Ag Today September 11, 2017

Audit finds improper taxpayer subsidies for Delta tunnels. Will it halt the project?

By Ryan Sabalow and Dale Kasler, Sacramento Bee

In a potential setback for the controversial Delta tunnels, federal auditors say $50 million in taxpayer funds were used to improperly subsidize San Joaquin Valley irrigation districts as they helped plan the project.

Despite insistence from Gov. Jerry Brown’s administration that no taxpayer dollars would be used to finance the tunnels, the U.S. Bureau of Reclamation obtained $50 million to pay the San Joaquin Valley districts for tunnels planning costs over a seven-year span, according to an audit released Friday by the U.S. Department of the Interior’s inspector general.

The audit said Reclamation used “a complex, obscure process that was not disclosed” to subsidize tunnels planning. “We found no evidence that USBR’s subsidy was ever disclosed in annual budget justifications or financial reports, and USBR officials could not give a valid rationale for providing the subsidy.”

The report comes at a crucial moment in the decadelong planning of the tunnels project. Directors of state and federal water districts south of the Delta are about to begin voting on whether to pay for the tunnels, formally known as California WaterFix.

Lisa Lien-Mager, a spokeswoman for Brown’s Natural Resources Agency, said she doesn’t think the audit will impede the project in any way. She declined comment on the allegations in the audit, saying “it’s a federal issue.”

Jason Peltier of the San Luis & Delta-Mendota Water Agency, an umbrella organization that includes several federal contractors weighing their participation in the project, added that he doesn’t think contractors’ votes on WaterFix will be influenced by Friday’s news. “I don’t think it’ll affect people’s decisions on the project,” he said.

But opponents of the project said the audit shows there’s no way the tunnels would pencil out without taxpayer subsidies. If contractors needed help paying for the planning process, “how can they handle paying for construction costs starting at $17 billion?” said Barbara Barrigan-Parilla of the anti-tunnels group Restore the Delta. “Ratepayers are really getting hip to this.”

Reclamation officials insisted they did nothing wrong, according to the audit.

The tunnels comprise Brown’s ambitious plan to overhaul the plumbing of the Sacramento-San Joaquin Delta, the fragile estuary that serves as the hub of an elaborate federal-state system that pumps billions of gallons of water to the San Joaquin Valley and Southern California.

Decades of pumping have degraded habitats and left some fish species on the brink of extinction; pumping often has to be interrupted to keep fish out of danger. By altering how water flows through the Delta, the Brown administration says the tunnels will preserve fish populations and enable the pumps to deliver more water to the south-of-Delta contractors.

Those water districts have spent around $250 million on tunnels planning. The Interior audit says $50 million of taxpayer money was used to subsidize the federal contractors’ share of the planning expenses.

Environmentalists and others have long accused Reclamation of having an incestuous relationship with valley irrigation districts. Much of their criticism is directed at Westlands Water District, an influential farm-water agency in Kings and Fresno counties that buys irrigation water pumped in from the Sacramento-San Joaquin Delta.

Westlands is one of the key federal contractors whose members are being asked to pay an estimated $17.1 billion to build the twin tunnels. Its board members so far have demonstrated reluctance to support the project because of the costs.

Westlands general manager Tom Birmingham said water contractors and others involved in planning the tunnels knew that Reclamation was putting money into the effort, but believed the agency was following the law.

“This wasn’t any secret,” Birmingham said. “Everyone understood what the Bureau of Reclamation was doing, the source of the money. … There has been very careful accountings of all of that.”

Criticism of Westlands’ relationship with Reclamation ramped up this year when President Donald Trump’s administration picked David Bernhardt to be the No. 2 official at the U.S. Department of the Interior, which supervises the Reclamation bureau.

Bernhardt is a former Westlands lobbyist who has sued the Interior Department and lobbied the Justice Department and Congress to finalize a settlement that could be worth more than $375 million to Westlands.

Documents obtained by environmental advocate Patricia Schifferle show he helped write amendments to a $558 million water bill, approved by Congress in December, that steers more water to Westlands and other water districts and eases construction of new dams.

Schifferle and others say that, as a top official, Bernhardt could give Westlands preferential treatment in how Interior implements the 2016 water legislation and the future settlement in a long-standing dispute over drainage. He also will be in a position to influence permitting for the tunnels project, which could ease deliveries of water to Westlands and Silicon Valley and Southern California urban water districts.

Ryan Sabalow: 916-321-1264, @ryansabalow,