Southern Califiornia’s new pact with the Delta water devil

July 30, 2012

By Wayne Lusvardi

If you dine with the Sacramento Delta water devil, you better have a long spoon.

That might be the lesson that Southern California should have learned after being stuck with a $283 million bill to bail out Gov. Jerry Brown’s embarrassing boondoggle in failed Northern California geothermal power plants when he was governor from 1975 to 1983.

On July 25, Brown reciprocated Southern California water ratepayers for bailing him out of a past political jam by offering them a pricey but downsized water tunnel through the California Delta, no guaranteed entitlement to water and 75 percent of the costs in his proposed Bay-Delta Conservation Plan.

The Plan includes a whopping $14 billion cost to convey water to Southern California through 37-mile tunnels under the Sacramento Delta. Habitat re-creation would cost an additional $10 billion.

The basic idea of the Bay-Delta Conservation Plan is to bring excess water in wet years through the Delta for storage in reservoirs and water banks for use in dry years by farms and cities.

(For clarification, the governor’s Bay-Delta Plan is not the same as the proposed $11.1 billion California Water Bond bond pushed out to the 2014 ballot cycle.  The bond would fund a new reservoir and scattered water projects around the state.)

The Details

As it is often said, the devil is in the details.  Only the costs of the proposal for a “Through-the-Delta Tunnels” project are being discussed. But it is total system costs that need to be focused on. The important facets of the Delta Plan are as follows:

1.  Two Through-the-Delta Tunnels would convey 75 percent of the water to Central Valley farmers and 25 percent to Southern California cities. However, Southern California cities would pick up 75 percent of the cost and the Central Valley farmers 25 percent.  The disproportionate share of the costs to Southern California water ratepayers would run against the intent of Proposition 218 to require voter approval for new taxes.

2.  The proposed tunnels have been shrunk by 40 percent in size and the number of pumps reduced from five to three.

3.  Legal guarantees on the amount of “new entitled or assured water” for Southern California are not in the plan.  Southern California presently has a maximum legal entitlement of 2 million acre-feet of water in a dry year (enough for about 4 million households per year).

4.  According to economist Jeff Michaels, the maximum proposed conveyance of 6.5 million acre-feet of water has been reduced to 5.5 million acre-feet.  This makes the project a bad investment and possibly unfinanceable.  Michaels indicates that tunnel project costs exceed benefits by $7 billion.

5.  The only guarantee in the Delta Plan is that there would be no water diverted for fish or natural disasters such as an earthquake.  This is called “water assurance.”

6.  Neither Southern California cities nor Central Valley farmers would get any added water storage reservoirs out of this deal.  Any new reservoirs would have to be funded from the proposed $11.1 billion Water Bond scheduled for the 2014 ballot.

7.  The cost of the Delta Plan does not include the $4 billion already allocated for levee improvements under Proposition 1-E, approved by voters in 2006. About $3 billion of that has already been spent on flood levee upgrades, with a $1 billion balance unspent.

8.  The actual total cost would be $39 billion: $14 billion for tunnels, $10 billion for habitat re-creation, $4 billion for levee repairs and $11 billion for reservoirs and other statewide water system improvements.  Bond interest costs would add about another 35 percent, resulting in a total cost of about $53 billion.  Assuming Southern California water ratepayers would incur 75 percent of the cost that, would reflect about $40 billion.

9. Assume a total project costs to Southern California water ratepayers of $29 billion at a 4.375 percent stated bond interest rate.  Then the added cost to water bills would be about $20 per month for each of about 7.2 million households in Southern California.  That would equate to a water rate increase of about $240 per household per year for 35 years.

10. Funding sources for habitat re-creation have not been established in the Delta Plan package yet.

Such a deal!

If you were Southern Californian, would you take this costly deal that doesn’t guarantee you any set maximum of water, in exchange for a water rate increase of about $240 per year to each of your customers?  The new plan merely assures that there will be no interruption of water deliveries due to the cyclical shrinking of fish populations.

Brown has said he does not need to go to voters to raise taxes to fund the plan.  This is because water districts, mainly in Southern California, would raise rates to pay off the bonds that would finance the project.

The actual construction of the Through-the-Delta Tunnels would take 10 years.  Moreover, there is no guarantee at this early stage that the tunnel project would ever get built due to the threat of environmental lawsuits.

As Laer Pearce, a land development public relations consultant, told me in an email, “Moving forward with the tunnels is the trump card to force the funding for habitat restoration … just as blocking the funding is the trump card to stop the tunnels. Ah, Crazifornia!” (Crazifornia is the name of Pearce’s blog, and of soon-to-be-published book of his on the state.)

The proposed tunnel project doesn’t meet a cost/benefit test and would contain no guarantees. This raises the question of whether the plan offers any real advantages over the “no project” alternative?

In the past, it took a crisis to overcome the North-South resistance to doing any water deal.  In the 1960s, the loss of life due to Delta flooding created enough of a crisis to get legislators to approve funding for levee repairs and Southern California got some water out of the deal.

Today, the crisis is somewhat hypothetical: an earthquake that could collapse Delta levees and canals of the California Aqueduct in a Katrina-like disaster.  But if an 8.0 Richter-scale earthquake hits the Delta, it is unlikely any engineering design could withstand the impact.

If Southern California is going to bargain with the Sacramento Delta water devil, it first had better find a very long spoon.



Write a comment
  1. Stanley K.
    Stanley K. 30 July, 2012, 12:35

    “The disproportionate share of the costs to Southern California water ratepayers would run against the intent of Proposition 218 to require voter approval for new taxes.”

    “If you were Southern Californian, would you take this costly deal that doesn’t guarantee you any set maximum of water, in exchange for a water rate increase of about $240 per year to each of your customers?”

    Great, I guess we’re supposed to swallow this new outrage along with all of the others? Why are we not allowed to vote for this TAX?

    Reply this comment
  2. Wayne Lusvardi
    Wayne Lusvardi 30 July, 2012, 16:36

    Good question Stan K.
    I guess the strategy is to jerk up higher water rates at each local water district where they can pass it by a vote of each water board. Time for pitch forks at each water board meeting?


    Reply this comment
  3. Burt Wilson
    Burt Wilson 31 July, 2012, 13:26

    The inability to vote on this issue is key to the defeat of the tunnels and intakes. This is anti-democracy. I have already nicknamed Gov. Brown as a “chicken” because he is afraid to let people vote on it because he knows it would go down to defeat–just as in 1982. I did media on the 1982 anti-Peripheral campaign and the same reasons to vote against that monstrosity are present in this latest watergrab. Not being able to vote on a multi-billion-dollar state infrastructure project is akin to taxation without representation. California has safeguards against a dictatorship and I assume some smart lawyer is looking at them right now. But we the people have to get involved!

    Reply this comment
  4. Wayne Lusvardi
    Wayne Lusvardi 31 July, 2012, 14:45

    A question has been raised as to the 75 percent Southern California share of the cost of the Bay Delta Conservation Plan in the above article – see email from MWD below.

    The following table from pages 8-68 and 8-69 of the Bay Delta Plan details the allocated costs.

    Estimated Funding Relevant to BDCP, by Plan Component
    Funding Source Percent
    State Water Contractors 36.5%
    Federal Water Contractors 36.5%
    U.S. Bureau of Reclamation 8.6%
    California Dept. Fish & Game 0%
    New Water Bond (2014) 10.9%
    Prop 1-E (levee improvement bond) 0.8%
    Prop 84 – (water conservation bond) 0.2%
    Delta Stewardship Council (Prop 84?) 0.4%
    U.S. Fish & Wildlife Service, National Marine Fisheries Service, U.S. Army Corps of Engineers, U.S. EPA, National Resources Conservation Service, U.S. Geological Survey, Other (interest income) 6.1%
    Total 100%
    Total Water Exporters Share 73%
    Total State Funding 12%
    Total Federal Funding 14%

    Reply this comment
  5. Wayne Lusvardi
    Wayne Lusvardi 31 July, 2012, 15:16

    Dr. Jeffrey Michaels of the University of Pacific Business Forecasting Center was contacted as to the question of the cost allocation for the Bay Delta Conservation Plan. His comments are below:


    I know that is what they say, and that is why BDCP may be “unfinanceable.” MWD may be able to lift their 25% share, but there are serious doubts about whether those receiving the other 75% can or will.

    Farmers can not pass on the cost through higher food prices, in almost all cases, they are in a competitive market and can not pass on the costs of water. California agriculture uses 34 million acre feet of irrigation water per year, and less than 4 maf of that total (about 10%) is pumped from the Delta. Delta dependent farmers have no more ability to set crop prices than your grocery store has over the price of bread. Most of it is going to come directly out of their bottom lines. They are really buying insurance against a regulatory or earthquake disaster, but it is extremely expensive insurance compared to the risk.

    The urban agencies are in a much better position to pass on the costs to ratepayers. But even they face a demand curve where their customers cut back or find alternative sources as the price rises.

    And yes, ratepayers and state taxpayers are also federal taxpayers. It’s like saying don’t worry I’m not going to take it from your debit card, I am charging it to your Visa.

    Jeffrey Michaels via email

    Reply this comment
  6. Wayne Lusvardi
    Wayne Lusvardi 31 July, 2012, 15:27

    Another Email Comment below from Dr. Jeffrey Michael, economist, University of the Pacific as to the assertion that MWD will pay only 25 percent of the Bay Delta Plan costs (see below):

    Hah, hah. Didn’t see this message (email above from MWD).

    They are right, they have firmly said only 25%.

    I have questioned why both BDCP and the Southern California Water Committee have stated that the tunnels are financially feasible by citing its per capita costs. That was the primary argument for financial feasibility in both BDCP draft finance chapter and the SCWC report, I didn’t make it up. MWD is 75% of the per capita population served by Delta exports. They are mad about the 75% assertion, but it comes from their own consultants. Their anger is misdirected. It is their consultants who suggested per capita financing, I just brought it to people’s attention.

    The only way to stop your very good questions if for them to release an actual financial proposal.

    Reply this comment
  7. Kurt
    Kurt 1 August, 2012, 13:41

    The fact that it does not meet the cost/benefit test, and there are no gaurantees, and no crisis except a hypothetical one that may very well destroy the tunnels, well it seems crazy and maybe even insane to go forward with this project. By all means start NOW!

    Reply this comment
  8. Stanley K.
    Stanley K. 2 August, 2012, 08:18

    Kurt, you took the words right out of my mouth.
    Sure, “leaders,” go ahead and embrace insanity.
    What else is new?

    Reply this comment
  9. Frances Griffin
    Frances Griffin 10 July, 2013, 03:18

    All the relevant scientific bodies that have studied the problem say that 3 million acre feet is the most that should be taken from the Delta. They are already exporting more than that. So how could the tunnel reasonably send more water south. No one is proposing shutting down the other state and federal pumps so they must be thinking to increase exports–well they say so, don’t they. This violates every scientific principle, not to mention laws that require that the water be used reasonably.

    The urban areas are doing a good job of reducing consumption, but over half the water exported goes to mega-growers who grow water intensive crops–some of them are subsidized crops- on arid land. They get the water so cheaply it is in effect a taxpayer subsidy in addition to whatever crop subsidy they get.It takes twice a much water to grow crops in the desert as in the Delta and much of the land will not drain so it has become toxic. Many of the mega growers are also water brokers and sell their “paper water” rights to cities and developers, often for ten(or more) times as much as they paid for it. They pay a fraction of what the average person pays for water.
    The BDCP is a giant boondoggle.

    Reply this comment

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