State: Delta tunnels a good investment
STOCKTON — More than six years after critics began calling for a full economic study of the Delta tunnels plan, the Brown administration released one on Tuesday, finding that the benefits outweigh the costs — albeit by a slim margin for some water users.
Delta interests immediately dismissed the study as skewed and speculative.
The new study looks only at the first of the two tunnels, which now are expected to be built in phases after officials couldn’t get water districts to commit to the full $17 billion cost.
Assuming that future water supplies to cities and farms as far south as San Diego would decrease substantially if the tunnels aren’t built, an economist working for the state found that the project would bring about $2 billion to $4 billion in net benefits to urban areas and likely several hundred million dollars in net benefits for agricultural districts. That’s spread over the expected century-long life of the tunnels.
“The cost-benefit comparison is pretty clear: This project makes sense for urban users under any scenario I considered. It’s a pretty sensible investment for them,” said David Sunding, a University of California, Berkeley, economist who was hired by the state to conduct the study.
For farmers, it’s a closer call, Sunding acknowledged. But if low-interest federal loans are available and farmers are able to trade water shares with urban areas, the benefits increase, he said.
Stockton-based Restore the Delta called Tuesday’s study “incomplete” since it looks only at the first tunnel. State officials have made it clear that they intend to eventually build both, and they’re seeking permits to do so.
Sunding’s report also clashes with previous work by University of the Pacific economist Jeff Michael, a consultant for anti-tunnels groups. Michael’s own 2016 analysis found that the costs of the tunnels would outweigh the benefits by perhaps $8 billion to $10 billion.
Why are the two economists so far apart? They rely on different baselines to calculate the costs and benefits.
Sunding’s study assumes deeper reductions in future water supplies if the tunnels are not built. Those reductions could be caused by increasing environmental problems in the Delta, climate change and earthquakes. He also considers the state’s impending regulation of groundwater use, arguing that will make surface water delivered through the tunnels more valuable.