COURT REJECTS DWR BOND VALIDATION FOR DELTA PROGRAM, HOLDING AGENCY EXCEEDED STATUTORY AUTHORITY

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In Department of Water Resources v. Metropolitan Water Dist. (2025) 117 Cal.App.5th 751, the Third District Court of Appeal affirmed the trial court’s decision that the Department of Water Resources (DWR) exceeded its statutory authority by issuing revenue bonds for the “Delta Program.”

Key Takeaway

  • Statutory authority for public financing must be clearly defined. The court held that DWR could not validate revenue bonds for the Delta Program because the program was defined too broadly to qualify as a “further modification” of the Feather River Project under Water Code section 11260.

Background

DWR operates the State Water Project, a statewide system of reservoirs, canals, and pumping facilities that deliver water from Northern California to water contractors throughout the state. The State Water Project was authorized by the Legislature in the 1950s, including the Feather River Project, which, under Water Code section 11260, authorizes DWR to construct, operate, and modify.

As part of the State Water Project, DWR has proposed the Delta Conveyance Project, a tunnel conveyance system intended to transport water through the Sacramento-San Joaquin Delta. In 2020, DWR adopted resolutions authorizing issuance of “Delta Program Revenue Bonds” to finance environmental review and planning, and—if approved—construction of water conveyance facilities associated with the “Delta Program.”

To confirm the legality of its public financing commitment, DWR filed a validation action on August 6, 2020, seeking judicial approval of the bond resolutions. DWR took the position that the Delta Program qualified as a “further modification” of the Feather River Project under Water Code section 11260. Various parties appeared both in support of and in opposition to validation, and opponents also filed a separate CEQA action that was consolidated with the validation proceeding. The trial court rejected the CEQA claims but concluded DWR exceeded its statutory authority in adopting the bond resolutions and therefore denied validation.

Appellate Decision

The Third District Court of Appeal considered whether the Delta Program, as defined in the Bond Resolutions, qualifies as a “further modification” of the Feather River Project within DWR’s statutory authority under Water Code section 11260. DWR argued that the Delta Program constituted an authorized modification because facilities conveying water in, about, and through the Delta would serve the purpose of the Feather River Project. Opponents countered that the Delta Program was too broadly defined to support validation and was not limited to facilities consistent with the Feather River Project.

The court agreed with the opponents, concluding that DWR’s definition of the Delta Program exceeded the scope of its authority under section 11260. The court found the Delta Program’s definition overly broad because it imposed no meaningful limits on the facilities that could be financed, the direction or use of the water, or the purpose of the program. As a result, the court observed that the bond resolutions would grant DWR “nearly unlimited discretion to specify the facilities for which the bonds will be issued.” The mere fact that a Delta Program facility would “convey water in, about, and through the Delta area” was insufficient to demonstrate a connection to the Feather River Project.

The court further reasoned that validating the bonds could effectively expand DWR’s discretion to define revenue sources for repayment or resolve whether DWR may charge state water contractors for Delta Program capital costs—issues beyond the scope of the validation proceeding. Because DWR failed to show that the Delta Program fell within its delegated authority, the court affirmed the denial of validation. Having resolved the case on that ground, the court declined to address the remaining claims, including those related to CEQA.

­ – Hannah Rider & Nina Berglund