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Pay Now, Pay Later: Economist says city would save with an all groundwater system 

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Providing one of the most compelling arguments yet against a proposed $70-million drinking water project, a natural resources economist said Tuesday night that the city of Bend stands to save several million dollars annually if it forestalls a planned upgrade to its surface water supply and transfers to an all-groundwater system for the time being.

Bruce Aylward told a standing-room only audience that had gathered at an OSU-Cascades sponsored forum that several of the key assumptions and analysis in a report from the city's engineering consultant were not credible. Aylward, who runs his own consulting business, Ecosystem Economics, has worked on dozens of water projects around the West and the world, including a trillion dollar dam initiative for the United Nations. On Tuesday, he said he had never seen an economic analysis using the methodology employed by the city's consultants, Omaha-based HDR. The company referred to it as a cumulative cash flow analysis.

"I've never heard of that technique," said Aylward, who is a former director of the Deschutes River Conservancy in Bend and well versed in the area's water politics.

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Whatever the reason for the approach, Aylward said the effect was to greatly exaggerate the cost of the groundwater option. Aylward said he performed his own analysis, which he summarized for the audience that packed into a small lecture room for the forum that was co-sponsored by COTV's Talk of the Town television program and will be broadcast Monday, Jan. 31 at 7 and 10 p.m. and available as an On Demand program.

Aylward said he recalculated some of the numbers used in the cost comparison analysis from HDR and came out with very different results. At the very least the options are basically cost neutral, meaning no additional expense to transfer to an all-groundwater option, at least on an interim basis, given the city's current demand, water rights and pumping capacity. However, once debt service on the almost $60 million upgrade is factored into the equation and the annual operation and maintenance cost of a new surface water plant is accounted for, the cost scenario is reversed. Aylward said he estimates the city would actually save its ratepayers about $2.5 million per year under the groundwater-only scenario, even when additional electricity costs related to pumping are factored into the equation.

The forum, which included representatives from the city, the Oregon Water Resources Department, the Department of Environmental Quality and the Upper Deschutes Watershed Council was the second such public discussion of the city's proposed project in the past week and comes amid mounting skepticism that the large public works undertaking is necessary.

City councilor Mark Capell defended the city's work to date and the decision to move forward, even as growth has slowed and other options have been put forward. Capell said that a groundwater option may look attractive and even pencil out in the short term, but the city has an obligation to look at the long-term costs and benefits of a project on the scale of the Bridge Creek upgrade. In that light, the project makes financial sense. While the upfront costs are significant, he said that when the bonds are retired in 20 years, the city would have some of the most affordable water rates in the West. In the meantime, he said the city doesn't have time to delay any longer on a project that it's been discussing and studying for more than four years. There are several reasons for that, none of which are related to demand. Capell said the more than 80-year-old delivery system that brings about half of the city's water supply to town from the Tumalo Creek drainage is on the verge of failing. Pieces of the aging pipe are already showing up in the city's holding tanks, he said. Because the Forest Service and the county are planning major work on Skyliners Road, now is a good time to coordinate their efforts. There is also a window of opportunity for savings on engineering, construction and materials.

Another factor is a looming drinking water mandate from the Environmental Protection Agency that requires the city to filter all of its surface water by 2014. However, that treatment requirement would not apply to groundwater, something that opponents have latched onto.

City officials conceded that they had not factored in one potentially significant line item in their reams of studies: the value of the water that could be returned, even temporarily, to the stream if the city left its surface water in the river using one of the "instream" leasing programs available. Aylward said the value of that water at the going rate is around $15 million. Even if the city didn't want to sell that water - which it doesn't - there are many groups and government programs that would pay the city an annual lease to keep that water in the river. While it's not clear what the exact environmental benefit would be, it would likely triple river flows in Tumalo Creek below the last irrigation diversion and potentially lower temperatures in both Tumalo Creek and the Middle Deschutes where summer temperatures do not meet the state's goals for fish and wildlife, according to the Department of Environmental Quality.

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