Harder on Water Neutral Development in California

Jennifer Harder (McGeorge) has posted Demand Offsets: Water Neutral Development in California on SSRN.  Here's the abstract:

Water supply is a critical issue for residential, commercial and industrial development in California. The continuing drought in 2015 highlights the erratic nature of water availability, and supply threats are expected to worsen in the future as a result of population growth, increased ecological demand, and uncertainty caused by climate change and other factors. In recognition of the pressing need for careful water planning and innovation, some local governments have adopted a requirement that new development be “water neutral.”

Water neutral policies require new projects to offset their water demand through conservation or new supplies. These policies are implemented in two steps: First, the developer reduces the proposed project’s on-site demand by incorporating efficient water-related fixtures, low-water-use landscaping, and innovative approaches such as recycled water use, greywater reuse, rainwater harvesting, and stormwater capture. The developer then “offsets” any remaining demand by facilitating improvements at existing development within the supplier’s service area. Water neutral programs may require offset ratios greater than 1:1 to address uncertainty about the effectiveness of conservation measures. Sometimes called “demand offset” or “zero footprint” requirements, water neutral programs create incentives for local government and developers to work as partners in pursuing innovative water use technology and supply management.

Water providers praise water neutral policies for their efficiency and sustainability, but most fail to adopt these policies until supplies are nearly exhausted. The reason for that duality is in part practical: By definition, water neutral programs place the burden of financing on- and off-site water demand reduction on new projects, and these costs can be high. When combined with the myriad of other local fees and charges levied on new development, new housing, commercial and industrial projects may become infeasible or less attractive to investors considering alternative projects. Lack of development can affect housing availability, economic recovery and employment — consequences that are particularly onerous during periods of financial crisis and economic recession.

Another concern expressed about water neutral programs is whether they will result in real water savings. There is a fear that homeowners might replace low-flow fixtures or low-water-use landscaping with less efficient fixtures or landscaping, for example, or that developments might otherwise exceed water demand projections. Some water neutral programs address that concern through high offset ratios; others have developed sophisticated enforcement programs that involve deed restrictions, annual reporting, homeowner association oversight, and financial penalties for exceeding water budgets. Local agencies with water neutral program experience cite enforcement as a key issue for program improvement, and seek more reliable, less personnel-intensive methods. In this regard, the enforcement issues faced by water neutral programs are similar to those faced by all water conservation programs in California, including emergency drought response programs. That coincidence of interest suggests a direction for near-term research and action in the statewide water conservation arena.

Challenges notwithstanding, the potential benefits of water neutral programs are numerous. Existing programs claim real annual water savings. Water neutral programs allow economic development to occur where moratoria would otherwise prohibit development, thus facilitating jobs, housing, recreational and other amenities. Through offset programs, existing communities benefit from increased efficiencies without having to invest in them; some water neutral programs focus these benefits within low-income communities that otherwise would not easily implement conservation measures. Water neutral programs may result in more reliable long-term conservation, and can help to achieve statewide conservation targets. Water neutral programs also provide direct incentives for developers to maximize efficiency, encourage investment in technology improvements, and inspire creative thinking about water management.

Water neutral programs provide opportunities for proactive drought planning and improved water supply sustainability. Although not a good fit for every jurisdiction, regional and local water neutral programs have the potential to play a larger role in California’s urban water efficiency portfolio. The state can take steps to realize this potential by investing in legal and technical research related to program design, liability allocation, conservation approaches, and enforcement. A voluntary model water neutral ordinance would assist local governments in designing their own programs.