Economy Tipping points in water transfers


Are rural to urban water transfers higher than previously thought? By George Oamek, PhD


This column makes good on my threat from the previous issue of Irrigation Today for more discussion on the secondary economic impacts of irrigation water transfers, specifically when irrigated acreage is retired and the water is transferred to other uses, such as to growing municipalities.


e relatively higher degree of impact may call for a possible re-evaluation of long-range water supply plans.


In review, the transfer is likely an economically effective move bene- fitting main parties in the trade — the urban area and the water right holder — usually at the expense of the area of origin’s community and culture. Economists estimate the un- desirable impacts of this deal, the diminishing of


rural communities, nearly exclusively


using economic impact multipliers that base the


impact proportionately on the reduction in irrigated crop value.


Properly qualified, multipliers are a good tool for making these estimates because they are simple to apply and make intuitive sense. But, a noticeable trend is that whenever a multiplier- based study was conducted, the results always seemed to say that area-of-origin impacts would be incremental and relatively small, not necessarily matching observations from, say, Crowley County, Colorado, which experienced major economic impacts resulting from irrigation water transfers. This is due to the linear,


30 Irrigation TODAY | January 2019


proportional nature of the multiplier tool, but also, I believe, due to a lack of consideration of threshold impacts to businesses.


Threshold impacts to businesses, alternatively termed business tipping points, occur when the local population base or purchasing base can no longer support the business. Reductions in irrigated acreage contribute to both of these, ultimately causing some businesses to close and further reduce the local economy. It’s not exactly an economic “death spiral,” but recognition that incremental impacts may also have cumulative impacts that are detrimental to many types of businesses. The trick to measuring the cumulative impacts rests on the ability to translate changes in irrigated acreage to rural population levels and then use these population changes to predict changes in the number and type of rural businesses.


The theoretical basis for predicting these changes has been established by economists at the University of Saskatchewan, with research providing evidence that the number and type of businesses are affected by both local population and distance to the next major community where comparable services could be found. This theoretical relationship was statistically verified by the author in a study using Colorado’s Lower Arkansas Valley as a test area, confirming there are possible threshold impacts associated with population changes resulting from reduced irrigated acreage.


So, why is this important?


It is important for two reasons: 1) actual economic impacts resulting from rural to urban water transfers are likely higher than previously thought when business threshold impacts are considered, and 2) our current economic tools need to be supplemented to include cumulative economic impacts as well as the incremental impacts.


From a water policy perspective, the relatively higher degree of impact may call for a possible re-evaluation of long-range water supply plans that depend on the use of transferred irrigation water. Alternative supply options, such as additional storage, may be relatively more attractive from a public perspective in light of higher than expected rural impacts.


Alternative forms of irrigation-to- municipal transfers could be better evaluated with respect to impacts to rural adjacent communities. For instance, “buy-and-dry” could be compared to a fallowing-leasing strategy by analyzing the relationship between irrigated acreage and farm employment. Under rotational fallow, farm employment may drop much less than under a buy-and-dry relationship, maintaining rural employment.


George Oamek, PhD, is


an economist with Headwaters Corp. and is also on the staff of the Platte River Recovery Implementation Program’s executive director’s office.


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48