1. Arkansas RIVER farms: investing in diversifying the region’s agricultural economy -- Economic and fiscal impact analysis
Prepared by: Doug Jeavons & Michael Verdone, PhD. Managing Director Senior Associate
September 22,

2. Overview and Status
ARF has already invested over $50 million to acquire farms and $1.6 million in augmentation improvements to date. They expect to spend up to $9 million more to develop up to 4,300 flexible irrigated acres.
ARF’s investments in irrigation and crop production will enable its prospective tenant, Colorado Dairy Partners, to invest an additional $40 million in the Valley to develop a state-of-the-art mechanized dairy near Las Animas
ARF retained BBC to analyze the economic and fiscal effects from these activities
This analysis includes:
Short-term and long-term effects on the regional economy
Fiscal effects on the Bent, Prowers and Otero counties

3. Long-term Economic Effects of Crop Irrigation and Production Enhancements
ARF owns nearly 14,000 acres of cropland in Bent, Prowers and Otero Counties
Water supplies and production are being enhanced by stacking water on the best acres, supplementing Ft. Lyon Canal renewable water supplies with ground water pumping capability through LAWMA, and potentially developing integrated pivot irrigation systems
Long-term economic effects were analyzed by estimating historical production values from these lands, and comparing to projected production values with ARF’s project
Estimated pre-project and post-project crop revenues were incorporated in a multi-county regional IMPLAN economic model to estimate effects on employment, labor earnings and other metrics in each county

4. ARF Acreage and Uses – Before and After
Source: ARF 2017.

5. Regional Economic Effects from Change in Crop Production
Regional economic effects from crop production on ARF lands were modeled for historical production and projected production with the ARF project
Economic modeling based on a multi-regional, IMPLAN input-output model to capture overall regional effects and effects by county – including cross-county trade flows
The improved crop production from the ARF project is projected to increase regional employment by about 17 jobs, and add approximately $1.2 million per year to regional output and labor income (see details on next page).

6. Long-term Economic Effects of Las Animas Dairy
The purpose of consolidating farming operations and developing a more reliable water supply is to attract larger agricultural businesses to the region, including a prospective state-of-the-art dairy near Las Animas
Colorado Dairy Partners plans to invest about $40 million to develop the mechanized dairy, which will include about 5,000 milking cows
The dairy will produce about $24 million per year in milk and related products, and will directly employ about 35 workers
Apart from the regional economic stimulus from these new jobs and salaries, the largest economic contribution from the dairy will result from purchases of feed from other (non-ARF) farms in the region

7. Potential Long-term Dairy Effects for Regional Crop Producers
Feed averages over 70 percent of total costs for large dairies (ERS, 2016). The Las Animas diary will require about $17 million per year in forage and grains.
ARF farms will eventually supply about ½ of the feed needed by the dairy, most of the remainder likely will be purchased from local producers.
Of the $120 million in annual forage and grain production in the region (excluding ARF-owned farms), nearly 90 percent is produced in Prowers and Otero Counties.
Source: IMPLAN, 2015.

8. Projected Annual Dairy Feed Purchases from Regional Producers

9. Summary of Long-term Economic Effects from ARF
At full buildout, upgrades to irrigation and crop production on ARF-owned farms projected to increase annual productivity by about $1.2 million per year (15%) and add about 17 new farm jobs
Benefits primarily in Bent County
The new Las Animas Dairy will employ about 35 workers with an annual payroll of about $1.5 million
The dairy will purchase at least $8 million in grains and forage (beyond production from ARF- owned farms), mostly from regional producers
Benefits primarily in Prowers and Otero Counties

10. Short-term Effects from ARF Investments
ARF plans on investing up to $2,000 per pivot-irrigated acre on construction of pipes, ponds, pivots, etc. Including $1.6 million already invested by ARF in augmentation monitoring systems, total investment will be up to $10.6 million.
Together with the $40 million investment in the dairy, ARF’s and Colorado Dairy Partners’ combined investment of approximately $50 million will produce substantial short-term economic benefits in the region.
Based on a 3 to 10-year development period, ARF’s irrigation system development expenditures are projected to support about between 13 and 41 short-term jobs per year.
Based on the same development period, Colorado Dairy Partners’ dairy development expenditures are projected to support about between 41 and 136 short-term jobs per year.

11. Incremental Economic Benefits from ARF Farm Operations as Investment Moves Forward

12. Effects on Tax Revenues
ARF’s project will affect property tax revenues in each county due to reclassification of some agricultural lands.
Although ARF is making substantial investments for new pivot irrigation systems, the county assessors do not levy property taxes on these improvements.
The dairy being developed by ARF’s affiliate, Colorado Dairy Partners, will generate substantial property tax revenues in Bent County.
The additional economic activity from increases in crop production, dairy activity, and the attraction of other users needing flexible water shares will also generate sales and use tax revenues for local governments.

13. Summary of Tax Effects in Bent County
Note: Property tax revenues include school districts and special districts as well as county government revenues.

14. Summary of Tax Effects in Prowers County
Note: Property tax revenues include school districts and special districts as well as county government revenues.

15. Summary of Tax Effects in Otero County
Note: Property tax revenues include school districts and special districts as well as county government revenues.

16. Summary of Key Findings – Bent County
Irrigation Improvements:
Construction projected to support 12 to 38 jobs in Bent County and generate $9,000 to $28,000 per year in sales tax revenues.
Increased productivity on ARF’s Bent County farms projected to support 19 additional jobs in the county and $1.3 million/year in additional labor income.
Bent County property tax revenues from ARF farms projected to decrease by about $54,000 per year (including taxes for school districts and special districts)
Dairy:
Dairy construction will support about 40 to 134 jobs over 3 to 10 year period and generate at least $24,000 per year in sales tax revenues within Bent County
The diary will directly employ about 35 workers. Annual property tax revenues from the dairy will exceed $600,000, including taxes for school districts and special districts.

17. Summary of Key Findings – Prowers County
Irrigation Improvements:
Construction projected to support 1 to 3 jobs in Prowers County over 3 to 10 years and generate up to $7,700 per year in sales tax revenues.
Prowers County property tax revenues from ARF farms projected to decrease by about $8,700 per year (including taxes for school districts and special districts).
Dairy:
Dairy will purchase over $8 million of feed per year (beyond production from ARF’s farms), including projected purchases of $2.1 to $3.4 million per year from Prowers County producers.
Economic activity supported by dairy feed purchases, and other dairy activity, projected to generate $24,000 to $37,000 per year in sales tax revenues in Prowers County.

18. Summary of Key Findings – Otero County
Irrigation Improvements:
Production on ARF’s Otero County farm projected to decline by about $150,000 per year.
Otero County property tax revenues from ARF’s farm (including school districts and special districts) projected to decline by about $3,000 per year.
Dairy:
Dairy will purchase about $8 million of feed per year (beyond production from ARF’s farms ), including projected purchases of $2.6 to $3.8 million per year from Otero County producers.
Economic activity supported by dairy feed purchases, and other dairy activity, projected to generate $20,000 to $30,000 per year in sales tax revenues in Otero County.