BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2480


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          Date of Hearing:  April 12, 2016


                  ASSEMBLY COMMITTEE ON WATER, PARKS, AND WILDLIFE


                                 Marc Levine, Chair


          AB 2480  
          (Bloom) - As Amended April 5, 2016


          SUBJECT:  Source watersheds:  financing


          SUMMARY:  Declares a state policy that source watersheds be  
          recognized and defined as integral components of California's  
          water system, and eligible for financing on an equivalent basis  
          with other water infrastructure.  Specifically, this bill:


          1)Declares it to be established policy of the state that source  
            watersheds are recognized and defined as an integral component  
            of California's water system, and that the maintenance and  
            repair of source watersheds are eligible for financing on an  
            equivalent basis with other water collection and treatment  
            infrastructure.


          2)Defines eligible maintenance and repair activities to include  
            the following forest ecosystem management activities:


               a)     Upland vegetation management to restore watershed  
                 productivity and resilience.

               b)     Wet and dry meadow restoration.









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               c)     Road removal and repair.

               d)     Stream channel restoration.

               e)     Conservation of private forests to preserve  
                 watershed integrity through permanent prevention of  
                 conversion and degradation, achieved through conservation  
                 easements.

               f)     Other projects with a demonstrated likelihood of  
                 increasing conditions for water and snow attraction,  
                 retention, and release under changing climate conditions.


          3)Requires the State Water Resources Control Board (Water  
            Board), in consultation with the Department of Water Resources  
            (DWR), to develop investment plans that prioritize actions for  
            restoration and conservation to improve watershed function in  
            the watersheds that flow into the Shasta and Oroville  
            Reservoirs.


          EXISTING LAW:



          1)Authorizes DWR to operate and maintain the State Water Project  
            (SWP) that provides water supplies for urban and some  
            agricultural uses in the state. Funds from the sale of general  
            obligation and revenue bonds have provided about 78 percent of  
            the financing for construction of the SWP, repayment of which  
            is made by SWP beneficiaries. The contractors repay water  
            supply related costs of the SWP that include about 94 percent  
            of the annual costs for operation and maintenance of SWP  
            facilities.
           

          2)Authorizes the issuance of bonds and loans to finance  
            expenditures of the SWP, and authorizes DWR to enter into  








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            contracts and establish prices, rates, and charges to produce  
            the revenues needed to pay for the costs of operation and  
            maintenance of the SWP.



          3)Authorizes the Central Valley Project (CVP), a federal water  
            project operated by the U.S. Bureau of Reclamation that  
            provides water primarily for agricultural purposes but also  
            supplies water for some urban uses in the state. 



          4)Requires DWR, in fixing and establishing prices, rates, and  
            charges for water and power, to include as a reimbursable cost  
            of any state water project an amount sufficient to repay all  
            costs incurred for the preservation of fish and wildlife and  
            determined to be allocable to the costs of the project  
            constructed for the development of that water and power. Costs  
            incurred for enhancement of fish and wildlife or for the  
            development of public recreation are not included as  
            reimbursable costs.



          5)Authorizes DWR to use revenue bonds or other funds available  
            for the purposes of the SWP to finance, in whole or in part,  
            water conservation programs and facilities that reduce demands  
            by the sponsoring contractor for project water from the system  
            and increase the supply of project water available in the  
            Delta for distribution.  



          6)Includes a state policy that the Legislature consider other  
            works as may be necessary to develop water to satisfy the  
            requirements of the watershed in which water originates  
            whenever the Legislature authorizes the construction or  
            acquisition of a project that will develop water for use  








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            outside that watershed.  

          FISCAL EFFECT:  Unknown


          COMMENTS:  This bill establishes a state policy that source  
          watersheds are recognized as essential components of the state's  
          water systems and that their maintenance and repair may be  
          financed similarly to the ways in which other water collection  
          and treatment infrastructure is financed.  This bill also  
          directs the Water Board to develop plans to maintain watersheds  
          in the Klamath-Cascade Region that feed the Shasta and Oroville  
          reservoirs, which, in turn, supply the SWP and CVP. 


          1) Author's Statement:  California's complex water system, which  
            includes the built infrastructure of dams, reservoirs, canals,  
            pumps and pipes that deliver water throughout the state rely  
            on a suite of financing options that provide the funding for  
            necessary infrastructure costs.  However, these projects rely  
            on more than the built infrastructure to function.  They also  
            rely on the five watersheds above the dams to collect, treat  
            and deliver that water to the dams.  These watersheds include  
            the Feather, Pit, McCloud, Upper Sacramento and Trinity River  
            watersheds.  While there is recognition that watersheds serve  
            these functions, there is no policy of system of support for  
            this natural infrastructure which is integral to, and supplies  
            and complements, the built infrastructure.  These watersheds  
            are essential to ensuring the future of a well-functioning  
            water system.  There is also substantial scientific  
            recognition that watershed condition affects the quality and  
            quantity of water delivered by watersheds to dams.  Enhancing  
            the conditions of the watersheds would increase water quality  
            by reducing sediment, lowering temperatures, and can also  
            increase water quantity by as much as 5 to 20% depending on  
            conditions.  The current condition of these watersheds is  
            suboptimal.  Restoration and conservation of these watersheds  
            has been sporadic and inadequate, and there is no  
            comprehensive plan for their restoration and conservation to  








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            support water security.  The goal of this bill is to recognize  
            the fundamental water system infrastructure role of source  
            watersheds, and set the foundation for a comprehensive plan of  
            restoration and conservation, with the potential of future  
            financing such as revenue bonds and other financing mechanisms  
            similar to those available for the built infrastructure.  


          2)Background:  California's two largest water projects are the  
            SWP and the CVP. The SWP is a water storage and delivery  
            system of reservoirs, aqueducts, power plants and pumping  
            plants that store and distribute water to urban and  
            agricultural water suppliers in Northern, Central, and  
            Southern California, parts of the Bay Area and Central Coast.  
            Of the contracted water supply, 70 percent goes to urban users  
            and 30 percent to agricultural users. The Project makes  
            deliveries to two-thirds of California's population.  



          The CVP is a federal water project operated by the U.S. Bureau  
            of Reclamation.  The CVP includes 22 reservoirs with a  
            combined storage of 11 million acre-feet, of which 7 million  
            acre-feet is delivered in an average year. In comparison, the  
            SWP's 20 major reservoirs can hold 5.8 million acre-feet, with  
            annual deliveries averaging up to 3 million acre-feet.  CVP  
            water irrigates more than 3 million acres of farmland and  
            provides drinking water to nearly 2 million consumers. SWP  
            deliveries are 70 percent urban and 30 percent agriculture,  
            meeting the needs of 20 million Californians and more than  
            600,000 irrigated acres, respectively. The CVP has long-term  
            contracts with more than 250 contractors in 29 out of 58  
            counties; while 29 agencies have 50-year contracts with the  
            SWP.

          Background information provided by the author notes that  
            watersheds are an essential part of the state's water systems,  
            constituting the natural infrastructure that functions to  
            collect, treat and transport water to reservoirs.  The  








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            Klamath-Cascade watershed in particular spans 10 million acres  
            and serves as the headwaters of the Sacramento River and the  
            source of much of the water that flows into the Delta.  As the  
            original source of the water for 25 million people and much of  
            California's agricultural economy, the author and sponsors  
            assert it is imperative that this watershed remain healthy.   
            However, watersheds are impacted by numerous stressors,  
            including drought, climate change, forest conversion, invasive  
            species, fire risks and fire suppression, neglect, and  
            inadequate forest management.
            Outside the Klamath-Cascade region, in other parts of the  
            state the snowpack has been decreasing with that trend  
            expected to continue into the next century.  The  
            Klamath-Cascade watershed receives 75% of the state's  
            precipitation.  According to the Pacific Forest Trust,  
            ensuring continued healthy watershed function requires that  
            85% of the watershed remain intact as relatively natural  
            forest.  The Trust is working with private landowners in the  
            region to conserve forests, and asserts that watershed  
            protection through maintenance of healthy forests is the least  
            costly and most effective approach to guaranteeing flows in  
            the Sacramento River.



            Examples of productive watershed investments in other states  
            include New York City, where investments in watershed  
            protection through forest conservation reportedly saved the  
            City between $6 and $8 billion over 10 years.  In 1989 New  
            York City faced the requirement that all surface drinking  
            water sources undergo filtration unless human activities could  
            be controlled within source watersheds.  The City faced the  
            choice of constructing new filtration facilities at an  
            estimated cost of $8 billion for construction and $300 million  
            in annual operating costs, or protecting upstate watersheds  
            for a cost of $1 to $1.5 billion.  

            Another example is the city of Denver which partnered with the  
            U.S. Forest Service to invest in forest restoration and  








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            watershed improvements after devastating fires and associated  
            sedimentation cost the city $160 million in fire suppression,  
            recovery and cleanup costs.  The city is investing $16.5  
            million over five years on 38,000 acres of priority watershed  
            lands critical to Denver's water supply.  The restoration  
            actions include forest thinning, removing roads, re-contouring  
            land, and controlled burns.

            In another example closer to home, the San Francisco Public  
            Utilities Commission indicates that it saves considerable  
            costs that would otherwise be required for filtration of the  
            City's water supply, by protecting the Hetch Hetchy watershed  
            which is the source of much of the city's drinking water.

            The Pacific Forest Trust also asserts that conserving and  
            restoring wet meadows in the Klamath-Cascade watershed could  
            increase groundwater storage by hundreds of thousands of  
            acre-feet annually.  Mountain meadows act as natural sponges,  
            soaking up water during the wet season and releasing it slowly  
            in the dry season when demand is highest.  By filtering  
            sediment, storing water and regulating stream flow, wet  
            meadows help ensure high quality supplies of water, and help  
            relieve drought and flood risks.
            A February 2015 report by the Association of California Water  
            Agencies (ACWA) entitled "Improving the Resiliency of  
            California's Headwaters - A Framework" acknowledges that  
            forests, meadows and source waters play a critical role in the  
            state's water supply, including water supply reliability and  
            improved water quality.  With these areas at increasing risk  
            of wildfires and other threats, ACWA stresses the pressing  
            need for actions to help safeguard California's future water  
            supply reliability and water quality.  The report's  
            recommendations include: 1) improving headwaters management as  
            a high priority, 2) prioritizing funding for proactive  
            headwaters improvements and substantially increasing  
            restoration efforts, 3) better realignment and water resource  
            management expertise among the Board of Forestry and CalFire,  
            4) incorporating headwaters management strategies into land  
            use planning, 5) updating and optimizing multiple benefits of  








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            tools such as forest thinning, vegetation management and  
            controlled burns, 6) investments in landscape-level research  
            on water and forests, and 7) promotion of biomass as a  
            potential source of revenue for headwaters protection.


          3)Prior and Related Legislation:  AJR 24 (Dahle), Chapter 112,  
            Resolutions of 2013, encouraged state and federal agencies  
            with jurisdiction over forest resource management to  
            collaborate across jurisdictions with regard to  
            landscape-scale efforts to maintain and restore California's  
            forests to protect the state's natural resources and water  
            supply, including watersheds, for future generations.



          AB 1471 (Rendon), Chapter 188, Statutes of 2014, authorized over  
            $7 billion in General Obligation bond funds for various water  
            needs, including $1.45 billion for multi-benefit ecosystem and  
            watershed protection and restoration projects.  The purposes  
            of these expenditure authorizations include: 1) to protect and  
            increase the economic benefits arising from healthy  
            watersheds; and2)  to implement fuel treatment projects to  
            reduce wildfire risks, protect watersheds tributary to water  
            storage facilities, and promote watershed health. 
          4)Support Arguments:  Supporters assert this legislation is  
            critical to supporting natural infrastructure improvements for  
            source watersheds in the state.  Watersheds are an essential  
            part of the state's water systems, constituting the natural  
            infrastructure that collects, treats, and transports water to  
            reservoirs.  Supporters emphasize that watersheds in  
            California are in sub-optimal condition, threatening water  
            security.  This is especially true with the increased stresses  
            of on-going drought and climate change.  Watershed restoration  
            and conservation will help prevent degradation, maintain and  
            enhance reliability, improve water quality, and, in some  
            cases, increase the quantity of water flowing into the state's  
            reservoirs.  Healthier watersheds also help regulate the  
            timing of flows into reservoirs, extending flows later into  








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            the year.  California does not currently have a comprehensive  
            plan for financing or improving watershed function to support  
            its water systems, yet the state does provide for  
            comprehensive financing of the built infrastructure of water  
            systems.  This bill will lay the foundation for development of  
            a comprehensive watershed investment plan that will provide  
            environmental and social co-benefits.   


          5)Opposition Arguments:  None received.


          REGISTERED SUPPORT / OPPOSITION:




          Support


          Audubon California


          Bear-Yuba Land Trust


          California League of Conservation Voters


          Defenders of Wildlife


          Mono Lake Committee


          Pacific Forest Trust (sponsor)


          Sequoia Riverlands Trust








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          Trust for Public Lands


          Wholly H2O




          Opposition


          None on file.




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