Farmers mull MID water rate hike as sale alternative

You don't hear this often: Some farmers in the Modesto Irrigation District might accept increases in their water rates.

But they see doing so as an alternative to the MID's proposal to sell water to San Francisco.

The size of the increases has not been determined, but these farmers say they are willing to pay for at least some of the canal system upgrades that the proposed San Francisco sales are designed to fund.

"Nobody wants to see their water rates go up," said Ron Peterson, president of the Stanislaus County Farm Bureau, "but we also realize as farmers that we have to make improvements in the capital infrastructure."

It's a delicate subject. Many farmers see the cheap MID water as an advantage in farming, which sometimes has tight profit margins. Some of them are willing to at least explore the proposal from San Francisco, which would pay about 70 times the farm rate in the first of the sales.

The MID board could vote on that deal June 26. It would involve 2,240 acre-feet of the Tuolumne River supply, which is 1.6 percent of the district's average annual deliveries to farmers and the treatment plant serving Modesto and nearby communities.

The board also could launch the environmental study needed for the sale of up to 25,000 additional acre-feet. This water would be freed up by construction of small reservoirs to catch spills at the ends of canals, funded by the sale proceeds.

MID farmers pay $9.83 per acre-foot for their basic allotment of water this year. District officials have said the cost could have to rise by as much as $65 per acre-foot to pay for the estimated $115 million in upgrades needed on the system over the next decade.

Such an increase would "push small operations to the brink," said Linda Brughelli, whose family has farmed northwest of Modesto for about a century.

She supports looking into the San Francisco option but said she would be willing to pay somewhat more for MID water. She and several other people have urged the MID to form an advisory committee on these issues.

"What's the common good?" Brughelli said. "That's what I'm looking for."

Other ways to fund plans

MID board president Tom Van Groningen said the San Francisco sales are just one option for paying for the upgrades. He is open to talking with farmers about raising their rates.

Director Glen Wild said he is especially interested in ending the subsidy for water operating costs from the MID's electricity customers, an average of $27 per year for each of them.

Peterson said he hopes that a water rate increase could be kept to far less than $65, perhaps by stretching out the upgrades and doing only the critical ones first.

MID officials said the cost might be reduced via a bond issue, with debt repayment spread over 30 years.

The San Francisco proposal has drawn support from Rubén Villalobos, president of the Modesto City Schools board. He is motivated in part by the need to keep water for the campuses affordable, but he also is concerned about farmers.

A $65 per acre-foot increase would have impacts as well for farmworkers and employees of food processing plants, Villalobos said.

"We're not talking about raising the rates two or three times," he said. "We're talking about raising the rates seven or eight times."

John Duarte, who uses MID water for his wine grapes east of Modesto, supports a substantial rate increase to prevent the San Francisco sales — perhaps to $50 per acre-foot, if he could be sure the money is well-spent on the upgrades.

Some farmers say the MID's low rates make their land more valuable, but Duarte said the values would decline if the transfers to San Francisco made the supply less reliable in dry years.

"Our land values are high because we have secure water, not because we have incredibly cheap water," he said.

These rates mean that water is a relatively small part of the cost of producing a crop in the MID. An acre of California almonds, for example, brought average gross income of $3,880 in 2010, according to the U.S. Department of Agriculture. Assuming water use of 3 acre-feet per acre, the MID bill came to just $27 at that year's rates.

Farmers note that their many other costs — such as fuel, labor, machinery, fertilizer, pesticides, mortgage payments and upkeep of the irrigation system — can squeeze the margin.

Prices for many crops have been strong in recent years, but this, too, can change, as dairy farmers know well from the swings in milk prices. That could make a water rate hike stand out.

"We know agriculture goes through cycles," Peterson said. "We have been on a fairly positive cycle for the most part, but we know those down cycles will come."

Bee staff writer John Holland can be reached at jholland@modbee.com or (209) 578-2385.

AT A GLANCE

Ag water rates:

These are per acre-foot, enough to cover an acre a foot deep.

• MODESTO IRRIGATION DISTRICT: $9.83 This is based on the 2012 allotment of 3 acre-feet for the basic charge of $29.50 per acre. Farmers can get an additional half acre-foot for $7.375 per acre. Water in excess of this can be sold for $30 per acre-foot on a case-by-case basis.

• TURLOCK IRRIGATION DISTRICT: $11.56 This is based on the 2012 allotment of 2¼ acre-feet of water for the base charge of $26 per acre. An additional five-sixths of an acre-foot sells for $15.

• OAKDALE IRRIGATION DISTRICT: $6.50 This assumes 3 acre-feet of water used for the per-acre charge of $19.50. The OID does not have a strict cap on water use, but it must not be wasted.

• WESTLANDS WATER DISTRICT: $116.50 to $153.46 This vast district west of Fresno has much higher costs for infrastructure, environmental restoration and other needs.

• SAN FRANCISCO PROPOSAL: $700 This is the starting price per acre-foot that the city has offered to the MID in the first proposed sale of Tuolumne River water. San Francisco, which already taps the river, would use the extra supply in dry years for its 2.6 million customers in four Bay Area counties.>