Dept. of Water Resources
Economic Analysis Section
901 P Street, 2nd floor
P.O. Box 942836
Sacramento, CA
94236-0001
Phone: (916) 653-7101
Fax: (916) 651-9289

While DWR economic staff are involved in a wide array projects, the majority of our projects can be categorized under the following categories of long-term activities:

State Water Project facilities' feasibility analysis:
DWR is almost continuously engaged in evaluating water supply augmentation facilities and programs for the State Water Project. Economic analysis is used to determine the net benefits of these proposals, taking into account local and regional water demand reduction and supply augmentation alternatives. To assist with this analysis, DWR economists use several models, including Least Cost Planning Simulation, CalAg and Net Crop Revenue.

Non-SWP facilities' feasibility analysis:
DWR often partners with the federal government and other government agencies to conduct feasibility studies for projects not necessarily related to the SWP but which are critical for statewide water management. Recent examples include Shasta enlargement studies with the US Bureau of Reclamation and flood damage reduction/ecosystem restoration studies conducted by the US Army Corps of Engineers and the State Reclamation Board. DWR economists assist with the economic analyses required for these feasibility studies.

Statewide planning:
In addition to operating the SWP, another key mission of DWR is statewide planning, specifically, the preparation of the California Water Plan Update (Bulletin 160 series) every five years. A critical element of the water plan pdate is the forecasting of regional urban and agricultural water demands, which can be accomplished using the economics modeling tools mentioned above. In addition to demand estimation, economic analysis can also contribute to policy discussions within the water plan update, including water-pricing issues.

Environmental/socioeconomic impact analysis:
Federal and state legislation (NEPA and CEQA) require the preparation of environmental impact statements/reports that may require the estimation of socioeconomic impacts of proposed projects and programs. Economic modeling tools such as Input/Output analysis can be used to estimate socioeconomic impacts of proposed SWP facilities and programs upon local communities as well as the service areas that will be receiving additional water supplies. These impacts include changes in population, employment, income levels, public service requirements and revenues, etc.

Local assistance loan and grant programs:
Beginning with the Davis-Grunsky Act of 1960, DWR has administered numerous programs that provide either low-interest loans or grants to local communities for water conservation, ground water recharge, local water supply development, or flood management purposes. Many of these programs require the local agencies to prepare benefit/cost ratios (verified by DWR economics staff) as a prerequisite for state funding.

Water transfers:
DWR economics staff review and comment upon water transfer proposals, including the evaluation of potential regional income and employment effects that may be caused by the transfer of short- and/or long-term agricultural water supplies to another region.

Review of other agencies' reports and analyses:
DWR economics staff review and comment upon economic analyses prepared by other agencies, including the review of urban and agricultural water management plans that incorporate economic analysis of proposed projects and programs.

DWR internal management decisions:
Because of the extensive system of SWP facilities (dams and reservoirs; pumping plants; aqueducts, canals and pipelines; radial gates, maintenance facilities, etc.) throughout most of the state, DWR management is constantly faced with operational decisions that would require the use of resources. Therefore, these decisions could potentially benefit from economic analysis, although the type of analysis would vary upon individual circumstances. For example, in situations where a decision has already been made to proceed with a project or program, then a more limited cost-effectiveness analysis may be appropriate to help ensure the best use of resources to achieve that objective. In other cases where there is a wide range of options being considered, a more intensive benefit/cost analysis may be more effective.