Article of Interest for December 26, 2013
San Jose Mercury News
Delta tunnels plan’s true price tag: As much as $67 billion
By Paul Rodgers
For more than a year, Gov. Jerry Brown’s administration has been describing his plan to build two massive water tunnels through the Delta as a $25 billion project.
That would rank it as one of the largest public works plans in California history.
But when factoring in long-term financing costs, the price tag actually ranges from $51 billion to $67 billion, according to new figures that emerged last month.
While there’s nothing unusual about long-term debt to finance big projects, the new numbers suggest for the first time that the interest payments for the controversial water tunnels could be even more expensive than many traditional projects financed by bonds.
And since the water project relies on a higher percentage of financing than Brown’s other legacy project — high-speed rail — critics and supporters alike are questioning if California can afford the cost.
“The numbers are big. There is sticker shock,” said Jason Peltier, chief deputy general manager of the Westlands Water District, an agency in Fresno that provides water to farmers. “We keep going back to our policy people and saying ‘Yes, this is tough to look at, but consider your other scenarios. How much more groundwater can we pump?’ That kind of thing.”
The Brown administration has yet to provide a detailed breakdown of the overall 30-year cost of the project, even in a 34,000-page report on the tunnels it released last month.
The new cost figures were presented at a Westlands district board meeting last month by a Westlands staff member and a Citigroup bond consultant.
Mark Cowin, director of the state Department of Water Resources, confirmed the estimates are accurate.
“The assumptions they’ve made are reasonable,” he said. “But financing is confusing. There isn’t any doubt about it. It’s hard to relay information that the public understands. We need to be clear that if you add up the total debt service, that’s a different type of calculation than the capital cost estimate. I would hope those two types of estimates aren’t confused.”
The new details are significant for three reasons: ….
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