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For water, perilous economy is big player in November 2012

The most ambitious and expensive water program to confront California voters since the State Water Project was approved more than 50 years ago may wind up getting reduced by billions of dollars, a victim of politics and the economy.

The assumption is that recession-weary voters won’t approve a big-ticket bond, so the problem is this: How do you cut back a complex, $11.1 billion package that was put together — barely – with a fragile agreement in which each piece needed a signoff by rival political forces?   If one piece is removed, does the whole structure start collapsing?

“There’s a lot of head-scratching right now,” said Assemblyman Jared Huffman, D-San Rafael, the chair of the Assembly water committee.

When the economy is weak, California voters traditionally reject big borrowings. The water bond, approved in 2009, had been planned to before voters last year. As the recession took hold, nervous lawmakers decided – again, with two-thirds votes — to push the measure back to November 2012.

On paper, at least, November 2012 would appear to be a good choice. Democrats tend to favor bond borrowings more than Republicans, and next November is a presidential election in which a high-than-average turnout of Democrats is likely. Turnout for Democrats also will be driven by a Republican-backed move to block unions from automatically deducting dues from paychecks – a hot-button issue for unions, the core of the Democratic base.

The public has been supportive of water development in the past.  A $5.4 billion borrowing was approved in 2006 as Proposition 84, part of a larger infrastructure-improvement plan. At the time that Proposition 84 went before the electorate, California voters had approved some $11 billion for water projects during the previous decade.

“The public is well aware that California has a serious water-supply problem,” said Timothy Quinn of the Association of California Water Agencies, “and that it will take investments in infrastructure and local resource development to solve that problem.”

Quinn’s group represents some 450 agencies that together deliver about nine out of every 10 gallons of water delivered to farms, cities and businesses.

But the November ballot also is fraught with peril: A spate of other borrowings and taxes may be on the ballot, too, including Gov. Brown’s $7 billion-a-year plan to raise sales taxes and impose new levies on the rich, then use the money for schools and public safety.

So the questions now are mounting.

Should the bond be pushed back again, this time to 2014? Should the bond go forward, but with a reduced price tag? If so, how should it be reduced – by removing projects or by an across-the-board cut? A bill to do just that, authored by Assemblyman Kevin Jeffries, R-Riverside, would make a flat 25 percent cut. Thus far, the bill is stalled.

Another option is to strip out all but the reservoir and storage money. That proposal – dubbed the “clean bond” — has little support in the Capitol except among Republicans, and which has outraged environmentalists.

Another possibility: Strip out the general obligation bonds, which require voter approval and priority payout from the General Fund, and instead use revenue bonds, which are paid off by the fees levied on those who get direct benefit of the projects. This sounds feasible, but critics note that local politics gets difficult here as customers find their bills higher to cover the costs of projects.

Any change in the plan requires a two-thirds vote of members in each house.

A final option: Don’t mess with the bond at all and let voters give thumbs up or down. For  environmentalists, this may be the best choice.

“The water bond is a mess. It’s a creature of pork-barrel politics in the Legislature,” said Ron Stork, a senior policy advocate for Friends of the River, “allowing state-federal water contractors and dam builders to put as much of the costs onto general taxpayers, as opposed to the beneficiaries.”

At stake is the plan — approved by Republicans and Democrats alike in the Legislature last year – to borrow $11.14 billion for water projects up and down the state. Those include water quality improvements, watershed protections, groundwater storage and cleanup, recycling, Delta safeguards, drought relief and some $3 billion to develop new storage, including reservoirs near Fresno and the other near Maxwell north of Sacramento.

Dozens of projects were included as the result of stormy negotiations between local, regional and state water officials; environmentalists, Delta advocates, farmers, business interests and others. The result was legislation containing a patchwork of projects cobbled together to please local, regional and state interests.

In real dollars adjusted for inflation, the 2012 water bond is less than the voter-approved, $1.75 billion bond of 1960 that funded the State Water Project. That bond would be worth about $12.7 billion today, according to westegg.com’s inflation calculator.

The key to winning voter approval for water bonds is getting enough diverse interests to support the projects, support that is driven by local districts that negotiated the package. That grass-roots support comes from local districts getting what they need.

But not everyone is happy with the November bond, including Huffman, who as water committee chairman carries a significant voice in water issues. 

“As written, this bond cannot pass in 2012 or any other year so my hope is — and the reality suggests — that we shouldn’t be seriously considering strategies to pass this particular bond, whether it is 2012, 2014 or 2020.”

“To be viable,” he added, “the revised bond will have to be leaner and greener.”


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