EVALUATING LOCALLY FINANCED RESERVOIR - THE CASE OF APPLEWHITE

In an era when subsidized water development is not available to munici palities, development costs are fully borne by the rate-paying cliente le. Proposed water projects therefore impact consumers both through in creased rates and increased water supply. Economic evaluation requires attention to the interdependent effects of both changes. Under these circumstances it is inappropriate to calculate the benefits of a proje ct due to the enhancement of supply and then obtain net benefits by de ducting project costs. A framework for the proper analysis of locally financed water development is proposed and then employed to evaluate t he highly controversial Applewhite Reservoir in San Antonio, Tex. The study indicates that cost recovery will take substantially longer than proposed, net present value is negative under baseline conditions, an d the project was initiated prematurely from the perspective of the we lfare of local water consumers.