Gilroy
– Already scrambling to cover a $34 million shortfall in next
year’s budget, the Santa Clara Valley Water District will soon have
to cough up another $6 million a year for the water it imports from
the Sacramento-San Joaquin Delta.
Gilroy – Already scrambling to cover a $34 million shortfall in next year’s budget, the Santa Clara Valley Water District will soon have to cough up another $6 million a year for the water it imports from the Sacramento-San Joaquin Delta.
But water district officials said increased costs won’t be passed along to consumers in the short-term.
The 35 percent hike will take effect later this year, when the district finishes contract negotiations with the Central Valley Water Project, the historic irrigation enterprise that some call a hydrological wonder and others consider a environment-busting boondoggle.
The CVP is a federal project managed by the Bureau of Reclamation. Every year, it pumps about 7 million acre feet of water that serves three million municipal and industrial users and irrigates about 3.5 million acres of mostly arid terrain that a CVP spokesman called “some of the world’s premier agricultural land.”
“If the Bureau was not here and never built the facility, California wouldn’t be what it is today,” said CVP spokesman Jeff McCracken. “You couldn’t live in a lot of places because of floods, and California wouldn’t be the fourth largest agriculture producer in the world.”
McCracken compared turning what is essentially desert into verdant farm land to the evolution of Santa Clara Valley into Silicon Valley.
“Silicon Valley is the premier producer of computers because the people who settled there developed it and did what was needed to make that happen,” he said.
The CVP, along with the State Water Project, provides about half of the water managed by the district. The vast majority of it is used in North County, but about 14,000 acre feet a year are put into the South County sub-basin and divided equally between agricultural and municipal use.
An acre-foot is equivalent to an area about the size of a football field filled to a depth of one foot. It is enough water to supply two families of five for about a year. Santa Clara County uses about 400,000 acre feet every year and South County uses roughly 15 percent of that.
The district stores some of its CVP water in Bakersfield as a hedge against drought. In a dry year, the district can trade that water to the Metropolitan Water District in Los Angeles in exchange for MWD water that the district can siphon on its way south.
CVP and SWP water originates well north of here and collects at Shasta Dam just north of Redding. From there, it flows down the Sacramento River to the Sacramento-San Joaquin Delta where it is pumped farther south. Santa Clara County’s water is delivered via the San Felipe Project and stored at the San Luis Reservoir east of Gilroy adjacent to Highway 152.
Construction of the project began in the 1950s and many of the hundreds of contracts the CVP holds with local districts are more than 40 years old. This is the first time they’ve been renewed.
The water district began taking delivery from the project in 1987, just in time to alleviate the drought in the Santa Clara Valley that lasted through the early 1990s, a point that district executive Walt Wadlow emphasizes to those who say the water deliveries are a waste of money, especially for South County residents who, in a typical year, can rely on groundwater.
“I have to take people back to the drought, when well levels were dropping precipitously,” Wadlow said. “If we had not had the federal water, we would have had an essentially empty reservoir. In a wet year, South County does very well, but we have to plan for dry and very dry years.”
The CVP is designed to take water from relatively wet regions where there are relatively few people and deliver it to dry, dense areas in the Central and San Joaquin valleys and southern California. Factory farmers in Fresno, Tulare, Kings, Merced and Kern counties are some of the project’s largest benefactors, which infuriates environmental advocates who say the project is a short-sighted corporate subsidy.
“The Reclamation Act was designed to meet the needs of California at the end of the 19th Century,” said Barry Nelson, a senior policy analyst with the Natural Resources Defense Council, of the 1902 legislation that established the Bureau of Reclamation. “We’re now in the 21st century and nothing has really changed. The bureau spends very little time trying to figure out how to help California meet the needs of a modern western economy.”
The biggest problem, Nelson said, is that water is not realistically priced. The water delivered to major farming operations is heavily subsidized. He said it’s a good start that new contracts for the water district and other urban areas are moving into line with the true cost of water.
“Urban agencies pay pretty close to full freight,” Nelson said. “There’s a very close correlation between the efficient use of water and its cost.”
Nelson praised the district for its commitment to water conservation and reclamation programs, but a $28 million recoiled water program for South County is one of the first service cuts the district is making to help balance its budget. The already-budgeted $3.2 million initial phase will begin in May.
In November, the district discovered it will lose $51 million in property tax revenue over the next two fiscal years. It has covered some of that shortfall by eliminating vacant positions from its budget and tapping reserves, but it must save $34 million in the 2005-2006 budget. In April, the district will decide whether to raise rates for the fiscal year that begins July 1.
Board Member Sig Sanchez said Thursday that doing so “would be the easy way out.”
“We could cut services, but what are we going to cut,” he asked. “It’s not unexpected that federal water rates are going up, we’ve been battling with them for years, but I don’t know anything that isn’t going up. Prices haven’t gone up in 20 years.”
The district’s contract with the CVP wasn’t set to expire until 2027, but legislation in the early 1990’s created a number of incentives and penalties to inspire districts to rework their contracts. By reopening the contract, the district allows federal officials to conduct another environmental review of the San Felipe Project. Had the district not re-negotiated, it would have to pay an annual $2.5 million penalty beginning in 2007.
In addition to paying for the water, the district also pays a small portion of a bond that financed the CVP, and with the San Benito County Water District, is paying back the $350 million it took to build the San Felipe Project.
Wadlow said the district was prepared for the CVP rate hike and has about $20 million in reserves set aside to cover the increase, but he also said that reserve was expected to last several years. Last month, he recommended that the district board keep wholesale water rates steady next year, followed by a 7.5 percent increase fro South County residents in July 2006 and 4 percent bump in North County.
That plan is contingent on water retailers, the municipalities and water companies that sell retail water, accepting cuts in non-essential services, but Wadlow said he expects retailers to ask for a increase to save some capital projects.
Gilroy City Administrator Jay Baksa said Tuesday that the city hasn’t staked out a position on the rate question. Dick Balocco, president of the district’s largest customer, San Jose Water Company, said this week that retailers haven’t reached consensus on the proposal, but he thinks it includes some “wishful thinking.”
“They can’t wait 10 years to repair leaking valves,” he said. “I don’t know how many dollars that amounts to, but I think it’s fair to say that retailers are concerned about holding rates down artificially only to see them spike in a year or two.”
The district will hold it first hearing on water rates on April 5.
