CA Water Bond on Election Eve: Did Political Leadership Push Prop 1 Over the Finish Line?

Sitting before my computer at sundown November 3rd, thinking about whether California voters will pass the 2014 water bond?  Hydrowonk believes the outcome depends on the balance among three factors: will the drought and political leadership exerted by Governor Brown overcome the drag of increasing debt burdens on voter support for water bonds? According to the wisdom of the Stratecon Water Policy Marketplace, the answer is yes. This market now predicts that the chance of the water bond passing is 57%.  Given the trend in voter support of water bonds and California debt loads, the passage of the water bond would be a remarkable achievement.

The Drag of Increasing Debt Burdens

Voter approval of water bonds has declined since the mid-1980s when voters approved water bonds with yes votes in the mid-70%. By 2006, voters were approving water bonds with yes votes in the mid-50%.  An analysis of voting patterns by Hydrowonk concluded that voter-approval of water bonds dwindles with rising debt burdens (see chart). Water Bond Vote Given California’s rising debt burden, Hydrowonk’s water bond model predicts that a $7.1 billion water bond in 2014 would have an expected vote share of 44.2%. Taking into account the statistical variability in this forecast, the chance of the water bond passing is 18%.  In other words, Vegas would put 5/1 odds against Prop 1 passing.

Enter the Drought

The current California drought has commandeered headlines. Central Valley agriculture has been laid to waste with unprecedented interruptions in state and federal project water deliveries.  Urban water users are urged to cutback use.  Water providers have imposed water use restrictions.  (On a personal note, Hydrowonk just closed on a house whose water provider sent an avalanche of material on water budgets and water restrictions.)  Has the drought escaped the notice of any voter?

When the water bond was the $11.14 billion blow-out passed by the Legislature in 2009, recent polling of voters suggested a water bond failure. By spring, polls showed that a trimmed down bond would yield more support (consistent with the drag of increasing debt burden discussed above).  Yet, the “up-tick” in the polls still left the outcome in doubt.

The Legislature struggled throughout most of the summer with proposals that represented, at best, modest cutbacks in the 2009 bond. Interest groups protected their individual flanks.  The sum of the parts still totaled to a hefty price tag.  Prospects of voters passing the water bond remained bleak.

Enter Political Leadership

Governor Brown changed the political dynamic with leadership. He told the Legislature that he would campaign against a water bond if the Legislature did not cut the size significantly.  He put the bar as low as $6 billion, but a political compromise was secured at $7.1 billion in new bonds and a reassignment of $425 million from unspent monies from earlier bond issues, some decades ago.

One-Sided Campaign

The most critical aspect of the water bond was the unanimous vote in the State Senate and almost unanimous vote in the Assembly. A grand coalition was formed—Democrats and Republicans, northern California with central and southern California.  Governor Brown is on TV supporting Prop 1 (water bond) and Prop 2 (rainy day fund—is California learning from Texas?).  While there is scattered opposition, it has not hit the high-cost California media outlets.  Unlike other electoral battles in California water (remember the Peripheral Canal in 1982?), the political community is united and there is no significant regional conflict that opponents could have exploited.  If Prop 1 passes tomorrow, the political strategy behind the 2014 water bond should be heralded as political genius.

Stratecon Water Policy Marketplace Speaks

So, Hydrowonk, what will happen? Well, Hydrowonk is not smart enough to figure this out without some tools.  So, I turn to the “wisdom of crowds” represented by prediction markets.  Hydrowonk put up a water bond question in mid-August on the Stratecon Water Policy Marketplace:

“Will California voters approve the water bond authorized by the Water Quality, Supply, and Infrastructure Improvement Act of 2014 in the November 2014 election?”

Anyone can join the marketplace and express their opinions about whether the probability of Prop 1 passing is higher or lower than currently determined in Stratecon’s water policy market. A total of 24 predictions have been made as of this post (see chart for price history and volume).

Prop 1 trading chart

From mid-August through mid-September, the predictions suggested that the probability of Prop 1 passing was below 50%.  The situation turned in mid-September.  Since then, the probability of success for Prop 1 has been steadily rising, although there was retreat in late October that proved temporary.

The Stratecon Water Policy Marketplace allows participants to express anonymous views as they submit their predictions—if you like a graffiti wall. Hydrowonk will defer to your takeaways, although my favorite one was a post on Halloween (can you guess which one?).

Comment Date
“Don’t believe drought will overcome voters aversion to growing debt” August 15, 2014
“Bipartisan agreement and continuing drought” August 16, 2014
“People do desperate things in bad droughts” September 02, 2014
“how else can we pay for it?” “The poor infrastructure was made apparent in LA ‘s flooding this summer” September 24, 2014
“Strong support and only opposition north of sacramento” October 02, 2014
“As more voters look at bond and small opposition gets some media, lower approval.” October 28, 2014
“CA needs to obligate funding for water conservation” October 30, 2014
“Because water is life. Nothing else is accomplished without sound water management.” October 30, 2014
“Californians are goofy” October 31, 2014
“Little opposition on the air” October 31, 2014
“voters tired of taking on more debt” November 01, 2014
“Polling shows stable support” November 02, 2014

Final Thought

The prospect for the water bond certainly looks much brighter than a year ago. Undoubtedly, the drought helped.  Based on an analysis of historical trends in voting and debt burdens, the chance of Prop 1 passing is 18%.  Tonight, Stratecon’s Water Policy Marketplace predicts that Prop 1’s probability of passing is 57%.  Remarkable testimony to how this year is different from historical conditions.

Hydrowonk has a nagging thought. The critical factor was that the 2014 water bond included $2.7 billion for water storage. If the water bond did not have enough money for storage, the bond campaign would have faced a split California, political establishment and user community. Support in the Central Valley and other inland counties would have probably turned into opposition. As you look at the electoral map tomorrow night, focus on the fact that California is a combination of “blue counties” (San Francisco, Los Angeles, along the coast) and “red counties” inland areas. Voting on a controversial water bond would probably have followed the “blue/red” divide in California.

This entry was posted in California 2014 Water Bond, Prediction Markets, Storage on by .

About Rodney T. Smith

Rodney T. Smith, Ph.D., President of Stratecon Inc.—an economics and strategic planning consulting firm—advises public and private sector water users on the acquisition, sale and leasing of water rights and water supplies in the western U.S. He is routinely involved in economic valuation of water rights, water investments, and negotiation of water acquisition and transportation agreements and has served as an expert witness in the economic valuation of groundwater resources, disputes over the economic interpretation of water contracts, economics of water conservation and water use practices, and the socio-economic impacts of land fallowing. For more information, see

2 thoughts on “CA Water Bond on Election Eve: Did Political Leadership Push Prop 1 Over the Finish Line?

  1. WayneLusvardi

    I believe the critical aspect of the now fait acomplis Water Bond will be its implementation.

    The $2.7 billion for water storage is subject to the predilections of the California Water Commission which does not need the legislature to fund a project. The Commission is 9 member Commission is stacked with four environmental advocates, 2 union labor advocates, 6 Democrats, and 8 Northern Californians. Given the Commission’s make up it is more like a Kangaroo Court than a vetting body.

    Of the 21 water bonds since 1970 totaling $32.45 billion (in 2010 dollars), California got no new surface water storage, allegedly about 300,000 acre feet of new groundwater, and who knows how much conserved water because the state does not require any metrics on its funding. The largest added water since 1970 was the 300,000++ acre feet of water transferred from the Imperial Irrigation District to MWD/San Diego at a cost of about $258 per acre foot which required no state water bond funding.

    1. Rodney T. Smith Post author


      Thanks for your persecutive. If Prop 1 passes, then the next step is the one you identified. How will it be implemented. As I indicated in an earlier post, the issue will be whether the $2.7 billion (for non-water supply benefits) will be sufficient to leave the cost of “water supply” benefits reasonable. When addressing water supply benefits, the DWR water analysis of supply availability was challenged by this year’s 5% SWP allocation and 0% allocation for CVP contractors. Unless DWR revisits their hydrology analysis (in light of recent regulatory restrictions), the “analysis” will be beside the point. Until contracts are offered and defined terms and conditions, and buyers “accept”, who knows what the future holds? Final point. Interesting the 2014 water bond legislation involved reallocation of earlier bond issues (as much as 30 years ago), one must consider whether, when all is said and done, another source of “unexpended funds”. To paraphase my earlier post, “CA needs to pass the water bond to see what it means”


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