Local farmers’ cost to pump water out of the ground could rise
dramatically this year, possibly leading to the loss of an industry
in Santa Clara County.
Local farmers’ cost to pump water out of the ground could rise dramatically this year, possibly leading to the loss of an industry in Santa Clara County.
Now, agricultural well owners pay $16.50 per acre foot of water to the Santa Clara Valley Water District. The agency’s board of directors Tuesday discussed the possibility that, because of a recent court ruling, they might be forced to push the rate closer to what large-scale municipal water retailers such as the city of Morgan Hill pay – $275 per acre foot.
Tim Chiala of George Chiala Farms said such an increase would wipe out his profits, and drive farmers out of the county for good, at a time when they are already racked with continually increasing costs to do business and tighter air quality regulations on the horizon.
“A big concern in this county is open space, and keeping urban sprawl under control,” Chiala said. “If it’s important to have open space, it’s important to have farmers. There are a lot of benefits to having agriculture close to the city core.”
Erin Gil, production manager of Grass Farm, agreed. He said higher costs for farmers translate to higher costs at the grocery store.
“People don’t appreciate that until they go to the store and pay $3 for a tomato,” Gil said.
Since 1991, the water district has kept agricultural groundwater charges at 10 percent or less than what municipal and industrial users pay in order to encourage low-impact land uses. Farmers’ lower rates have been subsidized by property taxes collected from land owners throughout the county and by the higher paying customers.
An April 2009 Santa Clara County Superior Court ruling, the result of a lawsuit filed by Great Oaks Water Co., said it is a violation of Proposition 218 for a public agency to subsidize one set of rate payers with higher rates charged to another set.
Directors and staff at Tuesday’s water district board meeting noted the ruling is not yet finalized in their first open discussion of the ruling since it was filed.
Non-agricultural users in North County pay even more – $520 per acre foot. An acre foot contains enough water to supply a family of five for two years.
It is possible this year that the different rate classes might have to be “equalized” because of the court ruling, according to water district Senior Project Manager Darin Taylor. While that means rates paid by some well owners, like the city of Morgan Hill, would drop, those paid by the farmers would increase. Taylor said that would cause “rate shock” among farmers who own wells.
Or the agency can fund the farmers’ subsidy with other funds such as re-allocated property taxes or reserve funds.
For the fiscal year that starts July 1, the cost of the agricultural subsidy will jump from $1.2 million to $4.7 million, because Proposition 218 trumps the Water District Act which caps agricultural rates at 10 percent of municipal users.
“This is no change in board policy. It’s a change in the judicial interpretation,” said Director Tony Estremera. “We cannot provide the credit unless we equalize the rates or find somebody else to pay for it. We have to find (about) four-and-a-half million bucks or we can’t allow the credit.”
Under Proposition 218, each customer’s rate for services can only reflect the agency’s cost to provide the service. Under that provision, agricultural charges would still be lower than those paid by residential users, according to former Director Sig Sanchez.
“In no way would we equalize (the charges) because the level of service is different,” Sanchez said, noting that the cost of providing water to the agricultural sector is less than delivery to other users. Those costs could be determined by further analysis by district staff.
Chiala Farms uses between three and four acre feet of water for each acre of land the company farms. Each year, the farm purchases about 2,000 acre feet of water for 650 acres of crops in Santa Clara County, according to farm manager Ian Teresi. A significant increase in the Chialas’ groundwater charges would “push us all out of here,” Teresi said.
Agriculture benefits the groundwater basin as a whole, and therefore other users, added Tim Chiala. He said the water they use for irrigation doesn’t run off the property as rainwater pours off concrete surfaces, and it seeps back into the aquifer from which it was pumped.
“We replenish the water supply. That’s why the rates are different, and we’re probably saving the district money,” Chiala said.
He added that the farmers never asked to be subsidized, but their use of water is a wholly different application than that used by households and industries and therefore should not be subject to the same rates.
Perhaps the water district could cut costs in its $305-million budget instead of increasing customers’ rates, Teresi said. For example, maybe they could seek a lower price for imported water, which makes up half the local supply.
Grass Farm uses about the same volume of water per acre of crops as Chiala. The sod grower has about 120 acres of land in agricultural production in Santa Clara County.
And farmers have more costs associated with water besides the groundwater charges, Gil said. They pay for electrical costs to run pumps, and the infrastructure to deliver water from the ground to the fields.
Gil also touted the advantages of agriculture to the community as a whole, as the turf he grows filters water as it passes back into the ground, and keeps the ground cool.
The water district began its practice of capping agricultural charges at their historically low level as a way to keep the industry alive.
“There was a concern about agriculture being extinct in Santa Clara County,” said Sanchez, who was a production farmer before he entered public service. “This maintains open space for future generations to enjoy, and it maintains what this county was originally – an agricultural community.”
The directors disagree with the Great Oaks ruling, which requires the district to reimburse the company for about $4.6 million in groundwater charges. Estremera said the purpose of Tuesday’s discussion is to prepare ratepayers for possible upcoming changes in groundwater charges, which will not be set before April 27.
“We want to make sure we’re not going to surprise people with different rates,” he said after the meeting.
