1. WWW.TOWNSENDPA.COM SACRAMENTO WASHINGTON, DC SOUTHERN CALIFORNIA NORTHERN CALIFORNIA California Water Bond Politics August 13, 2014

2. Slide 2 Slide 2Prologue 2006 Infrastructure Bond Package: Prop 1BTransportation Prop 1CHousing Prop 1DSchools Prop 1EFlood Control and Management 2006 Proposition 84 Park Bond Initiative: Included $1 billion for IRWM Included $1.2 billion for other water accounts No water-only bond proposal on 2006 ballot California Water Bond Politics | Townsend Public Affairs

3. Slide 3 Slide 3 The push for a “true” water bond Negotiations began in early 2008 to put forth a water bond package Governor Schwarzenegger and Republicans were heavily involved in crafting the package Democrats were willing to support a water bond, but only if several key water-policy related bills were adopted as well California Water Bond Politics | Townsend Public Affairs

4. Slide 4 Slide 4 2009 Water Bond Package Ultimately a water bond in the amount of $11.14 billion (SBx7-2) was adopted by the Legislature and signed by Governor Schwarzenegger for the November 2010 ballot. California Water Bond Politics | Townsend Public Affairs

5. Slide 5 Slide 5 2009 Water Bond Package California Water Bond Politics | Townsend Public Affairs

6. Slide 6 Slide 6 2009 Water Bond Package Spending Cap: “Of the $11.14 billion in bonds authorized in this division, no more than $5.57 billion shall be sold by the Treasurer before July 1, 2015.” Rationale: Adopt one large funding measure upfront Avoid going to voters twice in the same decade California Water Bond Politics | Townsend Public Affairs

7. Slide 7 Slide 7 2009 Water Bond Package In conjunction with SBx7-2, four water policy bills were also approved and signed into law: SBx7-1: Delta Governance ▫Sets the co-equal goals recommended by the Delta Blue Ribbon Committee SBx7-6: Groundwater Monitoring ▫Establishes the first statewide groundwater monitoring program SBx7-7: Water Conservation ▫Sets goal of reducing urban water use by 20% by 2020 SBx7-8: Water Diversion Reporting ▫Increases SWRCB enforcement of water rights use ▫Appropriates $546 million for water and environmental projects California Water Bond Politics | Townsend Public Affairs

8. Slide 8 Slide 8 2009 Water Bond Ballot Delay Water Bond was slated for the November 2010 ballot but was delayed to 2012 at the urging of Governor Arnold Schwarzenegger Water Bond was delayed again, this time to 2014 at the urging of Governor Jerry Brown. Statewide drought conditions at the time were smaller than in comparison to today. California Water Bond Politics | Townsend Public Affairs

9. Slide 9 Slide 9 Then and Now California Water Bond Politics | Townsend Public Affairs Graphic Credit: Brad Rippey/U.S. Department of Agriculture

10. Slide 10 Slide 10 2013-14 Water Bond Legislation Over a dozen water bond bills introduced between 2013 -2014 June 26, 2014 marked “AQUAPOCALYPSE” the initial deadline for the Legislature to replace the 2009 water bond with a new water bond measure. California Water Bond Politics | Townsend Public Affairs

11. Slide 11 Slide 11 Legislative Water Bond Efforts The dozen of bills introduced was narrowed down to three measures by June: ▫AB 1331 (Rendon) ▫SB 848 (Wolk) ▫AB 2686 (Perea) Several hearings were held and all three bills went through several rounds of amendments As of June 25 th the Governor still had not weighed in on any proposal California Water Bond Politics | Townsend Public Affairs

12. Slide 12 Slide 12 Legislative Water Bond Efforts While a final deal had not been reached by the Legislature, there was consensus on several key issues: Surface Storage with continuous appropriation Desalination as an eligible project category Water Use Efficiency Water Reuse and Stormwater Capture Water Recycling Delta Mitigation California Water Bond Politics | Townsend Public Affairs

13. Slide 13 Slide 13 Legislative Water Bond Efforts What wasn’t agreed upon… Funding amounts for: California Water Bond Politics | Townsend Public Affairs Delta Mitigation Surface Storage Overall Bond Amount

14. Slide 14 Slide 14 The Governor Finally Engages Governor Brown releases Water Action Plan Financing Act of 2014 on June 26 th Total Price Tag: $6 billion $2 billion for Surface Storage $1.5 billion for Water Quality/ Water Reliability $1.5 billion for Watershed Protection $500 million for Delta Mitigation $500 million for Statewide Flood Management California Water Bond Politics | Townsend Public Affairs

15. Slide 15 Slide 15 The Governor Finally Speaks “Five years ago, state legislators and the Governor put a pork-laden water bond on the ballot — with a price tag beyond what’s reasonable or affordable. “ “My $6 billion plan provides for water use efficiency and recycling, effective groundwater management and added storage.” California Water Bond Politics | Townsend Public Affairs

16. Slide 16 Slide 16 In response to the Governor’s desire for a smaller water bond, Senate Democrats release a scaled-down version of SB 848 (Wolk): Reduces bond amount from $10.5 billion to $7.5 billion Funding categories reduced by 30% except: ▫ Groundwater Treatment and Remediation (remains at $1 billion) ▫ Recycled Water (remains at $500 million) The night before summer recess, SB 848 fell apart and the Legislature recessed without reaching a deal. The Democrats Push Back California Water Bond Politics | Townsend Public Affairs

17. Slide 17 Slide 17 Summer Recess California Water Bond Politics | Townsend Public Affairs

18. Slide 18 Slide 18 Legislature Reconvenes Legislature reconvenes on August 4th with the Assembly Speaker publicly stating “we have to get something done this week.” Rumors float that a deal cannot be reached, and thus the 2009 Water Bond might remain in place on the 2014 ballot No formal hearings or meetings on water bond legislation take place during the entire week California Water Bond Politics | Townsend Public Affairs

19. Slide 19 Slide 19 Republicans Push Back On August 7 th, the Republican Caucus guts and amends SB 1013 into their new water bond proposal, totaling $8.7 billion: $3 billion for Surface Storage (with continuous appropriation) $700 million for Water Recycling $600 million for Delta Mitigation $1.5 billion for Watershed Protection $900 million for Water Use Efficiency California Water Bond Politics | Townsend Public Affairs

20. Slide 20 Slide 20 Game of Chicken Governor Brown: “They’re arguing about this $3 billion storage. You’re not gonna get these dams built without more billions, and it’s gonna take many years. We have a problem right now, and the $6 billion covers all the immediate stuff that we can do now.” Senator Jim Nielsen: “Where have we been? Where has the administration been since January? This water crisis has been around all these many months. Now in these last moments of session we’re going to panic, and gear up.” Senator Bob Huff: "You can't build two facilities with less than $3 billion.“ California Water Bond Politics | Townsend Public Affairs

21. Slide 21 Slide 21 Game of Chicken Deadlines are looming to finalize a ballot measure with the Secretary of State Dems need Reep votes in the Senate Some Republicans are privately grousing that the 2009 bond is better than any current deal the Governor has put forth Polling shows 9 percent favorability among voters for a $6 billion bond v. $11 billion bond Polls show support for 2009 bond drops by 17 percent with Governor’s opposition The Big Question: would the Governor truly fight the 2009 Water Bond in conjunction with his re-election campaign during a public crisis over drought conditions?? California Water Bond Politics | Townsend Public Affairs

22. Slide 22 Slide 22 The Governor Responds Mid-day August 11th the Governor releases legislative language outlining a $7.195 billion bond SB 866 and AB 1471 are amended and introduced the next morning August 12 Press conference held with the Governor, MWD, agricultural interests, The Nature Conservancy, among others. Noticeably absent: Republicans California Water Bond Politics | Townsend Public Affairs

23. Slide 23 Slide 23 SB 866/AB 1471 California Water Bond Politics | Townsend Public Affairs

24. Slide 24 Slide 24 SB 866/AB 1471 Funding eligibility dependent on compliance with 2009 Water Conservation Act and Urban and Agricultural Water Management Plans Bay Delta Conservation Plan neutral Protection of existing water rights Repurposes $105 million from Proposition 84, $95 million from Proposition 50 and takes on $6.99 billion in new debt California Water Bond Politics | Townsend Public Affairs

25. Slide 25 Slide 25 What’s Next Three Options California Water Bond Politics | Townsend Public Affairs No deal is reached and the 2009 Water Bond remains on the 2014 ballot No deal is reached BUT the Legislature and Governor agree to delay the 2009 Water Bond to a future ballot A deal is reached and a new Water Bond is put on the 2014 ballot as a replacement to the 2009 Water Bond

26. Slide 26 Slide 26 California Water Bonds: A Legacy of Victory Since 1914, 13 water-related bonds have been put on the state ballot by the Legislature or voter initiative Of those 13 water bonds, ONLY ONE has ever failed to pass (1982: Peripheral Canal, 62% opposed) California Water Bond Politics | Townsend Public Affairs

27. Slide 27 Slide 27 California Water Bonds: A Legacy of Victory California Water Bond Politics | Townsend Public Affairs YearNumberAmountResults 2000Prop 13$1.97 B64.8% 2002Prop 40$2.6 B56.9% 2004Prop 50$3.4 B55.3% 2006Prop 84$5.4 B53.8%

28. Slide 28 Slide 28 What’s Next Do Central Valley interests get the $3 billion in surface storage and support the measure? Does the inclusion of watershed solidify the support of environmental organizations? Do urban water interests believe there is enough local and regional water reliability in the water bond to garner their support? Can Delta interests transform the debate on the water bond into a referendum on the tunnels? California Water Bond Politics | Townsend Public Affairs

29. Slide 29 Slide 29Conclusion Christopher Townsend President CTownsend@TownsendPA.com Heather Stratman Senior Director HStratman@TownsendPA.com California Water Bond Politics | Townsend Public Affairs