An ongoing process that has received little media attention are the State Water Project contract extension negotiations which have been ongoing since May of this year. The negotiations are proposing to extend the contracts for the State Water Project water contractors by 40 to 75 years.
The original contracts, negotiated in the 1960s when the State Water Project was constructed, mostly extend to the year 2035. However, majority of the capital costs associated with the development and maintenance of the SWP are financed using revenue bonds with 30-year terms. The Department of Water Resources cannot sell revenue bonds whose maturity dates extend past the contract end date, making it challenging to finance the necessary capital expenditures with affordable terms if bonds with shorter terms must be sold. Therefore, it is necessary to extend the termination date of the Contracts, says DWR, so that this debt service remains affordable to the State Water Project contractors and their ratepayers.
As part of the Settlement Agreement of the Monterey Amendment, the negotiations are open to the public with the public having the opportunity to provide oral and written comment. In that spirit, the Planning and Conservation League, California Water Impact Network, California Sportfishing Alliance, the Environmental Water Caucus and others have written a letter to Carl Togersen offering their comments on the negotiations.
The letter points out that since the State Water Contractors depend on water sales to meet the payment obligations, the insurance policy for these payments is the assurance of water being available to the urban ratepayers in times of shortage. For decades, urban ratepayers invested millions of dollars, the letter says, but this urban preference was removed during closed door sessions:
” … Given droughts, climate extremes, and uncertainty of State Water Project water supplies, any contract extension must include an objective to reinstate this preference and these contract provisions that were removed without ratepayer notice or participation. This urban preference requirement would ensure that decades of promises, contract obligations, and ratepayer investments by these users, who pay the bulk of the project costs, would not be abrogated. … “
Furthermore, under the terms of the Monterey Settlement Agreement, the groups say that the costs, interests payments, water deliveries and capital reserves for replacement of aging infrastructure must be disclosed in honest and intelligible language, which extends to the BDCP:
” … if this contract extension project proposes to “indirectly” or “directly” finance any “new” as yet unapproved capital expenditures, such as the Governor’s proposed approximately $25 billion twin tunnel construction costs with estimated debt, operations, and other costs totaling $54.1 billion – these costs also need to be disclosed to the public and ratepayers before obligating them to this multi-generational contract extension. … “
The contracts also need to include an “opt-out” provision for those contractors who do not want to participate in, or will not benefit from, the new conveyance tunnels, the groups say.
Contract negotiations were initially expected to last three months but are ongoing. An environmental review process, under the California Environmental Quality Act, will follow completion of the negotiations and will provide opportunity for additional public participation. A final CEQA document analyzing possible environmental impacts is expected in early 2015
Click here to read the full text of the letter. For more information on the State Water Project contract extension negotiations, click here.
