SCVWD review of Open Space Credit Policy concerns farmers

Owners of South County’s small farms and ranches have had plenty to keep them awake at night, with growing government regulation, higher operating costs and increased competition from bigger growers outside the area.
A decision earlier this year by the Santa Clara Valley Water District to evaluate its Open Space Credit policy has added to those concerns.
Farmers have voiced their appreciation for the policy, which has kept their agricultural water costs under a set threshold since 1999 – and they don’t want to see the credit reduced.
“This [policy] is a way to support agriculture, reduce flood control needs, recharge the groundwater, and support the environment,” said Executive Director Jennifer Scheer with the Santa Clara County Farm Bureau. “It’s a win-win program that makes resources available for all.”
The credit limits the semi-annual charge paid by agricultural producers for groundwater to no more than 10 percent of the municipal and industrial charge. Currently the charge is at 6 percent, or $18.30 per acre foot. Municipal and industrial water rates are $305 per acre foot in South County and $680 per acre foot in North County.
The Open Space Credit is currently funded by a one percent property tax and is estimated to generate a net revenue of $6.5 million in fiscal year 2013-14.
SCVWD board members are considering whether a portion of OSC funds should be re-directed to other projects, such as flood protection. To aid in the district’s evaluation, board members directed water district staff to provide an economic analysis of the potential impact of a credit reduction on the viability of agricultural lands in South County.
In addition, an 11-member working group representing the agricultural, water, land planning and business communities was formed to study the issue. The staff hosted a series of working group meetings this summer, soliciting feedback from agricultural, water/environmental advisory committees and the Santa Clara Valley Water Commission.
On Sept. 10, 2013, the water district held a meeting at its San Jose offices to present results from the economic study and to receive working group recommendations.
Some farmers say the credit is essential to maintaining their operations at current levels, while others say it affects their ability to continue doing business in South County.
“The Grass Farm has been supplying South County with turf since 1969. In terms of economic outlook, we’re price takers, not price makers,” said owner Erin Gil. “Competition and price increases will determine whether we stay or leave. We understand that water is precious and scarce. We want to be a role model, and do anything we can agriculturally to support water conservation.”
Working group recommendations vs. SCVWD staff recommendations
The working group’s recommendations to the water district are:
• Maintain the Open Space Credit as is, both in practice and policy
• Weigh decisions in context of other external factors that affect agriculture
• Explore other sources of money for capital and operating projects that are less than robust and not fully funded
The SCVWD’s staff recommendation, alternately, is to change the existing credit and ask farmers – who are currently paying 6 percent of the municipal and industrial charge – to gradually pay up to 10 percent of the charge over a 10-year period.
Given the current $305 municipal and industrial rate, this would equate to $30.50 per acre foot for farmers – although Sheer points out the municipal and industrial rate is not a constant figure and increases every year.
Still, Darin Taylor, a senior project manager with the SCVWD, said staff sees “a minimal harm to the agriculture community based on this scenario.”
Kirigin Cellars winery owner Dhruv Khanna expressed appreciation for the water district’s long-standing Open Space Credit policy and its groundwater recharge efforts, but also voiced serious concerns about the local groundwater supply.
Kirigin operates more than 30 acres of vineyard land on Watsonville Road that is about 350 feet above sea level, but is still subject to groundwater production charges, according to Khanna.
“My well water supply is not assured in quality or quantity,” said Khanna. “The water district cannot guarantee me a water supply. Farming is getting tougher by the day. I hope you’ll preserve the existing Open Space Credit Policy to the maximum extent possible.”
Asking farmers to pay 10 percent of the municipal and industrial rate will have relatively low impact on “acreage,” or the amount of open agricultural land that stays open, according to Richard Howitt, a consultant with ERA Economics. The SVCWD contracted ERA Economics to conduct an economic study that analyzes the value to South County residents of having agriculture as open space, and the value of agriculture as a provider of ecosystem benefits.
“There is clearly a value of open space, both in terms of property values and in ecosystem services,” Howitt added.
SCVWD Director Brian Schmidt (representing District 7) noted that since the Water District doesn’t provide pressurized water, “agricultural water users have to look at the total cost of water, including the cost of pumping and maintenance, which is significant. For farmers, the water supply, the water table height is the real concern.”
The SCVWD board is expected to review the economic analysis report, recommendations from the working group and staff recommendations in September and October. Final action is expected to be taken by the board by the end of the year. To access SCVWD board meeting agendas and minutes online, click here.