Assembly Budget Subcommittee No. 4 on Climate Crisis, Resources, Energy, and Transportation

Good morning. It's nice to see a lot of interest in this budget item this morning. Welcome to budget sub 4. Today's our second hearing on the May revision. We will have a more thorough review of the items that we highlighted last week on Thursday.

We have 13 items that are planned for presentation, many more where we will only hear a presentation if requested by a member. We'll start with an overview of the Legislative Analyst Office, LAO, and then we'll move on to the discussion items.

For some items as marked in the agenda, we will take public comment at that time on that item to enable a dialogue, but most of the public comment will be at the end of the hearing. As always, members are welcome to ask questions and make comments on any item in the May revision, not just the discussion items.

We have experts from many, if not all of the departments in the audience. For each item on presentation, I'll ask each of the witnesses to introduce themselves before they begin their testimony. When we get to public comment, each member of the public will have one minute to speak.

We will likely have a lunch break from 12 to 1:30. Before we begin, I want to thank the Department of Finance and our state departments for using their expertise to propose a balanced budget in these uncertain times.

I especially want to thank the LAO for working over the weekend to provide us with reasoned analysis as we face these difficult decisions without much time to analyze them.

I also want to thank the members of the public and the stakeholders for coming to this hearing so that we can truly hear the impacts of these decisions on everyone.

We know that resolving the budget deficit and weathering the next few years will be difficult and we'll have to make some hard decisions to defund programs that advocates have fought to create, as we have had to do in the past two years.

In this subcommitee, we do not have certainty on how the national and global economy will impact our state over the next few years. At the same time, we're facing attacks from the federal government on our climate leadership.

But what we do know is that we need to make difficult and informed decisions this year to mitigate the harm to vulnerable Californians and protect the progress we've made as a state in protecting our environment and ensuring clean air, reliable and affordable energy and transportation, and protecting Californians against natural disasters.

I look forward to working collaboratively with the administration and the senate on a thoughtful budget that reflects our shared values and protects our environment. I'm ready to get started with the LAO's overview. Assemblymember Rogers.

Thank you so much, Chair. So one of the things that was brought to our office's attention was a new trailer bill that was dropped last night at 9:30 related to waiving the Coastal Act for projects related to the Olympics.

Given that other needs for Southern California and the Olympics have been working their way through the process for the last few months, including a bill we voted on yesterday around transit to bolster, I'd love for this committee to make space for us to actually discuss that proposal.

One wouldn't want us to get accused of dropping it at the last minute the the night before the oversight hearing to avoid having a transparent conversation.

I appreciate that. And I also informed the Coastal Commission staff this morning walking in that we would raise that. So we will add that to the discussion. Thank you very much.

Good morning.

Good morning.

Rachel Ehlers with the Legislative Analyst's Office. I'm going to keep my comments very brief given the length of your agenda, but wanted to make a few overarching comments first on the overall budget structure given the that you haven't had a full budget committee hearing since the May revision released.

So we haven't had a chance to share those overarching messages with you. And then a few overarching comments around the environment and transportation budget proposals. And then our team from the LAO is here and we will have specific comments on many of the items you have on your agenda.

So over the weekend our office posted this initial comments on the May revision on our website. If you haven't seen it, it's there on our LAO website. So the big takeaways there is that we estimate the May revision solves around a $14 billion budget problem that's in the same ballpark as the governor.

The governor estimates a $12 billion problem just based on some definitional issues. But really we agree with the governor's assessment that that's the size of the gap. The budget problem that the May revision solves.

This problem arose from both a combination of lower revenue forecast net across the budget window as compared to January, as well as higher baseline spending primarily, or most notably, in the MediCal program. So based on our initial assessment, we think the governor's revenue estimates are reasonable.

So there have been some years when the LAO revenue forecast is quite different than the administration. But in this case they line up pretty closely. So that's a helpful starting place. We also think the approach and the structure of the May revision are kind of largely reasonable under the governor's proposal as well.

However, you could take that same overall architecture and make different choices based on your priorities. So specifically, we recommend that you focus on solutions that do not delay or exacerbate the budget problem. That would be a similar approach to what the governor does, that the solutions you focus on don't push the problem into the out years.

Because we do continue to see pretty significant deficits in the coming years as well. We think it's appropriate to focus on reducing multi year spending because of those out year deficits, as the governor's May revision does. We think maintaining a reserve is prudent.

The governor's proposal would, under all of the estimates would have a $16 billion reserve remaining at the end of the 25-26 fiscal year, which we think is really important, particularly given all of the uncertainty around revenues and around federal spending.

To make sure you've got funding left in that reserve for the coming years makes a lot of sense. All of that said, you can take a different approach and a different mix of solutions as compared to what the governor has across the budget.

So now turning comments to the environment and transportation proposals, specifically of that kind of $12 to $14 billion problem that the administration solves. The areas covered by this subcommitee make up around $1.9 billion of the budget solution. As we've talked about, there's funding shifting from general fund to Proposition 4.

Most of that was proposed in January, but there's one more program proposed in May, so that totals around 300 million of that budget solution.

And then as we talked about in the hearing last week, a major new piece of the solution is shifting 1.5 billion of CalFire spending to the greenhouse gas reduction fund, relieving that general fund obligation which would grow somewhat in the out years. There are trade offs with these proposals for sure.

It will result in a lower level of overall spending and activities on these environmental and transportation areas than was otherwise planned. Those are the choices you are facing across the whole budget. Is spending less than was otherwise planned just given the downturn in revenues?

So the choice before you is basically what do you want to do less of and or do you want to raise revenues to help address that? That's always part of the balance that we would encourage you to remember. It's not just reducing spending. You also can increase revenues as part of addressing that balance.

So that means if you don't like these proposals from the governor in this area, you are faced with the choice of having to find an equal level of solution elsewhere in the budget, which will be challenging. You can use these approaches that the governor has and use them in a different way.

However, there's a little less flexibility on the Prop 4 side, if you want to use that tool because of the alignment with the bond categories, if you want to backfill general fund spending with that source, there's less flexibility there.

But on the GGRF, there's quite a bit of flexibility on which programs you want to continue funding with GGRF and which programs you want to continue funding with general fund. And we would encourage you, as we'll talk about when we get to that item, to use those funds as flexibly as you want to meet your pious priorities.

I think that's our overarching guidance to you. You are facing a budget problem where you have to shrink down the spending. So what are your highest priorities? Focus on that. Start there and then we can work with you to figure out what the funding sources are to meet those priorities.

I think a second overarching point that we will talk about in some of the subsequent items too, and also to Assemblymember Rogers point is there are some major policy changes being proposed in the May revision and you don't have a lot of time.

You haven't had a lot of time, particularly for the proposals that were released last night, to review these.

So our overarching recommendation is to defer without prejudice these major policy changes that surround water quality plans, the Delta, these Olympic related proposals, if they don't have to be done with the budget to implement and pass the budget by June 15, June 30, then we would say give yourselves the time you need.

Some of these are major policy changes and there's no need to rush when they are not related to implementing the budget. So give yourselves the time you need is our overarching approach for those policy proposals.

And then the final point, I'll just remind you, is that there was new spending proposed in the January budget from the general fund and there's smaller amounts of new spending proposed in the May revision, both from the general fund but also some special funds motor vehicle account.

So our overarching guidance is that it probably makes most sense to try and focus on your core existing budget and programs before expanding because any new spending, any expansion is necessarily coming at the expense of some of your existing spending, given the budget situation.

So thinking about what your highest priorities are is, in some cases, there may be some of this new spending that's really important for public health and safety. It might make sense. That means you're gonna have to make more reductions elsewhere.

So starting with what you've got and really having a very high bar for some of the new spending proposals. We said that in January around some of the proposals related to farm to school program from CDFA, Clean California, from Caltrans, the library, Parks Pass.

These are worthwhile activities, but thinking about them as adding new activities coming at the expense of your existing. And is that trade off what you want to do with your budget? And with that, our LAO team and I are here to help provide comments on the agenda and looking forward to the discussion.

Thank you. We will look forward to hearing from you as we go through these other agenda items also. Any questions, Assembly Member? Alrighty. We're ready to move on to our first presentation and that's the Delta Conveyance and Water Quality Control Plan trailer bills. Okay.

While they're coming up, I will let you know that because the Water Board is currently conducting an adjudicative proceeding related to the Delta Conveyance Project and the Administrative Procedures Act, it prohibits the Water Board staff from direct or indirect communications about an issue in a pending adjudicative process.

Water Board staff will will present the Water Quality Control Board proposal first. After their comments and questions on that item, they will leave and the Department of Water Resources will present the Delta Conveyance Project trailer bill.

So whichever administration witness would like to start on issue one from the Water Board, get those things nice and close to you, please.

Good morning, Chair and Members. Andrew March.

Even closer please.

Yes, I will try to not eat. I will attempt to not eat the microphone. Good morning. Andrew March with the Department of Finance. Before you are two trailer bills that are critical to the administration and to implementing a water system across California.

We would note that one of the themes of the May revision is efficiencies and streamlining processes. Both of these trailer bills are in line with that focus and streamline processes to help provide water to Californians. And with that, I'll turn it over to the Water Board to speak to the water quality control plan.

Okay. Thank you.

Good morning, Chair and Members. Phil Wyels with the State Water Resources Control Board. Happy to give a little bit more detail, but essentially the introduction already covered the point of the bill. It's for efficiency and streamlining. Our water quality control planning process has already been certified as a program to protect the environment.

And nonetheless, we spend a lot of time as we amend our water quality control plans to update them to reflect new science and new policy. We spend a lot of time working on the environmental analysis anyway, even though virtually all of the analysis that we do is not directly related to the Water Quality Control Plan amendment.

Rather, it's related to tangential incidental comments that are brought up about potential secondary or tertiary impacts of the water quality control planning process that we're engaged in. And so for that reason, we are.

The trailer bill in front of you would recognize that the water quality control plan amendments are actions to protect the environment and essentially provide an exemption from CEQA for that reasons.

Questions, Assemblymember?

Thank you so much. So I'm just candidly not supportive of the trailer bill language, particularly around the delta conveyance for. For three reasons. So the first is you currently have a court case that DWR has been adjudicated against, saying that they don't have the authority to issue bond debt.

And so, from my understanding, the governor and the administration is trying to change that court case in a very precarious way by adding this in. The second, this would allow for an unlimited amount of bond debt to be able to be implemented. You good? Okay.

At a time when we're trying to figure out what our highest priorities are, and as was noted by one of my colleagues in our brief hearing last week, the legislature had to choose between a climate bond, a housing bond last year.

And so a blank check for the death of tunnels project doesn't seem like a prudent approach when we talk about the state's finances. And then the final one is when we talk about streamlining and we talk about moving projects forward, which the legislature has shown a willingness to do.

I can't think of any other time where you've had streamlining of CEQA like this, where every single impact, every single community, every county, every city that is the most impacted by it is opposed to it. So I'm happy to hear your responses.

But yes, Assemblymember, just right now we have the Water Board here to talk about the water quality control plan tbl. And then in a few moments, we will have DWR to speak to the questions that you have around the delta conveyance.

That's fine. Sure, thank you.

Could you just real quickly give us a very short, one or two sentence, summary of what the purpose of the trailer bill is? I know you said it's efficiency, but, you know, what does it do? What's the class.

Class 8 category exemption to CEQA and what is the, you know, the water quality regional plan? Just so everybody can get this. And I'm talking about very briefly, though.

Sure thing, Chair. So the. The Class 8 categorical exemption from CEQA is for actions to protect the environment. And as I said earlier, our water quality control plans, by definition are designed to protect the beneficial uses of the waters of the state and so they are designed to protect the environment.

The trailer bill would make it such that the the Water Boards would not have to, when amending their water quality control plans, do a environmental analysis under CEQA. We would still do everything that we're required to do under state and federal law. And there's a lot for our water quality control plans, including economic analyses.

And and the benefit of doing so?

And the benefit of doing so is we spend an inordinate amount of time for all of our water quality control plan amendments, including both at the regional board level and at the state board level covering all sorts of matters.

We spend an inordinate amount of time drafting creative analyses of secondary and tertiary potential impacts because.

Because of the alternative analysis required in CEQA?

The alternative analysis but also because people will raise in their comments, although they're primarily concerned about economic impacts, they will couch them as environmental impacts that could flow all right.

Thank you. Thank you very much. Welcome Assemblymember Wilson. We're on just the State Water Control Board just very beginning and we're going to move to Delta Conveyance unless there's anything about State Water Control Board. Anybody else have questions for? Oh, LAO.

Sure. Good morning. Good morning, Mr. Chair and Members. I'm Sonja Petek with the Legislative Analyst Office. And overall, just reflecting what my my colleague Ms.

Ehlers said earlier, our overarching recommendation for both the water quality control plan exemption from CEQA as well as the Delta Conveyance Project trailer bill language is to defer without prejudice until later in the year. This is really for two main reasons. First of all, both of these trailer bills address highly complex issues.

These are issues that have been debated and discussed for years and even decades. And the legislature simply does not have much time at May revision to consider all of the potential implications, unintended consequences, benefits, drawbacks, et cetera. The second reason, also reflecting what Ms. Ehlers said, is you have a really challenging budget ahead of you.

You have tough choices you're going to have to make. These two pieces of trailer bill are not essential to passing the budget. So we think in light of the tough things that you're going to have to be thinking about, you're going to be having to think about cutting services that Californians rely on.

These two pieces of trailer bill sort of serve as a distraction to that those important conversations that you need to have about passing the budget. So that would be our comment. That's also our comment for the Delta Conveyance. But happy to answer any questions.

So that we don't have to repeat these comments over and over again about this, about deferral.

I thought that in the write up I thought was a great reference to the comments made about the difference between policy issues and budget issues and trying to do policy issues in budget trailer bills and what's appropriate, what's not appropriate in terms of doing that.

And so I think LAOs made the case very well both in the written documents and what you've said verbally about the value of deferring and not getting ourselves tangled up in all of these trailer bill languages. And as we're trying to fight the June 15 deadline that we've put on ourselves in terms of trying to move that.

So that's my thinking is consistent with that. I see some pretty good head nodding from my colleagues also. So the message of the administration, at least from us is that deferral is very much what we're what we're looking at given the two reasons offered by LAO. So thank you very much for being here. We appreciate it.

We'll now hear about the delta conveyance.

Welcome and whichever member of DWR would like to go first.

Good morning. My name is Karla Nemeth. I'm the Director of the California Department of Water Resources. I also serve as the governor's senior advisor on water. I want to just open today, telling you I just don't envy you in your budget challenges this year.

So it's always a difficult situation to make these kinds of cuts, especially when we've had so much momentum across a broad swath of areas in the state. I'm here today to discuss the governor's proposal to streamline parts of the Delta Conveyance Project.

For those of you who are not familiar with the project, it is a single tunnel project that Governor Newsom has proposed. He proposed, I think it was, in his initial state of the state almost eight years ago. And we are continuing to work through critical permitting efforts.

However, it's very much worth noting that the environmental permitting, including the California Environmental Quality Act, we do have a CEQA document that has been approved. We have California Endangered Species Act permit.

We are now moving through a water rights proceeding, which is essentially the Department of Water Resources petitioning the Water Resources Control Board to add to points of diversion with supported operations so that the state water project can continue into the future to meet the water needs of 2 out of 3 Californians. So it is of enormous significance.

I think that's why we anticipate a very robust debate on this topic. But fundamentally, the need to address the vulnerability of the delta in delivering water is an issue that has been around for a while. Most recently, three governors have moved a version of this project forward.

Many governors, I would observe, don't like to take a position on this project. It's difficult. It's one of the most controversial things in California. But the three governors that I've had the pleasure and honor to work for once looking at the information, they really do understand the risk to the California economy.

The project that we have right now, to be clear, and it is kind of a. I think it's just sort of a glitch in our. Just in our psyche. And someone mentioned it to me. I do that too. Every once in a while, I refer to it as the tunnels.

But I do want to make an important distinction. It is a single tunnel project that Governor Newsom has been proposing. It's a 6,000 cubic feet per second proposal. It's actually one that first emerged in the context way back in 2005.

For those of you who've been around the delta that long, as part of a Delta Visioning, so Governor Schwarzenegger moved to a 15,000 cubic feet per second project. Governor Schwarzenegger moved with a 15,000 cubic foot per second project. He put it underground. So it was no longer a canal, it was two tunnels.

Governor Brown reduced the project further to 9,000 cubic feet per second. That was a two tunnel program. And the project that Governor Newsom is supporting is a single tunnel, 6,000 cubic feet per second. I think it's important to appreciate that frame. This is not the peripheral canal. It's not your grandfather's peripheral canal.

It's probably a quarter of the size. But this project is fundamentally designed to protect Californians from a catastrophic disruption in the delta and the changing hydrologic patterns with increasingly extreme weather.

I think the last three plus years have been very interesting in terms of having wet conditions, not being able to move the water that we need to move in wet conditions when it is safest for the environment. And we haven't had three wet years in a row in quite some time.

So as a DWR Director, it just, I hate to, you know, let the air out of the room, but it does feel like drought's coming back for us and it will in all likelihood be deeper and longer.

So our ability to move water when it's wet, get it underground, get it into storage, use it more efficiently, get it connected with local recycling projects, has never been more important. So what we have before you in the trailer bill language is essentially multiple proposals to streamline the process.

It is our view that these proposals do not weaken the environmental protections that must be placed on these projects. It does not weaken the authority of the Water Resources Control Board to impose conditions on this project. But what it does do is, and it does not diminish due process.

We anticipate, we have lots of litigation on this project. We anticipate more litigation. And what we're really looking to do with this trailer bill language is resolve those issues in a quicker manner than would otherwise occur. We do have ratepayers. This is a ratepayer funded project. Ratepayers have been paying for the planning costs for quite a while.

In fact, I think we're bumping up on a planning duration that will be longer than the actual construction duration of this project. And so really this is a signal that Governor Newsom wants California to move forward on significant infrastructure projects, especially ones that help us adapt to climate change.

The multiple trailer bill provisions. One essentially applies to water rights proceedings writ large, and it essentially clarifies that the Water Board written in code, there are conditions in which an entity can bring a protest to a water right to the board.

And what the trailer bill language is doing is confirming that the Water Board can discount petitions that don't meet those requirements. That is a provision, again, that is not only focused on the Delta Conveyance Project, but you know, we do anticipate additional protests coming in as we move through that proceeding.

So it would in fact eliminate complications at the water rights proceeding for the Delta Conveyance Project. Importantly, there are already lots of protests. Those protests would carry forward. This is not a retroactive proposal. So folks who are actively protesting would continue to actively protest the project.

And I'm going to have to ask you to start to wrap it up.

Sure. And so that's one piece of it. The second piece of it is the state water project also has the totality of its facilities. That is a project that the legislature has confirmed is in the public interest.

We are seeking essentially confirmation in code that the state water project writ large is in the public interest and separating that out from the Delta Conveyance Project so that the Delta Conveyance Project can be evaluated as to whether or not it harms other beneficial uses. So providing clarity to that proceeding. Those are those two.

A third element is to streamline judicial review. And that is really modeled off the CITES proposal that this body approved, I believe it was two years ago, and also modeled off of streamlined judicial review for things like stadiums, et cetera. And then finally there's other proposals that really relate to the department's construction of the facilities.

So things like being able to offer entities fair market value for land acquisition without having to go through an eminent domain proceeding. Again, it's a way to limit timelines here.

And then finally the third piece, or the fourth piece rather is validating that the department does have the authority to issue bonds to complete this part of the state water project. We believe it's our legal position that the department already has that authority. I can respond to Mr. Rogers in his earlier comments.

Maybe I'll hold that until the question and answer. So thank you, Chair. I appreciate the opportunity today.

Thank you very much. I appreciate the presentation. And unless you have something absolutely critical, we're going to go on to questions. First, I'd like to welcome Assemblymember Lackey, Assemblymember Ransom, Assemblymember Connolly and Assemblymember Macedo to who joining Assemblymember Rogers and Assemblymember Wilson and myself here. Assemblymember Rogers had to step out.

And before I start on the comments, which this is a controversial issue, we could easily be here here all morning talking about this we have 13 items we're trying to get through.

So I would like to ask everybody to this is the hearing where it's important for us to get information from the administration, number one. And number two, identify the issues that the public needs to know that we're paying attention to.

But it does not probably benefit us to have a long dissertation as about why we are opposed, et cetera. Let's get the issues out there, then we can have the dialogue back and forth. So unlike some of our other hearings, we're not going to go back and forth on this and we've done that before.

So we're going to go 1, 2, 3. All right. And then 4. All right. Assemblymember Wilson.

Thank you. And I just left a press conference so I don't have to do the whole dissertation because I think we just did that for about 45 minutes. So I do have a series of questions. Assemblymember Rogers had to leave to go somewhere else.

And so we're going to combo kind of our questions and I'll get them all out so you can get an opportunity to respond. But he did want me to make sure I said this. So this is not my dissertation, this is his.

But he said you noted that in your remarks you talked about this being a fourth of a project. And his response to that was a fourth of a bad project is still a bad project. So it's his position that it is a bad project. You were able to be in the room to hear most of his questions.

So when I asked mine, you can kind of put them on together. And so this a couple of years ago, new to the legislature, and this was tried this fast tracking of the project and it was rejected at that time by the legislature to be in the budget trailer bills.

And at that time the same comment was, hey, go through the regular process. This is something that could go through four to five policy committees with all of the things that are being asked. And it's more expansive than even last time's fast tracking.

And so one of the questions I have is what do you think changed to say that we didn't have to go through a policy process over the last two years, but to do this again this way. And I do recognize in your comments you said Newsom signaled moving forward on significant infrastructure projects that adapt to climate.

But that's always been his position. That's one thing I love about the governor is his desire to get things done for Californians. And sometimes we can get in the way of that a little bit. But I like that that's his position.

So I really am wondering that last time we rejected it, this process, you've expanded it and what has changed in the last two years that you feel that it needs to be brought back again?

The second question I have is this is about the bonds and I think Rogers had this as well, is that you did lose in court. I know your position is that you're asking for validation because you don't think you should have lost in court.

And so if you're going through the legal way or through the legislative process to get this to validate your authority, there doesn't seem to be any language about how much DWR, the debt that will be issued, whether there's a limit, who's paying for it while the debt service is who's paying for the debt service while the project is getting built.

And given the fact that we know because we did this with the Oroville Project and the amount of cost that it raised, the amount that the cost ballooned over time is that we'll take the burden of that.

So I'm so what are the what are the I guess protections you have in place to ensure that the costs do not balloon and who's going to be covering that until we can put it, put it out.

And then also the changes that you're making to the Water Board process, what happens to the stakeholders involvement in those change, what happens to the communities that get the water now, what environmental protections are you putting within the pump? You know, all of these things. Have they been proposed for?

You're asking us to include to fast track this and to put this in. But are you said you weren't negating any environmental protections, but it sounds like from what you're doing you are. And then my last one will be because I'm sure the members of this committee have more is really is this being included?

I know we have the position that was noted from the chair from the beginning that it's not time sensitive and so we shouldn't be having this conversation. This was based on LAOs that we shouldn't have this conversation right now. We should shift it to later.

But I'm wondering why it's a part of the budget process in the first place. Why is this not a policy discussion? It goes back to initially. We tried this before. What changed? And so I'll leave it with that. And then piggyback if somebody doesn't mention a question.

I'll tell you what I'm going to do. I'm going to ask you to hold on your answers because let's get all the questions out and then I'm trying to identify the ones that I think we really have to have the answers to today and ones that you could potentially, if everybody's comfortable with that.

So I think, I believe we went to you. Mr. Lackey.

Excuse me. And I will just keep my remarks consolidated to just one, but it's a. It's a big one. Could you please describe land acquisition and, and how has it been going for this project so far? Because it's my understanding you need new, expanded powers to take people's property with weak and eminent domain protections.

How do you believe that these new powers will keep families and ranchers and farmers whole if you don't have to pay fair market value for seizing their land? That's my question. And it's very simple, very direct.

Thank, thank you. Assemblymember Macedo, no questions. Assemblymember Connolly.

Yeah, it sounds like some of this ground has been covered and I think a number of us have substantive issues with this proposal. In fact, I'm a signatory on a letter that's coming out led by the delta group of members who are focused on this.

I won't get into that at this point, but it does sound like it's worth reiterating, given the arc of this and given that the trailer bill language proposes a substantial policy shift. Again, what was the rationale behind proposing these trailer bills now instead of next year during the normal policy session?

I remain concerned about using trailer bill language to pass such a complex policy proposal and in fact, believe this is not the appropriate way to have this discussion. Similarly, I think it's already been asked, but I'll reiterate. How would the statutory changes that affect legal proceedings impact current legal proceedings related to the project?

And why is the trailer bill language for the CEQA exemption proposed for all state and regional water quality control plans and not just the Bay Delta Water Quality Control Plan update, if you can get into that as well. Thanks.

Great. And I'll follow up with. I had this question also, but you mentioned very briefly it was a combination of natural disaster and then the issues regarding climate change, wanting to be able to make sure that when there's wet water.

So if you could expand some on the natural disaster risk that you see that you're trying to mitigate with this particular project. But why don't we go back and go pretty much in the order that they were questioning. Oh, Assemblymember Ransom. Great. Welcome. Yeah, thank you.

Thank you, Chair. And thank you all for being here. I also won't do a long dissertation, because we did just leave the press conference. We think it's really important that this process goes through every audit that it possibly can. Given this unique approach to trying to, you know, get this done expeditiously.

I think my questions deal with one, the Delta Reform Act. And how, how is this not a violation of the Delta Reform Act, which requires us to make sure that we've done everything that we can to protect the Delta? Also my questions are about what Southern California, what you've done in Southern California.

We know that there we've stood up some projects, but, you know, can you verify that we even have enough capacity and that we've done everything that we could to build capacity for storage, for groundwater, for all of the different alternatives?

And if you are seeking to ship water and take the Delta water, where are you planning to even store that water? My other questions in regards to the CEQA exemptions. We all know that CEQA needs some fine tuning, but this is a case where this is such a huge project with such huge environmental impacts.

And we've seen projects before that we've built in California to divert water. Owens Valley catastrophe, we're going to live with that forever. We will never be able to restore the natural resources that were destroyed in sending water to Southern California from California, from this region.

How do we avoid that if we're not going to do all that we can to honor the, the responsibilities of that are included in CEQA if we're seeking exemptions? So those are my initial questions.

And I really think that we owe it to Californians to make sure that if we are going to do something like this, that we do it in the light of day in good governance. And this, this does not align with good governance. So if you can address those, those concerns, I'd appreciate it.

So you have one more question coming from Assemblymember Wilson and then we're ready.

And this is just a follow up to Assemblymember Lackey, if you can add to your response when he was talking about forcibly taking property. If you all have identified how many actual sites or land within your, within the site of this project that are actually going to be having to use the imminent domain process.

So why don't we start with what changed?

Okay.

How is this different than the battle we've gone through before?

Right. I think conditions on the ground have changed. I mean, since the proposal was brought, I believe before this body, two plus years ago, we've completed our CEQA document. It is an approved document. We have additional permits. And so I want to really clarify that this is not a CEQA waiver.

We are not diminishing the amount of analysis that will be completed and evaluated by the Water Board. And we do have two additional permits since this was last brought before this body.

So because of additional permits, that's.

More clarity on the specifics of the project, the proposed mitigation for the project, et cetera.

And the second question from Assemblymember Wilson, bond cost. You know, this doesn't identify all of the restrictions and stuff. Would there be future legislation that would do that, or does this authorize the bonds and then the legislature doesn't have any more input in terms of?

Right, so to be clear. So. So the state water project is. Is water user funded? The department issues bonds, revenue bonds, and then those are paid back by contractors. This project is no different. A subset of state water contractors are participating in this project. So the Department of Water Resources would issue revenue bonds.

We have lots of contractual agreements go into that and go into the repayment of those bonds, and that's how this project would be financed. It's not proposed to be financed by the California taxpayers, and California taxpayers have not yet been a financial backstop to the state water project. And I would not anticipate California taxpayers. It's just not.

It's not how we've owned and operated the state water project.

Okay, I know that. Assemblymember, your other questions. Are you comfortable?

I think there was one more, but. I'll wait till they answer the rest. Because some of them were tied into what others have asked.

Okay, great. All right, great. Assemblymember Lackey asking about fair market value, and Assemblymember Wilson followed up on that.

Sure. I'm going to let Chris Butcher respond to that directly, but I would open by saying we are not seeking to take anybody's land without fair compensation.

Good morning. Chris Butcher, Office of General Counsel for the Department of Water Resources. This would allow us to negotiate further with landowners not to be able to purchase properties at lower than fair market value. Fair market value would be essentially the base, whether you're talking about the eminent domain process or through negotiations directly with landowners.

That through this we could do that we could not currently do under existing law.

Do you have the numbers, et cetera, that Assemblymember Wilson asked for?

So we haven't started the process of trying to acquire properties for the project. We're still in the planning process and the permitting process. So until we go out and actually

start negotiating with landowners, it would be difficult to know how many landowners are willingly going to enter agreements to sell easements or portions of their property or those that would need to go through image domain process.

Do- But you would know how many sites there currently are. Even if it wasn't some, you were going to do fair market value or eminent domain. But you do know.

I don't know the precise number, but we'll get that for you right away. Yeah.

Alright, great. Assemblymember Connolly asked the question about does the CEQA exemption it's proposed for all state regional water quality control plans, not just the Bay Delta. Why is that?

So that's a question for the Water Board.

Alright, great.

Yes. To Assemblymember Connolly. We'll get back to you with that specific information.

Yeah. The Delta Conveyance Project proposed language doesn't include any exemptions from CEQA. We've gone through an extensive environmental impact report process already and we're just trying to streamline the review.

How about the voluntary agreements? CEQA exemption for the voluntary agreements.

Specific to the water quality control plan?

Will it be used for the voluntary agreements, the CEQA exemption?

The CEQA exemption in the- in the trailer bill language is specific to the water quality control plans. So not specifically for voluntary agreements, but overall for all water quality control plans.

Great. Looks like LAO has a comment.

Yeah, Sonja Petek again from the LAO. Just some information that might be helpful is the water quality- State Water Resources Control Board's current proposed draft of the water quality control plan for the Bay Delta does incorporate the voluntary agreement, the main aspects of the voluntary agreements proposal.

So presumably if it was easier to pass that Bay Delta plan, if it indeed incorporated the voluntary agreements, it'd be easier to get those through.

So that's an issue we have some concern about. Do you want to.

It's specific to the recirculation of the CEQA documents. So it's not necessarily a waiver of CEQA. I think it's. So it's specific to the- It's an update of the water quality control plan and as the Water Board previously mentioned, it's not relaxing any water standards.

Okay, great.

Assemblymembers, did you get your questions answered? Assemblymember Ransom?

I did not.

Great. Go ahead. Follow up again.

Yeah, my questions are regard- in regards to. I know you mentioned that it's not an exemption.

But in regards to the Reform Act and compliance with the Delta Reform Act, and you know the goals, to make sure that you've done everything you can do before you start at taking the water from one region to another from the Delta.

Yeah, good question. So the project does have to comply with the- the sustainability plan for the delta that was authorized by the Delta Reform Act. So that's a process whereby the department self certifies its compliance with the plan, presents that to the Delta Stewardship Council. We know that will be appealed. This is a controversial project.

And the Delta Stewardship Council will then hear those appeals and determine our compliance with the plan and therefore the Delta Reform Act.

So doing the process the way that it's been proposed, it seems like it circumvents that the order in which things should go, which is ensuring that it is aligned. So. And I do understand, you know, there's kind of two things happening. One, I hear you say you self certify, which that's a problem.

And then you're saying, well, we know it's going to be appealed, but we've already kind of gone around the process through this proposal. So how can we ensure Californians and folks that are concerned about there's a whole reason why the Delta Reform Act even exists. How do we confirm the people that we truly plan to honor that?

So absolutely we have to comply with the Delta Reform Act. There will be significant documentation that is all essentially evidence that's entered into the record for the Delta Stewardsh- Delta Stewardship Council along with our CEQA document that the Stewardship Council then evaluates.

I'll just add that the proposed language does not change that process at all. That process remains as it is an existing law today.

Okay. It's just our process is kind of out of order as we look at my question in regards to Southern California's storage capacities and alternatives that have been put in place and we look at, you know, the ability to even receive.

I've gone through lots of documents and it's probably somewhere, but what is their capacity if it existed today? What even can they even store given their current capacity?

Yeah. So what we anticipate, and one of the reasons why this project is important to that equation, what we anticipate are agreements between big urban areas like Southern California and folks in the Central Valley who badly depleted groundwater basins. And actually those groundwater basins, their capacity is about 10 to 12 times our surface reservoir capacity.

And those are severely depleted in parts of the state. So, you know, I can't answer for Metropolitan Water District, but I know, there's lots of discussion occurring about moving water that would essentially be moved by the tunnel and putting it underground and storing it underground for later use.

So is there a finite number that we know or there's just kind of discussions and loose agreements about potential when it comes to the storage ability? I'm just trying to be clear.

Well, those projects need to be developed and- and determined by the local water district. So that's a- that's a question for Metropolitan Water District and for that matter, Santa Clara Water District and some of our state water contractor partners.

Okay, so are we not concerned that we are proposing a, we're saying 20 billion dollar.

But we- we all know, whether we want to admit it or not, we all know that this is, well, more than 20 billion dollar project without even understanding the capacity to store potential in- in the event that there is excess, which is not always the case, but in the times that there are excess, do we even know that this is a good return on investment, so to speak, based on the amount of storage?

It's just- I'm a little baffled by that, the not having that information.

There is capacity to take this water and store this water. One of the things that this trailer bill language does not do is it does not determine the decisions that local water districts need to make at the end of 2026 about weather and how much to invest in this project.

So our water contractors have been paying the planning costs. They recently took a vote on an additional portion of planning costs. They have an expectation that they will have more information in partnership with the Department of Water Resources about a financing plan. So it's really who's paying for what, again, not the California taxpayer.

Who among water contractors is paying for what portion of the tunnel? And then they will take a vote based on that information and based on their own local information about the benefits of this- of this project, including how it relates to storage within their own service area. So that's how those pieces are- are meant to work.

Okay, so as that's happening, if, if say the price goes up to, let's say it doubles, are those folks then able to like opt out or people are able to opt out and then other people have to absorb the cost.

And potentially this could be a project that no one even picks up because it's just unaffordable for the, the folks who have to pay for it on the other end.

It's just, I- I just don't see anywhere else that we do business this way where we say, well, you know, we're going to do this thing and you don't know how much it's going to cost, but we're going to sell it to you. We do know how much it's going to cost.

It's a $20 billion project we have. I'll have to double check. We had been carrying a 37% contingency in that initial cost estimate. I think it's less than that now because we have more detailed information. We are also down a path of design engineering with certain innovations that we think can reduce the cost by $1 billion.

So we are very much monitoring our- our cost for this project. And- And the reality is, is for this project, the- the benefit cost ratio is 2 to 1. The state water project continues to be some of the most affordable water in the state. And we have to do lots of different things.

This water that we move from Northern California to Southern California needs to be used more efficiently. It needs to be recycled. It needs to be stored and stored underground. Climate is reducing the amount of water that the state water project will be delivering. It just is because of hydrology.

What this project does is it gives us the flexibility now that we know and have been living through very intense periods of extremely dry, where we're moving health and safety water, we're moving water at volumes that do everything we can to maintain water quality in the southern part of the delta.

That's what's happening in our system when it's dry, when our system is really wet. We had- We had moments this year when we had, you know, 200,000 cubic feet per second moving through our system and out through the delta. Our current infrastructure at that moment was turned down to, you know, in the neighborhood of 3,000 to 6,000 cubic feet per second.

So you kind of get a flavor of what it means to have additional diversion points that can divert water when we have these really big flows. And that's- that's fundamentally what we're- what we're managing for. Our ability to do that will arrest the decline of water that we are able to export out of the delta by about half.

So this is not a full compensation for what's happening with climate, but it is an affordable component that must be paired with other investments for California to have a resilient water future.

Okay, I appreciate that.

Thank you.

And climate affects, you know--

Including all of California--

Everybody.

You bet.

Right. Including--

Especially the Delta.

And- And including--

Yes.

-The Delta where the agricultural community is declared a state of emergency.

So I do think we- it's really important that we are ensuring that we are honoring the entire project for the delta, the Delta Reform Act and the Delta convene, whatever we're doing, making sure we're protecting the delta. And then I- I to my- just want to be clear, folks that have, are part of this discussion.

They don't have a- They can opt out. So we don't really know how much folks are going to be paying because people can- can opt out based on the cost or you have hars- final agreements in place.

Well, before we go into construction, all the water districts, based on the information that we have about the project cost, all of our cost estimates that are done to industry standards, frankly, and then some, it's a pretty conservative cost portfolio that we've been moving forward.

There is a cost benefit analysis that all the individual water agencies are working with. They will make a decision at that time and then the department will issue revenue- revenue bonds and they will begin to repay those revenue bonds. So at that point they're not opting out. Okay, thank you.

And Assemblymember Lackey has a quick follow up question. And then Assemblymember Wilson.

Yeah, I just want to clarify that my, my concern over this land acquisition situation wasn't just a wild accusation as it says right here, that the trailer bill would do the following. Let me read the language.

Exempt the Department of Water Resources from obtaining an appraisal or providing a written appraisal to the owner of a- of real property be acquired by the department for the acquisition of any easement, right away, covenant or any other interest in real property related to the development of the state water project. So you can see why I have.

Concern over this particular issue. Because trust, when you're talking about your own property, goes- I mean it doesn't exist unless it's written down. And so why would this provision even be needed if- if we're going to get fair market value?

That would, when the department does an appraisal, that's the amount that the department can offer. When we are not required to do our own appraisal, then the private property owner can do their own appraisal and tell us how much their property is worth and potentially we can agree to purchase the property at their success value.

So this in theory could allow us to purchase land at above what an appraisal that the department might otherwise come back with. And again the property owner can say no. This does not in any way bind a property owner to agree to a sale.

Only if the terms are reached that this satisfies the landowner would a sale occur.

So what kind of real power does the proper- property owner have if that- if the eminent domain could be exercised? That's what I'm trying to understand the real value of this process.

If you're trying to pull the power. Away from people in a written it- it's very scary.

Right. Yeah so- Yeah

Right. I appreciate that. And this language is not intended to pull power away from people. It's intended to speed up our ability to enter into what we would think would be more productive negotiations with people. How it works right now is the department gets an appraisal for land.

It almost is always less than what the landowner values at- it at. But because we have that appraisal, we have no choice but to enter into eminent domain proceedings for that parcel.

What we are saying and what we want this trailer bill language to do is enable us to go in right away, receive a propo- receive an appraisal from a landowner and negotiate from there so we avoid that front end, I would say extremely predictable disagreement about how land is valued. That's what we're trying to accomplish here.

Okay, thank you for that explanation.

Yeah. Yeah.

Assemblymember Wilson.

Thank you. Two follow ups to my question and then just the comments that ensued. One relates to bond and when relates to cost. And so you noted that DCA will be following the same process for the state water project bonds, and that that means that the bonds are not backed by the state, nor will they be advancing.

The state will be advancing money or has ever advanced money for any part of this project.

Right.

Okay. So it's a fact that we've never advanced money as it relates to the Delta Conveyance Tunnels.

Right. It's all paid for by users.

Alright. Just being sure. And then the second one was cost you talked about.

Well, we know the cost. The cost is $20 billion. So I'd like to remind of one thing. So the Oroville Spillway was projected to be $250 million. It resulted in being $1.0 billion. It was a one year project above ground with a mile long spillway. This is 40 miles long, expected to be decades to build.

And so you're saying that you project that the costs are to be $20 billion only and not to rise in any way?

That's correct. That's the information that we have. I don't believe the Oroville Spillway is a good comparison because that was a project that was done. We had two construction windows that were extremely narrow because that facility had to be ready for flood, for protecting those surrounding communities by flood.

So when we enter into an emergency response construction project, it's challenging to keep, you know, the costs where they need to be.

This particular project has the advantage of being planned and studied and has the advantage of a significant amount of design and value engineering that, you know, is not available to the department in the context of responding to an active emergency at Oroville.

Okay, so you're saying today, based on what you know today, that you expect that when we're all not here. Right. Cause you probably won't be here. We probably won't be here. None of the DCA will be here, but they will be able to say, yay, we got this project done in $20 billion.

So I welcome the conversation around other big projects, what they did to control costs, where they were effective, where they were not effective. And we can open our books and really show you all of that information. I just.

Assemblymember, with all due respect, I'm reacting a little bit to the Oroville Spillway example, because I just think it's not. It's apples to oranges, but we can't get into an apples to apples discussion.

Yeah. And here's the thing--

Yeah. Yeah.

You know, my background is in finance.

Yep. Yep.

Did budgets.

Yes.

Yeah.

And I--

-also recognize that when I was before decision makers, because that's what finance people--

-do. They prepare stuff.

Yeah.

Yeah.

For the decision makers. Right.

Yes.

And it's like, I can only give you today's cost.

Yep. Yep, I hear you.

I get that. But I think, because, you know, once again, it's- it's a blanket approval to issue debt, which I don't think DCA has the authority to do. I don't consider it as a part of this. So I- So I have a fundamental issue with that.

Right.

But it's a blanket to allow. To issue whatever debt.

And although it doesn't impact, as you noted, that the- it's following the state Water Project Bond Authority, meaning the state is not backing the debt, nor are they advancing money, you know, for this, there's still ratepayers. Right.

And I think--

-we are responsible to, as legislators, to not just think about our taxpayers, but think about our ratepayers and the decisions that we make that impact, whether you're a taxpayer or ratepayer, the impact of affordability. Right. And making sure that people get value. I say this all the time, especially when I'm talking about transportation stuff.

Yes.

You know, we get value. We- We in our own lives, we can have a cup of coffee at home. Right? Right. When you go to Starbucks and get a cup of coffee, two different experiences. Right. They cost two different things. But we find that, quite a few of us find value in going to Starbucks.

We find value in leaving our home and having somebody else make it for us. We find value in getting foam on it with a little heart sometimes.

Alright.

Okay.

We kind of find--

-value. I know, but I'm just saying. So here's the thing. We have to articulate value for this.

And I don't believe that we've articulated value in terms of the level of exemptions and- and just work around in the budget trailer language that we're trying to do. That really is a policy discussion. And I know we're talking about deferring, but I think we need to take this through a normal legislative process. Thank you.

Thank you, Assemblymember Ransom.

Thank you for indulging me chair.

I saw your finger go up again.

You saw my finger, you probably saw my eyes go up.

Hope- Hope it's a quick finger. And it's- it's more about getting information and less--

-about telling everybody in the room.

It's about getting information.

Because I- I think we're all baffled at this, like, insistence that it's a $20 billion project, but it's been a $20 billion project for the last several years. And I'm just trying to understand how in this environment, we've been able to somehow inflation proof this project that's going to go on for decades.

Can you tell us how you were able to do that?

Well, this project is based on 2023 dollars. And we did see an increase from 2016 to our latest cost estimate that was entirely due to inflation. That inflation extends to every project. It's not specific to this project. So that's why, based on the information that we have now, relative to the things that we can control. We believe

we have an extremely solid cost estimate with significant contingency built in. But do I know the- the, you know, value of- of a dollar in 2035? I'm not going to sit here and tell you, assemblymember that I do. But based on industry standard for cost estimation, we have a lot of confidence in this $20 billion cost estimate.

And I am, I'm glad to, you know, provide more information and really dig into that issue at- at any time.

Okay.

I understand it's important.

To ask how many projects you've done that have always been, like, on budget? Like, are all of their projects under or on budget? Have you had an experience like that before?

The State Water Project has been, you know, essentially operating a $2.6 billion facility for the better part of 60 years. And we have a great track record on- on asset management. I can provide more details on that as well. But we do a lot of significant construction work

And we've been on this.

Excuse me, but we've been on this item for more than an hour.

Okay, thank you.

And I think we- we could- we could- we could chase cost estimates for a long- for a long time, and I think we need to move on.

Thank you chair and thank you very much for being here.

Yep alright. Thank you. So want you to. But- But I still have a couple of things, you know, to finish up. Number one, I guess I want to try to put. I asked you to talk about natural disaster.

Oh, sure.

Yes. So what- what are- what are the risks to California of natural disaster that you were referring to?

Well, you know, one is earthquake risk in the Delta. So we know that there's about 65% chance that we will have an earthquake in the Delta really within the next 20 years. That's going to be a- I think it's a 6.2 or greater. So that earthquake risk is relatively well known.

It's something that really the Corps of Engineers picked up on in 2005 after Katrina and they kinda look- canvassing the USA, they zeroed in on the Delta and the fragility of the Delta. You know, the other, I would say natural disasters. One is just the slow sea level rise challenges that we have and pressure on- on Delta levees.

And I want to be really clear that DWR will always be in the levee business in the Delta with state funding. And this does not supplant that. There is significant work that needs to be done to help that system work better. It's not a replacement for this. But sea level rise is another,

I would call it a natural disaster pressure on the system. I think the other piece, and I would just say the thing that keeps me up at night around natural disasters is it's the cascade of a bunch of things that don't break the right way. So we were coming out of a pretty brutal drought in- in 2022.

The storm door opened in 2023. Everyone across the state had- had really drawn down all their reserves. So it's raining palpable relief. Let's start refilling reserves. Watching those atmospheric rivers come in.

And at first we were tracking them for the Golden Gate to go through the Golden Gate, in that case, they spin up the Sacramento Valley, unload, and all those flows go down in the system.

That potential for those kinds of storm events, those powerful atmospheric rivers to blow out a levee that at a moment when there's a lot of rain, we're meant to be moving water. We've been punished by drought. We're trying to refill our reservoirs.

Having a situation where we lose that and are not able to move water is catastrophic for California. And so that's one of the- there's several things that keep me up at night. That's one of the things that keep me up at night. That's the picture.

So- So there are a number of natural disasters that could impact us. What, but what I'm not hearing is how does that then impact the water supply? Southern California?

Yeah, I mean, so the Deltas, I mean, yeah, so the Deltas break based either by earthquake or by what you talk about in terms of this atmospheric river for the Delta's break. What happens?

Right. So then what happens is the, we have seawater intrusion into the Delta and the pumps essentially become inoperable. In that case, we do have emergency stockpiles to sort of build a pathway where we can keep as much saltwater out.

But we would be ultimately on pretty De minimis movement of water where we had acute like indoor sanitation and health and safety needs. We would, you know, establish a brackish water style and that's what we would be doing in that scenario.

So if the Deltas blow out either by earthquake or by this, then the pumps don't work. How does this project solve that problem?

So this solves that by- by separating the delivery system of fresh water from- from those levees. So it's underground, it is a tunnel. So if we had, you know, a significant levee breach after a storm event, we are going to continue to be able to divert water from outside of that tidal zone of the estuary.

So right now, I think, as you know, Assemblymember Bennett, we do keep it fresh at sort of cycles, that wouldn't have been the traditional behavior of an east west, you know estuary. And those water quality obligations are very important for the state water project and for this project to demonstrate that it protects.

I think what you're pointing out is actually a really important issue because that's number two that keeps me awake, is the Delta itself is very vulnerable to climate disruption. We need to be working with folks in the Delta to determine their water supply needs in that scenario.

And the department is open and- and willing and able to do so.

So when you say you'll be able to continue to do that, why, if you have, if you have sea level rise, right, and so you have this intrusion of salt water, why would the tunnel project be better than the current project?

The intakes are further upstream, so they would be out of that zone.

I think partially. You, you know the project so well, I think you assume everybody knows the benefits of the- of--

-of the project.

Thank you.

Appreciate that.

The- The fundamental- the fundamental issue I think that we have in- in front of us here in the State of California is there's lots of concern about this, as you've had expressed, you know, by my colleagues and stuff.

And we- we have to- we have to find some way to put these issues, you know, weigh all of these issues together, the significant concerns about the degradation of, you know, the environment, et cetera, and the Delta with- with the potential impacts of doing nothing and finding ourselves in another spot. That conversation takes time.

And I think there's palpable frustration that we constantly have these things come up to us right at the end of the budget cycle and hey, we want to have that.

And it makes it more difficult for, I think all of the advocates that are out there, you know, to advocate from their position, and it makes it difficult for all the opponents to be able to- to raise that. So I know that going through policy committees is not considered fun. Right.

But given the magnitude of this issue, it- it may be the only way you can actually get enough information out there in a steady enough format to- to be able to make this move. But to keep coming back with trailer bill, you know, at the end is- creates some real challenges.

So certainly between now and June 15th, I think we have that- that challenge out there, but I think we're committed to having a full and hearty conversation. From my perspective, the assembly is not likely to do that before June 15th. But whether we.

How we continue to do that is one we look forward to working with you on. Because you- you folks are trying to come forward in good faith and saying this is something that you think California needs, and people in good faith are trying to say how do we do it? And-

And minimize the impacts that are out there. So thank you very much. Anybody have any other final things here? I think we're going to move on to our next item. Thank you. Right stuff. Yeah. Oh, now we have- we're going to take public comment on this item. Will you guys stay here, please?

Because we're going to take public comment and that might stimulate any other questions. But we wanted to do that specifically because it's such an important issue. We wanted to make sure everybody could express from both sides and then we could go from there. Yes.

Thank you, Mr. Chair, members of the committee, Keith Dunn here on behalf of the State Building Construction Trades Council in support of the administration where the seismic event away from a human and economic catastrophe in the Delta. And this is just a really important issue that we like to move forward.

Thank you.

Good morning. Jennifer Pierre with the State Water Contractors. We represent the 27 million Californians who benefit from the State Water Project. And although this has been determined per said to not be a budget issue, this is a major affordability issue to allow the publicly elected and appointed boards of the public water agencies that would

benefit to get to a place where they can make a decision on the project more affordably. So at a moment when we don't have a lot of extra money on hand in the state, this is one tool to allow important infrastructure to move forward without any sort of compromise on our environmental values. Thank you.

Thank you.

Good morning. My name is Morgan Snyder and I am here today on behalf of Restore the Delta, SF Bay Keeper, Tulumi River Trust and Northern California Council Fly Fishers International. I first want to thank committee members here today for asking important questions. These trailer bills are an attempt to circumvent important due processes and public engagement.

As the LAO stated, these bills are a distraction from the important budget challenges this legislature has before them. CEQA allows critical public input on processes like the Bay Delta Plan. The numerous proceedings, quote, unquote, slowing the Delta Conveyance Project are in reality a pathway for environmental justice groups, impacted community and key stakeholders to engage in these processes.

Passing these bills as part of the budget would not only be an inappropriate use of the budget process, but would silence important input from Californians. For these reasons, we ask you to reject these trailer bills or at a minimum, defer them for the longer conversation such policy proposals require. Thank you so much.

Thank you.

Asha Sharma, commenting on behalf of Leadership Council for Justice and Accountability. We are very concerned about utilizing the budget process to make significant changes to CEQA through a process that does not allow adequate time for public input.

And urge the legislature to reject the Water Quality Control Plan CEQA Trailer Bill that would weaken water quality protections and threaten progress on access to safe and affordable drinking water across the state. Thank you.

Thank you.

Hello. My name is Melissa Tayaba. I'm the Vice Chair of the Shingle Springs Rancheria, also Director of Traditional Knowledge. My tribe's ancestral homeland span over seven counties including the Sacramento and Delta region. My tribe and others will irreparably be harmed by the Delta Conveyance Project.

We will not only lose access to our homelands that we have cared for and stewarded from time immemorial, but we would also lose our Delta estuary already in crisis and the eco cultural systems it maintains. More importantly, the Delta Conveyance Project would destroy and desecrate the resting place of our ancestors. It seems that to Governor

Newsom, our culture, our ancestors and the environment that sustains us is worth less than the ability to over divert water from our rivers to send more water and money to commercial water interests. In 2009, the legislature passed a law stating that we need to reduce reliance on the Delta for water supply.

Yet now the Governor wants to bypass laws put in place to protect tribes to fast track this tunnel.

Thank you very much. I'm going to mention this real quick here before. Well, you know, this is we've been an hour plus on this item. We have lots of speakers, for everybody who's paying attention, this is going to be a long day in budget sub four, number one.

Number two, this is our last opportunity in budget sub four to hear any of these items, right? So we- we don't want to rush it, but we do need everybody to be as efficient as possible.

So on this item we will continue with the 60 second comments, but for everybody who's going to comment for the rest of the day, we're going to move to 30 second comments so people can start to adjust. But I don't think it's fair for me to do that in the middle of this presentation.

But those of you who are there, and there are 25 of you or so, so still, to the extent that you can keep your comments less than 60 seconds, it's the essence of your point that we really need to hear and then move on as much as possible or else we will be into the midnight hour here.

Thank you very much.

Thank you chair thank you members of this committee, Ashley Overhouse, Water Policy Advisor with Defenders of Wildlife we oppose these two trailer bills at issue today. First, the tunnel.

Whether opposing or supporting the tunnel, this trailer bill changes the rules of the game mid process for all who have invested time and resources into evaluating analyzing the project as undemocratic. The legislature should let them finish the public and transparent process in the water rights and legal proceedings at a minimum.

Second, the trailer bill goes way beyond the tunnel and has unintended consequences for other areas of law. Finally, the tunnel is an environmentally damaging, technically complex and overwhelmingly expensive project. This legislature should reject this direct attack on an ecosystem community already in crisis.

As written, the Water Quality Control Plan Trailer Bill is designed to avoid adequate review, analysis and public and judicial oversight of the VA's voluntary agreements and undermines the update to the water quality standards of the Bay Delta Plan.

This is evidence of the inadequacy of the voluntary agreements, not evidence of CEQA being a problem in establishing legally appropriate and adequately protective water quality control plans. Thank you.

Good morning, chair and members. My name is Molly Colton and I'm speaking on behalf of Sierra Club California and our half a million members and supporters statewide. When I say we are in strong opposition to the Delta Conveyance Project and Governor Gavin Newsom's budget trailer

bills that seek to fast track the project and Sabotage the Bay Delta Water Quality Control Plan through the state budget process. These trailer bills would circumvent water law, environmental protections, public participation and due process. To advance one of California's most destructive and costly projects.

This project is currently estimated to cost $20.1 billion, but could easily double that after Trump era inflation, tariffs and rising construction costs. We are in strong opposition. Thank you.

Good morning. My name is Osha Meserve. I represent local agencies of the North Delta, which is a coalition of reclamation districts and water districts in the North Delta as well as many local agencies and counties in proceedings involving the tunnel.

A couple things that haven't been highlighted quite enough, I think about this extremely broad package of changes to California law is how it would change the definition of the State Water Project and add and allow the State Water Project and Department of Water Resources to add on at any time and subjugate water rights throughout the state potentially.

And so it- it does have an interference potential with the reasonable use provisions of the state constitution and decades, if not over 100 years of water rights law. And the promises that were made when the state water project was first constructed.

So I urge everyone to take a closer look at all of the provisions, in particular those that pertain to water rights. And in addition, I would like to respectfully correct a statement by the Department of Water Resources today that there's a 65% chance of a major earthquake in the Delta. What USGS said is in the Bay Area.

Thank you.

Good morning. My name is Taneicia Herring. On behalf of the NAACP California Hawaii State Conference, I wanted to express our strong support of this measure.

Good morning. Kyle Griffith speaking on behalf of Californians for Water Security in support of the Governor's trailer bill streamlining the Delta Conveyance Project. This budget trailer bill is not about circumventing public engagement in review.

This budget trailer bill is all about breaking through redundant archaic processes that have relay- resulted in endless delays and duplicative reviews and millions upon millions of dollars in additive costs while impeding the state's ability to compete the Delta Conveyance Project and other critical Lee needed infrastructure projects.

Ensuring that the State Water Project can continue operating and serving 27 million Californians is absolutely within the public good. The State Water Project is expected to lose up to 20% of its delivery capability by 2070 due to the impacts of climate change.

It is imperative that we move this project forward and the trailer bill will help us do so. Thank you.

Good morning. Mr. Chair and members. Karen Lange on behalf of the counties of Solano and Sacramento counties in opposition to this proposal. Disagree heartily with the previous speaker. Agree heartily with Ms. Ransom. Ms. Wilson. Mr.- Mr. Connolly, today and the points that you raised about affordability on the- and the points that Mr.

Lackey made about eminent domain, I'd really encourage you to look at the communities where this is gonna- where they're going to need to acquire land. CalMatters did a great article about the town of Hood. Those are folks that don't have access to attorneys.

And when you're going to, you know, go up against the State Department of Water Resources, people may lose more than they need to lose. And on the bond piece, the committee analysis says that DWR will borrow money and then the costs won't be passed on until that phase of construction is done.

And that may be five years, seven years. I don't know how long these phases are going to be. That does mean the State Department of Finance is going to have to find a way to factor in that debt service, at least on the short term.

How to pay for the debt service if we're not going to get the water contractors to pay us back for some number of years. So it does have a General Fund impact and it's terrible for the communities that Ms. Ransom and Ms. Wilson represent. We urge your no vote. Thank you.

Good morning. Dylan Elliott, on behalf of the County of San Joaquin, want to echo many of the comments just made by my colleague from Sacramento and Solano County, also many of those raised by those from the environmental community. We are in fervent opposition to this proposal. I would just like to point this

committee to the $150 million that are in Proposition 4 for Delta Levee maintenance and armoring. We share the concern of potential damage that could take place. We think that that is a much more reasonable proposal than staking California ratepayers with a 20 billion at least proposal. We would urge your rejection to this proposal. Thank you.

Hi. Natalie Brown with the Planning and Conservation League.

We're extremely concerned about the attempt to push Delta Conveyance Project and Water Quality Control Plan Trailer Bills through the budget process when they represent significant policy changes with bypassed environmental review process for these large projects with sweeping consequences for Delta ecosystems, communities statewide, safe drinking water and financial burdens on Californians.

Projects of these magnitudes and potential harms should not circumvent California law and legislative policy process. We urge the legislature to reject both of these proposals. Thank you.

Thank you. Barry Nelson representing the Golden State Salmon Association, California Salmon Fishing Industry. Our industry, when our runs are healthy, supports $1.4 billion of economic activity and 23,000 jobs. For the last two years, there's been no jobs, no economic activity. This year, our industry has been shut down because of the mismanagement of water. In the Central Valley.

This year, for the first time in state history, there will be no salmon fishing in the State of California. We're at risk of losing part of California's natural heritage.

The Delta Tunnel runs a serious risk of putting a stake in the coffin not just of the Delta, not just of the environment, but of fishing jobs and communities that depend desperately on a healthy river system. I would love to speak at length about the implications of this package on judicial review and water rights and so forth.

But, chair, in light of your admonition, I will hope to have an opportunity to do that in a policy committee. We urge you strongly to reject this package. Thank you.

Thank you.

Good morning. Alex Loomer, on behalf of the Environmental Protection Information Center and the Environmental Law Foundation, urging you to reject these two BCPs, or trailer bills. It's wrong to circuit the environmental review process for such a massive project, circumventing legal review, interfering with the administrative process, changing judicial review. Further

the set of proposals goes way beyond the Delta Conveyance Project. It'll have large, sweeping consequences for environmental protections way beyond the Delta. The legislature rejected the administration's efforts to jam the conveyance project two years ago. We urge you to do the same this year. Thank you.

Thank you.

Good morning. Thank you for your time. My name is Wesley Motlow. I'm a resident of Loch, California, a community in the Delta. This co- This project will damage the Delta in countless ways and pass on the costs to my generation of Californians. I've always been proud to be a member of this state.

But if this project is seen to fruition, I will not feel that way. Thank you.

Good morning, Chair. Scott Webb, Director of Advocacy with the Resource Renewal Institute, convener of the Environmental Coalition of the Bay Delta. Strongly against both these trailer bills. Fast tracking this dental tunnel. Dental tunnel through the state budget process takes away the power of the Legislator and a slap in the face to.

Tribes, Delta communities, environment, everyday Californians. Thank you so much.

Hello, I'm Mariah Lauritzen with the Golden State Salmon Association. I'm here to speak in strong opposition of the May revision trailer bill proposals that seek to fast track the Delta conveyance project and sabotage the Bay Delta Water quality control plan.

We are already seeing a lack of stewardship in the Delta and the Sacramento as evidenced by the fact that the commercial fishing season has been closed for three years running, disrupting people's livelihoods and then to try and bypass the established process that shows that there is no care given to communities in the Delta or industries in the Delta.

Thank you.

Hi. Kasha Hunt here with Nossaman on behalf of Santa Clara Valley Water District. On behalf of the Valley Water, we appreciate Governor Newsom's strong support of the Delta Conveyance Project and his efforts to move it forward. The trailer bill proposed by the governor streamlines and fast tracks the advancement of the Delta Conveyance Project.

Santa Clara Valley Water District is the wholesale water supplier and groundwater management, flood protection, and environmental steward agency that serves 2 million residents and thousands of job creating Silicon Valley businesses in the Santa Clara Valley County. About 40% of the water comes from the Delta and climate change is putting that supply at risk.

Therefore, the Delta Conveyance Project would help the state water project adapt to changing conditions, making this water supply more reliable for our community and for all California. And we therefore urge your support. Thank you.

Good morning. Kasil Willie, Staff Attorney for Save California Salmon. Save California Salmon and our supporters unequivocally oppose these trailer bill proposals designed to fast track the Delta Conveyance Project and dismantle the Bay Delta Water Quality Control Plan.

These trailer bills threaten to erode critical environmental protections and due process to push forward one of California's most contentious infrastructure projects, jeopardizing water quality for the San Francisco Bay Delta estuary. Current water quality standards in the Bay Delta are inadequate and the state must not rush incomplete voluntary agreements through the budget process.

Fast tracking the Delta tunnel while sidelining the Bay Delta plan process is an affront to democracy. It strips Californians, particularly those in the Delta and tribal communities of their rights to participate in decisions that affect their health and future.

Californians deserve a water deserve a water policy that is responsible, equitable and genuinely serves the needs of our communities, not one that centers the powerful few. We urge you to reject these trailer bills and require that any substantial proposal go through the proper legislative process ensuring thorough public input and transparency. Thank you.

Good morning. I'm Jamie Fanous With the Community Alliance with Family Farmers. We represent over 8,000 small and underserved farmers across California. We oppose the governor's proposal to fast track the Delta Conveyance Project, rushing the implementation with thoughtful community engagement inclusion will harm our small farmers in rural communities. Thank you.

Good morning. Audrey Ratajczak on behalf of Contra Costa County in opposition to the Delta streamlining proposal and just echo the comments of our Delta County Coalition partners that were here. Thank you.

Good morning. Mr. Chair and members. Glenn Farrell with GF Advocacy on behalf of the Southern California Water Coalition and San Gorgonio Pass Water Agency here in strong support of the trailer bell package. And I would just say, you know, climate adaptation looks different for different regions of the state.

And we fully support the prior comment about the Prop 4 allocation for Delta levees. That's a really important climate adaptation strategy for the Delta. Similarly, the Delta Conveyance Project is a very significant substantial climate adaptation project for 27 million Californians in other regions of the state. And that's why we strongly support this package.

Chair and members. Jay Jefferson with the Metropolitan Water District. We are in full support of this DCP streamlining package. This marks a critical next step in providing our state with a reliable option for water supply resilience in response to climate change. We urge your support in moving this package forward. Thank you.

Thank you. I'm going to hold for a moment. Is Ian Chowdhury from High Speed Rail? Is he in the audience?

He's downstairs. He's not in the audience right now, though.

Could you, could you let him know I'm trying to get a hold of him? I want to try to work out the timing of this. I was saying so if he could. If he could come up so I could catch him, I'd appreciate it.

Mr. Chair and members. Beth Olhasso, on behalf of the Inland Empire Utilities Agency. Echo strong support of my two previous colleagues, Metropolitan in the Southern California Water Coalition. Thank you.

Thank you.

Good morning, Mr. Chair.

Members. Adam Quinones, California Advocates, on behalf of Santa Clarita Valley Water Agency as well as San Gabriel Valley Municipal Water District in strong support of the governor's Delta streamlining proposal. I want to echo the comments of Metropolitan Water District and just say that, you know, these communities are looking for not for more water, but for more reliability in the face of climate change.

Thank you.

Thank you.

Chair and members. James Thuerwachter with the California State Council of Laborers. Thank you. We are in strong support on behalf of the 80,000 members that work on. California's water and transportation infrastructure. We fully support the DCP streamlining package. Thank you very much.

Good morning. Kim Delfino with Earth Advocacy on behalf of the California Native Plant Society. Also representing Golden State Salmon and Defenders of Wildlife. In strong opposition to the delta trailer bills for all the reasons that you've already heard. And it's a big project that deserves to go through the process the right way.

It has huge implications for community, the environment and water quality. And the proposals are going to have much broader implications beyond the Delta, which we think that the administration needs to consider more carefully and we would urge opposition. Thank you.

All right. While we have a couple of comments left, I'm going to announce that I'm going to change the order here. I'm going to move high speed rail up and hear high speed rail next. What's that? Yeah. Hear high speed rail next.

We will not get high speed rail done before we end up taking our break, but I would like to get that started. And then we will move back to item two on the agenda in terms of the other trailer bills because we will take a break from 12:00 clock to 1:30. It's sort of a mandatory.

We have to caucus with the administration on budget issues. So. So those of you that are here for high speed rail know that things will start to pick up here in a moment.

And those of you that are here for the various trailer bills, we will be getting to that, but it will most likely be after we do our caucus break. Thank you. Go ahead.

Good morning, Chair Bennett, members of the committee. John Kendrick on behalf of the California Chamber of Commerce in support of the Delta conveyance trailer bill. Thank you.

Robin Durston. I'm just a concerned citizen. Please urge you to reject the trailer bills. This proposal will ruin towns and farms along the delta and ruin the water quality for the farms. And we can't afford it because 12 billion dollar deficits of the state. So. Thank you.

Thank you. So we have. Do we have people here from high speed rail ready? Yeah, but he's going to come up.

While we're waiting, the high speed rail people understandably need a little bit more time to get up here. I'm going to jump to issue six, the Digital Experience Platform Project Fee trailer bill. We. You guys, you guys can stay here if you want. If. If there's only. Well, one of you will have to leave. There you go.

Good. So you two gentlemen can stay, right?

Good. Good morning.

I'm going to ask for a very brief presentation.

Yes, very brief. Good morning, Chair and members of the committee. My name is Lee Scott. I am the Chief Budget Officer here at the California DMV. With me today is Director Gordon. We're here to discuss the trailer bill language for the $1 BPA fee. Very high level. Our DXP project has three phases.

Occupational licensing, vehicle registration, and driver's license. As we're going to finish our vehicle registration phase by the end of the calendar year, this $1 system improvement fee will help us work with our business partners to pay their fair share. We've this. The original.

The original fee was sunsetted last December 2023 and we want to reenact it now that we're going to finish our vehicle registration fee or the vehicle registration portion. We've collected about $36 million to date and we anticipate to collect about 7 million a year going forward.

That will offset about 59 to 60 million dollars of the cost of the vehicle registration portion of the DXV.

And do you think this is going to put you onto steady funding or will we continue to have DMV shortfalls in the future?

Well, I think we'll let Department of Finance and the LAO talk about the MVA. Would you like to pick that up? Good question.

Yes. Thank you, Chair. Matthew Macedo, Department of Finance. I think overall this helps the motor vehicle account, which is the main funding source for the DMV. However, it will not solve that issue. All right. LAO.

Yeah. Rachel Ehlers with the LAO. I think the funding gap in the MVA is roughly $170 million. And this would raise, as noted, about $7 million a year. So certainly will help. Certainly makes sense to have everyone pay their fair share.

But I think the issue we would flag is that overall structural gap is still there and will still need attention.

Great. Any long term prospects for us in terms of the long term structural gap that you have?

Thank you, Chair. We're always continuing to monitor that. At this point, the May revision proposes a solvent MVA in 25-26.

Great, Do we have any? Anybody from the public wants to comment on this issue? Issue six, the DMV. All right. The platform experience. Thank you very much. All right, we will. We'll start with high speed rail now. We'll have a half an hour and we will continue high speed rail.

Great. Thank you.

Thank you.

Okay. So they can get that done before. Good morning. And we'd love to hear sort of the presentation. We have, we've, we've asked you to try to limit that to 10 minutes and, but we do have a little bit more time before we break for lunch.

But you will be able to stay for after lunch for questions from our other Assembly Members, et cetera. Right, good. Because this, this conversation will, you know, will go on, I'm sure. So go ahead. We'd love to hear the, we'd love to hear the presentation overall.

All right. Good morning, Chair Bennett and members of the committee, thank you for the opportunity to present today. I am Ian Choudri, CEO, the new CEO of California High Speed Rail. I've lived and worked in about 20 countries on different projects. Rail, ports, infrastructure, nuclear defense, and others, especially in heavy construction.

This project, I see it as more than a line. It's a long term investment in California.

Along with what?

Long term investment in California infrastructure, economy, and the environment. It's also the most, state's most effective tool to cut transportation emissions while we are building it. We are already doing that. The reduction of emissions.

In the future, every rider who takes high speed rail instead of driving or flying helps reduce pollution even during construction. We have roughly avoided 500,000 metric ton of emissions due to our construction practices that we have applied on the project.

So we consider that this is a climate investment with enduring impact and the only one of its kind being actively built in the nation.

Since stepping into this role last year, so roughly over 200 days now, one of my top priorities has been to provide a clear updated picture of the project where we are and also a very clear picture on what the project's scope, cost, and schedule will be in the future.

Last week we released the results of a comprehensive reassessment of Merced to Bakersfield. And the updated cost estimate reflected the lower range of 34.9 and the higher range of 38.5 billion.

This remains within the range that we included prior to my time in the last year's business plan through the upper range and reflects the increase due to continued market volatility and rising material costs. And we'll talk about that in our presentation.

And added contingencies to better account for the construction risk that we were challenged with in the past. And also looking at the realistic assessment of the current and future market conditions. That's very important for us. I'm also focused on changing how we deliver what we have been doing in the past. What's different now.

I'm looking at all the commoditized materials that we don't need general contractors to go do buy for us so that we can avoid markups and schedule delays. We are looking at procuring those material through contracting directly with the steel manufacturers, copper, aluminum and others, so that we can lock the prices for a number of years instead of dealing with it in every year escalation.

And the same thing we are doing also to accelerate from our lessons learned the right of way acquisition targets are different now than what were before. And then we are working on accelerating early works in the Merced and Bakersfield sides to relocate utilities before we bring the general contractors in to do their work.

While we remain focused on what's ahead, it's also important for us to acknowledge what has been already done. More than 15,000 jobs, $22 billion in economic impact, 99% of which stays in the State of California and over 900 small businesses that are currently involved with more than 2/3 of our investments today are benefiting disadvantaged communities.

We have also completed the environmental clearance from San Francisco to LA and are now in the finalizing updated cost estimates for the Gilroy and Palmdale connection. And we will talk in the presentation about why that's important. Sustained and stable support is critical. And now we are talking about funding and financing.

My observation is in the 200 days the stop and go funding approach has costed both time and a lot of more money. Over a third of recent cost increases stem from inflation alone. So more we delay, higher the cost goes.

That's why the administration's mayor vision proposes a dedicated baseline of at least 1 billion annually for high speed rail through the cap and invest program. This is what we'll be discussing. This is critical. It's not all end all but this is critical to providing the financial stability needed to deliver ourselves and then also to invest private sector.

We have to just remember we are not just laying a foundation. We are actively building a transformative system that will connect Northern and Southern California and redefine how people move on both sides of the state. Thank you again for the opportunity to present. I welcome your questions.

Thank you very much. We are going to make sure that we get the public comment, try to get the public comment squeezed in also before we deal with. What's that? Before we deal with all of, with, with all of this. But I have a number of questions to get started for you.

You and I have had the pleasure of being able to talk, talk by phone. You had a different, a different dollar amount that you were hoping was, was going to be what would be securitized or and so now what would, what would this $1.0 billion securitizing that, what would that give us in terms of project?

Yeah, so we, we did talk about that. And, and so if, and we anticipated that we will get the dollar that we were asking for that would have given us Merced, Bakersfield, Palmdale, Gilroy, all simultaneously with the investment securitizing that we could have done. Now we are not there. So we are at a different number.

What we are evaluating and the results are kind of there. We could finish with this, if we finance against the 1 billion a year. Not just take and build as a stop and go, but finance against it. Then we can finish, of course Merced to Bakersfield and then we can go a little further. Whether we decide to go towards north or south, that will be one thing that we think at this level that we can do.

But I'm also very keen to share with you that we need to bring private sector in so they can actually see and provide us the input of what they can think of, how they can create revenue generation, connecting what location they think based on the ridership that we have done and the models that we have provided. We know more or less where it's going to land.

But we do want to invite them now to come in and start sharing their ideas with us. We are issuing an RFEI. The private sector is aware of what is on the table now and they are still coming back to us and they're very interested to talk more about it.

So they are aware of the modification. Private sector still willing to talk?

Yes.

One of the things that I think to reflect the members of this committee that aren't here at this point in time but have brought up is this whole concern about trying to make sure this is going to be a long term effective project and a long term effective financing plan. And if it requires private investment, and that makes sense, I think I've accurately reflect most people saying we have to come up with some other alternative source of revenue, particularly if the Federal Government is pulling back at this point in time, that the private sector is certainly one to go, one for us.

But to have these assurances that the private sector is still interested is different than having an actual effective long term game plan. We have an update that is scheduled to come from high speed rail. I think that we're all pretty very interested in having before we lock in some of the commitments that we have, et cetera.

So there's significant interest in this year being more flexible until we get that plan, until we get more information from you, and then sit down and try to figure out what is the long term financing plan in terms of us moving forward.

How does that strike you in terms of your planning and your negotiations with the private sector and what would you do in the interim? If we had this interim plan of funding that doesn't have all of the securitization and all of those commitments in it at this point in time?

This is a very, very important question that you asked. So we looked at it in two ways. One, if the private sector investment discussion goes through this year, early next year, what are we doing in the meantime? That plan did not change.

We shared with private sector in the confidential one on ones of how we see this panning out. We looked at the under construction phase, which is 119 miles right now. I think we are very capable to finishing that civil work on that and then start laying tracks on that one.

Then the next phase, which is the completion of Merced to Bakersfield. That's where the mix of private sector investment and our own funds available that we can do, that kicks in.

Then comes the next bigger one, which is if we go to Palmdale or to Gilroy or go both simultaneously, that's what private sector is very, very interested in. That comes later.

So we are able to go on for another year and a half or two with the private sector continuously engaged because it takes time for them to come up with financial investment grade modeling to lock in and have evaluation done and have underwriters look at what the risks are.

I think we will be okay to continue on our track for another year, year and a half, while we are dealing with them. What we don't want to do is tell them is like, hey, we don't have any idea what we are doing. Then they walk away.

So if, is the private sector willing to take those steps if we are holding on the actual commitment to securitization until we get the plan from them?

Yes. Yes. And so we are issuing the RFEI in a month or two, request for expression of interest to the investors and concessionaires and financiers. And we already met with them multiple times through industry, one on one.

And so now we are issuing our own intent of what the program would look like in how many phases and where they have the opportunity to invest. And they have indicated they will be formally responding to it. So within three months we will have that.

So, so that would be that, that would give us the flexibility to make sure that we understand what the planning is before we commit to securitization.

I would say that there will be there will be two things that will happen. One, they will provide us input of which direction they think this program should go and how quickly this can connect real population center and economic growth centers and how quick they can commercialize the assets. We know we have a good idea of what that answer is going to be.

That will require for us to look at and come back to you and to say, should we continue on the path we are now, that is under the legislation today, or should we open it up for private sectors to go and be creative and innovative and give us a different solution than what we have today in SB 198?

I think it would be, yeah. I think from the conversations that I'm having with Assembly Members, I think the idea of having that information would be fundamental to having people be willing to take that next step in terms of securitization, et cetera.

So I welcome the of that and I welcome sort of this fresh, creative look at where we are at this point in time. I'm going to stop and turn to LAO comments and before we go on. All right, go ahead.

Thank you so much, Chair. Helen Kerstein y with the Legislative Analyst Office. So we've identified a few specific concerns with a proposal to continue at least $1 billion a year annually through the cap and trade extension to 2045. The first is that there's key information on the project that's still missing.

So the authority was supposed to provide a update report on March 1 that included a variety of updated information on all the different project segments, including Merced to Bakersfield, as well as schedule. The OIG has pointed out that there were a number of omissions in that report.

There is, we did just last week receive the update which was referenced, which suggests that they're about $3 billion over their previous previous cost estimate. That's even assuming significant changes in scope, including going down to a single track. So and some other modifications as well.

So there is that information, but there's still some, I think, critical pieces of information that we don't yet have. The second point I wanted to highlight is that there is a significant funding gap. Last time we were before you, we said that was estimated at 7 billion.

Now with this cost increase, it's likely to be about 10 billion. And that's assuming cap and trade through 2030. So if they got an extra 15 years at $1 billion, that would be $15 billion of additional funds. They've got about a $10 billion funding gap now 7 plus another 3.

So it's not a lot of room to maneuver especially if they lose their federal funding. That's over $3 billion of potential federal funding at risk. So maybe we're said to Bakersfield is possible with the funding that they have if they don't have borrowing costs.

If they have borrowing costs unless there's some additional funding source or unless it's more than a billion. So if they were to get the 25% and cap and trade revenues are higher than anticip, than they have been, which might come to pass, there could be some additional funding.

But just to highlight for you, there's uncertainty I think about whether Merced to Bakersfield is possible within $1 billion a year for the next extension. And then the third point I wanted to highlight is that there has been this indication that there's a need to securitize these funds. However, there's no clear plan for how to do so.

And really understanding what that's going to look like is going to be critical. Just to make sure that whatever terms are ones that the legislature is comfortable with.

So in light of all these concerns, we're recommending the legislature defer action on this until it has more clarity on the cost, on the schedule, on the exact plan for securitization, the trade offs of that, and then also should the legislature move forward, think specific trailer bill will also be important. Happy to go into that at a later time if that's helpful.