August 25, 2010 - Bend Bulletin - Water project merits skepticism

Sep 07, 2010

August 25, 2010 - Bend Bulletin - Water project merits skepticism

Water project merits skepticism

Published: August 25. 2010 4:00AM PST

Were horror master Stephen King to apply his talents to Bend’s proposed surface water project, he couldn’t choose two more frightening words than “complexity” and “uncertainty.” Both words figure prominently in an Aug. 16 memorandum to city councilors from Bend’s finance director, who describes some of the “complex financial considerations” that will affect the project. Compounding the complexity is the “uncertainty of ... funding” needed to mitigate rate hikes for city water users.

If all of this makes Bend residents shudder a little, it should. It also should make city councilors skeptical. By and large, they have supported the surface water project, which might still be a good idea. But councilors should be prepared to back out if the rosy assumptions that make the complex enterprise appear so attractive continue to crumble.

Bend’s municipal water supply currently taps two sources, the first — and older — being Bridge Creek near Tumalo Falls. The second is the region’s massive aquifer, which is recharged dependably by melted snow. Bend’s proposed project would, at a potential cost of more than $70 million, update the infrastructure that carries surface water from Bridge Creek to the city.

The project is necessary for several reasons, city officials argue. Federal regulations require even clean surface water like Bend’s to be treated for certain microorganisms. The inevitability of a fire in the city’s watershed argues for the construction of a filtration facility. Meanwhile, the existing pipeline — all 10 miles of it — is both old and unsuitable for use with a hydroelectric facility, which the city would like to build to generate revenue.

Pulling off a project of this magnitude will cost a whole lot more than simply abandoning Bridge Creek as a water source and drilling more wells, according to an extensive analysis completed last year. But the analysis makes a number of assumptions that improve the surface water project’s bottom line.

For instance, Bend could shift some of the costs onto taxpayers elsewhere by taking advantage of various “green” subsidies like Oregon’s notorious Business Energy Tax Credit. And over the long term, the city might profit handsomely by selling its hydro power. This possibility is particularly attractive given the electrical bills generated, so to speak, by groundwater. The stuff doesn’t pump itself to the surface.

Unfortunately, the assumptions built into the city’s admittedly complex funding plan are prone to uncertainty. Just recently, the City Council learned that some of the anticipated subsidies might be less generous than expected or simply unavailable. Meanwhile, the hydro project suddenly appears much less lucrative. According to the Aug. 16 memo: “In the 2009 Financial Model, revenue from hydro sales were projected to be about $1.7 million per year starting in FY2012-13. Current revised projections of hydro revenues are significantly reduced to about $700,000 per year starting in FY2014-15.” That’s no small difference.

And speaking of projections, the city’s 2009 analysis weighs anticipated costs and revenues for various alternatives over a period of five decades. But does anyone really know how much electricity will cost in 2032, much less 2062, the last year covered by the city’s analysis? Of course not. Attempting to calculate the costs and benefits of such a large public project over a 50-year period is probably necessary. But as the time frame increases, the accuracy of the assumptions necessarily declines, particularly in a project as financially complex and uncertain as this one.

Again, revamping the city’s surface water supply might be the best alternative despite the project’s cost and the complexity and uncertainty of its financing. But the option’s shortcomings should increase the skepticism of councilors, who must not make the mistake of clinging to it in the face of changing facts. Momentum is a lousy reason to approve expensive public projects.

Finally, the surface water project deserves special scrutiny for environmental reasons. For years, taxpayers and local irrigation districts have piped canals in order to increase flows in the Deschutes River — and in particular the section of river just below Bend, which becomes a comparative creek in the summer. Bend’s surface water project, on the other had, would continue the diversion of cold, clean surface water that otherwise might end up in the Deschutes. And as planned, ironically, it would do so with millions of dollars in subsidies.

Switching to groundwater ultimately would decrease Deschutes flows, too. But it would do so far downstream, where flows are relatively healthy. As long as city leaders are in the costs-and-benefits stage, they ought to explore the possibility of switching to groundwater and preserving their rights to in-stream Bridge Creek water. Surely, healthy creeks and rivers have some benefit to a city that profits from tourism and outdoor recreation.

Published Daily in Bend Oregon by Western Communications, Inc. © 2010

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