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The Great Water Rebate-Now What?

The Great Water Rebate-Now What?

Bob Sussman

(neither my wife nor daughter has proofed this paper and if I had handed this in to my HS English teacher Mrs. Woodson at Uni. HS there would be more red than blue)

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Water districts big and small are offering rebates to their customers in the Southern California region, to take out their lawn and replace it with a low water using landscape.  The rebates vary to some extent from water district to water district butthe DWP’s rebate of paying $3 per square foot of lawn removed, with a maximum of $6,000, is perhaps the most generous.  This is a pretty healthy rebate and has motivated lots of calls to some of my landscape contractor and designer friends.

The “rubber” is starting to meet the road.  Homeowners tearing out taking out their lawns are finding out that even a simple front yard landscape can easily hit $15,000 for an average size front yard. You could do it yourself (DIY) and buy a lot of plants for the $6,000, but you have to know what in the world you’re doing.  You have to take out your lawn. Then, you have to design your new garden, buy the plants, and plant them.  Irrigation system? Well, you might be able to get by with your old system and hand watering. Like I said, you can do it yourself but you have to know what you’re doing and it’s a lot of work. You might be $’s ahead by just paying someone to get it done correctly.

To the point, if you’re getting a $6,000 rebate can you afford a $15,000 landscape? Can you afford a $25,000 landscape? On a PURELY financial basis what can you afford and why?  Let’s assume you can write the check if you have to.  How much can you spend, on a purely financial basis?

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Ok, well let’s see how much we’re going to be saving each year.  In the early years your going to use a bit more water to establish things but you’ll also be spending less $ and/or time on maintenance since things won’t need cutting back for a while.  Give it a shot/ best guess what you’ll be saving annually,  you know +/- 10%?  Next, how long are you going to be living in the same house? I know you don’t know, I can’t see the future either but give it your best shot.  We need to get an idea as to how long you’re going to get these savings.

Now add up the savings.  For example, if you think you’ll be saving $300/month, that’s $3,600 per year. If your going to live in the house for another 5 years that’s a savings of $18,000. If you lay out after the rebate $9,000 ($15,000- $6,000) your big $’s ahead and it would be foolish not to get your new landscape.  Given these assumptions, if you’re only going to stay in the house for 3 years it’s still a good thing but close to breakeven, the longer you stay in this house the bigger the savings and the decision to get your new landscape just looks better and better.

To summerize, how much is this new landscape saving each year?  How long are we going to live in the house and benefit from the savings of low water use and maintenance? If it looks like you’ll be saving a lot more than your shelling out then the economics are with you.

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Is analysis perfect? No!  If you presented this in a college finance or accounting class you’d be in deep trouble. We’ve totally neglected the “time value of money”. If you don’t know what that is, then don’t worry about it.  Then there’s all the non-financial stuff too.

All kinds of stuff should be considered like the new creatures you’ll be bringing to your garden and a smaller environmental footprint.  So if the economics are there and you like the look, then come on down to the nursery and lets get started.

 

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