Subsidizing Local Food Production, Not Just Farmers

Water District, Grand Juries and the Poor Farmers

Water politics plays a huge role in all of California’s agricultural industry. Here in Silicon Valley, it’s no different.

A 2006 civil grand jury delved into Santa Clara Valley Water District’s governance, debt, and cash reserve issues in a report titled Santa Clara Valley Water District—What Lies Beneath the Surface. This close inspection of the water district governance revealed that large landowners increased profits on both farming and land speculation. Farmer/speculators' influence on the countywide water agency yield benefits specifically from low water rates for farmers in Santa Clara County at a 90% discount from the urban water pumping rates.

Of the seven incumbent directors on the water board, five are elected and two are appointed by the Santa Clara County Board of Supervisors. Two Directors represent the South County. Rosemary Kamei was originally appointed by the Water District Board and then elected as the representative for South County. She successfully ran for reelection in 2006 to a fourth term. In addition, the board of supervisors appointed Sig Sanchez to the Water Board. As the former mayor of Gilroy who also served four terms as a county supervisor for that area, Sanchez has well represented South County farmers and landowners on the Water Board since he was first appointed in 1980.

No one has been a better friend to the landowner/farmer than Sanchez. He insisted that their water rates be kept way below the revenue needed to pay for the South County’s use of the water infrastructure, knowing that as urbanization took place, higher rates could pay off the mounting debt incurred by the district. The water district readily admits this in its response to the grand jury report. (See the district’s response to recommendation # 6).

Sig Sanchez was a County Supervisor when the current Water Board was designed and put into place by a special act of the State Legislature. Despite having two representatives on the newly formed water district board, the farmers and Gilroy’s residents voted to keep their local water district in place when the other separate agencies merged to form the Santa Clara Valley Water District in 1968. Only after the water from the San Felipe aqueduct, funded by federal money, arrived in 1987 did the Gavilan Water District voters authorize the merger with the Santa Clara Valley Water District, thereby avoiding a double pump tax on all pumpers in the area.

In determining how to spread the costs of this new water, the district chose to abandon its “pooling concept” for setting water rates within the county. Instead, it set up a new zone for the South County farmers, which included the City of Morgan Hill, and set water rates to recover only the costs incurred to serve water within this new zone. The 1977 contract with the federal government, which was based on the farmer’s “ability to pay,” provided that agricultural water be sold to the district at a mere $16 per acre-foot. But the district melded this cost with the local South County supplies and set the local agricultural rate at even less—$5.50 per acre-foot. The new melded rate remained frozen at or below $11.50 per acre-foot until 2001. Meanwhile, pumping rates in the North County went from $100 to $330 per acre-foot for urban water suppliers in that same period.

The district eventually moved away from using crop factors to determine water charges and began putting meters on the wells of the largest agricultural users. The revenue collected from the farmers, however, does not even cover the cost of reading and maintaining the meters. From the district’s net revenue perspective, the water is being delivered for free.

When I was on the water board, I took it upon myself to demonstrate that raising water rates would not severely harm the farmers. Relying on the Agriculture Commissioner’s annual report, I calculated the percentage of water cost for each crop, using a sensitivity analysis for various rate increases. Doubling and even tripling the rates showed only increases of a fraction of a percent of the crop value. Despite this evidence, the board and staff ignored the unauthorized study, stating that it was not District policy to set its water rates on “ability to pay.”

One year when the staff actually recommended significant rate increases for farmers in South County, the Board took a rare position and froze the agricultural rates and instead added an “open space surcharge” on urban rates in the North County to generate the needed revenue that staff had identified. This surcharge is still in place today

Gilroy City Council members would often testify at rate hearings that farmers would quit farming and sell to developers (sooner rather than later) if the agricultural water rates were increased. But securing development rights in exchange for receiving this cheap water was never suggested or required.

Measure A was placed on the ballot in 2006 which threatened the development rights of these farmers. Opponents of the measure hired a San Diego spin master to parade the poor farmers who supposedly would be out of work if Measure A passed. Although it did not pass, one thing is for sure: farmers won’t ever go out of business due to the water rates set in South County for agricultural uses.

Extremely low water rates have been subsidizing farming in the South County for decades without any guarantees that land would remain in open space and productive. If these landowners are truly committed to farming, they can’t have it both ways. Either they accept restrictions on their land or they should pay full tariff on the water they are using to farm their land in the interim prior to development.

In the Omnivore's Dilemma Michael Pollan began to make the case for what he called the locavore movement. Considering the enormous amount of energy involved in growing, harvesting and transporting our food supplies to market, rising fuel costs and global warming would force us to look to local food production for supplying more of our daily bread & butter, etc. In Santa Clara County, once know as the Valley of Heart's Delight, the mild Mediterranean climate, with 300-day average growing seasons, and 400 square miles of fertile alluvial soils, may be one of the greatest agricultural resources in the world.

Since local policy makers have always been heavily vested in the local real estate market, today most of the 400 square miles of fertile soils have been covered over with asphalt, concrete and buildings. Homeowners and community gardeners are still keenly aware of the fertility of our local soils, coupled with great climate and a fairly reliable water supply. Unfortunately using that water, delivered through retail water companies, is now 20 times the price of water paid by commercial farmers in the county. That is not equitable! Food is food, regardless who grows it, as long as it's all locally produced.

City and County General Plans are finally beginning to include discussions about local food production resources. When this concept takes hold politically, it will include both commercial farmers as well as home and community gardeners as part of the local resources. The importance of this local food production will then equally value every square foot of producing soil and implement incentives to protect and encourage food production to occur to feed the local population. When this occurs, the Water Board will then be in the political position to have to extend their 90% discounts for irrigation water to everyone growing food, not just commercial growers.

With the powerful information management tools that we have developed in Silicon Valley, it would be quite feasible for homeowners to document the size of their home-grown vegetable gardens and apply to their local water retailer to receive the same 90% water discount available to the commercial growers who pump water from the common groundwater basin. This program would not necessarily reduce water consumption, but it may be the best incentive for getting homeowners to remove turf grass and replace it with homegrown organic food, grown with a minimal carbon footprint.

Some would think this isn't enough subsidy. But involving the IRS would result in generating so much bookkeeping that you wouldn't have time to tend to your garden.