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    Advanced Wastewater Treatment for Nutrient Reduction: Impact on Sacramento Income and Employment

    Aug 23, 2010
    In a report released today, the Business Forecasting Center estimates the economic impact of  a $770 million upgrade to the Sacramento Regional Wastewater Treatment Plant that could be necessary from increased regulations on nutrient discharge into the Sacramento River.  The report finds the nutrient removal project would reduce Sacramento area incomes by $94 million annually and reduce employment by 390 jobs.  While the construction and operation of the advanced treatment facility will create some jobs and income, these gains are more than offset by the negative impacts of a 50% to 75% increase in wastewater bills and fees on Sacramento households and businesses.

    The full report can be downloaded at http://forecast.pacific.edu/.  The Executive Summary is below.

    The Business Forecasting Center at the University of the Pacific was founded in 2004. Housed in the Eberhardt School of Business, the Center produces research reports on trends and issues shaping the regional economy including a quarterly economic forecast of California and nine metropolitan areas from Sacramento to Fresno and the San Francisco Bay Area. 




    Advanced Wastewater Treatment for Nutrient Reduction:

    Impact on Sacramento Income and Employment


    Ecological problems in the Sacramento-San Joaquin Delta have raised concerns about nutrient discharges, especially ammonia, from the Sacramento Regional County Sanitation District (SRCSD) wastewater treatment plant that serves most of Sacramento County and West Sacramento in Yolo County.  This report evaluates the economic costs to the Sacramento region of investing in an advanced treatment process that would substantially reduce ammonia discharge into the Sacramento River.  

    The ammonia reduction project would have a $770 million capital cost, and operation and maintenance of the completed facility is estimated at $30 million per year.  We estimate that the project will require SRCSD to generate an additional $90 million annually through increased rates and fees.  SRCSD is projecting even higher rate increases, because they anticipate larger debt coverage requirements to maintain their bond rating and continued slow growth in their service area.  The range of potential rate and fee increases is as follows:

    •·         The typical Sacramento household wastewater treatment bill would increase between $10 and $15 per month ($120 to $180 annually) from their current level of $19.75 per month.

    •·         Government, commercial and industrial users would also face wastewater treatment cost increases between 50% and 75%.

    •·         New development wastewater treatment impact fees would increase from $7,450 to between $11,000 and $18,000 per ESD (equivalent single family dwelling).  In-fill development impact fees would increase from $2,800 to between $4,200 and $6,500 per ESD.

    In addition to higher bills, the total economic impact of the project was assessed by estimating the negative effects of reduced disposable income on consumer spending, the negative effects of reduced construction activity, and the positive effects of building and operating the wastewater plant.  Considering all the effects, the average annual economic impacts over the 30 year analysis period on the Sacramento Region are:

    •·         Annual income loss of $94.4 million.

    •·         Annual employment loss of 390 jobs.

    This is a conservative assessment of regional impacts.  SRCSD estimates rate increases will be even larger than we assume.  We also assume increased impact fees will only have a small effect on the amount of new development, and only reduce the output of the construction industry by an amount equivalent to the increased fee payments.  The report assumes no effect on local electricity costs, although the project will generate a 2% increase in SMUD's electricity demand.  We assume increased wastewater treatment rates will not be significant enough to affect the location, operation or investment decisions of businesses, and that lost corporate income flows outside the region.  Finally, it is important to note that the analysis only examines nutrient reduction, implementing further advanced treatment to reduce other contaminants would more than double the costs estimated in this report.

    The results of this study inform planning and regulatory decisions regarding the San Joaquin-Sacramento Delta, and can be compared to analysis we have conducted on other aspects of the Delta issue.  In previous analysis, we estimated that reduced agricultural water supplies due to Delta pumping restrictions to protect endangered species result in an income loss of $150 million and 2,000 jobs in the San Joaquin Valley.[1]   We have also estimated that the closure of the salmon fishery in 2008 and 2009 created an annual loss in California of about 1,800 jobs and $120 million in income.[2]



    [1] "Employment Impacts of Reduced Water Supplies to San Joaquin Valley Agriculture,"  December 10, 2009.  http://forecast.pacific.edu/water-jobs/Pacific-BFC-Water-Jobs.pdf.  We will soon release an update of this estimate using new data that shows actual losses were 40% to 50% lower than this estimate.  Check our website at http://forecast.pacific.edu for an updated report.

    [2]  "Employment Impacts of California Salmon Fishery Closures in 2008 and 2009."  April 1, 2010.  http://forecast.pacific.edu/BFC%20salmon%20jobs.pdf.