Proposition 1 of 2014 dedicated $2.7 billion for investments in water storage projects, which the California Water Commission administers through the Water Storage Investment Program (WSIP). Seven water storage projects were selected and must complete the remaining requirements, including final permits, environmental documents, contracts for the administration of public benefits, and commitments for the remaining project costs.
At the February meeting of the California Water Commission, Program Manager Amy Young updated the Commissioners on the status of the seven water storage projects. New information has been culled from the last quarterly reports, and some project timelines have changed significantly.
- Harvest Water Program: The project was initially put forward by Regional San, which has recently been renamed Sac Sewer. The funding agreement between the Water Commission and Sac Sewer was executed. There have been some potential concerns related to the Delta Conveyance Project, and Sac Sewer is working with DWR to resolve them. The construction activities have begun on the project. The project has seven different construction pieces. They have advertised five of them and have awarded four of them. One of the projects is the construction of a pipeline that began on February 12; construction on another pipeline is expected to start in late February. The Harvest Water Program has public benefit contracts with the State Water Board and the Department of Fish and Wildlife. The annual reports on the public benefits are due in April of each year. In November, the Harvest Water Program received an award from WateReuse California.
- Los Vaqueros Reservoir Expansion Project: Early funding has been expended. The Los Vaqueros JPA will be taking over as the applicant for the project. Notable changes to the schedule include moving the draft public benefit contracts from March to July, and the non-public benefit cost share agreements were moved from April to September. The final award date has also shifted in turn from July to November.
- Willow Springs Water Bank: The project has expended 36% of the early funding; the early funding agreement just recently expired. The project proponent is looking to initiate a new agreement after they work with staff to close out the previous one. A critical next step for this project is the partnership agreement with AVEK, which is expected to occur by the end of the second quarter. Some other milestones: The project includes CEQA documentation for the pulse flows associated with the project; this is also the case for the Chino Basin program and Kern Fan, which are also pulse flow projects. The draft EIR for the pulse flows was released by DWR for public comment. Once this EIR is finalized, the pulse flow projects will then adopt the EIR as their own. Staff estimates the public benefit contracts should be completed in 2025, with a final award date possibly later that year.
- Chino Basin Program: Late last year, the Commission awarded additional early funds to the project, and at this point, 83% of the early funds have been expended. Some of the next steps for the project are determining the permitting pathway and the overall schedule. IEUA has been working on multiple preliminary design reports that will help to indicate what permits will be needed. They will also need to complete project-level CEQA analysis for some of their projects included in the program and adopt the pulse flow final EIR. Staff estimates the final award should occur mid to late 2025.
- Sites Reservoir: The EIR was recently certified and is moving on under SB 149, the infrastructure streamlining law. Since the EIR was certified, some lawsuits have been filed against the project, and it’s expected that a CEQA challenge decision will likely be made in early June. The record of decision for the federal environmental impact statement will be completed in July. Agreements for the non-public benefit cost share are set for June this year, although those agreements are expected to not be fully executed until early 2025. The water right protest resolution process at the State Water Board is ending, so the project will be moving into the hearing process with the Water Board, likely to start in March. The project proponent expects the Water Board process to wrap up in early 2025. Staff estimates the public benefits contracts would be done around that same time, which means the final award could occur mid to late 2025.
- Kern Fan Groundwater Storage Project: Phase one of the project should be starting construction soon. Phase 2 determines the turnout’s location, which is expected to happen by the end of this year. The location of the turnout will help indicate the permitting needed for the project. The JPA will need to adopt the pulse flow EIR. The schedule indicates that public benefit contracts can be completed by the end of 2025, and permits will be completed in 2027, which puts the final award date in 2028. Staff is scheduling a meeting with the JPA to discuss these schedule shifts, and the project proponents will update the Commission at the April meeting.
- Pacheco Reservoir Project: The early funding for Pacheco has been expended. And overall, no schedule changes were indicated in the quarterly report just received. The draft recirculated EIR/EIS is scheduled to come out in July of 2025, with the final a year later and then permits in 2027, which puts their final award towards the end of 2027. Valley Water will also return in April to provide another update and answer the Commission’s previous questions.
New items added to the quarterly report template: At the last meeting, the Commissioners expressed an interest in receiving more information from the project proponents, so staff looked at the current quarterly report template and plans to add a brief project description, a brief description of the project’s public benefits, and current total project costs. Staff added a place to put more information about the non-public benefit cost share and the status of the funding sources for the non-public benefit cost shares. They are also considering adding more information about the expected permits and agreements needed for construction.
During the discussion period, Commissioner Alexandre Makler expressed a desire to know more about the projects that have exhausted the early funding awards if that indicates that the project is in distress. He also wanted to know if the Commission will be notified when the Willow Springs Water Bank project will be presented to the AVEK board. He was also interested in knowing what peak employment for the Harvest Water Bank was and if they could provide some construction photos.
Commission discretion in funding Water Storage Investment Program projects: Options for redistributing funds
At the January commission meeting, the Commission discussed how its discretion could be exercised if a project in the Water Storage Investment Program is not making sufficient progress toward completing the program requirements and final funding hearing. This presentation will focus on what options the Commission has should funds return to the program, such as if a project is determined to not be making sufficient progress or amounts less than the initial MCED being awarded. Currently, none of the projects are in consideration by the Commission for lack of progress; these briefings are informational only.
The Commission has dealt with this issue once before. When the Temperance Flat project withdrew from the program several years ago, the Commission at the time provided a 2.5% inflationary adjustment to the projects in the program. It opened a screening process, eventually making feasibility findings for two projects. Then, in March 2022, the Commission decided not to go forward with another solicitation for those two projects and instead chose to fully fund the MCEDs for the lowest-ranked projects, and what was left provided a 1.5% inflation adjustment to all of the projects in the program.
There are three options for the Commission if funds return to the program:
- Inflationary adjustment: Based on the current amount of inflation since the last adjustment, staff thinks a large amount could be distributed with this method. However, Ms. Young noted that the amount available could exceed the amount of inflation, and funds could still remain; it depends on the funding available and the situation at the time. An inflationary adjustment would have to be applied to all the projects in the program, and adjustments already made in the past would be considered. Overall, she said this is the simplest and fastest option.
- Revisit the two projects on which the Commission made feasibility findings before the January 1, 2022, statutory deadline: This option does not provide additional funds to the current projects. This would require new regulations, which is not a short process. Then, the two projects would have to apply in a new solicitation and go through a complete evaluation, which could take two or more years. (Those two projects are the Del Puerto Canyon Reservoir and the Stanislaus Regional Water Authority Regional Surface Water Supply Project.
- Seek new projects: This would require statutory changes, which require a two-thirds vote of both houses, as well as voter approval. If that were to occur, the Commission would have to develop new regulations.
The table shows each option’s main pros and cons. Ms. Young noted that the first option is the quickest to implement, and the level of effort and cost to the state are minor. The cons are that there are no additional public benefits, and as projects are removed from the program, a reduction in public benefits generally occurs. The second option involves a fair amount of effort to fully evaluate the two projects found feasible, assuming those projects decide to apply, but it would take time to put together regulations and thoroughly evaluate the projects. The third option would open up the program for new projects, but the statutory and regulatory changes would take many years to implement and would be the most costly to the state.
So if additional funds become available, staff will evaluate the options and the situation and return to the Commission with recommendations.
During the discussion period, Commissioner Makler asked if the Commission was bound by a specific metric such as the CPI or if they could use a construction-weighted inflation index. Ms. Young replied there are economists on staff who would look at the various inflation numbers and provide a recommendation for what the inflationary amount would be, but the Commission has the discretion to decide what inflationary amount to use.
Commissioner Makler asked if the Commission could develop a robust inflation rationale, would it have to balance with the public benefit?
“Generally speaking, from what I understand, inflation goes both for the cost of the project and for public benefits,” said Ms. Young. “So as inflation increases for construction, it also increases the value of the public benefit.”
“But it may not increase in the same way,” said Commissioner Makler. “The second part of the question is, would the remaining proponents have an opportunity to come back in and make the case for additional public benefit, or is that static?”
“As things are right now, we cannot expand,” said Ms. Young. “We went through a long process of looking at all the public benefits, and there were public benefits that some projects put forward that we did not accept. So since we have gone through this whole process, we can’t revisit that.”
Commissioner Makler then asked if the Commission has to ‘ratably’ apply the money or if the Commission has the discretion to fund the remaining projects and not provide additional monies to projects that have already moved forward or completed their construction.
Commission Counsel Holly Stout said that right now, it is ratable. “The way that we’ve drafted the initial resolution for Harvest Water, for example, allows them to be eligible for additional funds, but it does not say, ‘Thou shalt give them additional funds,’” said Ms. Stout. “That would still be a matter within the Commission’s discretion. And at that time, when we were dealing with that situation, we would certainly have a more concrete recommendation on how to address whether or not it’s ratable or not.”
“One important distinction here is that none of these projects have actually received any money,” said Ms. Stout. “So we currently have seven projects, one of which has been fully funded. If we’re down to six projects, and one of them drops out through whatever means, you’re still left with basically the entire pot. So it would make more sense, from a fairness perspective, to award that conditional money to all of the projects evenly. There could be a situation, though, where that didn’t make the most sense from the Commission perspective – you’re not required to do one thing or the other, but you do need to keep fundamental fairness in mind. If you still have six projects competing for money that haven’t completed the process, then from a fairness perspective, in my legal opinion, you would need to spread that ratably. If you instead have four projects that are through the final funding award, one of which is completed, and you’ve got some other considerations, that’s a different situation.”
Chair Matthew Swanson summed it up by saying, “The projects selected went through a very rigorous process and then received very small amounts of money relative to the size and scope of the program. But this money has allowed them to do some administrative and planning work to help get these projects along. So we’ve used it a little bit. But I think we’re really done with that until a project gets to the end and is either awarded or not.”
The MCED is the maximum amount possible, and the Commission can award less than that amount, Ms. Young said. “When we get to an actual final award hearing, there’s a lot of analysis and going through what the project is actually contracted for. And looking at those numbers when deciding that final award amount.”
PUBLIC COMMENT
The agenda item concluded with a public comment from Osha Meserve, who represented the Stop Pacheco Dam coalition. She said it’s essential to ensure the projects can provide the public benefits the voters are paying for. “As you’ve been hearing in the updates from Pacheco and Valley Water, the Pacheco project has significant problems proceeding. There are huge environmental and permitting challenges for this new dam project, as well as geotechnical and safety issues in that location. So I think that the early funding is succeeding in helping to uncover those issues, so maybe it has provided its intended purpose.”
She also noted that so far, other potential project partners are not seeing the feasibility of the project, which is likely why there still are no project partners. However, Valley Water could potentially invest in the Los Vaqueros Expansion Project and the San Luis Reservoir Expansion Project, which could possibly provide the water supply security that Valley Water is looking for.
