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Water Bank Gets Onceover

When Governor Pete Wilson launched a water bank in 1991, many feared it would split farming communities, steal from local economies and tax rolls, and put land, field workers and suppliers out of work. But a 1993 Rand report commissioned by the state Department of Water Resources says new money going into the pockets of sellers pretty much offset any negative impacts of the bank.

The bank gave farmers, landlords and water agencies a chance to sell their water to cities and other thirsty folk via the Department of Water Resources. Sellers freed up the water either by not irrigating certain crops or by exchanging surface water for groundwater of sometimes lesser quality. Through the 1991 bank, the state bought an estimated 821,000 acre-feet of water for around $100 million.

The report finds that the bank reduced operating costs and crop sales substantially, which adversely affected farm suppliers. But the losses weren't large (2-3 percent) compared to the overall economy of the selling region and historic variations in the agricultural sector. Though crop revenue decreased, the ready cash enabled farmers to spend more on improvements and infrastructure. In general, sellers benefitted from the bank (see chart).

The report also details lessons learned for future water marketing ventures. Rand will examine the other side of the coin - impacts on buying communities - in a report slated for release this January.

Contact: Lloyd Dixon (310)393-0411

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