Markets best would clean up L.A. pollution storm

This is Part 2 of a three-part series. Part 1 is here.

Dec. 4, 2012

By Wayne Lusvardi

In Part 1 of this series, I explained how an $8 billion tax storm soon will swamp Los Angeles property owners. The tax storm will be:

* A jobs program disguised as a storm water clean up tax;

* Politically risky use of eminent domain;

* Out-of-control land acquisition costs for new storm water catch basins;

* A possible staggering loss of property tax base;

* Added taxes that will hit public schools, big box retailers and downtown Los Angeles commercial properties the hardest;

* The eclipse of representative government by unelected and self-dealing Storm Water Groups that will capture at least 50 percent of the taxes.

This tax is on a fast track to be enacted in Los Angeles County come hell or high water.  But is there an alternative that local cities could lobby the state legislature for to prevent such a “perfect storm” from happening?

A market alternative for storm water cleanups

Enter stage right into this political theater of tax controversy economist Bowman Cutter of Pomona College, U.C. Riverside professor of environmental policy Kenneth Baerenklau and water resources engineer Joong Gawng Lee.  Their policy paper, “Capturing Urban Stormwater Runoff: A Decentralized Market-Based Alternative,” may offer an option for policy makers to consider.

The conventional method of storm water capture is to route runoff to a large regional detention basin or settling basin to percolate into the groundwater.  Rainwater runoff is diverted into concrete-lined flood control channels located on top of natural river beds that flow to the ocean.

In the dense Los Angeles urban basin, it is difficult and extraordinarily costly to assemble land for new storm water retention basins.  The U.C. Riverside study indicated the following values for land (exclusive of any eminent domain court adjudication costs):

* Commercial land from $2.57 million to $5.44 million per acre;

* Industrial land from $1.13 to $2.00 million per acre;

* Residential land from $2.65 to $7.27 million per acre.

Typical retention basin sizes range from one acre to 25 acres, depending on rainfall, water shed capture area, permeability of soils and other factors.  A one-acre catch basin could cost from $2 million to $7.27 million; a 10-acre catch basin could cost $20 million to $70.27 million, depending on land availability.

Not only would expected land acquisition costs be substantial and the use of eminent domain undesirable and unnecessary.  There also would be a reduction of property tax base. Tax loss would run from $20,000 to $702,700 per year for each new catch basin, depending on size and the value of the land acquired. Construction and maintenance costs also are substantial factors.

Rather than fixed subsidies funded by taxes, Cutter has proposed a landowner competitive bid process for installing onsite storm water capture facilities. Cutter’s analysis indicates that a market competitive method of storm water capture would be 39 percent cheaper than the conventional alternative.  And with the California’s funding formula under AB 2554, the expected costs would be much higher. This is because 50 percent of the tax proceeds would flow to watershed groups for green jobs.

Market example

Cutter provides the following example of how a market-driven system of storm water capture might work:

“For example, a landowner might bid to install 1500 square-feet of porous pavement for a $1000 annual payment over 30 years. Thus the landowner’s decision to participate in the program is similar to the decision to invest in a financial instrument that pays a fixed annual dividend over some known time horizon.”

Cutter’s formula is conservative and does not include the offsetting value of groundwater captured for local water basins. Groundwater typically costs about $120 per-acre foot of rainwater that percolates into underground water basins.  The avoided cost of not having to pay for imported treated water is about $500 per acre-foot.

So the cost savings from a competitive bid process might be as high as 50 percent of a conventional storm water retention basin.  This would depend on how much rainwater could be infiltrated into groundwater basins instead of flowing to the ocean or evaporating at each local watershed.

Cutter’s study indicated that even a low cost competitive bid method would pay for only 38 percent of the typical construction cost of a storm water retention facility.  In other words, storm water capture is uneconomic from a groundwater generation perspective.  And it would possibly be double or triple uneconomic under the State’s green jobs subsidy component under AB 2554.

In an email, Cutter clarified: “The cost of storm water capture is a curve not a number.  Capturing the first, say, 10 percent of yearly rainfall is pretty cheap, the next 10 percent is a lot more expensive and so on.  There are also opportunities for inexpensive capture in the foothills where rainfall and infiltration is high.”

While there may be less costly opportunities to capture water at the base of the foothills, most of the contamination comes from roof and street gutters filled with decaying vegetative material mainly from deciduous city street trees located below the foothills on the alluvial fans and lower land basins.

Least cost alternatives not considered

However, it should be pointed out that there has been no apparent cost-benefit study conducted by the state or county of their specific storm water capture policy.

Nevertheless, Cutter further said, “The point of urban storm water capture is mainly water quality goals, so judging it by its water supply per acre foot cost is the wrong metric.  You have to judge it relative to other measures that achieve the same water quality goals.  That’s the point of the paper. It asks: If you are going to have these water quality goals, what is the most cost-effective way to meet them?”

But water quality goals can lead to out-of-control costs. For example, the Peck Road Park Lake in Arcadia adjacent to the San Gabriel River is cited as negatively impacted by pollution from runoff. The lake is an 80-acre former gravel pit that was converted to a park and lake that is stocked with trout for recreational fishing.  Would it be more cost effective to just close the lake, or turn it into a local catch basin?  There is no way of knowing without a cost-benefit study.

Another example would be the purported polluted “dead zone” at the outlet of the San Gabriel River near Long Beach.  The L.A. County Department of Public Works website states that water pollution causes fish and shellfish to suffocate from oxygen deficiency.

But it isn’t that the ecology is devoid of all fish or marine life.  Even the L.A. County website acknowledges that worms, jellyfish, spot fish and anchovies can live in low-oxygen environments.  There are organisms such as plankton and insects that eat undesirable algae blooms.

The environment can work either way as a low- or high-oxygen ecosystem. The choice of ecosystem has to do with cultural and political values — not science, pollution, “fish kills,” or endangered species only.  Shellfish are pretty and jellyfish can sting.  Cleaning up beaches and man-made inland lakes in former gravel pits will likely lead to a greater number of natural predators for other fish or marine life species.

Politicians only cherry pick beautiful or desirable marine species to justify their preservation policies and green jobs programs. The county’s so-called “Clean Beaches” program under AB 2554 may be effective in protecting shellfish or surfers in Surfside beach, but the environmental tradeoffs and least-costly alternatives are never disclosed.

Moreover, without an impartial cost-benefit study, the public has no idea how cost ineffective it is to clean up the watersheds.  There needs to be a way to determine the least costly alternative, even if storm water cleanups are uneconomic.

Storm water supermajority tax tyranny

As can be seen, AB 2554 is structured as another jobs program and out-of-control wealth transfer tax.

Janet Daley has pointed out a similar trend in Great Britain, where the Eurozone is headed for economic dictatorship.  As she describes it: “Many of the Left will finally have got the economy of their dreams – or rather, the one they have always believed in.  At last, we will be living with that fixed, unchanging pie which must be divided up ‘fairly’ if social justice is to be achieved.  Instead of a dynamic, growing pot of wealth and ever-increasing resources, which can enable larger and larger proportions of the population to become prosperous without taking away anything from any other group, there will indeed be an absolute limit on the amount of capital circulating in society.  The only decisions to be made will involve how that given, unalterable sum is to be shared out — and those judgments will, of course, have to be made by the state since there will be no dynamic economic force outside of government to enter the equation. Wealth distribution will be the principal — virtually the only — significant function of political life.”

California’s version of the taxation “tyranny of the majority” in Los Angeles County under AB 2554 will be cloaked in environmental laws. The laws will replace representative government with tax-sharing programs run by unelected, unaccountable and self-dealing sub-regional councils. It would be the beginning of the end of the California Republic and its replacement by a socialized democracy.  But is this inevitable?

For all of the above-discussed drawbacks to the currently structured storm water cleanup law in Los Angeles County, a market-based system should be considered as an alternative.  Such a market incentive system would avoid the drawbacks of use of eminent domain, lost tax base, and out-of-control costs.

Storm water capture is not economically feasible (costs exceed economic benefits on a water cost basis).  Nevertheless, the land cost advantage of a market bidding system offers substantial advantages over the current policy of storm water pollution clean up at nearly any cost.

Los Angeles County Watersheds

Watersheds Square Miles Residential Commercial Industrial OpenSpace/Other
Ballona Creek Watershed

Source: Santa Monica Mtns.

Discharge: Marina Del Rey

Cities: Beverly Hills, Culver City, Inglewood, L.A., Santa Monica, West Hollywood

130 64% 8% 4% 17%
Dominguez Channel Watershed

Source: Imported treated water

Discharge: Wilmington Drain

Cities: Carson, Compton, Inglewood, Palos Verdes, Rolling Hills, Torrance, Ports of Long Beach/LA

(parkland & open space in short supply)

133 93% developed 7%
Los Angeles River Watershed

Source: Griffith Park

Discharge: Long Beach

Population: 9 million

Cities: Los Angeles, Long Beach, Wilmington

834 37% 8% 11% 44%
Rio Hondo Watershed

Source: San Gabriel Mtns.

Discharge: Whittier Narrows & Peck Road Water Conservation Park

143 N/A N/A N/A N/A
San Gabriel River Watershed

Source: San Gabriel Mtns.

Discharge: Whittier Narrows

Cities: Azusa, Covina, Baldwin Park, Cerritos, El Monte, Whittier, Pico Rivera, Downey, Cypress, Bell Flower, Norwalk, Long Beach, Seal Beach

713 N/A N/A N/A N/A
Santa Clara River Watershed

Source: San Gabriel Mtns.

Discharge: Ventura Harbor

Cities: Santa Clarita, small portion of Palmdale

Population: 252,000

Note: Area & river in mostly natural state


786 31.6% 2.6% 0.5% 57%
Santa Monica Bay Watershed

Source: Santa Monica Mtns

Discharge: Santa Monica Bay

Population: 1 million

87 44% 35% 6% Rural 35%;Other 11%


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