$25 billion delta tunnel project will jack up users’ bills California’s controversial plan to build tunnels and siphon massive amounts of water from the Sacramento-San Joaquin River Delta will jack up costs for water users, including 3 million Bay Area residents, but farmers will be hit the hardest, according to a financial analysis released Friday. The report, by state Treasurer Bill Lockyer, says costs could double for some water customers if the Bay Delta Conservation Plan goes through, but concludes that the overall $25 billion price tag is “within the range of urban and agricultural users’ capacity to pay.” The massive project to move water south, which would also put $7.8 billion toward restoration of marsh habitat in the delta, would be paid with bonds sold by water districts relying on that water — districts that would increase water rates to pay off the debt, regardless of how much water the consumer is using. The Santa Clara Valley Water District, one of the largest metropolitan water agencies in Northern California, serving San Jose, Palo Alto and 14 other cities, plans to raise property taxes for its 1.8 million customers in Silicon Valley from about $36 to $60 a year over the next decade to help pay the $228 million costs they expect to incur between now and 2024 for the delta tunnels. In the East Bay, the Zone 7 Water Agency, serving Pleasanton, Dublin and Livermore, gets about 80 percent of its water from the delta. The district, on its website, has informed its customers of the possible future costs without providing specifics. The Alameda County Water District, serving Fremont, Newark and Union City, also gets its water from the delta and would presumably also raise rates. The tunnel plan is supported by Gov. Jerry Brown but has been attacked by environmentalists, some delta farmers and fishing groups who insist that, among other things, cost overruns would saddle water districts with more debt than they can afford. But the treasurer’s report was encouraging, said Terry Erlewine, general manager for the State Water Contractors, an association of 27 public agencies in Northern, Central and Southern California. He said it shows that this “critical investment” in a new water supply system is possible. “The Bay Delta Conservation Plan offers an opportunity to protect our state’s primary water supply from the constant threat of earthquakes, levee failures and flooding,” Erlewine said. “It’s a significant investment, but the risk of doing nothing is costly and bleak.” As the California drought worsens, agricultural interests and conservationists agree that something must be done to quench California’s ever-increasing thirst. The question is whether the state should spend billions of dollars capturing the water and distributing it through new pipelines or spend a little less money by maximizing usage through conservation. A laundry list of proposals, including water recycling, groundwater storage and even cloud seeding, are in a working draft of the California Water Plan, a comprehensive blueprint for future management of the resource. But those solutions aren’t expected to resolve the problem, leaving the twin tunnel proposal as an intriguing option. The problem, according to Tom Stokely, water policy analyst for the California Water Impact Network, is that costs for geotechnical engineering and construction complications are likely to go up. Conservation groups have recently calculated that cost overruns are likely to leave California with a $67 billion bill when all is said and done. Stokely and others point to the Central Valley Project, first authorized in 1935, as an example of how debt service can go beyond a district’s ability to pay. The federal government recently proposed forgiving as much as $300 million in debt and giving the Westlands Water District a permanent water contract, which could ultimately mean less water for other contractors. Another flaw, Stokely said, is that the treasurer’s analysis doesn’t adequately account for the fact that when prices go up, water usage, and therefore revenue, goes down. “This particular project would clearly increase the fixed costs of water districts that are already struggling,” he said. “The local agencies could end up raising prices so high that there would be so much water conservation that their revenues would be reduced and they wouldn’t be able to pay their bills.” Stokely said that has already happened to the Montecito Water District, in Santa Barbara County, where water use was cut 40 percent this year, leaving the district short. The treasurer’s report, commissioned by the California Debt and Investment Advisory Commission, examines a range of cost scenarios. It estimates that the state’s water customers would have to make billions of dollars in fixed payments each year, even during dry periods.Tim Gage, a partner with Blue Sky Consulting Group, which prepared the report, said municipal water districts that have large customer bases will likely have an easier time than smaller agricultural districts paying off the debt from tunnel construction. “The reason it might be challenging is because in many cases these are smaller agricultural water contractors that don’t have as many resources to pay debt service,” said Gage, former director of the state Department of Finance. “On average, depending on crop mix, it looks like their payment capacity is adequate, but there are a lot of variables.” Gage said some of the smaller districts might decide to switch from low-value crops like alfalfa to higher-value crops like almonds and pistachios to meet costs. The California Legislative Analyst’s Office recently said urban water districts can raise property taxes without first getting voter approval to pay for the twin tunnels. As many as 27 public agencies in the state, serving more than 26 million residents and 750,000 acres of agricultural lands, are expected to follow suit. Local districts, including the San Francisco Public Utilities Commission, Contra Costa Water District and the East Bay Municipal Utility District, would not be affected. Lockyer acknowledged that it won’t be easy to overcome the engineering, political and environmental-protection hurdles. “Our report makes public for the first time clear financial assumptions and sober analysis using a range of scenarios to help inform the public and policymakers,” Lockyer said in a statement. “The report is the result of two years of hard work and careful analysis, and it should contribute greatly to a rational public discussion about the project.” Peter Fimrite is a San Francisco Cronickle staff writer. E-mail: pfimrite@sfchronicle. Twitter: @pfimrite.
Posted on: Sat, 15 Nov 2014 02:25:04 +0000
Trending Topics
Recently Viewed Topics
© 2015