WATER COMMISSION: Commissioners prepare for final funding awards as first water storage program project nears the finish line

Regional San’s Harvest Water project expected to be the first project to receive final funding award

In 2014, voters approved Proposition 1, the Water Quality, Supply, and Infrastructure Improvement Act, which provided $2.6 billion to be invested in the public benefits of water storage projects.  The California Water Commission is administering the funding through the Water Storage Investment Program.  Seven projects have been selected, and the amount of funding the project is eligible to receive was set by the Commission in 2018.  Those amounts were adjusted in 2021 when the Temperance Flat project withdrew from the program.

Since then, the applicants have been developing their projects and working to meet the requirements before returning to the Commission for final award hearings.  These requirements include obtaining permits and completed environmental documents, executing contracts for the administration of public benefits, and agreements for the remaining project funding.

The projects are on different timelines and in various stages of completion.  The first water storage project to clear the hurdles and be ready for a final award hearing is expected to be Regional San’s Harvest Water project, which could be in front of the Commission in mid-2023.  With this in mind, Water Commission staff briefed the commissioners on the remaining steps for determining and disbursing the final awards.

Contracts for Administration of Public Benefits (CAPB)

Per the terms of the ballot language, Prop 1 provides funding for the public benefits of water storage projects.  Prop 1 defines those specifically as ecosystem benefits, water quality benefits, recreation, flood management, and emergency response.  One of the last requirements is for the applicants to complete contracts with state agencies for the administration of those benefits.

Prop 1 requires projects to provide ecosystem benefits, so all seven projects will have a contract with the Department of Fish and Wildlife.  Those projects with water quality benefits will have a contract with the State Water Board, and projects with recreation, flood management, or emergency response benefits will have a contract with the Department of Water Resources.

Before the final award hearing, the administering agencies (DFW, State Water Board, and/or DWR) will present their draft contracts to the Commission at a meeting for review and comment by the Commissioners and the public.  The draft contracts will be available for public comment for 14 days and posted on the Water Commission website.  All comments received will be forwarded to the agencies, which may consider those comments before executing the contracts.

The Water Commission will not approve the contracts as they are between the applicants and the administering agency.

The administering agencies are working on a template to aid the Commission and the public in understanding what will be included in the contracts.  The template will be brought to the Commission at an upcoming meeting.  Staff will also hold an online Q&A on the template in the forthcoming weeks.

Final award hearing

To request a final funding award hearing, applicants must submit documentation showing that the contracts for public benefits and agreements for the remaining project funding have been completed.  The project must also have completed final environmental documentation and obtained all required federal, state, and local approvals and agreements. 

The staff will review the information and produce a draft report summarizing the materials received, any changes to the project, and how those changes impact the initial amount awarded by the Commission.

This last step is important because as the projects have worked their way through the design and permitting process, they have undoubtedly been modified and may or may not produce the public benefits envisioned when the Commission first approved the project.  So at the final award hearing, the Commission can award any amount up to the project’s initial funding determination.

The final funding will not be made available until the Commission has held a public hearing and the Commission determines all of the statutory requirements have been met.  After the award hearing, the funding agreement will be executed, and the funds will be made available.

What is the Commission’s role in enforcement?

During the discussion period, commissioners discussed how the Commission would ensure the project provides the public benefits that are contracted for. 

Holly Stout, DWR Staff Attorney, stated that each administering agency is responsible for managing its contracted benefits.  So, if the benefit isn’t accruing as expected, it’s up to that agency to work that out with the applicant – up to a certain point.

There is going to be a process between that agency and Commission staff in terms of enforcement if the benefit can not accrue because of the split consideration issue,” she said.  “This is a work in progress; no one’s ever tried to do this before.”

The biggest issue we have is this issue of consideration for the contract,” she continued.  “You have to get something in return.  The way the statute has it set up is that the Commission is the one giving the money, but the benefits are going to the agencies.  So in order to have a valid contract, essentially the funding agreement and the contracts for public benefit need to be one whole agreement.”

She pointed out that this will all be detailed in the contract, including how the Commission will retain oversight. 

Commissioners noted that the funds will be given upfront, but the benefits won’t be realized until the project is completed; at that point, the Commission can’t get the money back.  So what role in enforcement can the Commission have?

The answer to that question remained unclear.  Staff only offered that the Commission’s role will be detailed in the contracts but provided few other details.  Chair Matthew Swanson noted that the agencies are working on the agreements now, so commissioners will have to wait and see what the agencies envision the Commission’s role to be.

Click here for more information on the Water Storage Investment Program.

Below: The chart shows the maximum conditional eligibility determinations (MCEDs), which is the initial amount of funding for public benefits set by the Commission in 2018 and adjusted in later years.

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