More California Water Prescriptions

Water, Water, Everywhere - Laffer and Winegarden, Pacific Research Institute (2012)

• Higher priced water really would discourage waste and entice additional supplies such as desalinization. Price changes keeping demand and supply in balance are the essence of markets. California’s problem is one of government interference not inherent water shortages. State and local governments have prohibited markets from doing what they do well—allocating scarce goods. 
• Charge all farmers, government agencies, and other water users the same price for water, no exceptions.
• The price of water should be raised such that the average price charged is initially set at five times the current average price.
• Grant all existing water users a credit on 70 percent of the amount of water they used last year. Above that point they would pay the new market price for all water in excess of 70 percent of last year’s usage. If usage were less than 70 percent of last year’s usage, then a credit would be given for their conservation at the new market price.
• Each year the credit will be reduced by 10 percentage points until it disappears in seven years.
•  Government should under no circumstances deprive the natural environment of its water set-asides. Our forests, bays, rivers, and marshes already share the burden of drought with us and can ill-afford any additional deprivation by reducing water set-asides.

Updated policy prescription - Zeitland, Aguanomics (2014)

• Price retail water service so fixed revenues cover fixed costs (e.g., pipes and plants) and variable revenues cover variable costs (e.g., making desalinated water or pumping water). Add an additional surcharge when water is scarce (i.e., to reflect the of of using water now that you may want later). That surcharge can be rebated to customers (by meter, not according to use) if the utility has no deficits.
• Use markets to allocate irrigation water among farmers who cannot take more than sustainable volumes from surface or ground water

In 2009, Zeitland quoted UPI reporter Lloyd Carter:

There are half a million acres of selenium-tainted salty land in the western San Joaquin Valley which require drainage in order to stay in production. Those lands have been without an economical, safe disposal method for vast volumes of drainage water for half a century. Some toxic drainage water, tainted with toxic levels of selenium, continues to be funneled untreated into the Lower San Joaquin River and the Bay/Delta estuary.

Those half million acres of alkali, saltly marginal farmlands use an average of 1.5 million acre-feet of water a year, which would meet the domestic needs of 15 million more Californians. Continued irrigation of those poisoned lands by massive amounts of water pumped from the Delta is also contributing to the ecological decline of the Delta. Until the drainage problem is resolved, or those poisoned lands taken out of production, the major problems of water in California will remain unresolved.

Norcal Wants Its Water Back - Zeitland, Aguanomics (2008)

Self-Evident Water Truths - Rep. McClintock (2013)

Self-Evident Water Delusions - Zeitland, Aguanomics (2013)

Reforming Water Markets - Edwards & Hill, Cato (2012)

Aquanomics - Gardner & Simmons, Independent Institute (2012)

• establishing secure and transferable private water rights and extending these rights to uses that traditionally have not been allowed, including altering in-stream flows and ecosystem operations

My Candidate Ballot Statement For Purissima Election

You own a share of Purissima's two main assets: $20M of pipes/tanks, and the right to buy 800K units/year of water from SFPUC. For each household, that's $10K and 780 gallons/day. I defend those property rights, including the right to use the water you buy as you wish (without harming the rest of us). I defend close local control of the district while seeking savings via alternative arrangements for water supply and district operations.

SFPUC is raising water costs to pay for overdue seismic upgrades. These upgrades mean we can cancel an expensive project to make Quarry Lake an emergency water source. That insurance is not worth the price. I also voted against subsidies for candidate statements and a museum water exhibit.

A Sacramento law was going to make the Hills adopt 33 pages of default irrigation rules. I proposed an alternative that added a simple water budget to the town's permitting process, leaving property owners free to decide how to meet their budget. The town adopted my alternative.

For more (including Purissima budgets and audits), see holtz.org/water.

Purissima Candidate Answers For Town Crier

How long have you lived in Los Altos Hills?  6 years

What is your background experience in local government and community leadership?

In addition to my four years on the Purissima Hills board, I served on the town council's Water Conservation Advisory Committee.  I've also been a classroom volunteer in a local public elementary school.  I've been active in the county Libertarian Party, and have helped the Silicon Valley Taxpayers Association draft ballot arguments against tax increases.

How does your professional experience compliment your work on the Purissima Hills Water District board?

In my software engineering career in Silicon Valley, I've experienced first-hand the importance of customer service and controlling expenses. Analytical and problem-solving skills have also proved useful in my board service. However, the main qualification for a candidate is having a policy compass of governance principles, along with the diligence to apply those principles.

To a new resident of Los Altos Hills or someone from outside of our area, how would you describe what the Purissima Hills Water District does?

The District provides potable water and firefighting levels of water pressure to every address within its boundaries.

Why are you running for re-election to the Purissima Hills Water district?

To help ensure that the District runs efficiently and respects the property rights of the ratepayer-owners of the district.

There are four candidates for three open seats.  Why should voters choose you?

Voters should choose me if they agree with my principles and priorities.   My principles are rooted in property rights.  You as a ratepayer own a share of Purissima's two main assets: $20M of pipes/tanks, and the right to buy 1.62M gallons/day of water from SFPUC (the San Francisco Public Utilities Commission). For each household, that's $10K and 780 gallons/day. I defend those property rights, including the right to use the water you buy as you wish (as long as it doesn't harm the rest of us). Ideally, I would like you to be able to sell the water you don't use to community members who want to buy more than their share, so that you could profit from your conservation efforts.

My priorities are to maintain reliable and cost-effective water supply while exploring alternative arrangements for  water sourcing and district operations.

What are the greatest challenges associated with water supply locally?

Purissima's entire supply currently comes from SFPUC's Hetch Hetchy system. We've spent years pursuing other potential sources: well water, Quarry Lake water, recycled water from Palo Alto to our North, and county water from Cal Water to our South. None of these options has yet proved workable, though we are still talking to Cal Water.

In recent years Purissima was using nearly 125% of its SFPUC allocation, even as the overall Hetch Hetchy system  was approaching its capacity limits.  However, as SFPUC has raised wholesale rates to pay for long-deferred seismic upgrades, the rising prices have caused system demand to fall sharply, and there is no longer any imminent prospect of Purissima being limited to just its allocation. Nevertheless, we've tried to buy additional allocation from other agencies that are SFPUC customers, but none is for sale at a reasonable price.

We also consider conservation to be a valid water "source", and so we continue our conservation programs and tiered pricing.  We've successfully cut our usage to 105% of SFPUC allocation.

Can you highlight your accomplishments on the PHWD Board?

A Sacramento law was going to make the Hills adopt 33 pages of default irrigation rules. I proposed an alternative that added a simple water budget to the town's permitting process, leaving property owners free to decide how to meet their budget. The town adopted my alternative.

Another accomplishment has been to question an expensive project to make Quarry Lake an emergency water source. When you look hard at the range of scenarios in which that water could actually be useful, it seems that this insurance is just not worth the price.

Why do you deserve to be re-elected to the board?

Re-election should not be considered a reward for past performance.  Voters should vote for whomever they expect will best implement the voter's principles and priorities. Of course, past performance can be a useful predictor of those principles and priorities.

What goals would you like the PHWD board to set for the next four years?  Are there any long-term goals?

Our goals over the next four years should be to 1) continue our capital spending program to improve seismic reliability and operational efficiency, and 2) explore alternative arrangements for water supply and district operations.

For the long-term, I would like to see Purissima extract itself from the unsound CalPERS retirement system, or at least remain vigilant about keeping our retiree obligations explicit, cost-contained, and fully funded. I would also like Purissima ratepayer-owners to have explicit ownership of their shares of the system -- i.e. the infrastructure buy-in share and the right-to-buy share of Purissima's SFPUC allocation.  Ratepayers who buy less than their share could potentially turn a net profit on their water bill.  This would promote conservation, and would get the District out of the business of setting conservation prices.

Info About Purissima Hills

• 2011 LAFCO review of PHWD - 21pp overview of PHWD by the Santa Clara County agency that oversees county special districts
• 2012 rate hearing presentation - 42pp PDF of the slides we presented
• 2012 review by Los Altos Hills - 11pp PDF presentation Sep 20 by town's ad hoc review committee
• finances summary 1995-2011 - 60-row Excel spreadsheet summarizing PHWD finances 1995-2011
• 2010 financial audit report - 38pp PDF of balance sheets, etc.
• 2015 BAWSCA annual report -  154pp PDF about the peninsula agencies like PHWD that buy water from SFPUC

Argument Against SCVWD Parcel Tax

I drafted for the Silicon Valley Taxpayers Association the following ballot argument against Measure B. The Registrar of Voters instead chose an opposing ballot argument that didn't mention the county grand jury criticisms of SCVWD, and that instead based its opposition only on environmentalism.

The only part of the county not in one of five "flood control zones" is the remote area beyond Mount Hamilton. So you pay for "flood control", no matter how high or dry.

SCVWD says the tax has "helped reduce the flood threat" for only 16,000 parcels. Flood protection should be paid for by the 1% who buy flood-prone property, not by the 99% who don't. The tax is also to "ensure safe, reliable water supply". However, SCVWD already directly bills those who buy its water or pump from its aquifers. Improvements to water reliability or quality should be reflected in water price, in order to promote conservation and efficient use. Instead, SCVWD sells water to farmers at a 90% discount.

Grand jury reports have criticized SCVWD over high salaries and wasteful spending. In "Gold Street Education Center -- $1.38M For What?", a grand jury said "educational efforts should no longer be masqueraded as Environmental Enhancements". It noted the center was built adjacent to a trailer park owned a SCVWD director's family.

In "SCVWD Awash In Cash As County and Cities Drown In Red Ink", jurors said that in 2000 the district "polled the public on price points and found $39 would be what voters would accept. Program funding was NOT based on the cost of needed projects." SCVWD has already spent $27,000 in Measure B polling.

Last time, district employees were fined $24,000 for failing to report 75% of pro-tax contributions.

Last time, tax proponents told us that this parcel tax "will end in 15 years".

What are tax proponents telling us this time that will prove to be false in hindsight? What will the next grand jury report tell us about mismanagement at this district?

Conservation Feebates

[I just sent this message to my fellow members of 1) the Purissima Hills Water District Board and 2) the Los Altos Hills Water Conservation Committee.]

Below are excerpts from Conservation Feebates -- Journal of the American Water Works Association, Jan 1996, pp. 70-78, by Dr. Robert Collinge, Dept. of Economics, UT San Antonio. If you read nothing else, read the first and last paragraphs.

The tricky part is coming up with the allotments, but my understanding is that, at least in Purissima, there is already a formula or method for assigning allotments in a drought. I have no problem telling Purissima customers that if they don't like our prices/allotments, then they can truck in their own water. However, I have a big problem with telling LAH residents that if they don't use the water they buy in the way the town thinks is best, then they can expect a visit from the sheriff (or equivalent). As long as a customer pays our stated rates and isn't a nuisance to his neighbors or to district infrastructure, then I don't think it's any of my business what he does with the water he buys.

---

Municipal water rates are expected to satisfy three objectives: efficiency, revenue neutrality to the utility, and distributional equity. Unfortunately, adjusting rates to efficiently achieve use and conservation targets would ordinarily generate excessive revenues. Rather than mold one tool to the service of three masters, this article suggests combining three separate tools. The first sets the water rate to cover the utility's costs. The second assigns customers allotments to water use. The third either charges a fee for use that exceeds the customer's allotment or hands out rebates for consumption below that allotment. The fees pay for the rebates--thus the term "feebate." The outcome is: revenues to the utility just sufficient to cover costs; efficient water consumption by municipal water customers without conservation mandates; and revenue effects that can be spread fairly across various categories of customers.

The Libertarian Perspective On California Water

Private property rights in all water, combined with full-cost pricing in free water markets, is the best (and indeed only) way to match California's vast water supplies to its growing water demands. In practice, this means

• ending the subsidies that make water for agriculture often cost ten times less than urban water, in exchange for giving farmers secure and fully transferable property rights in whatever grandfathered allotments they reasonably deserve;
• defining secure and fully transferable private property rights not only in all surface water but also in all groundwater, so that (for example) environmental groups are given full ownership of water shares needed for ecosystem maintenance;
• making all urban and agricultural water customers bear the full cost of the water they get, while also receiving the full profits when they use less than they are alloted and thus release (i.e. sell) water back into the system;
• allowing efficient and transparent market transfers of water rights 1) among users within water distribution systems, 2) between water distribution systems, 3) between water basins, and 4) between states (such as those with shares of the Colorado River);
• resisting calls for expensive and ecologically suspect new water projects as long as the above policies are not yet implemented.
  

This libertarian prescription of free water markets has been well presented by free-market think tanks like the Pacific Research Institute and the Reason Foundation. The best analysis I've seen so far is Ending California's Water Crisis - A Market Solution to the Politics of Water by Erin Schiller and Elizabeth Fowler (Pacific Research Institute, 1999). Its themes are underscored by Why Water Markets Can Solve California's Water Crisis - Amy Kaleita (Pacific Research Institute, 2008). An earlier study is Water Marketing In California - Richard Wahl (Reason Foundation, 1993).

For up-to-the-minute analysis, I recommend the blog http://aguanomics.com. For example, just today Dr. Zetland posted his analysis of California's draft 2009 water plan. His prescription:

1. Amend state law to require that ALL water rights (ground, surface, riparian, etc.) be adjudicated.
   
2. Retire ALL water rights that have not been exercised for over 10 years.
   
3. Direct DWR and SWRCB to formulate "plain vanilla" procedures to facilitate short term (<1 yr) water transfers within water basins and between basins.
   
4. Require that water resellers raise rates if water consumption rises above long-term (50+ year reliability) average water supplies. Keep raising them until consumption is below sustainable yield.
   
5. Require that ALL directors of a water district or agency resign if a shortage is declared and require a one-term cooling-off term before they can seek reelection.
   
6. Allocate space on "oversubscribed" conveyance according to market mechanisms (i.e., auctions).

Here's his Water Plan: "Structure rates such that everyone gets a human right allocation of water, allow trading among those who have (ground/surface) water rights, and make sure that the price of water fluctuates with water scarcity." Exactly.