How to Make Money from the California Drought

Or maybe this post should've been titled “Chinatown:  The Sequel.”

With California entering the third year of its worst drought ever, most Californians are leaving their cars unwashed, letting their lawns and gardens die, and hardly ever bathing or flushing the toilet.  (“Yellow is mellow, brown goes down.”)

The dried-up rivers and lakes have killed jillions of fish, and lots of farmers are either letting their crops die or plowing them under.  But that's just for chumps.  If you're shrewd, well-connected and have the conscience of a pimp, you can make a fortune from the California drought.  Froma Harrop describes the “Byzantine system of allocating water to a farming empire built where it shouldn’t be — in a desert...California has about 3,000 water districts, but the California Department of Water Resources doesn’t know the exact number. Nor does it have a clear idea what the districts are doing.  Out of complexity hidden in darkness rise corruption and reckless public spending. And fortunes are made.”

If you're growing the kind of crop that can be plowed under — alfalfa, strawberries, vegetables, etc. — then just plow it under already and wait for the drought to end.  But trees and vines take a long time to mature; they can't just be plowed under and then re-planted.  For somebody whose vineyards or orchards are mature and represent a huge investment, it might make sense to be allocated extra water during a drought.  Unfortunately the law doesn't make any distinction between someone whose orchard has been there for years, or generations even — and some sleazebucket who just this year started planting acres and acres of tree crops, just to take advantage of this loophole.

Another loophole (unique to California):  Residential developers are required to show that they have a source of water for the new residents they'll be bringing in.  Farmers have no such requirement; they can plant anything anywhere any time.  And this is where the vulture capitalists come in, and where the “Chinatown” reference comes from.

Quoting again from Froma Harrop's column:

“Billionaires Lynda and Stewart Resnick of Beverly Hills own Paramount Farms, an agricultural titan. Again, the water they obtain through public infrastructure may be used only for agriculture or restoring groundwater — according to law, anyway.  But that doesn’t seem to matter. The Resnicks appear to be selling some of their water to a developer seeking to create a new 2,000-acre planned community, Gateway Village, in another county. This is being done through a web of exotic arrangements — with the water bouncing through a maze of Resnick-owned companies, West Side Park Mutual Water Co. in particular...The Root Creek Water District, where Gateway is located, is in on the deal. Its lawyers will argue that the water being moved around is really just meant to recharge depleted groundwater. And that groundwater will be used for ... the pistachio and almond trees.”

Here are some more links to Lynda and Stewart Resnick.