14 Jun 2009

Life in a Tinderbox

SC sent me this email from R:
We live in a small city named Hidden Hills, it is a zoned equestrian community, and each home sits on a parcel of land that is a minimum of one acre, which by Los Angeles standards is rare. We also are adjacent to thousands of acres of parkland, known as Ahmanson Ranch, which has been subject to wildfires over the last few years. Ahmanson just a couple years ago was ablaze and the fire came right up to our property. We are told each year not only that we must clear our brush, but we also must maintain our property to protect against wildfires.

About a month ago, our water supplier, the Las Virgenes Municipal Water District, sent out notices to all of its customers advising them of their allotment of water, which in most cases requires a cutback of 50% in usage. In our specific case we have been allotted 33% of what we used the prior year. A 67% cut back, which will be impossible for us to achieve, the result will be that we will be surcharged $3 per unit over our allotment. If we were to use the same amount of water that we used last year, our water bill would approach $5,000 per billing period. This is not only absurd, but unachievable, impossible, given the size of our property, and the need to maintain the property in a manner to prevent a fire hazard.

While I understand there are concerns about spawning salmon, and other species of fish, the cutback in water supplies is not only going to cost Californian’s billions of dollars, but hundreds of thousands of jobs given the impact to the farming communities we depend on for food. If there was ever a time not to burden people with cutbacks in water supplies, and the resulting effects it will have on citizens of the State and the economy, it is now. We hear of creating jobs, we hear of stimulating the economy, we are suffering economically as a result of the economic meltdown, unemployment is at all time highs, our state sales and income taxes are at or near the highest in the nation, and now we are going to be forced to let our home landscape die, which will further negatively impact the value of our homes?

I don’t know what efforts are being made to tell these stories to the Federal and State Governments, nor do I know how to object to the imposition of the water rationing being imposed upon us, but frankly it is unjust and unacceptable. I appreciate that the eco system is a concern for fish species, but I also question the timing of this action, the urgency of the problem, and why such action would be taken at a time of drought and economic devastation that has gripped our state and country.
I do not have a sympathetic response to these thoughts. Although I agree that "changing conditions" are having a dramatic, negative impact on the value of R's land AND lifestyle, I do not think that the government has any obligation to continue stupid policies (cheap water) now revealed as stupid.

Note that 70 percent of LVMWD's residential water goes for outdoor irrigation.

Also note that water "shortages" in LVMWD are NOT because of the fish. They are the result of demand being greater than supply (water is too cheap), and drought-driven reductions in supply from the Colorado River and SWP. (LVMWD buys water wholesale from MWDSC.)

I applaud LVMWD for their move to change heavy water users for use -- something that managers further to the south were unable to do, i.e., explicitly prioritizing water for indoor use. Further, they are using higher prices (rather than rationing!) to "nudge" people towards that goal. At least he can choose his fate!

I suggest that R clear vegetation within 200 yards of his house and let the rest go to (non-irrigated) seed. Maybe a fire will come, but at least the house will be safe (x the fingers) AND firefighters will not die trying to hold back a "fire tsunami" when (not if) it comes.

Bottom Line: Back in the day, R didn't have to pay much for a ranchette in the middle of a firezone. Now R can choose among paying a lot for his status quo, moving out, or changing his lifestyle. Unfortunately, those are R's only choices.


  1. DZ ... maybe you do not have a sympathetic response, but I do !

    R trusted the government. The government failed to inform R that the supply was subject to certain conditions that the government was not complying with. R simply relied on what she believed to be dependable supply at the government's reasonable price and planned her landscaping accordingly. The Court has clearly found the government to be at fault. Within 50 days, all of CA will discover that the government has been at fault financially...

    We will soon see which is more desirable.. raising prices or increasing supply ! (ask Zimbabwe ?)

    Note: Strange that none of the 450 water districts that are so seemingly desperate for supply have never inquired about a new Source ...

    WaterSource/WaterBank waterrdw@yahoo.com

  2. I agree with WaterSource. While in the longer term, houses and even towns in fire zones may not be sustainable, the government (local, state, or federal) promised R that there would be enough water to protects R's land. Otherwise, R would probably not have bought the land in the first place.

    So, could you talk about not just 'water rights' but the losers that will appear when the water rights are 'rationalized.' I would hope that you do not end up with 'government wins because they can and citizens lose because they are not as powerful as government.' Such a conclusion would seem to fit Jared Diamond's kleptocracy and would further weaken Californians belief in government.

    So, what is the right solution?

  3. There must be some error in this story! $5,000 divided by $3 = 1,667 units! Extra, above their allotment. We live on a quarter of an acre and water a side yard, a front yard and a rear yard. We use 10 units a month in total. What is going on in Hidden Hills?

  4. Watersource and Eric, the "government promises" line gets no sympathy from me. People have lots of expectations about govt. services when they buy real estate. Schools, police stations, parks, roads, etc. The expecations are often disapointed and people adapt. Landscaping water seems pretty minor.

  5. @Anonymous

    So is your bottom line that the government should not be trusted and is not accountable?

  6. Uncertainty over government actions is a reality in nearly every economic equation. Nearly any industry has regulatory risks. Those (like ethanol) dependent of gov't subsidy may find they dry up. Anyone who saves for retirement has to deal with uncertainty over what tax rates will be when they retire. (and that Congress could rescind tax-exempt or deferred accounts.) That's a risk one takes in the market.

    While public officials might be cautious when taking actions that adversely affect people (imagine the firestorm if 401(k)'s lost tax-deferral), that shouldn't prevent them from being able to make the changes that need to be made. Artificially low prices led SC to consume more water in a place that's not abundant with it. Removing this market distortion so suddenly is jarring, but it forces a choice: how much is a private acre of beautiful water-hungry landscaping worth? (esp. versus an acre of food crops or other human consumption)

    The government didn't ask for a drought either, but that's what they face. They probably should have charged more for water earlier rather than a huge jump at once, but if there's not enough water there will always be those who lose out.

  7. @ Spencer,
    Good comment.

    So, is it reasonable to build economic projections, such as company proformas, with variability and risks included that have to do with changing governmental regulations and the non-accountability of government for the cost of these changes?

    Do economists build in these risk factors in a rigorous way in their forecasts?

    I ask because I have to rebuild my company's proformas and need to know what to do with regulatory risk.



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