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HomeMy WebLinkAboutMINUTES - 09162014 - D.6RECOMMENDATION(S): ADOPT a position of "support" on Proposition 1, the Water Quality, Supply, and Infrastructure Improvement Act of 2014, as recommended by Supervisors Mitchoff and Piepho. FISCAL IMPACT: The bond includes $7.12 billion in new debt for the State of California, plus the repurposing of existing unspent bond funds of $425 million for a total of $7.545 billion. According to the Senate Appropriations Committee: Annual debt service payments of $491 million (General Fund) for 30 years for a total of $14.724 billion assuming an interest rate of 5%. BACKGROUND: Proposition 1 asks voters to approve $7.12 billion in new borrowing and to redirect $425 million from past ballot propositions. (None of the re-purposed bond funds would be taken from existing projects.) It replaces Proposition 43, the $11.1 billion bond that was negotiated in 2009 but was considered too expensive and too burdened with earmarks to pass. That water bond was twice delayed. Originally certified to be on the state's 2010 ballot, it was removed and placed on the 2012 ballot, and then it was postponed again to 2014. According to supporters, which includes a long list of business, labor, agriculture and environmental groups, this 2014 Water Bond is needed to improve California’s water supply reliability and will help fund the implementation of a comprehensive water program so that a more reliable water supply is available for the public, the environment, agriculture and business. The framework for the package includes the following: APPROVE OTHER RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE Action of Board On: 09/16/2014 APPROVED AS RECOMMENDED OTHER Clerks Notes: VOTE OF SUPERVISORS AYE:John Gioia, District I Supervisor Candace Andersen, District II Supervisor Karen Mitchoff, District IV Supervisor Federal D. Glover, District V Supervisor ABSENT:Mary N. Piepho, District III Supervisor Contact: L. DeLaney, 925-335-1097 I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on the date shown. ATTESTED: September 16, 2014 David Twa, County Administrator and Clerk of the Board of Supervisors By: June McHuen, Deputy cc: D.6 To:Board of Supervisors From:David Twa, County Administrator Date:September 16, 2014 Contra Costa County Subject:Support Position for Proposition 1, the Water Quality, Supply, and Infrastructure Improvement Act of 2014 BACKGROUND: (CONT'D) Safe Drinking Water and Wastewater Management $520 million Watershed Protection, including funding for state obligations (multi-party settlements)$1.495 billion Integrated Regional Water Management, Water Conservation and Stormwater Capture $810 million Storage $2.70 billion, continuously appropriated Recycling $725 million Groundwater Cleanup and Sustainable Groundwater Management $900 million Flood Management $395 million TOTAL $7.545 billion (See also Attachment A, a description of the Bond prepared by the Association of California Water Agencies.) The revamped bond is generally consistent with California State Association of Counties (CSAC) adopted principles, including funding for surface and groundwater storage, groundwater cleanup and management, funding for watershed management activities, funding for small and disadvantaged communities, funding for Integrated Regional Water Management programs, and protections for area of origin and existing water rights. It is also consistent with the Contra Costa County Board of Supervisors' adopted Water Bond Principles which include: Allocates funds for the Delta through the Delta Conservancy; Any bond funds for water storage or water system operational improvements should be required to result in measurable improvements to the Delta ecosystem; Does not fund BDCP conveyance alternatives or measures required as mitigation by BDCP; and Includes significant funding for watershed protection by local agencies and for local flood control. The CSAC Board of Directors took up the Bond measure for consideration on Thursday, September 4 and voted to support it. (See Attachment B .) The Delta Counties Coalition has also indicated their support for the Water Bond. In addition, as reported on September 10, California voters are likely to approve a $7.5 billion water bond on the November statewide ballot, according to a Field Poll. By nearly 2 to 1, voters indicated they support the water bond, a somewhat surprising result given that the majority of people polled reported at first that they were not familiar with Proposition 1. Only about a third of respondents had seen, read or heard anything about Proposition 1 before the poll, but there is an encouraging sign for proponents as campaign season kicks off: Support was even higher among voters with prior awareness, at 57 percent. SUPPORT: (Verified 8/13/14 Senate Rules Committee) American Rivers Association of California Water Agencies Audubon Society Azul Bay Area Business Council California Alliance for Jobs California Building Industry Association California Chamber of Commerce California Coalition of Utility Workers California Coastal Protection Network California Conference of Carpenters California Farm Bureau Federation California Labor Federation California League of Conservation Voters California State Pipe Trades California Trout California Waterfowl Association California-Nevada Conference of Operating Engineers Community Alliance with Family Farmers Community Water Center Contra Costa Water District Defenders of Wildlife Ducks Unlimited Metropolitan Water District of Southern California Natural Resources Defense Council Ocean Conservancy San Diego County Water Authority Santa Clara Valley Water District Save Our Shores Silicon Valley Leadership Group Sonoma County Water Agency State Association of Electrical Workers State Building and Trades Council State Council of Laborers Surfrider Foundation The Nature Conservancy The Otter Project Trout Unlimited U.S. Green Building Council, California Upper San Gabriel Valley Municipal Water District Western Growers Westlands Water District WiLDCOAST Yuba County Water Agency Attachment A August 21, 2014 To: CSAC Board of Directors From: Supervisor Linda Seifert, Chair, Agriculture, Environment & Natural Resources Committee Supervisor Judy Morris, Vice-Chair Re: Proposition 1: The Water Quality, Supply, and Infrastructure Improvement Act of 2014 – ACTION ITEM Recommendation: The CSAC Agriculture, Environment and Natural Resources (AENR) Policy Committee is taking this measure up for consideration and a recommendation to the CSAC Board of Directors at their September 3, 2014 meeting . The staff recommendation is that the Committee adopt a SUPPORT position on Proposition 1, The Water Quality, Supply, and Infrastructure Improvement Act of 2014. Background. In the past 14 years, the California electorate has approved Propositions 13, 50, 84 and 1E that combined provided more than $14 billion for water and flood related projects and programs in California: •Proposition 13 (2000/legislatively referred bond act) authorized a $1.97 billion in general obligation bonds to "improve the safety, quality, and reliability of water supplies, as well as to improve flood protection." •Proposition 50 (2002/Initiative statute) approved issuing $3.4 billion in general obligation bonds for a variety of water projects. •Proposition 84 (2006/Initiative statute) authorized the State to sell $5.4 billion in general obligation bonds for water and flood control projects. •Proposition 1E (2006/legislatively referred bond act) authorized the State to sell $4.09 billion in general obligation bonds for various flood management programs. Proposition 1 asks voters to approve $7.12 billion in new borrowing and to redirect $425 million from past ballot propositions. It replaces Proposition 43, the $11.1 billion bond that was negotiated in 2009 but was considered too expensive and too burdened with earmarks to pass. That water bond was twice delayed. Originally certified to be on the state's 2010 ballot, it was removed and placed on the 2012 ballot, and then it was postponed again to 2014. For specific details on the bond funding categories, see the attached chart. Support/Opposition. The named proponents of Proposition 1 are the Association of California Water Agencies (ACWA), the California Alliance for Jobs, and Western Growers. Supporters state that, “California is in a severe drought. Reservoirs are low, groundwater basins and ecosystems are stressed, water quality is impaired, and wildfire risks are extremely high. Three consecutive dry years have pushed California’s water system to its limits and exposed -15- Attachment B vulnerabilities that must be addressed now if we are to avoid even more dire challenges in the coming years.” To date, there are no named opponents to this measure. Fiscal Impacts. See Fiscal Analysis: State Debt Memo included in packet. Policy Considerations. CSAC has reiterated its position on water related issues over the years through various policy statements, including, but not limited to support for statutory protection of counties of origin and watershed areas, support for existing water rights, the need for new and expanded water resources, and the need for local water conservation efforts. In addition, since 2000, we have supported three of the four water bonds that were placed before the voters – Propositions 13, 1E and 84. In 2002, we opposed Proposition 50 based on concerns expressed by our Board of Directors over insufficient funding for the development of new water supplies, excessive funding for land acquisitions and the consequential impact on local property tax revenues. No less than a dozen water bond measures were introduced by the Legislature this year as Members continued to negotiate the specifics of a revamped proposal. CSAC relied on existing policy statements and past actions to express support for the inclusion of specific elements in a revised water bond measure. In addition, the CSAC Executive Committee adopted the following water policy statements to provide guidance to the CSAC AENR Policy Committee and the CSAC Board of Directors when approving a CSAC position on the ballot measure. CSAC believes that a 2014 Water Bond include the following elements: •Continuous appropriation of funding for surface and groundwater storage projects. •Funding for groundwater clean-up and groundwater management planning. •Funding for watershed management activities, including forest management and fuel treatment projects that reduce wildfire risks and promote watershed health. •Funding and assistance to help disadvantaged and small communities build and upgrade wastewater treatment systems and finance urgent actions to provide safe drinking water. •Funding for projects and programs needed to maintain the character and vitality of communities within the Delta. Examples would include grants or low interest loans to growers to increase efficiencies and output; funding for county marketing strategies; funding to help implement and maintain an invasive species control program; levee improvements, environmental restoration and water supply and quality improvements. •Funding for Integrated Regional Water Management programs, local stormwater management and flood protection improvements. -16- Attachment B •Protections for area of origin and other water rights to ensure that these existing rights are not diminished, impaired, or otherwise affected by the provisions of the bond. County Impacts. Proposition 1 achieves the goals of the aforementioned CSAC policy statements. The measure provides funding for all the noted elements, including a continuous appropriation for water storage and funding for recycling projects, water quality improvements and water- related environmental protections. In addition, Proposition 1 provides funding for groundwater management activities – a subject CSAC has been working on extensively this year. The bond also includes funds to the Department of Fish and Wildlife for water quality, ecosystem restoration, and fish protection facilities that benefit the Delta while remaining neutral on the topic of the Bay Delta Conservation Plan, commonly referred to as the Delta tunnels. Action Requested. Staff is recommending that the CSAC AENR Policy Committee recommend a support position to the CSAC Board of Directors. Staff Contact. Please contact Karen Keene (kkeene@counties.org or (916)327-7500 x511) or Cara Martinson (cmartinson@counties.org or (916) 327-7500 x504) for additional information. -17- Attachment B -18- Attachment B August 21, 2014 To: CSAC Board of Directors From: Jean Kinney Hurst, CSAC Legislative Representative Re: Fiscal Analysis: State Debt – INFORMATIONAL ITEM As the CSAC Board of Directors considers a position on Proposition 1, the state water bond, staff has prepared this memo to provide additional information on the state’s current debt portfolio and practices. California is one of the largest issuers in the $3 trillion U.S. municipal bond market. The state largely relies on borrowing to finance public infrastructure projects such as roads, educational facilities, prisons, parks, water projects, and office buildings. Bonds are generally preferable for these types of projects for two reasons: first, because infrastructure typically provides services over many years, it makes sense to have both current and future taxpayers help pay for them; and second, in a state as large as California, these types of projects are difficult to pay for all at once (i.e. “pay as you go,” or essentially saving up money for a project). Types of Municipal Debt General Obligation Bonds are those bonds that are backed by the “full faith and credit” of the issuer with no specified source of funding for payment; the issuer can make its debt payments from taxes, fees, and other sources of revenue or raise a new source of revenue to meet its payment obligations. General obligation bonds are generally viewed as very safe investments and defaults are rare. In California, state general obligation bonds must be approved by a 2/3 vote of the Legislature, signed by the Governor, and achieve a simple majority voter approval. Revenue Bonds are bonds that are backed by a specific source of revenue generated by the specific project financed by the bonds. Revenue bonds are higher risk than general obligation bonds and therefore generate higher yield for investors. In California, state revenue bonds must be approved by a simple majority vote of the Legislature and signed by the Governor. Debt-Service Ratio (DSR) One important measure of the state’s debt situation is its debt-service ratio (DSR). The DSR indicates the portion of the state’s annual General Fund revenues that must be set aside for debt-service payments on bonds and, therefore, are unavailable for other state programs. The current DSR is about 5 percent of annual General Fund revenues. Without a new water bond, the LAO is projecting that the state’s debt service on already authorized bonds will peak at under 6 percent of General Fund revenues in 2018-19 and decline thereafter. Considering the pending water bond (Proposition 43), the LAO projects that the DSR will increase by less than a half a percentage point. Since -19- Attachment B Proposition 1 would authorize a significantly smaller water bond, we assume that the impact to the DSR would be much less than a half a percentage point. The 2014-15 State Budget The 2014-15 state budget plan includes a significant investment in managing the state’s debt. Governor Brown’s efforts to pay down the now-infamous “Wall of Debt” have resulted in a dramatic change in the state’s debt portfolio, particularly with the projected retirement of the Economic Recovery Bonds (ERBs). The ERBs are funded with a dedicated 0.25% of the state sales tax rate; the mechanism known as the Triple Flip offsets a reduction to local agencies’ Bradley-Burns sales tax rates. The 2014-15 state budget includes a supplemental payment of about $1.3 billion to finally pay off the ERBs. According to the State Treasurer’s Office, the state’s debt management practices have also improved. The Brown Administration has focused on first spending unused proceeds from prior bond sales to fund infrastructure projects, thereby reducing the need for additional borrowing. The state’s general obligation bonds have become more competitive in the market, with higher ratings and reduced interest-rate premiums. At the same time, the state refinanced billions of dollars of bonds at lower interest rates and reduced debt service payments by hundreds of millions of dollars. A Snapshot of California’s Current Debt Service Requirements Total Debt Interest Principal Total General Obligation Bonds General Fund Non-Self Liquidating Fixed Rate $61,371,619,142.70 $72,068,780,000.00 $133,440,399,142.70 Variable Rate 290,444,664.59 3,421,790,000.00 3,712,234,664.59 Enterprise Fund Self Liquidating Fixed Rate 345,136,486.24 669,080,000.00 1,008,216,486.24 Special Revenue Fund Self Liquidating Fixed Rate 818,942,175.00 3,306,745,000.00 4,125,687,175.00 Variable Rate 175,014.67 110,370,000.00 110,545,014.67 Revenue Bonds General Fund Lease Revenue 6,699,555,261.73 11,266,240,000.00 17,965,795,261.73 General Fund and Lease- Revenue Total $69,525,872,744.93 $90,837,005,000.00 $160,362,877,744.93 Source: State Treasurer’s Office, as of August 2014 In 2013-14, the General Fund’s bond repayments totaled over $5 billion. LAO projects that outstanding bond debt costs will rise, likely peaking at over $7 billion in 2019-20, as bonds that were previously authorized but not sold are marketed. Note that voters and the Legislature have approved about $29 billion in general obligation and lease revenue bonds that have not yet been sold. California’s Current Credit Ratings -20- Attachment B Type of Debt Fitch Ratings Moody’s Investors Service Standard and Poor’s General Obligation A Aa3 A Lease Revenue Bonds A- A1 A- Economic Recovery Bonds AA Aa2 AA Source: State Treasurer’s Office Staff Contact: For additional information, please contact Jean Kinney Hurst at jhurst@counties.org or 916.327.7500 ext. 515. -21- Attachment B