BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 1471
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          (  Without Reference to File  )

          CONCURRENCE IN SENATE AMENDMENTS
          AB 1471 (Rendon, Atkins, and Gomez)
          As Amended  August 13, 2014
          2/3 vote.  Urgency
           
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          |ASSEMBLY:  |     |(May 23, 2014)  |SENATE: |     |               |
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               (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  








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            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  








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            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  








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          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.








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          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. 








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          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  








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          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  








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          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