In a recent decision, the 3rd District Court of Appeal in California has ruled against the state Department of Water Resources’ (DWR) plan to finance Governor Gavin Newsom’s proposed water tunnel project. The court rejected the state’s proposal to issue billions of dollars in bonds for constructing a 45-mile tunnel beneath the Sacramento-San Joaquin River Delta.
Roger Moore, an attorney representing six Northern California counties and two Delta region water agencies, described the ruling as beneficial for ratepayers and taxpayers. He stated that it highlights the need for “transparency and accountability” from state agencies.
The appeals court upheld a previous 2024 decision by a Sacramento County Superior Court judge. It found that DWR does not have authority under a 1959 law to issue bonds for what would be considered a new “unit” of the State Water Project. The court concluded that DWR “exceeded its delegated authority” by planning to finance the tunnel through these bonds.
Kirsten Macintyre, spokesperson for DWR, clarified that while the court did not say DWR lacks authority to build or borrow funds for such projects, it found that their case description was “overly broad.” She said, “While DWR respectfully disagrees with that conclusion, we have taken additional steps to resolve the issue.” Macintyre noted that last year, DWR initiated another court case aimed at confirming its bond-issuing powers: “address the court’s concerns.”
If this appellate decision remains unchanged and no different outcome arises from ongoing litigation, state officials may need to revise their financing approach or consider petitioning the California Supreme Court.
The estimated cost of building the tunnel was $20.1 billion in 2024 according to state figures; however, critics argue actual expenses could be much higher. Officials have maintained that participating water agencies would ultimately repay any issued bonds.
The planned Delta Conveyance Project would create an additional route moving water from new intakes on the Sacramento River southward through existing aqueducts serving cities across California and agricultural land. This system currently supplies about 27 million people and irrigates approximately 750,000 acres of farmland.
California voters previously approved funding for earlier phases of this infrastructure in 1960 after legislation granted DWR construction authority in 1959. However, last week’s ruling determined those provisions do not extend bond issuance rights for major new modifications like this tunnel project.
Governor Newsom has called the project essential for California’s future and made it central to his administration’s agenda. Supporters argue it will help modernize water delivery systems amid climate change threats such as droughts, floods, sea level rise, and earthquake risks.
Opponents—including environmental groups, fishing interests, and tribal leaders—contend that construction could harm local communities and ecosystems within the Delta region while endangering already declining native fish populations.
