02 March 2010

Bill to Stop Farmers from Selling Water

This article discusses the issue. My favorite line is:
"Very few of these sales are voluntary," said Don Mills, chairman of the Kings County Water Commission. "The economics are forcing the farmers to sell the water."
I'm at a loss for words with that statement.

The bill text is here. Essentially, it would prevent DWR from approving agricultural to municipal transfers of State Water Project Water for periods lasting more than 10 years. Perhaps Mr. Arambula is unfamiliar with the Monterey Agreement, which specifically allowed these types of transfers? Lots of work went into that agreement, so to propose eliminating one of the Agreement's provisions shows a lack of historical understanding.

As for the 10 year transfer limit - When I lived briefly in Washington DC, I rode the Metro to work. Metro sold two unlimited weekly passes and I bought the Short-trip pass which covered all rides in off peak hours and up to $2.65 of a ride for peak hour rides. My peak hour ride to work cost more than $2.65, however, so to avoid paying more, I would take the yellow line north to the city (I lived in Alexandria) and get off a couple stops later, sprint to the fare gate, exit (that trip cost less than $2.65), re-enter to start a "new" $2.65 trip and sprint back to the subway before the doors closed, if I were lucky, to continue into DC. So much for their policy that the pass was only good for $2.65...

If the government says no to transfers longer than 10 years, we will see transfer proposals for 10 years with an expectation to renew. And users will get around it in other ways too.

Bottom Line: California's water market does not need pointless hurdles like this.

8 comments:

WaterSource said...

Wouldn't it be interesting to have a water market that government had no authority over other than to measure and monitor ONLY AT THOSE TIMES when a natural stream was used as a conveyance structure ...

Probably a bit too optimistic, but you get the idea ... water that is not part of the old problematic bureaucratic quagmire ...

And there are those pesky overdue catastrophic earthquakes that seem to arrive at inopportune times ... sshhhh, ... California is trying to sleep at night.

Josh said...

How about those ag. lands that have benefited from agreements about their ag.? I'm talking about Williamson Act lands, which represent 1/3rd of all private lands in California.

albionwood said...

Yeah, gummint should get out of the way so the farmers can find new ways to profit from the gummint-provided water...

Isn't this a little like selling derivatives? All the farmers have to sell are the "rights" to water that is provided through public conveyance. They don't really own the water, only the right to obtain it for a specific use. Allowing agribusiness to reap windfall profits from one-time sales of those rights - which are entirely dependent on the publicly-funded infrastructure - seems exactly the sort of short-sighted corruption you should be railing against!

What am I missing here?

Mister Kurtz said...

Well, for one thing, albionwod, you are missing the fact that the farmers who would be selling (and who are selling) most of the water have rights that predate any State or Federal claim, and who constructed the infrastructure themselves. Some other sellers, like the oddly criticized Sandridge, have never received subsidized water, and have paid for their share of the infrastructure though special assessments on their land. Why is it better for them to continue using water at an economic loss than for them to sell it to someone who can put it to better use? There is a legitimate concern that third parties will be ignored in agricultural/urban transfers. Limiting water sales to other agricultural users is a crude tool for addressing that, and could still encourage agricultural waste through under-pricing.
Arambula also likes to whine about "jobs" without objecting to mechanical harvesters, GPS ,drip irrigation, and hundreds of other toil-saving technologies. Pure pandering.

Mister Kurtz said...

Josh, you raise a very interesting issue that had never occurred to me. Just off the top of my head, it would seem to make sense for the property-taxing authorities to recoup some dough (not unlike the subvention funds they generally get from the General Fund) if the water is transferred and the land is fallowed. If a county has received subvention funds, they have nothing to complain about, but the State might. If the proceeds of the transfer are invested in irrigation improvements, there is probably a net gain to the tax base. Money received and simply pocketed is taxed as ordinary income, and the State (and Feds) get their bite there.

Damian said...

Where are these williamson act lands?

albionwood said...

Kurtz - Farmers built the SWP? "...the nation's largest state-built water and power development and delivery system..."

SWP water is provided by contract. I know CA water law is extremely weird, but is it really the case that the owners of the water have to obtain it by contract?

Mister Kurtz said...

Albionwood, the SWP users (unlike the Federal reclamation contract users) receive no subsidy. One could make the case that the SWP districts' ability to take property through eminent domain, and to issue tax free bonds constitutes a subsidy, however; but that is a much broader issue which affects more than water districts. Prior to the construction of the CVP, an immense water storage and distribution system had been constructed in California entirely with private capital, beginning in the 1870's. The actual subsidy that the CVP users receive is a matter of debate, but is probably less than $100 mio/year. In any event, no user of subsidized water is in a position to sell it. The water rights holders who are in a position to sell generally have senior rights, not exactly property but usufructs, that are subject to beneficial use and public trust constraints. They have no initial "water contract" contract per se but may have entered into contracts with the government or public agencies as part of the exercise of their water rights. I argue (with extremely limited success to date) that any such owners *not* selling some water (at least if they are physically able to do so) are failing to put it to beneficial use. They are also missing out on an excellent business opportunity.

Damian, the WIlliamson Act lands are all over the State. The idea was a 1960's scheme to address urban sprawl, by allowing a lower tax assessment for agricultural lands, based on their actual income stream, rather than what a developer might pay to pave them over with houses. Prior to Prop 13, both homeowners and farmers sometime found huge increases in their property tax bills, with no commensurate change in their living standards or incomes. Whether Prop 13 was the best way to address this problem has been debated ad infinitum and is not germane here.
Proposition 13 in many ways made the WA moot, since buyers know at the time of purchase what their taxes will be, and ought to capitalize that into the purchase price.