Comments on: Water subsidies are ‘ancient history’

By: Clay Campaigne

Clay Campaigne — Sun, 12 Apr 2015 18:52:31 +0000

“There is also the misconception that California’s water system would allocate water better during droughts if it weren’t for water and crop subsidies. But as the University of California, Davis Center for Watershed Sciences pointed out, any advantage of cheap water is paid for by higher agricultural land values.”
This doesn’t follow. It’s the price of the water itself that determines how much water is used. The land cost is a fixed expense, and has no effect on that quantity decision. To take an extreme case, if the price of the farmland is high but water is free, then the farmers’s best decision is to use water as freely as possible, once he owns the land.
Farmers could indeed suffer if prices rise, if their needs are not covered by long-term contracts. If so, perhaps they should be compensated. Just not via an implicit subsidy that encourages inefficient water use.
You talk about the calamitous effects of land value collapse: we should also consider what will happen in the event that there is insufficient water. A municipality bailout would probably be preferable to just running out of water, exhausting aquifers, and rendering some of them un-rechargeable.

By: Hank

Hank — Fri, 03 Oct 2014 16:21:36 +0000

The value of farmland would only come into play if it was sold. The property tax of that land is the thing not to be disturbed. I am curious, does the the property tax bill decrease if the land is out of production? I would think it may if it was the result of a declared disaster. I’m not against it just asking.

By: Bill Gore

Bill Gore — Thu, 02 Oct 2014 04:44:09 +0000

A good point, and ‘yes and no’ in terms of your broad conclusion at the end.
While cities and farmers that utilize the SRP canal system may not be getting a taxpayer subsidy due to SRP’s electricity sales, the users who benefit from water delivered via the Central Arizona Project (CAP) have, to my knowledge, received a federal subsidy in that the CAP was built with federal dollars, and the water allocation and transmission to the CAP from the Colorado River is administered by federal agencies. The CAP was Barry Goldwater’s ‘love child’ with Dennis Deconcini…The CAP benefits farmers, indian reservations and communities from south of Phoenix to Tucson.