Zone 7 Water Agency directors have voted 5-2 to raise the price of agricultural water by 3%, a relatively minor hike that one vineyard owner said is affordable.
Ryan Callahan, a grower familiar with the economics of Livermore Valley vineyards, told a reporter that a 3% raise is “a palatable increase. All in all, we are appreciative of Zone 7. They listened with open ears, and took our request into account.”
The winegrowers requested that Zone 7 set a rate for 2020 that would not have a big impact on water cost for growers. They must compete for contracts with wineries throughout the state. The vineyards in the north, where there is usually more rainfall than in Livermore, have lower costs for water, as well as for labor.
The 3% increase is a boost from this year’s $167 per acre foot, to $173. An acre foot is the amount of water that covers one acre to a depth of one foot.
The 3% bump was in stark contrast to the 30% cost for 2020 recommended by staff, which referred to a study by consultant Raftelis about actual costs incurred by Zone 7. The staff recommendation said the 2021 amount should go 10% above the 2020 proposal, and then 5% higher in 2022, to catch up with treated water, which pays its own way. With compounding, the three-year increase amounts to a 50% total increase.
However, such a high increase could start a negative tide in South Livermore wine country that could wipe out the expanding viticulture there, including its wine tourism, Zone 7 board President Sandy Figuers said before the Oct. 16 meeting. Figuers said he based his conclusion on what growers stated at a Tri-Valley Conservancy (TVC) meeting he attended.
TVC Executive Director Laura Mercier said that 2,800 acres of vineyards have been planted in South Livermore now. The TVC Board would like to see the area expand to the 5,000 acres it had decades ago, before urban sprawl started chipping away at croplands.
Although growers got what they wanted in the short run, the question remains whether they are paying their own way, or are being subsidized by treated water customers.
As part of the board’s action on the water rate, members approved creating a liaison group between Zone 7 staff and the growers to explore what formula might be fair in determining future untreated water rates.
Directors Dick Quigley and Olivia Sanwong cast the no votes. Sanwong did not explain her vote, but Quigley told a reporter later that the board should have far more information about actual costs, so a fair formula can be created, and not have to make snap decisions from the dais setting annual rates.
There are facts that point to the need to have agricultural water users pick up more of the capital spending and overhead of the agency itself, such as staff salaries, according to the consultant’s rate-setting study.
Quigley cited as an example the fact that Zone 7 is paying for building up the sides of the South Bay Aqueduct (SBA) to expand its capacity for water deliveries to Zone 7. The SBA carries water via the State Water Project (SWP) from the Delta.
Shouldn’t ag users also pay for building up the walls of the SBA, asked Quigley. Zone 7 needs the facts to create a fee that would not have treated water customers paying to subsidize ag users, he said.
The same opinion was expressed from the audience by Al Exner, a one-time candidate for the Zone 7 board. Zone 7 residents pay a charge for fixed costs on their treated water bills. “We should also do that with untreated water,” Exner said.
Exner was referring to the part of the Zone 7 water bill that is a fixed charge regardless of how much, or how little, water a customer uses. That reduces the fluctuations in revenue from water sales from one year to the next, so fixed costs, such as keeping the staff in place, are met.
Linda Kelly, who is part of a group that focuses on Zone 7 activities, said that it would be a good idea to create a committee that would work on treated water rates.