Water bank called private profit center

Bakersfield Californian - 12/20/03

By Vic Pollard, staff writer, Sacramento Bureau

The Kern Water Bank, which was supposed to help Californians get through droughts, has become just another profit center for a billionaire Los Angeles businessman, a report issued Friday by a Ralph Nader watchdog group says.

The businessman, Stewart Resnick, could not be reached for comment, but the president of the water bank's governing board, Bill Phillimore, said the report "is so full of errors I don't know where to start."

The report by the Nader-founded group Public Citizen called for the water bank to be turned over to the state and for all water districts to have public members on their boards for better accountability.

Public Citizen noted that the water bank, a vast, natural underground reservoir west of Bakersfield, was launched by the state in the 1980s to store water in wet years for use by farms and cities in drought years.

But it is now managed by a public joint powers authority that is effectively controlled by companies owned by Resnick, who is a major contributor to Democratic politicians.

Resnick is the owner of Roll International Corp., whose holdings include the huge Paramount farming empire in Kern County. Paramount in turn controls Westside Mutual Water Co., which effectively controls the Kern Water Bank Authority.

That puts Resnick in a position to reap large profits from selling water to developers and urban agencies that he obtained at low prices from the government, the report said.

"The Kern Water Bank is a priceless public resource, but under corporate control the bottom line will always be about price and profit, not the public interest," said Wenonah Hauter, director of a Public Citizen campaign to restore public control over water resources.

Phillimore, who also runs Paramount's huge farming operations in Kern County, said the company participates in the water bank primarily to stabilize water supplies for its orchards and fields. Paramount has been described as the largest producer of pistachios and almonds in the United States.

Phillimore said the only water sold out of the bank by Paramount so far has gone to a government environmental program.

Public Citizen's researchers said they discovered a copy of a water bank contract to sell water to the planned Newhall Ranch subdivision in northern Los Angeles County, but Phillimore said he believes the sale was never carried out.

"That's just one of the errors," Phillimore said. "They didn't bother to check the facts."

The Kern Water Bank is located on 20,000 acres of sandy alluvial fan where, historically, much of the Kern River disappeared into the ground west of Bakersfield.

It was labeled a water bank in the 1980s when the state Department of Water Resources acquired it for about $30 million and planned to develop it as part of the State Water Project.

However, it was turned over to agencies in Kern County in 1994 in a major overhaul of the state project, spelled out in what were called the Monterey Amendments.

Public Citizen was sharply critical of the fact that the state got no money for the 20,000 acres, although the report acknowledged that Kern County water districts gave up claims to 45,000 acre-feet of water from the state project as part of the deal.

It was also critical of the fact that the Monterey Amendments were hammered out in closed-door meetings between State Water Project customers and the department, with no input from environmentalists or other interests.

But Steve Macaulay, the department's project manager at the time, said the land for the bank was purchased with money paid by water districts for purchase of water from the state project.

"The taxpayers didn't pay for that land," Macaulay said.

Moreover, it was turned over to Kern County largely because the state was unable to develop it into a functioning water bank, according to Macaulay and others involved in the trade, including Kern County Water Agency General Manager Tom Clark.

With the transfer, Clark's agency oversaw the formation of a joint powers agency to operate the bank.

Paramount's West Side Mutual Water company has a 48 percent interest in the water bank. In addition, the Dudley Ridge Water District in southern Kings County, which includes a large amount of Paramount farmland, has a 10 percent stake, according to the report.

In a little-known development at the time, state law had to be changed to allow privately owned mutual water companies to participate in joint powers authorities, which are public agencies.

Clark said that was done to make sure the water bank authority was open to public scrutiny. Public Citizen said that is debatable, since the authority's offices are unmarked and located inside Paramount's offices on Lerdo Highway.

Other participants in the bank are the Wheeler Ridge-Maricopa Water Storage District, Tejon-Castac Water District, Semitropic Water Storage District and a sub-district of the Kern County Water Agency.

Each of the participants can use the water bank to store their own water from the state project, the Kern River or other sources, and pump it out as they need it.

Water is stored in the bank by letting it run out over the ground and seep down into the sandy aquifer. Large-capacity wells have been drilled to pump it out.

When recovered, the water can be used to irrigate farms within the participating districts as well as Paramount's orchards.

But it can also be sold to the highest bidder, which could mean a developer or a deep-pocket urban water agency.

That is the chief sore point with Public Citizen, which alleges the water bank operators are poised to profit from environmentally damaging urban sprawl in other areas of the state.

For example, Tejon Ranch, another major landowner with interest in the water bank through two other districts, is looking at the bank as a potential source of water for a resort development called Tejon Mountain Village tentatively planned near Lebec.

The report notes that California's constitution declares that all water is a public good, to be managed by the state for the greatest public benefit.

They said Paramount and other corporate farmers and developers are trying to "game" the water market the way Enron gamed the energy market.

"Their goal is to siphon as much of California's public water as possible to their corporate farms and 'master-planned' cities in the desert while profiting from insider water sales," the report said.

Phillimore said that is wrong.

He noted all water districts in Kern County are overseen by the umbrella Kern County Water Agency, which has set strict rules to guard against sales of water outside the county that would deplete local supplies.

So far, Phillimore said, all of the water sold by water bank participants has gone to the Environmental Water Account, a government program that uses it to replace irrigation water lost when shipments to Kern and other counties must be shut down to protect endangered fish in the Sacramento-San Joaquin Delta.

Public Citizen was also critical of that program, saying it uses taxpayer money to compensate farmers for solving an environmental problem that they created by pumping water out of the delta in the first place.

Public Citizen's recommendations to impose tighter public controls on water differ with that of some other major environmental organizations which have favored the development of an active commercial market for water. These groups say letting the market establish a price for water will stretch existing supplies by discouraging its "waste" on low-value crops and other marginal uses, reducing the need for environmentally damaging dams.

John Gibler of Public Citizen's Oakland office said, "We believe the best way to manage water resources is to keep them under public control." #