Expert Blog

DWR Is Suing Everyone for a Blank Check for a Delta Tunnel

In the middle of a pandemic, an economic recession, and everything else that 2020 is throwing at us, in early August the California Department of Water Resources (DWR) filed a lawsuit against every Californian to authorize spending an unlimited amount of money—money that would have to be repaid through increased property taxes and/or higher water rates from customers of the State Water Project—for an as yet undefined Delta tunnel project.
Doug Obegi (Alum)

In the middle of a pandemic, an economic recession, and everything else that 2020 is throwing at us, in early August the California Department of Water Resources (DWR) filed a lawsuit against every Californian to authorize spending an unlimited amount of money—money that would have to be repaid through increased property taxes and/or higher water rates from customers of the State Water Project—for an as yet undefined Delta tunnel project. On August 27 the Sacramento Superior Court approved the summons for this lawsuit that DWR is required to have published in newspapers across the state, which begins:

This lawsuit is what’s known as a validation lawsuit, which is an "in rem" proceeding (effectively a lawsuit filed against every person in California, and whose judgment is binding upon all of us), in order to validate a bond or government financing mechanism for all time. In other words, if DWR wins the lawsuit, then no person in California could ever file a lawsuit challenging those bonds or financing mechanisms to repay those bonds. While the lawsuit applies to everyone in California, everyone who lives in the service area of the State Water Project are the most likely to get stuck with the bill for this project.

In this case the lawsuit seeks to “validate” DWR’s bond resolutions for the Delta tunnel project. At this point it is literally a blank check: as paragraph 48 of the complaint admits, quoting from the bond resolution “the amount of bonds which may be executed, authenticated and delivered under this Resolution is not limited.” (emphasis added) While the lawsuit seeks court approval for DWR to borrow an unlimited amount of money to pay for the project, DWR recently estimated that the Delta Tunnel project would cost $15.9 billion, before accounting for the costs of issuing bonds and repaying interest. 

Already, the State Water Project’s largest agricultural contractor (the Kern County Water Agency) recently informed its Board of Directors (see pages 19 and 25 of this pdf) that they anticipate their member agencies will not participate in or pay for the Delta Tunnel project, except for a small amount (around 7.8% of their total contract amount) for municipal and industrial users in Bakersfield.

And what exactly is the Delta Tunnel project that the State would be spending unlimited amounts of money on? There isn’t one, and there may never be one: DWR claims that they have not decided whether to construct a Delta tunnel project, let alone decide on the specifics of that project (how big will it be? How much water will it divert? How much will it actually cost?). Indeed, the complaint admits that,

  • “The design and physical characteristics of any such Delta conveyance facilities are not yet determined, nor has the Department approved a project for implementation,” (paragraph 28), and
  • “On January 15, 2020, the Department issued its Notice of Preparation (“NOP”) initiating environmental review under the California Environmental Quality Act (“CEQA”) (Cal. Pub. Resources Code §§ 21000 et seq.) of a potential single tunnel Delta conveyance facility.” (paragraph 2) 

And finally, DWR is not just seeking to validate the ability to spend an unlimited amount of money on an undefined Delta tunnel project. DWR is also seeking to validate its ability to “charge and collect amounts under the Water Supply Contracts” with all State Water Project contractors to repay the costs of the Delta Tunnel project (See section 805 of the Bond Resolution), over as long as 70 years. In other words, if you live in Southern California, San Jose, or the service area of another contractor of the State Water Project, and DWR’s lawsuit is successful, you and your children might never be able to file a lawsuit to challenge the costs of paying for the Delta tunnel project, even if your local water district increased property taxes above 1% of the assessed value without a public vote (which would otherwise seemingly violate Proposition 13).

I'm not aware of any explanation why DWR Director Nemeth would authorize filing this lawsuit for a blank check for an undefined Delta Tunnel project, years before the State completes the public process to decide whether to approve a Delta tunnel project or what the specifics of such a project would be. It’s unconscionable to do so now, in the midst of economic recession and pandemic that are causing budget cuts across California and threatening households across the state.

DWR should withdraw this lawsuit.