‘A win-win’: In 180, water authority keeps discounted water rate for struggling San Diego County farmers

A feared hike in water costs for local farmers won’t be as bad as first expected following a reversal from the San Diego County Water Authority.

Water officials have bailed on earlier plans to sharply reduce a special water-rate discount enjoyed by many San Diego-area farmers — a discount the agricultural sector sees as a key policy keeping their struggling industry afloat.

In May, the authority had warned it might have to roll back the special discount because of falling demand for its water and other financial challenges.

But on Thursday, the authority’s board unanimously backed a plan to spend millions in property tax revenue each year to keep farmers’ water costs down.

Lisa Marie Harris, the authority’s finance director, called the new framework a “win-win.”

With an agricultural sector contributing $1.7 billion each year to the region’s economy, Harris called the authority’s continued support for farmers “critical.”

“We want to continue to support that, and we also want to provide customers a lower water rate,” Harris said.

About 1,000 local farmers enjoy the permanent special agricultural water rate, or PSAWR, which has existed since 2008.

But years of declining water demand and improving conservation efforts had not only driven up water costs across the region but also made keeping the discount in place untenable for the authority’s business model.

High water costs in the region are driven in large part by the authority’s past decisions to borrow money to build a large water delivery and storage system based on population growth estimates that didn’t materialize.

Paying off that debt gets passed on to water customers, and when less water is being used, rates have to rise to cover the authority’s fixed costs.

Jimmy Ukegawa, president of the San Diego County Farm Bureau, stressed to water directors Thursday that high water costs aren’t the only thing squeezing local farmers.

Regulation, high labor and insurance costs and competition with cheap imports pose considerable challenges for farming in the region, Ukegawa said.

“Farming has become very difficult in this county,” he said. “Being a generational farmer, we all look to pass our businesses on to the next generation. None of us wants to be that generation that got to shut down the family farm.”

The discount is not a subsidy for local farmers.

In exchange for a lower rate, farmers receive a lower level of service than what a household or other businesses do. That includes the water authority having the power to shut off water to farmers during a shortage or other emergency.

To keep the special discount going, water officials drafted three options for the future of the program.

One option, opposed by farmers, would see the discount lowered from about $800 per acre-foot of water to $500.

Another option, deemed unrealistic by the authority, called for farmers to receive full service. Under that option, the authority would offset the higher cost of full service by spending anywhere from $5 million to $20 million in property tax revenue.

With the support of farmers, water officials pushed for an alternative that keeps the discount similar to where it is today.

To achieve that, the special discount would technically be cut by hundreds of dollars. But the actual cost paid by farmers would be offset by about $5 million in supplemental spending from the authority’s property tax revenue.

The formal discount rate and the authority’s property tax appropriation for it will be determined during the authority’s rate-setting process next year.

But under the new model, early estimates show the price per acre-foot of water farmers pay would rise from about $2,000 this year to about $2,800 by 2029.

Frank Hilliker, vice chair of the authority’s board, called the arrangement “a huge help” for local growers of avocados and citrus.

“As farmers, we’re all enduring super huge cost increases everywhere we look,” Hilliker said. “Anytime we can get a little break, it’s nice.”