Tuesday, March 2, 2010

Arambula Bill Opponents Need Better Answers

Juan Arambula has proposed a new bill to limit farm-to-urban water transfers. I am probably the only economist on the planet who is happy to see this bill. Sometimes a little daylight is more important than marginal gains in economic efficiency. From the Fresno Bee,

“What am I going to tell folks when farmers sell their water and put farmworkers out of a job — and they make millions at the public’s expense?” said Arambula, who has long pushed for state water investments in the Valley.
I believe that Arambula is very sincere in his concern for farmworkers and taxpayers. I have a hard time being against Arambula's bill for economic reasons when it's opponents are offerring up these gems.

“Very few of these sales are voluntary,” said Don Mills, chairman of the Kings County Water Commission, which advises that county on water issues. “The economics are forcing the farmers to sell the water.”
Sounds like that check was loaded and aimed right at the farmer's head.  Not voluntary, hah!
Sandridge partner John Vidovich said: “I don’t like selling the water. I hated it.” But he said the company’s allocations from the State Water Project have dipped so low that it makes farming cost prohibitive. He blamed environmental pumping cutbacks at the Sacramento-San Joaquin Delta — the state’s water hub — and promised to reinvest the $73 million in agriculture, mostly in finding alternative sources of water.
Farming is so cost-prohibitive that Mr. Vidovich is going to reinvest all the money back into farming without surface water.  Vidovich, a Silicon Valley real estate developer must really love farming, because I doubt he became a millionaire with that kind of business mentality. I bet he regains his business acumen before he burns through all the $73 million. 

Finally, UC-Davis civil engineer Jay Lund weighs in on economics,

“In some ways it’s not much different from General Motors deciding to close a factory and sell off the equipment from a factory,” he said. Farmers are “allowing water to go to a different use that has high economic value to the state of California.”
Yeah, it's just like General Motors. GM has been unprofitable for years and entered bankruptcy, with many of its problems created by unsustainably generous employee compensation, benefits and pensions. Valley agriculture enjoyed record profits most of this decade while its employee's pay and working conditions remained the worst of any occupation. Oh, and when taxpayers bail out GM they get an equity stake in the company, and they are paying back the loans ahead of schedule. Westlands is just a wee bit behind paying back their zero interest government loans, and taxpayers would own most of the Valley's westside if the farmers' deal was like GM.  Other than that, the parallels are uncanny.

I wonder if the Latino Water Coalition will accuse Dr. Lund of being an out-of-touch academic who hates farm workers? He is advocating trades that will put farm workers out of a job.  Or is it OK when you support building a peripheral canal.

[A few minor edits made later plus comment.  Lund isn't all wrong here, and is certainly being a lot more honest than Mr. Mills and Mr. Vidovich so I am probably too harsh. But it is important to note the difference between this and a GM factory - especially since the federal government has made investments in both west side farms and GM in the name of economic development.]


  1. The "jobs" issue is a red herring. Unless, that is, you also think GPS, mechanical harvesters, and other labor saving devices should be banned. For some (not all) rights holders, the additional revenue from water sales can stabilize their businesses and help to pay for water saving technologies. I see this legislation as an isolationist and backward-looking stunt.
    As far as Sandridge goes, farming in Dudley Ridge may have made sense once. Now it does not. The SWP users there have paid their way without subsidy. Why is it better for them to go broke wasting resources instead of profiting from putting the water to better use?

  2. Mister Kurtz,

    Good comment. I wish the water sellers would give an answer like this instead of the ones in the article.

    The reason I like the legislation is that it reveals the jobs issue as a "red herring."

    I also like investment in capital that increases the productivity of labor (and generally reduces the amount of labor). In most industries, such investments increase wages and hopefully we will eventually see more wage growth in agriculture.