San Diego County’s cash-strapped water authority is considering a plan that could remove a discount it gives to local farmers — something farmers claim could put them out of business.
The authority gives a roughly 25% discount to about 1,000 farmers, who grow everything from flowers to avocados.
Everyone involved in the issue is facing higher costs. The authority has been imposing consistent double-digit rate increases on local water agencies in recent years primarily because of declining demand. Farmers are facing higher costs for labor, supplies, equipment, transportation and fuel.
Critics say removing the discount is shortsighted because it threatens to kill off a customer class the water authority can’t afford to lose. At the same time, rates for other customers may increase to cover the authority’s costs.
Question: Should a discounted water rate for local farmers go away?
Economists
Caroline Freund, UC San Diego School of Global Policy and Strategy
YES: Underpricing scarce resources leads to overuse. It would be better to charge farmers the market price of water and give them lump sum cash transfers to them during the transition to higher prices. Subsidizing water for farmers transfers income from consumers to farmers while encouraging the overuse of water by farmers. In contrast, appropriate pricing encourages farmers to employ water saving irrigation methods and plant crops aligned with the land and climate.
Kelly Cunningham, San Diego Institute for Economic Research
NO: This is a prime example of government mismanaging economic movement. When demand levels decrease, the response should not be to raise prices, which further lowers demand, but to decrease prices, which results in increasing demand. Higher prices will further oust farming from San Diego and the benefits of ideal natural climate for growing crops. If benefits of fresh and affordable supply of fruits and vegetables are to be realized, imposing greater costs will not achieve them.
Alan Gin, University of San Diego
NO: The county water authority is in a tough situation. It needs more revenue from existing customers because the number of customers it has is declining. But if it raises rates on existing customers, such as farmers, it risks losing even more of those customers. Given that and given the importance of agriculture to the local economy, the discount to farmers should be maintained. Unfortunately, lowering rates will unlikely gain the water authority many more customers, as water consumption is price inelastic.
James Hamilton, UC San Diego
NO: Agriculture makes an important contribution to the San Diego economy. And it is a key reason why San Diego is not Los Angeles. We should seek to preserve a mix of diverse land-use patterns in San Diego between residential, commercial, agricultural, and natural habitat. I don’t want to see all the orchards bulldozed to make subdivisions. The farmers were here using the water before most of the rest of us. Let them stay on their land and keep feeding us.
Norm Miller, University of San Diego
NO: Normally I would say farmers should pay the same as residents, except in California we have some subsidized central valley farmers paying rates as low as $15 per acre foot, while others are at $50 per acre foot and some in Southern California are at $500 per acre foot. Until we eliminate or phase out these subsidized areas, we should be careful not to put the local farmers out of business based on a competitive cost disadvantage.
David Ely, San Diego State University
NO: Not if the action of eliminating or shrinking the discount would cause a significant number of farmers to cease operations. The revenue from a discounted rate contributes toward covering the costs of the county water authority. If many farmers discontinue operations, the revenue from that group goes away but the water authority’s fixed costs would remain. Losing the revenue from local farmers would mean raising rates paid by the remaining water customers.
Ray Major, economist
NO: Removing the discounted water rate would decimate the farming sector in the county leading to loss of jobs and higher prices. The recent move to farm-to-table attempts reduce transportation costs of agriculture products, this too would be impacted. Rather than increase costs to consumers, government agencies across the board should find ways to cut costs and live within their budgets, as is expected of every resident.
Executives
Phil Blair, Manpower
YES: But gradually. I think the farmers maybe got too good a deal when the agency had to spend money to buy water rights back from the farmers. At the time, water agencies were desperate for water rights. But no subsidy should be canceled without warning and preparation. And city dwellers should not pay water rates that subsidize specific industries. And farming is an industry, albeit with very few jobs. Each need to pay its fair share for the resource and adjust their product pricing accordingly.
Gary London, London Moeder Advisors
YES: Government tinkering with preferential rates is not likely to produce much more agricultural production. Look at government mandates to discount housing prices for a selected class: They don’t achieve many more housing units, while interfering with normal market distribution. It is evident that the regional water rate structure needs an overhaul, not selective discounting.
Bob Rauch, R.A. Rauch & Associates
YES: Agriculture consumes approximately 80% of California’s developed water, yet it contributes only about 2% to the state’s gross domestic product. The best approach for all involved is to gradually adjust water pricing to reflect its actual value while providing to small and medium-sized farms during the transition. Implementing tiered pricing structures, investing in water-efficient technologies, and encouraging the cultivation of less water-intensive crops could promote sustainability without severely impacting the agricultural sector.
Chris Van Gorder, Scripps Health
NO: Farming is still an important aspect of California and San Diego County. We must that farmers sell what they grow and if their costs rise, so will the cost of the products they sell, and we buy. In the end, we will all pay more whether the discount is changed, eliminated or left the same – kind of like tariffs.
Jamie Moraga, Franklin Revere
NO: Eliminating this discount could hurt thousands of local family-owned farms, causing some to simply go out of business. Losing these farms would be harmful not only to our local economy, but also to consumers and businesses that depend on fresh, farm-to-table produce versus imported produce, which can contain preservatives and be more expensive. Because of the oversupply of water from reduced demand, the authority should explore other options rather than eliminating a discount for local farmers.
Austin Neudecker, Weave Growth
YES: Our fiscally threatened water authority owes everyone stable, transparent pricing. Agriculture s for approximately 8% of the region’s water supply and receives a 25% break, shifting costs onto households and businesses, and resulting in double-digit rate hikes. The sector currently employs roughly 10,000 to 20,000, but aid to growers should come from targeted state or federal grants, not perpetual subsidies that undermine fairness and the agency’s budget.
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