In case you missed it…
Link to full report, "Benefit-Cost Analysis of The California WaterFix," by the Center for Business and Policy Research, University of the Pacific, August 2016.
Check out page 21 for a table on "Present Value of Benefits and Costs of Delta Tunnels Through the Year 2131." Dr. Jeffrey Michael finds that, "Although the study includes assumptions favorable to the WaterFix, the results clearly show that the WaterFix is not economically justified under both the base and optimistic scenarios. The base scenario finds a net present value of -$10.2 billion, and a benefit-cost ratio of 0.23. That means the WaterFix is estimated to provide only 23 cents of benefits for each dollar of cost. In the optimistic scenario, the net present value is -$7.8 billion and the benefit-cost ratio is 0.39."
Report: Delta tunnels fail financially
Costs exceed benefits, Pacific economist says
By Alex Brietler
August 24, 2016
The costs of Gov. Jerry Brown’s proposed Delta tunnels vastly outweigh the benefits of building them, according to an analysis released Wednesday by University of the Pacific economist Jeff Michael.
“I don’t think there’s a project that’s economically feasible here. And it’s not close,” said Michael, director of the university’s Center for Business and Policy Research.
Michael has long been critical of the $15 billion tunnels. His latest review finds 23 cents of benefits for every dollar that would be spent — or, under a more optimistic scenario, 39 cents of benefits per dollar spent.
The Delta Counties Coalition, which opposes the tunnels, contributed to the study with a $10,000 grant.
State officials had not seen Michael’s full report on Tuesday and could not comment in detail, but Erin Mellon, a spokeswoman for the California Natural Resources Agency, defended the merits of the tunnels project.
“More than 50 years of experience tells us that California needs to modernize its water delivery system in the Delta or face increasingly severe supply disruptions and ecosystem damage,” she said. “We’re confident that upgraded infrastructure will more than prove its worth to future generations."
Michael said he used conservative assumptions to calculate the costs and benefits, and relied on figures found in the state’s own reports.
Among his arguments:
• The tunnels no longer include 50-year guaranteed deliveries for water users, and won’t provide enough water to justify the cost of building them.
• The environmental benefits of creating more natural river flows in the south Delta will be offset by the construction of new intakes on the Sacramento River.
• While the tunnels will safeguard a portion of the state’s water supply from a potential earthquake that could topple Delta levees, Michael says that might not may not provide any overall economic benefit. California has experienced severe water shortages in recent years, he said, yet the state’s economy has grown “robustly.”
“The notion that civilization is going to collapse from a shortage that is a fraction of the severity of the drought, I would hope our current experience has put that to rest,” Michael said.
He said he did the study because the state is moving forward to seek approval of the tunnels without having released its own assessment of the costs and benefits.
Mellon said such a study will be coming once discussions about how to spread the costs of the project among different water users have been completed. “That’s an important piece of the puzzle," Mellon said, "and will ensure our study is comprehensive and accurate.”