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On July 21, 2017, the California Department of Water Resources (DWR) filed a validation action in Sacramento County Superior Court seeking a determination from the court that the California Water Fix (CWF) bond resolutions DWR approved on July 21, 2017 are valid.  (Case No. 34-2017-00215965.)  Specifically, DWR seeks to confirm the validity of: (1) bonds DWR has authorized to finance the capital costs of the CWF; (2) resolutions that DWR adopted in connection with those bonds; and (3) the pledge of revenues for their repayment (collectively, the “Bond Resolutions”).

The lawsuit is directed at all “interested persons,” requiring any party seeking to contest the validity of the bonds to have filed an answer by September 15, 2017.  Numerous parties answered in opposition, including Butte, Contra Costa, Plumas Sacramento, San Joaquin, Solano and Yolo Counties, Sacramento County Water Agency, San Diego County Water Authority, Plumas County Flood Control and Water Conservation District, South Delta Water Agency, Central Delta Water Agency, and Save the California Delta Alliance.  The opposing parties include State Water Project (SWP) contractors north of the Delta who would not receive water from the CWF, and object that the Bond Resolutions allow DWR to fund bond repayments through their SWP contracts.  The Metropolitan Water District of Southern California has appeared in support of the Bond Resolutions.

The parties opposing the Bond Resolutions have raised numerous affirmative defenses, stating the legal reasons why the court should reject DWR’s request for a court order approving the validity of the Bond Resolutions.  Among other arguments, parties answering in opposition assert that:  (1) the Bond Resolutions violate the Delta Reform Act; (2) the Bond Resolutions violate the “beneficiary pays” principle inherent in Water Code section 85089; (3) the lawsuit is premature because the 18 pending legal challenges to the CWF under the California Environmental Quality Act (CEQA) make the CWF uncertain; (4) DWR does not have the legal authority to construct the CWF; (5) the Bond Resolutions fail to account for the likelihood of major cost overruns and risks stemming from the likelihood that the project funding referenced by DWR will not materialize; and (6) the Bond Resolutions fail to disclose how the outcome of unresolved proceedings, including the CEQA litigation and the pending CWF water rights proceeding before the State Water Resources Control Board, would transform the CWF into a different project.

The court’s initial scheduling order requires DWR to file responses to answers in opposition by October 30, 2017.  Assuming that the case is not resolved by initial dispositive motions, it is estimated that a hearing on the merits would likely occur about one year from now.

For additional information on this issue please contact Aaron Ferguson at 916-446-7979 or by email at aferguson@somachlaw.com.

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