BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 1585


                                                                    Page  1





          Date of Hearing:   April 12, 2016


                  ASSEMBLY COMMITTEE ON WATER, PARKS, AND WILDLIFE


                                 Marc Levine, Chair


          AB 1585  
          (Alejo) - As Amended April 4, 2016


          SUBJECT:  Monterey County Water Resources Agency: Lake  
          Nacimiento and Lake San Antonio


          SUMMARY:  Appropriates $25 million to the Monterey County Water  
          Resources Agency (MCWRA) for construction of a water conveyance  
          tunnel between Lake Nacimiento and Lake San Antonio in Monterey  
          and San Luis Obispo Counties.  Specifically, this bill:


          1)Appropriates $25 million from an unidentified state fund  
            source to the MCWRA for the purpose of constructing, in  
            accordance with a specified design-build process, a water  
            conveyance tunnel between Lake Nacimiento and Lake San  
            Antonio, and spillway modifications at Lake San Antonio to  
            increase storage by 60,000 acre feet.


          2)States legislative findings and declarations regarding the  
            drought, water supply, water quality, and flood risk  
            challenges facing the state, and specifically the Monterey  
            County region.  States further legislative findings and  
            declarations regarding capacity and overflow challenges  
            experienced at Lake Nacimiento and Lake San Antonio, two  
            reservoirs that provide water supply, groundwater recharge,  
            flood control, prevention of saltwater intrusion, and  








                                                                    AB 1585


                                                                    Page  2





            recreational benefits to the Salinas Valley, and plans to  
            construct a tunnel or pipeline between the two reservoirs to  
            mitigate these challenges.  Finally, makes legislative  
            findings regarding the area's status as a disadvantaged  
            community, and states that the area is a distressed community  
            that is a priority for state funding.      


          3)States legislative findings and declarations that a special  
            law is necessary to address the emergency circumstances of the  
            drought and the benefits these projects will provide to the  
            region.


          4)Includes an urgency clause stating that it is necessary that  
            this statute take effect immediately in order to responsibly  
            store water during California's prolonged drought; to protect  
            the Salinas Valley from flooding; and to protect water supply,  
            water quality, distressed communities, and urban and rural  
            property and structures during the El Nino. 


          EXISTING LAW: 


          1)The Water Quality, Supply, and Infrastructure Improvement Act  
            of 2014 (Proposition 1) makes available $7.45 billion in  
            general obligation bond funds for various state water needs,  
            including $810 million for integrated regional water  
            management projects, $43 million of which is allocated to the  
            central coast region of the state.  Proposition 1 also makes  
            available $2.7 billion for water storage projects.  These  
            funds are continuously appropriated to the California Water  
            Commission, which is tasked with selecting the projects to be  
            funded through a competitive public process, as specified.


          2)Provides that, subject to regional priorities, eligible  
            projects for the integrated regional water management funds  








                                                                    AB 1585


                                                                    Page  3





            made available in Proposition 1 include, among other things,  
            local and regional surface and underground water storage  
            projects, and regional water conveyance facilities that  
            improve integration of separate water systems.


          3)Provides that the integrated regional water management funds  
            shall be for expenditures on, and competitive grants and loans  
            to, projects in an integrated regional water management plan.   
            Expressly prohibits the Legislature from appropriating funding  
            made available by Proposition 1 to a specific project.  


          FISCAL EFFECT:  Appropriates $25 million from an unidentified  
          state fund for a specific project in Monterey County.


          COMMENTS:  This bill would appropriate $25 million from an as  
          yet unidentified funding source for the purpose of constructing,  
          in accordance with a specified design-build process, a water  
          conveyance tunnel between Lake Nacimiento and Lake San Antonio,  
          and for spillway modifications at Lake San Antonio that would  
          increase storage capacity by 60,000 acre feet.


          1)Author's Statement:  The author notes that in the midst of the  
            worst drought California has ever experienced, increasing  
            water capture capacity in the Salinas Valley watershed is  
            important regionally and statewide.  Any water not captured  
            through the reservoirs at Lake San Antonio and Lake Nacimiento  
            in Monterey and San Luis Obispo counties simply floods nearby  
            areas.  The author emphasizes that much of the damage from  
            past floods in the area has impacted the most economically  
            disadvantaged parts of the Salinas Valley.  In addition, the  
            inability to capture more water impacts agriculture which is a  
            major source of jobs and economic activity in the area.  An  
            Interlake Tunnel (Tunnel) would allow for excess water from  
            Lake Nacimiento to flow to Lake San Antonio in order to  
            maximize the capture of water in the Salinas Valley watershed.  








                                                                    AB 1585


                                                                    Page  4





             The additional water would help protect agricultural jobs in  
            the Valley.  The Tunnel would also increase water quality by  
            reducing the flooding of agricultural fields, and reducing the  
            intrusion of seawater.  The Tunnel will also reduce potential  
            flood damage in the region by reducing flood spillage by an  
            average of 11,857 acre feet per year.


          2)Background:  The MCWRA is responsible for managing,  
            protecting, and enhancing water supply and water quality, as  
            well as providing flood protection, in the County of Monterey.  
             MCWRA is a proponent of the Interlake Tunnel and Spillway  
            Modification Project which this bill seeks to fund.  The  
            project would include construction of a 12,000 foot long  
            gravity flow water conveyance tunnel connecting Lake  
            Nacimiento and Lake San Antonio reservoirs.  The Lake  
            Nacimiento reservoir fills three times faster than the Lake  
            San Antonio reservoir resulting in unused storage in Lake San  
            Antonio when Lake Nacimiento is at capacity and releasing  
            flood spills.  In addition to the Interlake Tunnel, the  
            proposed project includes spillway modifications that would  
            increase storage capacity in Lake San Antonio reservoir.  A  
            preliminary report prepared by the MCWRA in November 2015  
            concludes that the project would provide potential ecological  
            benefits including flood management, groundwater recharge,  
            surface/groundwater quality, and benefits to biological  
            resources.  The report indicates that these potential benefits  
            and other effects of the project will be further identified  
            and analyzed in an Environmental Impact Report to be prepared  
            in compliance with the California Environmental Quality Act  
            (CEQA) which has not yet been completed.  The project has been  
            under consideration since the late 1970s and was included in  
            the 2013 Greater Monterey County Integrated Regional Water  
            Management Plan.  The MCWRA indicates that in 2014 a group of  
            Salinas Valley growers revitalized the urgency for the Tunnel  
            project due to heightened awareness from the multi-year  
            drought.  The MCWRA report indicates that constructing the  
            Tunnel would add approximately 20,000 acre feet of net water  
            storage.  Increasing the capacity of the Lake San Antonio  








                                                                    AB 1585


                                                                    Page  5





            reservoir would also increase the storage capacity at that  
            reservoir by 60,000 acre feet.  This would provide additional  
            storage for flood control and conservation releases.   
            According to the MCWRA, the additional storage and controlled  
            releases resulting from the project would benefit the  
            watershed by reducing flood damage and flood safety concerns,  
            increasing potential for groundwater recharge, improving water  
            quality by reducing sediments and pesticide residues from  
            flooded agricultural fields, reducing salinity from sea water  
            intrusion, and improving instream flows benefitting biological  
            habitat and wildlife.  Reducing reservoir spills would also  
            reduce the likelihood of White Bass entering the Salinas River  
            and the loss of juvenile Steelhead to predation.   


          3)Prior and Related Legislation:  AB 155 (Alejo), Chapter 865,  
            Statutes of 2014, authorized the MCWRA to award a design-build  
            contract for the combined design and construction of a project  
            to connect Lake San Antonio, located in the County of  
            Monterey, and Lake Nacimiento, located in the County of San  
            Luis Obispo, with an underground tunnel or pipeline for the  
            purpose of maximizing water storage, supply, and groundwater  
            recharge.


          4)Issues for Consideration: 


               a)     Project Appears Eligible to Apply for Proposition 1  
                 funding through competitive processes:  The project that  
                 would be funded through this bill would appear to be an  
                 eligible project to compete for funding under at least  
                 two, if not three, different categories of funding made  
                 available for water management projects in Proposition 1.  
                  As stated above under the existing law portion of this  
                 analysis, Proposition 1 made available $810 million for  
                 projects that are included in integrated regional water  
                 management plans.  $43 million of this amount is  
                 specifically allocated to the central coast region, of  








                                                                    AB 1585


                                                                    Page  6





                 which the Salinas Valley is a part.  Eligible projects  
                 include local and regional surface and underground water  
                 storage projects, regional water conveyance facilities  
                 that improve integration of separate water systems, and  
                 watershed protection, restoration, and management  
                 projects that improve water supply reliability.  Eligible  
                 projects also include those that provide multiple  
                 benefits such as water quality, water supply, flood  
                 control, or open space.  The bond requires that projects  
                 that achieve multiple benefits receive special  
                 consideration.  At least 10% of the funds authorized by  
                 this chapter of the bond must also be allocated to  
                 projects that directly benefit disadvantaged communities.  
                  A 50% cost share from non-state sources is required, but  
                 this requirement can be waived or reduced for projects  
                 that directly benefit a disadvantaged community or an  
                 economically distressed area.  The project that this bill  
                 seeks to fund would thus appear to be well positioned to  
                 receive favorable consideration in a competitive process  
                 for a share of these funds.



               The project would also appear to meet the eligibility  
                 criteria to compete for a share of the funding made  
                 available through Proposition 1 for water storage  
                 projects being administered by the California Water  
                 Commission.  The Water Commission is currently soliciting  
                 concept proposals from interested parties for proposed  
                 storage projects.  Finally, the project may be eligible  
                 for funding from the flood protection bond funds made  
                 available under both Proposition 1 and Proposition 1E.  

               The Legislature in drafting Proposition 1 relied on several  
                 core principles; one being the desire to avoid individual  
                 project earmarks and instead rely on competitive  
                 processes for allocating funding for projects statewide  
                 and regionally.  This principle of avoiding individual  
                 project earmarks is a principle that applies beyond the  








                                                                    AB 1585


                                                                    Page  7





                 context of the bond, and points more broadly to the  
                 policy goal of having individual projects evaluated  
                 through competitive processes that examine in detail the  
                 merits of those projects in the context of other  
                 statewide and regional goals. 
               b)     Budget Appropriations v Policy bill:  While the  
                 appropriation of funding through a policy bill is not  
                 unprecedented, the normal and preferred process for  
                 appropriation of state funding is through the budget  
                 process rather than through a policy bill.  


               c)     Local Cost Share:  This bill does not specify  
                 whether the MCWRA would be required to provide a local  
                 cost share as a match to the state appropriation for this  
                 project.  While this bill does not currently identify the  
                 fund source that would be used, it should be noted that  
                 Proposition 1 requires at least a 50% non-state cost  
                 share for integrated regional water management projects  
                 funded with bond funds.  That local cost share can be  
                 waived or reduced for disadvantaged or economically  
                 distressed communities.  The author's office indicates  
                 that the local region intends for over two-thirds of the  
                 anticipated $68 million in costs for the project to be  
                 financed by local farmers and rate payers through a  
                 Proposition 218 process, however, this bill is currently  
                 silent as to whether a local match would be a condition  
                 of the state appropriation.


               d)     Unspecified Fund Source:  This bill as currently  
                 drafted does not identify a fund source for the $25  
                 million appropriation.  As explained above, while MCWRA  
                 is eligible to apply for available Proposition 1 funding  
                 through the competitive processes established for  
                 allocation of those funds, the Legislature may not  
                 appropriate Proposition 1 funding for specific projects.   
                 Some individual components of this project may be  
                 eligible for funding from other fund sources.  For  








                                                                    AB 1585


                                                                    Page  8





                 example, the project may require fish screens that might  
                 be eligible for funding from fisheries restoration grant  
                 funds, or from other prior bond funds such as Proposition  
                 40, to the extent there are any unencumbered funds  
                 remaining from that bond.  The project is in the coastal  
                 zone, so it is also possible that it might be eligible to  
                 apply to the State Coastal Conservancy for funding for  
                 some of the restoration components of the project.  The  
                 author has also indicated that there may be some flood  
                 benefits to the project so it is possible that components  
                 of the project may be eligible for funding from  
                 unencumbered Proposition 1E flood bond funds that were  
                 previously appropriated by the Legislature, though the  
                 entire project would not likely qualify for those funds.   
                 In summary, while there may be other state fund sources  
                 that might be available for different components of this  
                 project, the only source of funds that has been  
                 identified thus far as potentially available for the  
                 project as a whole is the State General Fund. 


          5)Supporting Arguments:  Supporters emphasize this bill will  
            help ensure that a critically needed water transfer project is  
            able to be constructed, and point to the enactment of AB 155  
            (Alejo) in 2014, which authorized the MCWRA to construct a  
            water transfer pipeline or tunnel between the two lakes  
            utilizing the design-build construction method in conjunction  
            with a Project Labor Agreement (PLA).  PLAs are agreements  
            that require award of government contracts for public  
            construction projects to unionized firms.  


          6)Opposing Arguments:  Opponents assert this bill would pressure  
            the county to use a design-build approach to construction of  
            the pipeline or tunnel connecting the two reservoirs, and a  
            PLA for the project.  The opponents are self-described Merit  
            Shop employer associations who indicate they follow a way of  
            doing business that rewards employees based on performance,  
            and support award of contracts based on safety, quality and  








                                                                    AB 1585


                                                                    Page  9





            value, regardless of labor affiliation.


          REGISTERED SUPPORT / OPPOSITION:




          Support


          State Building and Construction Trades Council of California




          Opposition


          Air Conditioning Trade Association


          Associated Builders and Contractors, San Diego Chapter


          Plumbing-Heating-Cooling Contractors Association of California


          Western Electrical Contractors Association







          Analysis Prepared by:Diane Colborn / W., P., & W. / (916)  
          319-2096









                                                                    AB 1585


                                                                    Page  10