The Economic Impact on the Local Economy of Irrigated Agriculture in the Paso Robles Area and Potential Impacts of the Sustainable Groundwater Management Act
Grant-Funded Report August 26, 2020.
The purpose of this study is to analyze the economic impact of the agricultural and wine industry within the Paso Robles Subbasin and AVA and San Luis Obispo County and to assess the economic impact of potential changes in the agricultural industry as a result of the Paso Robles Subbasin Groundwater Sustainability Plan that will reduce water allocations and/or increase the cost of water in the basin from 2020 – 2040 and beyond.
The Groundwater Sustainability Plan submitted to the state Department of Water Resources notes that if water use and precipitation patterns continue, the basin will be in overdraft by 14,000 acre-feet annually, which is about 17% of the total draw from the basin, based on hydrologists’ reports. Groundwater is the only source of irrigation water for agriculture in the subbasin. We analyze scenarios in which 10%, 17% and 23% of current water use is reduced. We show the economic effects for both irrigated agriculture as well as the impacts of lost fruit production for wineries in the region.
The loss to the Paso Subbasin economy from reduced irrigated agriculture ranges from $49.5 million to $146.3 million in lost economic value and in terms of employment, losing between 459 and 1,289 jobs, depending on the water reduction. The economic impact of lost wine value is even more significant, resulting in $183.4 million to $458 million loss to the overall economy in the subbasin, and $83.8 million to $215.6 million in lost output value to Paso Robles wineries. Job losses are estimated at 1,358 to 3,351 across the PR Subbasin economy, because of the lost grower, wine producer and consumer sales and expenditures. The Paso Robles wine industry is estimated to lose 376 to 967 jobs.
The analysis provided here indicates that between 12% to 32% of the total economic value and jobs could be lost in the Paso Subbasin wine industry, and between 10% to 26% of all SLO County winery economic output and jobs. In terms of lost economic value to the overall agricultural economy, both our analysis and an independent study sponsored by the SLO County Agricultural Commissioner’s office show that the SLO County wineries contribute almost $860 million to the overall SLO County economy. Our analysis indicates that between 21% and 53% of the total value of output could be lost from SLO County’s wine industry should water cutbacks occur. Irrigated agriculture overall will also have significant losses, with an estimated 4% to 11% decline in the total value of SLO County production agriculture.
This study is intended to provide an overview of potential economic impacts that may result from reductions to groundwater use for irrigated agriculture. The economic implications of water reductions are sizable and would cause a restructuring of the local business environment. This analysis may provide impetus for local officials to pursue alternatives for additional water supplies and find creative solutions to pursue groundwater sustainability in the Paso Robles Subbasin.
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