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November 21, 2014

Treasurer’s Report Finds BDCP Affordable


Last week, the California State Treasurer’s Office released The Bay Delta Conveyance Facility: Affordability and Financing Considerations, a study of affordability for the water facility construction proposed in the Public Review Draft Bay Delta Conservation Plan (BDCP). This independent study finds that the cost of the Delta conveyance facility is within the range of urban and agricultural users’ capacity to pay.

This report is the latest among several economic analyses on the costs of the Bay Delta Conservation Plan (BDCP) and uses the same cost estimates presented in the Public Review draft but from a different perspective with different analytical methods.  For example, BDCP cost and funding estimates are based on current dollars as a way to describe and quantify costs that will be incurred over the 50-year lifetime of the project. The Treasurer’s analysis examines how these same costs are incurred in future years and how those costs align with water supply benefits. Where previous studies on the BDCP have answered the question, “What is the economic value and benefit of investing in the BDCP?”, this report responds to the questions, “What are the risks of financing the conveyance facilities outlined in the BDCP?” and “Is the project affordable?”

“The two methods of looking at the same costs are consistent with one another, and are both important and widely accepted ways to look at costs and benefits,” said Professor David Sunding of the University of California, Berkeley, who has conducted numerous economic analyses for BDCP. “The conservative estimates and assumptions by the Treasurer’s Office provide further evidence that the proposed water improvements are prudent and affordable investments.”

Review the full report here.

Previous economic studies on the cost and benefits of the BDCP are available online:
  • Cost and Yield Information: In May 2014, the BDCP released a memo that assessed the cost of the BDCP compared to replacement of Delta-exported water by regional alternative sources.  The study found that additional water supply alternatives for MWD and its member agencies would cost about $13.9 billion to implement, whereas the cost of the BDCP is expected to be $3.7 billion to these same agencies. Moving beyond Southern California, the other urban State Water Contractors would similarly need to invest in additional local supplies of roughly 0.2 million acre-feet to make up for SWP supplies lost if the BDCP were not implemented. This additional investment is likely to be in the range of $6 billion assuming most of the projects came in the form of less expensive alternatives such as recycling and groundwater recovery. Looking across all urban State Water Contractors, therefore, the additional investment needed to make up for lost SWP deliveries comes to a total of roughly $20 billion. The proportional cost of the BDCP to these same urban contractors is $5.4 billion.
  • Statewide Economic Analysis: Released in August 2013, this draft report shows that securing water supplies through BDCP implementation will result in $73 billion in additional business output for California, and will protect and create more than 1 million jobs. Failing to implement the BDCP would result in a significant loss in California jobs, crop production, and economic growth, resulting in much higher food and water prices.
  • Economic Benefits of the BDCP and Take Alternatives: Released in December 2013, as a part of the Public Review Draft BDCP, Appendix 9.A provides a detailed analysis of the direct economic benefits to the state’s urban and agricultural water agencies receiving water supplies from the CVP and the SWP and finds the economic benefits outweigh the costs.
  • Implementation Costs and Funding Sources: Released in December 2013, as a part of the Public Review Draft BDCP, Chapter 8 outlines the estimated costs associated with implementation of the BDCP over the proposed 50-year term of the Plan and identifies potential funding sources and the mechanisms that will be needed to secure funding.
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