Cal. Water Code § 12885.5

In furtherance of the policy set forth in Section 12881.4, no funds shall be loaned for either irrigation distribution system projects or municipal distribution system projects, except in cases which, in the judgment of the department and the commission, involve extreme hardship which jeopardizes the public health, safety or welfare. Distribution facilities which are a necessary and integral part of an overall water development project may be covered by a state loan.