The Twin Tunnels and Southern California Rate Impacts

The Twin Tunnels and Southern California

The Bay Delta Conservation Plan (BDCP) is a Brown administration stalking horse for the Twin Tunnels, a massive project that would convey waterfrom the Sacramento/San Joaquin Delta          Photo: Chris Austin

to the San Joaquin Valley and the cities of the South State.
The Twin Tunnels would burden ratepayers – especially southern California ratepayers – with ruinous debt. That’s not hyperbole. When this project was first proposed in 2007, the state Department of Water Resources (DWR) estimated costs at around $3 billion. State infrastructure budgets invariably balloon beyond original estimates, and the Twin Tunnels are no exception. But the price inflation acknowledged by DWR is particularly jaw-dropping. In 2012, the agency revised the cost estimate to $12 billion. Then in 2013, it announced the final price tag might hit $25.6 billion. And recently, state officials allowed that costs, inclusive of financing, could reach $67 billion.There are many sound reasons for opposing this project. It would degrade the largest and richest estuary on the west coast of the continental United States, it is designed to transport far more water than is available, and the biggest beneficiaries would be western San Joaquin Valley corporate farms, not urban consumers. But all these downsides pale before the biggest objection: expense.

But the real bottom line is even worse than DWR admits. By the time all debt and unanticipated cost overruns are tallied, the final bill could exceed $100 billion. And because project costs will be born disproportionately by small ratepayers, expect water bills to spike, and stay stratospherically high for at least the three decades needed to fully service the debt. Ratepayers will be required to pay the bill for this white elephant; any chance of significant federal or state funding ranges from negligible to nil.

It is instructive to note that state officials pointedly have ignored repeated calls for a cost-benefit analysis of the BDCP. Their rationale is not difficult to fathom:  any objective inquiry would reveal the project as a colossal commitment of public treasure to a bankrupt and ultimately unworkable scheme.  Research conducted by independent experts confirms this.  Using data from the BDCP’s own studies, Dr. Jeffrey Michael, the Director of the Business Forecasting Center at the University of the Pacific, determined that the BDCP would yield one dollar in benefits for every $1.90 to $3.36 invested.

“When these very low benefit-cost ratios are considered alongside the inconsistent and incomplete financial plans, it is clear that the Delta water conveyance tunnels proposed in the Draft BDCP are not justified on an economic or financial basis,” Michael wrote.

Michael is hardly an outlier. Dr. Rodney Smith, a renowned water resources analyst and economist, determined water transported by the Twin Tunnels will cost $1,000 per acre foot by the time it gets to the government pumps at Tracy. That makes it prohibitively expensive even for Big Agriculture, and may explain the dwindling enthusiasm for the project in the San Joaquin Valley.

Ultimately, southern Californians will pay for any water imported through the tunnels multiple times. They will pay for it in generally higher retail water rates.  An additional surcharge on retail rates will be levied due to the automatic “pass through” costs that will result when the state issues revenue bonds for the project. Consumers also will pay higher property taxes, because the Metropolitan Water District of Southern California has the authority to assess property values relative to the cost of new water projects.  This is truly “water taxation without representation,” and the impacts will be far-reaching. An independent analysis by a prominent consulting group concluded that the average South State resident will “conservatively” pay between $9,000 to $10,000 over forty years to finance the project.

South State water districts may be starting to understand that the Twin Tunnels don’t pencil out. Dennis Cushman, the assistant general manager of the San Diego Water Authority, has noted his agency would be required to pay $1.1 to $1.2 billion to obtain water from the project, and that the “optimistic yield scenario” would be about 76,000 acre feet a year, an amount insufficient to meet demand.

Nor will the Twin Tunnels expand statewide water supplies.  Water deliveries are dictated by the volume of snowpack in the Sierra Nevada, Shasta-Cascade and Trinity mountains, not by infrastructure. Nor is it likely the project would ameliorate the effects of a drought similar to the one California is now enduring.  As climate change accelerates, California’s water supplies will decrease, not expand. Indeed, projected exports from the Sacramento/San Joaquin Delta have been reduced from 6.5 million acre feet to five million acre feet due to an anticipated diminution of snowpack.  You can’t draw blood from a turnip, nor more water from a desiccated Delta – no matter how fancy the plumbing.

Also, the BDCP attempts to ignore regulatory strictures now in place to protect water quality and endangered fish in the Bay-Delta estuary. But these regulations – the federal and state Endangered Species Acts, the U.S. Clean Water Act and the California Environmental Quality Act among them – are not going to disappear, the fervent hopes of state water officials notwithstanding. Indeed, lawsuits against the BDCP are inevitable.  Any such litigation will require complex, time-consuming and expensive responses from the state. And the money needed to counter these legal actions, of course, will come from the California taxpayer.

Further, southern Californians are liable to receive less imported water in coming years, even if the Twin Tunnels are built. The aforementioned diminished supplies due to climate change and required regulatory safeguards for the Delta are two reasons.  A third reason is the so-called “area of origin” clause in state water law. This stipulates that people living in areas where water originates have a priority claim to that water. Currently, relatively few of these rights are exercised. When and if those claims are fully exploited – an inevitability if dry conditions persist – the amount of water available for export will diminish.

Finally, in the best of circumstances, imported water can only satisfy about 30 percent of the South State’s water needs.  That’s why water districts in southern California are devising strategies that will make them less dependent on imported water in the future – strategies that include increased conservation, recycling, groundwater recharge with storm water and rainwater catchment. The BDCP is no panacea.  More to the point, it will undermine long-term solutions by diverting billions of dollars from sane, sustainable programs.

The Twin Tunnels, then, will expedite water deliveries to corporate farms at the expense of urban ratepayers — when water is available, that is. During drought, they may well sit inert. But the interest on the debt for this behemoth project will continue to accrue, and the lion’s share of both principal and interest will be paid by urban ratepayers, not agribusiness.  It is a sucker’s deal, and Californians concerned about their wallets and the fiscal responsibilities of government will resist it.

Leave a Reply