Section3_AgricultureWithTables

• Title: SWSI Phase 2 Report - Alternative Agricultural Water Transfer Methods to Traditional Purchase and Transfer
• Date: 11/7/2007
• Author: CWCB
• SWSI II - Doc Type: Final Report

Section 3
Alternative Agricultural Water Transfer Methods to Traditional Purchase and Transfer
Supporting Information:
The SDCWA-IID, MWD- PVID and MWD-
Sacramento Valley programs all involved farmers
who wanted to remain in agriculture and where a
strong agricultural economy existed.
Financial Subcommittee Question 6
"How do the annual local economic
impacts of a rotating fallowing program
compare with a permanent dry-up that
included voluntary payment in lieu of
taxes? (Loss of local tax revenue for
schools, government, etc.)"
Annual local economic impacts of a rotational
fallowing program are at maximum the fraction of
agriculture's economic contribution, which is
subject to annual fallowing. In fact, impacts would
be less due to MU payments to farmers and RFID. If
fallowing shifts among different parties, re-
classification ofassessor land status is unlikely, so
property taxes would be unaffected. Economic
impacts have been debated in other alternative
agricultural transfers, so no universal agreement on
this point is evident. Impacts of the example
discussed here would probably be minimal.
Although a smaller amount of crop production
would occur on farms when acreage is fallowed, the
economic effects of that lost production would be
mitigated by the program payments made to
participants. Participants would not experience a
loss of income as program payments would be at
least equal to lost revenue due to fallowing, if not
more. In some cases, there may also be the
possibility of dryland farming, which would allow
for some additional income. There may be some
third party losses of employment and revenues to
local businesses, but as mentioned above, program
payments made to participants would somewhat
offset these losses. Farmers are likely to continue to
spend money, including receipts for participation in
the fallowing program, on farm operations, including
labor, equipment and supplies, and in other
businesses in the community.
In comparison to a traditional agricultural transfer,
even if voluntary payments were made in lieu of
taxes, this fallowing example would have a greater
positive net economic effect compared to a
permanent dry-up and fallowing of the land, unless
the land was developed for other income-producing
uses. Voluntary in lieu payments made by the
purchaser of the water rights would go to local
governmental entities to mitigate loss of tax
revenues for services such as schools and other
publicly provided community services. However,
these payments are not likely to provide support to
local, private sector, businesses that have lost a
portion of their customer base due to the loss of
farms, and farmer spending. These voluntary
payments would not create jobs to mitigate the loss
of employment due to decreased agricultural
production. However, as noted above, if the land
was dryland farmed or converted to another use, the
loss of revenue may be lessened or perhaps revenue
increased, depending upon the type of development
and alternate use of the land.
The size and significance of third-party impacts have
been debated as part of existing fallowing programs,
but the economic drawbacks of fallowing programs
would be minimal compared to a traditional
agricultural transfer, unless the land were developed
for other income producing uses, such as dryland
farming, residential or industrial.
3-28 FINAL DRAFT