MWD to pay farmers to cut back farming: water agency seeks to foster water surplus amid drought.

The Metropolitan Water District this month appropriated $14 million to begin paying farmers not to grow crops and instead make available their surplus water to the agency for resale to Southland businesses and homes.

MWD's first-ever land-fallowing plan is one of several inventive but costly solutions the giant water wholesaling agency is pursuing to free up water during the sixth consecutive year of Southern California drought. One final approval is needed, from the U.S. Bureau of Reclamation, and that's expected by June 1.

The action amounts to bittersweet news for 15 million Southland consumers of MWD water, including most L.A. County businesses. They ultimately will pick up the tab for MWD's two-year pilot program, estimated at $27 million. The water will cost about 77 percent more than traditional MWD supplies, which will be factored into overall water prices.

The MWD board of directors May 12 voted to pay farmers $620 an acre to leave 22,000 acres of crop land idle in the Palo Verde Valley in Southeastern California, near the Colorado River. The 22,000 acres represent one-quarter of the valley's arable land.

While idling their fields of cotton, alfalfa, wheat and melons, the farmers would also relinquish their rights during two years to 200,000 acre-feet of water. That's about 6 percent of MWD's sales in 1991. (An acre-foot is nearly 326,000 gallons, the amount annually purchased by two "average" Southland homes.)

MWD officials insist the test program is absolutely crucial to buffer against a continuing drought.

"It will reduce the likelihood and magnitude of water shortages in the 1990s," predicted Jan Matusak, MWD principal engineer for Colorado River Resources. The farming cutback will occur over two years, the MWD will draw against the resulting surplus until Dec. 31, 1999.

It is also a rather peculiar program for the agency in terms of affordability.

First, securing the water rights will cost about $135 an acre-foot, compared with the $76 an acre-foot price of traditional new supplies from rivers and groundwater and $5-$10 an acre-foot the farmers pay to the Palo Verde Irrigation District.

The farmers' extremely low rates are due to indefinite federal grants to river water and legal claims to priority during times of shortage that date as far back as 1877, according to MWD. The MWD will mark up water to $321 an acre-foot to cover expenses for transport, treatment and storage; then it will be sold to retailing agencies for resale to businesses and homes.

Second, the fallowing program is deficit-financed. MWD's fiscal 1993 budget is projected to run an $84 million deficit on its $823 million spending plan. Money to fill the gap will come from MWD's "rate-stabilization" fund, meaning less cash will be available to cushion the size of future rate hikes on MWD customers.

The expensive plan was grudgingly accepted by some MWD board members.

"At this point, we need to do whatever we can get some water 'insurance' here," explained Tim Brick, a board member and delegate from the city of Pasadena. "Then we need to come up with some long-range solutions to eliminate water subsidies," said Brick, an environmentalist who has been critical of the continuing special privileges given to agriculture by state and federal governments.

MWD officials, not surprisingly, were even more insistent. "Southern Californians face recurring water shortages in the future as the region gradually loses nearly half of its annual Colorado River supply by other river users (Arizona and Nevada) taking more of their entitlements," said MWD General Manager Carl Boronkay in a prepared statement. Also, the region's population is growing by about 300,000 people annually, the MWD estimated.

MWD officials said if the two-year program is successful, it might be duplicated in future years.