Economist Dr. David Sunding’s recently wrote that the Bay Delta Conservation Plan’s (BDCP) project of sinking 40-ft wide twin tunnels 150-ft. below the surface of the Delta is a wise investment for California water-users.
What he didn’t mention is that he made his analysis on information that was spoon-fed to him by the BDCP and the Dept. of Water Resources (DWR) who kept from him information that was negative to the outcome they wanted. He admitted as much in a question and answer session at a recent discussion before the Metropolitan Water District of Southern California.
Meanwhile, Dr. Jeffrey Michael, a Univ. of Pacific economist commented on what was wrong with Sunding’s analysis, writing: “Benefit-cost analysis must compare the project to the next best alternative, not the worst case scenario. This report only compares the tunnels to the newly created “existing conveyance scenario” which is a worst-case, not the next best alternative for water contractors.”
Dr. Michael did his own analysis using the “next best alternative” and his finding was that the BDCP tunnels were a financial bust—producing a negative $2.86 for every $1 invested. Of course, Dr. Sunding and the BDCP executives are acting as if Dr. Michael’s analysis never existed.
But that’s not the BDCP’s only financial problem. As a recent Delta Stewardship Council (DSC) meeting I attended, BDCP representatives were supposed to give an update to the council on funding for the twin tunnels. They could have just as well phoned it in. Operating in a field where the BDCP must provide the DSC with “assured funding” the representatives talked all around it but still came up empty handed.
The problem stems from a higher-up decision made years ago to not use General Obligation (GO) bonds to fund the twin tunnels, but depend on Revenue Bond financing. General Obligation bonds, backed by the state and paid for by increased taxes, have to be put on the ballot and are voted upon by the public.
Revenue Bonds can be issued by any state agency and are paid for by user fees from the project—in this case revenues would be raised through higher local water rates. Revenue Bonds do not require a vote of the people and are a bit riskier than GO bonds because they are not backed by the good faith of the state.
So it is very clear that somebody higher up in the state does not want the twin tunnels to go to a public vote. What are they afraid of? Well, in 1982 the Peripheral Canal was voted down by a 67% to 33% margin—the largest defeat ever during Gov. Brown’s two tenures. Was someone afraid this would happen again?
As it stands now, the tunnels alone are projected to cost $17-billion out of a $24-billion total project cost. An association of state and federal water agencies—located mostly below the Delta—have offered to undertake the providing of a revenue stream to the DWR which would be the bond-issuing agency, but a year of negotiations has come and gone and there is still no “assured funding” for the BDCP’s project. In fact, the association of water agencies has filed a suit against the DSC objecting to the flow requirements of water out of the Delta.
All of this has evidently not produced an aura of confidence in the people and institutions who buy revenue bonds as investments. For example, what if an earthquake hits the Delta and turns it into one big swamp? Do they get their money back? And what if there are cost overruns (as there surely will be), do the water agencies just keep raising user’s water bills ad infinitum?
The only clear and safe avenue to “assured funding” for the BDCP is to use General Obligation bonds to fund their projects through a water bill that includes the tunnels. Let the people vote on it. That’s real democracy!
BURT WILSON is the Editor and Publisher of the Public Water News Service blog which is distributed to people throughout California who are involved in Delta events. He was on the staff of the anti-peripheral Canal campaign in 1982 and continues to monitor water actions in the Delta. He lives in Sacramento