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How Limousine Liberals, Water Oligarchs and Even Sean Hannity Are Hijacking Our Water Supply

A group of water oligarchs engineered a disastrous privatization scheme to make a fortune out of California's most precious natural resource.

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As majority stakeholder, Resnick took the lion's share of the profits. A recent investigation by the  Contra Costa Times revealed that even as its fish populations teetered on the brink of extinction, California pumped "unprecedented amounts of water out of the Delta only to effectively buy some of it back at taxpayers expense." From 2000 to 2007, California spent $200 million on buying water for the EWA, of which Stewart Resnick's subsidiary companies skimmed 20 cents of every dollar for a total profit of $40 million in seven years. With such gracious help from taxpayers, it is no wonder the Resnicks were able to build such a successful business empire.

"For a program that was supposed to benefit the environment, it apparently did two things -- it didn't benefit the environment and it appears to have enriched private individuals using public money," said Jonas Minton, a water policy expert with the Planning and Conservation League, a California environmental advocacy group, as quoted by the  Contra Costa Times

In a 2008 interview with the  New Yorker, Stewart Resnick said he initially got into farming in 1978 as a hedge against inflation. Either he was feigning naivete, or he must have quickly realized that he stumbled upon the money-making opportunity of his life, one that helped grow Paramount Farms into an agribusiness empire.

While California's farming industry was steadily shedding land and farms all through the 90s, the Resnicks were expanding production and acreage, nearly doubling their cultivated land holdings just in the three years after the Monterey Agreements.

But the profiteering off California's environment-friendly water program by Resnick and the rest of the Kern Water Bank crew is chump change compared to the  profits water merchants like him can make by selling paper water to real estate developers in the semi-desert wastelands of Southern California.

Take the deal that went down this summer between a farmer with a stake in the Kern bank and a McTractHome paradise in the Mojave Desert, 100 miles east of Los Angeles. For roughly $73 million, the Mojave Water Agency acquired permanent rights to 14,000 acre-feet of water pumped out of the Sacramento Delta and delivered via the State Aqueduct, enough water to flood an area the size of San Francisco six inches deep or hydrate up to 30,000 families for a whole year.

The farmer selling the water was not really a "farmer" in the poor, homesteading, buck-toothed sense of the word, but a private Bay Area-based company called Sandridge Partners owned by the Vidovich family. In addition to running a lucrative cotton and almond growing operation in the heart of the Central Valley, the Vidoviches also control a small real estate empire in the Silicon Valley, building and managing estate developments: office complexes, condominiums, mobile home parks, hotels and shopping centers.

John Vidovich, the current patriarch of the family business, and his wife Lydia live in an $11.4 million Los Altos Hills home. Hilly, wooded and overlooking the bay just south of San Francisco, it's one of the ritziest places to live in Northern California and the 8th most expensive zip code in America. (The president of Resnick's Paramount Farms, Joseph MacIlvane, rubs shoulders with the Vidovich family, sharing a post on the board of directors of the Dudley Ranch Water District, a private water district that owns 9.62% the Kern bank, along with John Vidovich.)

Despite -- or maybe because of -- the family's extreme wealth, Sandridge Partners is one of the top welfare queen-farmers in the country. In 2007, it received $1 million in federal farm subsidies, more than any other farmer that year, raking in an additional $6.8 million between 1995 and 2006, according to the Environmental Working Group. Known as "direct payments," the subsidies are made each year mostly to growers of corn, wheat, rice and cotton, with payout amounts based on past production, sometimes even regardless of whether the crops are still being grown.

But their $73-million water deal shows that farm subsidies aren't the only, or even the most, lucrative handout that has the Vidoviches living well. The money paid out via farm subsidies pale in comparison to the massive profits that can be reaped from simply reselling the heavily taxpayer subsidized water they receive from the state.

According one state water official, the Vidovich's $5,200 per acre-foot deal with the Mojave Water Agency was nearly double previous record price paid for water in California.

Just look at these profit margins: these days, Central Valley farmers buy water from California's Department of Water Resources for a heavily-subsidized $100 to $500 per acre-foot, while city slickers in San Francisco pay around $8,500 for the same water. With this kind of discount, Vidoviches could score a ten- to fifty-fold spread on their purchase-to-sale price. Even if they paid the maximum price of $500 per acre-foot, the water they sold to the Mojave Desert for $73 million would have only cost them $7 million. That's $66 million in pure profit, and all they have to do is let a couple of hundred acres of almond groves wither and let California taxpayers, their ritzy Los Altos Hills neighbors included, fill up their bank accounts.

Shocking as this textbook example of transfer of wealth is, it is neither an isolated incident nor a freak loophole. It was the intended effect of the deregulation and privatization of water hashed in Monterey almost 15 years ago, which transformed water into a truly liquid asset that could be traded with ease on the market. (In 2002, the Sacramento Bee estimated that members of the Kern County Water Bank made at least $128 million from water sales to other cities and counties, which the paper admitted was an incomplete and low-ball figure.)

"Think of the Bank of America, the way it operates with dollars, that's the way we operate with water," said Jonathan Parker, general manager of the Kern Water Bank Authority. "What we do is provide a service. We store water at cost and then take water out of the ground, at cost. They pay us to provide that service in the least expensive manner."

Parker was quoted in 2003. With all the bank bailouts that happened since then, the money-bank to water-bank analogy works even better. The Kern Water Bank shifts the cost for its water onto taxpayers and shifts all of the profits it makes by selling the water to itself. As it turns out, the money-making ideology of "nationalizing losses, privatizing profits" is no longer limited to Wall Street, and hasn't been for a long time. It's all part of the business plan for California's corporate farmers, and a glimpse into the future of California's water trade.

This is the backdrop against which the hysterics and fearmongering of California's water debate are being played out. The drought has been getting increasing political and media attention in recent months. At the core of the discussions are plans for a multi-billion dollar Peripheral Canal, a huge aqueduct that would be constructed to bypass the dying Sacramento Delta and tap into fresh water further upstream with supposedly less harm. It sounds nice on paper. But in reality, the Peripheral Canal is a water privatization con that would move water over to Central Valley water bankers and balloon California’s already over-leveraged "paper water" market.