California ballot measure may limit project financing

A plan born out of opposition to the Water Fix could require revenue bonds for projects larger than $2 billion to achieve public approval.

A proposed ballot measure requiring all project financings larger than $2 billion to go through the public approval process could cause delays in infrastructure projects, according to Fitch.

Championed by the No Blank Check initiative, the measure has garnered the necessary support to appear on the 2016 ballot, California Secretary of State Alex Padilla's office confirmed earlier this month. No Blank Check is backed by a coalition of labour, business, water, and agricultural entities who believe the project will “hijack” local water resources for use in industrial agriculture.

In a state suffering tough shortages, Fitch said that plans in the water sector would be most heavily affected by the measure if it becomes law. Noting that California’s rising population is approaching 40 million, the agency noted that deferred maintenance had left an estimated $750 billion in funding needs over the next decade, with only $57 billion of that covered in the state's 2015 Five-Year Infrastructure Plan.

“Revenue bonds have played a limited role in the state's infrastructure financing overall but have been essential for financing water projects,” the agency said. “In the absence of revenue bonds, water projects have few other funding options.”

No Blank Check was proposed by opponents of the California Water Fix, formerly known as the Bay Delta Conservation Plan (BDCP), a controversial plan to construct two long tunnels through the Sacramento-San Joaquin Delta. As part of the plan, agricultural and residential rate payers would finance a significant portion of the $25 billion project development costs should the proper regulatory approvals and political support be obtained, Fitch said.

State Governor Jerry Brown said in a statement that “the Delta pipeline is essential to completing the California Water Project and protecting fish and water quality. Without this fix, San Joaquin farms, Silicon Valley and other vital centres of the California economy will suffer devastating losses in their water supply.”

The governor added that he believes “claims to the contrary are false, shameful and a profound disservice to California's future”, but that didn't stop San Joaquin County's Board of Supervisors from voting 3-0 in favour of a resolution affirming the county's opposition to the fix.

“Water Fix doesn't really fix the state's water problem, and it doesn't provide a single drop of water,” Supervisor Bob Elliot told the local press. “It's obvious this new plan continues to be just as deficient as the original plan.”