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DISASTER PREPAREDNESS AND FLOOD PREVENTION BOND ACT OF 2006
Legislative Bond Act

QUESTION

Should the state sell $4.1 billion in general obligation bonds to finance disaster preparedness and flood prevention projects at the state and local levels?

BACKGROUND
(From the LAO analysis)

Multiple agencies at each level of government (state, federal, and local) have some responsibilities for flood management. In addition, private entities own and operate some flood control facilities. The state carries out a number of programs designed to provide flood management. Some of these programs are operated directly by the state, while others provide grants to local agencies for similar purposes.

The state is primarily responsible for flood control in the Central Valley. As shown in Figure 1, the state Central Valley flood control system includes about 1,600 miles of levees, as well as other flood control infrastructure such as overflow weirs and channels. The state directly funds the construction and repair of flood management structures such as levees, typically with a federal and local cost share. For approximately 80 percent of the levees in the Central Valley flood control system, the state has turned over the operations and maintenance to local governments (primarily local flood control districts), although the state retains ultimate responsibility for these levees and the system as a whole.

Outside the Central Valley system, the state's role in flood management generally consists of providing financial assistance to local governments for flood control projects located throughout the state. For example, the state has provided funding for the Santa Ana River Mainstem flood control project that spans Orange, Riverside, and San Bernardino Counties. In the Sacramento-San Joaquin River Delta region (Delta), as another example, the state has no oversight role with respect to local levee construction or maintenance (a majority of Delta levees--about 700 miles--are located outside the state system). Because a significant portion of the state's population depends on water supplies that come through the Delta, there is a state interest in the continued operation of the Delta levee system. Given this, the state has provided financial assistance over many years to local flood control districts in the Delta region to rehabilitate and maintain levees.

In general, state flood management programs have been funded from the General Fund, with some use of bond funds. Since 1996, the voters have authorized a number of state general obligation bonds, of which about $400 million has been allocated specifically for flood management purposes. Most of these bond funds for flood management have already been spent. State funding levels for flood management have varied substantially on a year-to-year basis, largely depending on the availability of General Fund and bond monies for this purpose. For example, since 2000-01, annual state funding for flood management has varied from a low of about $60 million (2002-03) to a high of about $270 million (2000-01). In addition to state flood management programs, local governments, including flood control districts and other public water agencies, operate their own flood management programs and projects. Funding for these local programs comes from various sources, including property assessments and, in some cases, financial assistance from the state.

A law passed earlier this year provides $500 million from the General Fund for emergency levee repairs and other flood management-related costs. The Department of Water Resources (DWR) has made rough estimates of the cost to repair and upgrade the Central Valley flood control system and levees in the Delta of between $7 billion and $12 billion.

PROPOSAL

Proposition 1E would create the Disaster Preparedness and Flood Prevention Bond Fund of 2006 to be administered by the state Department of Water Resources (DWR). The bond proceeds would be used to obtain federal matching funds and encourage local matching funds for a wide variety of projects. It would require the DWR to establish priorities, design projects, and prepare an annual plan for the uses of federal, state, and local funds. If passed, the act would take effect immediately as an urgency measure.

$3 billion is allotted to the DWR for study, evaluation, design, repair, rehabilitation, reconstruction, relocation, replacement, and mitigation projects for levees and other flood control projects, with a limit of $200 million per project, except for the Folsom Dam project.

$3 billion for Central Valley Flood Control System and Delta Levees. Through state projects and grants to local agencies, projects to evaluate, repair, and restore existing levees in the Central Valley flood control system and improve or add facilities for flood protection in the Central Valley's urban areas.

$500 million to local governments for the state's share of federally authorized Central Valley flood control projects.

$300 million for grants to local agencies not in the Central Valley for stormwater management programs.

$290 million to create, enhance, and protect flood corridors, including flood control bypasses and setback levees, and to create floodplain maps.

FISCAL EFFECT

The Legislative Analyst estimates that at an average interest rate of 5 percent, the cost over a 30-year period would be about $8 billion, $4.1 in principal, $3.9 in interest, and annual payments of about $266 million.

There could be a loss in local tax revenues, potentially up to several million dollars annually, if the state purchases land for flood protection projects, thus removing land from property tax rolls.

There could be unknown additional costs to state and local agencies to operate and maintain new properties and projects.

WHAT A YES OR NO VOTE MEANS

A YES vote means that the state could sell $4.1 billion in general obligation bonds to fund state and local projects for disaster prevention, levee building and repair, and flood control and other water projects.

A NO vote means that $4.1 billion in general obligation bonds could not be sold for various flood safety projects.

SUPPORTERS SAY

• California is subject to earthquake, flood, fire, and mudslides. Proposition 1E is critical to prepare for these disasters and ensure we always have enough clean water to meet our needs.
• Drinking water must be protected against contamination from pollution and saltwater intrusion. Millions of Californians depend on aging and fragile levees for their drinking water, as do million of acres of irrigated farmland. The Katrina disaster in New Orleans reminded us of the vulnerability of our own levee systems.
• Proposition 1E provides funding to rebuild out-of-date systems to prevent pollution and safeguard water sources.
• An important use for the bonds will be to leverage other funds from the federal government and local governments.
• Proposition 1E would not raise taxes; it will use taxes people already pay to make these important infrastructure improvements.
• The measure has strong accountability provisions, including independent annual audits.

OPPONENTS SAY

• The state's population is expected to grow to 50 million in the next decade, yet this measure will not build a single reservoir or water treatment plant to increase supply.
• It will give hundreds of millions of dollars to private organizations for their pet projects and overhead.
• The state has record-breaking revenues available to pay for water project repairs and maintenance, instead of borrowing money for 30 years, doubling the cost to taxpayers.
• Despite the huge cost of Proposition 1E, there is funding in it to repair only about 25 miles of our 2,000-mile levee system.
• Most of the projects go to protecting cities and their water supplies, while rural communities are slighted. Urban areas should pay for their own water supply needs with local taxes.
• The federal government should take responsibility for our levee systems.

SUPPORT AND OPPOSITION

Official ballot arguments in support are signed by: Henry Renteria, Director, California Office of Emergency Services; Michael E. Warren, President, California Fire Chiefs Association; Linda Adams, Secretary, California Environmental Protection Agency; Thomas A. Nassif, President, Western Growers; Peter Silva, Former Vice Chair, State Water Resources Control Board

Official ballot arguments in opposition are signed by: Thomas Hudson, Executive Director, California Taxpayer Protection Committee

FOR MORE INFORMATION

Supporters

Let's Rebuild California, 916-448-1401, www.ReadForYourself.org

Opponents

California Taxpayer Protection Committee, 916-991-9300, www.ProtectTaxpayers.com

Web Resources

Analysis by the Legislative Analyst's office

Voter Information Guide (ballot pamphlet)

Reports of campaign expenditures for ballot measures