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Here’s What’s Happening to All That Water Bond Money

Most of the $7.5 billion water bond approved by California voters in 2014 still has not been spent, even though the state’s drought continues. Policy expert Ellen Hanak explains why.

Written by Matt Weiser Published on Read time Approx. 6 minutes
The lowered reservoir
Los Vaqueros Reservoir in Contra Costa County, shown here, was funded largely by local water ratepayers. Proposition 1, the state water bond approved by voters in 2014, will pay only for the “public benefits” of such projects, leaving the rest up to local funding sources.Contra Costa Water District

Almost two years ago California voters, in the midst of a historic drought, passed Proposition 1, a $7.5 billion bond measure intended to ease water shortages by funding new projects.

At this point, many Californians are wondering where all that money went.

Most of it hasn’t gone anywhere, yet. According to a recent report by the Public Policy Institute of California (PPIC), just 2 percent of the bond money has been spent so far – about $177 million. The rest awaits a lengthy process of vetting funding requests.

The slowest part involves $2.7 billion set aside in the bond for water storage projects. And these cannot solely benefit water users. This money can be spent only on the portion of such projects considered “public benefits.” Proposition 1 directs the California Water Commission to define what this means, a process expected to conclude in December 2016.

To help explain the bond status, Water Deeply spoke with Ellen Hanak, director of the PPIC’s Water Policy Center, who is tracking the process.

PPIC broke down how much Proposition 1 money has been allocated, appropriated or awarded so far (as of June 2016). (PPIC)

PPIC broke down how much Proposition 1 money has been allocated, appropriated or awarded so far (as of June 2016). (PPIC)

Water Deeply: Has any of this new bond money helped ease the drought?

Ellen Hanak: That could mean different things in different sectors. What we know is that there’s been a lot of effort to try to deal with some of the problems that small, disadvantaged communities are facing with water supply, and in some cases with water quality. There are various pots of money available for that. But it’s my understanding what has gone for safe drinking water is related to supply reliability in some of these communities.

For the urban agencies, the understanding was when some of the bond appropriations were accelerated it was going to be investments that would help boost resilience, which is a little bit different from so-called emergency situations. That would be like a water recycling project that includes a cost-share from the state. None of that can come online immediately, but if this drought continues, it’ll help ease the impacts when those come online. And it’ll certainly boost resilience for future droughts.

This bond is not about tackling emergency problems. But by and large, there haven’t been that many emergencies, and they’ve been managing those pretty well. So, it’s more about boosting resilience for longer-term droughts and future droughts.

Big investments take time. So in the very near term, it’s not feasible to think that you can put millions and millions of dollars into investments that are going to immediately address drought problems. That’s why we need to think about building drought resilience as an ongoing effort rather than something that you just sort of address from one day to the next.

When people talk about surface storage projects (reservoirs), even once you get a project approved, it takes time to build it. That’s going to be true for a new recycling facility or a desalination facility. The things you can do more quickly are smaller and less complicated.

Water Deeply: Why does it take so long to spend this money?

Hanak: When voters approve a bond act, it doesn’t have specific projects earmarked. It has categories of spending and there are some rules set into the bond language about what can be eligible in a very broad way. Then, when the bond gets approved, that’s when the detailed work of determining specific eligibility criteria in the different areas starts.

The way we spend our bond money, it’s not that money that goes out and builds things. It’s really a way of providing state matching funds for projects that are done at the local and regional level. It’s a process where money is made available and the state, with a lot of public input, develops the guidelines for people to submit proposals. Then there’s a competitive process for that money.

There’s a tension between getting money out the door really fast and having a transparent, fair process that allows enough public input into what the criteria should be, and then gives people time to apply for it. That part of it is often something that folks who are not close to the process just might not be aware of. They might think, when they’re voting for a bond, “OK, everything is all laid out in detail as to how this is going to be spent.” But it’s not. It’s really more about categories of things that people think are important.

Water Deeply: A lot of people are interested in money for water storage projects. Why don’t we have projects approved and ready to receive this money?

Hanak: The bond language was very specific about the process that needed to happen, and we’re on track with that. There actually have been some stakeholders who have been saying they need more time, because they won’t be ready in January 2017 to submit applications for money for the storage projects. Those projects are going to require locals to demonstrate how their projects should qualify for these matching grants.

This is another thing people often don’t realize with these storage projects: The bond money is for only up to half of the project and only for the “public benefits.” They can’t just cover water supply for cities and farms. That’s the part to be covered by other funds, primarily local funds. Folks are hoping they may be able to get some federal cost share to come in there, but local funds are definitely going to have to be the major part of it.

The bond language foresaw that it was going to take time to flesh out the eligibility criteria because of this innovation in the bond, which is that the state is funding only the “public benefits.” And we need a clear definition of how you measure that in a multi-benefit storage project, which is the work that’s being done now by the Water Commission.

I suppose you could say, “Why didn’t we do that work before the bond was approved?” But that would be doing a lot of work without knowing if you would even have money to spend on that.

I will say, it’s not as if storage projects haven’t been occurring. If you look at urban Southern California, between the early 90s and the beginning of the drought, they increased their storage by a factor of 13 to 14 times. That’s very significant. Above ground, that included the Diamond Valley Reservoir. It included an increase in the capacity of surface storage in San Diego. But it also included an extensive amount of investment in groundwater storage around the region and outside, including the Kern County Water Bank. Up in the Bay Area, the Los Vaqueros Reservoir was initially built and then expanded. A lot of that was with local funding.

State funding is an important incremental source, but it’s not the primary source. Investments are happening as we speak with various kinds of funding including, in some cases, money remaining from earlier water bonds.

Water Deeply: What are these “public benefits”?

Hanak: The bond language laid out the categories in a broad way – things like flood management, ecosystem management. But the nitty-gritty of what that means in the context of a detailed grant proposal and how you do the accounting for it, that’s been the work of the Water Commission. And in the regulations that are on track to be finalized by the end of the year. That’s a big pot of money and that’s an issue that a lot of folks care about around the state.

Water Deeply: Is this focus on public benefits a groundbreaking idea?

Hanak: We’ve looked at how we’ve been spending money from past bonds. There was a lot of funding that was specifically allocated to the environment as well as some areas that one could definitely say are public benefits: things like water-quality management and environmental protection. So a lot of the bond money has been going to things that, I think, everyone could agree are public benefits.

Thinking about a project and how the benefits break out between the environment and water users is much more explicit in this process. And so it’s required a lot more careful planning. Figuring out how to do that accounting isn’t easy, particularly because some of the public benefits are not as easily measured as the water we use for cities and farms.

Critically, what has to happen for those kinds of projects is, you’ve got to know who the partners are who can be putting up the other 50 percent of the public benefits, as well as fleshing out what those public benefits are going to be and how the money you’re asking for relates to that. Folks who are looking at it from a little bit more distance probably would be surprised to realize how much legwork is needed to flesh all that out.

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