Prop 1 oversight hearing, part 2: First out of the gate: State entities with proposed water bond funding

Department heads tell legislators how they plan to disburse the first round of funds from Proposition 1

Last November, voters approved the $7.5 billion Proposition 1, the water bond.  The Governor’s proposed budget includes the first round of the disbursements of funds from the measure, and with such significant funds on the line, the Assembly Committee on Water, Parks, and Wildlife held an informational oversight hearing on February 10 to how the bond’s monies will be spent, and how the legislature can ensure the funds are spent wisely and cost-effectively.

In this second part of three part coverage from the hearing, John Laird, Secretary of Natural Resources; Mark Cowin, Director of the Department of Water Resources; Chuck Bonham, Director of the Department of Fish and Wildlife; Felicia Marcus, Chair of the State Water Resources Control Board, John Donnelly, Executive Director of the Wildlife Conservation Board; and Joe Byrne, Chair of the California Water Commission tell legislators how they plan to roll out Prop 1 funding and what types of strategies they plan to put in place to ensure accountability.

(For Part 1, go here: Proposition 1 Oversight Hearing, part 1: Background on the water bond and principles for moving forward)

JOHN LAIRD, Secretary of Natural Resources

Secretary Laird began with a brief overview, noting that the water bond was framed by the California Water Action Plan that was issued just over a year ago by the Secretaries of EPA, Agriculture, and Resources. “That water action plan really said we needed an all of the above water policy in California to move us ahead in every way,” he said.

“Last year was an amazing year,” he said. “The drought bill that the legislature approved last February filled in a piece of the water action plan. The operations that were negotiated between the state and the federal agencies for how to operate the system after the driest three years in recorded history in California were more flexible than ever before within the law, consistent with the water action plan. The groundwater bill that the legislature approved was really consistent with the water action plan, and the bond used the water action plan as a framework for filling in the different pieces so that by the time we were done, we have a broad based plan to move ahead on water in California.”

Secretary Laird said that as a former legislator, he would offer that past bonds were different than this one. “Many times, past bonds appropriated money or set it up to specific outside entities in a way that the process was appropriating to them, then whatever they did in the public process was how the money was distributed,” he said. “This time, there is complete transparent process that has been mandated by the bond in the establishment of guidelines, a 30-day notice whenever they are in draft before they’re approved, and then how they are approved, the process for distributing, the way it prescribes that is more than in the past and is much clearer, much more transparent, and much more in public.”

Secretary Laird said that the Resources Agency has distributed bond monies from prior bonds, and has already established a bond accountability website that shows how the bond monies are spent and the audits that have been done. The website is bondaccountability.resources.ca.gov.

“This time a lot of that was mandated in the bond, and it’s very consistent because our infrastructure is in place for being totally transparent and having that information out there,” he said. “So with the exception of storage which was continuously appropriated under the bond, the rest of the bond funding is appropriated through the annual budget process.”

The proposed guidelines are developed with stakeholders and applicants through a transparent and public process; the draft solicitation and evaluation guidelines are required to be posted on the website of any issuing state entity 30 days before the public meetings, he said. At least three public meetings are required throughout the state to consider public comments prior to finalizing program guidelines, which is before any Prop 1 monies are spent, he said. The guidelines are reviewed by the agency before adoption to make sure that they comply with the statutes and the bond measure.

Secretary Laird said that guidelines, solicitations, awards, progress on projects, and allocation balances are on the bond accessibility website which is bondaccountability.resources.ca.gov.  Program staff carefully follow projects and they are audited annually by the Department of Finance.

MARK COWIN, Director of the Department of Water Resources

Mark Cowin began by noting that the Department of Water Resources has quite a bit of experience in administering financial assistance programs, mostly through the Integrated Regional Water Management Program. “I think it has been a significant success and has helped move California forward on many fronts in improving water supply reliability throughout the state,” he said.

Through the Department’s Integrated Regional Water Management programs, DWR in coordination with the State Water Resources Control Board has awarded about $775 million over the past decade, which has leveraged about $4 billion total investment including local cost shares. “This has resulted in completion of 650 different projects – all types of different projects, water conservation projects, storage projects, and groundwater projects,” he said. “We estimate that the sum of all of those projects has produced about 2 million acre-feet of water supplies for California in combination of new local supplies and demand reduction, so very significant step forward for California.”

The Department of Water Resources has a number of new responsibilities under Proposition 1. Director Cowin listed them:

• Groundwater sustainability, $21 million: “This will be important for local agencies to give them some capacity to implement the historic groundwater sustainability program that was passed by the legislature and signed by Governor Brown last year,” he said.
• Integrated Regional Water Management, $33 million: “That funding is specifically designated for disadvantaged communities to try to give them some capacity to get a leg up on some of the projects and programs that are desperately needed in those communities,” he said.
• Agricultural water use efficiency and conservation program, $12.6 million.
• Urban water use efficiency and conservation program, about $10 million.
• Desalination grant program, requesting $5.5 million.

“Each of these processes will go through the usual administration with development of guidelines, finalizing those guidelines, accepting solicitations, reviewing proposals and making awards,” he said. “We have provided the Committee with our draft schedules for each of these programs, so I won’t get into that detail, but I will acknowledge that I think all of you will find those schedules too long. We need to try to optimize as best we can and get this money out working as quickly as we can, and I would submit to you that acceleration and accountability aren’t incompatible, but they aren’t necessarily best friends either.”

“As we work through the process and develop guidelines and work closely with communities, there are several limiting factors here including our own staff capacity, but also to be considered of course is the capacity of local agencies to develop their proposals and to develop the local cost share financing that will be necessary for them to be competitive,” he said. “Putting these funds out in a more deliberate schedule than folks would often request adds to our ability to be accountable.”

CHUCK BONHAM, Director of the Department of Fish and Wildlife

Chuck Bonham began by starting with the Department of Fish and Wildlife’s role in the California Water Action Plan. “Our Department is mentioned throughout the Water Action Plan,” he said. “We’re principally featured in action 4, which is the action to protect and restore important ecosystems around the state.”

There are about a dozen goals and objectives in action 4 related to protecting and restoring ecosystems that include very precise metrics, he said. “For example, going out and restoring 10,000 acres of mountain meadows in the Sierra for the benefit of water quality as well as native species, all the way to the number of coastal watershed projects we seek to do to deal with sea level rise and water quantity issues, to the general, such as establishing an approach to meld voluntary and regulatory efforts to ensure ecological outflow in the San Francisco Bay Delta area.”

The other predominant theme of the Water Action Plan that relates to the Department of Fish and Wildlife is integration, he said. “In my experience so far working on water issues in the state for over a decade, the Water Action Plan really forces dialog between me and the water board and between me and the DWR to achieve a greater gain through our integrated efforts across departments,” he said. “That’s important to note.”

“At the Department, we view the Water Action Plan as a framework for implementing Prop 1,” said Director Bonham. “So in some sense for us, Prop 1 is an implementation tool at a funding level to help us achieve what’s been articulated within the Water Action Plan.”

The Department of Fish and Wildlife is involved in Proposition 1 in four ways, two related to funding and two related to other issues. “You’ll hear from John Donnelly, Executive Director of the Wildlife Conservation Board, who is implementing an enhanced streamflow program around $200 million,” he said. “This is section 79733. Our Department works regularly with the Wildlife Conservation Board which is independent but housed within the Department. We expect to have an advisory and consultation role on developing that enhanced streamflow program.”

The other issue for the Department is that they are named as providing an advice and consultation to the California Water Commission around defining what public benefits will mean, he noted.

Director Bonham then turned to the two funding elements within Prop 1 that the Department has, noting that this information is different than what is in the handout. “We don’t have any funding relationship to Integrated Regional Water Management or the Central Valley Flood Protection Board,” he said. “Where we have our funding role within Prop 1 is in section 79737, where the legislature in the proposition included $285 million for our Department to do watershed restoration projects of statewide importance outside the Delta.”

“The last role we have in the Proposition is in section 79738 where we’re identified to manage $87.5 million for water quality, ecosystem restoration, and fish protection facilities that benefit the Delta,” he said. “The phrase is benefit, but there may be an assumption that means within the legal Delta physically. We are also able under this section to invest in science efforts that are consistent with the Delta Science Plan, and we’re required to do restoration in the Delta through the language in the statute in close coordination with the Delta counties, which I think is a strong improvement and will help the relationship between our department and local counties.”

Director Bonham then gave his Department’s timelines and progress. “My goal is that by the end of calendar year 2015, our Department is approving the first round of grants under Proposition 1, and I believe we’re on track to do that,” he said. “In February, we expect to go public with our draft guidelines and a draft solicitation notice. In March, we expect to do our three meetings around the state, which I believe we should be planning to do in coordination with the Wildlife Conservation Board or the DWR or any given Conservancy, so that the public can come have one stop shopping before all the potential funding entities, rather than several meetings over the course of the months of spring.”

“In April, we’ll take our guidelines and solicitation and move from draft to final; in May, we expect to present what we’re required to do to the legislative fiscal and policy committees by providing our final documents,” he said. “In July, we expect to run our first solicitation and between July and the end of the calendar year, we would do several rounds of review. We expect to do administrative review, scientific review, likelier to do external peer review, and then have final packages approved by the end of the year.”

Director Bonham said they would be focusing heavily on metrics, including biological output and outcome measures, scientific protocols, monitoring, and adaptive management. “I’ve created within the Department a multi-disciplinary unit of legal, budgets, contracting, science, and biology reporting directly to me whose sole purpose in the coming calendar year is to get this stood up, and it can be done, is where I would end,” he said, noting that he is confident in saying that as his Department set up a competitive grant program for cap and trade revenues in nine calendar months.

“On Proposition 1, our budget request is for an initial allocation of $36.5 million,” he said. “We think and are preparing for the mast majority of that, about $31 million, to be pushed out through competitive grant making to highly qualified projects.”

FELICIA MARCUS, Chair of the State Water Resources Control Board

Felicia Marcus began by saying thank the legislators for Proposition 1. “We are going to be able to help a lot of people in ways we have not had the tools do so before,” she said. “We have the possibility of doing some transformative work for a lot of people so we’re very excited about that.”

Ms. Marcus said that the State Water Resources Control Board has responsibility for allocating Proposition 1 dollars in five areas:

• $260 million for safe and affordable drinking water projects targeted at small disadvantaged communities;
• $260 million for wastewater treatment projects targeted at small disadvantaged communities;
• $625 million out of the total $725 million of Proposition 1 for recycled water projects with the remaining $100 million going to the DWR for desalination;
• $200 million for multi-benefit stormwater projects;
• $800 out of the total $900 to prevent or clean up contaminated groundwater, with the $100 million for managing groundwater basins going to DWR.

For fiscal year 2015-16, the Governor’s budget proposes funding for the drinking water projects, wastewater projects and recycled water programs. “Our plan for those to use our existing guidelines, criteria and existing programs because we have a very robust system for getting money out to people and projects on the ground,” Ms. Marcus said. “We’re going to combine our drinking water, wastewater and recycled water program dollars because that’s going to allow us to expedite the funding for these types of projects. We’ll be releasing the draft guidelines in March sometime and plan to have them approved by the full board before being available on July 1^st.”

More time is needed to work with stakeholders to develop program guidelines and criteria for the stormwater and the groundwater cleanup programs, so the Governor’s budget proposes some additional staffing for these programs for Fiscal Year 2015-16 with the intent of allocating that funding in the next fiscal year, she said.

“A groundwater program such as that envisioned in Prop 1 hasn’t been done before at the state level,” she said. “Having had a lot of experience in the superfund program as well as working with the state during the 90s and now again in this role, some cleanups can take all the money – one project and not even be close to done. So we really want to figure out how to select cleanups and protection projects that are going to be able to make a significant difference and produce usable water somewhere. Happily there will be a lot of those, but I think it bears thinking about and we look forward to people’s thoughts on that.”

One big improvement this year is that there will be one single application for the drinking water, wastewater and recycled water programs. “We’re going to pair the funding with our existing low interest state revolving fund programs which are very robust and in which we can augment as we need to with our AAA bond rating,” she said. “We’re going to offer it in loan-grant combinations. We’re proposing the amount of grant be based on means testing that means comparing how much residents pay for water and wastewater services as compared to the median household income for the community.”

“It means that folks can expect not just get a grant, but also get loans and planning assistance, whatever they need, because we want to make sure the entire project gets appropriate funding and actually can be completed versus getting grant funding that’s going to sit on a shelf somewhere because the rest of the project can’t be completed,” Ms. Marcus said. “We want to leverage the money in Prop 1 to improve water across California in many ways, as far as possible.”

Ms. Marcus said that applicants can apply now, as they already have in place the provisions on accountability that are mentioned in the bond. “By our very nature and our makeup, we’re a board that follows open meeting rules and does frequent workshops and meetings,” she said. “We make efforts to reach out to folks, talk about our programs and their performance, and we release an accomplishment report that talks about what we’re able to do every year. We set performance metrics for ourselves and we report on that online, for better or for worse. We track our utilization of funds very carefully in terms of how long it takes us to get them out the door.”

“In conclusion, I wanted to close a bit with a cautionary note,” she said. “We’re totally excited by the opportunities that Prop 1 is going to give us to improve drinking water and wastewater infrastructure, and particularly for small disadvantaged communities to increase water supplies through recycled water projects, stormwater projects, and groundwater cleanup. But although Prop 1 goes a long way towards making significant improvements, it doesn’t solve all our water issues. The overall investment needs for water infrastructure in California are enormous, so the challenge for us is going to be how do we leverage these bond funds to get the most done with each dollar.”

“We still have a huge affordability issue for small disadvantaged communities when it comes to dealing with operation and maintenance, and we’re going to need some kind of new funding source if we want to tackle that issue so we’ll be back to you,” Ms. Marcus said. “It’s in the budget A pages but it’s conversation we’ve been having with a lot of you to figure out how to get the tools we really need, not just to regulate water systems, not just to help the water systems that have the capacity to ask for money, but to actually figure out what we as a society in California are going to do to implement the human right to water, and that’s going to require some decisions from the legislature.”

“The lack of technical, managerial, or financial capacity is going to limit our capacity to give grant funds to some communities because we can give grant funds but we can’t give loans to folks who can’t pay it back,” she said. “There are priorities for regional – not necessarily consolidation projects but projects from a regional standpoint that should help get some managerial, technical, and financial capacity from larger more robust systems to help smaller communities as an incentive, and we’re looking to incentivize that further again, trying to figure out how we can do the most good with the tools we have.”

JOHN DONNELLY, Executive Director of the Wildlife Conservation Board

“We are fortunate to be having a key role in the water bond going forward,” began John Donnelly. “The water bond provides $200 million to the Wildlife Conservation Board for projects that result in enhanced stream flows.”

Investments by Wildlife Conservation Board will be made through a competitive grant process in coordination with the California Fish & Wildlife, SWRCB, DWR, and other agencies and organizations with the goal of securing and protecting enhanced water flows in priority stream systems statewide to achieve a number of conservation objectives outlined in the Water Action Plan, he said. These may include but won’t be limited to restoring Central Valley tributary salmonid habitat, restoring coastal watersheds, restoration efforts in the Klamath Basin, restoring key mountain meadow habitat and providing water and wetlands for riparian areas, he noted.

“Strategies that we’re looking at for enhancing stream flows will vary, depending on local conditions and needs,” said Mr. Donnelly. “Water efficiency projects, conjunctive use, off-stream storage, groundwater storage banks, and water transactions such as the purchase of water rights, lease or seasonal exchange are just some of the ideas that we’re contemplating.”

He outlined some examples. “Investments in the Klamath Basin could build on water transactions work previously implemented in the Scott and Shasta sub basins and in coastal California, changing seasonal water diversions by temporarily storing water in off-channel ponds or tanks could improve much needed summer and fall flows for salmonids,” he said. “In the Sierra Nevada, restoration projects could improve seasonal base flows, while in the desert streams of Southern California, improved groundwater management could be critical to improving habitat for birds and fish.”

“However, in all instances, there must be a clear identification of priority stream reaches, and amounts of timing, duration and quality of water necessary to drive effective ecological outcomes,” Mr. Donnelly said. “In addition, the appropriate monitoring plans and measurement will be critical in establishing appropriate flow targets and protecting restored water for intended conservation outcomes and successes over time.”

“We’re currently drafting competitive grant guidelines right now which will be used to solicit public input over the next few months,” he said. “We’re anticipating having our first public discussion around the guidelines in the program at the WCB meeting on February 25. Subsequently, we’ll be joining with the Department of Fish and Wildlife, potentially other conservancies, potentially the DWR or others, to hold public meetings around the state in north, central, and southern California during the months of March and April. We’ll use this public process over this period to inform changes, and make modifications as necessary to our guidelines. I will be working to have final guidelines ready to be presented and adopted by my board, the Wildlife Conservation Board, during its meeting in May later this year.”

Pending favorable action by the Wildlife Conservation Board in May, this will position the Board to be in a position to release its first PSP or solicitation proposal under the California streamflow enhancement program soon after the state budget is passed July 1, he said.

JOE BYRNE, Chair of the California Water Commission

Joe Byrne began by noting that Proposition 1 allocates $2.7 billion to the Water Commission which are continuously appropriated, to pay for public benefits associated with water storage projects that improve the operation of the state water system, are cost effective, and provide a net improvement in ecosystem and water quality conditions.

“We have to do a competitive process that ranks potential projects based upon the expected return for public investment as measured by the magnitude of the public benefits provided,” he said. “The projects that are eligible are very clearly articulated in the bond. There are the four CalFed surface projects – Sites, Los Vaqueros, Shasta, and Temperance Flat, plus groundwater storage projects, groundwater contamination prevention or mediation projects that provide water storage benefits, conjunctive use and reservoir reoperation projects, and local and regional surface storage projects that improve the operation of water systems in the state.”

The project must also be connected to the Delta, Mr. Byrne pointed out. “No project may be funded unless it ‘provides measurable improvements to the Delta ecosystem or to the tributaries of the Delta’”, he noted.

The bond language defines the public benefits that can be funded as ecosystem improvements, water quality improvements, flood control benefits, emergency response, and recreational purposes, he said. “It’s very important to note that of all the public benefits that we fund, 50% of what we fund needs to go towards ecosystem benefits,” he said. “There’s also a cost share so we can provide no more than 50% for the total cost of a project.”

“On the timing of things, we cannot allocate any money until after December 15, 2016,” said Mr. Byrne. “In the meantime, we are tasked pursuant to the act to come up with regulations to work closely with the DFW and with the SWRCB and get their prioritization of ecosystem benefits and also water quality benefits and adopt regulations by December 15, 2016. The regulations are ultimately about how we quantify public benefits and setting up a process for how the money will be spent.”

Management of benefits is also an important piece. “It’s not just the quantification and identification of benefits but how those benefits are going to be maintained over time,” he said.

Mr. Byrne said that the Commission has been in place for over four years. “We’ve been anticipating this and we do have draft guidelines and regulations that are online,” he said. “We intend to meet the deadlines of course, and have a very open and stakeholder driven process for the next five to six months, continuing until the regulations are adopted. In order for us to hit the deadline, our goal is to have regulations that the Commission adopts and sends to OAL by the end of summer or September.”

“The thought is that we’re going to have as open a process as possible and involve as many stakeholders as possible,” he said. “Our goal is to implement what all of you decided last year when you adopted Prop 1 in and we have no agenda other than to try to implement what is in here and stick to what is in the act.”

“So with that … “

Discussion highlights

Assemblymember Adam Gray said there is a lot of discussion regarding health and restoration of the wetlands in his district … what’s the time frame before we start seeing improvements to wetlands in the Central Valley?, he asked.

“My goal for our department is to be approving the first set of grant recipients by the end of this calendar year,” replied Director Bonham. “In the professional field of habitat restoration, particularly for in-river work, there is a limited field season, so you tend to see most of the habitat restoration occur end of summer or early fall … I am of the view we will be approving that first round and people will be well positioned at a minimum for field work in 2016.”

Assembly member Gomez asked about groundwater contamination, noting that the operaions and maintenance costs can be more than the project itself. How would you be assessing potential projects when it comes to an ability to build but then actually maintain and operate that clean up?

“Clearly there will be synergies between the safe drinking water fund, the contamination funds, and the stormwater capture funds,” responded Ms. Marcus. “Where we’re very much open to suggestion is to make sure that we can help the small communities who are the ones who are drinking really bad water in many places so that it will have some continuation, so part of our thinking has been to take the language in the bond that encourages prioritizing projects that help disadvantaged communities … there could be a regional project that ends up getting more priority because it’s actually taking care of an issue for a disadvantaged community. … That’s why we feel we need to be very thoughtful with the guidelines because the goal is to be able to use these dollars, which are tremendous, to do something that’s going to have real durable staying power and leverage the greatest good but with an eye towards helping the most disadvantaged among us. It’s a repeated theme across the bond which I’ve never seen in a bond like this which is why my heart is happy.”

Assembly member Anthony Rendon noted that there were two considerations in the bond, one was providing technical assistance for disadvantaged communities to make sure they had the ability to be able to compete with other communities for these funds, and the other consideration was a preference for emerging technologies to make sure that we’re on the cutting edge of water technology. Mr. Rendon asked what steps the directors are taking to make sure that technical assistance for disadvantaged communities and emerging technologies are considered in bond allocations?

“Technical assistance is going to be a really important part of this and it does give us the resources to be able to do that. We’ve had a pretty good track record on our wastewater side and so we’ll be able to expand that even more to the drinking water side,” Ms. Marcus replied. “When it comes to technology, I’ll just give a couple of examples. We’ve done some innovative work both with the Community Water Center with help from the California Endowment, and recently they just rolled out a community water filtration system that folks can go to in a disadvantaged community. We’re testing out point of use, point of entry devices in homes which might be a better solution for some remote far flung communities … Every community’s challenges are different. There are going to be places where by giving people incentives and removing barriers, we may get larger agencies to either consolidate or short of consolidation, serve the remote communities with new remote management devices that are in use, where you don’t need to have an operator physically at a plant once its built but you need someone monitoring the technology and be able to get there in a moment’s notice if need be … “

“I think there’s a general observation that while past bonds provided a preference for funding projects for disadvantaged communities, a lack of capacity in those communities to step up proposed projects and get engaged in a way that made them competitive for those funds paired with the desire to get the money out the door quickly has resulted in a lack of funding on a proportionally needed basis for those disadvantaged communities, so the exciting part of this bond is that it gives us new tools for dealing with that,” said Director Cowin. “The Department has requested about $30 million this year specifically for DAC through our IRWM program and that funding will be awarded both for capacity building and for the projects that comes from the engagement of those parties. There’s much to be done, and I think we have a high risk of seeing the same type of outcomes if we don’t use every tool we have to develop capacity so something for us all to work on.”

“As to technical assistance, I’m not completed in my own thinking how to do right by that commitment but I believe in it for this reason,” said Director Bonham. “Too often, these ecosystem restoration projects are stove-piped as only related to habitat value when in fact we find most of our degraded habitat is in close proximity to disadvantaged communities. In our long run interests, building an broader community that sees the value of habitat restoration as it relates to their own life is an important objective for our department so we’re thinking about that component.”

“As to emerging technologies, my expectation is we will actually have a scoring feature in our competitive grant making which will help bring forward those that are embracing emerging technologies that are out there,” continued Director Bonham. “Replacing an old culvert with a modern screen technology is an example. There’s a lot of technology development in the management of legacy roads on the north coast to manage sediment load, and there’s very much emerging technology around moving off of in some cases, gaging in a rivershed towards pressure transducers at critical riffle or salmon spawning beds to measure water volume, which may be related to Mr. Donnelly’s work on how you ensure an enhanced streamflow program actually secures an enhanced amount of streamflow.”

Coming up tomorrow …

In the third and final installment of coverage from the hearing, Lester Snow, Executive Director of the California Water Foundation; Cindy Tuck, Deputy Director of the Association of California Water Agencies; Chris Scheuring, Managing Counsel for the California Farm Bureau Federation; Omar Carrillo, Senior Policy Analyst with the Community Water Center; and Doug Obegi, Senior Attorney with the Natural Resources Defense Council’s Water Program offers their suggestions on how the bond funds can best be utilized to achieve the most public benefits.

For more information …

 

• For background materials prepared by Committee staff on Proposition 1, as well as additional hearing materials, go here: Background materials
• To watch this hearing on the CalChannel, go here:  Assembly Informational & Oversight Hearing on Proposition 1, California’s Water Bond
• For the Legislative Analyst’s Office handout on implementing the water bond, click here:   Implementing the 2014 Water Bond
• For an additional LAO report on the water bond that was released the day after the hearing, go here: The 2015-16 Budget: Effectively Implementing the 2014 Water Bond

 

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