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III. Economic Impacts of the Drought A. Background Newspaper reports suggest that the economic impact of the drought in 2002 was $1.1 billion. That would be roughly 0.6% of Colorado's gross state product, although a much higher fraction of some agricultural counties' income. The precise source of the estimate is difficult to track down, but appears to come from the Colorado Farm Bureau. The estimate is almost certainly wrong as much of the loss is too difficult to estimate or won't show up until future years. The estimate assumes that water -based tourism and agriculture incurred the most costs, with some additional losses due to forest fires. However, those sectors were not alone. Some homeowners and businesses have losses due to declining water levels in wells. In extreme cases, some must redrill wells to reach the lower water tables. Owners of landscaped property have costs in replacing landscaping killed or injured by drought if the injury is more than temporary. Landscape providers have at least temporary losses when restrictions are placed on new landscaping or landscape maintenance. On the other hand if they survive, they may recoup those losses later when landowners purchase replacement landscaping after the drought is over. Providers may also come out ahead as people replace present plants with more water efficient ones. Individuals may suffer losses when forced to pay more attention to how they apply their water to their landscape, but these losses are not measurable unless they interfere with the person's market activities. Some of these losses will not show up in the product accounts for the state. For example, if a person loses $1000 worth of landscaping because of the drought and then replaces it with a similar amount of material next year, the net effect would be somewhere between zero and $1000 gain in state product. It would be zero if the purchase of landscape material comes at the expense of other consumption (e.g. fewer dinners out). It would be $1000 if the expense comes out of savings or working harder to increase income. In each case, the person has a loss of $1000, but the State shows a gain or at least neutrality. B. Agriculture 1. Dry Land and Irrigated Agriculture in Colorado's Economy In a normal year, agriculture produces about $4.6 billion in total sales in Colorado, between 2.5% and 3% of the $175 billion gross state product, but net agricultural income is around $700 million, which is only 0.4% of state income. Two - thirds of sales are from livestock and the other third from crops. The major crops are corn, wheat, vegetables and hay. Sod and landscaping plants are another major sector that is sometimes included and sometimes not included in agriculture. In this report, landscaping will be related to municipal water use, not agriculture. In 2002, the drought seriously injured much of agriculture. The specifics are hard to identify, in part, because the data are still being collected. Basically, irrigated agriculture 13