Water Management
Price of Paradise · Hawaii Public Radio · aired 1993-08-01
Guests: Jim Moncur (Professor, University of Hawaii); Dick Bowen (Professor, University of Hawaii)
Duration: 00:26:42

[00:00:03] Randall Roth: With me today are two economists from the University of Hawaii, Jim Moncur and Dick Bowen. Jim is a professor in the Economics Department, and Dick is chairman of the Agricultural and Resource Economics Department. Jim, are we running out of water?
[00:00:20] Jim Moncur: Well, it still comes out of the faucet when I turn the the handle, but there there are a couple of ways to answer that. One is to look at short-run problems. How do we allocate what what we happen to have right at the moment? And the other is to look at how do we alter the allocation over a long period of time. How do we transfer water from obsolete uses to areas where it's a of growing demand?
[00:00:49] Randall Roth: You mentioned the short run. Are we short of water in the short run?
[00:00:53] Jim Moncur: Well, again, when I turn the faucet on, the the water comes out. So in that sense, we're, I guess we're not. The question is always whether we want to have how much excess capacity we want to have in the system. If we're in a period of drought as we were a few months ago, there's not quite enough to to allow everybody to continue doing things exactly the way they did in the past, watering the lawn and and cleaning the sidewalk with water and and all that sort of thing. But over the long run, we have to face questions of growth in in the demand for water.
[00:01:34] Randall Roth: I I've got to say you you don't make it sound as though we've got too big of a problem, at least not in in the short run, Dick. Do you concur?
[00:01:42] Dick Bowen: Yeah, I don't think it's that major a problem. I think there is a there is an issue of we could the Board of Water Supply probably could eliminate short shortages in the short run if they had a lot of of capacity, they put a lot more wells in they could do that, but that costs money. And so it's a question of do you want to spend a lot of money to have that reserved capacity, or do you want to occasionally have to ask consumers to cut back or or raise the price in some ways that force them to conserve when you have a shortage?
[00:02:13] Randall Roth: What about the price that we pay right now? Is it relatively high or relatively low? Or is is it possible to compare that sort of thing, Jim?
[00:02:20] Jim Moncur: It's probably been on the low side. Some data that I saw a couple of years ago suggests that urban water rates in the US are lower than in most other countries, and that and I happen to know that water rates in in Hawaii are lower than the average for the US as a whole. So we probably get get off somewhat lower, cheaper than than most other places in the world. It's also possible to draw some conclusions from looking at the cost data from the Board of Water Supply.
[00:02:56] Jim Moncur: For several reasons, the costs as they are stated on the accounting books are probably lower than than the real cost, the the full economic cost of of devoting resources to the production and distribution of water.
[00:03:12] Randall Roth: Does that hurt anything?
[00:03:13] Jim Moncur: Well, it means that since the costs [unintelligible — audio glitch] low, appear to be low, the the price is set lower than it should be, and that doesn't provide the proper incentive for people to to conserve. If it's cheap for me to to get water, I'm not going to bother being careful with the laundry or the dishwasher or the yard, what have you.
[00:03:40] Randall Roth: People don't respond to pleas to cut back on the use?
[00:03:45] Jim Moncur: They do, they do, but it's it's they don't they don't keep up with that sort of thing forever. That's a fairly temporary effect.
[00:03:54] Randall Roth: Just while they think it's a crisis or a pending crisis?
[00:03:57] Jim Moncur: If you look at what happened in California in the last what was it six or seven year long drought, once they began setting up surcharges for for water use, water use declined quite considerably, and it kept up.
[00:04:13] Randall Roth: Dick, a minute ago Jim mentioned that we had been in a drought, but I got the impression that he thinks it's over.
[00:04:20] Dick Bowen: Well, we are we are heading in the rainy season. We have had a little more moisture recently. I I'm not quite sure. I'm sure the Board of Water Supply is sitting there not sure if it's over or not. But let's hope so. It is getting close to the traditional rainy season.
[00:04:33] Randall Roth: Do we generally speaking get as much rain now as we got 10 years ago or 20 years ago or can you really tell?
[00:04:41] Dick Bowen: I'm not I'm not sure you can tell. It seems like we have had, since I've been here, and I've been here 11 years, there have been quite a few dry years below the norm, so, but is that just, you know, these things happen, or is there some dramatic climate change? You know, is this kind of debate going on. Has the worldwide, have you know, have we had a shift and I don't think the answer is there yet, so, uh, we don't know.
[00:05:04] Randall Roth: Jim, do you have any thoughts on that one?
[00:05:07] Jim Moncur: Well, I'm not an expert on on climatology or hydrology or that sort of thing. Uh it does seem to be true, from what I've read, that the geologists are finding that the that the water table in our in the groundwater is has declined somewhat over over the years on Oahu. And that's an indication that we're using more than what we than what we that we're using more than what we can continue to use.
[00:05:41] Randall Roth: We're taking more out of the bank than we're putting in.
[00:05:43] Jim Moncur: Right, right, right. We have some savings, but we may we may come to the end of them.
[00:05:48] Randall Roth: You you mentioned earlier that there are some obsolete uses of water. Are are you talking about irrigation of of sugar, and does this tie in with the closing of various sugar plantations?
[00:06:02] Jim Moncur: Yeah. In in fact, I probably shouldn't have used the word obsolete, but that's a rather inflammatory version of it, but sugar plantations can continue to produce mainly be because they have in the past received support from import restrictions. The price is higher than it would would have been, price of sugar is higher than it would have been without the import restrictions.
[00:06:31] Randall Roth: But wouldn't you say it's just a matter of time before all of the sugarcane in Hawaii is is gone?
[00:06:38] Jim Moncur: I gather not too much of it will be will be around into the distant future. Certainly, Oahu Sugar Company is already announced that they will fold in a couple of years. And how much longer sugar can keep on is certainly an open question. On the neighbor islands it may be a little different.
[00:06:59] Randall Roth: Dick, do you have any different thoughts on this?
[00:07:01] Dick Bowen: Yeah, there's been a dramatic recent reduction in in sugar acreage on the Big Island and now Oahu sugar on this island, so I think those two islands, I wouldn't be surprised in a few years, there's no sugarcane. There's only one plantation left on Oahu and one on the Big Island. Kaua'i and and Maui could last some time, it really depends what happens in world trade with the negotiations going on. But as long as there's protection, there's I think there's some hope. There are a few plantations that that may be able to continue going for some years, particularly on Maui, the HNCNS plantation is probably the strongest.
[00:07:40] Dick Bowen: But I I think you're going to see dramatic declines continuing.
[00:07:45] Randall Roth: Who who owns the water? For example, when Oahu Sugar Company shuts down, will they be able to sell their water rights to somebody else and and make some money on that?
[00:07:56] Dick Bowen: I would say right now, no. The water code that was enacted a few years ago by the legislature, I believe prohibits the sale of water while under a permit, which is what water in central Oahu is, so they're not they're not able to sell that water. So right now, I think it's going to be a grab. I know the Board of Water Supply wants to get in and and get allocated all that much of that water. And I'm not sure there's going to be a lot of competing uses because I don't see a lot of agriculture coming in to the interim.
[00:08:29] Randall Roth: Does that mean that our water law right now basically says use it or lose it? It's it's yours as long as you're using it, but if you stop using it, then it's going to go to somebody else?
[00:08:39] Dick Bowen: That's that's correct, yeah.
[00:08:40] Jim Moncur: Yeah, it does say that the the water code was very um sort of ineffective in terms of of defining who actually owns the water. Someone who owns water or owns the water rights, I should say, can can simply sell them once the the value of his uses of the water gets gets rather low. Here, you can't sell the stuff, and so there's no incentive to transfer water into higher valued uses as the economy changes the the relative values of different uses.
[00:09:29] Randall Roth: So, the sugar companies have been using water that isn't nearly as valuable to them as it would be to some others, is that what you're saying?
[00:09:39] Jim Moncur: Well, that's an that's an interesting question. It gets us into kind of long run what what goes on in the long run. Dick, can you end
[00:10:02] Dick Bowen: Yeah, well let me say when you're talking huge acreage to 10,000 acres and a lot of sugar, you're talking about a lot of water but and you don't need all that in the urban sector right now, but at the margin that is, uh, definitely, I think the water is more valuable in the urban sector. I think in sugar, because the low price of sugar and this barely profitable, in some cases not profitable. It's it's very little value per unit of water, and we know there's a a large value. So, but then again, we're not talking about all of Hawaii sugar's water at the margin it is.
[00:10:32] Randall Roth: You're listening to the Price of Paradise radio show. I'm Randy Roth, and my guests are two economists from the University of Hawaii, Jim Moncur and Dick Bowen. Jim, what about the quality of our drinking water? Is it uh particularly good water?
[00:10:47] Jim Moncur: Well, yes, I anyone who goes to uh anywhere else in the US virtually and and drinks water out of the tap realizes that that uh it certainly tastes great here. Uh but all the indications I know of uh indicate that uh that the um all of the quality indicators of our drinking water are quite uh quite uh good.
[00:11:17] Randall Roth: Now, the person that came to my door the other night wanting to sell me a water filter system, uh they didn't seem to think that it was all that great. What do you think, Dick? Do you agree with Jim?
[00:11:30] Dick Bowen: Uh I agree. I think we have the best some of the best water in the world right here. I don't think uh most people need a a filter.
[00:11:37] Randall Roth: Okay. Golf courses. We've had a number of guests on past shows talk about golf courses and it seems as though most, if not all, have said fairly positive things about them, and I've had a couple listeners contact me and say they think that maybe that's a bit one-sided. Interestingly, each listener has has said that water was their primary concern, the primary reason why they didn't want to see more golf course development. Where do you guys stand on on golf course development, Dick?
[00:12:05] Dick Bowen: Well, I have two stances. I'm a I'm an economist and I'm also a golfer. So as a golfer I want to see more. It's expensive and difficult to play in Hawaii. As an economist though I I support golf courses. Uh I think um I think they're a social of of good social value. I I don't uh understand really why there's great resistance to golf courses here. I think they're environmentally they're very attractive. Uh in many cases they're they're better looking than what they're replacing in in agriculture.
[00:12:38] Dick Bowen: Uh so I have no problems uh seeing more golf courses, um, and uh I don't I think a lot of the conflicts you see are specific cases where maybe a few farmers are having to relocate, and they're going to fight it, and you get a lot of you get a lot of uh press for that but uh not that many people are harmed by golf courses.
[00:12:57] Randall Roth: I see. Jim, how much water does a golf course use? Is it uh in the same category as as sugar irrigation or does it use more or less than that?
[00:13:06] Jim Moncur: Um, well, you're probably asking the wrong man, but my impression is [unintelligible — audio glitch] about the same. Um, we should point out that golf courses are are on agricultural use of water, and if we want to keep agriculture going here, that's one form of it. Um, they they perform the same function for quality that uh sugar plantations do or pineapple or whatever. Um, once you apply the water to the grass, it goes uh into the uh the ground and the ground helps filter it so it can be used again. Uh there are I suppose some different um uh herbicides and and so on that are applied to uh golf courses as compared to sugar plantations.
[00:13:53] Jim Moncur: But um I don't see any reason for thinking that it's a bad uh switch.
[00:13:57] Randall Roth: Dick, would you consider it an agricultural use of the land?
[00:14:01] Dick Bowen: Uh in ways it is. Uh [unintelligible — audio glitch] workers that work on maintaining the golf course are actually classified as agricultural workers. Um it's different. It's not your small farm, it's not the independent farmers, uh, so a lot of farmers will not agree with me uh and not So, it it is and it isn't. Uh but I it does employ ag workers and it does have benefits.
[00:14:23] Dick Bowen: The other thing that I I sometimes like to point out is that I favor golf courses attracting tourism, because I think that on balance tourism and agriculture uh are more uh complimentary than competitive. And that a lot of people do not agree with that, but we've actually studied this for three years, and uh agriculture in these days uh operates a lot off of tourism in terms of its marketing and new products, and so [unintelligible — audio glitch] see them as going hand in hand.
[00:14:52] Randall Roth: You're listening to the Price of Paradise radio show. I'm Randy Roth, and my guests are two economists from the University of Hawaii, Jim Moncur and Dick Bowen. Jim, I think you noticed that I offered you a glass of water when you came into the studio today, uh and yet when we go to a restaurant here on Oahu, we don't get a glass of water unless we ask for it. What's going on?
[00:15:12] Jim Moncur: Well, it's that's an attempt by the Board of Water Supply, I think, to raise awareness uh that there is a an impending uh water problem uh here over the long run. Uh I don't think it's uh saves a hill of beans worth of water, um, to mix metaphors there.
[00:15:32] Randall Roth: Beautifully, I might add.
[00:15:35] Jim Moncur: Uh but uh it does make people uh aware that that we have something of a uh of a water problem. I would I would say just set the price at uh at at marginal cost if you will, and um uh let people use it the way they want to. Uh actually [unintelligible — audio glitch] serving of of water in restaurants is only one aspect of of this uh same kind of problem.
[00:16:03] Jim Moncur: The Board of Water Supply and the City Council have uh declare declared all kinds of uh conservation requirements lately. Just uh last week the Star Bulletin had a front page story about the difficulties encountered by some small businesses uh in uh retrofitting their plumbing uh to accommodate low flow uh toilets and other uh water uh using devices.
[00:16:27] Randall Roth: And they can't install it themselves. They have to use a licensed contractor.
[00:16:29] Jim Moncur: Right. Isn't that nice?
[00:16:33] Randall Roth: Is that good for the community to um to require that these businesses use uh water-saving devices?
[00:16:40] Jim Moncur: Well, in a lot of cases, it's going to mean that these businesses are going to go out of business, and um that means, of course, that the some services that are now provided aren't going to be provided. And um um uh just pay the uh uh pay a higher rate to the Board of Water Supply and pass that cost on to their customers.
[00:17:08] Randall Roth: Dick, as I understand what Jim's saying, we should just let the market control how this scarce resource, water, is allocated. Um, what do you think about that? We we say if somebody wants to use it for farming or somebody wants to use it for whatever business, just step right up and pay the going rate.
[00:17:27] Dick Bowen: I would say that markets are are very valuable to have that it does uh creates incentives and people we have win-win that both sides have an incentive to to transfer water. Uh I think that there's there may be some misunderstanding that you're just opening up the anything can happen. I think even in a market system uh in the West that you still have a community groups or individuals still have a right to come in and protest a transfer if they see some social damage occurring because of a water transfer. So, uh it's not just opening up this water to anybody doing anything with it. There's a lot of checks and balances that can be preserved.
[00:18:04] Randall Roth: Okay. Jim, did I put words into your mouth? Do you feel that this should just be a a market system?
[00:18:10] Jim Moncur: Well, I would certainly like to see a lot more elements of the market uh embedded in our water allocation system in our water code and and uh uh I would I would rather see a much more price-oriented allocation process at the level of the Board of Water Supply, let's say.
[00:18:26] Randall Roth: That that makes sense to me, but at the same time it seems as though the the big water users would enjoy a a windfall here, wouldn't they? Wouldn't they have tremendous profits selling all that water?
[00:18:38] Jim Moncur: They might. Um, big landowners uh uh make tremendous profits doing that kind of thing too. So do small landowners incidentally. And uh there's no reason why uh um smaller water holders wouldn't uh wouldn't uh feel the same way.
[00:18:55] Randall Roth: Now, as I understand it, we really don't have a transfer system now. The prices of water are just arbitrarily set and they can be arbitrarily raised or arbitrarily lowered, but a person who has the right to use water now cannot sell it for a higher amount to someone else. Dick, is that correct?
[00:19:15] Dick Bowen: They cannot sell it. Uh, he can tr- he can request the Water Commission to transfer it to some other party. So-
[00:19:22] Randall Roth: Will they approve that?
[00:19:23] Dick Bowen: And if they, they might, if particularly if it's on the same land and the use hasn't changed very much. It's still an ag, let's say, and it's not a dramatic difference. So-
[00:19:31] Randall Roth: What if they- What if they're trying to cash in on it? They're trying to sell it to somebody that's going to develop a golf course or a housing tract or something like that.
[00:19:37] Dick Bowen: My understanding is that they're prohibited from selling water that's under permit, so they cannot sell that water, uh, directly. There may be ways because of land and water are sort of tied away together, there may be ways they're still in a sense getting money for that water but not directly by sale.
[00:19:54] Randall Roth: I see. I had the impression that- that it would be per- perfectly, uh, in accord with the water code, to approve uh, uh, transfers that have been arrived at by a willing buyer and a willing seller, um, but they don't don't have to.
[00:20:11] Dick Bowen: It's up to them whether the- it's up to the Water Commission whether they want to approve, uh, transfers of-
[00:20:16] Randall Roth: Okay. They're-
[00:20:17] Dick Bowen: I think there's some uncertainty whether there's money involved or not.
[00:20:19] Randall Roth: Okay. What I- What I'm referring to is when they passed the bill, the conference report, one of the conference reports on that bill, said that right in there that's the intention, however, that water not be sold if it's under permit. That's not in the law, but it's in the conference report, so how do you interpret that?
[00:20:36] Dick Bowen: It was explicitly- It was explicitly deleted from the law before the law was passed. That's right.
[00:20:40] Randall Roth: Yeah. So I think there's some uncertainty how a court if somebody challenged it-
[00:20:44] Dick Bowen: Sounds to me like we need some more lawyers. Untangle what they've tangled. You're listening to the Price of Paradise radio show. I'm Randy Roth, and my guests are two economists from the University of Hawaii, Jim Moncur and Dick Bowen.
[00:20:58] Randall Roth: Dick, what about small farmers? How do they fit into this? Can they afford to pay the going rate?
[00:21:04] Dick Bowen: Well, we have some small farmers and on O'ahu's an example that are operating off the county system, and this has been a bone of contention of whether they should get uh, preferential water rates, which they do get now. They- they pay less than the urban consumers. Uh, I have, however, have uh, even testified in favor of this for several reasons. One, uh, they're small farmers. They're- they're paying a lot, even though it's a- it's a lower rate than the urban customers, they're paying a lot. If you look at other agriculture users. They're paying hundreds of dollars per acre feet if you want to measure it that way, versus in California or even a Molokai $10, $15 an acre feet. They're- they're paying 10, 20, 30 times as much. They're already very efficient. Raising the price, I don't think is going to make them more efficient. They're using drip irrigation, they're not wasting water. It may drive some of them out of business. The other aspect is that they're probably, if the county took them off, they're probably going to be a lot of pressure on the state to come in and build an- another ag water system, and that's going to be more expensive than subsidizing off the present system.
[00:22:09] Randall Roth: Jim, do you agree with that?
[00:22:11] Jim Moncur: Well, I'd be, um, uh, in principle I don't like the idea of giving subsidies- uh, uh, through lower water rates. If we want to subsidize small farmers, let's subsidize small farmers by uh- Give them money. give them give them money. That's a good way to do it. Uh, but on the other hand, it's a- it's a relatively minor, uh, fraction of the total total amount of water that we have here and uh, I- it's just something I don't feel I feel terribly strong about.
[00:23:10] Randall Roth: You've commented that in the long run we have a water shortage. Why is that? Is that just because there are more people in Hawaii every year? Because it's too cheap. Dick?
[00:23:18] Dick Bowen: I'm not so sure you can say there's really is a shortage in the long run. Uh, there's a shortage only if, you know, like the institutions don't work right. Uh, and Jim I know would agree with this that, uh, sure the I think what what we're really saying though is that the there's water is becoming more scarce and the value is going up. But that doesn't mean necessarily you have to have a shortage. It just means that you can't give every user all the water they want. That you've got to uh, allocate that water and the market system is one way to do that.
[00:23:48] Randall Roth: We've got about one minute left. How should we improve the system? If we were to take just one step, what would that step be, and and whose job is it to take that step, Dick?
[00:23:49] Jim Moncur: Uh, the population is growing. That's the that's the big thing. Uh, there are no, uh, prospective new industries for Hawaii that will use an awful lot of water. It's mainly just population growth, um, and uh, well, there are a lot of ways that we could figure out to conserve water. If- for each of us to use a little bit less, uh, we don't have much of an incentive to do that right now.
[00:24:01] Dick Bowen: I think it would probably look at the water code. It's it's uh, in fact, it's timely because there's a Water Review Commission right now looking it's looking at the water code. Uh, and I think that there I think they ought to look again at this transferability issue that uh, and and allow more flexibility uh, because I think now's a good time to do it, because we're the water actually because of Sugar shutting down is not a a major problem. It gives us breathing room before it becomes contentious again. So I think I would say, revise the water code to allow more flexibility.
[00:24:34] Jim Moncur: I agree. I agree Dick. Uh, uh more immediately, I think we can pay a little more attention attention to getting the price right.
[00:24:42] Randall Roth: Thank you, Jim. Thank you, Dick. Our guests this week were UH economists Jim Moncur and Dick Bowen. For information about future programs, send a self-addressed, stamped envelope to Hawaii Public Radio, 738 Kaheka Street, 96814. We also would like to hear your thoughts about what we've said, or not said. Those comments can be sent to Hawaii Public Radio or fax to me at 956-6402. You've been listening to the Price of Paradise radio show. I'm Randy Roth. Aloha.