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A study released Wednesday by the University of the Pacific’s (UOP) Center for Business and Policy Research says new research indicates that the state’s proposed California WaterFix would cost more to build that it would deliver in return.
“This is the first comprehensive benefit-cost analysis of WaterFix and it is clear that it costs four times more than its benefits. This project simply is not economically justified,” said economist Jeffrey Michael, PhD, a professor of policy at University of the Pacific and director of the Center for Business and Policy Research. The center produces independent, objective analyses of business, economic, and public policy issues in California.
California WaterFix is the state-endorsed plan by the California Department of Water Resources and the U.S. Bureau of Reclamation to build 35-mile twin tunnels under the Sacramento-San Joaquin River Delta. The California WaterFix plan has replaced its predecessor plan, the Bay-Delta Conservation Plan.
Michael, a long-time critic of the more than $15 billion tunnels, states that for every dollar spent on the WaterFix plan would yield just 23 cents in benefits, such as increased water supply. Best case scenario, per UOP and Michael’s research shows a return of just 39 cents per dollar.
Though state officials had not yet seen Michael’s complete report, Erin Mellon of the California Natural Resources Agency, commented, “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.”
But according to the UOP report low water yield is the primary economic drawback of the project. The report concluded that WaterFix and the twin conveyance tunnels would only be economically justified if its construction and mitigation costs were below $2 billion dollars. Additionally, the report states that WaterFix would deliver too little additional water for the cost.
“I don’t think there’s a project that’s economically feasible here. And it’s not close,” said Michael.
The study received a $10,000 grant from the Delta Counties Coalition, which represents the governments of Contra Costa, Sacramento, San Joaquin, Solano, and Yolo counties, to help fund the research.
In carrying out the study, the Center for Business and Policy Research used the project description and operating assumptions developed by the state for the WaterFix environmental analysis. The study also includes many additional assumptions that are favorable to the project. The study did not consider the possibility of cost overruns, risk of harm to endangered species, or financing costs of a bond debt that is expected to be used to pay for construction.
“We did not include a pessimistic scenario that deviates from the state’s environmental analysis,” said Michael. “That means the economic return to WaterFix could be even smaller than we estimate.”
Professor Michael’s areas of expertise include regional economic forecasting and environmental economics including work on the economic impacts of the Endangered Species Act, climate change, and regulation on land use, property values and employment growth.
