Beverly Hills Billionaires Build a Water Empire In CA

Beverly Hills Billionaires Stewart and Lynda Resnick control an agricultural empire in the Central Valley of California which Forbes values at $4.2BN.  According to an article recently published by Mother Jones, the Beverly Hills based couple bought their first acres of ag land in 1978 as an inflation hedge.  Within 20 years the Resnicks had grown to be the largest producer/packager of almonds and pistachios in the world with 130,000 acres of land in the Central Valley and nearly $5BN in annual sales.  You’re all probably familiar with some of their brands:

But 130,000 acres of permanent crops requires a lot of water…about 120 billion gallons a year, in fact.  At that level of consumption, Mother Jones points out that the Resnicks consume more water than all the homes in Los Angeles combined.

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So in a state plagued by constant drought one might ask how the Resnicks built such a “thirsty” empire?  Well, at lease according to Mother Jones, they got a lot of help from taxpayers.

The Resnicks received their first taxpayer-funded water windfall in 1995 when they were effectively “gifted” the Kern Water Bank by the State of California (i.e. taxpayers).  Ironically, the State had just purchased the Kern Water Bank 7 years prior for $148mm (in current terms) to serve as an emergency water supply for Los Angeles.  We guess the threats that had led the State to seek out an emergency supply of water disappeared over the course of those 7 years.

As you might suspect, California taxpayers have always been a little suspect of the massive wealth transfer inherent in the Kern Water Bank deal.  As pointed out by the Los Angeles Times,the Kern Water Bank transfer has been the subject of decades of litigation with local water agencies and environmental groups that say “the Kern Water Bank transaction was essentially a gift of public property to private interests and therefore violates the state constitution.”

“By giving this resource away, not only have we lost money on the deal, but we’ve lost a mechanism to use this water for the most beneficial purposes,” Adam Keats of the Tucson-based Center for Biological Diversity, the lead attorney on the lawsuit, told me recently.

The storage facility is the Kern Water Bank, a complex of wells, pumps and pipelines on a 20,000-acre parcel of abandoned farmland southwest of Bakersfield. The water bank was initially part of the $1.75-billion bond-funded State Water Project, which provides water for 25 million Californians and irrigates 750,000 acres.

To be fair, the Resnicks did have to make “concessions” before being gifted the water bank…fortunately for them they gave up a whole lot of nothing.  According to the Los Angeles Times, the Resnicks gave up “junior water rights” associated with the State Water Project which the Times pointed out were “from a portion of the State Water Project that will never be built and therefore has no value.”  In fact, according to lawsuit documents, the Resnicks likely saved money by forfeiting their State Water Project allocation because it saved them from paying annual dues to the project.

To add insult to injury, Mother Jones points out that the story doesn’t end there.  The land that came along with the Kern Water Bank gave the Resnick’s access to water from California’s State and Federal Water Projects which could be purchased at attractive rates.  According to an analysis by the Contra Costa Times, between 2000-2007, the Resnicks were able to pocket $30mm by buying State and Federal Water allocations at $28 per acre foot and then selling to the State of California (taxpayers) for as much as $196 per acre foot.  So if we understand correctly, the Resnicks were gifted a $150mm project courtesy of taxpayers and then made an incremental $30mm selling the water they were gifted by taxpayers back to those very same taxpayers.  Genius.

Lest you thought there was something “fishy” going on, Lynda Resnick confirmed to Mother Jones that they have no political influence on water issues in California, saying:

“We have no influence politically—I swear to you.  Nobody has political influence in this. Nor would we use it.“

But as bad as that all sounds, at least from the perspective of California taxpayers, the current Resnick-supported, taxpayer-funded water grab by the Beverly Hills Billionaires puts the Kern Water Bank deal to shame.  Of course we’re talking about the “Delta Tunnels” project which is estimated to cost taxpayers up to $65 billion (this is a topic we recently wrote about in a post called “FishLivesMatter: California To Decide If Saving ‘Delta Smelt’ Is Worth $65 Billion Of Taxpayer Money“).

We’ll spare you all the gory details behind the project, but, in summary, when environmentalists effectively shut down water shipments flowing through the California Delta and into State and Federal Water Project canals in the northern part of the state the Resnicks, along with Governor Jerry Brown, floated the idea of building the “Delta Tunnels.”  The project contemplates building 30 miles of massive underground pipes to connect existing water canals to the Sacramento river in an effort to bypass the California Delta and all the environmental issues that come along with it.  The pipes could carry 67,000 gallons of water per second transporting the water to canals that would then flow to the Resnick’s farms in the southern part of the Central Valley.

But the original launch of the “Delta Tunnels” got push-back as taxpayers saw it as just another taxpayer-funded case of corporate welfare benefiting wealthy Central Valley corporate farming interests, like the Resnicks.  So what do you do if you’re a billionaire with limitless influence and taxpayers balk at giving you $65 billion for a pet project?  Well you put together coalitions like the “Californians for Water Security” and you poll 100s of “focus groups” to figure which buzz words work best to sway the hearts and minds of taxpayers.  Turns out, buzz words like “water security” and “fragile water infrastructure” combined with fear tactics incorporating risks from earthquakes is way more convincing to taxpayers than “massive taxpayer-funded wealth redistribution to Beverly Hills Billionaire farmers“…that just doesn’t have as good a ring to it.

Per Restore the Delta:

Public Records Act documents received from the Santa Clara Valley Water District show how Stewart Resnick’s Paramount Farms led the charge to create Californians for Water Security. They spent piles of money on focus groups with people from urban water districts, led by ratepayer-funded water district officials, to discover public fears and create messaging to sell the tunnels. This week, they are continuing by running from business chamber to business chamber to scare them into supporting the tunnels, falsely making the earthquake threat in the Delta somehow greater than the threat to the water system in Los Angeles. They forget, however, that time and time again in California, the majority of people do not see issues in the same way that dated, out-of-touch business chambers do.

So, with polling data in hand and an arsenal of buzz words from the focus groups, a new ad campaign was launched to convince Californians that they were going to die of thirst after the next earthquake wipes out California’s water infrastructure…that is, unless, the Resnicks get their $65BN.

And wouldn’t you know it, shortly thereafter, Governor Jerry Brown also coincidentally re-branded the project the California Water Fix and the fight goes on.

But we certainly don’t want to imply that the Resnicks have received all of these “perks” for nothing.  They have spent handsomely on political contributions over the years with funds flowing to Republicans and Democrats. As Mother Jones points out, the Resnicks have contributed money to every Californian Governor since Pete Wilson (who just happens to have been the Governor during that “questionable” transfer of the Kern Water Bank that we discussed above…but contributions to him were “small” at only ~$240,000 according theCenter for Investigative Reporting):

They’ve given six-figure sums to every California governor since Republican Pete Wilson. They donated $734,000 to Gray Davis, including $91,000 to oppose his recall. Then they gave $221,000 to his replacement, Arnold Schwarzenegger, who has called them “some of my dearest, dearest friends.” The $150,000 they’ve sprinkled on Jerry Brown since 2010 might not seem like a lot by comparison, but no other individual donor has given more. The Resnicks also have chipped in another $250,000 to support Brown’s pet ballot measure to fund education.

Data from the Center for Investigative Reporting on the Resnick’s political contributions over the years seems to support the Mother Jones data.  While California Governors seem to have benefited the most from the Resnick’s generosity, the DNC/RNC, state senators, congressmen and mayors all collected their fair share of the pie. 

Meanwhile, contributions have been spread out across the political parties.

While it is unclear whether the Delta Tunnels will ever be built we’re quite certain that the best interests of taxpayers will not get in the way of whatever decision is ultimately made.

Reprinted with permission from Zero Hedge.

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