Cal Water Fix Economic Analysis (Draft)

This benefit – cost analysis of the California Water Fix project was produced by Dr. David Sunding with the Brattle Group and a consultant to the Natural Resources Agency, a proponent of the project.

There are two basic questions with respect to the economics of the Cal Water Fix.  First, is the project affordable?  That is, do the water users who would pay for the construction and operation of the tunnels have the ability to repay the associated debt and operating costs?  Second, does investment in the Cal Water Fix generate benefits to water users that are greater than the costs?  This is the classic benefit-cost question, and it is often a more exacting test than ability to pay.

The purpose of this report is to examine the relative direct benefits and costs of the Water Fix, and to outline some of the major indirect economic effects of implementing the program.  The benefits of the tunnel are analyzed with respect to a no-tunnel baseline with the same operating criteria as the Water Fix.