The Inevitable Solution to Water Scarcity: Charge What It IS Worth

Dr. David Denslow

Dr. David Denslow has written an article today in the Gainesville Sun, under “Economic Views” where he summarized the problem we all talk about, which is the scarcity of water and subsequent degradation of our resources.  He writes:  “Raising the price today will save water for tomorrow, easing the shortage.  The sooner we start raising the price, the better.”  And he goes on: ” Study after study shows that raising the price reduces the gallons used.”  Higher income homes use proportionately more water.  Lower income homes use less.

We could apply the same formula to agriculture, who says that they must have huge amounts of water and polluting fertilizers to grow our food, otherwise they would grow less and we would have to pay more.   Maybe they should grow less, and maybe we consumers should pay more.  Maybe that is the cost of having rivers and springs.  Maybe that is what will happen when the water runs out.

Finally, Dr. Denslow concludes:  “The alternative to raising prices will be exhortation and regulation.”

These are words of wisdom.  Please take note Mr. DEP, Mr. GRU, Mr. Water Management Districts, Mr. Governor, and Mr. Florida Legislature, Mr. Agriculture and Mr. Big Water User.

This is perhaps the best article we have seen regarding Florida’s water woes, thank you Professor Denslow.

Thanks to the Gainesville Sun for allowing OSFR to republish this article here in its entirety.  You can see the original at this link.

Higher prices for water are an inevitable part of the future

Published: Sunday, September 28, 2014 at 6:01 a.m.
Last Modified: Friday, September 26, 2014 at 5:57 p.m.

Decades ago, a boardwalk and changing rooms ringed Poe Springs. Parents sat on shaded benches to one side watching their children swim. A snack bar and dance pavilion stood nearby. Often teenagers jumped off the diving board over the main boil and, without surfacing, swam underwater down the run to the Santa Fe River.

Now the changing rooms and diving board are gone, and only small chunks of concrete hidden in the dirt memorialize the dance pavilion. The structures were razed soon after the courts ruled that the residents of High Springs living in the neighborhood served by sand roads had to be admitted. Thanks to a donation years later and county support, the springs area has become an attractive park.

That underwater swim, easy then, now requires rare lung capacity. The current down the run has weakened by two-thirds. Poe, along with other springs, signals that our aquifer is finite. The time has come to obey Cynthia Barnett’s call in “Mirage” to raise water charges to the cost of providing an extra gallon.

Suppose that 80 percent of Gainesville Regional Utilities’ water came from the aquifer and the rest from desalination at a cost of $20 per thousand gallons — four to five times the current price. Since each 1,000 gallons of consumption avoided is worth $20, that would spur consumers to conserve appropriately.

Now suppose that all the potable water we consume can be provided cheaply today but will soon become much more costly. Raising the price today will save water for tomorrow, easing the shortage. The sooner we start raising the price, the better.

But who could blame Gainesville city commissioners, who are the GRU directors, if they refuse to touch this? Charging a price for water below its long-run cost is a subsidy. As with any subsidy, it becomes viewed as a sacred right. Voters retire commissioners who raise the price of water.

And would it be worth the bother? What if raising the price of water failed to reduce its use? Don’t worry about that. Study after study shows that raising the price reduces the gallons used. Doubling the price now would gradually reduce consumption by a third below trend. With GRU’s residential use at some 12 million gallons per day, that represents 4 million gallons per day saved. That would both save cost and raise revenue for GRU.

A large share of the water savings would come from low-income households, which are more sensitive to prices. To offset that, the revenue gained could be used to reduce the fixed monthly meter charge, or to subsidize residents of older houses to replace dated washing machines and dishwashers. Though the newer models save too little water to be worth the replacement cost, they also save electricity.

In Alachua County, as elsewhere, the more affluent residents in the newer houses use the most water, mainly because they are more likely to have automatic sprinkler systems. (I owe ideas and local data to many sources, especially UF’s Jennison Kipp and Lynn Jarrett, and Kenneth Friedman’s 2013 UF dissertation.)

Looking only at single-family homes built since 2000, those without irrigation systems average about 190 gallons per day.

Apartments and condominiums use less than half as much, but single-family homes with irrigation systems use almost twice as much.

Neighborhoods range from Turnberry Lake with 3,000-square-foot houses on half an acre to Blues Creek, with 1,500-square-foot houses on a tenth of an acre. Turnberry Lake, along with Arbor Greens and Cambridge Forest, consume over three times as much water per home as Blues Creek.

Indoor use in Turnberry Lake, Arbor Greens and Cambridge Forest will not respond much to higher prices. But over time their residents and others of similar developments will find ways to reduce their major use of water — irrigation. They will place moisture sensors in the lawns, aim sprinklers to reduce overspray such as watering driveways, and landscape with drought-resistant plants.

The alternative to raising prices will be exhortation and regulation.

Exhortation and regulation will reduce GRU’s revenue and at the same time raise costs, from mailing messages and tracking down violators. When restricted to watering on certain days, people water longer on those days. Required to use low-flow shower heads, they shower longer.

More and more, we’re learning to accept charging for scarce government-provided goods and services. Congestion fees for roads are an example. Someday we also will accept higher prices for water.

Dave Denslow is a local

economist. He can be reached at [email protected].



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