Thursday, October 28, 2010

Is this headline in California's future?

$9 billion project now tunnel to nowhere
New Jersey governor says state too broke 
Trenton, N.J. (AP) - The biggest public works project in the U.S. - a $9 billion-plus train tunnel connecting New Jersey and New York City - is dead in its tracks...
It also leaves New Jersey with nothing but a $600 million hole in the side of the hill.
(headline on page 6 of today's Stockton Record, no link available)

The obvious comparison is the $10+ billion Delta water supply tunnel envisioned in the deceptively titled Bay Delta Conservation Plan (BDCP) that still doesn't have a credible financing plan or economic analysis to justify the cost. 

Governor Christie is much admired by Meg Whitman and was out here campaigning for her.  He is also discussed as a potential Republican nominee for President.  California (both its government and its households) is a lot more "broke" than New Jersey, and has a weaker economic outlook.

The apparant refusal of BDCP to even analyze lower cost alternatives, including but not limited to a smaller tunnel, is simply bad government.  [Afternoon update: I am encouraged that the new FAQs posted by the BDCP state clearly that they in fact are evaluating, smaller tunnel options.  I had heard otherwise, but perhaps that is just what certain interest groups are urging them to do.]


  1. A smaller tunnel certainly should be on the table. But any discussion of new conveyance or no new conveyance has to include an economic analysis of the consequences of doing nothing. From what I've heard, the single-year impact of a complete collapse of water deliveries from the Delta is about three times greater than the estimated cost of the big tunnel - which would last for many, many years.

  2. Laer,

    This is a good comment. I agree with it all, except for your reference to the $40 billion cost of a collapse. And that's not your fault. You are just restating what has been repeated by many who are misrepresenting the report - yes I have read it.

    First, the $40 billion is not a single year cost and has been misrepresented by those pushing to get a big canal/tunnel. It is also not a net cost to the state, and it includes multiplier effects. That's o.k., but it is inappropriate to compare an impact figure with multiplier effects to the direct cost of building a canal - unless you want to calculate all the multiplier effects of the alternative uses of the $10+ billion building the canal. This figure deserves a post of its own in the future.

    But just think intuitive, back of the envelope figuring about if the cost could really be $40 billion in 1 year. Central Valley agriculture uses 25 maf of irrigation water per year, about 4 maf (1/6) of it exported from the Delta. At $15 billion per year in crop revenue in a record year, that is about $2.5 billion in lost crops at most. (Of course, it will be much lower due to coping mechanisms, losses concentrated among low-value crops, etc.) Maybe you get $2.5 billion with the multiplier effects. (No, don't believe the folklore of crop revenue multipliers of 7 in the valley.) Of course, you will lose some Delta agriculture and some property in the Delta too, probably a billion at most.

    So, where do you get the other $36 billion? Urban losses. But that will mostly amount to brown grass, which is indeed a loss, but $36 billion? Come on.