BILL ANALYSIS Ó AB 1471 Page 1 ( Without Reference to File ) CONCURRENCE IN SENATE AMENDMENTS AB 1471 (Rendon, Atkins, and Gomez) As Amended August 13, 2014 2/3 vote. Urgency ----------------------------------------------------------------- |ASSEMBLY: | |(May 23, 2014) |SENATE: | | | ----------------------------------------------------------------- (vote not relevant) (vote not available) Original Committee Reference: BUDGET SUMMARY : Repeals the $11.14 billion bond for water-related projects and programs that was drafted in 2009 (2009 Water Bond) and replaces it with the Water Quality, Supply, and Infrastructure Improvement Act of 2014 (2014 Water Bond), which provides $7.545 billion in bond funding for water-related projects and programs including $7.12 billion in new bond funding and a reversion of $425 million in existing bond funding. The Senate amendments delete the Assembly version of this bill, and instead: 1)Repeal the 2009 Water Bond, which is currently on the ballot for November 4, 2014. 2)Allocate $7.545 billion in new bond funding by authorizing $7.12 billion in new bond funding and reverting $425 million in unspent bond funds from the following Acts to this Act: $105 million from the Safe Drinking Water, Security, Clean Drinking Water, Coastal and Beach Protection Act of 2002 (Proposition 84); $95 million from the Water Security, Clean Drinking Water, Coastal and Beach Protection Act of 2002 (Proposition 50); $100 million from the Disaster Preparedness and Flood Protection Bond Act of 2006 (Proposition 1E); reverting $13.5 million from the Water Conservation and Water Quality Bond Law of 1986 (Proposition 44); $25.5 million from the Safe, Clean, Reliable Water Supply Act of 1996 (Proposition 204); and, $86 million from the Costa-Machado Water Act of 2000 (Proposition 13). 3)Allocate the funds by chapter for the following purposes (in AB 1471 Page 2 billions): $ 0.520 Chapter 5 Clean Drinking Water $ 1.495 Chapter 6 Protecting Rivers, Lakes, Streams, Coastal Waters & Watersheds $ 0.810 Chapter 7 Regional Water Security, Climate, & Drought Preparedness $ 2.700 Chapter 8 Statewide Water System Operational Improvement (Storage) $ 0.725 Chapter 9 Water Recycling $ 0.900 Chapter 10Groundwater Sustainability $ 0.395 Chapter 11 Flood Management 4)Retain the administrative and other provisions from the 2009 Water Bond that relate to water storage including, but not limited to: a) Continuously appropriating water storage funding to the California Water Commission (CWC), a governor-appointed body, and requiring the CWC to select projects through a competitive public process; b) Empowering the CWC to fund the public benefits of storage projects related to ecosystem and water quality improvements, flood control, emergency response, and recreation; and, c) Prohibiting expending bond funds on environmental mitigation, except environmental mitigation associated with providing public benefits. EXISTING LAW : 1)Enacts the 2009 Water Bond which, if approved by the voters on November 4, 2014, authorizes $11.14 billion in bonds for the following purposes (in billions): $ 0.455 Chapter 5Drought Relief $ 1.400 Chapter 6Water Supply Reliability $ 2.250 Chapter 7Delta Sustainability $ 3.000 Chapter 8Statewide Water System Operational Improvement (Storage) $ 1.785 Chapter 9Conservation and Watershed Protection $ 1.000 Chapter 10Groundwater Protection and Water AB 1471 Page 3 Quality $11.140 TOTAL 2)Creates a nine-member CWC within the Department of Water Resources (DWR) with each member appointed by the Governor, subject to confirmation by the Senate, and serving four-year staggered terms. AS PASSED BY THE ASSEMBLY , this bill required a tax on the distribution of fireworks and specified the moneys in the fund be used for public safety efforts and proper handling and management of dangerous fireworks. FISCAL EFFECT : Unknown. The state pays principal and interest during the repayment period and cost will depend on factors such as the actual interest rate paid, the timing of the bond sales (bonds are often sold over a number of years), and the time period over which the bonds are repaid. Fiscal analyses of recent bond measures assumes a 5% flat interest rate with a 30-year repayment period, yielding about $65 million annually in principal and interest costs to the state for each $1 billion borrowed. Under that formula, annual General Fund principal and interest payments would equate to about $490 million. In addition, there is a one-time General Fund costs to the Secretary of State for preparation of a statewide ballot pamphlet. That cost was previously estimated at around $200,000. COMMENTS : This bill would repeal the 2009 Water Bond and place a new revised 2014 Water Bond on the ballot that is structured to reduce its overall size and General Fund impact as well as address many pressing policy issues that have emerged since the 2009 Water Bond was negotiated. For a full history on the 2009 Water Bond, which has been delayed twice and unless repealed or moved is currently slated for the November 2014 general election, please see the Assembly Water, Parks and Wildlife Committee's April 29, 2013 analysis of AB 1331 (Rendon) of the current legislative session. Bond Dollars Represent Tradeoffs. The types of bonds that would be sold under both the 2009 Water Bond and 2014 Water Bond are general obligation bonds (G.O. bonds). G.O. bonds are secured on the full faith and credit of the State of California. A bond AB 1471 Page 4 act represents authority for the state to go into the marketplace and sell bonds, which are in essence a loan between the State and the bond holder which must be repaid from the General Fund with interest. The Public Policy Institute of California in its March 2014 report, Paying for Water in California, estimates that the current debt service on water-related G.O. bonds is around $700 million per year and "approaching the level of recent bond spending." The Legislative Analyst's Office, in a February 26, 2013 Overview of State Infrastructure Bonds concluded that the State's average annual cost for paying off the $11.14 billion 2009 Water Bond currently on the ballot would be an additional $565 million per year of General Fund debt service over the 40-year repayment period. Currently, over 90% of General Fund dollars are spent on k-16 education, health and human services, and corrections programs. In addition, most of the taxes the State collects and spends are transferred to local governments. This "local assistance" is used to pay for schools and for state health and welfare programs (such as CalWORKS, In-Home Supportive Services, and Medi-Cal) that are administered at the local level. Support for a Water Bond on the Rise, Critical Funding Gaps Identified. An April 17, 2014 release of a public poll by the non-partisan Public Policy Institute of California (PPIC) advises that support for a water bond is on the rise but the greatest support is for a slimmed down version of a bond. The PPIC notes that "Californians today are also more likely than they were a year ago to favor an $11.1 billion bond for state water projects. As the legislature continues to discuss the measure - now on the November ballot - 60% of adults (up 16% from last year) and 50% of likely voters (up 8% from last year) say they would vote yes. Today, when those who oppose the bond are asked how they would vote if the amount were lower, support rises (69% adults, 59% likely voters). A slim majority of adults (52%) and 44% of likely voters say it is very important that voters pass the bond." In a separate report the PPIC found that state faces critical funding gaps in five key areas of water management. These areas include safe drinking water in small, disadvantaged communities; flood protection; management of stormwater and other polluted runoff; aquatic ecosystem management; and integrated water management. AB 1471 Page 5 Major Issues with Differing Approaches in the Bond Proposals. There have been many different water bond proposals in the Legislature this session including, but not limited to AB 1331, AB 2686 (Perea), and SB 848 (Wolk). Those bills varied in terms of the amounts of overall bond funding being proposed and have ranged from a low of about $5.8 billion to over $10 billion, including a recent proposal from Governor Brown's Administration of $6 billion. The existence of so many different bond proposals, including in both houses of the Legislature and under the Administration, has allowed for a robust and exhaustive discussion of current relevant funding issues for water-related projects and programs. As a result, it is widely acknowledged that any successful bond proposal will need to maintain a broad appeal with respect to the core issues being funded while minimizing areas of contention that could fuel opposition. The areas of broad agreement in all of the bond proposals include the need for: adequate funds to help provide communities with safe drinking water; continued investments in Integrated Regional Water Management; expanded opportunities for local water supply reliability through increased agricultural and urban conservation, stormwater capture, water recycling and groundwater sustainability; and, additional investment in Delta levees. Unlike the other bond bills, this bill also recognizes and funds additional investments in statewide flood management. Besides the overall size of any bond, the major areas of policy disagreement have been: 1) the level of funding that will be directed towards water storage and whether it should be continuously appropriated; and, 2) the level of funding that should be applied to projects and programs in the Sacramento-San Joaquin Delta (Delta) and how any Delta funding relates, or does not relate, to the Bay Delta Conservation Plan (BDCP) process. Water Storage and Continuous Appropriation. With California currently experiencing a continuing drought, many stakeholders have identified increased water storage as a key strategy to combatting future water uncertainties. Under many of the current bond proposals both surface water and groundwater storage projects would be eligible for funding. However, new water storage projects can be very costly, particularly surface storage projects. This has caused proponents of those projects to seek to have money for storage continuously appropriated to the CWC. AB 1471 Page 6 A continuous appropriation means bond funds are not subject to the legislative budget process and go directly to the entity identified to receive them. Proponents of continuous appropriation for storage state this is necessary in order to provide a level of certainty commensurate with the likely high level of local investment. However, opponents of large allocations to surface storage feel those allocations could come at the expense of investments in water quality and local water supply reliability, such as increased water use efficiency and water recycling. Opponents of continuous appropriations also maintain that the Legislature's role in the budget is an appropriate check on the Administration and by extension the CWC, who are all gubernatorial appointees. This bill allocates $2.7 billion to both surface water and groundwater projects and continuously appropriates that funding to the CWC utilizing eligibility provisions almost identical to those in the 2009 Water Bond. Delta Neutrality. This 2014 Water Bond tries to be neutral with regard to the BDCP. The BDCP is a joint effort by Governor Brown's Administration and several water agencies that receive export water supplies from the State Water Project (SWP) and Federal Central Valley Project (CVP) to obtain 50-year endangered species act permits for SWP/CVP Delta facilities through a State Natural Community Conservation Plan and Federal Habitat Conservation Plan. The BDCP is a controversial project. Supporters maintain that the current proposed project will restore the Sacramento-San Joaquin Delta ecosystem and secure California water supplies through the construction of three new water intakes on the Sacramento River, two 40-foot diameter water conveyance tunnels 30 miles long, over 150,000 aces of habitat restoration, and "other stressors" actions (such as reducing non-native invasive species). Opponents of the current proposed project, which includes some environmental groups as well as many organizations and entities located within the Delta, believe it will decrease water supply and water quality in the Delta, disrupt their communities, and impact economic sustainability by removing agricultural land from production. In addition, they oppose the use of public bond money for water purchases that would directly benefit water exporters. A similar program was previously implemented under a provision of the now defunct CALFED AB 1471 Page 7 Bay-Delta Program called the Environmental Water Account (EWA). This bill maintains Delta neutrality in three ways. First, it is the only water bond proposal that does not include a specific "Delta Sustainability" chapter. Instead it funds all statewide ecosystem projects together in Chapter 6, Protecting Rivers, Lakes, Streams, Coastal Waters, and Watersheds. Second, it gives specific policy guidance regarding Delta projects in its general provisions. Third, it requires public processes and provides specific parameters for instream flow purchases. In Chapter 6, this bill makes $1.495 billion available for competitive grants for multibenefit ecosystem and watershed protection and restoration projects in accordance with statewide priorities. This bill ensures a statewide distribution of funds by dividing $327.5 million among all of the statewide conservancies, including the Delta Conservancy, which is governed by board that includes both local and state representation. The general provisions of this bill give further guidance to the Delta Conservancy, directing it to achieve its conservation objectives on public lands or through voluntary projects on private lands. The general provisions also direct the Delta Conservancy to coordinate and consult with the city or county in which a grant is proposed to be expended. This bill also provides $87.5 million to the Department of Fish and Wildlife (DFW) to benefit the Delta but requires DFW to consult with Delta cities and counties, as well as work with willing partners in those projects. This bill tries to balance the need for some instream flow purchases to benefit at-risk native fish while avoiding the pitfalls of the former EWA program, which purchased most of its water as short-term transfers handled internally by DWR in a non-public process. In contrast this bill allocates $200 million to the Wildlife Conservation Board (WCB), an entity that makes its decisions through a publicly-noticed process. Those purchases are also governed by general provisions in this bill addressing both permanent dedications of environmental flows and long-term transfers of not less than 20 years. Both types of purchases must be considered and approved by the State Water Resources Control Board though its public hearing process. This bill also prioritizes permanent dedications of instream flows and requires that all flows purchased for the environment with bond funds must provide fishery or ecosystem benefits that are in addition to, and not instead of, existing environmental AB 1471 Page 8 mitigation measures or compliance obligations. Chapter 6 of this bill also provides funding opportunities for projects outside of the Delta. In addition to the monies allocated to the conservancies and WCB, there is $100 million for urban creeks, $20 million to the Secretary of Resources for urban watersheds, and $285 million to the Department of Fish and Wildlife for projects outside the Delta. Finally, there is $475 million to the Secretary of Resources to comply with the State's existing settlement obligations, including but not limited to: the Quantification Settlement Agreement, including Salton Sea restoration; the San Joaquin River Settlement Agreement; the Tahoe Regional Planning Compact; and, the State share for Central Valley Project Improvement Act refuge and wildlife habitat area water supplies. This bill was substantially amended in the Senate and the Assembly-approved provisions of this bill were deleted. However, the language of this bill is identical to SB 866 (Wolk) of the current legislative session. SB 866 also previously concerned a tax on the distribution of fireworks but was substantially amended in the Assembly to delete the Senate-approved provisions and insert identical Water Bond provisions. Analysis Prepared by : Tina Cannon Leahy / W., P. & W. / (916) 319-2096 FN: 0004683