Last fall, after years of study, the state’s largest water agency voted to spend $4 billion on a new project to bring water south from Northern California’s rivers. Other water agencies were supposed to help pay, but most backed out.
On Tuesday, after a few weeks of scrambling, Metropolitan decided the project was worth nearly any price. Its board voted to spend $11 billion to save the project. For the extra billions of dollars, there’s no guarantee of more water.
The project is a pair of 35-mile underground tunnels to keep water flowing south through the Sacramento-San Joaquin Bay Delta, the series of waterways and wetlands fed by snow melting in the Sierra Nevada mountain range.
The deal solidifies Metropolitan’s role as the biggest player in California water for years to come. Metropolitan agreed to pay for the tunnels despite opposition from the agency’s two largest customers, the San Diego County Water Authority and the city of Los Angeles.
While the tunnels could still be delayed by courts or stalled by unforeseeable construction challenges and politics, for now the Metropolitan vote is a win for Gov. Jerry Brown, who has been trying for three decades to improve the north-south water system his father created. Last-minute arm-twisting by the governor helped seal the deal.
Here’s how it happened and what it means for California’s water supply and San Diego ratepayers.
Higher Bills to Come
There is no question the tunnels will increase water rates across the region. The question is by how much.
Metropolitan staff estimate the average water bill in Southern California will go up by $4.80 a month, at most.
The San Diego County Water Authority argues those estimates don’t tell the whole story. According to Water Authority calculations, the cost to San Diego customers could range from a mere 60 cents more a month to a shocking $23.30 more.
Why Build the Tunnels?
California decided long ago to dam and divert rivers in Northern California to provide water to farmers and cities around San Francisco Bay, in the Central Valley and across Southern California. That destroyed those rivers but made possible agriculture, industry and human prosperity.
The governor’s late father, Gov. Pat Brown, created this State Water Project, but it was never truly finished. A canal was supposed to route water around the environmentally sensitive Delta. This “peripheral canal” was controversial, expensive and never built.
Every governor since – including Jerry Brown again now – has talked about some sort of “fix” for the problems of the unfinished State Water Project. The tunnels are the new solution and could be one of the keys to Brown’s legacy as a governor.
Newer environmental regulations reduce how much water can be sent south, making supplies unreliable. By more precisely managing the way water moves, tunnel supporters argue, the state could protect fish and guarantee reliable water supplies.
The tunnels are also designed to help ensure two of America’s largest cities, San Diego and Los Angeles, have enough water even as the climate changes. Without the tunnels, rising seas could flood the Delta with ocean water, polluting the drinking water supply for over half the state. Plus, the current system is susceptible to catastrophic damage from earthquakes, something the tunnels could help avoid.
The environmental argument against the tunnels has always been that the current system is inherently destructive and a new project to perpetuate that system is compounding the destruction for generations to come. As for the fish, the environmental opponents of the tunnels say it’s absurd to think building tunnels to take water away from where the fish live will help fish.
Falling Short
Originally, water agencies in the Central Valley and Southern California were supposed to share the costs of the $17 billion project. They were supposed to pay according to how much water they get today from either the State Water Project or its federally owned companion, the Central Valley Project.
Metropolitan, which gets about a quarter of the water, was going to pay a quarter of the costs – that’s $4 billion. A collection of Central Valley farmers who get about half the water would pay half. And so on.
But those farmers, who already operate on thin margins, backed out of the deal last fall, citing how expensive the water would be once they paid to build the tunnels. For now, those farmers have a second major source of water, which they pump up from the ground beneath them. That’s a cheaper but likely unsustainable course of action that could eventually be their ruin.
A few smaller agencies still wanted to build the tunnels, but together with Metropolitan, they were billions of dollars short of the $17 billion.
Metropolitan decided the risk of losing Delta water was too great. Over the past few months, it’s been trying to figure out a way to build the tunnels without those farmers’ help. To make it happen, Metropolitan figured out it would have to come up with $11 billion of its own.
Paying for both tunnels was intriguing, but $11 billion is a lot to bite off, even for Metropolitan, an agency with an annual budget of about $1.7 billion.
Last Monday, Metropolitan staff called a press conference to announce the agency would abandon plans to build two tunnels and spend $5 billion to build just one.
But a few of Metropolitan’s 38 board members, led by Brett Barbre of the Municipal Water District of Orange County, decided to see if they could find the votes anyway.
Whipping Votes
After Metropolitan staff seemed to throw in the towel, Barbre said he expressed his “strong dismay” and then called Steve Blois, a Metropolitan board member from Ventura County.
Then they started making calls, trying to sell other board members on the idea of paying $11 billion for two instead of $5 billion for one.
By the middle of last week, it seemed like they might be on to something. Perhaps there were enough water agencies in Southern California willing to stomach the risk.
Then, the governor got involved.
“The governor was making phone calls [on Monday], which was huge,” Barbre told me.
The governor’s vote-wrangling worked.
On Tuesday, 61 percent of the Metropolitan board voted to build the tunnels.
But the no votes included representatives from San Diego County and the city of Los Angeles, creating the unusual situation where a water project sold as a way to save urban California from drought is opposed by its two biggest cities.
Metropolitan’s Monopoly
Since the Great Depression, Metropolitan has had a near-monopoly on imported water. First, it built an aqueduct to connect Southern California to the Colorado River. Then, several decades later, it helped pay for the State Water Project to get water from the north, through the Delta.
While Metropolitan is a nonprofit and considers itself a benevolent monopoly, some of its customers, including the San Diego, have grown tired of depending on it. The Water Authority buys Metropolitan water and then resells it to local water agencies, like the city of San Diego’s water department.
For the Water Authority, the turning point came when Metropolitan was caught off guard by a drought in the early-1990s. San Diego has argued for years since then that Metropolitan should make room for others to import and sell water.
While San Diego and Los Angeles are rarely on the same page, Los Angeles Mayor Eric Garcetti has been on a similar path in recent years. He’s vowed to reduce his city’s dependence on Metropolitan water by recycling wastewater, cleaning up contaminated groundwater and capturing stormwater.
“Local water is the best way to ensure resiliency in the face of climate change and earthquakes,” said Mark Gold, one of the city’s Metropolitan board members.
While everyone agrees it’s good to have many sources of water, local water officials often view new projects as a zero sum game, because ratepayers will only tolerate so much: If a Metropolitan project adds a dollar to a ratepayer’s bill, that’s a dollar less Los Angeles or San Diego can spend.
While Metropolitan does subsidize some local projects – the city of San Diego is asking for money to help pay for its own water recycling project – the agency also wants to build projects for the whole region. A cynical take is that Metropolitan wants to remain relevant and can only do so if it owns or operates its own projects.
If water officials fail to work together, ratepayers end up on the hook for vanity projects. A decade ago, Metropolitan and the Water Authority both rushed to build or expand their own water treatment plants. That cost hundreds of millions of dollars. During the height of the drought, the plants sat largely unused.
But, in a series of biting remarks on Tuesday, Metropolitan board chairman Randy Record made the case for a perpetual Metropolitan monopoly. He suggested Los Angeles is looking out only for itself and San Diego is unable to look out even for itself.
Los Angeles has another source of imported water, the Los Angeles Aqueduct, a city-owned system that drains water from the eastern side of the Sierra. Record said the city wants to keep importing that water but won’t help Metropolitan import water to help other parts of Southern California, like Riverside County, where Record lives.
“The only one you’re not interested in is the one I depend on,” Record said of Los Angeles.
Then he took aim at San Diego. The Water Authority’s boldest attempt to truly distance itself from Metropolitan is an ocean water desalination plant. But the plant is undependable. Record said that when it’s broken down, Metropolitan comes to San Diego’s rescue by providing imported water. Not only that, but San Diego customers save money when that happens because Metropolitan water is cheaper than the water sold by company that owns the plant, Poseidon.
“When that project is down, your ratepayers save money,” he said to San Diego.
Then, having shown how much bad blood there was in the boardroom, Record voted to build the tunnels.
Metropolitan’s New Power
In the past, the point of new water projects was to get more water. The tunnels, though, are mainly just designed to make sure there isn’t a lot less water due to climate change or environmental regulations.
Even by paying more for the tunnels, Metropolitan isn’t actually guaranteeing it will get more water either. Indeed, the agency could end up fronting two-thirds of the money for a project that it’s only guaranteed to get a fourth of the water from.
But Metropolitan’s leaders don’t think that will happen. Jeffrey Kightlinger, Metropolitan’s long-time general manager, sees several ways for Metropolitan to recoup its costs.
“It basically becomes an asset of ours and my guess is it’s going to become a very valuable asset over time,” he said.
First, he’s betting that demand for water in coming years will force other water agencies to chip in eventually. The tunnels will take more than a decade to build, and that does not count years of delay that could come from post-Brown politics or inevitable litigation. By then, the Central Valley farmers may have exhausted the cheaper groundwater they are using now.
Second, any number of customers could buy or lease space in the tunnels in years when they desperately need it. When they do, they’d be required to pay Metropolitan a fee to transport that water.
Or, third, Metropolitan would end up with more water after all – water that it can resell to customers in Southern California. That may come simply because it owns so much capacity in the tunnels or because it finds water rights holders who can’t get water without using the tunnels but are unwilling to pay to use them. For instance, if farmers don’t want to pay to use the tunnels, they may have water they own but can’t import, so they might then sell that water to Metropolitan.
What’s Next
Expect a lot of litigation. Some of it will focus on the financing plan, which was adopted without a whole lot of deliberation. Metropolitan held a workshop for board members in late March but didn’t even go over the deal on Tuesday before the vote.
Michael Hogan, a San Diego representative on the board, wondered how Metropolitan could justify paying $11 billion for a project it said only a few months ago was worth just $4 billion.