Thursday, 14 November 2013

BDCP Statewide Economic Impact Results Illustrate Why BDCP Is a Disaster for California Agriculture

According to the BDCP Statewide Economic Impact Report, implementing BDCP would have the following effects on crop revenue in California. 

Revenue Gain to SJ Valley Farmers From Improved Water Supply:  +$134 million (page 5.1-21)
Loss to Delta Revenue From Agricultural Land Retirement for Habitat:  -$89 million  (page 5.1-16)
Loss to Delta Farm Revenue From Salinity: -$2 million  (page 3.1-13)

Thus, the total net change in farm revenue according to the BDCP statewide economic impact report is $41 million annually. 

When interpreting this $41 million, remember this is gross revenue, net revenue or profit is significantly lower.  Also, this is the BDCP’s estimate based on their optimistic water supply and delta salinity scenarios.  I believe the outcome will actually be worse.

How much will the state’s agriculture industry pay to receive these miniscule benefits from the tunnel plan? 

Although the BDCP has not finalized an ag/urban cost allocation, the heads of the urban agencies have been repeatedly promising their boards that there will be no agricultural subsidy and every water user will pay the same amount per unit of water received.  Since BDCP is estimating debt service and operating costs at $1.2 billion annually (their figure, this understates likely financing costs) and agriculture receives at least 2/3 of the water, the farm share of the tunnel bill looks to be at least $800 million per year according to the leaders of the water agencies who pledge to pay for the tunnels.

Thus, the BDCP documents suggest the financing cost of BDCP to the statewide agriculture industry will be roughly 20 times higher than the net gain in statewide agricultural revenue.

With those kind of numbers, I don’t think it is an exaggeration to call BDCP an economic disaster for California agriculture. 

While there may be a few individual farmers who could benefit in some way, I don’t see how anyone who claims to be representing the statewide interests of California agriculture can possibly support BDCP. 

Finally, I should note that there are some agriculture impacts missing. 
On the negative side, it leaves out the land retirement for tunnel construction and the potential upstream impacts on upstream farmers in the Sacramento Valley and San Joaquin tributaries (I have been told that the reason BDCP predicts low salinity impacts in the Delta is that those farmers will be giving up water).
On the positive side, there are some water quality benefits to SJ valley production that are not reported separately in these reports, and some potential to reduce groundwater pumping costs for some farmers receiving exports in the SJ Valley.

None of these missing impacts would be remotely large enough to change the BDCP disaster for agriculture.  No wonder Dr. Rodney Smith is predicting a 90% probability that the agricultural contractors drop out of BDCP by June 30, 2014.

About the Author

Ethan Jacob

Author & Editor

I am Ethan Jacob Executive Director of the Center for Business and Policy Research at the University of the Pacific, where I have a joint faculty appointment in the Eberhardt School of Business and the Public Policy Program in the McGeorge School of Law..

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