SAN FRANCISCO — Groundwater legislation that California Gov. Jerry Brown signed Sept. 16 is a credit positive for local governments that are dependent on agriculture, Moody's Investors Service said in a report Thursday.
"While the Sustainable Groundwater Management Act will not mitigate supply shortages during the current drought, it will provide a statewide framework for future management of groundwater," Robert Azrin, vice president and senior analyst at Moody's, wrote in the report. "The legislation is intended to prevent substantial further depletion of water resources."
Moody's said the legislation is a credit positive for the economically struggling Central Valley, including the counties of Tulare, Kern, and Merced. The counties are rated Aa2, A1, and Aa3, respectively.
Brown signed a package of three bills Tuesday designed to create a framework for sustainable, local groundwater management.
"A central feature of these bills is the recognition that groundwater management in California is best accomplished locally," Brown said in his
New regulations will require the adoption of sustainability plans for over-drafted basins, while directing local governments to manage their groundwater resources through metering and penalties. The California Department of Water Resources and the State Water Resources Control Board are permitted to intervene if local oversight is inadequate. The legislation will do little to mitigate the impact of the current severe drought because municipal entities will have five to seven years to develop a sustainability plan, Moody's said.
In addition, the legislation will have little impact on the credit profile of the 52 local water districts and agencies it rates in California.
"For the most part, where groundwater comprises a portion of supply for districts/agencies, the basin is already managed through powers granted under existing state laws or ad hoc local agreements or court adjudication," Azrin wrote. "Under the new legislation, any change in availability of water from unmanaged basins would likely be a small part of the water enterprises' total supply portfolios."
With the passage of the groundwater legislation, California becomes the last western state to regulate groundwater basins. According to the state, its groundwater accounts for approximately 30% to 46% of the state's total water supply, depending on the annual rainfall.
