Update on ADWR NIA Reallocation Process

Arizona Department of Water Resources (ADWR) has posted the comments received on their proposed process for reallocation of the 96,000 acre-feet of Non-Indian Ag (NIA) water in the CAP system.  Several of the comments echo my points (with additional elaboration) on some of the failings of the proposed process.  Unfortunately, no one else suggested that a market mechanism for allocation would be appropriate.  Of course all the other comments were from actual stakeholders who might want to be granted rights to some of this water.  I acknowledge that a market is probably not in their self-interest.  I think it's not inconceivable, though, that some of the industrial users (mining companies) might be willing to get behind the idea, as they would be likely to come out ahead of many of the municipal users - at least in the short-term.  But in strict dollar terms they are probably better off with an administrative allocation process. 

The one idea that no one seemed to get behind was the proposal by CAP to impose a reliability charge with this water to establish a fund that would attempt to firm up this somewhat unreliable supply.  That was certain to be a tough sell.  Seems like most users would rather deal with supply reliability issues on their own.  I'll try to update again when ADWR posts the responses to the comments received, but it will likely take a while.

A few updates

If you check out the list of other blogs to the right you'll notice I did a bit of updating.  Gone are Waterblogged and On the Public Record (very sad to see this one go).  They just don't update that often anymore - and OtPR may be gone for good, I fear.  But I added something new - Agua-zona - a new blog by Juliet McKenna, who works for a consulting firm here in Tucson.  She's sharp and should bring a lot of good info to her blog.  Check it out when you have a chance.

Giving Thanks

I have so much to be thankful for this year.  I hope you do too.

Happy thanksgiving.

ADWR Water Allocation Process

One month ago, the Arizona Dept. of Water Resources (ADWR) held a public meeting to announce that they were beginning the process to allocate (or reallocate) approximately 96,000 acre-feet of Colorado River water delivered via the Central Arizona Project (CAP).  This is water that was made available by the big Arizona Water Settlement that was crafted almost 10 years ago, but under the language of the act was not available for reallocation until 2014.

As you might expect from the state agency responsible for management of the state's water they have proposed a tightly controlled administrative process for deciding who should get the water and how much they should be entitled to.  Oh, and there are also some costs associated with this water.  But as is typically the case, the cost for this water only covers the "costs" of administering the process, then when the recipient takes the water they will pay the "costs" for delivery.  There are no "opportunity costs" or "scarcity costs" included.  Now admittedly these costs are greater than what has been paid by those who currently possess allocations of Arizona's Colorado River water, but that is all water under the bridge, so to speak.  And what the entities who manage to "win" an allocation of this water will get is something slightly less than a continuously assured supply of renewable water.

Because this is water that was relinquished by agricultural contractors it holds a priority within the CAP system that is lower than the standard municipal and industrial allocation.  What this means is that when there is a shortage on the Colorado River that impacts Arizona's supplies this water may be unavailable for delivery.  ADWR has analyzed the expected reliability of this water and believes that up to 2/3 of this water should be continuously available, depending on the assumptions you use (a summary of their analysis can be found if you click the "presentation" link on the process page).

So far that's all well and good.  Where I have a problem is the whole process they have proposed for determining who is "worthy" of receiving an allocation of this water.  This is what administrative agencies always try to do and they never seem to get it right, especially in situations where you are dealing with a scarce resource.  People try to game the system, assumptions have to be made about where future demand will reside, and there just tends to be a whole range of normative "calculations" that need to be made to justify the actions of the agency.

I am planning to draft up some comments recommending that they at least try to allocate some of this water via a market-clearing auction (CAP staff proposed something similar as part of the ADD Water process that you can find here - click the link for "ADD Water Program Proposal").  I have no hope that it can all be auctioned off (there are too many bureaucratic hurdles in the way) but it just seems to me that given the year-to-year variability that might be present in at least some of the water available and the well-known superiority of market mechanisms to allocate scarce resources, an auction has to be the best way to ensure that this water is allocated in an equitable and efficient manner.  It's a long shot, but someone has to take the first shot.

Cato Article - Downsizing the Federal Govt. - BuRec

There's definitely some Cato Institute stuff that's just too far out there for me, but when they take on federal control of water resources in the West and advocate for more use of markets to allocate a scarce resource, they can probably reel me in.  I enjoyed this article, mostly for its advocacy of water markets.  I think it's easy to find examples of where the federal government has screwed up in their long-standing management of Western water and they do a good job of chronicling those in the article.  But they largely overlook much of the good that has resulted from those efforts - the Colorado being a prime example of both the good and bad of what the Bureau has done. 

We would not have the infrastructure that is needed to weather extremes of climate, like we have been experiencing the last couple of decades in the Colorado basin were it not for the extensive infrastructure built by the Bureau and that infrastructure could not have been built by any smaller unit of government.  We also could probably be figuring out better ways to manage the water of the basin if it weren't for ongoing federal control of the basin and all that infrastructure.  But the Southwest that we currently have - good and bad - clearly wouldn't be around today if not for what the Bureau did with the Colorado.

And the article clearly does a much better job of chronicling what's wrong than of proposing workable solutions.  That's think-tank work for you.  But still a pretty good article if you swing toward the free-market side on water management.

hat-tip to Marginal Revolution for the link that eventually led me to this article.

USA Today - Water Rate Study

This week USA Today posted a story about rising water rates throughout the US.  The increases (on a percentage basis) are very large in some cities.  It would also be interesting to see what those changes were on an absolute basis - if your water bill is $20 to start with then raising it to $40 is a 100% increase, but still a pretty small price to pay for having water come out of a pipe in your house whenever you want it.  This is a pretty gross generalization, but it looks to me like the systems with the largest cost increases are concentrated in older eastern cities where they have probably been hit with large bills for major system upgrades to old water system infrastructure or in rapidly growing western cities that might be paying, or preparing to pay, for expensive new supplies to meet surging demands (I'm looking at you San Diego or possibly Atlanta on both counts).

The article does a pretty good job of describing the paradox of conservation with utilities - when you conserve the fixed costs of running the utility are spread over fewer units so the cost per unit increases.  This is especially prevalent in water utilities that often recover a significant portion of fixed costs with variable revenue sources.

I had a thought while reading the discussion of how many utilities are facing high costs from past borrowing to pay for infrastructure upgrades, system expansions, costs of compliance with new regulations, etc.  Did some of them possibly overestimate the revenue they would take in in future years when they had to payback those bonds, either by assuming continued expansion of their connections or that rates of household consumption would level off rather than declining?  I don't doubt that many of the upgrades that were done were necessary, but maybe they would have scheduled the work over a different time frame if they had more reasonable expectations for future revenue streams.  Or tried a bit harder to find ways to curb costs for the needed work.

Thanks to Val Little at WaterCASA for tipping me off to this story.

Latest Installment in the Painted Hills Follies

Let's see if we can figure out what's wrong with this article.  In paragraph 4 it says:

The county approved development plans for the 284 acres of scenic Painted Hills property just west of the city limits, but the supervisors didn't want the site developed, so they asked the city to deny water service to the property.

So the county asks the city to save them from a bad decision - see the county voters approved bond funds that would enable the county to buy this parcel of land and preserve it as open space.  But when the owners wouldn't sell to the county, the county decided they could wait them out.  But somebody else came in and offered more money for the parcel, expecting to develop it.

The city instituted a new policy that was used to deny water for the development, but ran into other problems when the developer sought a different remedy.  They are currently in negotiations with the property owner to do a swap that will provide them with a develop-able parcel of land elsewhere and permit preservation of the Painted Hills parcel.  You can find info on the city's water policy referenced here and here.

But back to the current article.  At the end of the article are a couple of really nice comments from the County Administrator, Chuck Huckleberry:

Huckelberry wants the board to ask the city to change its water service policy to provide service to properties like Marrs'.
"The presently adopted Tucson Water policy does not support rational regional planning for water service," Huckelberry said in the memo.

Guess it really pays to stay on the good side of our county administrator.  If I can paraphrase something a former president said recently - it takes some real brass to encourage the city to use their new policy to prevent development in one location then come back and say that said policy prevents rational regional planning when it stands in the way of a particular development you do want to see go forward.  Is it any wonder people in this town have so little respect for our local governments?