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Rules. What Rules? GWSP Round II, Part II

October 15, 2013

The recently released new application letters seeking money from the second round of the Governor’s Water Supply Program (GWSP) reveal the imprecise and targeted – and perhaps un-constitutional – nature of a revised funding mechanism known as state direct investment (SDI).

The GWSP was launched by Nathan Deal in 2011 to disburse $300,000,000 over three years in the form of low interest loans and SDI for water supply projects to provide “an adequate supply of clean and affordable water” to communities in need of water security.  The Georgia Environmental Finance Authority (GEFA) was to administer the loans, and the Department of Community Affairs (DCA) was to budget for the SDI.  In 2011 and 2012, and in consultation with Georgia State Financing and Investment Commission (GSFIC), all the parties agreed that SDI had to result in state ownership of a physical “definable asset with an appropriate fair market value and useful life,” like land, a well, a water tower, or other real property.

In 2012, the GWSP’s first round simultaneously awarded $99,550,000 in loans and SDI.  The process revealed missed opportunities, political favoritism, and projects that demonstrated no need but were funded anyway, such as the Flint River aquifer storage and recovery (ASR) project in southwest Georgia.

Perhaps to avoid controversy again in 2013, GEFA re-wrote the scoring criteria for the second round of the GWSP.  The biggest change eliminated the first and key threshold question that was asked of all projects in 2012: “Does the applicant(s) demonstrate a need for new water supply through 2050?”  According to directions in the 2012 scoring criteria, “if the applicant does not demonstrate such a need, the applicant earns a zero for” the “Proposed Approach” criterion.  In other words, the 2013 criteria stripped a key qualifying question that was responsible for a number of projects rating a zero for need in 2012, projects that included the Flint River ASR scheme and the Lake Lanier Islands water well.  In 2013, applicants did not have to identify the need, they only had to indicate “the need is significant.”

With that criteria in hand, GEFA awarded four loans totaling $38,800,000 on August 27, 2013.  Then GEFA decided to rewrite the scoring criteria again but only for SDI applications.  GEFA, only with input from the Governor’s office and the Environmental Protection Division – and leaving DCA and GSFIC in the dark – arbitrarily redefined what classified as an “asset” for the purpose of awarding SDI to specific projects.  They changed the rules in the middle of the game.  Now, SDI awards do not have to result in state ownership of a physical asset.  Now, a state agency with no legislative or regulatory authority claims – despite centuries of established riparian rights – that the state can own water in the form of augmented flow and quantities of water in a reservoir.

On October 11, 2013, GEFA allowed SDI applicants to revise and resubmit their applications based on the new rules.  Five applicants resubmitted and two other applicants let theirs stand, however, the Madison Industrial Authority and Camp John Hope applications may no longer be eligible based on the new criteria.  While only $44,000,000 is available, the total request amounts to more than $105,000,000.  So what sort of asset do the applicants want the state to invest in?

The City of Dawsonville wants the state to spend $20,000,000 to purchase 1,100 acres of “real property” necessary for the proposed Calhoun Creek Reservoir.  According to the applicant, Calhoun Creek will provide water supply, flow augmentation and drought mitigation benefits for the state of Georgia.  The applicant sees little risk associated with the project.  However, the state would be investing in a project that the applicant acknowledges is not needed or supported by any regional utility or other municipalities.  Plus, the scheme is risky for environmental reasons: The proposal includes interbasin transfers (IBT) of raw water between river basins – in this case the Etowah and Chattahoochee – and this is unprecedented in Georgia.  Read more about one citizen’s opinion of Calhoun Creek.

Beyond that application, what asset the state will get in return for spending tax dollars is murky at best.

The City of Auburn identifies why their rock quarry-to-water supply reservoir project will benefit Auburn, Winder, and Barrow County.  Without the requested $2,500,000, Auburn “would have to raise its water rates.”  But the letter fails to really specify how or why the project would benefit the state.  Plus, GEFA already gave Auburn a $7,300,000 loan from the GWSP in September.

Paulding County already received a $21,600,000 GWSP loan in August to finance the Richland Creek Reservoir, in addition to $32,000,000 in loans awarded last year.  That’s a lot of money for a reservoir the county “would not require” or need for another fifty years, according to their recent October 10 letter.  Nevertheless, the county claims that $33,000,000 more in SDI would cover final design and construction phases.  But, according to David Austin – the Chairman of the Paulding County Board of Commissioners and brother to the Metro North Georgia Water Planning District chairman (Boyd): “several questions must be answered concerning how the State would like to utilize the project and how much capacity the State would like to obtain through its participation.”  In other words, Paulding County would like more of the state’s tax payer money but the state has not identified a need for water supply, increased safe yield or anything else.  In letters dated October 10 and 14, Paulding states they have no idea what they would be giving to the state in return for state investment.

Carroll County already received a more the $9,000,000 loan from the GWSP in September to expand the existing and tiny Indian Creek reservoir in the Tallapoosa basin.  Now the west Georgia community seeks a whopping $35,000,000 in SDI to build a bigger dam.  This application letter again reveals the unformed nature of the SDI criteria: “the Authority is willing to explore an agreement with the state to assist it with flow augmentation and protection against drought.”  What would the state actually be investing in?  Good question; Carroll County does not actually say.

All roads, rivers and water politics in Georgia seem to lead to north Georgia and Glades Reservoir.  Hall County has been working on the Glades project for decades, and has altered the project’s purpose and justification five times since 2007.  Because of this long process, undefined need and the mounting tab (current estimate: $130,000,000), Hall County needs a bailout.  The solution includes a $14,599,000 SDI request and a flat annual fresh water fee of $70 per tax parcel – regardless of size or value – levied on each of county’s approximately 75,000 tax parcels for at least fifteen years.  The letter falsely claims: “the city of Gainesville has stated that is supports the project.”  In fact, on October 1, 2013, the Gainesville City Council tabled a resolution on this very matter.  Citizens were grateful.

The Governor’s office, GEFA, and EPD made a unilateral decision on how state dollars should be spent to secure water supplies for communities in need. When they discovered they couldn’t invest tax payers’ dollars in pet projects, they changed the rules in the middle of the game.  But they did not seek any input from the experts. They made an end-round around GSFIC – the state’s financial planners – and undermined a system of checks and balances meant to ensure that state revenues and tax dollars are spent in compliance with the Constitution of the State of Georgia.

-Chris Manganiello

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