Peripheral Tunnels Economic Impacts Inflated: Gov. Brown Refuses to Conduct Benefit-Cost Analysis; Cost Estimate has Tripled, Public Will Pay

FOR IMMEDIATE RELEASE: Monday, August 5, 2013
Contact: Steve Hopcraft 916/457-5546;; Twitter: @shopcraft
Barbara Barrigan-Parrilla 209/479-2053;
Twitter: @RestoretheDelta

Peripheral Tunnels Economic Impacts Inflated:
Gov. Brown Refuses to Conduct Benefit-Cost Analysis;
Cost Estimate has Tripled, Public Will Pay

“No new water” for $54 billion

Sacramento, CA – Restore the Delta (RTD), opponents of Gov. Brown’s rush to build Peripheral Tunnels that would drain the Delta and doom salmon and other Pacific fisheries, joined with economic experts, environmental and consumer advocates today in criticizing the latest Economic Impact Report on the Bay Delta Conservation Plan (BDCP) as another “biased and piecemeal” analysis intended to promote the expensive and unnecessary project. “The Brown Administration is refusing to follow its own guidelines for determining whether a project’s benefits outweigh its costs,” said RTD Executive Director Barbara Barrigan-Parrilla. “The latest report perpetuates the biased, fragmented analysis that is no substitute for the comprehensive benefits-cost analysis any other project would be required to perform. If this weren’t the governor’s pet project, the Peripheral Tunnels would be rejected by the Dept. of Water Resources, based on its own guidelines.”

“The BDCP has refused repeated requests to conduct a benefit-cost analysis, and misled leaders and the public about their intention to conduct such analysis. By refusing benefit-cost analysis, the state is not following their own published guidelines and professional standards for economic analysis of large infrastructure projects,” said Dr. Jeffrey Michael, Director of Eberhardt School of Business at the University of the Pacific, and co-author of the Delta Protection Commission’s Economic Sustainability Plan.

Dr. Michael’s own cost-benefits analysis has found that the BDCP would cost $2.50 for every $1 in benefits. Three separate analyses of the costs, benefits and financial burdens of the proposed Bay-Delta Conservation Plan (BDCP), and its Peripheral Tunnels found it costs more than its benefits, and that it will impose a heavy financial burden on California businesses and families. The Brown Administration has produced partial and scattered reports that the public will not find useful in determining whether this largest-ever California water project is worth the crushing cost.

“Since the BDCP process started, the cost estimates of Delta conveyance have increased from $4 billion to $14 billion, the water supply and environmental benefits have declined, and seismic levee improvements have been shown to provide a broader range of economic benefits than the tunnels for a fraction of the cost. Our initial benefit-cost analysis finds that BDCP is a bad deal for all Californians, and the repeated refusal of state and federal agencies to follow their own economic analysis guidelines is troubling. Our benefits-cost analysis found the cost of the BDCP is $7 billion higher than its benefits; and, that it would cost $2.50 for every $1 in benefits, which is one of the lowest ratios for any project I have analyzed,” said Dr. Michael.

“Building $50 billion tunnels benefits California’s wealthiest corporate agribusinesses and oil companies that are demanding excessive amounts of water at the expense of California taxpayers and ratepayers. This report is a phony smokescreen to mask their water grab,” said Adam Scow, California Campaign Director with Food & Water Watch, a consumer advocacy organization.

Food & Water Watch commissioned ECONorthwest to analyze the impacts that the costs of building and operating the tunnels would have on LADWP ratepayers. The project would cost a typical Los Angeles family up to $9,0000, according to the report. It outlines a low-cost scenario of $20.6 billion, and a high-cost scenario of $47.2 billion. For each, they evaluate the costs if the state and federal water projects evenly split the costs of the tunnel and related activities, and if the state project paid 100 percent.

Bob Wright, Senior Counsel for Friends of the River pointed out that “the whole purpose of the Delta Water Tunnels water grab is to benefit the water exporters. The new biased Report shows net benefits of $4.683 billion to the exporters. (Table ES-2 p. ES-9. Yet the BDCP Appendix 9.A released in May showed that the net benefits for not doing the Tunnels at all, continuing with Through Delta conveyance, would be $4.415 billion. That is a tiny difference over the next 50 years and demonstrates based on even the biased work of the project consultants that there is no valid reason to waste one more dollar on trying to grab massive quantities of freshwater upstream from the Delta and critical habitat for a number of endangered fish species to accomplish a claimed miniscule economic benefit for the exporters.”

The report underestimates the negative impact on Delta recreation. “The BDCP will be devastating to recreation in the region. Many Delta marinas are small mom and pop operations that will not survive a disruption in business coming on top of the current major economic downturn,” said Bill Wells, executive director of the California Delta Chamber of Commerce. “Tourism and recreation are the main economic drivers in the Delta after agriculture. While 75% of Delta boaters live within 75 miles of the Delta the region attracts visitors from all over the world with it’s 1,000 miles of waterways and vast opportunities for land based recreation too “Proposed disruptions to State Routes 4, 12, and 160 will limit the number of automobiles that visit the area. The 24 hour per day operations of pile drivers and huge trucks hauling ‘muck’ will further disrupt traffic as well as boating, fishing, hunting, bird watching, wine tasting and casual day trips to area towns, museums, and restaurants. The construction of giant intakes at the town of Hood will disrupt boat traffic on the Sacramento River. The proposed barriers on Georgiana Slough and elsewhere in the Delta will further block boat traffic. ”

Wells quoted BDCP documents: “Lasting effects on areas made less desirable in which to live, work, shop, or participate in recreational activities as a result of BDCP operations could lead to localized abandonment of buildings.” “This sounds innocuous unless it’s your building that is abandoned,” said Wells. “Californians need to stand up and oppose the BDCP, it will devastate the Delta and the economy of California for the benefit of a few powerful fat cats.”

Dr. Michael said the Peripheral Tunnels would undercut more cost-effective efforts to improve California water policy. “The only way to finance the colossal debt of the Delta tunnels will be to keep southern California and Silicon Valley dependent on Delta water. The state cannot both build BDCP and develop advanced water technologies and alternative supplies. The two visions are fundamentally in conflict. A combination of Delta levee upgrades, local water supplies, conservation and recycling will be less expensive, more resilient to droughts (the biggest reliability threat), save lives and protect critical statewide transportation and energy infrastructure, and create jobs across the state, including southern California.”

“BDCP continues to ignore seismic levee upgrade alternatives that are cheaper than the tunnels and protect lives and more economic assets. This report continues the earthquake, water supply scare rhetoric, while ignoring the less expensive, common sense solution of seismic upgrades to Delta levees,” said Dr. Robert Pyke, a consulting geotechnical engineer and consultant to the Delta Protection Commission for its Economic Sustainability Plan. “Even though the ‘earthquake benefits’ are still overstated, they are small, which puts the lie to earthquake threat as a principal reason for building the tunnels. The water supply benefits are specious, because there will be nowhere to store the water in many of the wettest years.”

“The State likes to talk about how the water contractors will be paying for construction of the tunnels – but they will just pass on higher rates for water rate payers. They downplay that 15% of the project costs will be shifted to California tax payers through general obligation bonds,” said Barbara Barrigan-Parrilla, executive director of Restore the Delta. “They fail to mention that 16% of the project will be funded by U.S. taxpayers to cover the mitigation needed for damage from building these two enormous tunnels and diverting over half of the Sacramento River away from the estuary. Californians will be paying for this project with higher water rates, state taxes, and Federal taxes – all so Westlands growers can continue to do unsustainable farming on unsuitable land.”

“The cost keeps escalating and the benefits diminishing,” said Barrigan-Parrilla. Restore the Delta pointed to findings of the administration’s own analysis showing the “through-Delta” alternative has the highest benefit-cost ratio of all the options. “The Brown Administration has failed to disclose that California families will pay thousands of dollars, yet receive no new water.”

BDCP hasn’t met the criteria for financial feasibility set forth in DWR’s own “Economic Analysis Guidebook”: “The test of financial feasibility is passed if (a) beneficiaries are willing and able to pay their allocated costs for project outputs over the life of the project” (page 46). BDCP can’t evaluate financial feasibility without a cost allocation, and they don’t have a final cost allocation. They haven’t shown benefits/costs for agricultural beneficiaries under proportional cost allocation.

“We still see a project with no comprehensive cost-benefit analysis, and no analysis of water availability,” said Barrigan-Parrilla. “This boondoggle will impose heavy financial burdens on California families and businesses, while mainly benefiting a few mega-farmers in Westlands and Kern water districts. There is a better, cheaper and faster way to address our water challenges.”

“The BDCP’s own prior economic analysis shows that a through Delta conveyance alternative (Alternative F) would have a higher benefit-cost ratio to the water contractors, provide higher levels of ecosystem restoration, and cost $8.5 billion less than the twin tunnels plan,” said Dr. Michael. (Table 9-32, page 9-264)

Dr. Michael said, “BDCP’s own analysis shows that the majority of the economic benefits accrue to urban users, whereas the majority of water goes to farmers.”

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