Report criticizes NID rate increases

A Nevada County grand jury report Monday blasted the Nevada Irrigation District for continually raising water rates while holding large financial reserves.

The report said NID "substantially underestimated revenues" by $24 million, or 20 percent, from 1999 to 2004, "resulting in increased rates for both agricultural and treated water in each of the last five years."

NID General Manager Ron Nelson said he did not understand where the grand jury came up with the $24 million figure and will have to investigate it with Tess Andrews, the district's financial manager.

"I've told the board we'll have a full response in 30 days," Nelson said.

"The $24 million is really not an accurate representation of what occurred," said NID board member John Drew. "It's really important for everyone to look at the big picture and wait for our response."

The grand jury said a $3.1 million underestimation in revenues in 2004 was equivalent to a 20-percent increase in rates. It based that figure on a statement made during last year's budget planning that a 1 percent change in rates equals $150,000 in revenues.

The report also stated that NID did not explain to the public why it needed additional revenues to balance its current budget or the amount that would be raised by the increase.

Nelson agreed that perhaps NID has not done a thorough job of educating the public about its overall plan to finance operations through income while keeping reserves to rebuild its aging system.

But the recent rate increases were guided by a study demanded by the grand jury in 1999 and again in December 2000, Nelson said. Two years ago NID used the study to plan rate increases of 9 percent for five years to cover rising operational costs. Board members and NID officials said the increases were needed to keep the daily operations and management budget balanced.

However, the increase was only 6 percent across the board for the second year after some board members thought 9 percent was too much, with the knowledge the district had $73 million in reserve. The board has voted to dip into reserves the past two years to balance the budget and wants to stop doing that within several years.

Nelson said the grand jury's concerns about revenues and reserves were a byproduct of a time when NID was not so solvent.

"The district was almost bankrupt 20 years ago and we've adjusted too conservatively since then," he said.

The report also said delays in more than 50 percent of NID's projects have caused the costs to increase. When those projects are not done on time, the monies for them remain unspent, adding to the district's large reserves, the grand jury said.

"I think the assessment of not completing projects on time has some validity to it," Drew said.

"If we had been on schedule with our projects, we probably wouldn't be having this conversation," Nelson said. "Environmental studies have stalled things."

In particular, the Banner-Cascade Pipeline project should have been built during the last two years, Nelson said, but the environmental study for it was deemed inadequate and had to recently be redone.

NID officials have repeatedly said the reserves are needed for projects like the Banner-Cascade, which will rebuild the district's crumbling system of canals, pipes and reservoirs.

Recommendations to NID from the grand jury included a better process to estimate annual water sales and tighter control of projects.

It was the fourth time the grand jury has criticized NID since 1999 for increasing rates. Grand jurors called for the rate study in 1999 and 2000 and then criticized NID for having $167 million in cash and reserves in 2003.

That year, Nelson and Andrews said, $100 million of that money was actually assets such as district facilities and equipment.

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To contact senior staff writer Dave Moller, e-mail davem@theunion.com or call 477-4237.