Auditor predicts NID cash crisis
The Nevada Irrigation District is headed for a financial crisis in two to three years unless it alters its ways, an auditor said Wednesday.
Ralph Marcello, a certified public accountant, said crumbling facilities eventually will have to be replaced and the current income and financial reserves will not cover the costs that result.
NID officials were not surprised to hear the report. The district has been struggling with budget issues for two years while looking at ways to rebuild the system.
“You can reduce expenses, raise rates or do both,” Marcello said while presenting NID’s annual financial report. He added that NID can assume the state will continue to raid its coffers in order to balance its budget.
NID is expected to pay about $7.6 million this year and next year to the state. While the bailout deal struck with Gov. Schwarzenegger was initially promised as a final obligation on local governments, many in California believe more revenue will be funneled to the state in future years.
The water district has raised rates 25 times over the past 27 years, but outgoing NID officials have said in recent years that past boards did not plow enough back into the system and worried too much about the bottom line. NID has almost $65 million in reserve cash and investments.
But NID Finance Manager Tess Andrews and Marcello said the bulk of it is earmarked for system improvements, relicensing of hydroelectric plants and employee expenses. The district figured it had about $10 million in true rainy day money last September and $5 million was used to balance the budget.
NID is now on a plan to increase rates over the next few years to get into a position where revenues cover operating expenses.
Revenues increased by $2 million from 2003 to 2004 but operating expenses went up $4 million, Marcello said in a statement. “Given this trend, in a couple of years operating costs will not be able to keep up with revenues.”
But that still leaves the problem of paying for the system’s overhaul. “In our opinion, not enough net income is being generated to replace the aging assets as they wear out,” according to Marcello.
The assets like dams, power plants and canals have depreciated greatly over the years and can’t be sold to raise capital, Marcello added.
In other news:
• NID officials announced there is 20,000 acre feet of supplemental water this year, paving the way for its annual sale to the South Sutter Water District. Nick Wilcox – who unsuccessfully ran for the board last year on a platform that the water could be sold at market rate of $150 an acre foot instead of $18.42 – said the district was missing a way to raise revenue.
Water Operations Manager Don Wight said the water district is locked into a contract until the year 2013. He denied Wilcox’s claim that South Sutter is reselling it to others. The water is sold to agricultural customers of South Sutter, he said.
South Sutter General Manager Brad Arnold said Wight is correct.
“They’re off base on that. We’re not marking anything up. We get the water and sell it directly to ag within the district and always have.”
• Directors voted to put in a new pipeline for the Greenhorn Campground at Rollins Reservoir to replace a failed well and allow for flush toilets, showers and drinking water. The budget was set at $688,000 for the job.
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