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In the August and December issues of California Homeowner, we talked about profits made in real estate development by those who hold hundreds and thousands of acres, particularly those influential enough to trick ordinary middle- and lower-income citizen homeowners like us into underwriting costs through taxes while they pocket the profits.

We stressed the importance of existing law (President Theodore Roosevelt's Reclamation law of 1902 containing the 160-acre water limitation) in restricting profits that can be gained from the public treasury. Again we stress the 160-acre limitation.

If the venerable Senator Carl Hayden of Arizona and all other Southwest politicians want national legislation to bring water from the Colorado, Eel, Snake or Columbia Rivers to the Southwest, the following language should be included:

Nothing herein shall be deemed to exempt landowners from application of acreage limitation provisions of Federal reclamation laws, and such provisions shall be enforced by the Secretary of the Interior without exception. Such provisions shall also he applied and enforced without exception in connection withal water service contracts entered into pursuant to the authority granted tile Secretary under this Act."

Without the 160-acre limitation, government becomes an agency for redistributing natural resources and tax funds from middle- and lower-income groups to millionaire developers. This kind of operation is not economically justified in the eyes of voters.

If water prices were not heavily subsidized by taxpayers, developers could not afford to irrigate vast acreages. In fact, stripping the water program of subsidy could be as effective in breaking up large land holdings as enforcing the 160-acre limitation. Replacing the Reclamation Act of 1902 with better legislation might be desirable.

Reclamation law provides that funds from the sale of public lands be used for construction and maintenance of irrigation works for reclaiming arid and semi-arid lands of the West. As a result, one of our most valuable resources - water - is being spent to reclaim one of our least valuable resources - desert land. The question arises: Will it not be better to leave arid and semi-arid lands in their natural state for recreational and national park purposes than to develop them into unnecessary housing subdivisions and surplus farm crops? We should want water reclamation, not land reclamation. We can do better things with fresh water than pour it on deserts. Our problem is the best development of water resources in relation to people, financial resources, ecology, and land.

This month we pass along important new ideas for conserving valuable water resources and tax funds from Hirshleifer, DeHaven and Millimetres book. Water Supply Economics, Technology and Policy, published by the University of Chicago Press. The following remarks from James C. DeHaven's short paper by the same title. Speaking at the Statewide Home Owners' tax conference at San Fernando Valley Stale College on August 28, 1965, Mr. DeHaven said:

Water should be priced properly - industrial users pay less than cost.

In Los Angeles and other large cities, large users of water are charged less than the cost of procuring and delivering a unit of water to them. Large water-using industries are not motivated by this low price to install water treating and re-circulating equipment that could permit large reductions in their water use. As examples, depending on price, a steel mill may demand 1,400 to 65,000 gallons of water to produce a ton of finished steel; a steam power plant may use 1.3 to 170 gallons to produce a kilowatt-hour of electrical energy. Waste and inefficiency in the use of society's resources results from this pricing policy, because more highly-valued resources are needed to supply the extra water demanded at low prices than would be needed to install water-conserving equipment.

NEW YORK CITY USERS PAY LESS THAN COST

In New York City, 75 per cent of all water users are not metered. For those who pay a flat rate, the cost of extra units of water is zero, and there is no incentive to economize on use, fix leaks, or even turn off faucets. Competent studies indicate that repair of serious leaks in city mains and extension of metering could provide an additional water supply equal to the Cannonsville import project at a small fraction of its cost.

IRRIGATION AGRICULTURE PAYS LESS THAN COSTS

Irrigation agriculture typically pays low prices for water and uses huge quantities. In California, 90 percent of all water is used for irrigation. The Imperial Valley irrigator pays $2 per acre-foot for water; the municipal user in Los Angeles pays $80 per acre-foot or more. Yet, if 25 percent of Imperial Valley irrigators' water rights were purchased for transfer, the transferred water would equal two-thirds of all water used in the South Coastal area of California between Los Angeles and San Diego. Despite potentialities for transfers and pricing improvements, California is counting on costly new imports of water from the Feather River and other projects in the West.

UNDERPRICING HAS HARMFUL EFFECTS

In an arid region where water is costly to provide, a subsidy from taxpayers making water cheap to large-volume users encourages them to be wasteful and unconcerned with possible economies in water use. A likely and unfortunate result is development of more water-intensive, low-tax-base industries like irrigation agriculture. Whether under government or private auspices, whether directed to providing water supply, power, transportation facilities or consumer goods and conveniences, the interests of a region are best served by adoption of efficient projects.

IMPROVED ECONOMIC ANALYSIS OF PROPOSED WATER PROJECTS IS IMPORTANT

When total welter use begins to approach system capacity, public administrators should think of better ways to use existing supplies as on alternative to building expensive dams and aqueducts. All capital costs should be included in the water price when dams and aqueducts ore being justified and built. There should be no taxpayer subsidy.

Economic analysis of water projects should be improved. Too often, intangible, secondary or imaginary benefits chargeable to the taxpayer enter into benefit-vs-cost analyses, disguising the fact that costs ore greater than benefits.

For most products, market processes occur automatically to bring about economic equilibrium and minimize waste. For example, while New York talks about ''water shortage," it hardly ever has a food shortage. New Yorkers get potatoes from Idaho, watermelons from California, and bananas from Panama from thousands of suppliers, each looking to his private profit. In food marketing, price, competition and buyer resistance operate.

Water, however, seems short because it is handled like o "free commodity" by public agencies that place no premium on thrift. Government could eliminate imperfections in water law and its administration that prevent economic exchanges of water Government could lay claim to all unappropriated water and distribute this water to the highest bidders.

TECHNICAL STEPS CAN SAVE WATER

DeHaven described a number of (ethnical steps which, along with proper pricing, can save water:

• Purposeful reclamation of sewage water will be the next most important source of supply for the future of expanding population, agriculture, and industry compete more avidly for the limited supply of suitable natural water, it would be wise to prevent direct human consumption unless the water hoi passed tome distance through the ground, for example by artificial recharge.
• Water loss by transpiration can be eliminated, along with man beneficial vegetation, in and around reservoirs and streams.
• Immense losses by evaporation from reservoirs in arid areas can be reduced by monomolecular films on the surface of the water.
• Evaporation losses can be eliminated through use of natural and artificial underground aquifiers.
• Seepage losses can be prevented by lining canals and reservoirs.
• Cloud seeding might be used to redistribute the natural water supply.
• See water conversion, while a possibility, is much overblown as a water source because it is handicapped by high plant construction and operating costs.