Regional scientists, engineers, and inventors continue the search for technological solutions, and entrepreneurs have developed numerous new products to help solve our water needs. These legal and cultural institutions, and actors—and, of course, the firms that build the infrastructure and supply technologies—make up the functional components of regional water industries. Although this thesis is primarily focused on the emergence of a water reuse technologies industry it is critical to understand the Southern California industry context. In order to understand the workings behind market formation, knowledge development, or how resources are mobilized we must first understand the industry’s basic structure and the institutions governing it. The starting point of our analysis is to consider the Southern Californian regional water economy as it operates within the national context; particularly relevant is the state as it operates under a federal power sharing system .Interstate commerce is regulated by the Federal Government, and hence important governance tools such as interstate firm regulations, patent law, and environmental and safety regulations are largely in the hands of the Federal government . In general, California has a free hand to make rules and regulations as they see fit unless in conflict with Federal law; in practice,nft hydroponic this often means the state can make regulations that are stronger then the Federal government, but usually not weaker.

However the state cannot make independent trade rules and must abide by international treaties signed by the Federal government . Both entities have the power to make laws and tax and spend. The Federal government, however, has vastly more funds available and therefore large infrastructural expenditures as well as research and development investments are often allocated at the Federal level—although in the case of California’s water infrastructure local entities have been responsible for much investment . Innumerable legal scholars have dedicated their lives to exploring and debating the workings of our federal system, and I have no intention of attempting to cover such territory here. However, a few points are important to emphasize for our purposes. As participants in our national market, Southern California’s firms have access to the nation’s well-developed private financial markets as well as the nation’s consumer markets. Local scientific researchers are tied into national scientific networks. Inventors have protection under national patent system. Private entities, such as individual property owners and firms enjoy strong legal protections and have equal standing before the law. In claims of eminent domain the state is not only required to give just compensation, but often must put forth a strong legal case in order to justify the claim. The environment also enjoys strong legal protections under the U.S. system. Water projects must comply with legislation such as National Environmental Protection Act , California Environmental Quality Act , the Endangered Species Act, and numerous water and environmental quality rules. These protections have had profound impacts on state water management practices . The State and Federal governments both have also established agencies that create—or heavily influence—water policy. Similar to the nation as a whole, over 70% of the state’s water is used in agriculture . Accordingly, at the federal level much of California’s water policy and investment is directed towards the service of agriculture.

It should be noted that the United States effectively lacks a cohesive national water policy; this is largely due to the diverse geography of the country leading to very different local water needs. In effect this means that Federal agencies often serve as participants in local water strategies, rather then setting the policy agenda . This stands in stark contrast to some international examples such as Singapore or Israel where the central government has a near absolute authority to set national water policies. The Department of Agriculture and the EPA directly and indirectly play a strong role in the water economy through federal policy and regulation. Additionally, the Army Corp of Engineers and the Department of the Interior’s Bureau of Water Reclamation are charged with managing navigation, flood control, and the development —and transportation—of new water supplies. In Southern California these agencies continue to play a major role in the development of water resources, not only as a source of policy mandates, but also as direct builder and manager of numerous projects, from the Central Valley to the Colorado River . In fact, California’s largest surface storage owner is the Federal government with over 17 million acre feet in available water storage, nearly four times the state’s . The Bureau of Water Reclamation is also the largest holder of state water rights—the legal instrument that grants entities the right of water usage .The Federal government also plays a very strong role as a source of water research investment. For example the Bureau of Water Reclamation’s Title XVI and Water SMART programs provided millions to the building of the Orange County Ground Water Replenishment system . In 2011 California water projects and studies received a total of $21.2 million for reclamation and reuse projects and studies and another $11 million in 34 separate water and energy efficiency grants . Other Federal departments also play a role in funding water technology research including the Department of Agriculture, the Army Corp of Engineers, the Department of Energy, the EPA, and the National Science Foundation. Furthermore,nft system other Federal departments such as the Commerce Department and the Small Business Administration administer programs that provide funding for firms.

Although these programs are not water specific this is an additional source of firm financing other then conventional banks, private investors, and the stock or bond markets. Through their powers to tax and spend the Federal and State governments are a major source of water infrastructural investment and a primary source of research funding. They are also the regulators of our legal institutions, both those that manage knowledge creation, such as our patent system, but also financial instruments such as stocks and bonds that are primary funding mechanisms for our infrastructure, as well as the major source of private business investment. Typically there are three ways that public agencies pay for water infrastructure. In the United States the issuance of interest bearing bonds is a major form of infrastructure financing. Bonds allow a governmental entity to borrow money to be paid off over time to build or purchases capital facilities. The Federal government grants municipalities the right to raise funds through the selling of tax exempt bonds which gives municipal bonds an advantage over private bonds. In California infrastructural projects there are two principle bond types, general obligation bonds which are paid from the state’s general fund, and revenue bonds which are paid back by a dedicated revenue source usually the capital projects revenue stream . Unlike revenue bonds, general obligation bonds must be approved by voters and their repayment is guaranteed by the state’s taxes. Another is a so-called “pay as you go” approach where capital investment is paid by ongoing revenues, this is typical of many federal projects which are paid out of general tax revenues The third option is to rent or lease a privately owned infrastructural project. In this approach private owners make the capital investment and public agencies will make payments for its usage. This approach is still fairly rare in the United States, but is increasingly employed in the rest of the world, most notably in the developing world . These arrangements are often controversial and are criticized as privatization of a public good , but they have some major advantages. These types of contracts often save the local government the large initial capital expenditure—even though they are more costly for the region over the long term. They can also reduce the risk of incorporating new technologies for public agencies. In my examinations of Israel and Singapore, both countries used this type of agreement in building innovative plants that had the added benefit of bringing international expertise to the local market. If U.S. voters continue to be tax adverse and vote down new public agency water investment then one can expect to see this approach become more common here. Recently the LADWP has embarked on this approach with its request for proposals on a new Hyperion wastewater energy cogeneration plant in El Segundo3 . California is a representative democracy where the majority of water policy decisions are made by the State legislation, but the state also has a strong history of direct democracy through the use of voter ballot initiatives.

The ballot initiative process often takes precedence over the workings of the representative government. For example the infamous 1978 Proposition 13 tied state government’s ability to raise taxes by limiting annual property tax increases and requiring a two thirds legislative majority to raise taxes . Historically, voters have been very supportive of water issues. Since 1970, the state’s voters have authorized over $23.4 billion in water–related general obligation bonds. Nearly 80% of that has been approved in the six bonds since 2000 . However, voters have also turned down important water initiatives. For example voting down the Peripheral canal in 1982. The upcoming 2012 $11 Billion water bond revisits the peripheral canal, as well as a multitude of other projects . The bond had already been postponed from its original 2010 date and is likely to be further revised, and costs reduced to improve its chances at passage . Through its legislative authorities to determine the legal environment, California’s state government plays the most powerful role in setting local water policy. California’s legislature is among the nation’s most progressive and in recent years, the state has passed global warming, regional planning, and water ordinances that are among the world’s most admired. AB32 is a landmark global warming solutions act passed in 2006, and the closely related SB375, requires urban planning to include holistic assessments of carbon emissions and design communities that reduce them . In practice, this will result in higher density and less sprawling urbanities that are much more water efficient than designed communities of the past. Specific water policy measures such as AB1881, which mandates landscape water efficiency standards, or AB849 that allows for conditional use of grey water technologies , are important state tools that not only promote efficient use of water, but can also spur industry innovation . Today roughly 2,400,000 acre feet, or 60% of Southern California’s water supply, is imported to the region over the three major aqueducts – the Los Angeles River, the Colorado River, and the State Water Project . As these projects were built, each being more complex and expensive than the previous, a larger regional entity was needed to build and manage it. The City of Los Angeles first built the LA Aqueduct . Then in 1927 the regional water agency Metropolitan was established to build and manage the Colorado River aqueduct. Then finally in 1956, the State itself built the State Water Project and established a Department of Water Resources . The development of these multi-scalar regional water agencies has helped to give Southern California an incredibly complex water industry. California has over 3,000 water agencies operating statewide. Southern California has nearly 300 retail agencies alone . As these agencies regulate, manage, and develop water resources, they are important agents whose actions directly impact economic functions such as market formation, the direction of investment, and allocation of resources. Additionally—as I will show with Orange County—some of these agencies are at the forefront in researching new water technologies. Beneath the Federal and State agencies that regulate the industry, the actual service of distributing water and providing sanitation services and even most flood control services are provided by cities, counties, special districts—such as the regional special district MWD, or private firms. Special districts are public agencies established to manage or distribute water locally. These entities can be wholesalers, distributors, retailers, or specific levee and reclamation districts that largely manage flood control concerns, and water replenishment districts—generally regional organizations that are dedicated to improving groundwater supplies . Their governing boards are usually determined by public election. Special districts often have boundaries that overlap other water governance agencies, and rarely ever match municipal or county boundaries.