DELTA STEWARDSHIP COUNCIL: Water Year 2016 in review; Overview of Delta levee assessment district feasibility study

A retrospective look at water operations during Water Year 2016; plus an overview of the Delta Protection Commission’s Delta Flood Risk Management Assessment District Feasibility Study

WATER YEAR 2016 IN REVIEW

The water year for 2016 came to an end on September 30, 2016.  Each successive year of historic drought conditions has brought new water management challenges, and the challenge of managing limited reservoir water supplies for multiple uses has never been more difficult.

dsc-leahighEven though parts of Northern California experienced average to slightly above average precipitation during the year, spring runoff was significantly below average due to factors such as replenishment of depleted soil moisture, increased uptake by vegetation, and less precipitation falling as snow. The April 1 statewide snow water equivalent was 85 percent of average in 2016, but still not enough to achieve average runoff levels.

At the October 27th meeting of the Delta Stewardship Council, John Leahigh, State Water Project operations chief for the Department of Water Resources, briefed the council members on the drought impacts to the operation of the State Water Project, how the State Water Project met challenges due to the fifth straight year of drought, what the outlook is for the upcoming water year, and what the State Water Project prepared in their drought contingency planning.

leahigh-wy2016-slides_page_02Every year presents its unique set of challenges,” began John Leahigh.  “This was the drought monitor as it existed at the beginning of the calendar year, January 12th, and the majority of the state was classified as exceptional or extreme drought conditions as we came into the year.  This drought index takes into account a number of factors: cumulative precip, cumulative temperatures, soil moisture over time.  And as you know we’ve been in pretty dire circumstances.”

Mr. Leahigh then ran down the numbers:  “On a statewide basis, this was the lowest four year period on record, going from 2012 to 2015, and that goes back to records back to 1899.  Right in the middle of that, we had what was an extremely dry period, the driest 13 month period for the Sierra Nevada, and that was from January 2013 through January 2014; the Governor made his proclamation in January of 2014, immediately on the heels of this 13 month period.  It was by far the driest on record.  The last two years have been the warmest two years for the Sacramento Valley by a substantial margin. … We had the smallest and second smallest Sierra snowpacks on record for both 2014 and 2015.”

leahigh-wy2016-slides_page_05Going into the year, the El Nino had heightened expectations for much wetter conditions, but pretty much failed to deliver.  He then presented a slide of the drought monitor for October 25th, noting that the state is mostly still determined to be in drought.  “There really was not much relief at all for south of the Delta.  So it was really unfortunately a poor performer this last year in terms of precipitation as you move south in the state.

Mr. Leahigh presented a graph of the Northern California 8-station index showing precipitation, noting the precipitation for 2014 (red line), 2015 (blue line), and 2016 (green line), and the blue shaded area is average, which is 50” for the Northern Sierra.  He noted that with the rains, it will be one of the wettest Octobers on record.  “We did see above average precipitation for the northern part of the state,” he said.  “Normally I would say that’s fairly insignificant and it is still early, but certainly what these early rains are doing is definitely priming the entire watershed much earlier than is typically the case and so any subsequent storms that we see in November and December should produce runoff a lot earlier than we would typically expect.  This is somewhat encouraging going into the 2017 year.”

He then presented the same chart for the San Joaquin basin, noting that they had about average precipitation, but the two prior years had about half the average.  “All the indicators are, even though the Sacramento has been dry, the San Joaquin has been that much drier,” he said.

leahigh-wy2016-slides_page_08He presented a chart showing the runoff indices, pointing out that this is ‘where the rubber meets the road.’  “The precipitation parameters are nice to look at, but we really work with the actual runoff that’s observed,” he said.  “You can see substantial improvements in the Sacramento Valley, but still below average … even though we had the above normal precipitation, the result because of the dry soil moisture and groundwater levels over the last few years, that above average precipitation resulted in below average runoff, so we’re still trying to work our way out of this drought condition.  The same with the San Joaquin runoff; it was extremely low the last two years, and again, even with average precipitation, still below average on runoff for the San Joaquin Valley.”

leahigh-wy2016-slides_page_09In terms of water storage, there is a vast improvement in water storage over the previous tow years, but still lagging behind the average for where storage conditions have been historically for this time of year, Mr. Leahigh said.  “Shasta Reservoir is in the best shape of all of the reservoirs, and that was really by design,” he said.  “There was a concerted effort to conserve cold water pool in Shasta Reservoir to operate what I venture would be a conservative operation. … I think that was largely successful, but not at a cost to other uses in the system.  Much of the requirements downstream in the Delta, much of that was shifted primarily to Folsom and to Lake Oroville … the State Water Project covered essentially a little over 100,000 acre-feet of additional releases from Oroville then we would typically have been required under our Coordinated Operations Agreement with the Central Valley Project.  That was a temporary condition through the summer, just to aid in that protection of cold water pool in Shasta Reservoir, so that was one of the big changes this year in terms of operations between the two projects.”

leahigh-wy2016-slides_page_11He then presented a graph of storage in San Luis Reservoir, noting that this reservoir is operated differently than the others.  “It’s cycled on an annual basis for the most part,” he said.  “The attempt is made to allocate most every drop that we’re able to capture in San Luis Reservoir as part of the SWP and CVP allocations.  We did see much lower than normal storages this year as opposed to the last two years.  Typically end of August early September, that is the low point.  Typically you would see storages lower in dry years because of the relatively low allocations that are made; for the most part those deliveries are made in the year that they are allocated, whereas in average to wetter years with higher allocations, the water contractors will sometimes hold some of that water in San Luis in preparation for a future year that could be dry.  So typically the case is we do run lower in storage in San Luis in the dry years.

“This year, there were some additional struggles that had to do with the inability to release water from Shasta because of the commitment to meet better conditions on the Sacramento River as far as temperature,” he continued.  “Also San Joaquin River flows were extremely low again this year, as they have been in 14 and 15, and that creates a dynamic in the Delta that makes it difficult to move stored water from the Sacramento basin to the pumps in the south part of the Delta.  It’s a less efficient operation with the lack of San Joaquin flow.”

In addition, as has been the case the last couple of years, there were higher stages in the Delta that required additional releases in order to repel salinity intrusion.  “We did see a bit of an anomaly of higher than expected stages.  Now some of that has been attributed to the blob conditions – the warmer sea surface temperatures that occurred in the latitudes and the thermal expansion associated with that is attributed to some of that increase.  So that was a factor that created lower exports than we would have anticipated this summer and therefore San Luis was lower than anticipated.”

Mr. Leahigh noted that the Central Valley Project allocated every drop in their share of San Luis, with the State Water Project covering the dead pool storage.

leahigh-wy2016-slides_page_12Mr. Leahigh noted that the previous two water year classifications for both the Sacramento Valley and the San Joaquin Valley have been critically dry.  This last year, the Sacramento Valley improved to below normal, extending the streak to nine out of the last ten years having below normal or drier year types for the Sacramento Valley, he said.  The San Joaquin did not improve as much; it was dry year classification for this year.  The snowpack did improve from the dismally low 25% and 5% the last two years; it was 85% so it was still subpar, but it certainly was a big improvement from what we’ve seen.

Much of the increase in runoff directly resulted in increased Delta outflow, more than double the outflow the previous two years, he said.  “Summer outflow was also double, which on the dry years, that’s almost all supplemental flow that’s provided from the projects to a large extent,” he said.  “You can see just by operating to the below normal standards as part of the board standards, that produced double the outflow that we’ve seen in 2014, 2015.  If you recall those two years, not only were we operating to critically dry year standards, we also petitioned the board to modify those further downward in terms of outflow, just because of lack of supply to even meet the critically dry standards, so there were substantial improvements in Delta outflows.”

leahigh-wy2016-slides_page_13Water deliveries were improved this year over previous years, which have been very low in previous years.  “60% is a decent amount for the State Water Project, but still not fully meeting a level that would really help us completely dig out of the dismally low deliveries that we’ve seen the last couple years,” he said.

Mr. Leahigh noted that in previous years, due to lack of stored water and direct runoff, they petitioned the State Water Board to modify board standards, but that was not necessary for the Sacramento and Delta standards this year.  “We met all of those below normal type standards that resulted in the much higher Delta outflow.  The San Joaquin River is still hurting and Central Valley Project did have to continue to petition the board for additional modifications to flow standards this year in 2016.”

The State Water Board lifted the 25% mandatory cut on water use last year, as well as some of the curtailments of some post 1914 water rights, he said.  There was no need for a salinity barrier as in the previous years.  Temperatures in the Sacramento River were improved this year, relative to the last couple of years.

The Real Time Drought Operations Team (RTDOT), an interagency group of the fishery agencies, water projects, and the water board formed in 2014, still continued to meet through the year and continues to meet this year.  “One thing we’ve learned is you really need to be flexible and nimble in making some of these decisions.  Having that process in place is already a step forward in terms of being able to react to conditions as they come.”

The current outlook for the next three months from NOAA are for warmer conditions for California and much of the country; the expectations for 2017 for precipitation is a La Nina condition, which typically means drier conditions in the south; the outlook is for equal chances, he said.

Mr. Leahigh had a word of caution, though.  “Of all the signals of El Ninos and La Ninas, strong La Ninas tend to have the strongest signal in terms of predictability, and that’s for the drier in the south.  That being said, a point of optimism is that the last strong La Nina we had was 2010-11 and Los Angeles had 30% wetter than normal conditions.  So you have to take these seasonal forecasts with a grain of salt; they are certainly not predictive by any measure, but just to give you a feel for the probability bias.”

So in conclusion, “I think the key messages would be flexibility, nimbleness, and the fact that we have processes in place that would help us react to whatever we end up seeing in the coming year; there’s always a new challenge with respect to the hydrologic pattern and the regulatory environment, so just having those processes in place puts us one step forward.”

During the discussion period, Councilmember Patrick Johnston asked, “When you are evaluating whether to ask for modification in board standards, like for Bay Delta salinity standard, what is the relationship between that request and the expectations for contracted water?

If you look back at 2014 and 2015, you could put the sources of supply that’s available to the projects to manage into two major categories,” Mr. Leahigh said.  “One is the direct diversion of winter/spring flows that are occurring in the system; we are diverting water in the upstream reservoirs, some of that is passing through the reservoirs, and it’s also combining with runoff that’s produced in the valley itself, and those are excess flows that we can directly divert at the south Delta diversion points, at Banks and at Jones.  That operation is typically happening in the winter and in the spring.  If we don’t pick it up, it ends up in the Bay and into the ocean.”

The second category of supply that we manage is the stored water that we have collected in Shasta, Oroville, Folsom, over the winter and the spring,” Mr. Leahigh continued.  “We release that water during the summer to meet the in-basin uses, so it would be to meet the demands of senior settlement water rights contractors and also to meet the Bay Delta standards.  If there’s anything additional that’s available from storage, then we will release that water for export at the pumps for our south of Delta deliveries.”

In 2014 and 2015, there was not enough storage for any south of Delta deliveries; in fact, there wasn’t even enough to meet all of the settlement and salinity requirements, and that’s why we asked for modification.  Where the 5% and the 20% allocations came from was that excess flow that we were capturing in the wintertime that we put into San Luis Reservoir, so there was no stored water that was applied towards our south of Delta customers in 14 and 15.  All of that was used to meet the higher priority needs which are the senior water rights holders and meeting the Bay Delta standards, and there was no storage available for our south of Delta contractors.”

Now this year we had a substantial amount to meet both,” said Mr. Leahigh.  “We had plenty to meet 100% for the settlement contractors, we were able to meet all of the below normal standards that were required this year in the Sacramento and Delta, and then there was also a significant amount of water that was available to bolster the SWP allocation to 60%, so that’s the big change this year versus the last two years.  We had stored water to apply to our south of Delta customers.”

Related meeting materials …

OVERVIEW OF THE DPC’S DELTA FLOOD RISK MANAGEMENT ASSESSMENT DISTRICT FEASIBILITY STUDY

The Delta is defined by its levees – about 1100 miles of them, surrounding 146 islands and tracts, protecting the lands, lives, and infrastructure that live behind them.  However, maintaining and improving Delta levees is expensive: recent estimates peg the cost of bringing the Delta levees up to state and federal design standards at $1.3 to $3 billion, and that’s just a fraction of the $50 billion needed overall statewide for flood control infrastructure.

Funding for Delta levee improvements has primarily come from the Department of Water Resources ­­with a portion of those expenditures being matched by funds from local reclamation districts.  But these funding sources don’t capture funding from the multitudes of other beneficiaries of the protection Delta levees provide, mainly those who have energy, transportation, water and wastewater supply infrastructure, as well as waterfowl hunters and other recreational users.

Recognizing this, both the Delta Protection Commission’s Economic Sustainability Plan and the Delta Stewardship Council’s Delta Plan have recommended studying the feasibility of creating a regional district to assess levee beneficiaries for maintenance and improvement funds.

To evaluate the possible mechanisms and methods for assessing fees to other beneficiaries of Delta levees, the Delta Protection Commission is in the final stages of completing the Delta Flood Risk Management Assessment District Feasibility Study with a final report due in December.  At the October meeting of the Delta Stewardship Council, Jennifer Ruffolo, Program Manager with the Delta Protection Commission, briefed the council members on the preliminary findings and recommendations.

Ms. Ruffolo began by noting that the study raised as many questions as well as answers, but they did find some clarity in certain areas.  The study came about because bond funding, the major source of funding for Delta levee improvements, is running out, and furthermore, bond funding is not reliably consistent.  She noted that the assessment district idea appears not only in the Council’s Delta Plan and the Commission’s Economic Sustainability Plan, but the Governor’s California Water Action Plan as well.

dsc-ruffoloThere’s also been a long-standing interest in ‘beneficiaries pay’ as an approach to funding levee improvements,” she said.  “But when we looked at ‘beneficiaries pay principle’, we quickly came to the conclusion that an assessment district wasn’t going to help us expand the realm of beneficiaries that are paying for Delta levee improvements.  This is not to say an assessment district as described in the Delta Plan or in the Economic Sustainability Plan might not have some advantages and improvements and there might be reasons for moving ahead with that, but under current law governing assessments, it would not really increase the reach as a tool to bring in other beneficiaries.

The objectives of the study were to identify the beneficiaries of Delta levees; evaluate potential financing mechanisms across beneficiaries; identify the most feasible mechanisms; and to recommend next steps to further explore a portfolio of mechanisms.

We aimed to identify a broader range of feasible mechanisms that tie the costs to the benefits compared to the mechanisms that are currently in place,” she said.  “We believe that this could help move toward a more transparent and consistent approach to allocating the available funding.  We looked at calculating the actual purposes and activities of levees that the benefits are provided, such things as public safety, water export, recreation, and protecting habitat.”

The issue of cost allocation is quite technical, so Ms. Ruffolo said she wouldn’t get into the details.  “But it does have an effect and ultimately you can’t avoid the cost allocation issues,” she said.  “Those that are in place now do result in conflicting requirements essentially in that assessments are based on benefits, whereas a beneficiaries pays principle would look at the costs of serving the different beneficiaries and collecting revenue from those beneficiaries in proportion to the costs of benefits, so those issues would have be tackled at some point.”

Ms. Ruffolo further explained the cost allocation issue.  The current cost allocation for the subventions program is that the state cost share as defined in the water code is up to 75% of the cost above $1000 per mile; the local management agencies (generally the reclamation districts), would pay up to 25% of the costs.  “That essentially says that the state’s public interest is worth up to 75%,” she said.  “In other mechanisms like a cost based mechanism approach, you would have to identify the cost of serving the beneficiaries and you would allocate the costs on that basis, which is more like what they do in the public utilities world.  Those cost allocations methodologies are out there and could be applied in the Delta as long as the legal issues could be resolved, because assessments work under Prop 218 and there are a lot of technical issues around cost allocation, depending upon what type of fee mechanism you are going to use.”

The study was based on building blocks, which were technical memoranda that detailed levee funding and legal issues; beneficiaries and benefits; cost allocation principles and constraints; and financing mechanism screening.  The memoranda were presented to stakeholders in a series of workshops to give them an opportunity to review the fundamental data and assumptions, and to ensure stakeholder buy-in throughout the process.

ruffolo-slides_page_07They looked at a broad range of Delta beneficiaries, which are categorized into six categories; they then identified the primary types of benefits that accrue to those categories.  “The economic benefits of Delta levees include paying for flood protection or the benefit of avoiding the impact of flooding, which would reduce or avoid damages to in-Delta assets and property as well as avoided service disruptions associated with moving resources through the Delta, whether those are truckloads or cars of people or oil or water or electricity,” she said.  “Secondary impacts that are of benefit to the state of levees are the impacts to the state economy and non-market benefits such as those of protecting the ecosystem.”

Measures of benefits are typically equivalent to the economic and social value of the production of goods and services, or the assets and the resources at risk of flooding,” she continued.  “Where possible, we used quantitative measures of benefits, but those such as the value of in-Delta water use and upstream water beneficiaries and the value of habitat were mostly qualitative.

ruffolo-slides_page_08Ms. Ruffolo presented a slide showing the difference in the current approach versus the beneficiaries pays approach.  “This slide shows that if you applied beneficiaries pay, you would basically be going from a system where we lump most of the benefits together and some private benefits under the public funds; we would then separate that out under a beneficiaries pay approach.  So the study seeks to find mechanisms to would enable us to break apart the lumping into more specific allocations of the costs of levee improvements according to the benefits received by private parties, whether that’s individuals or entities, versus the general public, which would be paid for under the state share.”

Ms. Ruffolo pointed out that an assessment district is not really a silver bullet, because it doesn’t reach the beneficiaries outside of the Delta, so the focus was shifted to look at the feasibility of other mechanisms.  “The issue of an assessment again is very specific to Prop 218 and the associated case law, so if you’re going to use the term ‘assessment’, you are by definition limited to assessing the special benefits of the project, rather than general benefits or indirect benefits of the project.

She noted that there may be governance reasons that might propel the Council or the Commission or DWR to look further into an assessment district, but not to further the beneficiary pays approach.

They evaluated about 50 candidate mechanisms, looking at the institutional, legal, cost responsibility, and political aspects of feasibility.  They reduced that to about 12 and then with further screening, came down to essentially three, in addition to the existing mechanisms of bond funding and assessments.

We found that the system doesn’t collect revenue from all the beneficiaries because benefits extend outside the Delta to water exporters and outside of the Delta water users, upstream dischargers who benefit from being able to discharge their floodwaters or wastewaters into the Delta; there are roads, pipelines, railroads, and other forms of linear infrastructure that don’t currently contribute to assessments and whose benefits, whether or public or private or in combination, greatly exceed the value of the property based assessments that could be levied against those infrastructures.”

There are a lot of questions about how far the benefits extend and what would be reasonable to include in the realm of Delta beneficiaries; Ms. Ruffolo said that this was a very high level feasibility analysis that didn’t get into those detailed questions, but those questions would need to be answered if further study or implementing a beneficiary pays approach is to be considered.

ruffolo-slides_page_12The current financing mechanisms are assessments, the general fund, and general obligation bonds.  Assessments cover the shares of Delta communities, infrastructure, and in-Delta water users; state funding covers the public interests and probably a considerable proportion of the private benefits and interests, she said.  The striped lines on the slide indicate that to the degree that everybody pays some taxes, and the general fund pays for general obligation bonds and the levee money that we have now, people and other beneficiaries do pay, but not in proportion to the level of benefit that they receive, she said.

We found that there are significant benefits to out of Delta beneficiaries that don’t contribute in proportion,” Ms. Ruffolo said.  “Where levees are important for conveyance or water quality, those are the situations in which you have out of Delta beneficiaries that do benefit but don’t pay toward assessments. In other words, the benefits are not consistent against all levees and tracts, which further complicates this.  So it’s very hard to say there should be one size fits all sort of finance fee or mechanism; it’s going to have to be done in a way that attributes the benefits to the group of levees or tracts that provides those benefits.”

ruffolo-slides_page_14The potential financing strategy they came up with would be to add a fee, such as a Delta flood prevention fee, a water use fee, or a conveyance fee which would allow the state to collect revenue from out of Delta beneficiaries more in proportion to the benefits they receive.  “They would then contribute that level of funding to represent those private benefits received,” she said.  “State funding, to the degree that it is available, would be more targeted to represent those public benefits and the state interests, such as ecosystem restoration and the general state economic benefits of the Delta and so on.”

We essentially found that these sorts of fees could be imposed to capture benefits of water quality and water supply,” she said.  “All of these would take quite a bit of further calculation to estimate the benefits and to whom they accrue and how to apportion those benefits to the different beneficiary classes.  The Delta-wide flood prevention fee is perhaps most like the idea of a Delta wide assessment district, in that it would be broad based and imposed uniformly, but it would not be based on benefits; it would have to be modeled on something like the state fire prevention fee, or a general tax such as the San Francisco Bay Restoration Authority recently passed which was a parcel tax.  But an assessment district would not have the authority to impose that sort of tax.

This study raised as many questions as it answers, and we clearly would need additional analysis of the different classes of beneficiaries, how far the benefits extend, and perhaps a collaborative effort between Stewardship Council, the Delta Protection Commission, DWR, and the flood board would be in order to figure out how to tackle this at the next level,” she said.  Those questions include the legal restrictions and how would they be addressed; what agencies should implement the different fees; would new legislation be needed; would the increased revenue justify the transaction costs; would there be sufficient stakeholder support; and could the political will be mustered to move forward?

Other issues worth deeper analysis would be to take a deeper look at the possibilities of a Delta-wide assessment district and to improve governance issues and consistency issues; it’s also worth taking a look at the federal funding available, but Ms. Ruffolo acknowledged that it’s not likely to be a significant source.

The next steps are to prepare the final report, which will include the complete background and approach, the methodology, the mechanisms, the findings and the recommendations.  That will be presented to the subcommittee at the Delta Protection Commission in early December, and then approved by the Commission at a subsequent meeting.

Related meeting materials …

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One comment

  • Restoring deep Delta River DREDGING purifies the soil and water (with 100 Year USACE/engineer maps) is cost effective. Health and financial losses to five Delta River counties has not been included, not to mention affiliated agri-tourism jobs. California Desalination produces twice as much water for 90% living on the coast. The destructive twin tunnels plan is a dust debacle, for health, finances and fertile soil in North Central Valley (with Delta River counties). The Dustbowl documentary shows others were in clueless denial by others of decades for the Midwest. Concrete costs can go to 28 points of Desalination, not ignoring the Groundwater and Aquifer issues that avoid California earthquakes. Who hires and pays the water bureaucracy?

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