Prop 1 oversight hearing, part 3: Looking ahead: Stakeholder recommendations for maximizing public benefits

Stakeholders discuss how the $7.5 billion in bond funds should be spent to benefit the most Californians
Capitol lobby statue

“Columbus’ Last Appeal to Queen Isabella,” inside lobby of state capitol building

The passage of Proposition 1 last November provided $7.5 billion in funding for a variety of water projects and activities, such as water storage, watershed protection and restoration, groundwater sustainability, regional water management, drinking water quality, and flood protection.  The Governor’s proposed budget for 2015-16 includes the first disbursements of funds from the measure.

On February 10, the Assembly Committee on Water, Parks, and Wildlife held on information oversight hearing on Proposition 1, the water bond.  In this third and final portion of coverage from the hearing, Lester Snow, Executive Director of the California Water Foundation; Cindy Tuck, Deputy Director of the Association of California Water Agencies; Chris Scheuring, Managing Counsel for the California Farm Bureau Federation; Omar Carrillo, Senior Policy Analyst with the Community Water Center; and Doug Obegi, Senior Attorney with the Natural Resources Defense Council’s Water Program offers their suggestions on how the bond funds can best be utilized to achieve the most public benefits.

LESTER SNOW, Executive Director, California Water Foundation

Lester Snow began by putting the bond in context of the current water resource situation. “California for several decades has a steady decline in reliability,” he said. “Our water resource reality has been changing over decades and has been changing faster than our management institutions, policies, and infrastructure has been able to adapt.  So we sit here with a lower level of reliability than what we had probably decades ago, primarily due to climate change but also our interest in protecting and restoring the environment has resulted in this change.”

Lester Snow 2The bond is a significant jump start in terms of reinvesting, because we’ve had decades of deferred investment in our water system, and a diversified portfolio-based approach is essential, he said. “There is no silver bullet,” he said. “You cannot build a reservoir and fix California’s problems. You can’t install ultra low flow toilets and fix California’s problems. It really is about moving forward in a very comprehensive way.”

We want to be quick and effective, but it’s more important to make smart investments than quick investments,” Mr. Snow added. “We will regret those.”

The drought has revealed fundamental weaknesses in our system, and we don’t know how long it will last, he said. He then gave some key points:

An opportunity for an integrated approach: Mr. Snow pointed out that an integrated approach will allow for the maximum impact from investments. “The Los Angeles area provides a good example of a need to coordinate the bond,” he said. “They have had a historic groundwater contamination problem in the San Fernando basin and they need to clean that up. When they clean that up, it will open up opportunities to reclaim wastewater that’s currently discharged to the ocean. It also opens up an opportunity to capture stormwater and put it into the groundwater basins. It gives them a chance to take wet year water and store it in the basin and it gives them a chance for conservation. All of those are separate pots of money, and it’s really important that regions come forward with an integrated approach and the state is able to respond to that integrated approach.”

Additional storage investments are necessary, especially in groundwater storage:We’ve lost snowpack and snowpack isn’t getting any better,” he said. “There’s no question that we need to invest in additional storage. I want to make sure that there’s groundwater storage going on as that’s probably the best way to provide a drought buffer. Capture high flows, get them in our groundwater basins where you can hold them for 4, 5, or 6 years when the next drought comes along. In my opinion, any surface water project needs to be pared with groundwater as that’s the only way for it to be effective. If we had five more surface storage facilities today, they’d all be below normal. We need to get that water in our groundwater basins.”

Need to provide assistance for implementation of new groundwater legislation:As we speak, there are regions struggling with coming together on how to proceed with the Sustainable Groundwater Management Act and we need to provide them assistance. There are some philanthropic foundations that are currently trying to provide assistance, but the state needs to step up and help people form their local agency and get on with the planning.”

Disadvantaged communities:It’s actually quite an embarrassment that in the richest state in the richest nation, people go without safe drinking water,” he said. “The problem is that we can build a shiny facility for them but the O&M costs are outrageous for some of these treatment facilities. I don’t know that the bond can help, but I think the state and perhaps the legislature needs to step up and help solve that problem.”

The bond is just a down payment:It’s not enough,” said Mr. Snow. “Whether you look at the PPIC report from last year or the American Society of Engineers, we’re somewhere $6 – 12 billion a year behind adequate investment to catch up with the reliability we need, so let’s get the bond implemented but let’s look at other issues. Do we need 218 reform to help locals come up with their share of money? When do we start talking about a statewide water fee? These are all things that we need to talk about. We cannot allow there to be a sense that this bond has fixed California’s water problems; we need to be able to move on.”

Spend wisely:Spend wisely and keep an eye on the ball, which is reliable supplies for the economy and the environment,” Mr. Snow. “It’s never too early to start talking about the source of funding.”

CINDY TUCK: Deputy Executive Director, Association of California Water Agencies

Cindy Tuck 1Cindy Tuck said her suggestions for the state fall into three categories:

Efficiency:We agree that there needs to be smart investments, but we do think the money should get out the door, so efficiency is critical,” she said. “We appreciate that the Brown administration is moving forward with the guideline process as the first key step, and we think they are being thoughtful in that area. It’s very important that these processes be transparent and the public is able to provide input.”

The other part of efficiency is the timing of the amounts that is disbursed each year, she said. “For some categories, water recycling is a good example – that money can go out quickly and there are projects that will have more recycled water and that will help our water supply reliability problem, so those things should move forward quickly,” she said. “There’s $100 million for the planning part of implementing the new groundwater law from last year, and the Governor’s budget has $21.3 million in it for this year; we’re looking at is that the right number, but certainly you don’t want to take too many years for getting that pot of money out or it’s not going to be in time to help the new agencies plan for sustainable groundwater management, so we’re looking very carefully at that pot, which is a very important pot.”

Effectiveness:The words of the act are very important so the guidelines have to be consistent with the law, but I think another important point is that the funding needs to be meaningful,” she said. “We need to make sure that real projects go forward that are going to make a difference, and the devils’ in the detail on the guidelines. For example, recycling again, if there’s a cap in the guidelines that says you can only have $5 million per project, then that’s not going to be significant for some of the larger projects going forward. So it’s key to look at some of those details that may not be in the statute but are in the guidelines and we’ll be participating in some of those key processes.”

Accountability:   “Part of it is how much money got out the door, but more important is having a look at what the outcomes are,” she said. “Particularly on the water supply reliability money, what are the outcomes from the money? For the storage investments, what additional capacity in storage do we gain from the projects that are approved? How much more recycled water will we have because of the funding that went to those projects? It’s really obvious, but in some past bond implementation, there really wasn’t a focus on what did we get for the money and I think we owe the public that.”

“So those are my comments,” she concluded. “As Prop 1 implementation goes forward, we stand ready to provide information to the legislature.”

CHRIS SCHEURING, Managing counsel for the California Farm Bureau Federation

Chris Scheuring began by saying that the California Farm Bureau Federation is extremely happy that the bond passed. “It’s a tremendous opportunity after a generation of inactivity or at least not a significant enough activity on the infrastructure front as California has grown and as environmental policy has been overlaid onto our water system,” he said. “I think the recent drought cycle has underscored that. Looking forward, we are looking at comprehensive groundwater regulation, we are looking at a declining snowpack, and we are looking at other climate effects on hydrology which are going to turn this into a much more flashier system. All of that points straight in the direction of the importance of storage in our view.”

Chris Sheuring 2When I listened to testimony before the California Water Commission a couple of weeks ago, there were comments from a certain corner which were somewhat skeptical of the public benefits of surface storage projects,” he said. “It struck me that those same interests just a couple of years ago before the State Board in the informational flow proceedings that the state board entertained, lobbied heavily for lots of in-stream flows for the support of the ecosystem and fisheries. It seems to me that for my money, the fish don’t care where the flows come from, and it’s far better to build forward with this bond money to provide those ecosystem benefits then to pursue policies that result in the retirement of water rights to protect fisheries.”

The only other recommendation I would give is that I detected a bit of shading in Lester Snow’s comments towards groundwater projects,” Mr. Scheuring said. “We certainly think groundwater projects can have many public benefits both direct and indirect, but we would urge the water commission and others going forward and decide how to spend this bond money, to take a very hard look at the projects that are already on the table and that are out front in terms of planning. I am talking about surface storage projects that are well known in the CalFed process and others. … The studies that I have heard show that those projects can provide a tremendous public benefit in their operations and in some respects, some of them are in the advance stages of planning. This bond presents us with a pretty large chunk of money and it may not come around again for a long time, so we ought to be looking at the big opportunities rather than the smaller opportunities as we go forward.”

And with that …

OMAR CARRILLO, Senior Policy Analyst, Community Water Center

Omar Carrillo began by noting that the Community Water Center works with and for rural and small disadvantaged communities, many of which have lacked access to safe, affordable, clean water for many years. Long before the drought declaration of 2014, there were communities who had bad water and were running out of water, he reminded.

Omar CarilloOne of the things that we’ve known for a long time is that that funding is slow to get to these communities and there are many barriers to being able to secure resources,” he said. “We were very active in developing and working with Assemblymember Rendon and other members to make sure to ensure Prop 1 has disadvantaged community-specific resources, specifically those that lack safe drinking water.”

Mr. Carrillo said that the communities are small and lack economies of scale; typically they have populations of 1000 or less; sometimes 200 or below. “We’re talking about severely disadvantaged communities, a lot of which are in rural areas,” he said.

He then gave his recommendations:

Prioritize vulnerable communities and the human right to water:There was $32 billion including this bond in terms of water bond resources that a total since 2000, but only 2% has gone to small communities for drinking water and wastewater resources, so moving forward, we definitely have to focus those resources on these small communities, and those are severely disadvantaged, very small communities,” he said. “We should not prioritize shovel-ready projects over disadvantaged communities. I say this because Prop 84 did actually have a clause in there that prioritized immediate projects versus projects that needed some planning to go ahead, but a lot of the communities that we work with require a lot of work before they actually are shovel-ready, so we should not prioritize shovel-ready over disadvantaged community projects.”

Prioritize technical assistance resources:We should also prioritize technical assistance resources,” he said. “There’s $25 million in Prop 1. We’re talking about project development, community engagement, grant writing, project management, engineering, environmental review, and training and financial assistance. Technical assistance has to help these communities become competitive ultimately for the bricks and mortar, for the permanent source funding.”

Consolidation:We should also look at funding consolidations. Bottom line is that we have 7500 regulated drinking water systems in the state. Some of the systems that we work with would want to work with other systems to consolidate, so maybe several small systems can come together. The state should look aggressively into transitioning some of these small communities towards consolidation for a more permanent water source, and be more sustainable.”

Operations & Maintenance costs:Funding O&M is critical,” he said. “A lot of those costs are associated with operations and maintaining their systems, so we should look at not just at Prop 1, but we should look at other sources. The state has cleanup and abatement resources that help communities that have contaminated drinking water; we should also look more aggressively at a water surcharge, a public goods charge, and maybe even looking at some of the key contaminants such as fertilizer fees. Those are all ways of addressing some of the major issues impacting some of these communities.”

Developing an office within the State Water Board for disadvantaged communities:We are big proponents of developing and creating and office within the State Water Board that systematically addresses the issues of small communities,” he said. “What we would like to see is a collaborative effort that starts addressing the list of small systems. Right now we have 183 systems that we know of, but here soon with hex chrome there’s going to be possibly hundreds more, so we know who these systems are. This office would be responsible for working with these small systems to systematically have them work together and consolidate.”

With that, I’ll leave it and just mentioning that we are going into the fourth year of drought,” he said. “Things are going to get more critical and difficult. We look forward to working with all of you and other stakeholders to ensure that communities are safeguarded against drought impacts. The Community Water Center is a resource for all.

DOUG OBEGI, Senior Attorney, Natural Resources Defense Council

Doug Obegi 1Doug Obegi began by saying he is actually very optimistic after listening to the agency panel and after meetings he’s had with them. He then focused on four points:

Accountability mechanisms in the bond text:There are a number of provisions in the bond text that ensure transparency and accountability,” he said. “I’m thinking particularly of the requirement to fund public benefits and not pay for private benefits, so the bond doesn’t pay for existing mitigation or compliance obligations. That makes sure that we’re using public tax dollars to pay for truly public benefits, not private benefits. Similarly, the cost sharing elements of the bond make sure that local agencies that will benefit from projects put their money where their mouth is and that we’re funding good effective projects. Those cost sharing requirements can and should be waived for projects that benefit disadvantaged communities.”

Enhancing accountability:We need to have an agreed upon methodology for evaluating these kinds of projects. Right now one of the problems that we have with the bond is that we don’t necessarily do as good of a job of evaluation and reporting as we should, so we’re recommending that the legislature ensure that agencies are requiring that project proponents and applicants actually do evaluation, monitoring, and reporting back. There also needs to be some agreed upon methodology for quantifying the benefits, whether that’s ecosystem benefits, whether it’s water supply, and the economic benefits as well as benefits to local communities.”

Maximizing benefits:We do need to make sure that we’re looking at multi-benefit projects and that when the agencies are awarding grants, they aren’t just thinking about how much water is this creating, but being able to prioritize projects that serve multiple benefits,” he said. “If you have a floodplain restoration program that has groundwater recharge, creates open space for disadvantaged communities, provides habitat for threatened and endangered fisheries, and still creates a lot of new water, one would hope that kind of project would get ahead in the evaluation process. As the agencies prepare their guidelines, we need to make sure that those kinds of multi-benefit projects do come out either at or near the top and that the value of multi-benefit projects even when they can’t be monetarily quantified are really considered.”

Storage and accountability:The legislature doesn’t have a lot of oversight with storage funding,” he said. “There are some differences of opinion around storage, but by and large, what the storage chapter set up in the bond is that we are funding public benefits not private benefits, they have to be quantified and it’s a competitive process. That’s why groups like the NRDC strongly supported the bond, because we believe that a lot of these groundwater projects will come out on top. We’re not necessarily opposed to all new surface storage projects but we want to see good projects that are cost effective that have ecosystem benefits. The legislature does play one important role with respect to oversight of that storage money, and that is that the other house has oversight responsibility over who serves on the California Water Commission, and that is an important role for the legislature to take to heart as we look at spending $2.7 billion over the coming years.”

Discussion highlights …

Assemblymember Gallagher asked about groundwater storage. “Unless we actually capture more water, where do we get the water to put into the groundwater basins?

Lester Snow 1There’s a couple of approaches,” responded Mr. Snow. “If you proceed with a surface storage facility like Temperance Flat, which is called out in the bond, my comment is you’re going to get very little out of that unless you connect it to groundwater storage. Then you collect those flashy flows, you move them out into recharge basins. The last time we had floods, 2011, there was some experiments down in the valley, a farmer by the name of Don Cameron grabbed some of those flood flows before they got into the San Joaquin River and caused flood damage, and put them out on his fallow fields and effectively recharged water, and so there are opportunities to capture those wet year flows that aren’t kept now for use and have very limited environmental benefits.”

Marc Levine 1Chair Marc Levine asked Doug Obegi to elaborate on how the multi-benefit projects can be encouraged when considering investment of the money.

I think asking of that question of the agencies is the first place to start,” replied Doug Obegi. “I am encouraged because the first set of guidelines that have come out do reward at least a little bit multi-benefit projects … the question becomes how are we quantifying those benefits, and is that enough of a boost for multi-benefit projects. I think it’s probably something that we’re going to need to talk with the agencies more and encourage them to give more points to multi-benefit projects.”

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For other coverage from this hearing …

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