1. 1 Natomas Levee Improvement Program Crediting Issues Before the Central Valley Flood Protection Board February, 2009 Sacramento Area Flood Control Agency

2. 2 What is Credit? Traditionally, the Corps constructs projects, and requires payment of a “local share” by the non- federal sponsor. –In California, that “local share” is split between the State and the local sponsor. Where projects are not yet Congressionally authorized, or where the Corps does not have funds to construct, local agencies may seek to construct projects in advance of the Corps. In these circumstances, the local agency requests that the funds it expends act as a “credit” toward the local share for future work to be performed by the Corps.

3. 3 Credit Mechanisms The credit mechanism most familiar to the Board is know as Section 104 credit: –This mechanism comes from Section 104 of WRDA 1986. –It provides that for projects not yet authorized, where the local agency seeks credit, the local agency shall request a credit pre-approval prior to start of work (this has since be interpreted as prior to “contract award”). –The actual credit is then determined after construction and after authorization of the project.

4. 4 Credit Mechanisms Some other credit mechanisms are specific to individual projects, such as Section 130 of the Omnibus Appropriations Act of 2008: –Section 130 is specific to work previously authorized in Natomas. –It provides: “the non-Federal interest shall receive credit toward the non-Federal share of project costs for expenses that the non-Federal interest incurs for design or construction of any authorized project feature, including credit for work commenced before the date of execution of a cooperation agreement for the affected feature. The amount of the credit shall be determined by the Secretary.”

5. 5 Belt and Suspenders Section 130 of the Omnibus Appropriations Act of 2008 covers authorized work. SAFCA believes that most if not all of the work for Application Nos. 18159-2 & 18159-3 is authorized. However, to the extent that any of it is not authorized, SAFCA seeks to rely on Section 104. (This Board requested Section 104 credit on January 25, 2008). The Corps has agreed to process Section 130 and Section 104 together.

6. 6 Obtaining Credit Under Section 130 The Corps has not issued guidance for implementation of Section 130. The Corps recently stated that in requesting credit under Section 130, the Board should use the guidance adopted by the Corps for Section 2003 of WRDA 2007.

7. 7 Section 2003 of WRDA 2007 Provides that “in any case in which the non- Federal interest is to receive credit..., the Secretary and the non-Federal interest shall enter into an agreement under which the non- Federal interest shall carry out such work, and only work carried out following the execution of the agreement shall be eligible for credit.” Corps guidance (EC 1165-2-208) provides that the form “MOU” provided by the Corps satisfies the requirement of an “agreement.” This is like the Section 104 process, except that the actual MOU must be executed prior to construction, instead of merely receiving an approval letter from the Secretary.

8. 8 The MOU In order to get the credits, the MOU must be executed before SAFCA awards a construction contract on April 1. The MOU requires commitments of the signer, such as actually building the project. These are commitments that the Board cannot make. Because SAFCA is the proper entity to make the commitments, SAFCA has signed the MOU and the Corps is beginning to process. SAFCA will cooperation with DWR to ensure that State funds provided toward the project obtain credit through provisions of the funding agreement for the NLIP.

9. 9 Conclusion SAFCA is working with DWR and your staff to make sure that all funds provided by SAFCA and the State are available for maximum credit.