Section 6004 - Requirements for the Quantification of Benefits(a) The applicant shall quantify the physical and economic magnitude of public and non-public benefits that would be provided by the proposed project. The applicant shall indicate whether a benefit is public or non-public to provide an accurate cost allocation to determine allowable Program funding. The net public and non-public physical benefits shall be calculated using the physical, chemical, or biological change in each benefit resource condition that is created by or caused by the proposed project, less any negative impacts of similar physical units, location, and timing, created or caused by the proposed project as compared to the without-project conditions at the same reference point (i.e. 2030 future conditions, 2070 future conditions). To comply with this section, the applicant shall select the most appropriate method described in the Technical Reference to quantify the physical and economic magnitude of the net public and non-public benefits of the proposed project. Pursuant to the Technical Reference, an applicant may also select a method not included in the Technical Reference if the method is scientifically sound, appropriate for the project, and adequately described and documented. The quantification of public and non-public benefits shall include the following: (1) Without-Project Future Conditions. Except as provided in subsection (E), all applicants shall use the Climate and Variable Infiltration Capacity (VIC) model results data for the two without-project future conditions (2030 future conditions and 2070 future conditions) provided by the Program on September 9, 2016 incorporated by reference herein. In addition, applicants defined in subsection (E) shall use the CalSim-II and DSM2 model products provided by the Program on November 2, 2016 incorporated by reference herein. If the model products provided by the Program do not adequately describe the without-project future conditions relevant to the project, applicants may also use other tools or models to complete the description of the without-project future conditions. (A) The without-project future conditions shall be defined for surface water and groundwater operations and physical, chemical, biological, economic, and other resource conditions; and include information relevant to quantifying the potential public and non-public physical and economic benefits and costs of the proposed project for the planning horizon.(B) The without-project future conditions shall include the infrastructure, population, land use, water use, water operations, laws, regulations and other characteristics relevant to the analysis of the project, including all existing mitigation or compliance obligations. The without-project future conditions shall be developed using best available information on current conditions and include projects, programs, and water management actions that would be reasonably expected to occur in the foreseeable future. To be included in the without-project future conditions, projects, programs, and water management actions must be under construction or approved and permitted. Potential sources of uncertainty in future conditions are addressed in section 6004(a)(8).(C) The applicant's analysis of without-project future conditions shall include any watershed(s) or region(s) that would affect or would be affected by the proposed project. If the project affects State Water Project or Central Valley Project operations or both, the analysis must include the watersheds where the affected State Water Project or Central Valley Project facilities and water uses, as applicable, are located.(D) The without-project future conditions shall represent the change in climate and sea level conditions for California at the years 2030 and 2070. The level of change in climate and sea level conditions for 2030 and 2070 is defined in Section 2.12 of the Technical Reference.(E) Applicants for the following categories of proposed water storage projects shall use the model products provided, as described in section 6004(a)(1): 1. CALFED surface storage projects, as defined in section 6001(a)(10); and2. All projects requesting funding for quantified benefits within the Delta or resulting from Delta improvements.(F) Applicants that quantify flood control benefits using hydrologic and hydraulic modeling of future flood events may provide such modeling analysis using one of the following. If 6004(a)(1)(F)1. or 2. is used, applicants must explain how benefits might be different under the provided future climate and sea level conditions. In all cases, monetization of flood control benefits must be consistent with this section. 1. Modeling provided in their feasibility studies;2. New modeling using historical flood events or historical hydrology; or3. New modeling using the climate change hydrology data set provided.(2) With-Project Future Conditions. The applicant shall define and assess the with-project future conditions for the years 2030 and 2070. The with-project future conditions shall be based on the without-project future conditions and include all additions or modifications specific to the proposed project. Additions or modifications include proposed changes in infrastructure, population, land use, water use, water operations, laws, regulations, and other characteristics that describe the with-project future condition.(3) Calculation of Physical Changes and Resulting Benefits. The applicant shall quantify and describe the physical changes, including public and non-public physical benefits. The physical changes are the difference between the with-project future conditions and without-project future conditions at the same reference points. The determination of potential public and non-public physical benefits (i.e., positive or beneficial physical changes) shall account for any negative physical changes or impacts that are not fully mitigated. (A) To calculate the physical changes, the applicant shall:1. Use a geographic scope, spatial resolution, and time-step that are sufficient to accurately quantify the physical benefits claimed.2. Document how calculations of expected physical changes are derived and show the relationship between the proposed project, its operations, and the expected physical changes, including public and non-public physical benefits created or caused by the proposed project. The operations of the proposed project shall be described in detail. Any changes in the project's water operations and related physical benefits during the planning horizon shall be disclosed.(B) The applicant shall disclose and quantify, where possible, any impacts or negative effects the proposed project would impose on the ecosystem, water quality, uses and storage of water, or resources relative to the without-project future condition during the planning horizon, to the extent that those impacts are less than fully mitigated. If the analysis used to quantify the negative effects is different from that shown in the applicant's CEQA or other environmental documents, the applicant shall describe how and why they are different and the implications of those differences.(4) Monetization of the Public and Non-Public Physical Benefits. The applicant shall estimate the monetary value of the public and non-public physical benefits in accordance with subsections 6004(a)(4)(A) - (K). Applicants shall provide monetized benefits at the 2030 condition. Applicants have the option of providing a separate monetization analysis for the 2070 condition, or applicants may apply the resulting monetized value per unit of physical benefit derived from the 2030 analysis to the physical changes at the 2070 condition. The appropriate level of analysis for monetizing each public and non-public physical benefit depends on the magnitude of that benefit compared to the total magnitude of public and non-public physical benefits and the size of the proposed project. If public physical benefits cannot be monetized, the applicant shall provide justification why and include a qualitative description of the importance of the benefits; primarily, who is affected, how, and how often, and provide other evidence to show how the physical change is beneficial and important to Californians. (A) The analysis shall be conducted in constant 2015 dollars as described in the Technical Reference section 5.2.5. All future economic benefits shall be displayed in constant dollars for each year of the planning horizon. Economic benefits estimated prior to 2015 shall be escalated to 2015 values using the yearly average Consumer Price Index for California as described in section 5.2 of the Technical Reference. Applicants may use other index values to update older benefit estimates if justification is provided.(B) The planning horizon is the expected life of the proposed project in years plus the construction period, or 100 years, whichever is less.(C) A 3.5 percent real (inflation-free) discount rate shall be used for all calculations that convert a constant dollar monetary value of benefit or cost into an equivalent value at another point in time.(D) Where future population levels are relevant to physical and/or economic benefits calculations, the applicant shall use the most current population forecasts published by the California Department of Finance.(E) The applicant shall determine the cost-effectiveness of the proposed project by calculating, displaying, and justifying the cost of the least-cost alternative means for providing the same amount or more of the total public and non-public physical benefits as provided by the proposed project, if there is at least one feasible alternative means of providing the same amount or more of the total public and non-public physical benefits. If alternatives were considered as part of the feasibility study or other published document (such as a plan formulation study), applicants need not re-analyze the alternatives within the application. Applicants shall provide the document containing the analysis of alternatives and provide within the application a brief summary of the cost of the least-cost feasible alternative and the reasons for rejecting the alternatives in favor of the proposed project.(F) The applicant shall calculate, display, and justify, for each public and non-public benefit, the benefits monetized using each of the following approaches, to the extent it is applicable to the proposed project: 2. Cost of feasible alternative means that provide at least the same physical benefit. If alternative ways of providing a public benefit were evaluated but dismissed as infeasible in the feasibility study or other published document (such as a plan formulation study), applicants shall briefly summarize the results of that analysis. If one or more feasible alternative ways of providing a public benefit exist, the applicant shall estimate the lowest cost of such feasible alternatives; and3. Willingness to pay for the benefit, if it can be justified and documented. If multiple, reasonable economic methods exist to estimate willingness to pay, the applicant shall justify the method selected.(G) The monetized benefit of the proposed project shall be calculated as the avoided cost (if any) plus, for any portion of the physical benefit not monetized as an avoided cost, the minimum of the feasible alternative cost value (if any) and the willingness to pay value (if any).(H) Where applicable, monetized public and non-public benefits shall consider how the dollar value of the public and non-public physical benefits varies by the hydrologic conditions.(I) The applicant shall tabulate, for each future condition, the dollar amount of public and non-public physical benefits monetized using each of the applicable approaches in section 6004(a)(4)(F). When the dollar amounts vary by hydrologic condition, the tabulated value at each future condition shall be the expected dollar value considering the frequency of hydrologic conditions in the datasets used to calculate physical changes.(J) To calculate the present value of the economic net public and non-public benefits for a project, the economic analysis requires dollar net benefits to be calculated for each year within the planning horizon. To calculate the net benefits from the start of project operations until 2030, applicants may interpolate between current conditions benefits and 2030 future conditions benefits. If current conditions benefits estimates are not available, applicants shall extrapolate from the quantification under 2030 future and 2070 future conditions to obtain quantified benefits and impacts for the years of operation before 2030. To calculate the economic net benefits for years between 2030 and 2070, applicants shall interpolate using a linear trend between 2030 future and 2070 future conditions benefits. If there are other important changes in monetary benefits in other years during the planning horizon, applicants may also include those years as points for interpolation. To calculate the economic net benefits from 2070 until the end of the planning horizon (as applicable to projects with an expected project life extending beyond 2070), applicants shall assume 2070 economic benefits.(K) The applicant shall monetize any impacts or negative effects the proposed project would have on the ecosystem, water quality, uses and storage of water, or resources relative to the without-project conditions, in the planning horizon, to the extent that those impacts are less than fully mitigated. For each benefit category, the applicant shall display the net benefit (monetized benefit minus monetized unmitigated impact).(5) Estimate of the Total Project Costs. The applicant shall include the total project costs, including construction cost, interest during construction, land acquisition, monitoring, environmental mitigation or compliance obligations, operations and maintenance, repair, and replacement costs during the planning horizon using methods described in Technical Reference section 6. (A) All cost estimates shall be in 2015 dollars.(B) All cost estimates shall be less than or equal to five (5) years old at the time of the submission of the application and costs estimated prior to 2015 shall be escalated to 2015 dollars using U.S. Bureau of Reclamation Construction Cost Trends.(C) Interest during construction is the interest that accrues on capital costs expended during project construction. It shall be calculated as the interest an applicant pays between the time the construction cost is incurred and the start of project operations.(D) Project cost estimates shall be reviewed, approved and signed by an engineer licensed by the California Board for Professional Engineers, Land Surveyors, and Geologists.(6) Comparison of Net Benefits to Total Project Costs. The applicant shall display and compare the present value of economic net public and non-public benefits and total project costs. (A) For each public benefit category, the applicant shall provide the following items: 1. The present value of the expected value of economic net public benefits over the planning horizon, expressed in 2015 dollars, discounted to the first year of project operations; and2. The estimated Program cost share for each public benefit category, in present value dollars at the first year of project operation, and an explanation of how the cost share was calculated, consistent with Technical Reference section 8.(B) For monetized public benefits, the applicant shall calculate the expected public benefit ratio pursuant to the Program as the ratio of the present value of the economic net public benefits to the total requested Program cost share.(7) Cost Allocation to Beneficiaries. The applicant shall provide a proposed allocation of total project costs to all project beneficiaries, including the Program, and an explanation of how the allocation was calculated, consistent with Technical Reference section 8. (A) Public benefit cost shares for the five public benefit categories may be allocated to the State of California, the United States, local governments, or private interests. The total requested Program cost share is the portion of the public benefit cost shares allocated to the Program, and: 1. Shall consider the share of public benefits received by Californians;2. Shall not exceed 50 percent of the total capital costs of any funded project;3. Shall be at least 50 percent ecosystem improvements;4. Shall not be associated with environmental mitigation or compliance obligations except for those associated with providing the public benefits as stated in Water Code section 79753. a. For projects defined in section 6004(a)(1)(E), flow related environmental mitigation or compliance obligations are those set out in the model products defined in section 6004(a)(1). Costs associated with these environmental mitigation or compliance obligations shall not be included in the Program cost share. Costs associated with other environmental mitigation or compliance obligations as listed and accounted for pursuant to section 6003(a)(1)(AA) shall not be included in the Program cost share.b. For projects not defined in section 6004(a)(1)(E), costs associated with environmental mitigation or compliance obligations as listed and accounted for pursuant to section 6003(a)(1)(AA) shall not be included in the Program cost share.c. Costs of activities imposed as environmental mitigation or compliance obligations triggered by, or applicable to, the proposed project providing public benefits may be funded.(B) The cost allocation developed in subsection (A) shall be used to determine the requested and eligible Program funding for public benefits. An applicant is not required to modify the costs allocated to non-public benefits determined in its feasibility study, except as needed to demonstrate overall project feasibility as required by Water Code section 79757(a).(8) Sources of Uncertainty Analysis. The applicant shall disclose how the expected public physical benefits that would be provided by the proposed project are expected to change due to the following sources of uncertainty: (A) Climate change. The applicant shall describe how extreme levels of climate change could affect the public physical benefits claimed. The level of change in climate to be explored is provided in Section 2.12 (Climate Change and Sea Level Rise) of the Technical Reference. Applicants shall describe how operations of the proposed project could be adapted to sustain public physical benefits claimed. The applicant shall provide documentation or calculations and assumptions used to support the conclusions.(B) Future projects and water management actions. Applicants shall disclose how other potential future projects and water management actions, as may be included in the applicant's CEQA cumulative impact analysis, could affect the public physical benefits claimed. Applicants shall describe how operations of the proposed project could be adapted to sustain public physical benefits claimed. The applicant shall provide documentation or calculations and assumptions used to support the conclusions.(C) Other sources of uncertainty identified by the applicant. Applicants shall disclose any other potential sources of uncertainty and describe alternative operational strategies or adaptations the proposed project could be adapted to sustain public physical benefits claimed or to maintain the level of public physical benefits provided by the project if future conditions differ from the with-project future conditions described in subsection 6004(a)(2).(D) Project performance during a drought. The applicant shall describe and quantify the amount of water stored in the water system due to the project that could be used for public benefits at the beginning and end of a five-year drought. The five-year drought shall be defined as five consecutive dry or critical years in the hydrologic data used in the analysis for the 2070 conditions. The applicant shall specify the drought period within the hydrologic data set used and describe the significance of the amount of water in the water system due to the project to system flexibility and maintaining public benefits during the drought period.(9) Documentation. The applicant shall provide the data, assumptions, analytical methods and modeling results, calculations, and sources of information used to quantify the public benefits of the project. The applicant shall use sources of information that are publicly available, whenever possible, and other information submitted with the application.Cal. Code Regs. Tit. 23, § 6004
1. New section filed 3-7-2017; operative 3-7-2017 pursuant to Government Code section 11343.4(b)(3) (Register 2017, No. 10). Note: Authority cited: Sections 79705, 79711, 79750, 79751, 79752, 79753, 79755 and 79757, Water Code. Reference: Sections 79705, 79711, 79750, 79751, 79752, 79753, 79755 and 79757, Water Code.
1. New section filed 3-7-2017; operative 3/7/2017 pursuant to Government Code section 11343.4(b)(3) (Register 2017, No. 10).