Farmers reap millions selling water to cities
Over the past 12 years, the country’s biggest urban water agency has paid farmers about $190 million not to grow crops on thousands of acres near the Colorado River in the Palo Verde Valley.
The water has gone to Los Angeles and other cities across Southern California, and in return, the farmers who’ve left some of their lands unplanted have been able to count on additional income.
Records released by the Metropolitan Water District of Southern California show the agency has paid millions of dollars to the biggest landowners in the area, including several board members of the Palo Verde Irrigation District who originally voted to approve the deal in 2004.
All seven current members of the Palo Verde Irrigation District’s Board of Trustees have farmland enrolled in the land-fallowing program and have been receiving payments for the land they leave dry each year.
The top recipient has been Fisher Ranch LLC, the family company of Bart Fisher, a board member and the valley’s second-largest landowner after Metropolitan. The records show his company has received $27.6 million in annual payments since 2005 for land left fallow.
Three other Palo Verde board members also have companies that are among the top 10 recipients. They include Grant Chaffin, whose farms have received $7 million, Daniel Robinson, whose company has been paid $5.7 million, and Jack Seiler, whose farms have received $5.3 million, according to the records.
Others whose businesses have been getting payments through the program include Palo Verde President Charles Van Dyke and board members Gary Bryce and Duane Berger.
The Desert Sun requested records from the Metropolitan Water District under the California Public Records Act to investigate how public money is spent in the land-fallowing program, which has been widely touted as an example of how California’s growing cities can work cooperatively with farmers to obtain more water supplies while also supporting agriculture.
The records show payments to a total of 172 individuals and companies, including multimillion-dollar sums to more than a dozen growers over the past 12 years.
The 35-year land-fallowing agreement between the two water districts is unique in California, and it’s also unusual in that Palo Verde board members voted to approve a deal they’ve personally benefited from.
This year, the irrigation district’s board members also voted to sue the Metropolitan Water District to challenge land deals that they argue amount to an illegal water grab — a lawsuit that is partly aimed at defending the existing land-fallowing agreement.
Fisher and other board members say they’ve had no conflicts of interest in these decisions, and their attorney has backed them up. They say the fact that they’ve benefited from the program is the nature of their agency’s structure as a landowner-voting district. All of the board members are landowners, and they’re elected by landowners under a voting system in which the largest property owners can cast the largest numbers of votes.
Fisher was a leading proponent of the agreement in the early 2000s. He said he supported it because he strongly believed it was in the best long-term interests of landowners and the community.
There was initially some resistance to the idea among farmers. But after four years of discussions within the community and negotiations between the water districts, the Palo Verde board voted in 2004 to approve the deal.
“The financial interests of the board were the same as the financial interests of our electorate,” Fisher said. He recalled that Palo Verde’s attorney advised the board ahead of the vote that they were fine to proceed with the decision.
“There’s no conflict at PVID at all, because of how we are constituted,” Fisher said. “Our electorate is whom we serve, and our electorate are landowners.”
“Our job is to look after the best interests of our landowners, and that’s what we do. That’s what we’ve always done since I’ve been serving on the board,” said Fisher, who has been on the board for 20 years.
When they negotiated the terms of the deal, Fisher said, the overarching purpose was helping California meet its water needs “without diminishing agriculture or our community in the process.”
Officials at both Palo Verde and Metropolitan say the land-fallowing program has been a success. The deal has provided Metropolitan a source of relatively inexpensive water to augment its supplies for 26 member cities and water districts, helping to keep the taps running for 19 million people across Southern California.
The vast majority of landowners who qualified for the program voluntarily signed up to enroll their farms.
“I have a vested interest and so do all the landowners in Palo Verde, especially those who participate in the program,” Fisher said.
Participating farmers received an initial signup bonus of $3,170 per acre. In Fisher’s case, the records show, his family entities received $6.3 million in initial signup payments.
Under the program, Metropolitan calls for a certain percentage of farmlands to be left dry each year, up to a maximum of 29 percent of the valley.
Farmers say the program pays well enough that it usually pencils out to rotate some fields out of production for the year.
Having those regular payments can function as a “safety net” for farming businesses during hard times and can provide a guarantee to help in getting credit from banks, Fisher said. That doesn’t mean it always pays more than farming, though. Looking back at some years, Fisher said, farmers would have earned more selling crops than having unplanted fields.
‘Nobody’s getting rich’
This year, more than 23,000 acres were left fallow, about 25 percent of the valley’s farmlands, which surround the town of Blythe near the California-Arizona border.
Fisher is a third-generation farmer whose family started farming in the Palo Verde Valley in 1917. He said the fact that Fisher Ranch has received more from Metropolitan than any other business simply reflects the fact that his family has been farming for a century and has gradually expanded its landholdings.
Fisher farms more than 11,000 acres, growing hay, wheat, broccoli, cantaloupes and honeydew melons.
He said while his business receives large sums based on that acreage, it takes a lot of money to run the operation. Fisher pointed out that he and other growers make huge investments in tractors — which can cost roughly $300,000 each — as well as other equipment. They take out big loans and have large payrolls.
His company has an average of 120 full-time employees, plus hundreds of other temporary field workers and packing workers during harvest time.
“Just to be in agriculture requires access to vast amounts of capital,” Fisher said. “Nobody’s getting rich on this program.”
His fellow board member Seiler agreed. He owns about 1,400 acres and also rents about 2,400 acres from other landowners.
Seiler said even when farmland is temporarily taken out of production, farmers still face substantial costs related to those lands. For instance, they still have to pay water fees and taxes to the irrigation district.
“It’s not that we’re not doing anything with the land and getting a big fat check. There are offsetting costs associated with this,” Seiler said. “That money has to go to offset the rest of the farming operation, just like we were growing crops on it.”
Five of the board members who approved the deal with the Metropolitan Water District in 2004 are still on the board, and they say the agreement has worked well.
But the farmers who lead the irrigation district grew suspicious and concerned in 2015 when they learned Metropolitan spent more than $250 million buying up more than 12,000 acres of farmland — and then started renting the land to growers under leases that impose water-saving limits and charge much higher rents if growers fail to cut back.
While considering whether to sue, Fisher said Palo Verde’s board members discussed the fact that under the agreement, Metropolitan has the ability to cancel the entire program.
“Some people would laugh and point at me because I’m the largest non-Metropolitan landowner in the valley,” Fisher said. “They were laughing I had the greatest liability in terms of potential loss of income, and that’s true.”
But he said the board members decided that not challenging Metropolitan would represent a much bigger risk for the valley’s landowners.
The board voted on July 18 to sue Metropolitan, and filed the lawsuit Aug. 4 in Riverside County Superior Court. The irrigation district is challenging Metropolitan’s most recent land purchase as well as six leases covering about 21,000 acres.
Palo Verde argues Metropolitan violated the state Constitution and its own regulations with the 2015 land purchase, and that an environmental review of the leases should be carried out.
One of the farmers’ concerns is that with Metropolitan now owning nearly a quarter of the valley, the district could try to meet its water targets by leaning more heavily on its own lands while paying growers less through the established program.
Fisher said his district doesn’t want Metropolitan to be able to transfer more water out of the valley, beyond what the fallowing program provides for, without negotiating that with the farmers or providing compensation.
“We’re representing the interests of all the landowners in our valley, and also to a larger extent, we’re representing our community’s interests,” Fisher said. “I think our actions are consistent with the best interests of the community and of our landowners. And in fact, I think we would face potential legal liability if we didn’t step up the way we have because of that fiduciary responsibility.”
Board member Bryce agreed with Fisher when asked whether he sees any potential conflicts in the agency’s decisions. “I feel we have a very high-integrity board looking out for everyone in the Palo Verde valley and trying to be a good neighbor as well!” Bryce said in an email.
People in Blythe say the issue of potential conflicts of interests hasn’t been raised publicly. But Peter Scheer, a First Amendment lawyer who advocates for open government, said he has concerns.
“The problem with the Palo Verde Irrigation District is its very structure. It is a public entity controlled by the same business interests that the entity regulates,” said Scheer, a board member of the First Amendment Coalition, a nonprofit based in San Rafael. “That means the people who run the district have a financial stake in nearly every action the District takes. The District is set up to serve not the public interest, but the private business interests of members. The two are not necessarily the same.”
The district’s most recent financial disclosure forms show that Van Dyke, the board’s president, lists the Metropolitan Water District among his business entities’ sources of income, while the six other board members did not mention Metropolitan.
California’s Fair Political Practices Commission, which enforces conflict of interest laws, said it can’t comment on any specific situation.
Commission spokesperson Phillip Ung said generally speaking, if an official's financial interest is "indistinguishable from the general public," then there might not be a conflict of interest. “Also, the effect of a vote on the identified interest must have no unique effect on the official's interest."
The decisions by the Palo Verde board may also fall under a situation described in a conflict-of-interest guide published by the California attorney general's office, which says if a public official’s financial interests are affected “in substantially the same manner as all members of the public generally, or a significant segment thereof, no conflict of interest exists.”
A district of landowners
The Palo Verde Valley has the oldest rights to Colorado River water in California. The irrigation district was formed in 1923. It’s one of a group of water districts that were created as special landowner-voting districts.
Metropolitan General Manager Jeffrey Kightlinger said the way Palo Verde is structured, with a voting system based on assessed land values, it’s not surprising that big landowners are represented on the board.
He said when the state Legislature created the districts in the early 1900s, this structure was seen as a way of having elected leaders with a direct stake in their community’s issues.
“They’re there to work on water issues for the valley, and that directly impacts them as landowners, and that’s the way the state law contemplated how they would operate — along with a number of other irrigation districts around the state,” Kightlinger said.
Metropolitan has paid about $190 million to the valley’s farmers since 2005, including both initial signup payments and annual payments, plus $35.8 million in related escrow costs for “water easements” on farmers’ properties. Those easements ensure that if a piece of land is sold, the next owner must continue participating under the agreement.
The district has also paid $3.9 million in administrative costs and $6 million for a community improvement fund, which has financed loans to local businesses and paid for projects including a new roof for a library.
Kightlinger said the $6 million fund was created to address worries that some residents raised during town hall meetings about the possibility of community interests taking a backseat to agricultural interests in the deal.
“I think that program has worked pretty well,” Kightlinger said. “It’s been a net positive for the valley and the community.”
The agreement has allowed Metropolitan to take the water that’s saved in the valley: a total of 1.3 million acre-feet of water since 2005. On average, that’s about a tenth of the water that Metropolitan gets from the Colorado River and about 5 percent of its total water supplies — enough to supply approximately 200,000 households in an average year.
Kightlinger described the program as a good partnership but said Metropolitan’s managers are also concerned to see water use creeping upward on the area’s farmlands. He said that “takes away from the savings of the program, and works at cross-purposes with our long-term goal.”
Metropolitan negotiated five-year leases with its tenant farmers to provide financial incentives that would encourage them to use water more efficiently, Kightlinger said.
“You get a bonus if you use less water, essentially. And if it works, it might be something we’d like to explore with the whole valley, and then the whole valley would be able to participate and have a potential to make more money on it,” Kightlinger said.
Metropolitan has defended its land purchase as a sound investment for its ratepayers. Owning an additional 12,000 acres has enabled the district to pay less through the fallowing program.
The records of land-fallowing payments show some of the biggest recipients over the years have included two entities that previously owned Metropolitan’s land: Farmland Reserve, Inc., a Utah-based nonprofit investment arm of the Church of Jesus Christ of Latter-day Saints, and Verbena LLC, a subsidiary of the company Renewable Resources Group.
The more than $20 million in land-fallowing payments over a decade to those two former owners show roughly how much money Metropolitan is saving now that it owns the land.
“Overall I think the program has been a win for the valley and a win for Metropolitan, and we’re just looking to find ways to make that better,” Kightlinger said. “We actually want to find ways to spur more collaborative, more efficient agriculture that works for both our sectors.”
Officials at both water districts say they’re hoping to work out their disagreements and settle the lawsuit.
“We’d like to preserve the good that we have in the program and not taint the well and have this become too bitter,” Kightlinger said. “We’re going to talk, we want to collaborate, but we aren’t also just going to let their board have a veto over what practices we do on our property — and that we don’t think harms anyone else.”
As for the payments that Palo Verde board members have received through the land-fallowing program, Van Dyke said the figure of $2.1 million shown for his company, Van Dyke Farms, is inaccurate. He said that amount, the total of annual payments since 2005, includes funds for other landowners who “did not have enough acres on their own.”
Palo Verde’s board members stress that all of the water delivered to the valley’s farms belongs to the irrigation district. They say Metropolitan shouldn’t be trying to move more water out of the valley without negotiations and without compensation.
“If they want to own the land, I don’t have a lot of heartburn over that,” Seiler said. “I want them to do like they said in the agreement, that they will not treat their lands any differently than other lands that are enrolled in the program.”
Seiler said he and other farmers want to see the land-fallowing program continue to be a model for farm-to-city water transfers.
“It’s a fair deal,” Seiler said. “And I’d like to go back to the way it was.”