SAN JOSE — Three months after Coyote Creek overflowed its banks and caused $100 million in damage to homes and businesses in San Jose, a flood control project straddling the city’s northern edges with Milpitas may be in danger of being shut down because of red tape.
The $35 million project is designed to provide 100-year flood protection to 2.2 miles of Upper Berryessa Creek, reducing flood risk to 680 properties and, perhaps most importantly, to Santa Clara County’s first BART station: the new Milpitas station, scheduled to open in December.
The creek, built by farmers in the 1920s as a drainage ditch, is now surrounded by major roads, subdivisions and developments such as the Great Mall of Milpitas. Biologists have found it contains no endangered species, and it runs dry most years during the summer.
Upper Berryessa Creek didn’t overflow its banks during this winter’s heavy rains, but every 10 to 20 years it does. The last big floods were in 1998, 1983 and 1982.
The flood control work, funded by Congress in 2014, had all its permits. Contractors hired by the Army Corps of Engineers began work in October.
But last month, state water regulators came back and rescinded an earlier approval they gave in March 2016. The regulators, working for the San Francisco Bay Regional Water Quality Control Board in Oakland, said the two agencies overseeing the project, the U.S. Army Corps of Engineers and the Santa Clara Valley Water District, had to restore 15 acres of wetlands or 15,000 feet of creek — nearly three miles — somewhere else in the South Bay to offset the harm to the environment from the project.
That could cost millions, according to the water district, which has appealed the order and threatened to sue.
More ominously, the Army Corps warned in a letter that the additional costs could cause the project to go over budget, changing its cost-benefit ratio calculations and “leading to its 
cancellation.”
“The regional board risks bringing this project to a screeching halt — and if that happens they have to take responsibility if there is flooding in this area,” said John Varela, chairman of the water district. “It’s a travesty.”
The environmental damage, the regional board staff wrote in its April 17 order, will come when construction crews widen the stream so it can hold more water during major storms.
When they carve back the banks and put rocky “rip rap” covered with soil and native plants along the edges, that will “result in less habitat” for “algae, worms, diatoms, micro- and macroinvertebrates, and fish larvae,” providing less food for fish and birds, according to the order from the regional board. It was signed by its executive officer, Bruce Wolfe.
Frustrated water district officials say that the entire episode illustrates why it can take so long — and cost so much — to build flood control projects.
“They say the stream is good habitat for fish and birds,” said Christopher Hakes, the assistant operating officer at the water district who is overseeing the project. “They took some pictures and there were ducks. I’ve had ducks in my pool. That doesn’t mean it is the right habitat for them.”
Regional water board officials say they are only enforcing the federal Clean Water Act and state water quality laws.
Keith Lichten, chief of the regional water board’s watershed management division, said that the laws are designed not only to protect crystal-clear wild salmon streams, but also degraded streams that could be brought back in ways that the Chicago River and urban streams around the country have been restored.
He said the regional water board does not want the flood control work shut down. In fact, Lichten said, his agency “bent over backwards” and gave early approval last year so the work would be done in time for the BART station opening. But, he said, the agency always made it clear that it could come back later and add more provisions to the permit.
“Construction is already underway,” Lichten said. “We’re pretty confident that it will be completed by the end of the year in time for the BART station opening.”
Water district officials say it’s illegal for the regional board to require costly new additions to a project once it has given approval when the conditions have not changed.
Meanwhile, construction crews hired by the Army Corps continue their work.
On Friday, the Army Corps declined interviews. On Sept. 19, however, when the issue of wetland restoration first arose, the top Army Corps official in the San Francisco District, Lt. Col. John Morrow, wrote a letter to the regional water board saying he was “disappointed and frustrated” and that the board was overstepping its authority. He said the board should have raised concerns earlier when it helped review the project’s extensive environmental impact study.
The board’s claims “lack scientific basis,” Morrow wrote.
“Unwarranted mitigation requirements could adversely impact the benefit-cost ratio of the project thereby leading to its cancellation,” he added, noting that other new burdens “could result in either a stop work order or termination of the project.”
Lichten said he has since talked with Army Corps officials and doesn’t believe the agency will bring the project to a halt. But water district officials say that’s still a very real possibility. They point out that Army Corps leaders in Washington, D.C., are now working for the Trump administration, which in recent weeks has halted $647 million in funding for Caltrain electrification on the Peninsula because of bureaucratic and political squabbling.
BART backers have been watching nervously. The new requirements could “result in significant delays,” wrote Cindy Chavez, a Santa Clara County supervisor who is chairwoman of the Valley Transportation Authority, in an October letter to the regional water board. The VTA is overseeing the $2.3 billion project to bring BART to San Jose.
The regional board’s stance could lead to “a long-term waste of public funds, or, at worst, result in the U.S. Army Corps of Engineers canceling or terminating the project,” Chavez said. “Not only would this situation leave the new BART station and rail lines vulnerable to flood damage, but it could also interrupt BART service during times of flooding.”
