ACWA Urges Administration to Limit Grant Access to Public Agencies

March 17, 2004

ACWA Urges Administration to Limit Grant Access to Public Agencies
Private Water Utilities Should Not be Eligible for Prop 50 Funds, Association Says

SACRAMENTO– The Association of California Water Agencies (ACWA) is urging the Schwarzenegger Administration to oppose a move to make private water utilities eligible for state grants and loans under Proposition 50 of 2002.

In a March 16 letter to Governor Schwarzenegger, ACWA said it opposed guidelines being developed by three state agencies that would allow investor-owned utilities (IOUs) to receive grants and loans for water and wastewater system improvements. Noting the size and assets of investor-owned utilities and their parent companies, ACWA said general obligation bond funding should be reserved for local public agencies that do not have the resources and access to private capital that their investor-owned counterparts have.

“These large, well-funded corporations have ready access to U.S. and international capital markets to invest in their utility systems,” ACWA Executive Director Steve Hall wrote. “There simply aren’t enough state general obligation bond funds to address all of the water and wastewater needs in California.”

Hall noted that local public agencies are doing their part to provide essential services and rely on local property taxes, special assessments and ratepayer dollars. “Local property taxes have once again been targeted to bail out the state budget. Local infrastructure needs cannot be met by local dollars alone, access to grants and loans is critical,” said Hall.

General obligation bond funding historically has been limited to local public agencies. With the exception of bond funding issued under the California safe drinking water program, IOUs have never been eligible for water bond grants and loans.

Hall said the question is not whether customers served by IOUs would benefit from investor-owned utilities becoming eligible for bond funding; clearly they would. The real issue, he noted, is that IOUs – many of which are now part of multi-national conglomerates –have access to capital markets for the purpose of financing projects. Most local public agencies, particularly small ones serving less than 10,000 people, do not have the same access to private capital.

“Wall Street and the German and British capital markets should continue to directly handle the capital needs of IOUs; California general obligation bond proceeds should help California’s local public agency utilities because these local agencies rarely have the same access to capital as their IOU counterparts,” Hall wrote.

ACWA noted in the letter that IOUs attempted to gain eligibility for Proposition 50 funds as well as future bond measures through the Legislature last year, but their proposal – SB 909 – failed to pass.

Proposition 50 is a $3.5 billion water bond passed by California voters in 2002. The California Department of Health Services, the California Department of Water Resources and the State Water Resources Control Board are currently developing guidelines for how Prop 50 funding will be awarded.

ACWA is a statewide association whose 440 members are responsible for about 90% of the water delivered in California. For more information, visit www.acwanet.com.