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Delta Flows — WaterFix Alphabet Soup Edition: JLBC; CBA; DCFA; WIFIA; Series AZ Revenue Bonds

By: Barbara Barrigan-Parrilla


JLBC Hearing Recap

After the Joint Legislative Budget Committee (JLBC) Hearing last month for the State Water Contract Extensions Amendments, Restore the Delta joined in working with coalition partners on an analysis, and legislative follow up on outcomes from the hearing. While the “holding” of the hearing itself does indeed advance the WaterFix process, we were pleased with legislators, under the leadership of the Committee Chair, Senator Holly Mitchell, for asking tough questions and asserting their authority for further oversight of State Water Project Contract Extensions, specifically in relation to the Delta tunnels. In effect, it was the best possible outcome from a bad process.

This does not mean we were pleased, however, with the Department of Water Resources’ responses to questions posed by JLBC members.  What was said, what was meant, and what is accurate, thus, deserve further scrutiny. And of course, we have to consider the implications of the advancement of a bad process.

During the last week of September, RTD joined onto a coalition letter requesting that the Department of Water Resources issue a revised and updated Draft Environmental Impact Report (DEIR) for the State Water Contract Extension, as required under the California Environmental Quality Act (CEQA), because since the close of the close of the public comment period on October 17, 2016 significant changes and new information regarding the State Water Project Contract Extension have come to light.  To read this letter in full click here.

In a follow up letter to the JLBC, we have requested a subsequent hearing regarding the State Water Contract Extension Amendments because full vetting of the amendments by the public has not yet occurred due to changes made to the amendments since 2016. We also maintain that past comments made in writing by the public, along with any new comments, should be made fully available to the JLBC members for proper oversight and consideration before further review of the State Water Contract Extension Amendments.

To recap how evasive DWR was during the JLBC hearing , watch this exchange between DWR Director Karla Nemeth and Senator Richard Pan.  Director Nemeth’s unwillingness and delay in answering questions, as to whether the State Water Contract Extension Amendments reviewed at the JLBC hearing would advance bond financing of WaterFix, exemplifies why the public distrusts DWR’s management of CA WaterFix.

In summary, Director Nemeth explained, as we had asserted all along, that the State Water Contract Extension Amendments were the trigger for the subsequent WaterFix Contract Amendment to begin selling construction bonds. Director Nemeth offered to meet with individual legislators at a later date to review a completed Water Fix Contract Amendment.  Committee Chair, Senator Mitchell, and Senator Pan discussed that such oversight would have to be initiated by the JLBC or another legislative committee.  We hope our followers in Southern California, and here in the Delta, can help us with urging both Senator Mitchell and Senator Pan to make such oversight happen. Whether JLBC members are opposed-to or in-favor of the Delta tunnels, they need to remain dogged in overseeing the project because DWR continues to obfuscate in explaining the facts, along with Metropolitan Water District, whenever possible.

Speaking of Obfuscation, There’s the Cost Benefit Analysis

The most recent Cost Benefit Analysis (CBA), was recently released by DWR for the Delta tunnels project.  It is as problematic as all the previous incomplete analyses put forth by the Brattle Group’s Dr. David Sunding, (a hired-hand who interacts with MWD senior management as to how best represent WaterFix economically to the public), because it contains a reworking of WaterFix criteria and differs quite a bit from what DWR has presented to the State Water Resources Control Board (SWRCB) during hearings for construction permits regarding water operations of the project. The new sea-level rise benefit in this CBA has never been introduced elsewhere, including DWR’s case-in-chief before the SWRCB, and DWR doesn’t believe it should be reviewed presently before the SWRCB because it wasn’t part of the initial permit application.

Talk about three-card monte. DWR promises the JLBC a new CBA; DWR puts forward a CBA that is completely inconsistent with what they have presented as the application for the project to the SWRCB; DWR then dismisses the need for the SWRCB to consider the new CBA because it wasn’t part of the initial permit application. The public, consequently, cannot develop a real understanding of the real benefit-cost ratio because two different sets of criteria are used in public presentations by DWR.  And the JLBC has only been made aware of this switch because we brought it to Senator Mitchell’s attention in our recent letter.  To review all the problems with the newest CBA for WaterFix click here to read a blog by Dr. Jeff Michael with the University of the Pacific.

DCFA Non-Happenings          

The Design Construction Finance Authority has cancelled its second monthly board meeting.  That means the DCFA has not met in public since the August meeting, where it was revealed that the WIFIA Loan LOI for the first $1.1 billion for design and construction funding was not prepared by the DCFA’s CEO, Brian Thomas, but instead by Assistant General Manager for Kern County Water Agency, Brent Walthall.  Who-filed-what became an issue because DCFA Board Member Gary Kremen, who represents Santa Clara Valley Water District, accused the press and Restore the Delta of “fake news” due to press reports before the meeting that the WIFIA Loan LOI revealed the 2018 cost for CA WaterFix  at $19.9 billion.  Further complicating matters, the DCFA Board was not made aware of the WIFIA Loan LOI because it was not included in the DCFA Board packet for board members or interested members of the public.  Once approache and corrected by the press, Director Kremen had to retract his incorrect assertion against the press. This last DCFA meeting can be watched here. This video is courtesy of Gene Beley with the Central Valley Business Times.

In short, it appears that Kern County Water Agency staff is preparing financial documents for the DCFA Joint Powers Authority without any participation, review or approval by DCFA staff, or the DCFA Board of Directors.  Does this mean the JPA is actually a shell organization so that Kern County Water Agency and Metropolitan Water District (which is serving as the accounting and banking service) move forward with financial planning without any transparency or public oversight?  Cancelling two public meetings to keep DCFA work underwraps does appear to support this theory.  Moreover, such backroom maneuvering contradicts the transparency championed by DWR’s Director Nemeth at the JLBC Hearing.

DWR Revenue Bond Series AZ Happenings

The Department of Water Resources regularly issues revenue bonds to fund ongoing projects, a completely normal function of state government. But something does stand out to us in the most recent DWR revenue bond AZ series.  While this bond series does not name CA WaterFix by name, it includes in Appendix I of the prospectus, a “Delta Facilities Program” that has cost $230.3 million through this present revenue bond issue AZ. DWR estimates it will need an additional 423.4 million for a total capital expenditure of $653.6 million. (Appendix I-2 table, PDF page 236.) A few pages later it is described this way: “Delta Facilities Program. The Delta Facilities Program consists of projects and measures in the Sacramento-San Joaquin Delta area, and in the vicinity of rivers and tributaries to rivers that flow into the Sacramento-San Joaquin Delta, that are designed to (1) increase water supply by increasing the efficiency of water transfer through the Delta, (2) improve water quality, and (3) reduce or mitigate for fish losses caused by pumping. The projects and measures include dredging, channel improvements, flow control structures, seismic studies and environmental mitigation measures.”

Item #1 sounds euphemistic for the tunnels project, and even if it is boilerplate language left over from the original Proposition 1 in 1960 authorizing the State Water Project, DWR argues elsewhere the tunnels are just an extension of the State Water Project. Thus, we are not convinced that this is NOT a loophole for Delta tunnels project funding, and needs to be compared to what is being put forward by the Delta Construction Finance Authority in its JPA financial plan for the Delta tunnels.  We have indicated our questions around this issue to the JLBC for oversight and questioning. Click here to read the DWR Revenue Bond prospectus.

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