A contribution from Bruce Aylward

The City of Bend’s Surface Water Improvement project is the largest infrastructure project attempted by the City.  It happens to be taking place in the middle of the worst economy our country and region have seen since the Depression.  Although planning for it started after the peak in the local housing market, city staff (and their consultants) have yet to fully catch up with how fast Bend’s growth has gone from overheated to flat. 

When you make an investment there are three things to consider:

-the reversibility of the investment

-the risk and uncertainty associated with the investment

-the timing of the investment

Generally speaking, the more irreversible the investment and the more risk and uncertainty associated with the investment, the more you will want to put off the investment until later - assuming you can of course.  How does this apply to the City’s Surface Water “Improvement” Project?

Buying and putting large pipes in the ground and building a water treatment plant (and a hydropower plant) are pretty much irreversible investments.  If the City does not use the pipe or the treatment plant, can it exit the investment and get ratepayers’ money back?  Largely, no.  Perhaps some salvage can occur but it would be cents on the dollar. 

How much risk and uncertainty is associated with the project?  Here it is important to consider not just the uncertainty associated with the pipe and the treatment but our knowledge and understanding of the project and its potential alternatives.  In this regard the uncertainties are huge:

will the Tumalo watershed go up in a fire? and when?

will the water treatment plant really function through a fire and its aftermath?

what will be the running costs of the water treatment plant (the VE Study suggested much higher costs for water treatment)?

what are the real costs and benefits of alternatives to the City’s favored project?

Probably the biggest questions are when will the economy rebound and when will the City’s population grow again?  When that happens will water demand grow again? or will water conservation limit future growth in demand?

If an irreversible and uncertain investment can be delayed it remains a future option.  The passage of time can help resolve uncertainties and put the decision to move forward with the project or an alternative on firmer ground.  So the key question here is can the City wait?  The City says no, citing the 2012/2014 deadlines for being compliant with EPA regulations that require treatment of surface water.  What City staff have consistently ignored is the fairly obvious point that if the City is not using surface water it will not be subject to the EPA rule.  Therefore, if there are solutions that allow the City not to use surface water, it can buy time to better evaluate its alternatives.

So where would the City get its water if not from Tumalo Creek?  Well, the City pumps about half of its current annual supply out of the ground at present.  Could it pump it all out of the ground and avoid the deadline?  Most certainly!  In the winter the City meets demand of about 5-6 mgd and in the summer peak day demand of 25-28 mgd.   In the winter the City uses all surface water to save on pumping costs.  In the summer the City can reliably divert about 7-8 mgd of the peak day demand from the Creek, as it must share the water with irrigators.  So on a summer day if the City is meeting demand of 26 mgd - the peak day demand in 2010 - then it is using 8 mgd from Tumalo Creek and it is pumping 18 mgd.  So pumping water to meet water in the winter is obviously not an issue if the City can pump 18 mgd during the summer.

But what is the City’s capacity?  How much water can it pump?  Well, at present the City has about 32.2 mgd of in-service rated well capacity.  One existing well is not in service and another well is slated for construction in short order.  Why, you might ask does the CIty have so much capacity when it needed only 18 mgd last summer?  There are at least two reasons.

The first reason is that the City must have a standby source of water in case the surface water goes off line.  This may happen for a number of reasons.  One of the City’s largest fears has been not if but when a fire in the watershed will disrupt supply.  Also, in recent years, the City has had to turn off the surface water and go 100% to  groundwater during periods where high flows make the waters of Tumalo Creek too muddy (turbid) to use.  (Actually what the City has done is divert the water anyway and then dump the dirty water back into the creek just outside of town.) So this explains why the City might have 25-28 mgd or more in capacity but why 33 mgd?  Is not the plan to put in a treatment plant that can keep surface water flowing to the City even in the event of a fire?  So why overbuild?

The second part of the answer is that the City’s 2007 water plan, actually written in 2006, was a plan to support more growth, not a plan to live through a recession.  The plan projected a growth in water demand in 2008 and subsequent years of 7% per year.  The City’s surface water supply in the summer is fixed - at least as long as the irrigators want their water, too.  So the City’s ability to meet peak daily demands in the future rests wholly on groundwater.  So the City has been dutifully increasing its well capacity each year, implementing its Water Master Plan.

Circling back to the beginning the point is that the City has spare groundwater capacity due to its Master Plan.  In fact subtract 33 from 28 (just to build in some breathing room) and you will see that the City has 18% spare capacity even if it goes 100% to groundwater this summer.    In fact at a modest 1% growth rate in water demand the City would not need to drill another well for another ten to fifteen years.  If the City goes to 100% groundwater there is no urgency to build the “improvement” project as the EPA rule is not invoked.  At a later date the City can reconsider the project when it is timely to do so.

City staff continues to say that going to groundwater only is not a good idea because using more groundwater means more pumping costs.  This is true.  How much more though?  And how does this number compare with the savings from putting off this large and expensive infrastructure project?

Taking the average of the last five years of water use the City might spend up to an additional $640,000 a year.  Given the low capacity utilization of its existing wells this number may be even lower, as using a pump when its already on can cost less than turning it on.  How would this impact ratepayers?  The answer is that it would save them money.  If the City built the $70 million dollar “improvement” project then the annual interest and payments on a bond to finance the project might be $5,000,000 a year.  Plus the City expects that running the water treatment plant - membrane plants use power to push water through membranes - might cost about $500,000 a year.  Subtract the $500,000 the City expects to make each year off the hydropower facility and you get a net cost of $5 million per year to the City. 

Compare that with the pumping costs and it looks like City ratepayers might save up to $4.5 million dollars a year by setting the project aside.  But what about all the capital costs for new wells and connections that the City and its consultants trotted out in their “economic” analysis?  The inconvenient (and well hidden) truth for the City is that even with the SWP the City has to keep building wells and making sure that in the event of a surface water outage the CIty can deliver maximum daily demand.  So, it makes no sense to charge those wells and facilities to a groundwater only option as ratepayers have to pay for them - even with a dual source supply.  Maybe an extra well or two need to be kept on hand, but that is a matter of a few million not $40+ million as the City maintains.  So, really you can pretty much compare spending a half million or more on groundwater pumping with spending $70 million up-front plus $500,000 each year.  This is not complicated math, finance or economics.

But if the City went to all groundwater - even if only temporarily - would it not put its water rights at risk?  Could it really take up the project at a later date?  Well, certainly - Oregon’s 1987 Instream Water Rights Act provides a mechanism to protect surface water rights for instream use without risk of forfeiture.  The Act and the Instream Leasing Program run by the Deschutes River Conservancy and the Oregon Water Resources Department can be used to restore the surface water formerly diverted by the City to Tumalo Creek, enhancing flows at Tumalo Falls and on downstream - and tripling flows beyond the irrigation diversion below Shevlin Park.

In other words by taking a timeout the City can:

- save ratepayers almost $3 million a year

- triple flows in lower Tumalo Creek for the benefit of all County residents and visitors

- preserve the option to re-examine the “improvement” project and its alternatives at a later date

Sounds good to me.