Wednesday, August 24, 2016

Benefit-Cost Analysis of the WaterFix

Earlier today, the Center released a benefit-cost analysis of the California Water Fix.  Last year, state officials said they would release their own benefit-cost analysis in August 2015, but it is now a year later and nothing has been forthcoming.  In this analysis, I would describe the "optimistic" scenario as my best estimate of what I think DWR's benefit-cost analysis would look - based on previous work done by their consultants for the tunnels when they were part of the BDCP.  The "base" scenario reflects what I believe are more realistic values, and in both cases the WaterFix has benefits that are far less than costs.

Since the benefit-cost ratio for the optimistic scenario is so low, it did not seem necessary to consider a pessimistic scenario which would consider possibilities of higher costs or that the tunnels created greater environmental damage than predicted in the proponents' documents.  While 23 cents of benefit per dollar of cost is bad, the reality could be even worse.

A link to the full report and a summary table of results is below.   

http://www.pacific.edu/Documents/school-business/BFC/WaterFix%20benefit%20cost.pdf
 

Present Value of Benefits and Costs of the California WaterFix. 

2014 dollars, 3.5% real discount rate, 15 years of construction, and 100 years of operation. 

 
Base scenario
Optimistic Scenario
Benefits
 
 
Export Water Supply
$1,319,521,208
$2,822,409,124
Export Water Quality
$1,677,361,307
$1,677,361,307
Earthquake Risk Reduction
$0
$435,796,554
Total Benefits
$2,996,882,515
$4,935,566,984
 
 
 
Costs
 
 
Construction and Mitigation
$11,676,474,531
$11,676,474,531
Operation and Maintenance
$591,658,075
$591,658,075
Ecosystem
$0
$0
In-Delta Municipal
$111,279,332
$37,093,107
In-Delta Agriculture
$682,807,143
$293,953,421
In-Delta Transportation
$132,205,755
$132,205,755
Total Costs
$13,194,424,836
$12,731,384,889
 
 
 
Net Benefit
($10,197,542,281)
($7,795,817,905)
Benefit/Cost ratio
0.23
0.39

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