficiency is the key."
Some legislators questioned how voters will respond given the state was in a serious drought when the bond measure was passed and remains there if the state delays rolling out projects.
Despite recent rainfall the state is undergoing a very severe drought, the likes of which haven't been seen in 1,200 years, U.S. Secretary of the Interior Sally Jewell said Feb. 6 at a joint press conference in Sacramento with California Gov. Jerry Brown.
She announced that the federal government is setting aside $50 million in federal funds for Western states suffering from droughts, of which $29 million will go for a water reclamation project in California's Central Valley.
Brown bristled a bit in response to a question regarding skepticism voiced by legislators on both sides of the aisle that the $7.5 billion in water bonds will be well spent.
"We are doing our best to spend the money both wisely and quickly," Brown said. "No one wants to keep money in the bank, but we do want to spend it wisely."
Levine has been among those who have expressed skepticism.
"The history of water development in California has been witness to spectacular successes and devastating failures often with respect to the same projects," Levine said. "We have sometimes seen one region benefit at the expense of another."
Speakers who testified at the bond oversight committee hearing put in plugs for their pet projects.
A battle already appears to be shaping up around whether the $2.7 billion earmarked for water storage projects merely pertains to groundwater or surface water storage projects as well.
The legislature has to approve bond money the governor has factored into his state budget proposal, but lawmakers do not get to choose specific projects. They allocate the money to various state agencies to figure out how the money is spent.
Brown's initial budget proposal for fiscal 2015-16 included $1.7 billion to implement what he called the Water Action Plan. Of that, $535.5 million would come from the $7.5 billion water bond.
The proposal includes $178 million for various watershed protection and restoration activities, $137 million for water recycling and desalination projects and $69 million for projects to improve drinking water in disadvantaged communities.
The state's nonpartisan Legislative Analyst's Office, which came out with its 29-page report outlining recommendations a day after the hearing, said Brown's proposals are generally consistent with the intent of the bond, but recommended steps "to better ensure that the most cost-effective projects are selected for funding and that sufficient oversight and evaluation is provided."
The largest chunk of Prop. 1 money, $2.7 billion, bypasses the legislature entirely. That amount set aside in the proposition for water storage projects like dams, reservoirs and groundwater falls under the purview of the California Water Commission.
The remainder of the money is earmarked as follows: $1.495 billion for watershed protection and restoration, $900 million for groundwater sustainability, $810 million for regional water management, $725 million for water recycling and desalination, $520 million for drinking water quality and $395 million for flood protection, according to the LAO.
The water commission's slice of the pie can only be used to cover costs related to the "public benefits" associated with water storage projects such as "restoring habitats, improving water quality, reducing damage from floods, responding to emergencies, and improving recreation," according to Anton Favorini-Csorba, an LAO fiscal and policy analyst, who testified at the hearing.
The LAO's report recommends the state legislature specify what portion and type of activities should be eligible for bond funding, including which water supply and water recycling benefits are "state-level public benefits."
Analysts stipulated that water supply benefits should not be considered state-level public benefits to the extent that they accrue to private entities, such as the ratepayers of a water system.
It recommended the practices aimed at evaluating cost-effectiveness be based on guidelines that insure consistent assumptions about physical conditions and benefits and consistent methods to evaluate benefits and measures of past performance by grantees as a criterion in the selection process.
The LAO also suggested all departments be required to submit staffing plans for all bond-related activities.
According to the report, only some of the administration's proposals for positions to support Proposition 1 activities specify whether they took declining workload from other bonds into account when determining positions needed.
The departments should also clearly outline how the legislature and public will be able to hold departments accountable for their outcomes.
It also asked that the Brown administration add additional information on bond expenditures to its bond website, and produce an annual report on progress implementing the bond.
Some speakers were already looking ahead to the need for additional funding.
"We should look at a water surcharge or fee on contaminants such as fertilizer," said Omar Carillo, a senior policy analyst for the Community Water Center.
Doug Obegi, a senior attorney with the Natural Resources Defense Council Water Program, suggested that the guidelines should make sure that public tax dollars pay for public, not private benefits.
"This may not solve all of our problems, but I am excited about the opportunities this will give us," Tuck said. "California has an enormous need for water projects, so the key will be to effectively leverage this funding."
Levine, D-San Rafael, said the hearing was the legislature's first, but it won't be the last.
"The legislature plans to stay engaged in this process," he said.