Open Space Credit safe for now

South County farmers and ranchers continue to be concerned about agricultural groundwater rates, despite a decision by the Santa Clara Valley Water District to maintain until June 2015 the current Open Space Credit.
The credit has kept agricultural water costs under a set threshold since 1999.
The district also indicated it is “likely to propose an increase to all groundwater charges” consistent with the 10-year projections published in its annual report, which would diminish the benefit of the Open Space Credit.
The recent decision was reached in a unanimous vote by the SCVWD’s Board of Directors during their regular Nov. 12 meeting. As a result of the decision, the SCVWD’s Open Space Credit policy will remain unchanged for now. The semi-annual charge paid by agricultural or livestock producers for groundwater will stay at 6 percent of the municipal and industrial charge, or $18.30 per acre foot. The credit limits the agricultural groundwater charge to no more than 10 percent of the municipal and industrial water rates, which are currently $305 per acre foot in South County and $680 per acre foot in North County. The Board will look at the agricultural charges on an annual basis to assess the need to bring the agricultural groundwater production charge up to the 10 percent policy limit.
South County farmer Pete Aiello, who participated in an 11-member working group representing the agricultural, water, land planning and business communities that met and studied the issue, said he was “pleasantly surprised” that the group’s final recommendation was to maintain the Open Space Credit as it is.
“Incremental increases will kill us,” he said. “We face wage, fuel, land and other cost increases. We just want to survive … and continue feeding the world.”
Gilroy Mayor Don Gage also addressed the SCVWD board, highlighting a tough economy, tight budgets and high operating costs among the factors that challenge South County’s agricultural community.
“If you increase the water rate it’s part of a cumulative effect that will make it impossible for farmers to compete, and once farmers leave, they’ll never come back,” he said.
The Open Space Credit is currently funded by a one percent property tax and is estimated to be a net amount of $6.5 million for fiscal year 2013-14. Water district officials had initiated a review of the Open Space Credit in February 2013 to consider whether a portion the funds should be re-directed to other projects, such as flood protection.
During the nine-month review, the SCVWD took a number of steps to understand potential impacts of changing the credit. In addition to establishing the working group, this included:
• Hiring ERA Economics LLC, a consulting firm, for an economic analysis and report on potential OSC reduction impacts on the viability of agricultural lands in South County
• Soliciting feedback from agricultural, water/environmental advisory committees and the Santa Clara Valley Water Commission
• Hosting public meetings to present results from the economic study, receive working group and staff recommendations as well as public comment
The ERA Economics report estimated that 15,000 to 17,000 acres of South County open space and farmland are currently covered by the Open Space Credit. The study indicated that continued agricultural land use and open space preservation provides significant benefits and services including: water quality, groundwater recharge, flood risk reduction, habitat, biodiversity, pollination and climate adaptation, and carbon sequestration. By its most conservative estimates, ERA put the total value of such services at $514 per acre, for a total annual value of $7.7 million.
Gage expressed some disagreement with the ERA report, believing that it underestimated the amount of acreage that would be fallowed if the Open Space Credit were reduced.
SCVWD Director Dennis Kennedy (District 1) commented that the working group and district advisory committees have “responded strongly to keep the Open Space Credit at 6 percent.”
Referring to the South County farming community, he added that “it is amazing to see the efficiency and focus on new farming techniques. We as a board need to send a strong message of support.”
In a letter to water district officials, the Santa Clara County Open Space Authority stated that the county has lost 50 percent of its prime farmland to development over the last 30 years, and that maintaining the current agricultural water rate and Open Space Credit Policy is a key factor in sustaining the economic viability of the County’s remaining cropland. OSA described the credit as one of the few remaining incentives provided to farmers to stay in farming.
Sherrie Kennedy of Gilroy-based Sherrie’s Farm told SCVWD board members that local farmers face competition from large producers in and outside of the region.
“Increased rates will decrease our competitiveness,” she warned.
While the working group previously recommended the Open Space Credit remain unchanged, district staff’s recommendation was to increase the ag rate to 10 percent of the municipal and industrial rate over five years. The SCVWD has the discretion to review the Open Space Credit policy again in June of 2015 or later. There was a general consensus among stakeholders that if any future changes to the agricultural water charge are to be implemented; they should be done through a phased approach that aims to minimize impacts to the ag sector.
For general information about the Santa Clara Valley Water District, visit www.valleywater.org. To read the SCVWD annual report, visit http://www.valleywater.org/Services/PAWS2013.aspx.