Water Authority Seeks Clarity About Bay-Delta Financing Plan

Short Title
Water Authority Seeks Clarity About Bay-Delta Financing Plan
Formal comment letter raises questions about costs, benefits and revenue guarantees

The San Diego County Water Authority is urging state and federal officials to be more transparent and thorough in explaining the fundamental financial components of a proposed $25 billion project to construct twin tunnels under the Sacramento-San Joaquin Bay-Delta.

Draft environmental documents for the Bay Delta Conservation Plan should be expanded to include enough information for water agencies to assess both costs and benefits, the Water Authority said in a formal comment letter to state and federal regulators on May 30. The Water Authority also requested more details about how much water would result from the project and pressed for greater inclusion of all water contractors to ensure balanced implementation of whatever strategy is adopted.

As the largest customer of the largest State Water Contractor, the Water Authority and its ratepayers have a major financial stake in the BDCP, a proposal for addressing complex water supply and environmental issues around the Sacramento-San Joaquin Bay-Delta. In recent years, about 20 percent of the San Diego region’s water supplies flow through the Bay-Delta, the hub of the State Water Project. The system has become less reliable in recent years as the ecosystem has deteriorated. The state’s preferred fix includes three new water intakes on the Sacramento River and two large-diameter tunnels to carry up to 9,000 cubic feet of water per second under the Bay-Delta, along with habitat restoration. That plan is reported to cost approximately $25 billion over 50 years.

The Water Authority has been an advocate for a Delta solution and consistently supported the co-equal goals of water supply reliability and environmental restoration in the Bay-Delta, but it has not endorsed any specific project. Instead, the Water Authority performed an extensive nine-month review of the problems plaguing the Bay-Delta, along with several proposed solutions. Analysis has been based on Board-adopted policy principles that call for Bay-Delta actions and projects that provide regulatory certainty for water agencies, result in more water storage in wet years, allocate costs to stakeholders in proportion to benefits received and support development of local water resources.

“A healthy Bay-Delta is important for all of California,” said Maureen Stapleton, general manager of the Water Authority.  “It’s imperative to the success of any project that critical, unanswered financial issues are addressed before moving forward. We must be able to explain to our ratepayers what they are receiving in return for their investment.

“Any fixes to the Bay-Delta must be based on detailed cost-benefit analyses and enforceable funding commitments. To date, nothing in the BDCP documents confirms that any state or federal water contractor has made a specific commitment to fund the project, which prevents any meaningful cost-benefit analysis or feasibility assessment. We’ve said for months that too many critical questions remain unanswered for a project of this magnitude.”

Those questions, repeated in Friday’s letter, include:

  • How many State Water Contractors and Central Valley Project Contractors will make enforceable funding commitments to the BDCP?
  • Who pays if State Water Contractors and Central Valley Project Contractors default on their funding obligations or decline to participate?
  • How will costs be allocated among project participants?
  • Will California voters and Congress approve funding to make the anticipated state and federal contributions to the project?
  • Who pays if those funding sources don’t materialize?

The Water Authority’s letter also addresses several other issues in the BDCP environmental documents. For instance, the Water Authority advocates for participation in the governance and implementation of the BDCP by water contractors that are expected to fund the project, and greater transparency about what open meetings and records laws would apply to various BDCP management teams.

BDCP environmental documents were released in December 2013 and the Draft Implementing Agreement was released May 30, 2014.  Due to this timing, Water Authority staff is reviewing that agreement separately.  It is not clear how quickly state and federal agencies will respond to comments on the documents and issue a final Environmental Impact Report/Environmental Impact Statement, or when construction could begin on a project. In June, the Water Authority Board will consider adopting a resolution to encourage a timely completion of the environmental review process. In addition, the Board may consider adopting a position on the BDCP proposal when the environmental documents are finalized and a financing plan has been produced.

The Water Authority is the largest of 26 member agencies of the Metropolitan Water District of Southern California. MWD, in turn, is the largest State Water Contractor, and would be expected to pay 25 percent or more of the total project’s cost. Since MWD derives more than 80 percent of all its revenues from water sales, a decreasing sales base over the long term would force some MWD member agencies to shoulder more of the cost of Bay-Delta upgrades than expected.  The Water Authority has repeatedly called for MWD member agencies to provide firm financial commitments to demonstrate their need for the project and pay their fair share of MWD’s fixed costs related to the Bay-Delta, but they have refused to do so.

More information about the Bay-Delta, including the Water Authority’s comment letter on the environmental documents, is at www.sdcwa.org/bdcp.