Policy

California's Governor Wants Water Tunnels. Antitax Group Wants to Know Who Pays


California has a $25 billion plan to transport snowmelt from the northern Sierras through a pair of 37-mile tunnels to farms and cities in the south. But there’s no indication of how much water users will owe for the huge project or who’s on the hook if they can’t pay for it, according to the Howard Jarvis Taxpayers Association, the state’s leading antitax group.

That assessment, in a letter last week from Jarvis to John Laird, secretary of the California Resources Agency, is important as much because of who said it as for what it says. Against the backdrop of the state’s withering drought, Californians are fiercely debating Governor Jerry Brown’s Bay Delta Conservation Plan, with public comments due on the proposal’s environmental review by June 13. Arguments usually break down by north vs. south, farmers vs. fish. The Jarvis letter, from the group that spawned the national tax revolt in the 1970s, sounds a fiscal alarm: “Unresolved financing and taxpayer issues are a major concern,” the letter warns.

Brown’s two-tunnel plan is similar to his Peripheral Canal proposal defeated by voters in a statewide referendum in 1982, the last time he was governor. It would capture Sierra runoff east of Sacramento and pump the water southward, bypassing the Sacramento-San Joaquin Delta that flows into San Francisco Bay. The eastern intake would supposedly enhance reliability for agricultural and urban water users in Central and Southern California, who currently compete with salmon and other threatened species, as well as Northern California farmers using delta water supplied via federal and state canals. While the tunnels wouldn’t add to the state’s overall water supply, they would obviate the need to run the delta’s massive pumping systems, a major killer of salmon and other fish.

The state says the cost of building the tunnels will come to about $16 billion, with an additional $9 billion to be spent—in a second phase of the project—on restoring the delta’s levies and ecosystems. Under the plan, almost 70 percent of the project’s total cost would come from water users, with the rest from state bonds and the federal government. What happens if the farms or urban water districts can’t or won’t foot their share of the bill? What if costs balloon, as they have in several recent California megaprojects? Those issues haven’t been addressed in the plan.

“The project’s economics don’t work, which is why the plan is so vague,” says economist Jeffrey Michael, director of the Business Forecasting Center at the University of the Pacific in Stockton, Calif. “I can’t think of anything worse for the Central Valley economy than to add another $1 billion of debt, when farmers are already fallowing up to $2 billion of crops because of drought. This will only escalate the water wars.”

The Jarvis group, in its letter, asked the state to produce a detailed financing plan, specifying how much individual water agencies would have to pay to support the project. The taxpayers group also wants the state to specify how costs would be reallocated, or how the project would be redesigned, if water users are unwilling to bear their share of the costs and to clarify who bears the financial risk for project shortfalls.

Nancy Vogel, director of public affairs for California’s Department of Water Resources, says it’s too early to delve into that level of detail. “The financing plan comes later. We’re trying to get (environmental) permits first,” she says. “Those questions are premature.”

Waldman is a reporter for Bloomberg News in San Francisco.

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