Drought & Water Management

• Title: What the Current Drought Means for the Future of Water Management in Colorado
• Date: 1/1/2003
• Description: 2002 Drought Impact Report
• Basin: Statewide
• Drought Mitigation - Doc Type: Reports

$200 million. Denver Water has budgeted several million dollars to filter out ash and
restore reservoir banks after the Hayman fire, costs that may or may not be included in
the state's estimate of restoration costs. Some costs would, of course, be incurred in even
a wet year and those should be subtracted from 2002 costs to estimate the drought impact.
Future restoration costs for the forests should be added, but are unknown.
The value of the burned forests in terms of lumber is close to zero, as lumbering in
Colorado has been almost profitless for either the industry or the owners of the trees, for
years. However, the value of the homes that were destroyed is significant. Fires burned
384 homes and 624 other structures. The total value of improvements lost may exceed
$50 million. The loss of future use of the land for other than lumbering purposes is
captured in the losses in the tourism industry, but is likely to be small. Total cost of the
forest fires appears to be $200 -$300 million plus the nine people who lost their lives
fighting the fires.
Fire fighting and rehabilitation costs are mitigated by the fact that a major share of the
costs is borne by the federal government, not the state or local governments. To the
extent that the fire fighters buy local services, there may even be an economic gain from
the presence of federally financed fire fighters. Denver Water has received a federal
grant to cover some of its fire- related costs. Losses in buildings are partially offset by
insurance, although the insurance benefits are reduced by increases in premiums after the
fires. Fire fighting costs are significant even in wet years. The local share of fires
including losses in homes and structures, net of insurance and net of normal years costs,
is probably between $100 and $150 million.
E. Urban Landscape and Municipal Water Supply
Water districts themselves are incurring some costs in trying to mitigate the effects of the
drought. Most water districts in Colorado imposed some form of water restrictions
during the summer. There are costs to enforcing the water restrictions. Some districts
are using lower quality water supplies that require more treatment. Some are establishing
emergency service to nearby residents whose wells have dried up. Denver estimates that
its drought related costs, excluding rehabilitation after the Hayman fire, will amount to
about $11 million over two years. Lost revenue due to water restrictions is estimated at
$22 million for their one million customers. The water that was not used is presumably
worth at least as much as it costs to the customer. Hence customers restricted from
buying $22 million worth of water (over two years) have a loss of at least $22 million.
The real loss is not the revenue lost to Denver Water, but the customers' inability to buy
(or even waste) a product that they want. Total loss in the Denver water service area is
thus $33 million.
Denver water customers amount to almost one fourth of the state. Some districts have
more serious problems and some less. If we assume that Denver is an average district,
the projected loss statewide would is $130 million for water users. Such an estimate is,
of course subject to a large possible error from districts that do not match Denver and
from people served by wells.
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