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Speech by Dick Carleton, Merrill farmer, telling how the
effects of the ESA-gone-bad impacted his family.
posted to KBC 1/7/04  Speech was given in 2002.

Over the past couple of months you have been hearing through the media and elsewhere that the economic impact of the water shutoff this past summer has not been as catastrophic as expected. In fact, it has been reported that some farmers were doing quite well because of the government aid we received. The economists from OSU and University of California put the loss at 44.5 million, as reported in the Herald and News. What was not reported was how they arrived at that figure.

Dick and Margie, March 2003

The lady giving the report stated that they really didnít know how to determine an accurate loss as they had never come across a situation like we had in this Basin and had no model in their computer to use. Therefore, she said, they did as economists do. They picked a figure and then worked backwards to justify that number. Not one farmer was contacted to help arrive at an accurate figure. Assemblyman Dick Dickerson of California calculated that same loss at $300 million.

The impact on this Basin is just now really beginning to be felt and it will probably be several years before we fully recover, even with full water deliveries.

I would now like to take a couple minutes of your time to explain, from a farmerís viewpoint, what the effect of no water has actually been.

I am a 3rd generation farmer in the Klamath Project. I earned a Masterís Degree with a major in math and a minor in science. My, 81 year old mother still lives on the farm in Merrill that has been in our family since 1909. She is also solely dependent on that farm for her livelihood. She was hoping my grandson, the 5th generation, would be able to farm that land.

Now, to the economic impact we have felt because of the water shutoff. Our family farm lost about $800,000 in total gross sales, before expenses, last farming season. That revenue would have been generated primarily from hay and potatoes had we been able to raise them. That is about 80% of our total sales based on the 2000 crop year. That money supports 3 families as well as my mother. Up to this year we had 3 full-time employees and 3 to 4 seasonal employees. At harvest time we would have as many as 30 employees for the harvest season. That money supported them and their families also. That money also helps support 3 other families we rent ground from. Further, it provides the means to pay for such things as fertilizer, fuel, implements, parts, labor, payments on land and equipment, as well as repay our operating line. Almost all of the receipts from our sales came from outside the Basin, from as far away as the East Coast, as well as from foreign countries such as Japan, Korea, and Taiwan. This money was circulated throughout the Basin through the purchase of the goods and services I mentioned above.

This loss of sales revenue due to the water shut off has forced us into bankruptcy. Locally, 4 other farmers have filed bankruptcy protection for the same reason. (At least 3 other families chose to hold auctions last summer and fall. I understand there are about 15 other families who are on the brink of such action). But, it is said, "We got government aid.í We did and are very appreciative of the efforts of Congressmen Greg Walden and Wally Herger, Senator Gorden Smith and others for going to battle for us and securing 20 million dollars in aid for us in the Basin. We also thank them for their ongoing efforts on our behalf. That money was intended to go to us to be used to make land payments, tractor payments, house payments etc. In other words it was intended to keep us solvent so we would be able to continue operations in 2002.

Now, I would like to tell you where our share went. We received $122,000 as our share. Thatís a lot of money! But $30,000 of that was to go to the family we rent ground from. Also, that money is taxable. Most of the sales revenue from the 2000 crop year was paid to us in the 2001 tax year. Since we did not have water last summer, there were no expenses to off set those sales. We didnít have to buy such things as fertilizer, fuel, parts etc. nor did we have the labor expenditure to offset our sales. So, this double revenue with no expenses puts us in the 50% tax bracket between state and federal taxes. That means the government gets half, or $60,000 back. But, here is the catch. Remember we are in bankruptcy protection, and by court order, the bank gets it all. So, the bank gets the money and we are left with a $60,000 additional tax liability plus a $30,000 debt to our landlord. It will take us a long time to work out of this financial mess created by this regulatory drought.

I would like to think we are an isolated case, but I am sure that many of the other farmers in the Klamath Project are in the same position we are. This is only the tip of the ice burg and I am sure you will see more bankruptcies and auctions in the months to come.

Thank you,

Dick Carleton




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