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State’s Report: Gov. Brown’s Tunnels Could Cost $62 Billion

FOR IMMEDIATE RELEASE: Friday, November 14, 2013
Contact: Steve Hopcraft 916/457-5546; [email protected]; Twitter: @shopcraft, Barbara Barrigan-Parrilla 209/479-2053 [email protected]; Twitter: @RestoretheDelta

State’s Report: Gov. Brown’s Tunnels Could Cost $62 Billion
Expect 34% Construction Cost Overrun,
Fails to Answer Whether Tunnels are a Good Investment

Construction Estimate has gone from $4 billion to $32 billion

Sacramento, CA – Restore the Delta (RTD), opponents of Gov. Brown’s rush to build Twin Tunnels that would drain the Delta and doom salmon and other Pacific fisheries, today responded to a State-sponsored Report on Affordability and Financing for the Bay Delta Conservation Plan (BDCP) showing the project is likely to exceed construction cost estimates by 34 percent and cost up to $62 billion for the expensive and unnecessary project. “The Brown Administration is planning to stick families and businesses with the bill for subsidized water to mega-growers to export almonds and pistachios,” said RTD Executive Director Barbara Barrigan-Parrilla. “The latest report includes the news that the $24 billion construction bill is likely to grow to $32 billion. If this weren’t the governor’s pet project, the Peripheral Tunnels would be rejected by the Dept. of Water Resources, based on its own guidelines.”

The costs per acre-foot are not for new water. Rather, that is the additional cost for water already delivered. The report’s caveats on page 8 belie the rosy spin that the Resources agency is putting on this report. Also the summary does not mention the probable need for Metropolitan Water District to have “take or pay” contracts with its members, most notably the City of Los Angeles.

“The tunnels are really only affordable if property taxpayers who get no benefit are on the hook to pay for them,” said Patricia Schifferle, Director of Pacific Advocates. “Even if the water tunnels turn out to be two dry tunnels, or do not deliver much water, property taxpayers will be on the hook to repay the massive debt along with ratepayers. Many of these taxpayers do not receive any water service from the State Water Project (SWP), but they will still pay. The tunnels are only affordable if taxpayers pay for the mitigation costs caused by the SWP and the Central Valley Project (CVP) of over $4 billion.”

“We still see a project with no comprehensive cost-benefit analysis, and no analysis of water availability,” said Barrigan-Parrilla. “This boondoggle will impose heavy financial burdens on California families and businesses, while mainly benefiting a few mega-farmers in Westlands and Kern water districts. There is a better, cheaper and faster way to address our water challenges.”

“Capacity to pay does not show that farmers are better off with tunnels. It only shows how far you can push average water costs before farming is unprofitable and the value of land in agricultural use is zero. The report states that contracts would have to be changed to force farmers to pay for water they don’t receive in drought years, but its analysis only shows that farmers could barely make payments in an average year. Farmers would have greater risks of bankruptcy in a drought under this plan,” said Dr. Jeffrey Michael, Director of the Business Forecasting Center at the University of the Pacific, and co-author of the Delta Protection Commission’s Economic Sustainability Plan. “This narrowly focused report does not answer the question of whether the tunnels are a good investment. The water contractors have the financial capacity to make many bad investments. Doing so is bad for their ratepayers and the citizens of California.”

“In each updated report or conversation regarding the tunnels, the cost per acre foot of water becomes more expensive,” said Barrigan-Parrilla. “Californians cannot afford these boondoggle tunnels, either in their taxes to pay for a conservation plan that will fail without adequate flows, or in their water rates. Urban residents will not receive additional water. But mega growers on the west side of the San Joaquin Valley will. The Executive Summary says that existing bonds can be used to finance the state’s contribution to the BDCP. Governor Brown assured the public that the recently passed water bond would not be used for the tunnels project. Have California voters been fooled?”

Dr. Michael’s cost-benefit analysis found that the BDCP would cost $2.50 for every $1 in benefits. Three separate analyses of the costs, benefits and financial burdens of the proposed Bay-Delta Conservation Plan (BDCP), and its Peripheral Tunnels found it costs more than its benefits, and that it will impose a heavy financial burden on California businesses and families. The Brown Administration has produced partial and scattered reports that the public will not find useful in determining whether this largest-ever California water project is worth the crushing cost.

“Since the BDCP process started, the cost estimates of Delta conveyance have increased from $4 billion to $14 billion, the water supply and environmental benefits have declined, and seismic levee improvements have been shown to provide a broader range of economic benefits than the tunnels for a fraction of the cost,” said Dr. Michael.

“The report doesn’t look at any of the hard issues (like Friant Water District paying for the Exchange Contractors’ share of costs, whether state and federal costs are reasonable and likely to occur), and looks only at impacts to four contractors (MWD, WWD, SCVWD, and Kern). For the 2 agricultural contractors, BDCP will result in a doubling (or nearly tripling for Kern) of the cost of water, and is just barely affordable from the Treasurer’s report.

Dr. Michael said the Peripheral Tunnels would undercut more cost-effective efforts to improve California water policy. “The only way to finance the colossal debt of the Delta tunnels will be to keep southern California and Silicon Valley dependent on Delta water. The state cannot both build BDCP and develop advanced water technologies and alternative supplies. The two visions are fundamentally in conflict. A combination of Delta levee upgrades, local water supplies, conservation and recycling will be less expensive, more resilient to droughts (the biggest reliability threat), save lives and protect critical statewide transportation and energy infrastructure, and create jobs across the state, including southern California.”

“The State likes to talk about how the water contractors will be paying for construction of the tunnels – but they will just pass on higher rates for water rate payers. They downplay that 15% of the project costs will be shifted to California tax payers through general obligation bonds,” said Barbara Barrigan-Parrilla, executive director of Restore the Delta. “The new report fails to mention that 16% of the project will be funded by U.S. taxpayers to cover the mitigation needed for damage from building these two enormous tunnels and diverting over half of the Sacramento River away from the estuary. Californians will be paying for this project with higher water rates, state taxes, and Federal taxes – all so Westlands growers can continue to do unsustainable farming on unsuitable land.”

“The cost keeps escalating and the benefits diminishing,” said Barrigan-Parrilla. Restore the Delta pointed to findings of the administration’s own analysis showing the “through-Delta” alternative has the highest benefit-cost ratio of all the options. “The Brown Administration has failed to disclose that California families will pay thousands of dollars, yet receive no new water.”

Cost of Peripheral Tunnels:
Construction $24.5 – $32 billion
O&M $1.5 billion
Interest on Tunnel Revenue Bonds: $26.3 billion
Habitat and Conservation $7 billion
Interest on General Obligation Bonds: $3.2 billion
Administration and Research $1.6 billion
Total $54.1 – $62.1 billion

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