It’s a calm, clear day on West Sacramento’s South River Road, a meandering two-lane route that runs atop a levee buffering houses and farmland from the placid Sacramento River. It’s hard to envision the chaos that would ensue if the great dirt barrier were to burst, pouring millions of gallons of water into adjacent homes and businesses, but that nightmare scenario just got harder to prevent.

For decades, state and local flood agencies have been able to start construction on approved flood prevention projects and then request reimbursement from the federal government after the fact. But in 2011, Assistant Secretary of the Army Jo-Ellen Darcy put an end to that policy nationwide, pointing a finger at the Yuba County Water Agency, which she claimed was abusing the system by filing excessive claims.

As a result, Capital Region communities, and West Sacramento in particular, are now wondering how they’re going to pay for necessary levee improvement projects that stretch into the tens of millions of dollars. 

Formerly known as a Section 104 credit, the federal repayment process for levee improvement projects has long been a boon to the Sacramento Region’s flood protection efforts. Similar to pre-qualifying for an auto or home loan, the credit program has helped to kick start big-ticket flood mitigation projects like the Natomas Levee Improvement Program and the spillway at Folsom Dam.

While communities nationwide are free to self-finance their own flood prevention projects, efforts have traditionally been a financial collaboration of three partners: a local flood agency, the state and the U.S. Army Corps of Engineers. Local agencies typically pay 35 to 50 percent of the cost, and the state and federal government pay the rest.

Because such projects can often take years to get off the ground, Congress in 1986 began allowing nonfederal agencies to begin construction on proposed projects following the Corps’ initial reconnaissance study. The locals can then request that the money they spend be credited toward their portion of the project’s overall cost.

“We really need this advance investment by local agencies,” says Congresswoman Doris Matsui, whose 5th Congressional District includes flood-prone areas like Natomas and Sacramento’s Pocket Area. “Because of the credit, levee repairs in Natomas were able to begin in 2007. Without the credit, it would not have begun until [2011].”

But that all changed in May 2011. Citing what she deemed excessive credit requests by the Yuba County Water Agency for levee upgrades along the Upper Yuba River near Marysville, Secretary Darcy killed the Section 104 credit program for the entire country.

In her announcement, Secretary Darcy listed multiple issues with the Yuba agency’s use of the credit program, including the fact that they had made seven requests on the same levee project, that their cost estimates for the work were significantly higher than the Corps’ estimates, and that the amount of credit they were collectively seeking “far exceeded any credit that might eventually be afforded” to them.

She did not mention any other agencies or actions as cause for her decision.

Additional policy statements sent to the Corps, however, implied a belief that too many local agencies push projects that encourage development in dangerous floodplains and then use the crediting program to pressure the Corps into endorsing these risky ventures.

Even so, Secretary Darcy is now referring local agencies to an alternative crediting tool, Section 221, which she says is “more contemporary and comprehensive.” The jurisdictions aren’t buying it.

Scott Shapiro, an attorney with Downey Brand and a long-time consultant for the Sacramento Area Flood Control Agency (SAFCA), says the new process is restrictive. Early credit requests, for instance, are not allowed, and other requirements can push back credit eligibility for several years. The new credit process also lacks coverage for a variety of high cost elements, including land acquisitions, easements and rights of way, potentially adding tens of millions of dollars to the costs paid by the state and local agencies.

Shapiro says those restrictions are making flood agencies think twice about moving ahead with future projects, even those already in the works.

“This policy is creating a disincentive for local agencies to go out and spend money now to reduce significant flood risk,” Shapiro says.

The timing of the decision has mostly spared SAFCA and the San Joaquin Area Flood Control Agency: SAFCA Executive Director Rick Johnson says his agency doesn’t have any projects pending Section 104 credit, and SJAFCA Executive Director Jim Giottonini says his area has only one, which impacts a relatively small number of residents.

But West Sacramento is a different story. In 2011, the city was working to complete two critical flood mitigation projects along its northern border in an effort to reach state-mandated 200-year flood protection. In a classic case of really bad timing, Secretary Darcy’s decision came just as the city’s application reached her desk. It was denied.

Rounds of back and forth dickering led nowhere, leaving the city with the tough choice of stopping work or finishing without the hope of receiving federal credit.

The city chose to finish both projects on its own dime. Now, city leaders are facing the same dilemma as they look to begin the Southport Early Implementation Project, a major levee renovation along a six-mile stretch of the Sacramento River along the city’s eastern border. It is estimated to cost around $160 million, with work hopefully beginning in 2014.

It is a significant financial risk. West Sacramento Mayor Christopher Cabaldon says the city has access to around $80 million for flood projects, primarily acquired through a combination of new development fees and property and sales tax assessments. But because the project features large setback levees, much of the initial costs will be spent acquiring land and rights of way, costs Section 221 credit won’t cover.

Although the Corps has recently adopted plans to speed up its study process, any credit West Sacramento might get for the actual construction work will come, at best, years from now. That leaves the city in the unenviable position of spending all of its available money on just one project.

While Cabaldon says that would bring the city to better than 50-

percent completion on its pending levee upgrades, it would also leave West Sacramento without the money to take on any further projects for the foreseeable future.

Even with that uncertainty, Cabaldon says there are several good reasons for the city to push forward.

“For one, the Southport project gives us vastly better protection against loss of life and property,” he says. “It is an absolute no-brainer from a safety perspective.”

It’s also something the Federal Emergency Management Agency likes to see. Cabaldon says FEMA has so far been satisfied with the city’s continuing efforts to tackle its flood dangers, and has no interest in re-mapping the city. Both parties, he says, know a re-map will end up creating the same type of moratorium on new building currently in place in Natomas. “That would essentially result in a shutdown of all new economic development, and then we couldn’t pay for the levee improvements,” he says. “They get the Catch-22 we’d be in. As long as we keep finishing one levee a year, they know we’re making progress.”

The issue has drawn the attention of many of California’s Congressional contingent, including Sens. Dianne Feinstein and Barbara Boxer. The two have urged Secretary Darcy to consider granting waivers to specific local flood agencies that would allow them to garner the earlier credit. Darcy has been open to the proposal, but so far West Sacramento’s attempts to obtain such credit for their earlier levee improvements have been rejected.

Although Secretary Darcy singled out the Yuba County Water Agency, other flood officials in the Sacramento Region say they do not have any ill will over what happened.

“There’s no resentment for them at all,” says Shapiro. “We’re all in this together.”

He further notes that Secretary Darcy’s concern about floodplain development and local advance construction driving the Corps’ planning process was more about her issues with SAFCA’s Natomas project than with Yuba. And while the issue over accumulation of credits definitely came out of the Yuba project, Shapiro says the California bond measures that provide all the state money used for flood reduction projects, propositions 1E and 84, require state and local flood agencies to max out all available federal cost share options.

In essence, he says, they “were required to apply for the Section 104 credit” at every opportunity.

Tip Belza, a member of the Yuba County Water Agency board of directors, says he also would take issue with his agency being blamed for its loss.

“We haven’t done anything outside of the norm in this area at all,” he says. “We’ve done a lot of flood protection projects, but we’ve also spent one heck of a lot of our own money doing it.

“When you’ve been flooded twice in 10 years like we were (1986 and 1997), you are very motivated to get projects done.”