Klamath Water Users Association
August 8, 2003
Governor’s Office Orchestrates Funding Request for Klamath Groundwater Users
Staff members from the office of Oregon Governor Ted Kulongoski have brought together a diverse group of stakeholder and agency representatives to put forth a call for assistance to help Klamath Project irrigators. The result: a letter signed by ten diverse interests – including the governor’s office - that will be circulated to elected officials and non-profit funding organizations.
David Van’t Hof, Governor Kulongoski’s Natural Resources Policy Advisor, and Katy Coba, Director of the Oregon Department of Agriculture, spearheaded a recent effort to secure funds to compensate Klamath Project water users who have switched to backup groundwater supplies this summer. Greg Wolf, Director of the National Policy Consensus Center at Portland State University and Pete Dalke from Oregon Solutions did much of the legwork required to bring parties together in Portland last week and craft an open letter requesting funding assistance.
The Oregon Solutions Network is comprised of businesses, non-profits, governmental agencies and citizen organizations that are able to connect their resources, expertise and interests to collaborative, community based projects.
This spring and summer Klamath Project irrigators have worked with the U.S. Bureau of Reclamation (Reclamation) to reduce water deliveries from Upper Klamath Lake (UKL) in an effort to avoid violating a lake level elevation established by the U.S. Fish and Wildlife Service (USFWS) in its biological opinion developed for 10-year Klamath Project operations. Despite the fact that Project irrigators have reduced diversions, Reclamation in late June developed new data that predicted additional reductions would be required by the Project to maintain the minimum elevation of UKL. These reductions are considerable and would likely be difficult to achieve without significant additional groundwater pumping and/or hardship in the Project area.
“Dire economic and social impacts will likely occur to the $200 million local agricultural economy if water is withheld from Project lands in the middle of the summer,” the letter states. “We are assuming for the time being that additional conservation measures and use of alternative water supplies must be pursued with vigor to help irrigators reduce lake diversions. Groundwater substitution provides one such tool to address this objective; your help in securing funding for this measure would be invaluable.”
At the present time groundwater is being pumped at the sole cost of interests in the Klamath Project.
In addition to Coba, other signatories to the letter include Paul Cleary (Director, Oregon Water Resources Department), Fritz Paulus (Oregon Water Trust), Lynn Schoessler (State Director, USDA Rural Development Agency), Dave Sabo (U.S. Bureau of Reclamation), Toby Freeman (PacifiCorp), Chrysten Lambert (Klamath Water Trust), Rick Woodley (Klamath County Soil and Water Conservation District) and Dan Keppen (Klamath Water Users Association).
Any direct financial or in-kind assistance you may be able to provide to address the short-term problem is appreciated. Please contact Pete Dalke at 503-725-9097 with your input and for more information on how you may be able to assist.
California Congressmen Meet with Klamath Project Growers
California’s two Klamath Project congressional representatives visited the Klamath Basin this week to tour the area and meet with local elected officials, producers and water officials. Congressman John Doolittle is in the Basin today, and Representative Wally Herger spent over four hours meeting with local interests in Tulelake yesterday. Both are strong supporters of agriculture. The meetings were organized by the Tulelake Growers Association.
Local representatives briefed the two congressmen on concerns with the current Klamath Project operations plan, potential new storage projects, and the lease land farm program on the Lower Klamath National Wildlife Refuge complex. Both Doolittle and Herger helped lead a recent effort to defeat a legislative proposal made by Rep. Earl Blumenauer that would have eliminated row crop farming on the lease lands. That measure was voted down on the floor of the House of Representatives last month, and Doolittle’s opposition speech was memorable.
“If you set the precedent today that we as the Congress are going to dictate what crops a farmer can grow, watch out the rest of you,” said Doolittle in his statement. “Because today it is in a small part of remote Northern California and Southern Oregon, but tomorrow it will be all over the country as these people with their agendas come after you and your families and your way of life.”
At yesterday’s meeting, Herger stayed focused through four hours of presentations and discussions. He expressed his appreciation for the unity shown in the Basin over the past two years.
“You are speaking with one voice – that’s good news,” he said.
Klamath Farmer / Fishermen Meetings Deemed A Success
Last week’s tour of the Klamath Project – hosted by Klamath Water Users Association for guests from the Klamath Fisheries Coalition – was considered a success by many of the participants:
“Wow! What a great trip. Thanks for the warm welcome and the great food. I am very excited about the potential outcomes of this meeting. If we band together we will force the appropriate people to take notice. I am looking forward to you all coming this way.”
Marlyn Schafer, Curry County Commissioner
“It was a great learning experience for me, one that I will never forget.”
John Griffith, Coos County Commissioner
“I know that all of us enjoyed each and everyone of you and your stories and historical perspective. In the near future we will be meeting with fisheries groups and looking for a resolution to this difficult issue.”
Lucie La Bonte, Curry County Commissioner
Steve West, Klamath County Commissioner
“I believe that we will have more influence on the management of the river if we develop a spirit of cooperation between upriver and downriver interests, and start viewing the river as the entire watershed. Through cooperation we can identify the real problems affecting Klamath River salmon and begin to solve them.”
Ralph Brown, commercial fisherman and Curry County Commissioner
The coastal representatives will host a tour for a delegation from the Upper Basin later this fall.
Local Lender Discusses Financial Impacts of 2001 Water Crisis with Herger
Greg Williams, branch manager of Northwest Farm Credit Services, provided an informative and sobering overview of the financial impacts of the 2001 Klamath water crisis to Congressman Wally Herger (R-CA) on Thursday in Tulelake. Williams, a 30-year employee with his organization, has worked for 23 years in Klamath Falls, and was raised on a cattle ranch near Bonanza, Oregon.
Northwest Farm Credit Services serves Northern California and the four northwest states and Alaska. According to Williams, his company has about $41 million in loans outstanding in the Klamath Basin. Williams thanked Herger for his assistance in securing federal financial assistance in 2001.
“I can tell you that many of our customers only remain in the basin due to the federal programs that helped to mitigate losses from the water shutoff,” he said “Without that assistance many farmers would have ended up in liquidation, either voluntarily or involuntarily.”
Most growers “dodged the bullet” with the 2001 financial assistance, he said. However, agribusinesses and some farmers still sustained large financial losses.
“I know, because I saw the financial records,” said Williams.
Williams identifies five credit factors that lenders evaluate when making loans and the impact of a reduced deliveries of water, without adequate compensation.
Credit Factor #1: Character
Character is the individual’s background, education, willingness to pay bills on time, and farming ability. Williams believes this credit factor has been significantly impacted due to added stress, inability to concentrate due to uncertainty, and increased time commitment to defend water rights. Stress manifests itself through anger, health problems and tension between neighbors.
Credit Factor #2: Capital
Capital refers to the balance sheet of the customers. The strength of the balance sheet is one of the key factors in determining how much credit a lender can extend to a borrower. According to Williams, the Klamath Basin water crisis has generally adversely impacted the financial position of the farmers of the Klamath Basin. This is due to loss on income, loss of opportunity to grow crops in 2001 (a year with high potato prices), capital expenditures for wells and other adjustments to irrigation systems, farming further from home, and cash contributions to fight the water battle.
It was not unusual to have loan requests of $50,000– $250,000 to drill and develop a well. Some prospective drillers developed wells that were dry or had inadequate water, which drained their resources. For successful well developers, the costs increased their debt/asset ratio and depleted cash reserves. However, the new backup water supply may have given them a safety net for the future.
According to Williams, real estate values remain “shaky”. Although local appraisers have not seen a decline in land values in the Klamath Basin since 2001, they are quick to point out that there is less demand for land without an alternate source of irrigation water. They will also tell you that following the cutoff of water in 2001 the real estate market stopped in its tracks for a few months.
Should there be a total cutoff of water, the basin’s irrigated land value, without wells, could drop from $1,200-2000/acre to $150-250/acre, says Williams.
“In other words, a 500-acre farm valued at $1 million could drop in value to $100,000,” said Williams. “These dryland values would destroy the balance sheets of basin farmers as well as taking away their ability to generate income.”
Credit Factor #3: Capacity
The third credit factor is capacity, which is the ability to generate income to pay annual operating expenses, service debt payments, and provide a reasonable level of living for the family. The water cutoff in 2001 impacted the ability to repay debts due to inability to grow a normal crop and/or increasing expenses. In addition, there were fewer part-time employment opportunities available for those who also work off their farms.
The water cutoff left irrigators in a position of not knowing when the next “surprise” cutoff or reduction in water deliveries will occur. This has impacted the capacity or repayment ability of farmers as they have taken a more conservative approach to crop rotation. Many of Williams’ customers now plant fewer acres of row crops like potatoes and onions due to the risk of water curtailment. In addition, tenant farmers now prefer land with secondary water sources. This adversely impacts the landlords without an alternative source of water.
Credit Factor #4: Collateral
Collateral is the fourth credit factor and includes assets to repay and secure the loan. This may include a lien on crops, cattle, equipment, and real estate. A water shutoff would cause the value of collateral to fall to the point that customers may not be able to repay the loans from normal income or the sale of collateral. If land values drop by 80-90 percent, the owner will not be able to either sell out or generate sufficient income to repay their loans.
Credit Factor #5: Conditions
The last consideration in making a loan decision is the conditions or terms of the loan. This may include the amount, collateral needed, interest rate, length of loan, and other requirements. Williams says that Farm Credit Services has been able to continue to finance the Klamath Basin with no more attrition of its customers than normal. However, in some cases his lenders have had to beef up loan conditions.
“We are approving these loans but we are not ignoring the increased risk,” said Williams. “As a cooperative, we are committed to financing the farming community. Our directors and local advisors are farmers and ranchers and they understand this risk and realize that the Klamath Basin may be the first of many communities to face extraordinary challenges.”
Recognizing the challenges is one thing. Taking proactive measures to reduce or manage the added risk is another. Williams’ company is setting aside additional reserves for losses that could be sustained if there is a total cutoff or substantial reduction in the deliveries of water. The firm also emphasizes close working relationships with its customers to ensure that added risk is recognized and appropriate steps taken to protect their own equity.
All of this takes time, effort and commitment of staff and management.
“As a lender in this environment we financially support organizations that are on the battlefront,” told Congressman Herger. “We too get worn down, but we must remain positive to be successful. I believe we will have tough times ahead, but a viable farming community will remain in the Klamath Basin,” said Williams.
Comments Due August 13 on BLM’s Upper Klamath River Plan
The opportunity for the public to comment on the draft Environmental Impact Statement (EIS) for the Bureau of Land Management (BLM) “Upper Klamath River Management Plan” ends on Wednesday, August 13. The draft report assesses several proposed actions on BLM land along the Klamath River, including vegetation treatments to protect scenic quality, modifications to recreation and campground sites, road modifications, and fire risk reduction. The preferred alternative proposed in the draft report emphasizes restoration and improvement of natural resources values.
While the preferred alternative recommends increases in base river flows for fish habitat improvement, BLM maintains that proposed actions will not affect operation of the Klamath Reclamation Project, including flows into and out of the planning area.
The report’s draft recommendation to exchange or acquire land under current PacifiCorp ownership has generated opposition from the Siskiyou County Board of Supervisors.
CALENDAR OF EVENTS
Wednesday, August 13, 2003 – End of Comment Period, Upper Klamath River Management Plan Draft EIS. Contact Larry Frazier or Don Hoffheins at the Bureau of Land Management, 541-883-6916.
Thursday, August 14, 2003 – Klamath Falls Rotary Club: “Myth Making on the Klamath River”. 12:00 p.m. Presentation by KWUA Executive Director Dan Keppen on the facts, falsehoods and exploitation associated with the 2002 Klamath River fish die-off. Shilo Inn, Klamath Falls, Oregon.
Thursday, August 14, 2003 – KWUA Executive Committee Meeting. 6:00 p.m. KWUA Office, 2455 Patterson Street, Suite 3.
Friday, August 15, 2003 – End of Comment Period, USBR Conservation Implementation Program. Contact Christine Karas at the Bureau of Reclamation: 541-883-6935.
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