April 5, 2010

Via Web Form

Terry Breyman
Associate Director of Natural Resources
Council on Environmental Quality
722 Jackson Place, N.W.
Washington, D.C. 20503

Re: Comments on the Draft Principles and Standards Sections of the ‘‘Economic and Environmental Principles and Guidelines for Water and Related Land Resources Implementation Studies”

Dear Mr. Breyman:

Taxpayers for Common Sense (TCS) appreciates the opportunity to provide comments to the Council on Environmental Quality on the Proposed Principles and Standards Sections of the Economic and Environmental Principles and Guidelines for Water and Related Land Resources Implementation Studies (the proposed P&S).

As an organization that works for better management of taxpayer resources, TCS has long advocated for a federal water policy that ensures a modern, economically efficient, and appropriately limited role for the federal government in the management of water resources. The proposed P&S represent an opportunity to move toward such an improved federal water policy.

TCS supports many of the praises and criticisms of the proposed P&S submitted by a diversity of conservation, budget, and governance groups. TCS submits our separate comments to bring attention to a few particular points critical to making federal water policy work in the interests of all American taxpayers.

The federal government's primary role in water resource management should be to provide leadership in facilitating projects and policies that reflect a comprehensive and coordinated national vision. As such, the proposed P&S must establish a framework for effectively addressing the nation's water resource needs while promoting accountability, modernization, prioritization, and equity.
 

I. Proper Calculation of Benefits and Costs

While the proposed P&S takes a positive step in requiring an accounting of both quantifiable and non-quantifiable benefits and costs of proposed policies, it is lacking in specificity for policies and projects proposed for expressly economic considerations, such as navigation, flood plain management, and disaster mitigation. Projects that are primarily undertaken because of economic considerations must provide a significant return on investment for taxpayers.

II. Benefit-Cost Analyses must account for true costs and benefits

Proper calculation of benefits and costs associated with proposed projects is integral to ensuring better management of taxpayer resources. History has shown interested parties and agencies have not always used the proper methods or most up-to-date tools in calculating benefits and costs. There are a number of steps all agencies must take in calculating costs and benefits of proposed projects and policies:

a. Use of modern accounting methods

In too many cases the Army Corps of Engineers (Corps) has avoided easily calculable costs. For instance, the Corps assumes optimal project funding (every dollar is available when it is time to be spent) when calculating benefits and costs of projects. In reality, the Corps has rarely, if ever, received optimal funding – this in turn increases project costs and delays project benefits away from those that justified authorization.

b. Use of the proper discount rate

By law, the Corps uses a flawed discount rate formula set in 1974 for its benefit-cost analyses, which today leads to inaccurate and faulty assessments of project justifications. The discount rate is based off of the rate for Treasury bonds and is designed to adjust slowly. No one believes Corps projects are as safe a risk as Treasury bonds and the slow adjustment means that the discount rate may at some point actually fall below the Treasury rate. The discount rate should be set by the Office of Management and Budget.