California's 1991 Drought Water Bank

Economic Impacts in the Selling Regions

by Lloyd Dixon, Nancy Young Moore, Susan W. Schechter


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In 1991, to mitigate the effects of a five-year drought, the California department of Water Resources bought water from farmers, landlords, and agencies in northern and central California and resold it to urban and agricultural areas. This study found that although operating costs and crop sales were substantially reduced for farmers who participated in the Bank, the Bank's economic impact was not large compared to the general agricultural economy of the region and to historic variations in the agricultural sector, and that participating farmers increased their farm investment. Recommendations for future banks include spreading purchases and rotating farmers to diffuse the bank's negative impacts, considering a lower water purchase price, using standard rules and contracts, and developing procedures to minimize divisiveness among landlords, tenants, and local businesses.

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