Tax Plan Mulled To Finance $53 Million Cost Of H2O Importation In Indian Wells Valley

The governing board and staff of the Indian Wells Valley Groundwater Authority are currently, and over the next several weeks will continue their effort toward, determining how much of a financial burden those landowners or water users within the authority’s jurisdiction will need to assume in covering the cost of completing a water pipeline project to replenish the region’s dwindling water supply.
Indian Wells Valley lies at the extreme northwestern end of the Mojave Desert and the confluence of the northwestern corner of San Bernardino County, the southeastern end of Kern County and the southwestern extension of Inyo County.
In 2015, in the aftermath of a four-year running drought and a determination by the California Department of Water Resources that Indian Wells Valley overlies one of the 21 water basins throughout the State of California in critical overdraft, the Indian Wells Valley Groundwater Authority was formed, pursuant to a joint exercise of powers agreement involving Kern County, San Bernardino County, Inyo County, the City of Ridgecrest and the Indian Wells Valley Water District as general members and the United States Navy and the United States Department of the Interior’s Bureau of Land Management as associate members.In 2014, then-California Governor Jerry Brown signed into law the Sustainable Groundwater Management Act, mandating water-saving measures throughout the state and requiring local agencies to draft plans to bring groundwater aquifers into balanced levels of pumping and recharge through the adoption of a groundwater sustainability plan. Based upon a survey of water usage patterns undertaken by an engineering consultant, Carlsbad-based Stetson Engineers, the authority and the Indian Wells Valley Water District sought to derive a strategy for both reducing water use in the valley and increasing groundwater recharge to reach a balance of both that will end the overdraft.
Achieving that balance has taken on an urgency based upon a California State mandate that depletions of the valley’s groundwater cease by 2042.
According to surveys completed to provide the data needed to formulate the Indian Wells Valley Groundwater Sustainability Plan, the average natural annual recharge in the basin is 7,650 acre-feet while the annual drafting of groundwater in the region by all entities is three to four times that amount.
Any realistic assessment of the existing population, industrial, agricultural and commercial operations in the area and the decreases in the drafting of water from the regional aquifer that could be achieved through efficientization, conservation, increased recycling of water and perhaps the minimization of evaporation demonstrated that it would not be possible to achieve a use/recharge balance by 2042.
Accordingly, staff and the board of the Indian Wells Valley Groundwater Authority long ago concluded that the sought-after goal of bringing the region’s water table out of a state of overdraft can only be achieved by the importation of water from outside the valley and then injecting it deep into the ground to avoid evaporation and replenish water lost from excessive production.
The groundwater sustainability plan for Indian Wells Valley, as formulated by Stetson Engineers and staff with the Indian Wells Valley Groundwater Authority, which consists in the main of the various staff divisions of the Indian Wells Valley Water District, calls for obtaining water from the California State Water Project on an annual or continuous basis to make up the difference between the amount of water being used in the valley and the amount of annual rainfall that recharges the valley’s aquifer.
In order to tap into the state’s aqueduct, the authority will need to construct a 50.8-mile pipeline from California City to Ridgecrest, consisting of 40.6 miles of 24-inch pipe and 10.2 miles of 18-inch pipe, of which 22.8 miles will consist of steel pipe, 27.5 miles of PVC [poly-vinyl chloride] pipe and a half-mile of HDPE [high density poly-ethylene] pipe for trenchless drainage crossings; three pump stations; one 240,000-gallon regulating tank at peak elevation in El Paso Mountains along Highway 395; and a million-gallon terminus tank at the Indian Wells Valley Water District Ridgecrest Heights Tank Facility.
The preliminary project cost estimate for completing the groundwater sustainability plan as was projected in January 2020 was $177,975,000, including a 20 percent contingency add-on. The original cost estimate was adjusted downward to $165,740,000, including a 30 percent contingency add-on, when an alignment study for the project was completed in April of this year. Just four months later, however, in August, the cost estimate had jumped to $200,536,000, including a 20 percent contingency add-on.
Those estimates, however, did not include land acquisition, permanent easements, temporary construction easements, and fee property, construction administration, permitting fees or credits on existing conservation easements for sensitive species mitigation.
Of tremendous moment for the authority is the means availability to pay for the project. Under the Groundwater Sustainability Act and related federal laws and regulations, the authority can qualify for five potential options for federal funding of construction activities associated with the interconnection pipeline project, which are administered through four separate agencies.
Under the Water Resources Development Act, the project qualifies for two programs, one being as a water resources project and the other under the terms of an environmental infrastructure project, both administered by the Army Corps of Engineers. The Indian Wells Valley Groundwater Authority’s share of the cost of project completion if it were to be done as a water resources project would be $15 million. If it were to be done as an environmental infrastructure project, the authority’s share of the project completion cost would be $53 million.
Under the National Defense Authorization Act, the project could qualify for federal funding in an arrangement by which the administrative agency would be the Department of Defense, and ownership, operations and maintenance of the project would reside with the United States Navy.
Under the Water Infrastructure Improvements for the Nation Act, the project could conceivably qualify for federal funding to be administered by the Department of the Interior.
Under the US Environmental Protection Agency’s loan program, the project could qualify for federal funding assistance which would ultimately be administered through a private finance institution on behalf of the Environmental Protection Agency.
It is unclear what percentage of the project cost could be defrayed under the National Defense Authorization or the Water Infrastructure Improvements for the Nation acts. It does not appear that the funding amounts from either would approach that provided by the Water Resources Development Act, however. The US Environmental Protection Agency’s loan program could conceivably cover up to 80 percent of the currently estimated $200,536,000, such that the authority would need to defray roughly $40 million. That program is subject to a number of unknowns, however, including how much of the loans might ultimately be forgiven and how many might need to be paid back in full.
Consequently, the Indian Wells Valley Groundwater Authority Board of Directors is most heavily focused on the two programs available under the Water Resources Development Act. The program to be completed as a water resources project, ultimately at a cost of $15 million to the Indian Wells Valley Water District, would take as long as 11 years to complete. The program undertaken as an environmental infrastructure project, costing the Indian Wells Valley Groundwater Authority $53 million, would be completed within a much shorter timeframe, one of roughly five years.
Board members are naturally sensitive to the $38 million difference in cost to be borne by the authority. As it stands, the authority is gravitating toward some order of taxing regime to finance the pipeline construction.
Relevant is whether the authority will opt for a tax-as-it-goes approach, whereby tax revenue brought in each year, presumably as an additional assessment on property owners’ property tax bills, would go directly toward paying for ongoing work on the project. Conceivably, given an 11-year timetable for the program to be completed as a water resources project, taxpayers or ratepayers within the jurisdiction of the authority could provide the roughly $1,363,636 annual local share of cost for building the pipeline. If, however, the authority seeks to have the project completed as an environmental infrastructure project, the authority’s annual share of cost over the five years it would take to complete the project would run to $10.6 million per year. That would create a taxing regime likely to be too onerous for the Indian Wells Valley’s taxpayers to bear, such that the authority would need to go to a bond-issuing arrangement, one which would spread the payments out over as many as 40 years, but which would involve having taxpayers for as many as four decades take on the added burden of paying back not just the principal of the loan but interest.
Unclear is whether the financing would involve property taxation or an increase, probably a very steep one, on water rates for the more than 11,000 Indian Wells Valley Water District customers, the roughly 1,000 ratepayers in San Bernardino County and some 300 to 400 water users in Inyo County.
There has already been resistance to fees that the authority sought to impose on major water users in the Valley.
An early strategy which the authority and Stetson Engineers, as the designated water resources manager for the Indian Wells Valley Groundwater Authority, sought to impose to both reduce water use in the valley and increase groundwater recharge involved carrying out a survey of water usage patterns in the region and then assigning water use allowances to the region’s well owners. Excess use fees, referred to as augmentation fees, were formulated for application to those well owners who were pumping above their allowances as well as on any farmer whose use exceeded his respective share of the water supply set aside for agricultural usage. The concept was that money to be generated in that way is to be used to purchase imported water and pay for the eventual provision of infrastructure needed to bring in the imported water. This was accompanied by a farmland fallowing proposal, where selected farms were to have their active operations reduced.
Even before the California Department of Water Resources had fully examined the proposed groundwater sustainability plan for the Indian Wells Valley, a number of farms and operations in the region raised protests over the limitations being imposed on them. Among those were Searles Valley Minerals, Mojave Pistachios and Sierra Shadows Ranch, along with John Thomas Conaway and the Nugent Family Trust. Ultimately, those entities sued the groundwater authority and the Indian Wells Valley Water District as the lead agency in that joint authority, claiming the conservation efforts being undertaken imposed not only an unacceptable financial burden on them but were abrogating their long-established water use rights altogether.
Before embarking on a taxing regime that might trigger even further litigation, the authority board at its August 23 meeting tabled further discussion of the tax or rate increases until a decision is made about how, exactly, the authority is to go about constructing the pipeline, including which federal program it will seek to use in completing the project.
A decision will need to be made soon, however, meaning by the end of the year, as the pipeline project will require substantial lead time. Not only that, but many shallow wells in the valley – meaning those that plumb to a depth of no more than 150 feet – are on the verge of going dry because of the drop in the volume of water in the regional aquifer. According to the U.S. Geological Survey, “Public-supply wells in Indian Wells Valley are completed to depths between 240 and 800 feet, consist of solid casing from the land surface to a depth of 180 to 260 feet, and are screened or perforated below the solid casing.”
While the leadership of the Indian Wells Valley Groundwater Authority is absolutely convinced that the authority will need to import water to sustain the basin’s viability and build a pipeline to do so, they want to make no missteps in committing more money to carry the project off than what is absolutely necessary. Most board members expressed confidence the authority can be judicious in the use of available funding by being methodical in determining what program to use, even if that requires more time to make a correct evaluation, and yet meet the 2042 deadline to balance water use in the valley with water replenishment in the valley.
At present, the authority is striving to complete California Environmental Quality Act certifications for the project by October 2024, have the final design completed by March 2025, make a comprehensive invitation for the project contractor by mid-to-late-2025 and engage in construction between the years of 2026 and 2028 for water deliveries to commence in 2029.
According to the authority, agreements with California City and Kern County with regard to the project are nearing completion; property owners whose property is to be impacted have been contacted and most rights of entry have been obtained, although a few are yet up in the air; the authority’s geotechnical consultant has completed about a third of the soil borings; and authority officials are engaged in bi-weekly coordination meetings with the Bureau of Land Management to discuss National Environmental Protection Act issues relating to the project.
-Mark Gutglueck

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