Sacramento Bee on Wastewater Rates

Like a good reporter, Matt Weiser is skeptical of SRCSD claims about the magnitude of increasing wastewater rates in last week's Sacramento Bee.  However, if the Bee is looking for government agencies being dishonest about Sacramento wastewater rates, they should also investigate the claims of the regulator, the Central Valley Regional Water Quality Control Board.

The Sac Bee article about SRCSD begins

A letter hitting most residential mailboxes in the capital region this week offers startling information: It soon may cost three times more to flush your toilet.

That is, if you agree with the numbers

The article goes on to suggest that rates may not actually increase by $40, it looks like they could increase by 2.5 times instead of triple ($30 per month more rather than $40 per month), although there is a lot of uncertainty at this stage.  I agree with this, it probably won't be as bad as SRCSD is saying, although their scenario is not wildly exaggerated  (SRCSD would have to start weaving tales of thousands of homeless Sacramentans to approach the exaggerations routinely made by water exporters about regulatory costs). 

In the article, Central Valley Regional Water Quality Control Board staff also complain that the flyer didn't describe the environmental benefits from the upgrade.  That's a fair comment, but after reviewing many documents the Regional Board's staff uses to justify the upgrade, they are also guilty of producing one-sided analysis that fail to properly analyze the economic impact of their rulings on communities they regulate.  Even more bothersome is the way they misrepresent the small amounts of information they do present to justify the costs of upgraded treatment. 

1. The board's staff compares current rates in communities that they have already required to upgrade their plants to the projected rates in Sacramento.  It is an inexcusable apples to oranges comparison.  Many of the communities for which they cite current rates have recently approved large wastewater rate increases to pay for plant upgrades that have yet to affect current rates.  I am most familiar with Stockton which the regional board notes has monthly fees of $22.75.  However, Stockton just approved a large rate increase to pay for an upgraded plant that will nearly double wastewater costs between now and 2015 to around $40 per month.  Lodi is similar although they are already halfway through the 5-year process of roughly doubling rates.

2.  The board's states in reports and correspondence with Senator Steinberg and others that "other communities that have completed the plant upgrades and are operating the upgraded systems without irreparable economic harm."  Really?  That is a pretty strong assertion for which they provide no evidence, and have conducted no assessment.

It is almost certainly a false statement.  We have yet to see the full impacts of higher rates in most areas so any conclusion to this effect would be premature.  As one current example of a place where high wastewater rates have already hit, the City of Placerville just voted to increase sales taxes to subsidize increased wastewater rates that were hitting low-income residents hard.  While this has allowed them to off-load some of the costs on non-residents and reduce the regressive effect of the rate increase, their wastewater costs are now being paid from a revenue source that typically supports general fund services like police, fire, parks and libraries who will now be unable to use sales tax increases to offset cuts to these vital services.

3.  Most annoying to me, the Regional Board staff misrepresents Pacific's economic impact reports (most notably on page 39 of this report).  They do not cite the main result of the study, an annual employment loss of 976 jobs and annual income loss of $246 million over the next 30 years.  Strangely, the only thing they report is a conservative assumption that we made to facillitate the calculations, "increased wastewater rates will not be significant enough to affect the location, operation or investment decisions of businesses, and that lost corporate income flows outside the region." This is presented in a way to suggest that we disagree with the local building industry.  They left off the fact that we had clearly labeled this assumption as conservative and a reason why our impact estimate could be too low.  

I was surprised that they also cited our other reports on the effects of Delta problems on other stakeholders (Valley farms and salmon fishing), specifically citing the losses to income and employment that have been sufferred.  I would be pleased by that if they had reported the Sacramento impacts in the same way, but they don't.  If they did, it would show that the negative impacts on Sacramento for the proposed permit are actually larger.  [Note: I called CVRWQCB staff last week and offerred to explain how to properly report and interpret the results to our study and brief their board, but the call was not returned.]

I am not saying that Sacramento shouldn't make some upgrades to their wastewater treatment.  Maybe they should go as far as the Regional Board proposes, I can't say.  But neither can the Regional Board without making an honest, good faith effort to properly report and assess the economic impacts on both Sacramento and other cities affected by their previous rulings.

Valley Mayors on High-Speed Rail

I have resisted stepping into the high-speed rail issue, despite the tempting targets of the thinly documented but often repeated claim that HSR will create 450,000 permanent jobs, and optimistic ridership projections.

If we are going to do it, we need to be smart about it (such as taking another look at the Altamont vs. Pacheco pass decision).  Being smart about it is also the point of the op-ed by north Valley mayors, including Stockton's Ann Johnston, in today's Sacramento Bee.

California is challenged with building a technological wonder rivaling the economic and social impacts of the Transcontinental Railroad. Instead, the California High-Speed Rail Authority appears set on building a rail line to nowhere that only provides critics with 66.4 miles worth of reasons to attack the project.

The staff proposal runs from the rural region of Borden with a couple of hundred people south of Madera to Corcoran – population 25,000, including 13,000 inmates.

Will State Leaders Ever Get Real About Peripheral Canal Costs?

The Director of the California Department of Fish and Game touts the peripheral canal in today's Sac Bee without mentioning costs.

A few days ago, Natural Resources Agency Secretary Lester Snow sends a press release about the BDCP without mentioning costs.  The release says the new BDCP reports "will also identify issues that require further resolution, including additional scientific analysis to improve upon water operations for Delta fisheries, ecological metrics to measure progress, and ongoing development of an adaptive management plan."  No cost or financing on that list either. 

How can you be a state agency head in November 2010 and push a $13+ billion public works project without even mentioning cost?

Fresno Bee Illegal Immigration Series

The Fresno Bee is running a week-long series on illegal immigration titled, In Denial.

So far, I think it's good.  Each day has a feature story, and two shorter supporting stories.  The biggest economic topics: budgets, jobs, visas, consumers are in the days to come and should make for good blog material.

If you haven't seen it, here is the link.

Would BDCP staff accept "dots" instead of dollars in their paychecks?

For a process that makes all sorts of high-minded statements about being guided by science, the flim-flam that passes for economics in BDCP is stunning.  Here is the summary of the cost assessment in the BDCP options evaluation. (table E-2, page 13 of executive summary).  Options 3 and 4 include isolated conveyance, a peripheral canal/tunnel.  4 dots is the highest ranking, 3 dots second highest, 2 dots is third highest, and 1 dot is the lowest ranking.

I thought the canal/tunnel had high costs, but according to BDCP, it is the choice that minimizes costs.

How did they do it?  A look at the methods document is revealing.  Instead of adding up dollars, they used unique rating scales for each cost category, thereby converting dollars to "dots" with an arbitrary, subjective scale.  Here is an example of the scale they used (from page 2-59 of the assessment).

Construction Costs Rating Scale:
High Rating = cost less than $1 billion
Moderate Rating = cost likely $1 to 3 billion
Low Rating = cost likely $3 to 5 billion
Very Low Rating = cost likely greater than $5 billion

Reduced Downstream Water Treament Costs Rating Scale:
High = greater than $2 billion
Moderate = $1.5 to 2.0 billion
Low = $1.0 to 1.5 billion
Very Low = less than $1 billion

Apparantly, BDCP analysts reject the notion of assessing all costs with a consistent, uniform measure (dollars) that happens to be the same units that those costs will be paid in the real world.  They reject the idea of using the units utilized by all credible economic assessments and budget analyses.  Instead, it is better to slice the costs up into categories, apply arbitrary and inconsistent rating scales to each category, qualitatively assess the results, and then assign them a ranking. 

It reminds me of those Wall Street geniuses who divided up and rebundled all those sub-prime mortgages into securities that magically made all the risk go away.

What a bold scheme.  A cost category that is unfavorable to your preferred outcome can be assigned $2 billion between increments, whereas a category that is favorable to your preferred outcome can be arbitrarily assigned $0.5 billion per unit on the rating scale.  Even better, we can assign all costs exceeding an arbitrary threshold to the lowest/highest rating.  Thus, if the canal ends up costing more than $5 billion, say $8 billion, $13 billion, it doesn't matter at all, since everything above $5 billion is in the same rating class.

I wonder if this clever financial innovation can be used when it is time to pay back the bonds issued to finance the BDCP.  If Wall Street bond buyers need a demonstration project to ensure it works, I recommend we use BDCP staff salaries as a pilot program, and issue paychecks in dots instead of dollars.  We can redeem the "dots" for 25 cents on the dollar, using the same arbitrary "exchange rate" used in the BDCP options analysis.  Also, mirroring the options evaluation, anyone earning more than a $100,000 per year will receive a fixed $25,000 payment since all salaries over the threshold are in the "very high" category and treated the same. 

There are even more issues with the cost analysis, from the relevant cost categories that were eliminated, the double counting of issues already assessed for other criteria (cost is one of only 17 criterion used), to the comparison of "economic impacts" with direct costs as if they are the same thing.

Yes, I know the options evaluation was done in 2007, but it remains a critically important assessment.  This is the analysis that was used to conclude isolated conveyance was the "most promising" option, a statement that BDCP participants had to accept to be included in the process.  It is the analysis that was used to justify the singular focus on isolated conveyance from the beginning.

If (when?) BDCP fails, it will most likely be due to excessive costs and the lack of a real financing plans.  Blame will be placed on the recession and other unknowns, but these assessments reveal that BDCP never treated costs or economics seriously from the beginning.

On second thought, I've got to try this with my wife.  "Honey, as you can see in Figure 3, for your new car, a cost over $20,000 gets a high cost rating, but for my new car the scale shows that it has to go over $80,000 to get rated as high cost.  Using this scientific scale, it is clearly optimum for us to get a BMW for me and a KIA for you.  You might think it's unfair, but this is the same process used by the largest, and most complex habitat conservation plan in history that is committed to scientific rigor.  Trust me."

Sacramento Wastewater Treatment Plant: Updated Impact Report

We have updated our assessment of the cost of upgrading the Sacramento Wastewater Treatment Plant as would be required by the tentative discharge permit under consideration by the Central Valley Regional Water Quality Control Board.  Over the next 30 years, the report finds that meeting the requirements of the draft permit would reduce Sacramento area incomes by an annual average of $246 million and reduce employment by 976 jobs in an average year.  While the construction and operation of the advanced treatment facility will create some jobs and income, these gains are more than offset by the negative impacts of a 140% to 210% increase in wastewater bills and fees on Sacramento households and businesses.

Link to full report.  The executive summary is below.

Ecological problems in the Sacramento-San Joaquin Delta have raised concerns about the discharge from the Sacramento Regional County Sanitation District (SRCSD) wastewater treatment plant that serves most of Sacramento County and West Sacramento in Yolo County. The Central Valley Regional Water Quality Control Board recently released a Tentative NPDES Discharge Permit that would require over $2 billion in upgrades to the Sacramento Regional Wastewater Treatment Plant. This report evaluates the economic costs to the Sacramento region of complying with tentative permit. All costs and economic impacts in this report are measured in 2009 dollars.

The project would require nitrification, denitrification, microfiltration, and UV disinfection. The capital cost is estimated at $2.083 billion, and operation and maintenance of the completed facility is estimated at $77 million per year. We project that the project will require SRCSD to generate an additional $239 million annually through increased rates and fees. SRCSD is projecting even higher rate increases, because they anticipate larger debt coverage requirements to maintain their bond rating and continued slow growth in their service area. The range of potential rate and fee increases is as follows:

• The typical Sacramento household wastewater treatment bill would increase between $28 and $42 per month ($336 to $504 annually) from their current level of $20 per month.
• Government, commercial and industrial users would also face proportional wastewater treatment cost increases between 150% and 200%.
• New development wastewater treatment impact fees would increase from $7,450 to between $15,000 and $35,000 per ESD (equivalent single family dwelling). In-fill development impact fees would increase from $2,800 to between $6,000 and $13,000 per ESD.

In addition to higher bills, the total economic impact of the project was assessed by estimating the negative effects of reduced disposable income on consumer spending, the negative effects of reduced construction activity, and the positive effects of building and operating the wastewater plant. Considering all the effects, the average annual economic impacts over the 30 year analysis period on the Sacramento Region are:

• Annual income loss of $246 million.
• Annual employment loss of 976 jobs.

This is a conservative assessment of regional impacts. SRCSD estimates rate increases will be even larger than our projections. We also assume increased impact fees will only have a small effect on the amount of new development over 30 years, and only reduce the average output of the construction industry by an amount equivalent to the increased fee payments. While the impact on development over 30 years will be relatively small, the effect will be greatest in the near term, pushing back the date at which many development projects become financially feasible for several years and delaying Sacramento’s recovery from the recession. The report assumes no effect on local electricity costs, although the project will generate a substantial increase in SMUD’s electricity demand. We assume increased wastewater treatment rates will not be significant enough to affect the location, operation or investment decisions of businesses, and that lost corporate income flows outside the region. Due to these conservative assumptions, the negative impacts could be larger than we estimate. On the other hand, the negative impacts could be smaller than we estimate if less advanced, lower cost treatment options suggested by Central Valley Regional Water Quality Control Board consultants were developed in more detail and proven to satisfy regulatory requirements as well as the scale and site requirements of the SRCSD plant.

The results of this study inform planning and regulatory decisions regarding the San Joaquin-Sacramento Delta, and can be compared to analysis we have conducted on other aspects of the Delta issue. In a recent analysis conducted in cooperation with UC-Davis researchers, we estimate that reduced agricultural water supplies due to Delta pumping restrictions to protect endangered species result in an income loss of $72 million and the loss of 1,400 jobs in the San Joaquin Valley. We have also estimated that the closure of the salmon fishery in 2008 and 2009 created an annual loss in California of about 1,800 jobs and $120 million in income. Our initial analysis of Sacramento wastewater treatment upgrades was limited to nutrient reduction, and we estimated an average loss of 390 jobs and $94 million in income. The $246 million estimate of lost income from the Tentative NPDES Discharge Permit for Sacramento are more than double the loss estimated in these other cases, whereas the job loss is lower since sewer impacts are distributed across hundreds of thousands of households rather than being concentrated on a low-wage industry such as agriculture.

Our Katrina? More like our Dennis.

Tom Philp, executive strategist for the Metropolitan Water District, is the latest to compare a seismic-induced Delta flood to Katrina.

Katrina is a bad numerical comparison, but the exploitation of the greatest American tragedy since 911 to push his employers' business agenda is offensive.  Are Tom Philp and Met comparing dead grass in an LA lawn to Americans dying in the Superdome?

His post emphasizes water supply, and does not mention the potential loss of life or property in the Delta region which is the only loss that is comparable to Katrina (in type not magnitude).  The tunnel solution he pushes in the post does nothing to protect against Katrina-type losses (lives or property in the Delta), it would just protect some of the exporters water supply.  In fact, the agenda Philp is pushing explicitly recommends letting large chunks of the Delta be lost in Katrina-type floods because fixing the levees is too expensive.  While I don't advocate unlimited spending on Delta levees, if there is anyone who has a legitimate case to invoke Katrina to support their Delta cause, it would be the people living in the Delta who want more public investment to upgrade levees.

On to the numbers, Katrina killed nearly 2,000 people, and caused $125 billion in direct property losses.  I have read the studies Philp and others reference, and it looks to me like the comparable property damage and fatalities of the big Delta earthquake scenario is about 1-2% of Katrina.  It might get to 3-4% if you added in crop losses.  It would be a tragedy, but in the low range on this NOAA list of the 96 largest U.S. weather disasters over the past 30 years.  A catastrophe for sure, but a manageble one.

Yes, I know the state's study says there could be as much as $40 billion in losses from a Delta earthquake.  But that number includes the value of lost services (such as what people are willing to pay to keep their lawns green), estimated multiplier effects from crops not grown, etc.  A comparable number for Katrina would include losses for all sorts of business transactions that did not take place as a result, plus multiplier effects.  A comparable total from Katrina would easily be in the trillions and still increasing five years later.

In the future, I hope Philp uses more correct and relevant comparisons to California natural disasters.  From this chart, the Valley freezes, the 1995 floods, and wildfire outbreaks that occur every few years would be most comparable.  The linked chart doesn't include earthquakes, but I believe this Delta quake scenario is a lot less costly than the 1989 and 1995 California earthquakes too, so the freezes and wildfires seem the best comparisons.

At least he used a question mark.

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.]

Unemployment Friday

Another month passes, at California unemployment is still stuck at 12.4%.  As reported earlier this week in our new forecast, we now expect unemployment to remain at or above 12% through the first half of 2011, and not drop below 10% until the end of 2013.  Yes, that is more than 3 years from now.  At 13.808 million, California payroll jobs reached a new low for this cycle, and is now 250,000 jobs below where we were when the recession "officially ended" in June 2009, and 1.4 million below the 2007 peak.  Most losses are now in local governments and schools, although construction also has yet to end its 4 year slide.

The bright spot continues to be San Jose, the only place in Northern California that is clearly in recovery mode.  It is being totally driven by the bounce back in the computer/tech sector, with both computer manufacturing and computer system design jobs up 5% over a year ago.  Temp. employment services (likely related to the computer bus.) and private universities are also posting strong numbers.  With unemployment in San Jose still topping 11%, it will be a while before their renewed growth starts spilling over to the rest of the region in a big way.

San Francisco also posted its first solid monthly report since I can remember.  SF has been the biggest disapointment through the first year of recovery, as I had expected it to show a pattern more like San Jose.  Scientific and professional services in the San Francisco area are finally showing the gains we have been anticipating.  Don't get too excited, SF only gained 1,000 jobs back this month, and is still way down from a year ago.  It will take more than one good report to clearly show a new trend.

It is in the Valley where the reports turn uglier, and it isn't surprising given the dependence of these areas on government and construction, and the relative absence of technology, R&D, and other areas fueling growth.  Sacramento and Stockton took another significant step back this week, and unemployment rates across the Central Valley are all over a full percentage point above last year's level.

Delta Stewardship Council Should Ignore the Water Contractors' Protest Against the Environmental Water Caucus

I just read the letter the state and federal water contractors wrote to the Delta Stewardship Council urging them to ignore the Environmental Water Caucus (EWC).  I found the second sentence in the letter especially interesting, and completely misleading.

There is no need for the Council to revisit that which was reviewed by the Delta Vision process and has been evaluated carefully by credible independent analysts in recent years... (note: the analysts they refer to repeatedly in their letter is the PPIC and the 2008 Comparing Futures report)

Much has changed, and there are an abundance of good reasons to revisit these old reports.

1.  No one was talking about tunnels in either Delta Vision or PPIC, and the estimated costs of building the alternative conveyance have roughly doubled since these reports were done. 

2.  Those reports did not evaluate the type of proposal EWC is making.  In particular, PPIC compared a scenario of No Exports (with wildly exagerrated costs from water shortages) to a large surface canal.  There was no evaluation of a small tunnel vs. a large tunnel as many reasonable and credible people are now suggesting.  And even the BDCP "discussion document" says the loss in water exports if we do not build alternative conveyance in 2050 is about 1.5 maf, not the worst case, disaster scenario of 0 exports (-6 maf) modeled by the PPIC.  PPIC did not account for water conservation or anything close to what is being discussed by EWC or BDCP.

I should also note an unsubstantiated claim in the contractors' letter about the economic contribution of westside farmland.  "These lands develop about $12 billion in economic value for California annually." 

Really?  I challenge the water contractors to provide a reference for that ridiculous claim.  $12 billion is 3 times the entire GDP of Kings County ($4 billion of which $1.5 billion, 38%, is government/military spending.  For comparison, the GDP of Sacramento is only 23% govt/military).  Maybe they shouldn't be so quick to point out when people ignore gross vs. net water conservation when they are triple and quadruple counting dollars, and failing to differentiate between revenue/output and value/income.
 
Finally, do they have any references other than the 2008 PPIC report?  As noted above, the PPIC did not analyze $10+ billion tunnels, or an alternative scenario that looks anything like the EWC vision.  Furthermore, the 2008 PPIC has plenty of its own exagerrations that tip their analysis in favor of a canal.  For example, I wouldn't call a report that completely leaves out the commercial value of the salmon fishery, and uses phony projections of the state's future population as "careful."  Regardless of its weaknesses, that report is severely outdated now, to the point of being irrelevant.  We have a lot of new information, the scenarios have changed, and I am willing to bet that even the PPIC folks would have a hard time arguing against the need for some substantially updated analysis after nearly 2.5 years of new developments.
  
In fairness to the PPIC people, it must be frustrating to be so selectively cited, and their report isn't all bad.  For example, the contractors don't mention that their recommendation of new conveyance also hinged on the contractors paying a lot more for Delta restoration than currently proposed in BDCP discussion documents, they recommend water exports even with a canal quite a bit lower than the contractors want, and a number of these researchers were involved in the Delta flow requirements report for the SWRCB that the contractors like to disparage as irrelevant.

(A few minor edits on 10/22)

New Economic Forecast Released

Like most forecasters, we have been busy marking down our outlook.  It's not pretty, especially in the Central Valley.  Summary pasted below.  Summary tables, more highlights and subscription information at this link. 

CALIFORNIA AND METRO FORECAST: October 2010


California Double Digit Unemployment Will Last Through 2013

Sacramento has the weakest 2011 outlook.

(Stockton, Calif.) October 21, 2010 – The faltering recovery will keep California’s unemployment rate above 10% for three more years according to the Business Forecasting Center at the University of the Pacific. This quarterly forecast is a significant downward revision in the 2011 and 2012 outlook, and reflects a slowing national economy.

In the Central Valley, which is disproportionately impacted by continued weakness in construction and state budget cuts, unemployment rates are projected to plateau at their current high levels for nearly two years. Homebuilding remains at record lows in the Valley, and cuts to schools and local governments are offsetting any gains from improved conditions in agriculture.

Sacramento has the weakest outlook for the next 12 months, with no job growth projected between 2010 and 2011. Sacramento unemployment will exceed the state average for 2011, the first time this has occurred in over two decades of consistent data. By 2013, Sacramento and Stockton will be leading a strong recovery in the Central Valley, but the next two years will be extremely challenging for the region.

San Jose continues to be the only area in Northern California that is clearly recovering. We project 3% job growth for San Jose in 2011 and 2012, and this strength will eventually spill over to its lagging neighbors. Unemployment in all the Bay Area metros should drop below 10% by the end of 2011.

State of Debt

The LAO reports on the $15 billion and climbing shortfall in the state's Unemployment Insurance Trust Fund.  The entire shortfall has accumulated since January 2009, and hundreds of millions of dollars in interest payments will soon become due.

In other cheery news, the Treasurer's Debt Affordability Report was released detailing the $89 billion in current taxpayer-backed debt with an additional $50 billion authorized but unissued to date.  The report also details "Yields on the State’s 30-year tax-exempt GO bonds ranged from a low of 4.82 percent to a high of 6.10 percent. Compared to AAA-rated tax-exempt GO interest rates, these translate to spreads of 87 to 172 basis points."  That means the state is paying about an extra 1% on its debt due to its lousy credit rating.  That's a lot of extra interest, that could be used for other purposes.  The report also details the state's debt burden is the 2nd highest in the country after New York.

Not to be outdone by their state government, California's households have proven themselves to be pretty adept at loading on their own debt.  The state may have the 2nd highest debt burden in the country (for now), but our private households have the highest per capita debt burden in the U.S. according to the Federal Reserve Bank of New York, $80,000 per capita compared to the U.S. average of about $50,000.(see page 18).

 

Does Jerry Brown's Water Plan Really Call For a Peripheral Canal?

This AP headline caught my attention this afternoon "Brown calls for delta canal in Calif. water plan".  The article states,

In a plan he released on his website, Brown endorsed building a canal or tunnel around the Sacramento-San Joaquin Delta... Brown previously has said California needs a better system to more efficiently move water, but the Democrat's water plan is his most explicit support of a canal or tunnel to help to deal with the state's current water troubles...

Oddly, the article includes no quotes from Brown or his campaign that clearly endorses a canal. So I went to his website to read the plan to see what it actually says.  The canal doesn't come up until the 5th bullet under point 5 of the 7 point plan.

5.  Protect and Restore the Delta....

• Complete scientific, economic and environmental review of alternative conveyance facilities recommended by the Bay Delta Conservation Plan

6. Invest in California's Water Infrastructure including water storage facilities

California desperately needs investment in its water infrastructure, but given the State's financial condition, we must ensure that investments are cost-effective and funded by the appropriate sources. The beneficiaries - or users - of water infrastructure projects should pay their share of the costs of those projects. The state should invest in infrastructure improvements providing benefits to the general public or the environment. The projects must be cost-effective and make long-term sense. As Governor, I will:

• Support infrastructure investments, including water storage projects, that achieve the multiple goals of increasing water supply reliability, protecting the environment and other public benefits, such as wetlands protection and restoration, and flood protection.
• Support conveyance and storage investments, such as a peripheral canal or tunnel, that provide a net benefit in ecosystem and water quality conditions and where the beneficiaries pay for the benefits they receive

It doesn't sound like very explicit support to me.  It sounds like he is calling for studies "a scientific, economic and environmental review of the BDCP", and offers conditional support if the canal passes some cost-effectiveness and beneficiary pays tests. 

Maybe I don't know the full story, but it looks to me like AP botched this story and misrepresented Brown's water plan.

Update 10/14: The front page of the Stockton Record ran the AP story today under the bold headline "Brown Supports Building Canal or Tunnel around the Delta."  No doubt that headline just cost him a few votes in Stockton.  I see no press release on the Brown website regarding the release of what the AP says is a "new" water plan.  Hopefully, the Brown campaign will clarify his position so people know exactly where he stands.

Update 2, 10/14:  It seems that most people think this is a clear endorsement.  I guess I don't understand how to read politicians' statements although Brown supposedly has a reputation for speaking clearly.  I still read this as weak conditional support, that could be withdrawn if the costs are too high and environmental benefits and safeguards are weak. 

How much should crop production decline during a drought?

According to the report I recently published with UC-Davis researchers, crop production in the San Joaquin Valley declined between 2.3% and 2.5% in the 3rd year of a extended drought in which water supplies declined by a much greater percentage.  I find the 2.5% decline to be a remarkably low number, half what most experts predicted, and the agriculture industry and water managers certainly deserve credit for their achievement in the face of adversity. 

Still, the conventional wisdom is that we have a terribly broken water system, especially for agriculture.  Would a truly broken and disfunctional system deliver such results?  To those who hold this view, I wonder how much would crop production have to decline in a drought for them to be satisfied with the water system.  Would -1% be good enough?  0%?

When the drought is over, agricultural production in the Valley will still be constrained by environmental pumping restrictions brought on by a collapse in fish populations.  The highest estimate I have seen of the impact of these pumping restrictions on Valley crop production is a 1% decline.  Is that too much to ask given the great environmental damage created by the pumps?  What is a reasonable expectation?  -0.3%?  0%?

Postscript (10/6):  I see that asking reasonable questions like this about Valley agriculture has been called waterboarding and generates comparisons to Nazi's these days.

Realtors' Economic Forecast

One expects, and typically receives, an optimistic assessment of the economy from the California Association of Realtors. Today's news release accompanying the new CAR housing market forecast contained the most optimistic statement I have seen about the California economy in a long time. According to CAR chief economist Leslie Appleton-Young,

We expect a net jobs increase of approximately 1.4 million jobs in California for the year to come ...

That has to be a misquote. A net gain of 1.4 million jobs would be roughly 10% growth. Surely, she means 140,000, we will see when the details are presented later this week.

More importantly, they are predicting a 2% gain in the median home price from 2010 to 2011 which is pretty modest for CAR and suggests the jobs quote is indeed a mistake. I expect median prices to be flat with some continued declines at the high end of the market that will not affect the median.