Written by David Castellon
Groundwater sustainability agencies (GSAs) in Tulare, Fresno, Kings and Kern counties have until 2020 to develop plans for long-term viability of their regions’ supplies.
In other California counties where state officials deem the groundwater overdraft problem less critical, their GSAs will have until 2022 to finalize their plans.
Once those plans are done, the various groups will have 20 years to implement them, with a common goal of halting in their areas the overdraft of groundwater.
The law requiring these plans, the Sustainable Groundwater Management Act (SGMA), already is having a big effect on prices for agricultural land, particularly in the areas from Madera County down to Kern county, where some of the most severe over drafting in the state commonly occurs.
“In anticipation of the SIGMA rules, prices are already being impacted,” said Michael Schuil, a real estate broker with Visalia-based Schuil & Associates, which specializes in sales of agricultural land across California and 10 other states.
In fact, the changes began about the time Gov. Jerry Brown signed into law in September 2014 the three pieces of legislation that make up SGMA, he said. The rules were developed as California was undergoing the worst drought in its recorded history.
The price for some ag land keeps inching lower as the deadline to submit the first SGMA plans approach, Schuil said.
“Right now, we‘re seeing people not buying properties because they aren’t sure what’s going to happen,” Schuil said.
Still, there are some farms for sale, but “white lands” — those with wells but without regular, reliable access to additional surface water — have become tougher sells in light of the upcoming SGMA rules, Schuil said.
For example, he said, white land that might have sold for $20,000 an acre two or three years ago might now go for just $14,000-$15,000 now. In comparison, farmland within the Fresno Irrigation District, considered a highly reliable local water source, might fetch $28,000 an acre.
“And declining prices for land with access to just well water likely will get worse next year,” Schuil added.
Those concerns are echoed in a report released earlier this month by Rabobank.
“The outlook for California land prices depends on the region and specific differences between properties within the region,” with the land parcels having access to both reliable well water and surface water likely to retain their prices better than those with only well water, according to the report from the European-based bank’s RaboResearch Food & Agribusiness division.
“On average, Southern [San Joaquin] Valley properties are expected to see the biggest declines in valuations during 2018-19,” states the report, referring to Tulare, Kings and Kern counties.
As for the Valley’s central region, Madera and Fresno counties, the Rabobank researchers state that Westside farmers have had to depend heavily on their wells for irrigation, as they have no other water sources to recharge the aquifers under them.
It goes on to say, “these properties will be most constrained by SGMA implementation. Lower-quality [more saline] groundwater also limits crop yields,” while properties with access to water from irrigation districts operating in Fresno County “should be relatively more immune to negative impact.”
Roland Fumasi, vice president and senior analyst for RaboResearch Food & Agribusiness, stated in an interview that other factors are adding to declining values of Valley ag land, including reduced prices being paid for nut crops, which has curtailed the high demand for nut acreage that was selling big just a few years ago.
“Certainly the most attractive properties are the ones with two water sources — surface water and wells. With SGMA, it’s important to have water alternatives to recharge aquifers in the dry years.”
Lighter downward pressure is expected in the Sacramento Valley and the northern [San Joaquin Valley], with an estimated average land value decline of 7 percent in both regions because surface water is more readily available in those areas, the report states.
In comparison, the forecast predicts over the same period ag land values in the central and southern parts of the Valley declining at averages of 10 and 12 percent, respectively.
As for other parts of state, more surface water availability in Southern California, Northern California and coastal regions is expected to allow ag land values to rise, though SGMA likely will stunt that rise in rates slower than in previous years, the Rabobank report states.
Fumasi said he hasn’t tried to forecast land prices after 2019, until after the various groundwater basins plans are completed and made public.
“Once these plans see the light of day, it can go one of two ways,” one with local farmers and communities having to severely cut back on their well usage, which might further hurt property values, particularly well-only lands, Fumasi said.
But at least for some lands, the restrictions may not be as severe as some have anticipated, he added.
While that might not result in an upturn of ag land prices in those areas, it might slow or stop the price declines, Schuil said.