Wednesday, 24 August 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


About the Author

Ethan Jacob

Author & Editor

I am Ethan Jacob Executive Director of the Center for Business and Policy Research at the University of the Pacific, where I have a joint faculty appointment in the Eberhardt School of Business and the Public Policy Program in the McGeorge School of Law..

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