Three weeks after the tunnels received a crucial green light from federal environmental regulators, the $17.1 billion project got a cool reception from nearly 100 growers who farm in the powerful Westlands Water District. Provided with detailed financial projections at a Westlands board meeting for the first time, the farmers suggested they aren’t ready to sign onto the plan.
Investment bankers from Goldman Sachs & Co. said debt repayment could balloon farmers’ water costs to as much as $495 an acre-foot under the most expensive scenario, or about triple what Westlands growers currently pay. …
“My initial thought, right off the bat, is no way this will work,” the tomato and almond farmer said in an interview. “Those numbers might work for a city, Metropolitan and them. For a farmer, none of the crops that I grow can support these numbers.”
I am sorry these farmers are only hearing about these estimates now. The cost range for this water has been available knowledge for half a decade now. We’ve known for years that tunnel water wouldn’t be agricultural water.
This is another illustration of how dedication to ideology over reality is penalizing the conservative farmers of the San Joaquin Valley. The rough price range for water out of the Delta tunnels has been known for almost a decade. Wise district managers should have relayed this reality to their farmers. Messrs. Neve and Bourdeau should not be learning about this now.
Instead, the leadership at Westlands continued to pander to the fantasy of additional new low cost water. Over the years they’ve paid millions into the BDCP planning effort. (In the end, that may end up being a subsidy for the cities that can take water from a small tunnel alternative.) I don’t know why Westlands management didn’t explain to their farmers years ago that it was time to cut their losses. One unflattering possibility is that they were more willing to throw their growers’ money at a project that wasn’t going to deliver ag water than they were to challenge the conservative water management philosophy of the region. Another unflattering possibility is that the district managers and lobbyists enjoy the lifestyle that their growers support, and aren’t going to tell them unpleasant truths until they absolutely must. Either would explain bringing in outsiders from Goldman Sachs to explain the real costs of the Delta tunnels. In either explanation, the management and leadership at Westlands aren’t working in their growers’ best interests. Even if their growers demand it, perpetuating the fantasy of additional low cost water will not give them the knowledge they need to plan for their farms in the long term.
5 responses to “Long foreseeable.”
Will be more of the same subsidize and subsidize some more. Hard to break habits we’ve had for a century. We honestly need to further subsidize construction, maintenance and operation of more water and wastewater systems in the Valley and we need to do so urgently. California can afford it and it’s wrong to leave so many Central Valley communities with horrible water systems.
Another theory. The Westlands growers know full well the costs of tunnel water. Their public skepticism is actually part of their negotiating strategy to make urban water users pay more than their fair share.
Yes, that was my thought exactly: give me a break, this is nothing but a ruse to get urban water users to fully subsidize (or more) the cost of agriculture water. I don’t believe for a second the farmers are stupid – they know full well what they are doing. I mean why not make the cost of watering a lawn and taking a few showers $500 or $1000 a month? Multiply that by a few million people and they can take that subsidy straight to the bank.
Almost without exception, when an industry is so subsidized that it needs ever increasing amounts of subsidies just to stay alive, it is a bubble waiting to burst. Some bubbles last longer than others (think Big Oil). The ag-water industry in the central valley mirrors the sub-prime mortgage crisis in 2007, just before the crash. All the data is there, it has been known for years the economics are upside down and the major players are likes ‘moths to light’ filling the pipeline with ever-increasing bad investments. When you subsidize something, anything really, you are extending credit to someone with the expectation it comes back in the form of economic stability / growth. In the case of housing, banks were issuing mortgage loans even when it was clear the borrower couldn’t sustain the level of debt. The same is true of the delta-tunnels – we are preparing to issue a massive amount of debt to an industry that is admitting upfront it cannot sustain the cost. This will just accelerate the decline cycle, with more and more farmers leaving, foreclosing or simply selling their interests until there is no one left to pay the cost.