The Game’s Finally Up: California Water & Real Estate

by Bill Hatch, March 17, 2010

In spite of this winter’s rains, California is still going into its fourth year of drought and its second year of high-powered water warfare. The state now lives in a state of perpetual water anxiety. We even have a monthly religious rite at the top of Echo Pass, near Lake Tahoe. A shaman from the state Water Resources Department, surrounded by reporters stumbling in snowshoes, takes a magic wand onto a field of snow, plunges the wand into the snow, pulls it out, and utters predictions of the state’s water supply. Reporters return to their newspapers and write that there is not enough water. Some of the older ones think of the 1974 classic movie, *Chinatown*, about a local water war in Los Angeles.

There is a drought, indeed, but there is no long-term water shortage in California. The state’s water comes in different amounts, sometimes in floods, sometimes minimally in drought periods, most often in some quantity in between. On the other hand, there is an overpopulation problem and an agribusi­ness problem which, combined with three light-rain­fall years, has shut down the king salmon commercial fishery for two years because of overpumping in the San Joaquin Delta. This overpumping from the largest estuary on the West Coast has occurred from the two pumps, state and federal, located side by side on the Delta, during a huge real estate boom and a gigantic expansion of orchards (mostly almonds) south of the Delta. Following a settlement between California and upstream users on the Colorado River, Southern Cali­fornia’s other main source of fresh water, this ruinous overpumping has made extinction likely for some Delta species and is threatening the existence of a viable salmon fishery.

The latest plan to construct a peripheral canal around the Delta, tying into the state and federal canals running south, would permit salt from the ocean to penetrate the Delta all the way to Sacra­mento. This would cause great damage to Delta farming, which occurs on the richest land in the state, in favor of sending water to the west side of the San Joaquin Valley, where farming takes place on alkali flats and soil and groundwater is laced with salts and heavy metals, and a shallow layer of hardpan beneath the land creates a perched water table. Drainage water from the west-side farms has been legally trapped in that area since the ecological disaster at Kesterson Wildlife Refuge in the early 1980s, when west-side drainage to Kesterson was shown to cause death and deformity in migratory birds and other wildlife on the refuge. “Informal” means of exporting the toxic drain­age water are under investigation at the moment. But the basic situation is that the west side is salting up and will be unfarmable in the near future. The land­owners hope to maintain their federal water allot­ments in order to sell water to Southern California at urban retail prices. Recently, farmers have been selling their land to Southern California water districts for the water that is alleged to go with the land.

A large part of the propaganda about agricultural water in California today concerns supposed “rights” to sell water, developed for irrigation, to cities for large profits. It throws into doubt the speculation in almonds by humble “family farmers.” It is too bad for real almond growers, who farm in areas where almonds naturally flourish, irrigate them from either groundwater or Sierra river water, because this west-side speculation is ruining their markets. The other main agricultural commodity still selling below break­even costs of production after 16 months is milk. Cali­fornia leads the nation in production of milk, and the San Joaquin Valley is the center of the dairy industry. Like urban development, California agricultural development has never been remotely moored to the concept of limits.

The addition of 5 million people in California (from 33 to 38 million) since 2000 took the state beyond the long-range carrying capacity of its natural resources. It made up the difference by transfers from agriculture in the north to the cities in the south and to agriculture in the south San Joaquin Valley. But, urban water politics is not about providing water for the existing population, it is about more prospective population growth. California economic growth, despite the claims of agriculture and several other industries still extant, has come to mean only one thing — growth in the housing industry. That process begins with real estate speculation, but real estate speculation is spurred by the promise of more water supply. The State Water Project long ago corrupted that process by promising many times the amount of water it has ever been able to deliver.

The housing boom and bust has left California with the highest number of foreclosures in the nation and the second highest unemployment rate. Because it is the largest state, it is now a drag on the entire national economy.

Developers don’t merely influence state and local governments in California. They’ve owned them for decades, more completely than any business has owned California state and local governments since the era of the Southern Pacific Railroad Co. As California goes to Washington, D.C., looking for an $8 billion federal bailout to soften the blows of its midterm round of funding cuts, we are reminded of the arrogance, captured by Ambrose Bierce a century ago, of Southern Pacific methodically bribing con­gressmen to get them to forgive the $30 million debt the railroad owed to the federal government.

A few years after the state legislature unanimously passed electrical utility deregulation, in 2001 Califor­nia went from a $12 billion surplus to a deficit of more than $20 billion, out of which it has tried unsuccess­fully to crawl ever since. Even in the midst of an incredible inflation of real estate values, it did not completely balance its budget. The policy of Califor­nia politicians at all levels has been to keep all state taxes low, making California an attractive place to live, by borrowing on the bond market. Entering 2010, California has the lowest bond rating in the U.S.A. and speculation that it will default on a bond payment in the coming year is no doubt stimulating credit default swap markets.

The state is awash in debt, from upside-down home mortgages, farm debt, commercial business slowdown, to junk muni bonds. When west-side land­owners scream for more water for overproduced almonds and dairies, bankers are standing in line behind them. Local and state governments have been gutted from loss of property-tax income, as urban real estate values plunge. The most vulnerable members of society are the victims of choice. Health and human service budgets have been slashed, employees laid off, and the state is on a furlough system requiring some enforced days off without pay. As one county employee who works with the homeless in Merced County put it, if she loses her job, she will lose her home and “who will there be to help me when I’m homeless?” However, the broke county agreed to con­tinue subsidizing agricultural property taxes.

The anxiety of the California population, the larg­est of any state in the country, has created a fertile field for political hysteria. State politics has begun to resemble New Guinea cargo cults, insisting on forcing through infrastructure on more borrowed money in the desperate hope — because our leaders are actually unable to imagine anything else — of more population growth.

The finest example of California political insanity at the moment is the 19th congressional district, where Richard Pombo announced his candidacy last week. The district is an interesting example of the gerrymandering art. It follows the San Joaquin River, from its headwaters in the Sierra to its confluence with the Mendota Pool on the west side of the San Joaquin Valley. The pool is the southern extremity of the Delta-Mendota Canal, originating in the Delta and beginning of the San Luis Canal, which flows southward to water the speculative almond orchards of Westlands Water District. The district includes Yosemite National Park, the Hetch-Hetchy Reser­voir, Stanislaus National Forest, the Friant Dam, Lake Millerton and part of the Friant-Kern Canal, the Don Pedro Reservoir, parts of the Madera, Merced, Tur­lock, Modesto, Oakdale irrigation districts and one or two others in San Joaquin County. Even most Cali­fornians do not know most of these water projects by name, but they make up the midsection of the entire water delivery system.

In 2006, Pombo lost his Delta seat and chairman­ship of the House “Resources” Committee (restored to its former title, Natural Resources Committee, in 2007) because he was exposed in that campaign for what he was, a pathological right-wing ideologue, crook and liar. We are not predicting that Pombo will give Yosemite back to the Indians and their corporate gaming associates to create the most beautiful casino in America, but, knowing Pombo, it’s possible. And how long is his good friend, the convicted lobbyist and influence peddler, Jack Abramoff, in jail for any­way? It is more likely Pombo will do to the San Joaquin River Settlement, a quarter-century legal and congressional battle to put fresh water back into the river between Friant Dam and the Delta, what he did to the CalFed process that tried to “fix” the Delta for a decade: starve funding for it. Pombo and his backers do not want any salmon swimming in that river again. They want it just like it was: diverted to the southeast valley through the Friant-Kern Canal and the rest of the second longest river in the state as an agricultural drainage ditch.

California politics is the politics of mindless pup­pets. Our governor went to the Copenhagen climate-change conference pretending to be an Austrian green political philosopher, though he had just entered a bill in Sacramento to suspend the California Environ­mental Quality Act on a number of unnamed con­struction projects in the state. Looking for the pup­peteers, we can’t help but imagine that creditors of public and private debt will be pulling the strings for years to come.

The state, in its lust to be the biggest in every way, has grown ungovernable. It is neither governed nor effectively regulated; it is auctioned off, piece by piece, in backroom deals between puppets and pluto­crats.

The grand water projects of the last century are now tearing the state apart environmentally, politi­cally and economically. The top political demon of the puppet theater in 2010 will be environmental law, regulation, and anyone who dares to try to uphold them according to the laws of public process. Yet, environmentalists did not create the housing boom or the ecological destruction caused by agribusiness. Except for some ethically disadvantaged, large, corporately funded groups, environmentalists opposed the interests that created the current disaster. The corruption in the state’s political culture regarding natural resources is so deep and unconscious that nobody embedded in it can think their way out. For 30 years, the state Capitol has been run on three propositions: that government should operate like a business; growth is inevitable; and there is a “free market” in private property rights in developed sur­face water. This effluvium of porcine spirits has left for dead the official mind in the face of a growing cri­sis in the state’s natural resources.

At one point at the meeting with angry west-side growers last summer, U.S. Dept. of Interior Ken Sala­zar stood up and told them to sit and quiet down. They were so stunned that any politician would dare to say so that they did it. Salazar did not permit any more pumping from the Delta than was allowed by law last summer, despite high-priced propaganda campaigns, the latest a 60 Minutes segment amount­ing to nothing more than Leslie Stahl going gaga over our telegenic Hun governor. Salazar is reported to be seriously considering running for governor of Colo­rado rather than face continual assaults against reason, taste and law by Pombo and the rest of the San Joaquin Valley congressional delegation — represen­tatives Devin Nunes of Visalia, Jim Costa of Fresno, and Dennis Cardoza of Merced. They all belong to the same party, Big Ag & Water. Cardoza was Pombo’s go-to Blue Dog henchman back in the day of continual attacks on the Endangered Species Act in the “Resources” Committee for the benefit of a hand­ful of local developers during the boom. Together, as what local dairymen called the “Pomboza,” they did everything congressmen can do to create a speculative rape of their adjoining districts, which resulted in the highest foreclosure rates and some of the highest unemployment rates in the nation.

California does not have a water crisis, at least not so far in this drought cycle. However, the most pow­erful interests in the state will continue to say there is one because they depend on real estate speculation. Large landowners near urban areas, developers, con­struction companies and mortgage lenders created a supply-driven housing boom that blew out. Specula­tion in water — the essential infrastructure for the next speculative boom — is increasing. At the same time, the most obvious population experiencing rapid growth consists of the homeless. When the Mojave or Irving Water Districts secure more water, the specu­lative price of their land increases. On and on it goes. It is absurd. It is reality. It is the absurd reality of California development, inextricably bound to a pri­vate market in the most essential public resource out­side of air.

The public has one friend in court, the Public Trust Doctrine, the idea that the state holds the natu­ral resources in trust for the people. A Public Trust lawsuit on the Delta faces challenges the equivalent of those facing a salmon smolt reaching the Golden Gate. But it is the best chance the California public has to defend itself against the plutocrats and their free-market water casino.

Bill Hatch lives in Merced, CA. He can be reached at wmmhatch@sbcglobal.net.

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