Southern California water agency backs off plan to finance Delta tunnels
SACRAMENTO — It was one of the most ambitious and controversial plans floated in California water politics in decades.
Southern California’s behemoth water agency was going to bankroll most of Gov. Jerry Brown’s $16.7 billion Delta tunnels project, ensuring both giant pipes get built but raising the specter of a “water grab.”
That plan died suddenly on Monday, less than a week after staffers from the Metropolitan Water District of Southern California presented the proposal to the agency’s board of directors. The district ultimately decided the financing plan contained too many risks.
Metropolitan officials said they now support the “staged approach” reluctantly championed by Gov. Jerry Brown’s administration. Under that plan, the tunnels would get built one after another, as funding becomes available. State officials say there’s enough support from south-of-the-Delta water districts to build the first tunnel, at a cost of about $11 billion.
The Brown administration, in a prepared statement, said “the state will continue pursuing final permitting to allow construction of the project — whether full or built in stages.”
Metropolitan General Manager Jeff Kightlinger said Monday he wanted to build both tunnels at once, but his agency couldn’t secure commitments from cost-wary San Joaquin Valley farmers to repay Metropolitan in the coming years.
So for now, he said, one tunnel will have to do.
“We can’t just keep debating the nuances of the project,” Kightlinger said. “We have to settle on something. I would have preferred the larger one ... but I think it’s important we decide to move forward.”
The project, known officially as California WaterFix, has been on the drawing board for a decade, and long has had issues with its costs and financing. The sticking point for Metropolitan’s funding plan stemmed from the San Joaquin Valley agricultural districts that belong to the federal Central Valley Project, a network of reservoirs and canals that supply water to different parts of the state. So far, key agricultural districts have refused to participate in WaterFix. They say the project’s costs are too high, in large part because of a funding formula developed by the CVP’s operator, the U.S. Bureau of Reclamation.
Metropolitan already has committed more than $4 billion to the tunnels but offered in February to contribute another $6 billion or so to cover the agricultural districts’ share. That would have allowed both tunnels to be built simultaneously. Metropolitan would have acted as the banker, financing the lion’s share of the project up front and then selling tunnel capacity to the farmers “to make sure Metropolitan’s investment was protected and would be paid back,” Kightlinger said.
The plan ran into internal resistance. Some members of Metropolitan’s board were wary about using urban residents’ water bills to finance a project that would require eventual reimbursement from agricultural agencies.
“It would have been a huge risk for ratepayers,” said Mark Gold, one of the city of Los Angeles’ representatives on the Metropolitan board. Gold had voted against Metropolitan’s initial decision to spend $4 billion on the tunnels.
Kightlinger said the biggest hangup was that most Central Valley Project contractors remained leery of the costs, even if Metropolitan was willing to pay them upfront.
Unlike Metropolitan, which can spread its costs over 19 million ratepayers whose monthly bills would rise by just a few dollars, the farmers’ costs would be shared by a few thousand growers.
Another crucial problem: Because of historic water rights that predate the construction of the Central Valley Project in the 1930s, some farmers are exempt from paying for water they get from the Delta. As a result, the U.S. Bureau of Reclamation decided they shouldn’t have to pay for the tunnels either, putting more of the burden on the remaining growers.
That issue became apparent last week at a summit meeting of all the parties interested in the tunnels.
In a memo sent Monday to their board of directors, Metropolitan staff said there were “a number of internal institutional issues that first needed to be resolved” among the farmers on the Central Valley Project before Metropolitan could commit to the financing.
The federal government isn’t contributing funding for the tunnels, but it has the authority to establish how its agencies in the Central Valley Project would pay for building WaterFix.
The largest Central Valley Project contractor, the sprawling Westlands Water District in Fresno and Kings counties, would see water costs triple or quadruple to as much as $800 an acre-foot, making the project too expensive, Westlands general manager Tom Birmingham said in an interview Monday.
Birmingham said the Bureau of Reclamation still is studying the funding and might develop a formula that he would consider more reasonable.