Gary Zimmerman: NID’s billion-dollar dam boondoggle, with water users paying the bill
May 5, 2017
Water is important! So is an up front estimate of the "real" cost of the proposed Centennial Dam being promoted by the Nevada Irrigation District!
Everyone is for more water, but not everyone, especially existing NID water users and taxpayers will support a billion dollars spent for water that likely will be flowing to promote development elsewhere!
Does the "average" NID customer know that their water bills could increase by $1,300 a year to build a billion-dollar dam on the Bear River that would mostly supply water so the City of Lincoln can grow to the size of Roseville? NID has a responsibility as a public agency to estimate the costs of the proposed dam, at the beginning of the process, not after NID directors commit to spending a billion dollars for a snowpack that doesn't exist!
Transparency is critical for a public agency, and yet NID is asking for project approval from the Army Corps, but NID has not provided customers with a credible estimate of the project cost! As an economist, who has reviewed the economic analysis for a number of development proposals, I've found the careful overall cost estimate prepared by a former Placer County Water District Director Otis Wollan to be very reasonable. Unlike NID, Wollan includes the standard, but huge costs that NID has either ignored or not bothered to estimate or present to the public at this time. Expenses like the certain costs of future inflation in construction, "typical" cost overruns on similar large projects, and yes, financing for the half-a-billion dollars NID will need to borrow for the cost of construction, mitigation, eminent domain purchases, legal problems …
Water is good, but not at the cost of the Bear River, and certainly not this billion-dollar proposal.
The proposed dam, when one correctly includes costs, like Mr. Wollan has done, from financing, from inflation, and rising interest rates causing higher interest costs, likely will cost somewhere from $1 billion to $1.2 billion! More if cost of overruns are included. What does paying $1 billion for this dam mean to the average NID customer?
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The project NID is proposing likely would add $35 to $40 million a year to NID's interest expenses according to Wollan's analysis. Adding $500 million dollars or more in NID debt, will sharply lower NID's debt service ratio (based on NID's fiscal year 2017 budget) from a low-risk borrower to a high-risk borrower rating, causing the financing costs for the proposal to soar even higher! NID directors must understand that they would have to issue high-risk, high-cost bonds, not the lower cost bonds they have issued in the past. Including financing costs about doubles the cost of the proposed dam.
Consider what the real cost means for the "average" NID water customer. A billion-dollar proposed dam, spread over about 25,000 customers (NID's website) suggests a cost of about $40,000 per water customer! Spread that cost over an estimated 30 years, including the annual cost of repaying the debt, and the "average" existing ratepayer would be in the range of $1,300 a year, or over $110 a month.
There are other critical questions for NID about where the proposed water might come from, and where it might go. If the dam below their proposed billion-dollar boondoggle doesn't fill up every year, and their Bear River watershed in the Sierra does not normally include a significant snowpack because it doesn't include the High Sierra where most of the snowpack normally is found, and the water from the Bear River is already over allocated, where does NID find the water it is promising?
If the water isn't there and the cost is outrageous, why is NID pushing the project? Could it be to provide water to the rapidly expanding City of Lincoln, so that Lincoln can meet its 2008 General Plan goal of growing from 45,000 residents today to 120,000 residents by 2050. It appears that NID ratepayers and taxpayers, rather than getting backup storage, will mostly end up paying the bill for new water connections in Lincoln.
Water is good, but not at the cost of the Bear River, and certainly not this billion-dollar proposal. NID should start looking at other cheaper and more environmentally friendly options, including conservation, before they waste more on this ill-conceived proposal.
Gary Zimmerman lives in Nevada City.
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