BILL ANALYSIS                                                                                                                                                                                                    





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          |                                                                 |
          |         SENATE COMMITTEE ON NATURAL RESOURCES AND WATER         |
          |                   Senator Fran Pavley, Chair                    |
          |                    2009-2010 Regular Session                    |
          |                                                                 |
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          BILL NO: AB 2092                   HEARING DATE: June 22, 2010  
          AUTHOR: Huffman                    URGENCY: No  
          VERSION: June 15, 2010             CONSULTANT: Dennis O'Connor  
          DUAL REFERRAL: No                  FISCAL: Yes  
          SUBJECT: Delta plan: financing.  
          
          BACKGROUND AND EXISTING LAW

          Last November, the Legislature passed the Sacramento-San Joaquin  
          Delta Reform Act (SBX7 1(Simitian)).  Among other things, SBX7 1  
          established the Delta Stewardship Council, a seven member body  
          charged with developing, adopting, and implementing a  
          comprehensive Delta Plan management plan for the Delta by  
          January 1, 2012.  

          PROPOSED LAW
          
          1.This bill would require the Delta Stewardship Council, by  
            January 1, 2013, to develop a long-term finance plan to pay  
            for the costs of implementing the Delta Plan, including all  
            projects, programs, and related administrative costs  
            identified in the Delta Plan.

          2.The finance plan would be required to include all of the  
            following information:
                 An annual expenditure plan for implementation of the  
               Delta Plan.
                 An estimate of all existing state and federal funds.
                 An evaluation of existing programs and projects to  
               determine if funding could be redirected to the Delta Plan.
                 A definition of public and private benefits.
                 An analysis and description of the basis for allocating  
               program and project costs among private and public  
               interests.
                 An enforceable mechanism that ensures that fees,  
               contractual payments, cost-share agreements, and  
               contributions are expended as intended, and not diverted to  
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               other purposes.

          1.The finance plan would be required to identify and evaluate  
            the benefits to all groups resulting from the implementation  
            of the Delta Plan. The plan would further be required to  
            identify and evaluate the negative impacts caused by all  
            groups to the Delta that the Delta Plan seeks to address.  The  
            plan would identify and evaluate the benefits to, and impacts  
            caused by, all of the following:
                 The public.
                 Urban and agricultural water users diverting water in  
               the Delta.
                 Urban and agricultural water users diverting water in  
               the Bay-Delta tributaries and watershed.
                 Delta landowners, including, but not limited to,  
               reclamation districts and public and private landowners,  
               and building and transportation interests.
                 Delta recreational users.
                 Dischargers into the Delta or its tributaries, including  
               wastewater dischargers.
                 Commercial fishing.
                 Other interests with infrastructure or operations in the  
               Delta.

          1.The finance plan would be required to allocate costs based on  
            the beneficiary pays principle.  Financing proposals to pay  
            for public benefits or impacts would include new and existing  
            state and federal funding including proceeds from the sale of  
            bonds. Financing proposals to pay for private benefits or  
            impacts would include new and existing fees, contractual  
            payments, and cost-share agreements.

          2.The council would be required to review the finance plan at  
            least once every five years and update the plan as the council  
            deems appropriate.

          3.The council would be prohibited from adopting new fees unless  
            a statute is enacted that specifically authorizes the council  
            to adopt such a fee.

          4.The council would be required to seek to obtain early funding  
            contributions from groups that may benefit from the  
            implementation of the Delta Plan, for purposes of funding the  
            council's planning and administrative activities.  The council  
            would be required to track early funding contributions and  
            provide credit for those contributions against future funding  
            requirements.
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          ARGUMENTS IN SUPPORT

          According to the Author, "The 2009 water legislation was in  
          large part based on the Delta Vision Strategic Plan prepared by  
          the Blue Ribbon Task Force in 2008.  The Strategic Plan states:

               "Successful governance of the Delta will depend on a  
               coherent, effective, and reliable financing structure.   
               That system must include financing to pay capital costs,  
               whether by GO bond or Revenue bonds, and Council authority  
               to impose reasonable fees related to implementation of the  
               Delta Plan."

          "The Delta Vision Strategic Plan includes Finance  
          recommendations (Strategy 7.3) and indicates that financing  
          should come from multiple sources and the new system of  
          financing 'must be premised on beneficiaries of improvements  
          paying commensurate to their benefit.'"

          "Successful implementation of the Delta Plan will require a  
          financing structure that includes funding from the primary  
          beneficiaries of the Delta Plan and from those groups that are  
          continuing to impose negative impacts on the Delta watershed.   
          The Delta Plan will include actions related to ecosystem  
          restoration, improved water quality, improved water supply  
          reliability, and Delta levee improvements and stability.  A  
          finance plan for implementing the Delta Plan should recognize  
          that public and private interests should contribute in  
          proportion to the benefits received or negative impacts caused."

          ARGUMENTS IN OPPOSITION

          Opponents are largely concerned that they might be  
          inappropriately required to pay fees to fund the Delta Plan.   
          The Northern California Water Association's concerns are  
          typical:

          "If fees are to be established to pay for the Delta Stewardship  
          Council and the Delta Plan, then they should be tied to direct  
          benefits that will be derived from the implementation of the  
          Plan. It is difficult to see any benefits to upstream water  
          users that are not statewide or public benefits. For example,  
          the potential recovery of listed fish species is a public  
          benefit that would be realized at the state level. Suggestions  
          that this would be a measurable benefit to specific water users  
          assumes that the recovery would occur and that the actions  
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          implemented as part of the plan would be less onerous than  
          actions that would be taken if the Plan is not implemented."

          "We are also concerned with the potential perception that  
          allowing pre-payment of fees could bias the decision as to who  
          will pay fees and how much they will pay. Specifically, the  
          likely candidates to pre-pay fees are those who will benefit  
          from the implementation of the Delta Plan.  If the group  
          required to pay fees is expanded to include those who do not  
          directly benefit from the Plan (and obviously did not pre-pay  
          fees), it will be difficult to not see this as rewarding those  
          who pre-pay."

          COMMENTS 
          
           Financing Plan Is Critical.   One of the more prominent problems  
          with CalFed was the lack of a funded program plan.  Instead, it  
          relied on diminishing contributions from the general fund,  
          sporadic federal appropriations, and periodic bond  
          authorizations.

           Beneficiaries Pay.   While everyone agrees with the concept,  
          precisely defining it has been elusive.  In 2005, then Senator  
          Machado introduced SB 113.  Through that bill, he tried to  
          define the beneficiaries pay principle as it would apply to  
          financing Delta improvements through the CalFed Program.  That  
          effort was unsuccessful for a number of reasons, not the least  
          of which was lack of agreement on definitions.  

          Also a 2005 budget trailer bill required the development of a  
          Sacramento-San Joaquin Delta Strategic Plan.  While the delta  
          vision process did result in a lot of good product, it did not  
          include "A strategic financing plan, including provisions for  
          delta beneficiaries to pay their share for the benefits that  
          they receive."
          
          SUGGESTED AMENDMENTS: None 










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          SUPPORT
          Audubon California
          California Council of Land Trusts
          Contra Costa Water District
          Cucamonga Valley Water District
          Eastern Municipal Water District 
          Irvine Ranch Water District
          Metropolitan Water District of Southern California
          Natural Resources Defense Council
          Santa Clara Valley Water District
          The Nature Conservancy
          Three Valleys Municipal Water District
          Westlands Water District

          OPPOSITION
          City of Sacramento
          Friant Water Authority
          Glenn-Colusa Irrigation District
          Placer County Water Agency
          Regional Council of Rural Counties
          Sacramento Regional Water Alliance  
          Sacramento Valley Water Alliance
          The Northern California Water Association
          Valley Ag Water Coalition
          Western Growers





















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