Report Finds Delta Tunnels Will Need $6.5B Subsidy

(CN) — California officials say that a previously unreleased cost-benefit analysis of Gov. Jerry Brown's proposed delta tunnels project indicating that taxpayers may have to shoulder $3.9 billion of the $15 billion price tag is outdated.

The fall 2015 analysis obtained through a public records request by Restore the Delta, a group opposing the "California WaterFix" project, states that without a multibillion-dollar contribution from the federal government or some other entity, local water districts may not benefit as expected from the project.

Nancy Vogel, spokeswoman for the California Natural Resources Agency, told Courthouse News that the study is "outdated and incomplete."

"The state has not concluded that WaterFix requires federal funding to be feasible. The project remains based on the premises that its beneficiaries will pay and a full financing plan will be made available when complete," she said.

State officials estimate that the cost to design and construct the two 35-mile-long, 40-foot-high tunnels below the Sacramento-San Joaquin Delta will cost $14.9 billion, with an additional $796 million in mitigation costs.

These costs are intended to be paid for by the public water agencies benefitting from the water deliveries, according to the state.

An additional $1.4 billion is expected to be spent on the operation and maintenance of the project over the next 50 years, to be shouldered by the water agencies and federal funding.

However, last year's cost-benefit analysis found that some local water districts may not see a benefit from the project.

While urban water users can afford the project and receive most of its benefits, WaterFix does not produce benefits that will exceed the costs for most agricultural water users, according to the analysis authored by economist David Sunding of the University of California, Berkeley.

His analysis assumes that the federal government or some other entity will make a $3.9 billion contribution to the capital and operating costs of WaterFix to make it feasible.

"If these costs must be borne by the other delta water users, then the net benefits of the project are even more negative for agricultural contractors," Sunding wrote.

Looking at the project's benefit and cost figures as a whole show that water contractors with the State Water Project and Central Valley Project would see a net benefit of just over $6 billion, according to the analysis.

But looking at the results more closely, "the level of direct benefits for state and federal agricultural contractors is not sufficient to justify investing in the project," Sunding wrote, noting that agricultural users would likely lose $1.5 billion.

Without a $3.9 billion contribution from the government or another third party, even urban contractors may not find the project as attractive, Sunding said.

He noted, however, that the project would provide "significant indirect and public benefits" to residents of the state, such as reduced food prices and increased employment opportunities.

These benefits "justify a state contribution to the project in addition to the assumed public contribution," Sunding said.

Barbara Barrigan-Parrilla of Restore the Delta said that it is clear WaterFix planners "have no qualms about Californians paying for the project through higher water rates, property taxes, and state and federal income taxes — all for the benefit of big agricultural growers on the west side of the San Joaquin Valley, and special-interest water districts like Metropolitan Water District of Southern California."

She added, "Southern Californians and Silicon Valley water ratepayers should be very concerned as they will end up subsidizing big agriculture four different ways."

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