Planning & Management


396910 - Estimation of Ability to Pay for Levee Improvements

Tuesday, June 5
8:30 AM - 10:00 AM
Location: Greenway GH
Co-Authors: Lawrence Roth, Vice President – Arcadis

In the California Sacramento-San Joaquin Delta (Delta), levee failure could cause flooding potentially accompanied by injury, loss of life, property and infrastructure damage, water supply interruption, and environmental damage affecting the entire State. The Delta Plan, adopted on May 16, 2013, recommended that the Delta Stewardship Council (Council) develop a Delta Levees Investment Strategy (DLIS) to identify funding priorities for State investments in Delta levees. Considered in establishment of funding priorities are cost allocation procedures and methods for determination of Reclamation District (RD) ability to pay shared costs of levee improvements. Ability to Pay (ATP) is traditionally defined as affordability; i.e., a constraint on consumers’ willingness to pay (WTP) for goods and services – in this case for flood risk reduction, water supply, and other benefits provided by levees. Affordability is measured by RD income relative to levee expenses, independent of WTP. This paper presents a practical method for estimating RD ATP for expenses of Delta levee maintenance and improvements, based on accessible financial and economic information for each RD. The proposed method relates RD levee expenses (net capital, operating, maintenance, and debt service expenses for levees and associated flood control systems) to RD income, measured by agricultural acreage, agricultural property value, crop type, and crop value. Pilot application of the proposed methodology identified major sources of variation in ATP, including the natural configuration of Delta islands, the type and location of the physical components of the flood management system for which RDs are responsible, and the distribution of land uses and agricultural income-earning potential within the Delta. The pilot application also informed potential strategies for (1) cooperative financing of levee investments, and (2) adjustment of subventions (State support of annual levee maintenance expenses) to reduce acute disparities in ATP.

George F. McMahon, Ph.D., PE, D.WRE, PH, BCEE, ENV SP

Vice President, National Expert - Water Management


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396910 - Estimation of Ability to Pay for Levee Improvements

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