CALFED Finance Planning

Need for Finance Planning

• Status quo approach to rely so heavily on State bond funds unlikely in the future

• Existing funding significantly declining• Legislative direction on new water user fee • Benefits-based financing principle in ROD • Avoid piecemeal finance planning

California Bay-Delta ProgramYears 1-4 Program Funding

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

Yr 1 Yr 2 Yr 3 Yr 4

Program Years

$ i

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Water User

Local

Federal

State

California Bay-Delta ProgramYears 1-5 Cumulative Funding

Federal7%

Water User7%

Local Grant Match22%

State Bond Funds55%

StateGeneral Fund

& Other9%

California Bay-Delta ProgramYears 5-8 Estimated Funding

$0

$100

$200

$300

$400

$500

$600

$700

Yr 5 Yr 6 Yr 7 Yr 8Program Years

$ i

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Water User

Local

Federal

State

Finance PlanningReports

Finance Options Report–Expand understanding of benefits and

costs –Develop financing options

Ten Year Finance Plan –Develop specific funding targets–ID unmet needs–ID financing strategy

Finance PlanningReports

Draft Finance Options Report provides Foundation for 10 year plan discussion:

• Annual funding targets for each element and task/project

• Schedule and readiness of projects • Potential benefits and beneficiaries • Possible finance strategies for each element

and task/project

Finance Planning Outreach

• Stakeholder and agency workgroups & informal meetings

• Legislative hearings & meetings• Public meetings and workshops • Independent Review Panel

– 8 member panel of academics and practitioners

Analysis For Developing Finance Plan

1. What are the reasonable funding

needs/targets?

2. What are the benefits?

3. Who are the beneficiaries?

4. How should costs be allocated?

5. What are the finance tools?

10 Year Finance PlanFunding Targets & Unmet

NeedsProgram Element Funding Targets Available Funding Unmet Needs

Ecosystem Restoration $1,701.3 $701.7 $999.6Environmental Water Account $416.1 $122.9 $293.2Water Use Efficiency $2,236.3 $1,348.2 $888.1Water Transfers $6.0 $6.0 $0.0Watershed $123.0 $51.6 $71.4Drinking Water Quality $264.4 $4.5 $259.9Levees $489.8 $61.4 $428.4Storage $1,034.5 $952.6 $81.9Conveyance $338.9 $143.6 $195.3Science $368.9 $22.5 $346.4Oversight & Coordination $123.0 $73.6 $49.4

Subtotal $7,102.1 $3,488.6 $3,613.4

Potential Capital ProjectsSurface Storage Construction $5,358.9 $0.0 $5,658.9Conveyance Construction $2,408.4 $149.5 $2,258.9Susiun Marsh Levees $101.0 $0.0 $101.0

TOTAL (including Potential Capital Projects) $15,270.4 $3,638.2 $11,632.2

What are the Benefits?

– Water supply (yield & reliability)

– Drinking Water Quality

– Ecosystem Improvement

– Flood Protection

– Hydropower

– Recreation

Measuring “Economic” Benefits

• More Easily Measured: Water supply,

water quality and flood protection

• More Difficult to Measure: ecosystem

improvements

Finance Tools For the Public Share

– State General Obligation Bonds– General Funds– Federal appropriations

For the User Share – Self Liquidating GO Bonds– State Revenue Bonds– SWP & CVP contractor charges– JPA Revenue Bonds– Local matching contributions– New State Administered Fees

New State Administered Fees

Fee versus Tax:• Need a Nexus between level of benefits and

amount paid in fees

• Each program in CALFED has different set of beneficiaries that would result in varying fee levels among water users

New Benefits Based Water User Fee

Finance Options Report suggests that a water user fee is best suited to programs with diffuse water user benefits & not able to identify individual beneficiaries such as:

• Ecosystem Restoration• Environmental Water Account• Drinking Water Quality• Delta Levees• Watershed

Example Finance Strategies

• Surface Storage Construction

• Groundwater Storage

• WUE (Conservation, Recycling, & Desalination)

• Ecosystem Restoration Program

Financing negotiated project by project based on willing beneficiaries

GW and WUE Grant Programs – Primarily local funding, Public share for broader statewide benefits

Public share - Future State bonds & Fed appropriations, Water User share - fee possible, Local cost shares

10 Year Finance PlanNext Steps

Before mid-October

• Refine funding targets and available funds

• Develop proposed cost sharing plan

• Continue outreach with agencies and stakeholders

Finance Planning Issues /Challenges

• Measuring or understanding benefits to support cost sharing

• Philosophical differences--property right vs. public trust

• Ensuring balance & linkages across Programs

• Large gap, no easy money, numerous interest groups & timeframe condensed