Scrum for stimulus dollars sets off regional water battle

In a federally mandated rush to get stimulus dollars out the door, the Schwarzenegger administration has inadvertently set off a battle between rural and urban lawmakers in the Capitol.

At issue is $280 million in funding for wastewater treatment and sewers. But the fight is illustrative of the battles that are beginning to pop up over how to spend federal stimulus dollars, and some of the dangers that arise as the state sprints to meet the Obama administration’s orders to spend the money quickly.

The federal government granted the $280 million to the California State Water Resources Control Board. Last week, the board adopted guidelines about how to spend the money. Under the guidelines, $70 million will be earmarked for the state’s poorest communities, mostly in rural areas. Another $70 million will go to backfill water projects that were funded with bond money, but have since been stalled because of the economic slowdown.

The remaining $140 million would be used for low-interest loans to local agencies for new water projects under the guidelines adopted by the state board last week.

But urban lawmakers have taken umbrage with the way the administration has crafted its guidelines, saying they keep poor areas of large cities from getting any of the funding.

In order to spend any of the money, the state needs the Legislature to act. A bill by Sen. Gloria Negrete-Mcleod, SB 27 X3, would allow the state to start handing out water project money. But the fight between urban and rural water districts has threatened to slow the bill’s progress.

The bill is backed by the Schwarzenegger administration, and passed the Senate on a 36-0 vote Monday. The Assembly is scheduled to vote on the bill Thursday.

Like many state programs receiving early stimulus dollars, the federal money will augment an existing state program.  The board has an existing loan program in place. Typically, they offer 20-year, low-interest loans to public agencies or non-profits for pre-approved water treatment projects.

But there are some changes. To conform with federal guidelines, at least half of the $280 million must be given out as grants instead of loans. The bill is needed to enable the board to give out money instead of loaning it.

The state board is under orders from the federal government to spend the $280 million quickly. The federal government wants the state to spend at least half of the $280 million no later than June 17 of this year.

The Assembly is scheduled to take up the bill Thursday, but there is interest in amending the bill on the Assembly side.
Under amendments proposed in the Assembly, the $140 million set aside for loans would instead be used for grants. Urban water districts argue making that money available as grants would allow projects in poor, urban areas to apply for the same kinds of grant funding that poor, rural districts will be eligible to receive.

It was unclear whether the Schwarzenegger administration supports those amendments. Senate sources indicated the author’s office would probably not oppose such amendments.

To help money get out the door, the bill would raise the cap on grants from the water fund from $1 million to $10 million per project.

The measure also exempts projects that receive stimulus funding from a host of planning requirements that would otherwise be required.