Transfer Mechanisms for Alternatives to Buy-And-Dry – More Than Just Water! To: Ditch and Reservoir Company Alliance Partial Presentation February 19, 2009 Updated, Modified March.
Download ReportTranscript Transfer Mechanisms for Alternatives to Buy-And-Dry – More Than Just Water! To: Ditch and Reservoir Company Alliance Partial Presentation February 19, 2009 Updated, Modified March.
Transfer Mechanisms for Alternatives to Buy-And-Dry – More Than Just Water! To: Ditch and Reservoir Company Alliance Partial Presentation February 19, 2009 Updated, Modified March 2009 John Wiener www.colorado.edu/ibs/eb/wiener hand-outs and presentation will be posted NOT REPRESENTING THE VIEWS OF THE UNIVERSITY OF COLORADO, NATIONAL CENTER FOR ATMOSPHERIC RESEARCH, OR NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION [email protected] Dedication: to Dr. David Carlson (not responsible for any errors or opinions) Note on the posted version • This set of slides is more than could be presented; the white slides are added to help orient users. • the “speaker’s notes” include references and sources for the information presented. There is also a lot of explanation of terms and ideas that might be unfamiliar. It may work best to move the line between the slide and the notes. • First up: conclusions! Conclusions • Better water transfers COULD BE DONE – Using 3 forms IN COMBINATION (handout) – PARTICIPATION of all interests is needed – COST COMPARISONS needed… – PARTNERSHIPS – not just spin, not just procrastination • Better water transfers ARE NOT ENOUGH – Too many threats to marginal conventional agriculture (new references added) – Water too valuable – Ditch company not sufficient tool Conclusions • Cumulative costs of transfers matter – Loss of agricultural capacity is LONG-TERM – Loss of agricultural capacity is NOT VALUED • literally, in economic evaluation • metaphorically, in policy – Biological issues – almost unknown now, less in the future • Opportunity Costs – the loss of chance to make better use of land and water – – irreversibility of semi-arid land use change? • The next frontier – Seeing a better future Conclusions • Need useful participation of the full range of interests affected by water transfers – compensation and security of interests. • Politics is the likely alternative to a market – good idea? Who gets to decide what? • Change and more change: prospects are not comforting! • “Keep things as they are” is not on the menu • SO, WHOSE RULES WILL CONTROL? Who will determine the outcome? HINT: property rights in a “no-plan” state…but whose property in what? What’s a “Better” transfer? From whose point of view? • Better than “buy-and-dry”… traditional transfer: no future irrigation on that land – drop in production – drop in tax base – drop in labor and farm families – drop in inputs used and purchased • LESS RANDOM than traditional? Water right values not strongly linked to soil qualities, environmental values, spatial coherence with other values – important unknowns! • • • • What’s a “Better” transfer? From whose point of view? Better for Counties than “ranchettes” that are financial vampires and biological problems as the only way for some to recapitalize Better for Farmers who want farming to be attractive for their families Better for Cities that have citizens with a lot of interests beyond their water bill alone Better for the future capacity to produce food and fiber near home, sustainably – • Now, I’ll try to show all that and you try to stay awake! Not just water transfers! • This presentation is about transfers, but… • It’s not just about water transfers… • “If it was just losing the water, why did we lose so many farms in the wet years?” – Tom Pointon… not alone in the question – Leroy Mauch, many others… • The argument: farmers and ranchers need to use all their assets, with water as key because of current value Housing Density Change 1960 - 2050 (Tom Dickinson, C.U. Center for American West, and IBS Social Sciences Data Analysis Center) URBAN DEMAND FOR WATER KEEPS GROWING Why will agricultural water continue to be transferred? Who cares? • Here are some graphics showing parts of the problem, with urbanization, the SWSI estimate of potential irrigation losses (and why they’re very optimistic), and the land use changes affecting farm land. • Also, just a little on the adverse consequences in ag-dependent areas of origin Colorado Front Range (Center of the American West, on the internet with two other cases) 2030 M&I Water Demands and Gaps (Colorado Statewide Water Supply Initiative slide -- except for comments) Yampa/White/Green North Platte South Platte 10,300 AF Colorado Gap 107,800 AF 107,600 AF Gunnison Dolores/ San Juan/ San Miguel Identified Projects 404,300 AF Rio Grande Beware! Self- reported “identified projects”! – --- If the big ones fail, the “gap” soars… Arkansas Ag water is still relatively cheap This is for the sale of water rights, not one use or a lease From Denver Water Integrated Resource Plan, and in Luecke et al., 2003, What the Current Drought Means for Colorado… (on-line from Trout Unlimited, Colorado) $700 to Pueblo Chieftain Survey November 2005 - Retail Water Rates $1400 “retail” prices not counting tap fees, etc… Even with ethanol… WATER WILL MOVE Front Range City Golden Highlands Ranch Aurora Thornton Broomfield Westminster Northglenn Arvada Colorado Springs Pueblo Boulder Lafayette Pueblo West Englewood Denver Louisville Pueblo 150,000 g $645 $632 $590 $511 $498 $490 $475 $472 $471 $452 $432 $409 $374 $354 $352 $345 $327 Without block increase, charge for 325,000 g -- one acre-foot $1,397 $1,369 $1,278 This is likely $1,107 $1,079 not correct $1,062 - with $1,029 $1,023 inclining $1,020 block rates, $1,020 prices may be $936 higher in $886 most if not all $810 $767 cities. $763 $747 $708 Based on annual use of 150,000 gallons and 1-inch meter rates. Figures are rounded. 12 to 23% of what’s left – or more ? ! Doesn’t address quality of land lost SWSI slide BIG questions about this: water to acres varies, and the basis of the demand estimate is uncertain… And, no climate effects! Prime Farmland in Colorado Only 2.5% of Colorado’s land WAS prime (all of it irrigated)... …but the precise location of this land is unknown. There is evidence that people prefer good land and biologically valuable land to dull and dry spots, for development (except some view-points) Colorado Dept of Agriculture, National Agricultural Statistics Service (USDA), Natural Resources Conservation Service (USDA) Magnitude of Ag Land Conversion (1987-97) – 12 years ago! 2.5% of Colorado’s land was converted from ag to other uses over a 10-year period (1.4 million acres) But, rate of conversion is widely believed to be much faster now! IT’S TEN YEARS LATER, NOW… Colorado Dept of Agriculture, National Agricultural Statistics Service(USDA), Natural Resources Conservation Service(USDA) March 2006 http://www.environmentcolor ado.org/envco.asp?id2=232 75 Conversion of Best Farm Land – Near Loveland, in Weld County, CO I25 Boyd Lake One square mile Slide by Tom Dickinson, IBS and Geography, Source: National Agriculture Imagery Program (NAIP),USDA-FSA Aerial Photography Field Office What is now happening to the farmdependent areas? Where the land is NOT CONVERTED to urban use? Population Growth is NOT evenly distributed Percent of total population in poverty, 2005 WEALTH and CAPACITY are not evenly distributed, either… d Source: USDA ERS (downloaded 17 May 08) http://www.ers.usda.gov/Data/PovertyRates/PovListpct.asp?ST=CO&view=Percent State Programs? • Budget? What budget? How much can we keep of what there was in rural assistance and services? • Resource Planning? Prior Appropriation. • Land Use Planning? Only in a few cities? • Economic Development? See Arkansas Basin Roundtable Water Transfers Guidelines Committee Report: visit from the official working hard to bring big employers to the Front Range. What’s the point? • More urban growth – more water demand • Losses of prime farmland have already been severe. Losses continue and are expected to continue. Good land is being converted from farming to other uses. • And, there are adverse consequences in areas of origin, especially where the land is not converted to urbanization. • State response seems minimal. • Now, on to climate change and why you should care about this. Next, some information on climate change – this will also affect the value of land and water rights and agricultural capacity – Changes in extreme events are very serious for agriculture history, not just models • “Changes in extremes are already having impacts on socioeconomic and natural systems.” • “In the future…heat waves and heavy downpours are very likely to increase in frequency and intensity. Substantial areas of North America… more frequent droughts of greater severity…hurricane wind speeds, rainfall intensity, storm surge levels are likely to increase…. strongest cold season storms… likely… more frequent...” OBSERVED CHANGES • • • • General rise in observed temperature Number of heat waves increasing Fewer unusually cold days Decrease in frost days, longer frost-free season • SUMMARY: “shift towards a warmer climate… increase in extreme high temperatures… reduction in extreme low…” • Arbor Day Foundation!!! Extreme events will occur more often Worked for the bark beetles… what else is out there? Heat moves water. Water moves heat. More heat, more move. Intensity of Precipitation, Erosion • Soil and Water Conservation Society, 2003: Increased precipitation intensity could undo all the progress in reducing soil erosion since creation of SCS! • CCSP SAP 3.3 (2008,p. 4) : “Extreme precipitation episodes (heavy downpours) have become more frequent… and now account for a larger percentage of total… intense precipitation… (the heaviest 1%...) in the continental U.S. increased by 20% over the past century while total precipitation increased by 7%...” Other Erosion/Runoff Issues • Increased ET from warmer temperatures – changes in vegetation • Pressures on farming for input-intensive practices – ethanol from corn, no-till with high levels of herbicides before, during and after cropping • Seasonality changes – longer growing season – more weeds? • Crop switching, labor costs… • Pressure on CRP lands – drought use! Timing and cumulative effect • “More frequent extreme events occurring over a shorter period reduce the time available for recovery and adaptation. In addition, extreme events often occur in clusters. The cumulative effect of compound or back-to-back extremes can have far larger impacts than the same events spread out over a longer period…” • Note: This applies to financial as well as ecological well-being Categories of Impacts on Water – Colorado (modified from Udall, 2008, Citizens’ Guide to Climate Change in CO) • WATER QUALITY • ET demands – ag and urban water use • Water storage and reservoirs • Water rights and allocation systems • Energy demand increases • Environmental qualities – habitats in disturbance • Ecological interaction pollinators, pests, etc • Fisheries/aquatic ecosystems • Recreation uses • SOIL EROSION/ RUNOFF What’s the point? • Soil erosion may be greatly increased by increases in intense rainfall events • This will affect agricultural capacity • And, it will interact with other changes in water quantity and water quality, in complicated ways. • Now, more on climate change and what it means. CHANGES IN PRECIPITATION OVER THE LAST CENTURY Major Predictions – Climate Change Effects on Western Water • • • • • • • Temperatures up – winter, nights Longer between freeze dates Higher Evapotranspiration Snow sublimation increases Timing of snow melt earlier Volume of available supply changes Biological and vegetation changes – – predation, pollination, migration (e.g Beetle!) – succession, competition, invasive species Climate Change Vs Western Irrigation • USGCRP Sectoral Assessments (Water, Ag.): – Small changes with big water consequences in West, but nationally, moderate effects, no “crisis” (Gleick 2000, Reilly 2001) (1950s Problem?) • USGCRP: Central Great Plains (Ojima et al 2002) – With less water, irrigation hurt, with more water, irrigation loses to dryland • USGCRP: Great Basin/Rocky Mtns. (Wagner et al. 2003) – Ag declines in all scenarios • Recent Integrated Assessments (2004, 2005): – Current management in trouble – Ag. Loses water, all scenarios, even “best case” (references, interpretive memo available) -- changes in comparative advantage of irrigation versus dryland • IPCC Fourth Assessment, 2007 – <www.ipcc.ch> • US Climate Change Science Program, see CCSP website” <www.climatescience.gov> • Climate Change in Colorado <www.cwcb.state.co.us> and Citizens’ Guide < http://www.cfwe.org/CitGuides/CitGuides.asp> This report is for hunters and fishers, but it is worth a look for birders and other outdoor people. See also: National Research Council, 2008: Ecological Impacts of Climate Change -- written for everyone. <www.nap.edu> Worth looking just for great photos of game and fish – written for all What’s the point? • Climate trends have not been helpful for some parts of the US, and have been helpful for some other parts. • Climate change will also have regional differences. Colorado is going to be warmer, but we don’t know yet if all or parts will be wetter or drier. • But the prospects for keeping water in irrigation are not so good, either way. • Back to land use changes again, and the problem of cumulative change and limits. Housing Density Change In Colorado Housing Density Change 1960 - 2050 (C.U. Center for American West, Tom Dickinson) 2000 - 2020 2020 PEOPLE MOVING INTO THE RIPARIAN CORRIDORS 2000 David M. Theobald. “Targeting Conservation Action through Assessment of Protection and Exurban Threat.” Conservation Biology, 17(6):1624-1637. Dec. 2003 Newcomers and Exurban Development • The “ranchette” phenomenon -- currently 4 times the area occupied by all the cities and towns in Colorado -- but forecast to double in 30-40 years (Theobald et al.) … >35 acres unregulated… – Not new data… more than 4 times, now… • Good neighbors? County and school services cost average of $1.65 for each $1 tax revenue – Coupal and Seidl, 2003 – CSU Dept Ag and Res Econ • Biologically, impacts may be disproportionate to area occupied -- (no planning allowed!) – Just hoping for easements to prevent problems? • THEY ARE NOT ALL FARMING! (except for tax rate) Environmental Limits? • Endangered Species Act – What’s next? – lack of information on private land • Minimalist Minimum Stream Flow Vs Climate Change? (Trout Unlimited studies: Dry Legacy 1 and 2) • Wetlands-related limits? Invasives? • Changes to land and water already extensive • Re-Redistribution of water? – (Water Resources Impact May 2008) • No cumulative impact studies – stay blind? • Again, how will limits work? Whose cost? Incentive to race to avoid? Whose future? The green area includes land unintentionally wetted by irrigation return flows and conveyance loss -- it may now be important habitat that we should pay to secure Data source: Landsat Enhanced Thematic Mapper, 2005. Map by Thomas W. Dickinson, Institute of Behavioral Science, University of Colorado at Boulder Oh, yeah… salinity… Figure from Gates et al., 2002, Monitoring and modeling flow and salt transport in a salinitythreatened valley. J. Irrig. And Drainage Eng., 128(2): 87-99; downloadable from journal site. Salinity above 1500 mg/l is bad for even stock watering; these levels also reduce crop yields. GROUNDS FOR FLEXIBILITY IN MOVING WATER FROM CURRENTLY IRRIGATED LANDS? What if we hit Cumulative Limits? • Water quality issues – – TMDLs? (total maximum daily loads) – Only very recently can Colorado Water Courts even consider water quality… Will there be a limit? How will transfers interact with NPDES? • Effects of erosion and changes in runoff from termination of irrigation? • HOW WILL A LIMIT WORK? WHO BEARS THE COSTS? • RACE TO BEAT THE LIMIT? Door slam? On whose future choices? Whose growth? Cumulative Costs or Losses • Agricultural Capacity – loss of irrigated acreage – loss of soil qualities, especially if not farmed – loss of farm families and labor – loss of agricultural sector linkages/infrastructure • Biological Capacity – loss of connectivity of habitats and chance to preserve it – loss of diversity of habitats and chance to preserve • Loss of Future Choices – especially cheap ones… What’s the point? • Many changes are affecting and will affect environmental values, including but not limited to climate change • We don’t know much about what is “out there” on private lands, and we don’t do much to look into cumulative changes • The impacts of hitting a limit are not evenly spread – deals made before the limit is recognized (or imposed…) so far have gotten away without costs, but later deals might bear all the costs – a race? • Now, back to that sustainability problem for agriculture… A little more on sustainability of current conventional agriculture… How can there be a problem? Looks great! THESE CHANGES ARE ALL POSITIVE! How can there be a problem? High growth where agriculture is not overwhelmed by urbanization and rural land use change and growth (or what, in Wyoming?) Again, “inputs” here is a combination of all factors of production – NOTE FL and GA are among Eastern states with big irrigation increases and increasing “induced drought” on top of hydrological drought Meanwhile, HIGH SOIL EROSION – Is this sustainable? • 90% of US cropland is losing soil faster than it can be restored; 75% of range needs help • ~ 1/3 of US topsoil was lost 30 years ago (Pimentel 1980) • HALF of Iowa’s topsoil is gone – and still losing average 30 t/ha/yr (soil formation rate 0.5 to 1 t/ha/yr) • 40% of Palouse topsoils were gone, 1995 • Costs to US, 2001: ~$37.6B/yr (but not with good ecosystems valuation or replacement of services costing) • $20B/yr for fertilizer replacement for lost nutrients (eroded soils take NPK away, as well as biological active fractions and potential) • And then there’s the incredible costs of pesticides, with 1000-fold increase in organophosphates (Pimentel 2005) Doesn’t look good… • On average, 1.5 kg of soil is lost in the production of 1 kg of corn in the U.S. cornbelt • Their average erosion figures for US: – 1982: 7.3 tons/acre 1987: 6.9 tons/acre – 1992: 5.5 tons/acre 1997: 5.0 tons/acre – We were making progress… before ethanol and drought… • SPREAD OF NO-TILL HAS DOUBTLESS HELPED, BUT HERBICIDE USE WAY UP– What now with input prices so high? • Gardiner and Miller (Soils in Our Environment, 10th Ed., 2004: pages 407,409) USDA Agricultural Research Service Program Report, 2000 •Soil erosion is still a major threat to sustained productivity of agricultural soils About 1.5 to 2.0 billion tons of soil in the United States are lost annually by soil erosion. •Soil erosion occurs about 17 times faster than soil formation •90 percent of all U.S. cropland is losing soil above the sustainable rate. INPUTS TO MAKE UP FOR LOSS OF GOOD LAND AND LOSS OF LAND QUALITY? U.S. Nitrogen Use 1,000 nutrient tons 12,044 Series1 2,738 1960-2006 We’re using an awful lot of this stuff (as water quality people know…) Today the U.S. imports over half of the nitrogen and 80 percent of the potash fertilizer used on its farms. The U.S. went from being the world’s largest exporter of nitrogen fertilizer in the 1980s to becoming the largest importer in the 1990s. Domestic production of nitrogen fertilizer declined during the 1990s as the price of domestic natural gas (the primary source of nitrogen) increased because of demand for natural gas in the U.S. expanding faster than production. USDA 2004 Who needs good soil as long as energy is cheap and natural gas is cheap and transportation is cheap and no one else needs to buy the stuff so it is cheap to buy abroad? (How long will that last?) New Fertilizer Price Information • Updated information from USDA Economic Research Service: – Feb 2009, “Factors Contributing to the Recent Increase in U.S. Fertilizer Prices, 2002-2008”, USDA ERS AR-33 (http://www.ers.usda.gov/Publications/AR33/) – Amber Waves (Magazine of USDA ERS) article: “Recent Volatility in U.S. Fertilizer Prices – Causes and Consequences”, March 2009, (http://www.ers.usda.gov/Amberwaves/) • If you haven’t looked, try the USDA website! Re-cap: Loss of Future Choices • Financial constraints on agricultural areas • Planning not a preference? Lack of capacity? Small towns left out? • Fragmentation of land – – “Ranchettes” proliferating – very fast – Lack of ability to control development (Will?) – County coffers drained by costs>revenues • NEW QUESTION: Are amenities and rural quality of life a luxury or necessity for future development? – Prisons and nursing homes don’t care… What’s the point? • It seems very unlikely that we can continue with conventional agriculture without steep increases in the costs of substitutes for lost soil quality or big changes in how we farm • Meanwhile, in Colorado and the West, the water is being moved and land lost, much forever • The value of good land and good soil may be affected by scarcity… eventually… soon? • But both water and land are being subjected to increasing stress from climate • THAT’S WHAT WE HAVE TO DEAL WITH • What can we do under existing rules/rights? Enough… too much… what to do? • Water transfers: three forms of transfer that seem to meet needs (hand-out has details and website where this is posted does too) – Rotational Crop Management – Interruptible Supply – Spot Market • Time to get to talking about transfers of more than just the water – • BUT, water might be the key to re-design and use of all the assets • Can we do this in the market??? Markets in Colorado Are Not Working Well • Little information on who owns what, or prices paid. Compare real estate or almost anything else... • Lack and/or cost of information probably favors the few buyers (and lawyers and engineers) over the many sellers • Asymmetry probably favors brokers even more! • Historic limitations on “beneficial” uses of water… – Biggest change: In-stream Flow Rights – recent innovation, unfinished project, many of these quite junior • Exclusion of those affected by “third party impacts” or externalities – limits on standing, timing of entry bad • Public interests not well identified or represented yet • Un-represented seek “entry” by political or regulatory means • Limits on kinds of contracts and arrangements – – short-term moves very limited – no long-term lease deals yet – “interruptible supply” very limited in Colorado • POOR MATCH of Costs and Benefits – physical, economic, temporal Inhibits INCENTIVES for better (Cf. IWRM!) IF WITHIN MARKETS: New forms of water transfer wanted ( details in handout) • Short term spot market -- “water bank” • Long-term “rotating crop management” -timing specified intermittent transfer to meet “base load” demand for municipalities (M&I sector), other high-value uses • Long-term interruptible supply arrangement -- transfer when condition is met, to meet foreseeable but timing-unspecified demand • [Along with temporary “bridge” deals (substitute water supply) and micro deals] Long-Term Rotational Crop Management • Very long-term is ideal -- stability for all – Planned locations of fallow/etc – Farm incomes and financing improved? • “Base-load” predictable water supplies • Only Up-front infrastructural costs (e.g., diversions, conveyance) – financed; no revegetation mess • “Pay-as-you-go” acquisition, not bonding, (save 50% at 3.25% interest for 30 years), better match of costs and benefits • ALL terms of deals negotiable - including end of term, indexing, risk management (Still some limits in new CRS 37-92-103 and -305(4)(a)(IV)) Long-Term Interruptible Supply • Also very long-term idea -- stability goals • NOT available in “3/10” years, 10 year limit deals in CRS 37-92-309 -- want much longer • Water moved on call, as specified, e.g. for... – Dry-year and drought recovery – Facility management – Wet-year opportunities (Aquifer Storage, etc) • Prices indexed to opportunity costs, costs of flexibility, and timing of “call” and situation • Pay-as-you-go instead of up-front and debt… • ALL terms should be negotiated! Stacking Deals for Management • Base-load (every year) from rotational fallowing and other transfers of some water • Intermittent needs from interruptible supply • Unforeseen needs from spot market • COMBINATION – (Cut to the chase: this is partnership, whatever you call it… Contracts are a means of risk distribution) • But, don’t these cost more? Don’t know… • Why should a city do this? (“Like, uh, what’s my motivation?”) Missing Cost Information on “Buy and Dry” NOW… • revegetation required of formerly irrigated land… to what? “Native” may not be on the menu anymore…. – costs and duration of efforts required? • treated as proprietary, so far • successful cases demonstrated in public science? • standards may change – increased difficulty • soil erosion hazards increasing – higher intensity of precipitation • weed and fire loads questions – new obligations? • changed soils within new climate questions Missing Cost Information on “Buy and Dry” NOW… • Costs of “pay-as-you-go” water acquisition should be lower than front-end purchases, where long-term debt is used (e.g., add 50% if 1-2 points for bond origination and 30 years at 3.25% interest) • Costs may be lower where dry-year and spot market needs can be met without new infrastructure (e.g. fill existing rather than make new storage in dry years, fill aquifers, etc.) • Coordination and cooperation might help! Why Would a City Change? • Because of Grassroots pressure from citizens with many interests – IF THEY FIND OUT IN TIME? Any city inquiries into what citizens want? Only low rates? • Because of full accounting of revegetation and financing costs? Does the water department deal with that stuff? • Public disclosure of “extra costs” involved • Because a city recognizes long-term interests in partnership with rural areas Whose urban interests count? • Urban constituents are ratepayers BUT ALSO tax-payers paying bonded debt • Supporters of open space, agricultural preservation, and rural areas • Consumers and Purchasers of food, amenity • Voters for conservation etc – See Trust for Public Land “Conservation Vote” – Even in No Plan, No Foresight Colorado: 110 elections, $3.8 Billion • Recreators and Users of rural places • Members of a lot of groups… mixed bag! • Any one ask them? Not sure… polls… Whose Urban Interests Count Now? • Simplicity, Reliability, “Invisibility”: Water System Management Values – Traditional is understood and predictable – New kinds of deals would require much more intensive collaboration – NOT SECRET! • Management Preference for Permanence (please see handout – principles page) – “We sell a tap forever” – Life of facilities and financing not a factor – Partnerships and long-term planning? Too new! – No incentive to match benefits and costs Why Would a County Care? • Because counties may decide to defend themselves from “ranchettes” drain on financial viability (Costs>>revenues) • Because agriculture may decide to seek common self-defense instead of being permanently paralyzed, and wants county viability and services for its purposes • Because rural towns want to survive and use regional cooperation for self-defense Two Constants and What Could Be Done? • A way to think about this mess… • Constant 1: Urban ability and will to pay -- for water AND ALSO for amenity, environment, open space, ag. preservation…. • Constant 2: Soil formation is very slow; climate is faster! • Suppose you owned all the pieces? What could you do to maximize the outcomes? – Answer tells what you want to maximize (pie flavor) – Answer tell how much you might get (pie size) – Problem: you don’t own it all. So, how to organize so as to get the biggest and best possible pie, for owners and others affected? • We use markets, mostly… Can they work better? What’s the point? • Business as usual is not working very well for most of the affected interests who are just left out of the picture, even within city and county governments • There are important questions about how much more partnerships and new forms of transfer would cost, compared to Buy-andDry. Perhaps they would even save $$. • We can’t tell in the secret competitive market approach. A few points on economics • Efficiency is definable on a distribution of resources; it is an adjective, not a noun. • Econ 101: Edgeworth-Bowley Box…(econ trivia…) “It’s all relative…” as far as what is a desirable use of resources • Econ 102: Clark, 1973: Economics of Extinction – Perfectly rational to kill ‘em all, cut ‘em all playing by these rules… • Econ 201: Positive discount rate: reduce the future from far ahead to present value: it is trivial; – Just doesn’t work for century or two out – Not much good even decades ahead if all else is seriously uncertain…Energy, Ag inputs, Markets • Econ 301: Evaluation is definable within a general equilibrium, but not transferable to a different equilibrium with reallocated resources and price structures… Norgaard & Howarth 1992, etc • Benefit-Cost Analysis is NOT adequate for the long term! • We can’t just “do the math”! What’s the point? • The long term is hard to think about, but if the people who built the ditches had not, where would be? • The math won’t give you answers about what matters to you in the long term • But, we can only get there through the short term – and things might be more subject to change now… IF cities take citizens seriously, counties take their quality of life seriously, and agriculture takes the future seriously -- what should we consider? Making Markets Work for YOU • What you keep is not the result of the maximum yield – it is the result of the maximum difference between costs and revenues. What is the real farming goal? • Scarcity increases value: good farm land is getting more scarce, quickly – especially land that can grow without expensive imported high-energy inputs that run-off into other expensive consequences • How do you hang on to your best land through the next 10-15-20 screwy years? MAKING MARKETS WORK • Markets need good information about prices and supply and demand… AND COSTS!!! • Markets can’t reflect unknown interests – Lack of vision – what value exists and what is possible? – Lack of planning and public interest, non-market interests, future interests, state interests? CUMULATIVE IMPACTS!!! Bite the bullet…take this seriously! • Internalize “externalities”! Third-party interests – Get them to the table! – Coordinate interests – make better deals! – Pay for interests! (Not necessarily money…) – What can a local or state government put on the table? • Land use controls to help create and maintain value • Services distribution – where the infrastructure goes • CREATE VALUE with secure wanted conditions Re-design a ditch? Why? • WHAT’S THE BEST WAY TO MAINTAIN AGRICULTURAL VIABILITY AND PRODUCTIVE CAPACITY, AND MAXIMIZE THE LONG-TERM VALUES OF THIS SET OF ASSETS AND RESOURCES? • Match wanting to farm with best soils, best water delivery • Match access, smart growth, residential value, and design with most desirable places for those uses -• Patterns of farming and other land uses are important for all • Find overlaps of interest: recreation, scenery, conservation • MEET MARKETS! Organics and direct sales keep growing, and all those new people are potential customers (see references) • What can the city and the farmers do together to minimize losses and long-term burdens, and to create and capture value to support flexibility in farming, compatible land use and development to provide capital for the changes wanted, and to sustain the amenity, open space and other values? • How do we support thoughtful discussion of getting to goals, and using the group to support individuals, and increase value? Images of the Bessemer From the Colorado Decision Support System, 2003 data • A few images to suggest some of the kinds of information that might help re-design the Bessemer, for the long-term benefit of the City and the Farmers • Note: the crop information is from 2003 observations. Updates would be desirable; this is intended to support illustration and stimulation only. Is there much more corn, with the ethanol boom? Vegetables were scattered around – Are there more? Would there be more if there was more money? Here’s the grass/pasture in 2003 – why there? Any pattern other than history or accident? A lot of fields were not irrigated – was the water already gone? Or was this due to the Drought? A lot of parcels were fallow – Result of the drought? What has changed? The red fields here are the fallow AND also the not-irrigated in 2003 – that’s a large amount of land! Here’s one view of the irrigation in use in 2003… from CDSS What kinds of questions might be asked? • Suppose the City wanted to buy 1/3 of the water and the farmers wanted to make the most money from the other 2/3… How? • Suppose the City was willing to pay a lump upfront and then a stream of payments over many years; would that be financially better? • What would you do with the lump? Change to more vegetables? Invest in future flexibility? • What would you do with stream of income? Use it to finance more changes? Pay off debt? • What if the fallow lands and dry lands could be part of a rotation – would that help with a longterm no-till crop rotation? • WHAT DO YOU WANT IN 20 YEARS? for who? How could the farmers “design” anew? • What would a big developer do? Why not use all those tools – thinking of the whole package rather than single families facing hard choices? • The city and county and state could help with design of new management organizations – districts and risk management – to achieve many purposes, for long term benefit of all. • Value comes from certainty; knowing your farm can go on as a farm, and that you can plan for the long term is an amazing idea! • Real estate value comes from location and certainty – knowing that what you like about a place will not disappear next year… Open space; near rivers, creeks and ditches; out of heavy traffic but with good access; a pleasant neighborhood… near an elementary school… affordable retirement facilities near home… • Would you trade some fallowed dry land for development that would pay for improved facilities for all the farmers? • Would you create value by designing a network of trails and horsepaths and stables so that your kids can take care of the horses, that eat your hay, and make their owners happy that they live where they can have that? • What would you do? Time to start thinking seriously about the whole package! “No action” is probably not available; what’s the next choice? The missing link: landowners • To create and capture value, need to create certainty – what will happen in this place? • Commitments to each other: Can you do it? • Probably some form of transferable development rights: Everyone gets a piece of the pie, and the pie gets bigger because of certainty. • Development is careful, controlled, valuable. • LOTS of planning, lots of argument… not easy – BUT within the normal scope of city activities to support such processes. • The big money plans – can you? Where we start… way behind… • Prior Appropriation is Our Plan – “Private competitive market; disclosure optional ” • Policy Discussions and public research: 2003 on… – Statewide Water Supply Initiative – Basin Roundtables and Interbasin Compact Commission, 2006 on… looks nice, but… • “Breaking impasse, Denver utility, W. Slope cut deal…” (2007) (You talk while we make deals) • “Water expansion builds worries for some…” $3 Billion on projects, racing… (keep talking, please…) • If you’re winning, you like the rules as they are. Ownership and Resource Management Organization • Forget defending the status quo – tried it • Fragmentation is victimization • no more unequal access to planning and management capacity, etc etc etc... • Municipal “permanence” in water supply matches to rural long-term management of long-term core resources – the rest is management … • “We get what we organize for” – • David Freeman First off: To Do List • Look at all you have: land, soils, water, environmental value, scenery, quiet, air quality… And WHAT YOU WANT! • Location: what are you near? What are you not near and want? Who else might care? What have you got to trade? • What resources can you call on? – Some state, federal agencies – Commercial resources (careful! – contingency?) – Real estate brokers, etc. (Maybe if.. then, deal?) – THE CITY THAT WANTS YOUR WATER!!!! • COMMIT TO THINK AND PLAN FIRST • COMMIT TO A FIRST OPTION FOR THE LAND ENTERPRISE YOU WILL OWN, to get around the Jacobucci problem – you need organization. Help in re-design • Money – from long-term water deals – imagine a stream of income for a very long time!!! Time to plan, ability to invest carefully and flexibly, to change as needed when input and output markets change. • Support for environmental values… • Old irrigation water could be the key to new irrigation and new income security • Private firms plan, design, and work with clients in all phases of projects • Buying City planning staff could be assigned to help with this – from contracting to the end • Local governments could start thinking long-term if there were prospects for a future • Hang together or be hanged individually – use community! Or, you could blow it off… A drainage ditch near Ordway, CO, after the wind erosion after the fire after the wet spring and winter after an average year after the multi-year drought after years of water erosion on the formerly irrigated lands after farming from 1860s -70s until the 1960s… When the water was sold and there was no idea of revegetation… Pueblo Chieftain Photo, Chris Mclean, 02 May 08 Thanks for your attention! Denver Post, 18 May 06, Brian Rutherford