We learned about water stocks and water banks so it just seems natural to make the next step to water bonds. In this case specifically, the California Water Bond or as many people like to refer to it as – The Safe, Clean, and Reliable Drinking Water Supply Act. The hope is with additional funding of $11 billion, residents of California can rest knowing they won’t have to worry about water for the next 50 years or so. The Water Bond will pay for some very important water projects in California including:
• $3 billion for water storage projects
• $2.25 billion for projects that “support delta sustainability options”.
• $1.7 billion for ecosystem and watershed protection and restoration projects in 21 watersheds.
• $1.4 billion for “integrated regional water management projects”
• $1.25 billion for “water recycling and advanced treatment technology projects”.
• $1 billion for groundwater protection and cleanup
• $455 million for drought relief projects, disadvantaged communities, small community wastewater treatment improvements and safe drinking water revolving fund.
What is a General Obligation Bond
A municipal bond backed by the credit and “taxing power” of the issuing jurisdiction rather than the revenue from a given project. In this case the issuing jurisdiction is the state of California and they would be adding to their current bond debit of $89 billion. California would borrow money from investors at a low interest rate and pay the principal plus interest back over time. The repayment period varies but typically is 30 years. The bonds can be traded at any time during the repayment period. The interest rate tends to be low because the bonds are exempt from Federal and sometimes State taxes.
How Do These Projects Help
In the Metropolitan Water District’s service area in Southern California more than half of the storm water created runs off into the ocean without a chance to recharge ground water supplies. The biggest allocation of funds in the water bond will be for water storage projects which will help capture more storm water. Capturing more storm water allows California to rely less on imported water.
The bond also pays for “delta sustainability options”. This includes twin tunnels dug under the California delta to move water from North-to-South underneath the Delta to southerly farms and cities. This way the East-West surface water flows for fish migration could be restored.
Will this Water Bond Pass
This will be up to voters. The probability of passing increases each day the drought continues. We could be experiencing the perfect storm to pass the bond. More farming communities are struggling each day and with little or no rain in California the focus of water has become huge. The cost of the bond with repayment at 2% interest (a good rate for municipal bonds in California today) will be $14.6 billion. This equals $400 per person in California (36.5 million people) over 30 years or a little more than $13 dollars per person per year. This doesn’t sound like a lot of money to firm up water to the 12th largest economy in the world where without water, we know the economy will dry up.
What is the Problem
There are arguments against the water bond. The biggest argument seems to be it is too costly and maybe the cost is inflated. Others believe the better solution is conservation. They suggest conservation can bring reductions in water use at a lower price tag.
The California Water Bond is going to be a large focus of the California 2014 election. There are many very bright people looking at the bond and possible alternatives. This is great news because something has to be done about water and the sooner the better. Eliminating uncertainty about water in an urban area ensures growth and future business investment. I hope you will share your thoughts and ideas about the bond with others on the blog as well as other voters who may not be informed on the issue.