BILL ANALYSIS �
SB 866
Page 1
( Without Reference to File )
SENATE THIRD READING
SB 866 (Wolk, Steinberg, and Pavley)
As Amended August 13, 2014
2/3 vote. Urgency
SENATE VOTE : Vote not relevant
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. Specifically, this bill :
1)Repeals the 2009 Water Bond, which is currently on the ballot
for November 4, 2014.
2)Allocates $7.545 billion in bond funding by authorizing $7.12
billion in new bond funding; reverting $105 million of unspent
bond funds from the Safe Drinking Water, Security, Clean
Drinking Water, Coastal and Beach Protection Act of 2002
(Proposition 84); reverting $95 million in unspent bond funds
from the Safe Drinking Water, Security, Clean Drinking Water,
Coastal and Beach Protection Act of 2002 (Proposition 50);
reverting $100 million in unspent bond funds reverted from the
Disaster Preparedness and Flood Protection Bond Act of 2006
(Proposition 1E); reverting $13.5 million in unspent bond
reverted from the Water Conservation and Water Quality Bond
Law of 1986 (Proposition 44); reverting $25.5 million in
unspent bond reverted from the Safe, Clean, Reliable Water
Supply Act of 1996 (Proposition 204); and, reverting $86
million in unspent bond reverted from the Costa-Machado Water
Act of 2000 (Proposition 13).
3)Allocates these funds by chapter for the following purposes
(in 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, &
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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)Retains 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
Quality
$11.140 TOTAL
2)Creates a nine-member CWC within the Department of Water
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Resources with each member appointed by the Governor, subject
to confirmation by the Senate, and serving four-year staggered
terms.
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 GF costs to the Secretary of State
for preparation of a statewide ballot pamphlet. That cost was
previously estimated at around $200,000.
COMMENTS : The prior language of this bill, which related to a
tax on the distribution of fireworks, was deleted and it was
amended with language that 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 that has been carried
over 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
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
State General Fund with interest. The Public Policy Institute
of California (PPIC) 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
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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 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 2014 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.
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) of the current
legislative session. 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,
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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.
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
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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 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 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 specifies public processes and specific
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parameters for instream flow purchases in its general
provisions.
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 provided $87.5 million to the Department of Fish and
Wildlife to benefit the Delta and requires consultation with
Delta cities and counties, and willing partners.
This bill also tries to address 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 the State
Department of Water Resources 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 mitigation
measures or compliance obligations
In addition to the funds provided to the conservancies and WCB,
the watershed chapter of this bill provides $100 million for
urban creeks, $20 million to the Secretary of Resources for
urban watersheds, $285 million to the Department of Fish and
Wildlife for projects outside the Delta; and, $475 million to
the Secretary of Resources to comply with the state's existing
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settlement obligations including, but not limited to: the
Quantification Settlement Agreement, including Salton Sea
restoration; the Tahoe Regional Planning Compact; the San
Joaquin Restoration Agreement; and, the State share for Central
Valley Project Improvement Act refuge and wildlife habitat area
water supplies.
August 13, 2014 amendment. The amendment adds $350 million to
the overall bond total in two ways. First, by authorizing an
increase of $125 million in new bond sales, thus bringing up the
total authorized in new bond sales from $6.995 billion to $7.12
billion; and, second by reverting an additional $225 million in
unspent bond funds, thus bringing the total amount of currently
unspent bond funds that are reverted to be allocated under this
Act to $425 million. Corresponding language in the amendment
allocates the additional $350 million in funds throughout the
bond by adding: $20 million for safe drinking water; $25
million for protecting rivers, lakes, streams, coastal waters
and watersheds; $30 million for integrated regional water
management; $200 million for water storage; $25 million for
water recycling; and, $50 million for groundwater
sustainability.
The amendments also make clarifying changes regarding water
transfers, the allocation of integrated regional water
management funds, state settlements, as well as eligibility and
cost recovery in contaminated groundwater basins. Finally, they
add language allowing bond funds to be sold consistent with
Federal law if that law is amended.
Analysis Prepared by : Tina Cannon Leahy / W., P. & W. / (916)
319-2096
FN: 0004680