The Plan for New Dams

In 2014, Californians voted to make available $2.7 billion dollars of public money for the so-called "public benefits" of new water storage, reviving the prospects for a series of previously deadbeat dams or perhaps other projects.

The 2014 bond represents a long line of work by dam builders frustrated by policies put in place by California Governor Pat Brown and President Ronald Reagan that State Water Project and federal water projects pay back much of the taxpayers investment.  With most of the good damsites already occupied by dams and dam builders forced to pay for new projects, new dam construction ground to a halt for decades.

Chapter eight of the bond (and its $2.7 billion dollars of free public subsidies) was the price demanded by minority legislators to provide the two thirds majority in both houses of the California legislature to put the $7.5 billion dollar California Water Bond on the 2014 ballot. The rest of the legislature paid the ransom, Governor Jerry Brown made the bond the centerpiece of his re-election campaign, and millions of pro-dam advertising dollars inundated the airwaves. The measure passed, and this debt against California's general fund obligations can now be accessed by the California Water Commission for eligible water storage projects.

Commission Action

The Water Commission spent four years creating regulations to give this money away and analyzing the applications of the supplicants. (And Friends of the River, along with a handful of other influential environmental groups, dogged the process all the way.) The decision-making meetings to initially allocate funds to the storage projects played out in May, June, and July of 2018.

Eight projects survived the Commission gauntlet: four dam projects, four projects that involved groundwater storage. The dams were the Temperance Flat, Sites, Los Vaqueros, and Pacheco Dams. The groundwater projects were Sacramento Regional Sanitation District, Chino Valley, Kern Fan, and Willow Springs.

The Commission allocated the full eligible financing to the two Bay Area dams, Los Vaqueros and Pacheco, Temperance Flat Dam, Sacramento Regional Sanitation District, and Chino Valley. The remaining three projects all shared a funding “haircut,” as the eligibility of the eight projects ended up exceeding the available bond funds by $146 million.

The Commission’s press releases and op eds in newspapers supported the voter’s actions to provide taxpayer funds for these projects, saying it was a new way of financing these important public works projects.

Paul Rogers, at the San Jose Mercury News and Bay Area News Group, got the better and more honest observation:

Jay Lund, director of the UC Center for Watershed studies, noted that Proposition 1 was the first time in California history that the state agreed to fund large water projects with general obligation bonds, which are repaid from the state’s treasury. Other water projects have been funded with revenue bonds, in which money from each water district paid off the bonds through local taxes and water rates.

“It is taking money from the state general fund that provides for schools, prisons and everything else and gives it to some of the most well-off water districts in the state,” Lund said, noting the state must repay the bonds, with interest over decades. “Every billion of that is going to be taking $50 million out of the general fund every year for a long time.”

Kurtis Alexander from the San Francisco Chronicle also interviewed Professor Lund:

Jay Lund, director of the Center for Watershed Studies at UC Davis, said Prop. 1 was largely an aberration since the state and federal governments have retreated from the Dam-building business.

The reasons are numerous, he and other water experts say. For one, the best spots for reservoirs are taken. Also, the harm that dams do to fish and rivers has become increasingly clear. And finally, there's just not much money for the pricey endeavors.

"This is pretty unprecedented that the state is providing general fund revenues for water storage. It's rarely done on this large of scale," Lund said. "But I'm not sure there's any more economically promising surface storage to be built no matter how much money you have. This may well be the last hurrah for water storage."

The Commission’s press outreach efforts also express confidence that these projects will move forward to completion. Nevertheless, given the Commission’s own scoring on the “implementability” of these projects and the considerable funding shortfalls, some of these projects, even with public subsidies may not meet the real-world tests of financeability.

Some Quick Analysis of the Results of the Water Commission Vote

The groundwater storage and recycling projects received just over 25% of the $2.6 billion dollars allocated by the Water Commission, amounting to nearly half of the total funding needed for these projects.

Comparatively, new surface storage (dams), three of the dams had been under study for decades, received almost three-quarters of the $2.6 billion dollars, but this only amounts to 20% of the funding these projects need.

But there were some real disparities: the funds allocated to the Bay Area reservoirs were half the billion-dollar costs of these projects. The $5.2 billion Sites Dam project off the Sacramento River was allocated $816 million, 16% of estimated project costs, and the $2.8 billion Temperance Flat Dam (located on a river in which no more water rights were available) was allocated $171 million, or 6% of estimated project costs.

Going Forward

Going forward, the Commission and other state agencies’ job will be to ensure that the “public” benefits promised by the projects are part of the project design as the supplicants refine their projects and beneficiaries. Actual funding will come when the projects have all their approvals, most of the financing for the “private” benefits (water to be delivered to farms and cities), and construction ready to commence.

Three dam projects sought and received “early” funding to support environmental reviews and permitting. The Commission was unable to reach agreement on what level of early funding Temperance Flat Dam should receive, and the project thus receive no funding.

For Friends of the River and our allies, the Commission funding allocation votes turn a key corner. Although the Commission must make sure the benefits that they purchased from the supplicants become part of the project design, the attention is necessarily going to shift to each of the projects. Many of these projects are still searching for a design, operational regime, and beneficiaries. The answers they find are going to affect some important California rivers and estuaries.

Jostling for 25% Funding

In late August of 2018, Governor Jerry Brown sent a letter to Secretary of the Interior requesting federal participation in all eight of the Water Commission-funded California storage projects, plus informing the Secretary of the Water Commission's determinations. The letter was intended to fulfil two required steps in the 2016 Water Infrastructure Improvement Act of the Nation Act for 25% funding for non-federal California storage projects. Of course the 2016 WIIN did not authorize anywhere near enough money to fund much for these non-federal projects, nor the two federal dams that Reclamation is pursuing, the Temperance Flat dam and the Shasta Dam raise. (It should be noted that the governor's letter was superfluous for Temperance Flat dam since a governor's request is not required to move forward on federal dam projects in California.)

8.27.18 Gov ltr to Secretary Zinke (ocr)

This letter satisfies two preconditions for non-federal storage projects in California to receive up to 25% federal funding for seven of the eight CA Water Commission-funded dams.

FOR WIIN CA storage provisions memo 1-5-2016

Sunset Clause

Some of these eight projects are going to be rushing not only to put their projects together, but to meet the statutory deadline in the bond language.

79757.

(a) A project is not eligible for funding under this chapter unless, by January 1, 2022, all of the following conditions are met:

(1) All feasibility studies are complete and draft environmental documentation is available for public review.

(2) The commission makes a finding that the project is feasible, and will advance the long‑term objectives of restoring ecological health and improving water management for beneficial uses of the Delta.

(3) The director receives commitments for not less than 75 percent of the nonpublic benefit cost share of the project.

The Commission staff noted that the Pacheco Dam project would have to rush to complete its feasibility studies and draft environmental documentation. Others have observed that that the Temperance Flat Dam may not be able to meet that second criteria. The Sites Dam still has to put together funding commitments for well over four billion dollars. That could prove difficult if project financing is divided between the local boosters (who can't afford very much) and south-of-delta urban agencies. It also could difficult if there are meaningful constraints on diversions aimed at protecting Sacramento River habitats and fisheries. And the list could go on.

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