Groundwater use by cities is more economically productive than it's use by agriculture. The former should be privileged in the inevitable allocation conflicts.
Farms can't afford to pay municipal rates which people washing their cars do. If you look at the cost of a car wash paying even say 0.1 cent per gallon would make a minimal difference, but no farm could afford to pay 0.1 cent per gallon.
Any system that forces farmers to compete with other users of water means the farmers lose.
However, I still think an auction system would create less distortion than case-by-case measures to de-prioritize agriculture in allocation conflicts.
My point: If you build a company in a location which is unviable in the long term, should you be subsidized as to not move to a more viable location? I think such subsidies are unviable in any but the short term, and are counterproductive for every other party involved.