In a decision that could complicate Gov. Gavin Newsom’s push to build a giant water tunnel and remake California’s water system, a state appeals court has rejected the state’s plan for financing the project.
The 3rd District Court of Appeal ruled against the state Department of Water Resources’ plan to issue billions of dollars in bonds to build the 45-mile tunnel beneath the Sacramento-San Joaquin River Delta.
The decision is a win for California ratepayers and taxpayers, said Roger Moore, a lawyer representing six counties in Northern California and two water agencies in the Delta region.
He said it underlines that state agencies “have to take real steps to make sure that there is transparency and accountability.”
Upholding a 2024 decision by a Sacramento County Superior Court judge, the court ruled the water agency does not have the authority under a 1959 law to issue bonds for a new “unit” of the State Water Project, which delivers water from the Delta to farms and cities, and “exceeded its delegated authority” in planning to finance the tunnel through bonds.
Kirsten Macintyre, a spokesperson for the department, said the court didn’t say the Department of Water Resources lacks the authority to build the project or borrow funds to pay for it, but rather that the description the state presented in the case was “overly broad.”
“While DWR respectfully disagrees with that conclusion, we have taken additional steps to resolve the issue,” she said in an email.
Last year, the agency opened a second court case in an effort to confirm its bond-issuing authority, a step that Macintyre said was taken to “address the court’s concerns.”
If the appeals court decision stands and the ongoing case doesn’t bring a different conclusion, it might lead the Newsom administration to revise its plan for financing the project. Officials could also petition for the California Supreme Court to hear the case.
The state estimated in 2024 that the tunnel would cost $20.1 billion, while opponents say it could cost three to five times more than that.
State officials have said that the tunnel, called the Delta Conveyance Project, ultimately would be paid for by participating water agencies that agree to repay the bonds.
The tunnel would create a second route to transport water from new intakes on the Sacramento River to the south side of the Delta, where pumps send water into the aqueducts of the State Water Project.
The system of aqueducts and pipelines transports water from the Delta to 27 million people in cities from the Bay Area to San Diego, and to 750,000 acres of farmland.
In 1960, California voters approved bonds for the construction of the State Water Project. Legislation in 1959 had given DWR the authority to build the Feather River Project, an initial component of the State Water Project.
But in the ruling last week, the court said DWR officials were wrong to rely on that provision. The three judges said it doesn’t allow the agency to issue bonds “under the guise of a ‘further modification’” of that original water system.
Newsom has said the project is essential for the state’s future and has made it a central priority of his administration.
State officials and supporters of the project have said the tunnel would modernize the state’s water system for more severe droughts and deluges with climate change, and would withstand sea level rise and the risks of a major earthquake in the region.
Opponents, including environmental advocates, fishing groups and tribal leaders, argue the project would harm the Delta’s communities and ecosystem, and further threaten native fish that are already in decline.
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