Are Santa Clara Valley farmers paying too little for precious water?

SAN JOSE — The water that irrigates Santa Clara Valley’s last farms comes dirt cheap for growers who pump it out of the ground.

They pay just a fraction — 6 percent — of the amount residents and businesses in the valley must pony up for their well water. The rest of the cost for farmers’ water is subsidized, mostly from revenue the Santa Clara Valley Water District receives through property taxes.

The water subsidies have been around for decades, justified as a way to help out farmers eking out a living and prevent more agricultural land from disappearing into pavement and buildings.

But now, the Santa Clara Valley Water District is debating whether and when to start charging farmers more for the cost it incurs in replenishing the precious groundwater. The district needs to finance major improvements to its water delivery operation, and unless farmers pay a higher share, the annual agricultural subsidy — called an “open space credit” — is projected to swell from $8.1 million to $22 million in 10 years.

Farmers are pushing back, however, saying even modest increases to their groundwater costs could drive them out of business because they already pay high electricity bills to pump up the water.

“They say they want open space, and agriculture … as opposed to having it all paved over with development, but they want to keep raising all these costs that make it hard to survive,” said Paul Mirassou, a farmer at B&T Farms in Gilroy and president of the Santa Clara Valley Farm Bureau.

It’s the accumulation of many costs that are hurting farmers, added Erin Gil, a past president of the Farm Bureau and second-generation farmer in Coyote Valley. He said it’s hard for farmers to keep up with regulations and rising expenses because they have little control over how much crops will sell for in the marketplace.

In a region that has seen its nickname changed from the Valley of Heart’s Delight to Silicon Valley, the loss of farmland isn’t a new trend. Over the past three decades, Santa Clara County has lost 21,171 acres of farmland and ranges to development, according to a county report. Meanwhile, U.S. Agricultural Census figures show that the number of farms has fallen from 1,312 in 1987 to 890 in 2017.

And Santa Clara isn’t alone. In Contra Costa County, there were only 459 farms left in 2017, down from 602 only five years earlier, the Agricultural Census shows. In Alameda County, on the other hand, the agricultural landscape changed only slightly during the same five-year period, as the number of farms dropped from 452 in 2012 to 446 in 2017.

At its meeting Tuesday, the Santa Clara Valley Water District board is scheduled to vote on a list of proposed groundwater production rates for next year. Included would be an increase in the charge to farmers by  $5.21 per acre-foot, for a total of $32.23 per acre-foot.

But a majority of the current water board already has indicated it’s leaning toward delaying any rate increases for two years.

Board director John Varela, who represents most of southern Santa Clara County, said farmers shouldn’t be hit with any rate increase. “I believe the cost we’re asking ourselves to incur to keep these businesses viable is minimal,” he said.

Board director Tony Estremera indicated he’s willing to wait two years before imposing a rate increase, but not any longer.

“After these two years, if we don’t have any other funding, I can’t see that we are going to tell other areas … that we can’t provide flood control safety because we have the open space credit,” he said. “I don’t expect to vote for continuing the open space credit if we don’t have funding to cover it.”

Others argue the subsidy raises equity issues about whether the water district should be spending millions to benefit a special interest in one part of the county.

“Nine years ago I was the lone voice … (but) the board has finally come to the realization this is unsustainable,” board director Linda LeZotte said. “It’s also a false argument that a slight increase in water charges to the farming community is going to result in the fallowing of land and the paving over of farms.”

The groundwater production charge pays for the district’s cost to pump water back into the ground. In areas where groundwater is over-pumped, soil collapses, causing the aquifers to sink so far wells dry up because they can’t reach them.

About 41 percent of groundwater is replenished from rainfall and runoff, while the rest is pumped back into the ground from reservoirs or water delivered by the water district.

Costs are expected to grow in large part because of major infrastructure projects and associated debt, such as the $513 million seismic retrofitting of the Anderson Dam and a $20.8 million expansion of pipelines to transport recycled water.

The district is also looking to free up money to pay for flood control efforts.

Farmers used to pay 25 percent of what residential and industrial users pay for groundwater until 1991 when the board lowered their share to 10 percent to help them through the drought.

In recent years, it continued to set the rates even lower, down to the current 6 percent of the regular rate, in an effort to preserve agricultural land.

The effort to save farmland is multipronged.

The Santa Clara County Board of Supervisors recently approved $20 million in seed funding for a program to buy development rights from farms at risk of being paved over and developed into housing or commercial uses.

Nursery crops such as flowers make up the largest crop in Santa Clara County, worth $81.5 million, according to a 2017 crop report, followed by mushrooms at $79 million and bell peppers at $19 million.

Gil, the Farm Bureau’s past president, pointed to the recent closure of Uesugi Farms, one of the valley’s largest family-owned growers, as an example of what’s been happening for years.

“(They closed) because of the costs of … regulation, labor and the pressures of urbanization, and they were one of the farms that was growing in California and Mexico,” Gil said. “It shows you the volatility and fragility of agriculture in Santa Clara.”

There are strong financial incentives for owners to sell their property for development, Gil said, and once developed you can’t get farmland back.

“So if we want to keep having a full plate or full farmers market, and have choices, we have to have resources such as water to be able to produce those things,” he said.

Katja Irvin of the Loma Prieta chapter of the Sierra Club says while the group generally supports efforts to preserve farmland, the increase suggested by water district staff is modest and could encourage further water conservation by farmers.

“By raising rates, it’s a signal they should conserve water and keep their water bills the same,” Irvin said. “We do think that’s feasible.”

Contact Thy Vo at 714-867-8381 or tvo@bayareanewsgroup.com.