TO: Napa County Groundwater Sustainability Agency
FROM: Brian D. Bordona - Director of Planning, Building and Environmental Services
REPORT BY: Jamison Crosby - Natural Resources Conservation Manager
SUBJECT: Funding Options for Groundwater Sustainability Plan (GSP) Implementation
RECOMMENDATION
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Receive a presentation on funding mechanisms to fund Groundwater Sustainability Agency management and Groundwater Sustainability Plan implementation and provide direction regarding funding options. (No Fiscal Impact)
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BACKGROUND
The Sustainable Groundwater Management Act (SGMA) was signed in 2014 and provided a framework for the sustainable management of groundwater resources in California. The Napa County Groundwater Sustainability Agency (NCGSA) was formed in 2019 to manage groundwater resources consistent with SGMA for the Napa Valley Subbasin and received a $2M grant from Department of Water Resources (DWR) to develop a GSP which was submitted to DWR in January 2022 and approved in January 2023.
To date, the work of the NCGSA has been funded entirely from the County General Fund (for a total of approximately $8.7M) and the DWR grant. Complying with SGMA is a requirement and continuing to manage groundwater at the county level has significant advantages for groundwater users (as opposed to State control if the Subbasin does not achieve sustainability).
Recognizing the need to explore options for a stable, dedicated source of funding for the future, the NCGSA entered into Agreement No. 230312B with SCI Consulting Group to evaluate options and make recommendations for the establishment of fee, special tax or benefit assessment to fund GSA management and implementation of the GSP and related programs. Depending on the outcome of the evaluation and direction from the NCGSA, SCI will prepare a comprehensive Fee Report for the proposed programs and improvements to be funded. Initial planning and engineering were conducted throughout 2023, including initial stakeholder outreach and the preparation of a Funding Options Technical Memorandum.
Various funding pathways are available to GSAs in support of GSP implementation. The four options are the basis of today’s discussion include:
1. Fee in accordance with Water Code § 10730 or §10730.2;
2. Special Tax approved by the voters;
3. Special Assessment approved by property owners; and/or
4. County General Fund (current funding source). Each option includes considerations of implementation procedures, legal requirements, and other factors.
In addition to the legal mechanism that defines a funding option, a methodology must also be selected to establish the basis of charges allocated to rate payers. Several methodology options are commonly seen in support of groundwater management, including parcel and acreage-based approaches (producing a rate per parcel or per parcel acre), irrigated acreage approaches (producing a rate per irrigated acre) and extraction-based approaches (producing a rate per acre foot; often utilizing estimation).
Several key considerations contribute to the determination of the optimal funding path, including revenue generation potential, payer pool, allocation of costs, equity, political viability and community acceptance, legal defensibility, cost of funding mechanism implementation and administration, and precision of methodology. In reviewing options related to funding mechanism and methodology options, these considerations help to frame discussion of the appropriate choice.
Use of the County General Fund, while effective to this point, is not considered a long-term solution to Napa GSA’s funding needs. However, some degree of continued General Fund contribution in tandem with a stand- alone funding mechanism is an option and could continue to subsidize rate payers as well as support inducements to conserve groundwater. SCI has focused to this point on potential fee programs proscribed by SGMA, with some consideration of special taxes and benefit assessments.
Funding Mechanism Legal Frameworks
Within SGMA, two revenue paths are specifically described to fund a groundwater sustainability agency:
• §10730 fees provide funding for general GSA management and GSP implementation excluding major capital investments or improvements; and
• §10730.2 fees support the full spectrum of GSA costs including major capital investments and facility operations and requires more rigorous and lengthy adoption procedures.
These two “SGMA fees” are the primary funding mechanisms used by GSAs. In terms of fee implementation, there are several key differences between the two types of SGMA fees as discussed in the attached Funding Options Technical Memorandum.
Special Taxes and benefit assessments are two additional funding mechanisms available to public agencies, however for reasons set forth in the Technical Memo (attached), these are not recommended by staff.
Funding Mechanism Methodology Options
1. Extraction-based approaches utilize estimation of groundwater use to produce a charge per acre foot. While somewhat more complex in terms of establishment and annual administration efforts, this option can provide for the most proportional basis for charges. In addition, it provides an impetus for conservation. Changes in land use and agricultural activity require annual adjustments and communication with property owners, use of alternative water sources must be considered, and fluctuation in groundwater use can affect charges as conditions fluctuate. As one of the fees prescribed by SGMA, this framework is commonly used by GSAs across California.
2. Parcel and acreage-based approaches provide a simple mechanism that is based on readily available property data from a land use perspective. The advantages of this approach are that it is easy to explain and efficient to administer. However, such charges are not proportional to the amount of groundwater used. In some cases, GSAs will use a parcel or acreage fee to apportion some degree of “base costs,” by spreading these costs out across all groundwater-using parcels.
3. Another methodology commonly used by GSAs produces a charge per irrigated acre, however an irrigated acreage fee is not inclusive of non-agricultural groundwater users and, a flat charge per irrigated acre does not consider the amount of groundwater used.
Staff Recommendation and Rationale
Considering the above, staff recommends pursuing a §10730 fee utilizing an extraction-based methodology (Option #1 above). As one of the fees prescribed by SGMA, this framework is commonly used by GSAs across California including all three Sonoma GSAs.
In terms of the funding mechanism legal framework, several considerations contribute to this recommendation. Napa GSA’s immediate budget needs stem generally from administrative and SGMA-required costs, which align with § 10730’s description of “program administration.” Additionally, § 10730 requires consideration of Proposition 26, while § 10730.2 contains more stringent proportionality requirements, introducing additional challenges to cost apportionment. Procedural requirements for a § 10730 fee do not require a majority protest process, which streamlines fee implementation. To ensure the community is engaged and informed in the process, a rigorous community outreach effort will be conducted.
Regarding methodology, an extraction-based approach is optimal for several reasons. As noted above, apportioning costs based on estimated groundwater extraction is the most granular approach available. While this approach requires more cost and effort, it is the most comprehensive means of establishing fee proportionality. All groundwater users can be incorporated into the fee structure based on estimated extraction. For agricultural properties, groundwater use can be estimated by establishing water use estimates by crop type. Once these averages have been developed and vetted, they can be applied per crop, per acre across each parcel. Estimated water use for residential and commercial parcels can be determined based on local water use patterns. Input from local public water systems can be extremely beneficial to this process, as they likely have readily available data for a number of residential and commercial properties. This data could be used to determine typical water use amounts for various parcel types. Groundwater use on residential and commercial parcels can vary depending on various factors, including number of residences, household size, and landscaping. These factors may be considered to the extent possible. In most cases, public water systems themselves can be charged according to metered extraction data, as these entities are usually required to track and report any groundwater use.
A charge per acre foot of water allows for all groundwater user types to be included in a fee structure according to the proportional benefit they receive from a groundwater sustainability program. The goal of using an estimated extraction approach is to equitably allocate the benefits of GSP implementation across all groundwater extractors. In this sense, extractors are not charged for the extraction itself, but rather extraction is used as a means of apportioning costs based on the amount of groundwater used.
Funding for GSP implementation is a relatively new endeavor and remains somewhat untested in the courts. For this reason, there are questions surrounding best practices and the optimal approach for meeting GSA funding needs. However, other GSAs have utilized similar approaches to this recommendation. Three GSAs in Sonoma County implemented § 10730 fees based on estimated extraction in 2022 and continue to use these fees today to fund program administration.
Next Steps
1. Direct staff to work with SCI to pursue the stated recommendation through the steps listed below.
2. Continue stakeholder outreach efforts. Discussions with agricultural groundwater users, public water systems within the Subbasin, and other stakeholders will help to inform a well-rounded fee structure as well as develop ways to encourage conservation of groundwater.
3. Prepare preliminary groundwater use estimations for all land uses, consulting with stakeholders, technical experts, and applicable agencies to ensure the accuracy of estimated uses by land use type and consistency with Napa GSA groundwater model. Consideration of water conservation efforts already made by groundwater users will be taken into account in order to accurately determine variability in use estimates for parcels that utilize more efficient irrigation methods or other means of water use efficiency.
4. Begin building a comprehensive interactive database in support of the fee program. This database will contain property characteristics obtained from the Napa County Assessor’s office, agricultural characteristics, and other relevant information. This database will provide the basis for fee charges and will also serve as a means through which groundwater users can view information related to their property and submit appeals as needed.
5. Upon completion of steps 1-4, staff will return to the GSA to present preliminary rate scenarios for the GSA’s consideration. At that time the GSA can either: accept the rate scenarios and direct staff to proceed with development of a Draft Fee Study; direct staff to modify the proposed rate scenarios; or direct staff to cease any further development of a groundwater fee.
PROCEDURAL REQUIREMENTS
1. Staff Report
2. Public Comment
3. Discuss and provide direction
FISCAL & STRATEGIC PLAN IMPACT
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Is there a Fiscal Impact? |
No |
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Is it Mandatory or Discretionary? |
Discretionary |
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Discretionary Justification: |
Provide source of non-General Fund funding |
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Is the general fund affected? |
No |
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Future fiscal impact: |
Analysis of future impact is pending |
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Consequences if not approved: |
Implementation of the GSP will have to continue to be funded by the County General Fund. Given current budgetary needs and the time required to establish a funding mechanism, it is imperative that staff receive direction in order to plan to finalize the program by summer 2025. |
ENVIRONMENTAL IMPACT
ENVIRONMENTAL DETERMINATION: The proposed action is not a project as defined by 14 California Code of Regulations 15378 (State CEQA Guidelines) and therefore CEQA is not applicable.