Local farmers are fighting against a plan to sharply reduce their special water rate discount, contending it could wipe out much of the county’s already-shrinking agriculture industry.
The cash-strapped County Water Authority says it must roll back the longtime rate discount it now gives to roughly 1,000 local farmers because of dropping demand and changes to the authority’s business model.
Farmers say the rate hike proposal is shortsighted because it would accelerate the demise of many farms, stripping the water authority of existing customers at a time when it needs more customers — not less.
Losing hundreds of local farms would also hurt ordinary San Diegans, the farmers say, by replacing local fruits and vegetables with imported produce that would be more expensive and less fresh.
“To jeopardize what we have here — that serves not only the local community but the rest of the state and the county — would be very shortsighted,” said Dana Groot, president of the county Farm Bureau board. “We are losing agricultural acreage every year and water rates play a significant role in that.”
The discounted rate, which has existed since at least 2008 and was made permanent by the water authority’s board in 2020, is called the permanent special agricultural water rate, or PSAWR — pronounced “pee-zar.”
While the discount varies from local water agency to water agency, it is typically in the neighborhood of 25%.
Local strawberry farmer Neil Ngata told the water authority board last week that the discount rate is keeping many farms in business.
“The PSAWR is one of the only things helping us stay alive,” he said. “I cannot see that the costs should be pushed on to farmers who are barely making it.”
Farmers are facing higher costs for labor, supplies, equipment, transportation and fuel.
The proposed hike to the PSAWR, which could amount to a cumulative rate increase as large as 50% in coming years, comes with the water authority in a precarious financial position.
The authority has been imposing consistent double-digit rate increases on local water agencies in recent years primarily because of declining demand.
The key problem is that the authority is contractually obligated to buy more water than its member agencies typically need, forcing it to raise rates to cover its built-in costs for infrastructure, storage and operations.
More broadly, the authority borrowed money to build and maintain a significantly larger water storage and delivery system than is now needed.
Shrinking the PSAWR discount could make a small dent in the authority’s problems.
Dan Denham, the authority’s general manager, stressed last week that no firm decisions have been made on how much to roll back the PSAWR. He plans to unveil a proposal this fall for multi-year rate increases that would take effect in January 2027.
But the water authority board will be asked to vote next month on the preliminary step of starting to charge PSAWR customers for water storage, a service they haven’t been paying for.
Because lower demand means less of the water used by farmers comes from the Metropolitan Water District and more of it comes from the water authority’s broader supply, officials say it makes sense for PSAWR customers to pay for storage.
Critics say hiking the PSAWR is shortsighted because it threatens to kill off a customer class the water authority can’t afford to lose.
“We know the water board needs to make money and it’s hard to justify the PSAWR rate,” said Harold Stewart, who grows avocados and flowers. “But once the farmers are gone, you’re not going to have those water sales at all — and they’re not going to come back.”
Denham says a key solution to the water authority’s problems is finding customers in other states and regions to buy some of the authority’s oversupply of water. It would be counterproductive to lose agricultural customers when the authority is looking to broaden its customer base.
Lindsay Leahy, who represents Oceanside on the water authority board, requested last week an analysis of how much overall rates would need to rise if all water demand through the PSAWR program were to go away.
Pierce Rossum, the authority’s rate and debt manager, said the upward pressure on rates would be similar to when Rainbow and Fallbrook left the water authority in 2023. When customers go away, rates must go up because remaining customers must cover the built-in costs, he said.
San Diego has just over 4,000 farms, with 94% of them family owned, according to the county’s 2023 crop report. The total agricultural output was $1.66 billion in 2023, the report said.
Gary Arant, who represents Valley Center on the water authority board, said agricultural demand for water has dropped sharply over the last two decades.
He said demand was roughly 110,000 acre-feet to 120,000 acre-feet in the late 1990s and early 2000s, but is now about 13,000 acre-feet.
Teresa Acosta, who represents Carlsbad on the water authority board, said she doesn’t want to see those numbers keep going down.
“I’m happy to revise our cost methodology, but I don’t want to put people out of business,” Acosta said. “I think we need to find a happy solution somewhere in the middle.”
Rossum stressed that the PSAWR is not a subsidy, where one class of customers pays more so that another class can pay less, because that is illegal under state law.
He explained that farmers pay less in exchange for agreeing that their water supply will get cut off before others if there is a severe shortage.
“It is not a subsidy or a discount, it is simply a reflection of a lower level of service,” Rossum said.
Avocado grower Patte Hughes is lobbying against changes to the PSAWR.
“The financial challenges to continue growing food become more daunting every year,” she said. “A little here, a little there, adds up to a lot.”
