California's future prosperity depends on a reliable and affordable water supply to fuel its growing economy and provide for its increasing population. The value of water to the state's $750 billion dollar economy was made clear when the March 1994 issue of Standard & Poor's Creditweek Municipal magazine warned bond investors that, “Problems faced by California water suppliers will have a generally negative impact on credit quality for years to come due to the economic impact and rising costs associated with water supply and reliability.”

Standard & Poor's assessment sent a chill through California's business community. In addition, other sources added to the grim forecast by elaborating on the widespread effects of water shortages:

• California's manufacturing and commercial sectors will be hit hardest by losses in revenues and jobs;

• Businesses will reconsider expansion within California and even consider relocating elsewhere; and

• Reduced economic activity due to an unreliable water supply will translate not only into lower credit quality, but reduced tax revenues for governmental entities as well.

Business leaders responded to these ominous predictions by getting involved in efforts to improve the state's ailing water system, adding a cogent, new voice to the chorus of traditional water interests. As the hub of the state's water system, the Bay-Delta immediately became the focus of their attention and efforts.

The Bay-Delta Accord: The Business Community's Involvement

The Standard & Poor's announcement in 1994 forced the business community to take notice of the problems in the Bay-Delta. A group of business leaders from throughout California reacted by writing a letter to President Bill Clinton and Governor Pete Wilson, urging them to move quickly to resolve the myriad of problems plaguing the Bay-Delta. This action signaled that it was time to transcend the north vs. south approach to water that had divided the state for decades by acknowledging that California's water supply problems threatened the entire state's economic future.

This coming together of the business community served as an impetus for the signing of the Bay-Delta Accord in December 1994, the landmark agreement which provided principles for the protection of the Bay-Delta. The Accord marked the beginning of California's long journey toward ensuring an adequate water supply for its cities, farms, and environment, which continues today and will continue well into the next century.

The Water Supply Dilemma

The Department of Water Resources recently spelled out California's water supply crisis in simple terms: if California sustains its current growth, the state could face a water supply shortage of 3.7-9 million acre-feet in the year 2020. This scenario would undoubtedly create an atmosphere hostile to economic growth and expansion.

To make matters worse, each successive period of prolonged water shortage, will hit California businesses increasingly harder. As the 1987-92 drought proved, businesses institutionalize water conservation practices enacted during a drought and continue them long after a dry-spell has ended. By eliminating the “fat“ in their water consumption, commercial and industrial interests lessen their capacity to absorb future reductions in their water supplies.