Financing a Delta Plan

With the upcoming release of the initial draft of the Delta Stewardship Council’s Delta Plan, it’s time for a discussion about how this ambitious plan should be financed.  (If you’d like a little more background, I’ve written about this issue here, here and here.)  

There’s a great deal at stake in this discussion. One of the major causes of the collapse of the CALFED Bay-Delta Program – the predecessor of the Delta Stewardship Council -- is that it failed to develop a credible financing plan. CALFED assumed an unrealistically high level of state and federal funding. Those funds failed to materialize and the plan floundered – stalling the CALFED ecosystem restoration effort and its planned investment in stronger Delta levees. As a result, CALFED lost credibility, leading eventually to its dissolution and the creation of the Delta Stewardship Council. 

Given the many challenges facing the Delta, such as the ongoing collapse of its fisheries and concerns about long-term stability, it is essential that the Council not repeat the CALFED financing mistake. By the time the Delta Stewardship Council adopts the Delta Plan, it will have been more than a decade since CALFED adopted its failed plan. We can’t afford to lose another decade. 

Many others have tried to spark this financing discussion. A year ago, the California Legislative Analyst’s analysis of the state budget included the following:

How Will Implementation of the Delta Plan Be Financed? The new legislative water package requires that implementation of the Delta Plan to be developed by the council begin by January 2012. However, the water package did not provide a long–term financing plan (the proposed water bond was not designed to fund all components of the legislative package), including for implementation of the Delta Plan. Thus, it is not clear how implementation of a new Delta Plan would be able to proceed in a timely manner as contemplated in the recent legislation. (Emphasis added.)

The Public Policy Institute of California has encouraged a realistic discussion of financing through the release of its 2009 report Fixing the Delta: How Will We Pay For It?

Just yesterday, economist Jeffrey Michaels wrote about the challenge that financing could represent to making progress on Delta issues.   

The Delta Plan will only be implemented if the Council tackles financing issues head on. And the Council can’t simply wait for the end of the process to write a financing plan. A realistic conversation about how to pay for the many elements of a Delta Plan will inevitably force hard choices.    

The simple truth is that a discussion about financing the Delta Plan is essential to writing a realistic Delta Plan. Why is that? It’s pretty simple. Let’s say that your mechanic just told you that you need a new car. Assuming that federal taxpayers will pay to purchase and maintain your next car, what would you buy? (I suspect that Porsche sales would increase. Personally, I’d buy my wife the restored 1964 convertible Falcon she’s always wanted.) Now assume that this federal subsidy vanishes and you have to pay the full cost of that purchase. Would that financing decision affect the car you’d plan to buy? I suspect that in most cases it would – leading to increased sales of efficient and affordable cars. In the same way, financing decisions should shape the preparation of what could be a fifty billion dollar Delta Plan.   

Over the coming couple of weeks, I’ll write a series of posts about Delta financing. I’ll focus on three major issues – financing ecosystem restoration, flood management and water conveyance facilities. These posts will be based on a “beneficiary pays” approach to financing. That approach holds that stakeholders should pay for the impacts they cause and the benefits they would receive from a Delta Plan. 

I should be clear up front. A realistic and ambitious Delta financing plan is possible. And beneficiaries should not pay for the entire cost of this plan. The investment of some public funds can be justified. After all, the Delta Plan should generate real public benefits. But the benefits to some stakeholders will be great and the limits on public funds are real. Relying primarily on public funding would be neither fair nor realistic. Unfortunately, the financing challenge hasn’t gotten easier since the CALFED plan was finalized a decade ago - the state and federal budgets are in far worse shape today than they were in 2000.  

It’s hard to object to a beneficiary pays based financing plan in the abstract. But, as always, the devil is in the details. Writing this financing plan won’t be easy. But remember that without financing, a Delta Plan is just a wish list. It’s time to get real.