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IMPROVING NEW MEXICO’S WATER MANAGEMENT - page 20 / 47

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For Albuquerque, the curtailment due to one year of growth would be from 14.7 to 14.5

(000) gallons per month per household. This amounts to an annual economic loss per household

of $4.32. [(14,700 – 14,500) x ($1.59 + $1.67)/2] The total loss for the city on annual basis is

$469,346. By obtaining 1500 extra aft of water, citizens of Albuquerque would avoid the loss.

The long term annual value of additional water is then the total economic loss divided by the

amount of additional water that eliminates the loss, $313 [$469,346 / 1500] per aft (annual

basis). Table 12 indicates the long term annual value of water (“willingness to pay for additional

water”) for urban use along the Rio Grande. Santa Fe has very high value because water is in

very short supply and very expensive to the household. Albuquerque and Las Cruces have

approximately the same value. El Paso has a higher value reflecting its current shortage. Table

12 also indicates the water right value, the long term annual value capitalized at 6.5%. A water

right is considered a capital asset that produces an annual return – the long term annual value

outlined above. Capitalization is method for determining capital value from annual value.

Capitalized value is similar to the amount in a savings account that has 6.5% interest rate. All

these cities have active water supply and water right acquisition programs. Estimates for other

urban areas such as Roswell or Farmington are not available, but urban water values would be of

similar magnitude to Las Cruces.

Agricultural Value for Water

Often people overstate water’s agricultural value because other factors of production are

equally important. To be sure there would be little New Mexico agriculture except ranching

without water, but this is also true of capital, land and labor. When we examine the value of

water in agriculture, we must net out the returns to these other factors. Water has a high value

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