Economic Effects of Rural Water Systems on Agricultural Production and Productivity in Selected Counties in South Dakota

Insufficient quantity and quality of water in South Dakota are two reasons rural residents have been turning toward rural water systems to meet their water needs. The first large rural water system was organized in 1962 to serve 700 rural residents near Rapid City. From 1962 to 1970 the growth of rural water systems in South Dakota was slow with only nine systems in operation as of 1970. Currently, the total capital investment for a large system averages $4.5 million. This amounts to an investment of $4,700 per hookup and an average monthly user charge that would exceed $20 if the system were to be self-supporting. If all the communities in South Dakota wanting rural water were aggregated, it would cost $46 million to develop the systems. This amount of growth is of great concern to the state because rural water systems are usually not financed by their members. One reason for this is because many users continue to use their old source of water. The cost of providing a system will be even higher in the future because inflation may cause higher construction and operating costs in a new system. Because of these large and increasing costs, water systems have to rely more and more on subsidies, either through grants or low interest loans. With the recent Federal Budget cuts and the pressure for more cuts in the future, rural water systems will have to prove their usefulness to the economy. Even then, rural water systems can expect less help from the Federal Government. Therefore, the state of South Dakota may be called upon to provide more money to rural water systems if the systems are to expand and survive. As mentioned before, rural water can affect the economy in many ways and there have been several studies that have shown the sociological and physical effects on the household and the community. This project will concentrate on how rural water affects livestock productivity and production in an eastern and western county in South Dakota. Productivity in this context is defined as the change in output per one unit of input and production is the change in livestock numbers. This study will be useful to groups that are considering implementing a rural water system and to policymakers and decision makers dealing with water related issues. The results of the study could have an effect on the availability of subsidies for construction of rural water systems. The main objective of this study was to develop a methodology to measure the total effects of rural water on the livestock sector of the agricultural economy in specified areas of South Dakota. The specific objectives of the study were: 1. To construct a model to simulate the effects of a rural water system on livestock production and productivity. 2. To test the model with empirical data from a survey of livestock producers in two South Dakota counties, one located in eastern South Dakota and one in western South Dakota. Differences due to geographical location were examined