Water Primer 102208

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LegislativeAnalysts Ofce

CaliforniasWater: AnLAOPrimer

October 2008

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Contents

Introduction ...........................................................................2

Chapter 1: Overview of Californias Water Governance .......4

Chapter 2: Water Supply, Source, and Delivery ...................15

Chapter 3: Demand and Use of Water ................................ 32

Chapter 4: How Do We Finance Water Projects?.................41

Chapter 5: What Drives the Cost of Water? ........................58

Chapter 6: Issues for Legislative Consideration ..................64

Glossary ...............................................................................73

Acknowledgments

This report was prepared by Catherine B. Freeman, under the supervi-

sion o Mark C. Newton. The Legislative Analysts Ofce (LAO) is a

nonpartisan ofce which provides fscal and policy inormation and

advice to the Caliornia Legislature.To request publications call (916) 445-4656.

This report and others, as well as an E-mail subscription service, are

available on the LAOs Internet site at www.lao.ca.gov. The LAO is

located at 925 L Street, Suite 1000, Sacramento, CA 95814.

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Legislative Analysts Ofce

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decisions to the growth in Caliornias economy over the nextseveral decades.

How Do We Finance Water Projects? Chapter 4 looks athow state, local, and ederal entities nance water projects.We highlight the states largest water initiative, the SWP, andhow it has been unded, as well as take a brie look at ed-eral and local nancing o water projects. In Caliornia, mostwater agencies use a beneciary pays approach to undingwater projects whereby those who benet rom a project pay

or the majority o its costs.What Drives the Cost o Water? In Chapter 5, we high-

light the actors aecting the cost o water, explore whatgoes into a typical residential water bill, and show the trendtoward higher residential water rates. We also identiy ac-tors aecting the regional dierences or agricultural waterprices.

Issues or Legislative Consideration. Change is inevita-ble in Caliornias water system. Chapter 6 highlights optionspolicymakers have to make changes to Caliornias supplyand delivery o water. From water storage to conservation,water rights to water transers, policymakers have a breadtho options available to institute change in Caliornia waterpolicies.

This report relies on most recent data available rom sev-

eral ederal and state agencies, including the U.S. GeologicalSurvey, U.S. Bureau o Reclamation, Caliornia Departmento Water Resources, State Water Resources Control Board, theCaliornia Department o Fish and Game, Caliornia Depart-ment o Public Health, the Caliornia Energy Commission,Public Policy Institute o Caliornia, as well as inormationrom private water entities, including a survey o residentialwater rates by the rm Black & Veatch.

Finally, there are many unique terms in the water world.Please see the glossary on page 73 or a quick reerence todenitions o commonly used terms throughout this report.

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Caliornias Water: An LAO Primer

4

Many State Agencies Are Involved inWater Management

Many state agencies are involved with water manage-ment. While overlap among agencies occurs in terms othe broad objectives addressed, generally, there is notduplication o unctions. This is because most agenciesocus on a specic subset o water management respon-sibilities. For example, both the State Water ResourcesControl Board (SWRCB) and Department o Water

Resources (DWR)the states two lead water manage-ment agencieshave mandated water supply objec-tives. However, their practical roles dier greatly

Responsibilities

Agency

Water

Supply

Water

Quality

Flood

Control

Department of Water Resources X X

State Water Resources Control Board X X

CALFED Bay-Delta Authority X X X

California Public Utilities Commission X X

Colorado River Board X

Department of Pesticide Regulation X

Department of Public Health X

Department of Toxic Substances Control X

Office of Environmental Health Hazard Assessment X

Chapter 1

Overview o CaliorniasWater Governance

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DWR ocuses on water delivery, water supply planning,and inrastructure development, while SWRCB is more

o a regulatory body, managing water rights and waterquality permitting (both o which have an eect on wa-ter supply). These roles are complementary and otenrequire the two agencies to work in concert to addresswater management at the state level.

Management o the Caliornia water system consistso three key components: water supply, water quality,

and food control. Most agencies involved in one ormore o these components also have responsibilitiesor scientic activities and monitoring and administer-ing nancial assistance or local water inrastructure.All o these responsibilities can serve to meet multipleobjectives. For example, several nancial assistanceprograms attempt to jointly address water quality and

water supply needs at the local level, thereby provid-ing more comprehensive local water supply reliability.Other state agencies not listed may be involved withwater management as part o their greater mission (orexample, the Department o Conservation manages astate watershed program).

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6

Non-State Entities Play Roles

In Water Management

At the ederal level, most agencies have distinct rolesor example, the United States Environmental Protec-tion Agency ocuses on water quality, while the UnitedStates Bureau o Reclamation ocuses on water supply.However, these roles can overlap and potentially du-

plicate state eorts. For example, both state and ederalentities estimate the states water supply resources, al-though the state has a more comprehensive role thoughthe eorts o DWR.

At the local and tribal levels, however, most entitiesplay multiple roles, including both water supply andwater quality ones. Local entities can be both regulated

and regulatory entities, receiving permits rom stateagencies or water quality while in turn regulating

Responsibilities

Entity

Water

Supply

Water

Quality

Flood

Control

Federal Agencies

Bureau of Reclamation X X

Army Corps of Engineers X X

Environmental Protection Agency X

Geological Survey X X

Other Entities

Tribal governments X X X

Cities and counties X X X

Special districts X X X

Private water companies X

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their constituents to meet those permitting require-ments. In some respects, these roles may duplicatethose o state or ederal eorts. For example, ederal,state, and local water agencies may each be indepen-dently investigating the development o new watersupply sources to potentially serve the same region o

the state.

The 1,200-plus water districts in Caliornia perorm awide range o activities, both water and non-water re-lated. Many districts provide more than one o the threedesignated water services (water delivery, sanitation, orfood control). Lighting, recreation and park, and streetmaintenance services are the most common non-water

activities perormed by the states water districts.

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Diering Defnitions o Water Regions Loom

As Challenges to Bond Fund Allocations

The water regions dened by both DWR and SWRCB,while similar, are not identical. The SWRCB worksin conjunction with nine semiautonomous regional

boards (each having policy-setting responsibilities)while the DWR divides the state into ten hydrologic re-gions governed rom Sacramento headquarters. Severalactivities o the DWR and SWRCB require coordination

Department of Water Resources

Hydrologic Regions

1. North Coast

2. San Francisco Bay

3. Central Coast

4. South Coast

5. Sacramento River

6. San Joaquin River

7. Tulare Lake

8. North Lahontan

9. South Lahontan

10. Colorado River

1

2

3

4

5

6

7

8

9

10

Similar Boundaries

Different Boundaries

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among regions and between the two state agencies,such as the joint SWRCB/DWR allocation o the $1 bil-lion Integrated Regional Water Management bond undpackage (discussed urther on page 47). The dierence

in regional governance between SWRCB and DWR willpose a challenge to these agencies as they attempt tocoordinate the implementation o this bond program.

State Water Resources

Control Board Regional Boards

1. North Coast

2. San Francisco Bay3. Central Coast4. Los Angeles

5. Central Valley

6. Lahontan7. Colorado River Basin

8. Santa Ana9. San Diego

1

2

3

4

8

9

7

6

5

Similar Boundaries

Different Boundaries

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18601922 1928

1969

1970

1972

1974

Levee and

Reclamation

Districts.Formation of locallevee and reclamationdistricts authorized byLegislature.

Colorado River

Compact. Multi-stateand federal agreementdesignates wateramounts allocated to theupper and lowerColorado River basins.

Reasonable and

Beneficial Use

Doctrine.California Constitutionamended to requirethat all water use bereasonable andbeneficial.

Porter-Cologne

Water Quality Act.Provides Californias firstcomprehensive body ofwater quality law.Wild and Scenic Rivers,

Clean Water Acts.Legislature passes state Wildand Scenic Rivers Act,Congress passes federal CleanWater Act.

Federal Safe Drinking Water

Act. Congress mandates waterquality standards for drinking water.

NEPA, CEQA, and CESA.Passage of National Environmental Quality

Act (NEPA), California EnvironmentalQuality Act (CEQA), and the CaliforniaEndangered Species Act (CESA).

Selected Events in State Water Policy

HistoryA Timeline

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1931 1933

19591967

1985 2003

County of Origin Law.Guarantees counties theright to reclaim their waterfrom an exporter if needed inan area of origin.

Central Valley Act.Authorizes a majorwater projectthe stateCentral Valley Project(CVP); ultimately theCVP was taken over bythe federal government.

Burns-Porter Act.

Authorizes $1.75 billion inbonds for development of theSWP (later ratified by voters).

Delta Protection Act.

Resolvesissues of Delta-relatedlegal boundaries. Addresses salinitycontrol, and water exportation at the

same time the State Water Project(SWP) development proposal isbeing considered.

State Water Resources

Control Board Created.Board regulates both water rightsand water quality (functionsformerly regulated by twoseparate boards).

Pesticide Contamination

Prevention Act.State law to regulate and

monitor pesticide use to preventgroundwater contamination.

California Bay-Delta Authority Act.Creates the California Bay-Delta Authorityand provides policy direction for theCALFED Bay-Delta Program.

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1951State Water Project (SWP)

ProposedThe state Department of PublicWorks, Division of WaterResources (a predecessor of thecurrent Department of WaterResources) makes a proposal to

the Legislature for a major statewater project (initially called theFeather River Project).

1960Burns-Porter RatifiedBurns-Porter Act ratified by voters;$1.75 billion bond issue for SWPdevelopment of a major north-southtransfer of water including multiple

reservoirs and conveyance systems.

1973First Deliveries MadeFirst SWP deliveries to SouthernCalifornia.

1982Proposition 9 DefeatedProposition 9, which would let SB 200

go into effect, thus authorizing astatewide package of water infrastruc-ture including the Peripheral Canal,was overwhelmingly defeated in astatewide vote.

2007

Water Exports ReducedFederal court rules that pumping by state and federalwater projects puts an endangered species, the DeltaSmelt, at risk of extinction. The state later reducespumpingand at one point shuts down the Bankspumping plantreducing water deliveries by up to30 percent to comply with the order.

1997Coastal Extension CompletedSWP Coastal Aqueduct completedlinking SWP to Santa Barbara andSan Luis Obispo Counties.

2008Operations Further Reduced

Federal court rules that a 2004 biological opinion by the U.S.Fish and Wildlife Service related to state and federal watermanagement operations does not adequately protectsensitive fish populations, including salmon. Creates potentialfor further reductions in water project deliveries from theDelta beyond those required by the 2007 federal ruling.

Milestones in Caliornias State Water Project

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1901First Deliveries MadeFirst deliveries from the ColoradoRiver made to farmland in theImperial Valley through a privately

developed channel now known asthe Alamo River.

1905Salton Sea FormedFlooding diverts Colorado River

water into Imperial Valley, formingtodays Salton Sea.

1922Compact SignedColorado River Compact signed bymultiple states and federal govern-ment, allocating 7.5 million acre-feet

(MAF) per year to each of the riverstwo basins (upper and lower).

1998-2003

4.4 MAF Annual Apportionment ImplementedThe Colorado River Quantification Settlement Agreement is reachedbetween California, other Colorado River Basin states, and the federalgovernment. The state agrees to reduce its water use from the Colorado

River by about 800,000 acre-feet over timeto its apportionment of 4.4 MAF,and assume most financial responsibility to restore the Salton Sea.

1928Boulder Canyon Act SignedCongress passes the BoulderCanyon Act authorizing theconstruction of Boulder (Hoover)

Dam and other facilities on theColorado River.

1934All-American CanalConstruction BeginsConstruction starts on All-AmericanCanal in Imperial Valley and on

Parker Dam on the Colorado River.

1937Colorado River Board FormedLegislature creates the ColoradoRiver Board to represent state in

Colorado River negotiations.

1963Arizona Lawsuit DecidedArizona v. Californialawsuit decidedin Arizonas favor, allocating

2.8 MAF of Colorado River water peryear specifically to Arizona.

1989First Major TransferFirst major Colorado River water

transfer to Metropolitan WaterDistrict which in exchange agrees topay for Imperial Irrigation District

water conservation efforts.

The Colorado RiverSouthern Caliornias

Eastern Water Source

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1959Delta Protection Act Enacted.Resolves issues of Delta-related legal

boundaries, and addresses salinitycontrol and water exportation.

1978Water Rights Decision.State Water Resources ControlBoard (SWRCB) issues water rights

decision setting initial Delta waterquality standards.

1982Proposition 9 DefeatedProposition 9, which would letSB 200 go into effect, thus

authorizing a statewide package ofwater infrastructure including thePeripheral Canal, was overwhelm-

ingly defeated in statewide vote.

1986Racancelli DecisionState Court of Appeals directs

SWRCB to consider allbeneficial uses, includinginstream needs (environmental

water uses), of Delta water whensetting water quality standards.

1994

Bay-Delta Accord SignedState and federal resource manage-ment agencies sign Bay-Delta Accord,setting interim water quality standardsto protect Delta estuary and provide

water supply reliability.

1993CVP Flows RestrictedFederal court rules that CVP mustconform with state law requiring

release of flows for fisherypreservation.

1992Congress Approves CVPIACongress approves Central ValleyProject Improvement Act (CVPIA)designed to mitigate environmental

impacts from the federal CentralValley Project (CVP).

1995Water Board Delta PlanSWRCB adopts new Delta water

quality plan and begins relatedwater rights hearings.

2007Water Exports LimitedFederal court limits water exportsfrom Delta, citing endangeredspecies concerns.

2003Bay-Delta Authority Act PassedLegislature passes act creating the

California Bay-Delta Authority andproviding policy direction for theCALFED Bay-Delta Program.

Legislation and Judicial Action Guide

Bay-Delta Activities

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Where Does Water Come From?Not All Water Flows Into Supply Stream

Water Supply. Between 28 percent and 45 percent owater in the state in any given year is dedicated to wa-ter supply or urban, agricultural, and environmentalpurposes, the percentage generally depending on thelevel o precipitation in that year.

The remaining waterdoes not necessarily go unused.In part, water rom wet years replenishes groundwater

basins, allows urban users and armers to use less odedicated water supplies or irrigation and landscap-ing, and provides periodic fushing fows to riversthroughout the state.

50

100

150

200

250

300

350

400

Wet Year Normal Year Dry Year

Water Coming Into State

Precipitation, Imports, andInflow to the State

Water SupplyPercentage ofWater Coming Into StateDedicated to Urban, Agricultural,

and Environmental Purposes

Million Acre-Feet

28% 42%45%

Chapter 2

Water Supply, Source,and Delivery

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Factors Aecting Water Available

For Delivery

Water

Available

To Deliver

Weather

Availability of

Groundwater

Environmental

Factors

SystemConstraints

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Four actors determine the availability o waterordelivery or urban, agricultural, and environmentalpurposes: (1) weather and precipitation, (2) environ-mental actors, (3) system constraints, and (4) availabil-ity o groundwater.

Weather, including precipitation, is oremost in deter-mining the total amount o water available in any givenyear or urban, agricultural, and environmental uses.Also, environmental constraints, including the amounto water required to be let in a river system or shand wildlie purposes and protection o endangeredspecies, determine the amount o water that can bedeveloped or nonenvironmental purposes.

The development o water or use inherently involvessystem constraints. For example, while surace storageis part o the states water inrastructure, the movemento this water to its destination (conveyance) is a signi-cant limiting actor. The states largest water deliverysystem, the State Water Project (SWP), serves only a

portion o the state, mostly in Southern Caliornia, andthis water must be moved through the Sacramento-SanJoaquin River Delta (the Delta) where environmentalrequirements are a limiting actor. Local systems alsoace conveyance constraints, such as challenges to movewater to areas higher than the water sources (requiringpumping uphill).

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Precipitation Varies Widely Year to Year

Precipitation is generally measured as rainall andsnowall. The Wet Year, Average Year, Dry Yeardeterminations made by the Department o Water Re-sources (DWR) are in part based on precipitation levels,

but also actor in snow pack, runo conditions, andprevious-year conditions.

Wet and Dry Cycles. Caliornia has experienced sev-eral multiyear periods o wet or dry cycles in the past100 years. Also, while precipitation has varied year toyear, the amount o these annual variations seem to beincreasing recently.

Precipitation (In Inches) 1890-2006

10

20

30

40

50

1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

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Mix o Water Supply Sources Shits in

Dry and Wet Years

In drier years, overall water supply available to dedi-cated uses declines due to a lack o water coming intothe system (mostly rom rain and snow). Less rainall

and snow pack reduces the amount o water availablethrough local surace water projects, and local waterreuse and recycling projects. During such dry years,local groundwater use increases.

Some water projects are designed to lessen the nega-tive impact o dry-year conditions. For example, theSWP, ederal water projects, and Colorado River Project

systems were developed with multiple storage andconveyance acilities (and associated water rights). As aresult, these surace water projects are not signicantlyimpacted by single dry-year conditions. The ability to

(Million Acre-Feet of Water, by Water Supply Source)

aMainly surface water with some integration of other sources such as groundwater.

5 10 15 20 25

Local Groundwater

Local Reuseand Recycling

Local Projectsa

Federal ColoradoRiver Project

Federal Central

Valley Project

State Water ProjectDry Year (2001)

Wet Year (1998)

Surfa

ceWater

Other

continued

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store water rom year to year lessens the fuctuation inthese systems, though in multiple dry years, the watersupply rom these systems is reduced.

During wet years,as more water is drawn rommainly surace water supplies, groundwater systems

recharge or ll up (similar to a sponge soaking upwater). This water is then available in relatively moreabundance during dry years when surace water sup-ply is lower.

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Groundwater Is a Major Contributor to

States Water Supply, More So in Dry Years

Groundwater supplies around 30 percento Cali-ornias overall dedicated water supplies in averageprecipitation years and up to 40 percent in dry years.

Groundwater is both managed and regulated locally inmost areas o the state.

In some areas where surace supplies are not acces-sible or economically easible, groundwater supplies100 percent o a communitys public water.

About 43 percent o Caliornians obtain at least some

o their drinking water rom groundwater sources.

10

20

30

40

50

60

70

80

90

100%

Wet Year Average Year Dry Year

Groundwater

All Other Developed Water Supply

21%

29%

39%

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Surace Storage Capacity Concentrated in

Northern and Central Foothill Areas o the State

Tuolumne

Shasta

Butte

Surface Storage Capacitya

(In Million Acre-Feet)

Over 3

2-2.9

1-1.9

Less than 0.9

aIncludes both state and federal

reservoirs.

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Caliornias major water systems, located in thenorthern, central, and eastern parts o the state, all havelarge surace storage acilities (mainly dams and res-ervoirs). Counties with the highest capacity o suracestorage (Shasta, Butte, and Tuolumne) also host threeo the largest reservoirs in the state. In Caliornia, the

DWR Division o Dam Saety regulates 1,200 damswith around 21 million acre-eet (MAF) o combinedstorage capacity, with the remaining about 17 MAF ocapacity under ederal jurisdiction.

Most dams in Caliornia were builtbeore 1975. How-ever, since that time, local surace storage developmenthas continued, with notable developments includingthe 800,000 acre-oot Diamond Valley Reservoir servingthe Metropolitan Water District o Southern Caliorniain Riverside County completed in 1999.

Most o the largest reservoirs in the state are ownedby the ederal government with the balance owned bythe state, local government, or private entities.

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Caliornias Largest Surace Storage Owner

Is the Federal Government

The ederal governmenthas developed the mostsurace storage capacity in the state with over 17 MAF

o capacity in ten reservoirs on multiple river systems.These reservoirs generally are part o the ederal Cen-tral Valley Project (CVP), which serves about 3.1 millionpeople, and provides irrigation water to over 2.6 mil-lion acres o land. The largest reservoir in the system isShasta Lake with 4.6 MAF o capacity.

The state,as part o the development o SWP, built

Oroville Dam and reservoir on the Feather Riversystem with a capacity o 3.5 MAF. The SWP providesall or part o the drinking water supply or 23 millionpeople and provides irrigation water to about755,000 acres o land.

Owners With Reservoir Capacity Totaling Over 500,000 Acre-Feet

aIncludes San Luis Reservoir that was developed in conjunction with the State WaterProject and has a capacity of 2 MAF of water. The project is cooperatively managed by thestate and federal government, and built under the jurisdiction of the federal government.

Total Capacity in Million Acre-Feet (MAF)

2 4 6 8 10 12 14 16 18

Federal Governmenta

State of California

Turlock Irrigation District

Pacific Gas and Electric

Merced Irrigation District

Yuba County Water Agency

Metropolitan Water Districtof Southern California

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Delta Is at the Heart o

The Caliornia Water System

Water fowing through the Delta is the main source osupply or two major Caliornia water delivery projects,the SWP and the ederal CVP. From these projects, amajority o Caliornians rely on water fowing throughthe Delta or all or part o their drinking water. In ad-dition, approximately one-third o the states croplanduses water fowing through the Delta.

10% Eastside

Tributaries/

In-Delta Precipitation

12% Central Valley

Project, Mostly

Agriculture

16%

San Joaquin River

65% Outflow to

Suisun and

San Francisco Bays

8% In-Delta Use,Mostly Agricultural

Source of Water

Into the Delta

Water Deliveries

and Flow Out of Delta

74% Sacramento

River Valley

15% State Water Project,

Mostly Southern California

Urban and Industrial Use

continued

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The state has spent over $3 billion since 2000 in theCALFED BayDelta Program (CALFED) to help protectand restore the Delta. The objectives o the programwhich involves 25 state and ederal resource agenciesare to (1) provide good water quality or all uses,(2) improve sh and wildlie habitat, (3) reduce the gap

between water supplies and projected demand, and(4) reduce the risks rom deteriorating levees. A num-

ber o current and ongoing planning eorts, includ-ing the Delta Vision process, could undamentallyredene CALFEDs uture and the states unding andpolicy priorities or the Delta.

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State Water Project Moves Water,

Mainly From North to South

Disconnect Between Water Supply and WaterDemand.Water supply in Caliornia does not naturallyoccur where demand is highest. Much o Caliorniasrainall occurs in the north, while much o the demandor water is in the south. As a result, the SWP has been

In-Stream/River

Canal/Pipeline

Delta BoundaryRedding

Oroville

Sacramento

Fresno

San Francisco

Coastal Branch

South San Joaquin

West Branch

East Branch

Upper Feather

Oroville-Thermalito

North Bay

South Bay

San Luis

Los Angeles

San Diego

continued

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developed as a complex system or storing and trans-porting water through much o the state, as shown onthe map.

Storing and Transporting Water. The need to storeand transport large quantities o water creates its own

challenges to ormulating statewide water policy. Forexample, water transported south rom SWP acilitiesmust rst make its way through the Delta, which cre-ates environmental and land-use pressures. Proposalsto bypass the Delta with either a Peripheral Canal orother conveyance system have been proposed over theyears, and such alternative conveyance systems con-

tinue to be evaluated today.

SWP Extensions. The SWP continues to evolve with re-cent extensions approved, including the Coastal Aque-duct to serve coastal areas down to Santa Barbara andthe East Branch Extension serving areas near Riverside.

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Population Centers Rely Heavily on Water

Imported From Other Regions o the State

Four o the state's ten water basins depend signi-cantly on water imported rom other regions o thestate. These our basins, which are largely urbanized

and/or agricultural regions in the central and coastalparts o the state, account or almost one-hal o urbanand agricultural water use statewide.

Surace Water Storage. As the states water supplylargely originates in its northern region, extensive sur-ace water projects (dams, reservoirs, and aqueducts)have been built, supplying about 68 percent o state-

wide urban and agricultural water use.

aWhile the Colorado River region is a net exporter of water within California, its main sourceof water is imported from the Upper Colorado River Basin.

Water BasinsIn-State Flow of Water for Use

Net Exportersa

Net Importers

Percent of Urban and Agricultural

Use Met by Imports:Less than 30%

30-60%

Over 60%

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Who Are Caliornias Top Five

Water Rights Holders?Federal Government Is theTop Water Rights Holder in California

A water right is legal permission to use a speciedamount o water or a benecial purpose such as drink-ing, shing, irrigation, arming, or industry. The StateWater Resources Control Board regulates water rightsor those taking water rom lakes, rivers, streams, andcreeks. It does not regulate the rights to use under-ground water supplies, which are primarily regulated

by a patchwork o local laws.

The ederal government, through the Bureau o Rec-lamation, holds the most (in volume) water rights inthe state with over 112 MAF o water held, mainly or

20 40 60 80 100 120

U.S. Bureau

of Reclamation

Imperial

Irrigation District

Pacific Gas andElectric Co.

CA Dept. of

Water Resources

Southern California

Edison Co.

(Permitted Water Rightsa, in Million Acre-Feet)

aPermitted and licensed water rights issued by the State Water Resources Control Board.Other water rights (such as pre-1914 claims) are not included in this list.

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delivery through the ederal CVP. Second to this arethe water rights held by the Imperial Irrigation District(44 MAF), serving mainly arms in the Colorado Riverregion. Two private gas and electric companies holdrights to over 41 MAF o water collectively, mainly orhydroelectric power. The state, through DWR, holdsrights to about 31 MAF o water.

Most Water Rights Held by Federal Government,

Irrigation Districts, and Utilitiesa

O the top 25 water rights holders (generally thosewith rights to use over about 1 MAF o water), the ed-eral government holds much o the water rights, whileirrigation districts and utilities make up much o the

rest o the water rights holders. State and urban localagencies hold less than 20 percent o the water availableto the top 25 water rights holders.

a The top 25 water rights holders, in terms of volume of water, by category.

Utilities (Gas and Electric)19%

Federal Government38%

Municipalities andUrban Special Districts

7%

Irrigation Districts

25%

State Government11%

(Percent of Water Rights Held)

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Use o Water Changes SignifcantlyFrom Wet to Dry Years

The total amount o water supply available in anygiven year or dedicated uses varies greatly dependingon precipitation levelsrom about 65 million acre-eet(MAF) in a dry year to about 95 MAF in a wet year. Inaddition, the allocation o water among urban, agri-cultural, and environmental uses also varies greatly

between wet and dry years.

aEnvironmental water includes instream flows, wild and scenic flows, required Delta outflow,and managed wetlands use. Some environmental water is reused by agriculture and urbanwater users.

Wet Year(95 Million Acre-Feet)

Dry Year(65 Million Acre-Feet)

Urban

Uses

Agricultural

Uses

Agricultural

Uses

Environmental

UsesaUrban Uses

Environmental

Usesa

Chapter 3

Demand and UseO Water

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Water Use Growing More Slowly

Than Population

Water used or urban and agricultural purposes hasgenerally remained stable, and has even declined attimes, even though population has increased. Sincethe 1980s, the state has enacted multiple conservation

measures to assist local entities, mainly cities wherethe majority o the population lives, in reducing waterconsumption. These measures have included low-fowtoilets, showerheads, and landscape irrigation improve-ments, and have resulted in decreases in per capitawater use in some areas.

Agricultural water use has also remained relatively

stable, as has the amount o acreage used or agriculture,over the last several decades. However, it is anticipatedthat agricultural water use will decline in uture yearsor a variety o reasons, as discussed on the next page.

5

10

15

20

25

30

35

40

72 80 89 91 93 95 0075 85 90 92 94 98 01

5

10

15

20

25

30

35

40

45

50

Water Use

(In Million Acre-Feet)

Population

(In Millions)

Population

Urban Water Use

Agricultural Water Use

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Future Agricultural Water Use Likely to Drop,

While Urban Use Remains Uncertain

Caliornia is likely to see a drop in agriculturalwater use in the uture, under most orecasts produced

by the Department o Water Resources (DWR). This isdue to increases in agricultural water eciency, chang-es in the use o armland requiring less water (in somecases the conversion o land or other uses, or shit tohigher valued crops using less water), and the likelyincrease o transers rom agricultural areas to cities tomeet growing urban water supply needs.

(Million Acre-Feet)

5

10

15

20

25

30

35

40

2000Actual

CurrentTrends

Less WaterIntensive

Economy

More WaterIntensive

Economy

Urban Water Use

Agricultural Water Use

2030Three Scenariosa

aThe Department of Water Resources estimates water use in the future under three scenarioscurrent trends, less water intensive, and more water intensive. These scenarios are consideredviews of possible water use in the future, rather than a prediction of water demand.

continued

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Future changes in the urban use o water, includingresidential and commercial, is more dependent on thestates policy priorities or water use eciency and en-vironmental protection. For example, the more waterintensive economy scenario developed by DWR orthe year 2030 envisions relatively higher use o water

in agricultural and industrial sectors, with no morewater being dedicated or environmental purposes andless emphasis on water use eciency than currently.Alternatively, i water use eciency and the environ-ment take greater precedence in state priorities, DWRsscenarios envision less water being used in cities andtowns in 2030 than currently.

Changes in water policy and legal rulings will havemajor impacts on how these scenarios change overtime. Examples include the Governors recent pro-posal to reduce per capita water use in urban areas

by 20 percent, the SWRCBs statewide water recyclingregulations, and judicial determinations on the amounto water that can be delivered rom the Delta due to

endangered species laws.

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Urban Inland Water Use Higher Than

Coastal and Statewide Average

Per capita water use among urban users varies sub-stantially between inland and coastal areas o the state.In general, urban per capita water use recently has

been declining overall in Caliornia, with coastal areasgenerally ollowing this trend. However, inland areas,where hotter climates tend to occur, have increased percapita water use in recent years in part due to increaseduse o water-rich landscaping.

Overall Decline Due to Conservation. Various con-servation programs over the years, mainly state bond

unded and locally unded, have contributed to thedecline in overall per capita water use in Caliorniasurban areas.

(Gallons Per Capita Per Day of Urban Water Use)

50

100

150

200

250

300

350

400

1960 1972 1985 1995

Statewide Urban Average

Coastal

Inland

Courtesy of the Public Policy Institute of California, Lawns and Water Demand in California,Figure 1. California Economic Policy, Volume 2, Number 2, July 2006.

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Same Crop, but Dierent

Water Use by Region

(Acre-Feet of Water for Each Acre of Crop Land Per Year)

Central

Coast

Colorado

River

San Joaquin

River

Pasture

5

10

15

20

H

L

Colorado

River

San Joaquin

River

Orchard

Central

Coast

5

10

15

20

H

L

5

10

15

20

Colorado

River

San Joaquin

River

Tomato

Central

Coast

H

L

Colorado

River

Central

Coast

San Joaquin

River

H=High Water Use L=Low Water Use

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Agricultural Use o Water Signicant. Caliornia agri-culture uses roughly 30 MAF o water a year on 9.6 mil-lion acres. Caliornias vast water inrastructureincluding the development o the State Water Project,Central Valley Project, and Colorado River, as well aslocal and regional groundwater supply projectswas

developed to provide water or irrigation (among otherpurposes), with agriculture using about 80 percent oCaliornias developed water supply.

Same Crops, but Dierent Water Use by Region. Onaverage, the same crop will use dierent amounts owater depending on the region the crop is grown in.For example, tomatoes grown in the Central Coast use

less than one-hal the water as in the Colorado Riverregion.

Agricultural Use o Water Aected by MultipleFactors. The amount o water used to grow a particularcrop varies widely by region. While business decisionsor agricultural water use largely ocus on climate con-ditions (hot, dry weather would require more water),there are a number o other actors that infuence theamount o water used to grow a particular crop. Theseinclude: (1) soil type, (2) water supply source (ground-water to be pumped or surace water delivered), (3) theamount o water rights held by the armer (water rightsin Caliornia have a use it or lose it clause as de-scribed on page 68), and (4) the particular use o other

inputs needed to grow a crop (or example, some ertil-izers or pesticides require more water to apply).

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Amount and Use o Water Varies

Among Water Basinsa

Water Basin Variation. There is substantial variation

among the states water basins in the amount o waterused or urban, agricultural, and environmental uses.In general, urban areas use less water than agriculturalareas. Environmental water use, or water that is gen-erally required to maintain sh and wildlie habitat,tends to be higher in the northern part o the state.

Future Water Use. Overall, DWR projects statewide

water demand to remain the same or decline slightlybetween 2000 and 2030 under current conditions. How-ever, urban and environmental uses are projected to in-crease, while agricultural uses are projected to decline.

5

10

15

20

25

NorthCoast

SanFrancisco

Bay

SouthCoast

SanJoaquin

Million Acre-Feet

Environmental

Agricultural

Urban

aData reflect average use for selected water basins for 1998, 2000, and 2001a wet year,

a slightly above-normal year, and a dry year, respectively.

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Various Approaches Available to FinanceWater Inrastructure

Three Financing Approaches. Generally speaking, thereare three main approaches available or public agencies tonance the acquisition and/or use o capital inrastructure.(These approaches are distinct rom the separate issue owhatfunding source[s] will ultimately be used to pay or theinrastructure.) These approaches include:

Pay-As-You-Go. With this approach, inrastructure

projects are paid or directly rom current revenues.Typically, a portion o a local water project is nancedusing a pay-as-you-go nancing mechanism. The statehas also used a pay-as-you-go approach or capitalinvestment in some food control projects.

Renting and Leasing. This can sometimes be easiblewhere privately owned inrastructure (such as a pri-

vately owned desalination or wastewater treatmentplant) is available or public use. In these cases, thegovernmental entity makes rent or lease paymentsto the private owner o the particular inrastructure.Somewhat rare in the water world, this approach may

be increasingly used by public agencies as private in-vestment in water inrastructure increases.

Bond Financing. By ar the most common orm o in-rastructure nancing, this approach typically involvesthe governmental entity borrowing money to be paido over time to build or acquire long-lived capital a-cilities that generate services over many years.

Chapter 4

How Do We FinanceWater Projects?

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Bonds Are the Major State Financing

Approach or Water Inrastructure Two Types o Bonds. The state has traditionally used

two major types o bonds to nance water inrastruc-ture. The key dierence between the two types o

bonds is the source o unds to pay back this debt.

General Fund-Supported Bonds Revenue Bonds

These are paid off from thestates General Fund, which islargely supported by tax reve-nues. The majority of these aregeneral obligation (GO) bonds.These bonds must be approvedby voters and their repayment isguaranteed by the states generaltaxing power.

In the case of the State WaterProject (SWP), however, GObonds were paid back mainly byuser fees, while remaining guar-anteed by the states generaltaxing power.

The second type is lease-

revenue bonds, which are author-ized by the Legislature. Theseare paid off from lease payments(primarily financed from theGeneral Fund) made by stateagencies using the facilities theyfinance. These bonds do notrequire voter approval and arenot guaranteed. As a result, theyhave somewhat higher interestcosts than GO bonds.

These also finance capital pro-jects but are not supported bythe General Fund. Rather, theyare paid off from a designatedrevenue streamusually gener-ated by the projects they fi-nancesuch as water user as-sessments. These bonds also donot require voter approval.

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Authorized Amount o Water-Related Bonds

Total Water Bonds Authorized. Since 1970, the statesvoters have authorized over $23.4 billion in water-related general obligation (GO) bonds, mainly or water

quality and drinking water purposes (see next page).(Typically, these bond measures also included und-ing or other resource-related purposes as well, suchas land conservation and habitat protection.) However,84 percent o this amount (about $19.6 billion) wasauthorized since 2000. This included the single largestwater bond ($5.4 billion) in Caliornia history in 2006.(Not all o these bonds have been issued yet.) A major

change in 2006 was the inclusion o food control as amajor purpose in a statewide bond. A complete listingo water-related bonds is shown on the ollowing page.

1970-2006 (In Billions)

1

2

3

4

5

6

7

8

9

$10

70 76 82 86 96 0274 78 84 88 00 06

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Water-Related Bonds

1970-2006(In Millions)

Year General Obligation BondAmount

Authorized

1970 Clean Water Bond Law of 1970 $250

1974 Clean Water Bond Law of 1974 250

1976 California Safe Drinking Water Bond Law of 1976 1751978 Clean Water and Water Conservation Bond Law of

1978375

1982 Lake Tahoe Acquisitions Bond Act 851984 California Safe Drinking Water Bond Law of 1984 751984 Clean Water Bond Law of 1984 3251984 Fish and Wildlife Habitat Enhancement Act of 1984 851986 California Safe Drinking Water Bond Law of 1986 1001986 Water Conservation and Water Quality Bond Law of

1986

150

1988 California Safe Drinking Water Bond Law of 1988 75

1988 California Wildlife, Coastal, and Park LandConservation Act

776

1988 Clean Water and Water Reclamation Bond Law of1988

65

1988 Water Conservation Bond Law of 1988 60

1996 Safe, Clean, Reliable Water Supply Act 995

2000 Safe Drinking Water, Clean Water, Watershed

Protection, and Flood Protection Act

1,970

2000 Safe Neighborhood Parks, Clean Water, Clean Air,and Coastal Protection Bond Act of 2000

2,100

2002 California Clean Water, Clean Air, Safe NeighborhoodParks, and Coastal Protection Act of 2002

2,600

2002 Water Security, Clean Drinking Water, Coastal andBeach Protection Act of 2002

3,440

2006 Disaster Preparedness and Flood Protection BondAct of 2006

4,090

2006 Safe Drinking Water, Water Quality and Supply,Flood Control, River and Coastal Protection BondAct of 2006

5,388

Total $23,429

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State Water Project: Mainly Bond Financed,

Paid Back by Users

From 1952 to 2007, unding to build the State Water

Project (SWP) totaled about $6.4 billion, mainly romrevenue bonds and GO bonds.

When the revenue and GO bonds are paid o, it isestimated that those entities who receive the water romthe SWP (contractors) will have paid or about 96 per-cent o the cost o building the project. The remainder ispaid by the state, to cover sh, wildlie, and recreation

enhancements associated with SWP, and the ederalgovernment, primarily or food control benets.

(In Billions)

aIncludes federal flood control payments and investment earnings.bGeneral obligation and revenue bonds used to pay for the State Water Project (SWP)were paid back by SWP contractors (water users), rather than the General Fund.

1

2

3

4

5

6

$7

Othera

California Water Fund

General Obligation Bondsb

Revenue Bondsb

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Recent Voter-Approved Water Bonds

Shiting Focus to Water Management

1996-2002a

$5.5 Billion

Water Quality

Water Managementb

CALFEDc

aIncludes water-related funding in Propositions 204, 13, 40, and 50.

bIncludes flood control, water supply, water conservation, and water recycling.cIncludes various water management activities focused on the Bay-Delta region.

2006

$8.8 Billion

Water Quality

Water Managementb

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Since 1996, voters have approved over $14 billion inGO bonds or water-related purposes. Prior to 2006,water bond unds were allocated among the CALFEDBay-Delta Program (CALFED) (largely ocused on theSan Francisco Bay/Sacramento-San Joaquin Delta estu-ary), water quality, and water management activities.

Recent bonds have not provided unding explicitly orCALFED. They have instead unded water quality andplaced an increased ocus on water management. Thelatter category addresses water supply, food control,and water conservation/recycling requirements.

The increased emphasis on water managementis also

refected in bond unding through local assistance tothe Integrated Regional Water Management Program(IRWM). Under IRWM, locals submit to the state aregional water management plan addressing issuesincluding water supply reliability, water use eciency,stormwater, and food control, among others in order to

become eligible or bond unds or projects identied in

the regional plan. The program is jointly managed bythe Department o Water Resources and the State WaterResources Control Board.

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Benefciary Pays

A Reasonable Funding Policy

Beneciary Pays Principle. On a number o occasions,the Legislature and state water program administratorshave stated their intent that the costs o state water pro-grams and projects should be paid by those who benetrom them. This is reerred to as the beneciary paysunding principle. A water program or project may

benet a clearly dened subset o the states population(or example, individual water users receiving deliv-eries rom a water project), the public as a whole (or

Beneficiaries of

Water Projects/Programs

Can Include...

Industry

Public Recreation

Agriculture

Floodplain Dwellers

Residential Fish and Wildlife

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example, rom sh and wildlie habitat enhancements),or refect a combination o private and public benets.

At the state level, current examples o the applicationo the beneciary pays principle are ound in most wa-ter programs, including the nancing o CALFED, SWP,

food control projects, and water quality and waterrights regulation. For example:

Flood Control Projects. The nonederal share ocosts or a ederally authorized food control projectare split between the state and the local govern-ments that benet directly rom the project.

The SWP. Capital and operational costs o the SWPare generally paid or by water agencies receivingSWP water deliveries. However, sh, wildlie, andpublic recreational enhancements beneting thegeneral public are paid rom the states general-pur-pose unds.

Surace Storage Water Projects. Beneciaries osurace water storage projects that proceed to con-struction are required to reimburse all prior plan-ning expenditures made rom the states GeneralFund.

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Users Pay a Signifcant Portion o

Federal Central Valley Project Costs

The ederal Central Valley Project (CVP) is a networko dams, canals, pumps, and other acilities solely inCaliornia providing water or agriculture and otheruses, similar to SWP. However, unlike SWP that pro-vides the bulk o its water to urban users, CVP pro-vides the majority o its water to agriculture.

aAs of September 30, 2006.

ReimbursableUsers Pay

(85% [$2.9 Billion])

Non-Reimbursable

Federal Treasury Pays

(15% [$0.5 Billion])

0.2

0.6

1.0

1.4

$1.8

Irrigation WaterDistricts

Other WaterUsers

(In Billions)

Total Cost: $3.4 Billiona

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Irrigation water users pay about 55 percent o CVPreimbursable costs ($1.6 billion), while municipal andindustrial water users are responsible or the remain-ing 45 percent (or about $1.3 billion). These reimburse-ments are paid through long-term contracts with wateragencies.

The total capital cost to construct the CVP as o Sep-tember 30, 2006, is about $3.4 billion. The ederal Bu-reau o Reclamation calculates how much o the capitalconstruction cost is reimbursable rom water users.Currently, users pay about 85 percent o total costs. Incontrast, more than 95 percent o SWPs costs are reim-

bursable rom water users. The costs assigned to suchCVP purposes as food control, navigation, and sh andwildlie needs are not reimbursable and are paid by theederal government.

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Local Water Projects Use Multiple

Funding Sources

Revenue Bonds Mainly Used. While local agenciesgenerally have unding sources similar to the state andederal governments, they mainly use revenue bondssupported by ees paid by local water users. Generalobligation (GO) bonds backed by property taxes havealso been used by local governments. Local agencies alsoare able to access state revolving loan programs mainlyor water quality inrastructure (such as wastewatertreatment plant improvements or to meet sae drinkingwater standards), as well as state-local assistance grantsrom statewide bond unds. In many cases, these stateprograms require a local match or share o cost.

Revenue

Bonds

Cash

On Hand Local

Water

Projects

State Grant/

Loan Funds

Other

Fundsa

aSuch as private investment funding and property tax-backed general obligation bonds.

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Cash Versus Revenue Bonds: Size o Project AectsLocal Financing Approach. Many local entities havelong-term capital plans which und at least part o aproject with cash reserves.

When project costs go beyond cash availabil-ity, revenue bonds are generally used to make upthe dierence. For example: The Diamond ValleyReservoira $2 billion, 800,000 acre-oot reservoirdeveloped by the Metropolitan Water District oSouthern Caliornia (MWD)was unded approxi-mately 80 percent rom revenue bonds and 20 per-cent in cash rom MWDs current revenues (user ee

revenues and investment income).

In contrast, a smaller project, the City o SantaCruz Bay Street Reservoir Reconstruction Projecta$20 million, 107 acre-oot reservoir reconstructionwas ully unded by cash on a pay-as-you-go basiswith 80 percent unded by water rates and 20 per-cent rom connection ees (paid by developers or

construction projects).

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Local FinancingSpecial Water Districts

Largely Turn to Benefciaries or Funding

Water Supply$4.4 Billion

Beneficiaries Fees/

Sales

Beneficiaries Fees/

Sales

Beneficiaries Fees/

Sales

Property Taxes

Other Revenues

Property Taxes

Other Revenues

Water Quality$2.1 Billion

Property Taxes

Other Revenues

Flood Control$600 Million

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The Role o Water Districts and User Fees. Althoughmany cities and counties provide water services, specialdistricts also provide these unctions. Special districtsprovide a number o water services including waterdelivery, waste disposal (sanitation), and food control.User eescustomer charges or the cost o the servicesthey userepresent the largest source o revenues orthese activities (more than 60 percent). These ees can

be used to repay bonds, or or pay-as-you-go, renting,

or leasing payments.

The Use o Property Taxes. Depending largely on his-torical decisions, some water special districts receive anallocation o property taxes to support their operations.In order to support large capital projects, some specialwater districts seek voter authorization (two-thirdsvote required) or local GO bonds backed by property

tax levies.

Flood Control Funding. Property taxes provide aboutone-third o food control district revenues. Other majorsources o revenues include development ees, benetassessments, and intergovernmental aid.

Other Revenues. These revenues include interest earn-

ings, various taxes and assessments, and grants romgovernment agencies.

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How Does Proposition 218 Aect Local

Authority to Finance Water Programs? Background. Proposition 218, approved by the states

voters in 1996, restricts local governments authorityto raise property owner ees, taxes, and assessments.The measure also permits residents to use the initia-tive process to repeal or reduce local ees, taxes, andassessments. The provisions o Proposition 218 aect

the nancing o water programs, including water sup-ply delivery, food control, and stormwater services, asdiscussed below.

Water Supply Delivery Service

Many local governments charge property owners user eesor water delivery. Prior to increasing these ees, a government

must notiy ee payers, hold a hearing, and reject the increase i amajority o the ee payers submit written protests. In some cases,Proposition 218 does not allow governments to charge propertyowners user ees. For example, government may not imposeees to nance the uture expansion o a water system. To raiserevenues or these purposes, government may impose taxes,assessments, or ees on developers. (We discuss Proposition 218srequirements regarding these other revenue sources below.)

Stormwater Services

Local governments nance stormwater clean-up servicesrom revenues raised rom a variety o ees and, less requently,through taxes. Property owner ees or stormwater servicestypically require approval by two-thirds o the voters, or a ma-

jority o property owners. Developer ees and ees imposed onbusinesses that contribute to urban runo, in contrast, are notrestricted by Proposition 218 and may be approved by a vote othe governing body. Taxes or stormwater services require ap-proval by two-thirds o the electorate.

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Flood Control Programs

Local governments sometimes impose assessments on propertyowners to pay or food protection programs. Under Proposi-tion 218, the dollar amount o each property owners assess-ment refects the owners relative benet rom the programand improvements nanced by the assessment. A majority oproperty owners must approve new assessments, with eachvote weighted in proportion to the property owners assess-ment liability. Governments may only impose assessments or

programs and improvements that provide a distinct benet toland or buildings. Programs and improvements that benetthe public at large (such as a regional recreational acility) may

be nanced with taxes, approved by a two-thirds vote o theelectorate.

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Factors Aecting the Cost o Water Delivery

From the Water Suppliers Perspective

Chapter 5

What Drives theCost o Water?

Obtaining Legal Right to

Use the Water

Moving Water to Supplier

Treatment of Water

Distribution of Water

Wastewater Management

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Rising Energy Costs a Major Driver

In State Water Project Cost Increases

Annual State Water Project (SWP) costs have in-creased rom $600 million in 1996 to about $1 billionin 2008. While bond-related costs or capital projectshave increased by about 34 percent, the majority o theincrease is or operations and maintenance o the sys-tem. Over this period, labor and equipment costs haveincreased $116 milliona 77 percent increase. Energycosts to run the system have more than doubledrom$192 million to $389 million.

200$600

Bond Debt Service

(Principal andInterest)

Energy

Labor andEquipment

Insurance

20 40 60%

1996

2008 (est.)

(In Millions of Dollars) (Percentage of Total Costs)

Cost Drivers

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Residential Water Rates Going Up, and

Vary by Region

Residential water rates vary regionally, althoughnot as much as agricultural rates (see page 62). Coastalregions (including the Central Coast) pay the highestresidential water rates, mostly due to the cost o trans-porting and treating surace water delivered rom otherregions (such as rom the SWP or Colorado River).In other regions, the combination o available cleangroundwater and surace water reduces the consumerprice by diversiying the sources o water supply in wetand dry years.

Residential Monthly Water Charge Comparisonsa

aRepresent what a typical single family residence is charged for water service each monthin the various cities and service areas for an average water usage of 1,500 cubic feet(11,000 gallons).

Source: Black & Veatch: 2006 California Water Rate Survey.

bDue to a recent rate change at the Metropolitan Water District of Southern California,this area is likely to see higher rates in the near future.

10

20

30

40

$50

San Joaquin

Valley

Southern

Californiab

Northern

California

Central Coast

2001

2006

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What a Water Bill Pays For

Many actors aect the rates paid by most nonag-ricultural water users statewide. In a typical urbanwater agency, the budget is split between operating and

capital/debt service expenditures. Most oten, capitaland debt service are as high or higher than operat-ing expenditures given the cost o developing capitalinrastructure. The relative share o these costs variesgreatly among water agencies depending on the needor capital inrastructure.

Within operating costs, most agencies have ongoing

costs or purchasing water (such as rom the SWP orother water rights holders), distribution costs (includ-ing energy payments, labor, and maintenance), andwater treatment (including chemical purchases, labor,and acility operations).

Source of Supply

WaterTreatment

Water Distributionand System Maintenance

Operating Expenses

Debt Service

Capital Projects

Sample Nonagricultural Water Bill

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Agricultural Price o Surace Water: Central

and South Coast Farmers Pay Much More

The cost o surace water delivered to agriculturalconsumers varies widely between two coastal areasand the rest o the state. In the Central Coast and SouthCoast hydrologic regions, most agricultural consumersare charged prices closer to residential rates, refect-ing the high cost o the water delivery systems bring-ing water rom other regions o the state (mainly theSWP). Lower prices in other regions can be attributedto a number o actors, including more abundant local

(Cost Per Acre-Foot)

100

200

300

400

500

600

$700

NorthCoast

ColoradoRiver Area

SacramentoRiver Area

San JoaquinRiver Area

TulareLake

SouthCoast

CentralCoast

High Cost

Low Cost

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surace water supplies, capital storage and delivery sys-tems that are largely paid o, and lower-cost contractsor water.

The cost o agricultural water, among other actors,is related to the type o crops grown. For example, the

South Coast and Central Coast regions are well knownor specialty crops, such as artichokes, strawberries,avocados, and citrus, which are also supported by thetypes o soil and climate conditions in these areas. Therelatively high value o these crops helps support therelatively high cost o water required to grow them.In areas where water costs are less, row crops (such ascotton, wheat, corn, and tomatoes) are more likely to

be ound. This is due to a number o actors, with theabundance o low-priced water being one actor amongmany.

Potential or Lower Costs in Coastal Areas. In somecoastal regions, agricultural users contract with theirwater suppliers or lower prices in exchange or anagreement to take less water during dry seasons. Inthese cases, armers would take higher reductions inwater deliveries than their urban counterparts in dryyears in exchange or lower rates over time.

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Key Considerations orWater Policy Decisions

Throughout this primer, we have shown the many dimen-sions o water in Caliornia, rom who uses it, to its cost, tolegal provisions governing its management. A ew themesarise rom these pages, including the complexity o the watersupply system; the challenges o conveying water to thosewho need it, particularly through the Delta region, and tothose with limited access to regional water supply; and the

importance o having a reliable and suciently high-qualitywater supply to meet average demand.In this section, we address several key water policy issues

that legislators will likely ace in both the short term andlong term and make recommendations or legislative action.Given competing demands or unding, it is important or thestate to ocus on cost-eective solutions and to ensure thatits water supply and water quality programs are coordinated

and administered eciently and eectively. The overarchingtheme o our recommendations is to improve the manage-ment o water within the stateboth in terms o how cur-rently available water is allocated among uses and the level ofexibility o water delivery systems to meet demand as condi-tions (such as extended dry periods) change in the uture.

Chapter 6

Issues or LegislativeConsideration

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Supply and Demand Projected to Be NearlyEqual Under Average-Year Conditions in 2030...

...But Dry-Year Demand Projected to

Exceed Supply

aDeveloped water supply is the amount of precipitation, surface water, or groundwater madeavailable for use, generally through construction of storage or delivery systems.

bDemand projections from Department of Water Resources, 2005 California Water Plan.

10

20

30

40

50

60

70

80

90

Urban Agricultural Environmental All Water Uses

Current Developed Water Supply

(Average Year)a

Projected Demand

(Current Trends) 2030b

(Million Acre-Feet)

10

20

30

40

50

60

70

80

90

Urban Agricultural Environmental All Water Uses

Current Developed Water Supply

(Dry Year)a

Projected Demand(Current Trends) 2030b

Figure 1

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achieve one acre-oot o water savings per year. This estimateis based on three specic CALFED-proposed projects:(1) Sites Reservoir, (2) Temperance Flat Reservoir, and (3) LosVaqueros expansion. The DWR also determined that in therange o 500,000 acre-eet o additional water annually couldresult rom this water management strategy.

In evaluating options or additional water supply, the Leg-islature should not only consider the cost-benet o each but

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ater

Agricultu

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aterU

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Additional Annual

Water Potentiala

(Million Acre-Feet Per Year) Cost Per Acre-Foot

Longer TermShorter Term

Additional Annual Water

Potential (Median)

Cost Per Acre-Foot (Median)

Figure 2

Options for Additional Water Supply:

Benefits and Costs

aReflects the midrange of estimates of water supply development potential of particularsolutions, Department of Water Resources, California Water Plan 2005.

bIncludes integrated management of groundwater and surface water.

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how they work together as a comprehensive package o tools.Each o the options presented in Figure 2 would contribute toneeded fexibility in the management o the water system andthereore all may have a role to play.

Using the criterion o least cost, highest gain, short-termoptions (including those that would have a greater short-termimpact and, i sustained, a long-term impact as well) should

be directed rst toward urban water use eciency andgroundwater storage, and second to agricultural water use

eciency and other options. For long-term options, investingin the long-term solution o recycled municipal water would

be the rst unding priority, with improvements to convey-ance, desalination, and the proposed CALFED surace storageprojects as secondary options.

Fundamental Changes Needed in

Water Rights SystemReasonable Use Requirement Should Better Refect

Scarcity o Resources. The development o Caliorniaswater rights system is steeped in tradition, and has roots inthe State Constitution, but its implementation is based onoutdated policy that is in need o reorm. Article X o theConstitution requires that water be put to benecial use and

that waste o water or unreasonable use be prevented. Atrst glance, such principles seem reasonable. However, theirimplementation has had counter-productive results in someinstances. The reasonable use requirement or surace waterhas generally been implemented as a use it or lose it policy,which itsel resulted rom a policy o rst in time, rst inright. Under the latter policy, the rst individual to claim awater right gains the water right so long as they can demon-

strate the continued use o water. The combination o theselongstanding policies can lead to inecient uses o water.

Water Rights Realignment Necessary. It is in the interesto the state to undertake a concerted eort to realign the wa-ter rights system to better refect modern needs and circum-

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stances. For example, this could be done by accounting orthe potential or water conservation and water use eciencyin managing water rights. Thus, where water is required oragricultural purposes, the water right should mirror only theamount o water needed to grow a crop using available watereciency technology. Similarly, urban water rights should re-fect the use o cost-eective water conservation and ecien-cy measures. By realigning water conservation and eciencyeorts with water rights, overuse o water simply to main-

tain a water right could be reduced and that water would beavailable or other purposes within the region or state. Thismodernization o the water rights system could start to beaccomplished by the enactment o legislation to provide anupdated, comprehensive denition o the reasonable use owater to be used in the water rights permitting process. Thisdenition would encompass the potential or the water rightsholders to avail themselves o water conservation and wateruse eciency measures discussed above.

Reevaluate How Groundwater Is RegulatedAnd Managed

Groundwater Important to Water Supply. The potentialto use groundwater to increase water supply, by introduc-

ing water rom another source into the ground as a storagebasin, or encouraging the natural relling o groundwaterbasins, is a signicant option to address water supply needs.However, successul implementation o this solution is ham-pered because groundwater use is generally not regulated ormonitored at the state level (in contrast to surace water). Inaddition, local groundwater management does not take intoaccount statewide water needs. Finally, groundwater quality

is not protected under state regulation as comprehensivelyas surace water quality. When contaminated, groundwaterloses its potential to serve as a water supply source.

Recommend Statewide Groundwater Rights and Qual-ity Permitting System. For the reasons stated above, we rec-

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ommend that the Legislature establish a state-administeredwater rights system or groundwater. In addition, we recom-mend that the water quality permitting processes o the stateand regional water boards be restructured to protect ground-water to the same extent as surace water. While moving inthese directions would increase state administrative coststo establish and implement new programs, in the long termthere would be cost savings to public and private entitiesacross the state. This is because these eorts would decrease

the need or costly water rights adjudications, cleanup odegraded groundwater, and treatment o groundwater oruse in water supply. As with the regulation o surace wateruse and quality, we believe a strong case can be made orgroundwater beneciaries and polluters o groundwater topay or the bulk o the costs o state groundwater regulatoryprograms.

Addressing the Role o the Delta:Coming to Terms With Trade-Os

Over $5 billion has been spent through the CALFED eortto address issues related to water fows in and through theSacramento-San Joaquin River Delta (the Delta). The issuesprimarily revolve around the problem o balancing environ-

mental objectives with urban and agricultural water supplyrequirements.The states Delta-ocused water systemthe SWPpro-

vides a portion o the water supply to two-thirds o Cali-ornians (mainly in Southern Caliornia, the Bay Area, andcoastal cities) and irrigation water to over one-third o thestates cropland. Ater years o research and study, there isgenerally common agreement among policy experts that the

current approach to managing the Delta must change to meetthe states water supply reliability and environmental objec-tivesin other words, the state needs to abandon the busi-ness as usual model. A culmination o this research is seen

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in the soon to be released Delta Vision strategic plan as wellas the recently released Public Policy Institute o Caliornia(PPIC) report evaluating various alternatives or managingthe Delta. Both o these reports ocus on specic proposals tochange how water is conveyed through the Delta, and lay outtrade-os that will need to be made in meeting economic andenvironmental objectives under any o the alternatives.

At present, water exports are being reduced rom theDelta to meet sh and wildlie needs, as required by ederal

court-order. It is unlikely that the state will be able to achieveall the water supply and environmental benets that are cur-rently being demanded o the Delta under current law andpractice (see pages 25 and 26 or a discussion o the role othe Delta). Trade-os will need to be made, and these willlikely have negative impacts on certain segments o the statespopulation, economy, and environment. The Legislature willneed to evaluate the specic projects recommended in theDelta Vision and PPIC reports, as well as other reports, to de-termine the acceptable level o trade-os o continued exporto water rom the Delta, and enact legislation that refects theLegislatures policy on the appropriate choice or uture waterconveyance and management in the Delta. Additionally, theLegislature should give particular consideration to the rolethat water rights and water transers can play in strengthen-

ing water supply reliability or competing uses o water. TheLegislature also needs to set clear policy or who will pay orthe implementation o its Delta policy, and we recommendthis be based on the application o the beneciary pays und-ing principle.

Conveyance Through the Delta Must Be Addressedand Soon. Recommendations to strengthen water supply reli-ability, acilitate water transers, increase surace water stor-age outside o the Delta, and generally improve the eciencyand fexibility o Caliornias water system all hinge on ad-dressing current problems with conveyance o water throughthe Delta. The Delta Vision task orce as well as the PPIC have

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ound that an alternative to the current system o conveyanceis necessary i environmental and economic objectives or theDelta are to be met.

There are three basic alternatives to the current through-Delta conveyance system that have been evaluated(1) anisolated peripheral acility such as a canal or pipeline isolatedrom the Delta, (2) combining through-Delta conveyance withan isolated peripheral acility (dual-conveyance), and(3) ending water exports rom the Delta to the south. While

the PPIC report recommends the Peripheral Canal as thelong-term solution, the drat Delta Vision strategic planrecommends the dual-conveyance approach. To this end,we recommend that it be apriority or the state to select analternative to the business-as-usual conveyance approach.This would be done ater considering each alternatives costs,inherent trade-os (including environmental and land useimpacts), and benets.

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Glossary

Acre-FootThe volume o water required to cover one acreo land to a depth o one oot.

AssessmentA charge levied on property to pay or a publicimprovement or service that benets that property andthereore the property owner. Assessments are usually

collected on the regular property tax bill.Beneciary Pays PrincipleAccording to this principle,those who benet rom the provision o a good or serviceshould be responsible or paying its cost.

Conjunctive UseThe integrated management o suraceand groundwater supplies to improve water supply reli-ability, such as pumping surace water into groundwater

basins or storage.

ConveyanceWater transport through a pipe, canal, ditch, ornatural system (such as a river or groundwater).

DamA physical structure designed to hold water back in areservoir.

DesalinationThe removal o salts rom water to convert toresh water.

Developed Water SupplyThe amount o precipitation, sur-

ace water, or groundwater made available or use, gener-ally through construction o storage or delivery systems.Distribution SystemA network o pipes or other means

o conveyance leading to the user o water, such as pipesleading rom a treatment plant to a customers plumbingsystem.

FeeA charge imposed on an individual or business or aservice, such as water right permitting or water delivery,

used by that individual or business.GroundwaterWaters beneath the land surace in under-

ground basins (aquiers), underground streams, andunderground fows o a surace stream.

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Groundwater RechargeInfow o water to a groundwaterreservoir rom the surace. Precipitation moving to thewater table is one orm o natural recharge.

IrrigationThe controlled application o water through man-made systems to supply water requirements not satised

by precipitation.LeveeA natural or manmade earthen barrier along the edge

o a stream, lake, or river, protecting adjacent lands romfooding.

Per Capita Water UseThe average amount o water usedper person during a standard time period, generally perday.

Polluter Pays PrincipleAccording to this principle, privateindividuals or businesses that use or degrade a publicresource (such as air, water, or wildlie habitat) should payor the social cost imposed by their use o the resource.

PrecipitationRain, snow, hail, sleet, dew, and rost.Reasonable and Benecial Use DoctrineA state consti-

tutional requirement (Article X, Section 2) that all waterresources must be put to benecial use, preventing wasteor unreasonable use or unreasonable method o use.

Recycled WaterWastewater that is treated so that it can bereused beore it passes back into the natural hydrologicsystem.

ReservoirA pond, lake, or basin, either natural or articial,or the management o water, such as storage.

RunoThat part o precipitation, snow melt, or irrigationwater that nds its way to surace streams, rivers, lakes,drains, sewers, or the ocean.

SubsidenceA dropping o the land surace occurring as aresult o a number o actors, including as a result o largeamounts o groundwater being pumped. Cracks and s-sures can appear in the land.

Surace WaterWater that is on the earths surace, such asin a stream, river, lake, or reservoir.

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Urban Water UseWater used or commercial, industrial, ordomestic household purposes, such as or business needs,drinking, ood preparation, washing, and watering lawnsand gardens.

WastewaterWater that has been used in homes, industries,businesses, and agriculture that is not available or reuseunless it is treated.

Water QualityDescription o the chemical, physical, andbiological characteristics o water, usually in respect to its

suitability or a particular purpose.Water RightThe legal right to use water rom a particular

water source, such as a stream or river.Water SupplyWater withdrawn (or example, rom streams

or groundwater) that is delivered to users.Water UseWater that is used or a specic purpose, such as

withdrawals or domestic use, irrigation, and industrialprocessing, and instream uses such as or hydroelectricpower production and environmental-related fows.

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