On November 6, California voters will decide the fate of Proposition 3 (the Water Supply and Water Quality Act of 2018), which authorizes the sale of $8.9 billion in new general obligation bonds for water-related infrastructure and environmental projects. This includes funds – most of which would be distributed through grants – for various projects related to water supply, watershed health, flood management, groundwater, facility upgrades and fish and wildlife habitat.

Many are confused about the bond, and numerous organizations have taken positions supporting or opposing it. We at the Pacific Institute, a California-based think-tank focused on water, are taking no formal position on Proposition 3, opting instead to offer the voting public some insights into its complexities.

For context, California has authorized approximately $60 billion (in 2018 dollars) in water-related bonds since 1960. If passed, Prop. 3 would be the fourth-largest water bond in California history. Further, the combination of Prop. 68 (approved by voters in June 2018) and Prop. 3 would make 2018 the second-highest funding year for water-related bonds in the state’s history. The largest authorization was in 1960, when California voters approved construction of the State Water Project.

If Proposition 3 passes on November 6, it will make 2018 the second-biggest year for bond funding of water issues in California history. (Image courtesy The Pacific Institute)

The cost of Proposition 3 to California taxpayers will be $17.3 billion over the next 40 years, including full repayment with interest. This money would come out of the state’s general fund, which relies on personal income tax, sales tax and corporate taxes for much of its revenue. While repayment of the bond does not necessarily increase taxes, it competes with other projects and services paid for out of the general fund, such as public schools and universities, the state prison system, the Medi-Cal health insurance program, unemployment benefits, state parks and other health and social services.

Pros

• Provides much-needed funding for key water needs: Prop. 3 would fund critical improvements to California’s water systems, helping to improve watershed health and prepare our state for climate extremes. Nearly $2.5 billion would be allocated to protect and restore watersheds throughout the state, including projects that would improve water supply reliability and water quality while providing additional co-benefits, such as fisheries habitat, recreational uses and wildfire resilience.
  In addition, Prop. 3 allocates more than $2.1 billion toward water conservation, water recycling, stormwater capture and other alternative water supplies. These investments are critical for ensuring safe, clean and reliable water for communities and the environment, especially considering climate change, continued growth and the need to restore freshwater ecosystems.

• Supports disadvantaged communities: Prop. 3 would help alleviate water challenges in disadvantaged communities and economically distressed areas by supporting critical drinking water and wastewater system improvements. In several instances, funds are set aside or prioritized for these communities, and cost-sharing requirements may be reduced or eliminated. However, funding to support ongoing operation and maintenance costs is limited, raising questions about the long-term sustainability of these projects.

Cons

• Not developed through the legislative process: Proposition 3 is a citizen’s initiative ballot measure and, as such, it did not follow a typical legislative process. To gain the support needed to pass the bond, funding came from specific groups using what both the San Francisco Chronicle and the San Jose Mercury call a “pay-to-play” operation. Further, bond provisions were negotiated behind closed doors.
• Supports some controversial projects: A standout concern is the $750 million Prop. 3 proposes to fix the federal Friant, Kern and Madera canals that were damaged by groundwater overpumping. This would effectively require the use of state taxpayer money to repair a federal project that benefits private interests. We note a similar concern about funding in the bond measure for repairing the Oroville Dam, which some argue should be provided by those who directly benefit from the dam.
• Provides limited oversight: While the proposition does set forth stipulations for accountability of funds, it does not require legislative oversight. Although state agencies are responsible for distributing the funds, there is no single body that would control and monitor the distribution of funds, nor is there any single entity with the power to withhold or delay funds if the requisites delineated in the proposition are not met.
• Large general obligation bonds are insufficient and unsustainable: Long-term, reliable funding streams are needed to support and maintain California’s natural and built water systems. The state has a long history of using general obligation bonds for water-related projects, but while bonds provide important short-term financial resources, they are unreliable and costly. In addition, the inability of this funding source to address operations and maintenance of projects is a problem and, in some cases, may set communities up for “orphan” projects that are promising at the outset but cannot be sustained.

Like most propositions, Proposition 3 has important pros and cons that voters will need to weigh based on personal preferences and priorities. But regardless of its fate, voters should not expect these funds to be the last investment that is needed for California’s water systems. Adequately addressing the state’s water challenges will require leadership, commitment and a broader range of funding sources.

The views expressed in this article belong to the authors and do not necessarily reflect the editorial policy of Water Deeply.