CASE STUDY RESEARCH PAPER- REPORT ( 48 Hours - A+ Score Required)

Case Study: Local Water Sources

Wayne Thorn

Class #49

Construction Engineering 330

Professor Hossein Hemati

May 2, 2019

Table of Contents

Introduction………………………………………………………………………………….…….2

Proposal Overview……….………………………………………………………………………..3

Engineering Economy Techniques with Assumptions and Formulas—Proposal 1………………4

Engineering Economy Techniques with Assumptions and Formulas—Proposal 2...........….........6

Engineering Economic Analysis in Public/Private Sector………………………………………..7

Risk Factors and Other Considerations …………………………………………………………..8

Recommendation………………………………………………………………………………...10

References………………………………………………………………………………………..11

Introduction:

In semiarid San Diego, drought is common. There is often little rain, even during the rainy season. The result is relatively few local water sources. Therefore, 85% of San Diego’s water must be imported. One source is northern California--the California State Water Project brings water 700 miles from the San Francisco Bay Area Delta. The most well-known source is the Colorado River, which supplies water to San Diego, Los Angeles, and much of the southwestern U.S. There are problems that arise from reliance on outside water sources, though. First, a lot of water is lost to evaporation, as it flows slowly in canals or sits in gargantuan reservoirs such as Lake Mead in hot desert heat. Also, many municipalities use the water along the way, returning salty, treated wastewater to the rivers/canals. Hence, these sources contain water that is adequate for human consumption, but lacking in quality. Thirdly, it costs a lot of money to have this infrastructure to bring in water from faraway sources. Essentially, there are high water bills in consuming water that comes from a long distance. Finally, there is an environmental impact to this transportation of water. The Colorado River is overallocated, due to its many dams, such as Hoover Dam and Glen Canyon Dam. For instance, when Glen Canyon Dam was built, the Lake Powell reservoir formed, which drowned historic Native American lands and biodiversity in what was a thriving desert ecosystem along the untamed Colorado River.

As reliance on imported water systems causes many problems, local water sources must be paramount. In San Diego, there is a brand new desalination plant in Carlsbad. That option is plausible, as there is a vast saltwater ocean, the Pacific, whose water can be desalted. While the technology is expensive, it is smarter to rely on that than hoping for a good snowmelt in the Colorado River’s origin at the Rocky Mountains, which also experience periods of drought. Another local option is recycling our consumed water. This water is recycled, either for human consumption or to add to the groundwater supply. Most interesting, this water is fairly clean, as it has to go through an intensive cleaning process before reuse. It is also treated again in a mix with the imported water before being sent to people’s faucets. The future seems promising for more local water sources, as residents in drought-stricken areas such as San Diego have become more conscious of limited local water availability and the lack of reliability of faraway sources. For example, thirsty lawns have been exchanged for drought tolerant plants and mulched landscapes, along with rainwater barrels that can capture storm water.

Proposal Overview:

There are two proposals for increasing local water sources in the San Diego area. One local option is the Pure Water San Diego project, which aims to produce one-third of the city’s water by 2035. In Phase 1, 30 million gallons per day of high quality, recycled potable drinking water will be available, through advanced purification technology, in 2023. Phase 1 will serve the northern part of the city. In Phases 2 and 3, an additional 53 million gallons per day will be available by 2035 to serve central and southern San Diego. Another local option is to build a desalination plant that can cover more residents throughout the county, namely North San Diego County. The Carlsbad Desalination Plant will be used as model to gauge the cost-effectiveness of building a desalination plant. To simplify, I will compare Phase 1 of Pure Water San Diego, proposal 1, to the desalination plant option, proposal 2.

There will be two judging criteria, fiscal and environmental impacts, to decide which local water option is better. Both will produce enough local water, so production will not be considered. For each proposal, I will calculate the net present worth (NPW), annual worth (EUAW), net future worth (NFW), and benefit-cost (B-C) ratio. I will also consider how much each plan affects the environment.

Engineering Economy Techniques with Assumptions and Formulas--Proposal 1:

The first proposal, Phase 1 of the Pure Water San Diego project, will increase local water sources by collecting wastewater and removing its pollutants to make it potable for 1,400,000 city residents. The Morena Pump Station will send wastewater to a brand new North City Pure Water facility. This facility will be located on city land in the La Jolla area next to the North City Water Reclamation Plant. The filtration facility will use a five step multi-barrier treatment technology: ozonation, biological activated carbon, membrane filtration, reverse osmosis, and UV/advanced oxidation. The cleaned water will go to Miramar Reservoir to mix with imported and local water sources. Then the water is treated again at the Miramar Drinking Water Treatment Plant to become potable in adhering to state and federal water guidelines.

Figure 1: Purification diagram courtesy of https://www.sdcwa.org/purified-water.

Assumptions:

From the perspective of the city of San Diego, I will analyze the proposal finances using a 40 year analysis period, as it will take customers a long time to pay for the new facility. The city’s actual period is roughly the same amount of time, as their analysis for Phase 1 of this proposal runs from 2019 to 2060. I will use an average monthly water bill rate of $6.49. Even though the customers will pay more upfront on their water bill in the early years due to a higher current money value, I will simplify these amounts with an average monthly water bill add-on amount of $6.49. I will use a 15% minimum attractive rate of return as a generic, common interest rate. Maintenance and jobs analysis will be omitted, since no credible amounts were found. Thus, any profits may be somewhat elevated. Also, $2 billion in revenue will be added, as the Point Loma Wastewater Treatment Plant will not require refurbishment. Furthermore, water is saved using the purification plant, as the treatment plant would simply have disposed of the water. In terms of environmental impacts, the use of raw water sources are lessened in shifting from purely imports to recycled water.

Formulas:

Cost:

EUAC = $1,400,000,000(A/P, 15%, 40) = $1,400,000,000(0.1506) = $210,840,000

P.W. of Cost = $1,400,000,000

F.W. of Cost = $1,400,000,000(F/P, 15%, 40) = $1,400,000,000(267.864) = $375,009,600,000

Revenue:

From 2019-2060, average monthly cost: $6.49; per resident; 1,400,000 residents per year

EUAB = + $2,000,000,000(A/P, 15%, 40) = + $2,000,000,000(0.1506) = + $301200000 = $410,232,000

P.W. of Benefits: =(P/A, 15%, 40) = (6.642) = + $724,190,544 = $2,724,190,544

F.W. of Benefits =(F/P, 15%, 40) + $109,032,000(F/A, 15%, 40) = (267.864) + $109,032,000(1779.1) = $535728000000 + $193978831200 = $729,706,831,200

Profit:

EUAW = EUAB – EUAC = $410,232,000 - $210,840,000 = $199,392,000

Net PW = P.W. of Benefits – P.W. of Costs =$2,724,190,544 - $1,400,000,000 = $1,324,190,544

Net FW = F.W. of Benefits - F.W. of Costs = $729,706,831,200 - $375,009,600,000 = $354,697,231,200

Benefit-Cost (B-C) Ratio:

1.95

Engineering Economy Techniques with Assumptions and Formulas--Proposal 2:

The second proposal, a desalination plant similar to the Carlsbad Desalination Plant, will increase local water sources by filtering and cleaning salty Pacific Ocean water. High pressure devices separate the salts from the water using tiny reverse-osmosis membranes. A desalination plant covers 3,300,000 residents in the county. The cost of the desalination plant is $1,000,000,000, with $50,000,000 yearly in power costs. There are 400,000 residents whose water needs can be met with the desalination water alone. The plant will produce 50 million gallons of potable water daily, suitable to the meet the water needs of 400,000 people or 10% of San Diego County’s water supply.

Figure 2: Desalination technology photo courtesy of https://www.kqed.org

Assumptions:

From the perspective of the city of San Diego, I will analyze the desalination plant over a 40 year period to be able to compare to the Pure Water project. For simplicity, I will consider that 3,300,000 residents, not the aforementioned 400,000 residents, will pay the $5 fee on their water bills to finance the project. The desalination plant is supposed to help the region as a whole, so it makes more sense to spread the cost out over more customers. It should be noted that the city only has 1,400,000 residents, so in reality the city residents would be paying more than $5. A minimum attractive rate of return will be 15% to compare to the Pure Water project. There will be $50 million in annual revenue for the region’s economy, stemming from economic benefits that come from this investment in the San Diego region. Most notably, there will be 42 full-time employees. Environmental impacts involve the disposal of the salts.

Formulas:

Cost:

EUAC = $1,000,000,000(A/P, 15%, 40) + $50,000,000 = $1,000,000,000(0.1506) + $50,000,000 = $150,600,000 + $50,000,000 = $200,600,000

P.W. of Cost = $1,000,000,000 + 50,000,000(P/A, 15%, 40) = $1,000,000,000 + 50,000,000(6.642) = $1,332,100,000

F.W. of Cost = $1,000,000,000(F/P, 15%, 40) + $50,000,000(F/A, 15%, 40) = $1,000,000,000(267.864) + $50,000,000(1779.1) = $267,864,000,000 + $88,955,000,000 = $356,819,000,000

Revenue:

From 2019 to 2060, average monthly cost, for simplicity, was $5 added to customers’ water bills

per customer; 3,300,000 residents /year

EUAB = + $50,000,000 = $248,000,000

P.W. of Benefits: =(P/A, 15%, 40) + $50,000,000(P/A, 15%, 40) = (6.642) + $50,000,000(6.642) = $1,315,116,000 + $332,100,000 = $1,647,216,000

F.W. of Benefits =(F/A, 15%, 40) + $50,000,000(F/A, 15%, 40)= (1779.1) + $50,000,000(1779.1) = $352,261,800,000 + $88,955,000,000= $441,216,800,000

Profit:

EUAW = EUAB – EUAC = $200,600,000 = $47,400,000

Net PW = P.W. of Benefits – P.W. of Costs =$1,647,216,000- $1,332,100,000 = $315,116,000

Net FW = F.W. of Benefits - F.W. of Costs = $441,216,800,000- $356,819,000,000 = $84,397,800,000

Benefit-Cost (B-C) Ratio:

1.24

Engineering Economic Analysis in Public/Private Sector:

The viewpoint for the engineering economic analysis is done from the perspective of the city government of San Diego. Therefore, each proposal is a public sector project. Note that the Carlsbad Desalination Plant was funded by private capital, but for this case study it is viewed as if it were financed by San Diego residents. The city is in a position of trust to determine the future of water sources that supply the city. Water can be procured for the betterment of the city residents, so each proposal actually promotes the general welfare of the city residents. There is more stability offered, as the city, in either proposal, places an increasing amount of importance on local water sources. The Pure Water San Diego option, proposal 1, offers a simple yet brilliant idea—put $1.4 billion toward a new plant that can treat and rehabilitate consumed water instead of spending $2 billion on refurbishing the aging Point Loma Wastewater Plant that just dumps the treated water in the Pacific Ocean. Here, the tax dollars are spent wisely.

The second proposal, building a desalination plant, is also done from the city’s perspective. It can support the water needs of even more citizens, but it is also more costly. Overall, the city will see which option has the best financial outlook, namely which one has a higher profit. However, the city will consider the long term outlook in terms of having a more robust water supply that is more sustainable and practical for the city residents. Essentially, having more local water sources ensures that the city remains viable in combating the effects of drought.

Risk Factors and Other Considerations:

There are some risk factors and other considerations. For proposal 1, San Diego residents may object to drinking water that has been recycled and cleaned for reuse. The term “toilet to tap” is often used with a negative connotation to attack these type of wastewater purification projects. However, residents should be reassured that the wastewater is not only cleaned and returned to the Miramar Reservoir, but it is also treated again in a blend with the imported water before reaching people’s homes. In terms of environmental effects, proposal 1 seems to have minimal environmental effects. If anything, treated sewage was going to be placed in the Pacific Ocean from the existing Point Loma Sewage Treatment plant. Thus, allowing the water from the treated sewage to go back into the water supply, instead of importing dwindling water supplies, is sensible. There is less strain on the imported water sources and those damaged ecosystems.

For proposal 2, a risk factor includes population growth associated with a brand new local water supply, as the southwestern U.S. has experienced massive population growth in the last century due to added water infrastructure. However, the San Diego Association of Governments, a regional planning agency, has stated that most of the San Diego county population increase by 2030 of one million people will be mostly from births from the existing population. Therefore, there should not be a massive population increase from non-residents that will further strain the water supply. Another risk factor is environmental damage. One recent incident was the discharge of a chemical into the Pacific Ocean that was used in the desalination process. The plant was cited for an environment violation, and is working on isolating and removing the chemical from the ocean. Here, desalination is an emerging technology that needs to be refined further. It should be noted that there is still the problem of salt disposal once salts are removed. Desalination is promising, but it still needs to improve as the only large scale west coast plant is the Carlsbad Desalination Plant.

For both proposals, natural disasters, project financing, and depreciation need to be evaluated. Earthquakes, can damage either type of infrastructure. Since each type of earthquake event is unique, it is virtually impossible to design the water infrastructure to stand up to any type of earthquake. Droughts will more adversely affect the proposal 1, as the Pure Water option will rely on water still being imported from mostly distant sources. The desalination plant will not be adversely affected by any drought, as the Pacific Ocean is too large to evaporate. In terms of financing, there has become a recent issue of whether it is still financially viable for people to still live in California, due to constant threats of severe drought, fire, and earthquakes. There is always a risk that the residents paying the water bills for this water infrastructure may not necessarily still be living in San Diego in the foreseeable future. They may opt to live in a more stable region where climates are harsher, but offer water stability. For depreciation, there was no information found in either proposal that says how long this water infrastructure equipment can last. The equipment will likely need to be replaced or upgraded as it ages or new technological innovations occur.

Recommendation:

My recommendation to the city is to choose proposal 1, the Pure Water San Diego project. It has a higher fiscal upside. There is larger present worth profit margin, $1,324,190,544, than proposal 2’s $315,116,000. Also, there is a higher benefit-cost ratio for proposal 1, 1.95, than for a desalination plant, 1.24. Another issue is financing, as desalination plants prefer private financing, whereas the wastewater purification plants are more easily publicly financed. Oversight is more ideal for public financing. A third issue is environmental-friendliness. Pure Water San Diego allows for the reuse of water, so San Diego will require less raw water from distant, environmentally damaged sources. If the desalination plant was chosen, it would have helped limit water imports, but there would have been a cost in terms of salt disposal and any effects on the marine ecosystem. As the desalination technology advances in sophistication, though, its effects on the environment may become less detrimental. At some point, such as in ten years, it is advisable to keep the Pure Water San Diego project and also add a more environmentally-conscious desalination plant to further bolster San Diego’s local water supply. Most ideally, the desalination plant would bring in raw, mostly pure local water. Once consumed, this water could then be recycled for potable reuse through the Pure Water plant. Having a major part of San Diego’s water sources be 100% local would be paramount for San Diegans and the environment.

References

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san-diego-moves-closer-to-construction/

Bravo, C., and Ojeda, A. (2018, Nov 6). Project to Turn Wastewater into Drinking Water to

Begin Construction in Spring 2019. Retrieved from https://www.nbcsandiego.com/news/ local/Pure-Water-San-Diego-Transform-Wastewater-Drinking-Construction-Contracts-Phase-1-500705201.html

Frequently Asked Questions. (n.d.). Retrieved from https://www.carlsbaddesal.com/faqs.html

Gorn, D. (2016, Oct 31). Desalination's Future in California Is Clouded by Cost and

Controversy. Retrieved from https://www.kqed.org/science/1115545/

desalination-why-tapping-sea-water-has-slowed-to-a-trickle-in-california

Newnan, D.G., Eschenbach, T.G., & Lavelle, J.P. (2017.) Engineering Economic Analysis. New

York, NY: Oxford University Press.

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development/sandiego/population

Project Overview. (n.d.). Retrieved from http://carlsbaddesal.sdcwa.org/overview/

Pure Water Phase One - Estimated Impact to Typical Single Family Residential Customer

Monthly Bills. (n.d.). Retrieved from https://www.voiceofsandiego.org/wp-content/uploads/ 2019/03/March-Pure-Water-Customer-Impact.pdf

Pure Water San Diego – FAQ. (n.d.). Retrieved from https://www.sandiego.gov/sites/default/

files/pure_water_san_diego_faq_-_10-20-16_0.pdf

Pure Water San Diego. (n.d.). Retrieved from https://www.sandiego.gov/public-

utilities/sustainability/pure-water-sd