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borne by the state. The cost is paid for equally by the water users. He agreed the way water is allocated in this state does not make a lot of sense. One of the reasons we are in the marketing business is that the environmental community has opposed building more dams and canals. They say we should take the water from the farmers and politically the best way to do that is through water transfers and purchasing. That is why water transfers are available through the federal and state systems. Mayor Tarver asked if the costs of water will be so much that it would be better for agriculture to go out of business and sell the water than to raise the crops. Mr. Dixon felt that was possible. Environmentalists are already concerned about developing deserts. You use public money to build expensive water projects to farm rice in the desert. One can question that policy, but that is what has been done. Now that water is being transferred to the cities through entitlements, he believed some people will make a great deal of money. Mayor Tarvet asked if Zone 7 had analyzed what the effect of this agreement would have been on the last seven year drought. Mr. Dixon said no. He did not think there would have been much difference. Because the drought was so severe, the 100% allocation or cut back occurred in the second year so that in the later cut backs, agriculture and M&I would have been the same. The loss to us versus other M&I users is because we have an agricultural enti~ement. Vince Wong, Zone 7, indicated that the worst year of the seven year drought was looked at and 70% of the entitlement was cut back, which is what was experienced in 1991. Under that situation we received 8 % less water than we would without the Monterey Agreement. Overall, within that seven year period, with the Monterey Agreement the net amount would be a 2 % reduction. Mr. Pico summarized that long range current entitlements are not enough to service the overall General Plan expectations and this agreement will effectively reduce by 2 % the amount of water that we would otherwise be able to potentially get. As a result of that, there will be a $220,000 year in savings, but Zone 7 may have to go out and purchase additional entitlements at some point in time. Mr. Dixon stated there is an existing contract to purchase water from the Byron Bethany Irrigation District (BBID) and the $221,000 a year will finance the transfer of 2460 acre feet of water at that price. When water is available at $35 an acre foot, Zone 7 can buy as much as 6500 acre feet of water. Zone 7 feels that with that money it will be fairly easy to buy water. We don't have to buy it in the worst of the drought because of the groundwater basin. The __ continued income of $220,000 will purchase approximately 2200 acre feet of entitlement at $1,000 acre foot, so that financially there is plenty of money provided in this agreement to 11 / 14/95 -7-