Gary Zimmerman: What does a billion-dollar dam mean to you?
September 14, 2018
The Nevada Irrigation District elections this November are critical to the future of the water district, and all who live in the Yuba/Bear watershed.
As an economist who has analyzed the costs of NID's proposed Centennial Dam, I'll focus on the fiscal impact of NID's billion-dollar proposal and on NID's backwards planning process.
Current NID directors have provided the public with neither a detailed engineering cost estimate or a total cost. Construction costs alone could be upwards of $400 million according to state economists, or $500 million by my estimate, as NID has consistently failed to include costs of project mitigations. If approved, bond financing and interest costs could double the total cost to $1 billion or more. Another credible estimate, based on projected NID expenses including the proposed dam, could drive costs even higher, perhaps tripling ratepayer charges.
Fortunately, the Sept. 4 candidate forum in Grass Valley provided an opportunity to listen to two outstanding candidates for the NID Board. They have the qualifications, experience, and good judgement to bring fiscal responsibility and transparency to NID water policy and planning. The candidates are Bruce Herring (Division 2) and Laura Peters (Division 4).
In 2015, NID estimated construction costs at around $160 million. By 2018, NID cost estimates submitted to the State for the entire project were $372 million. California Water Commission (CWC) officials this year, reported that construction and operating costs in present value terms would be $491 million.
NID provided no rebuttal when the State did not find any public benefit from Centennial, thus disqualifying NID for State funding. The federal government has shown no interest in providing funding. NID would need to issue long-term bonds, or seek even more expensive private sector funding.
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What does a billion-dollar dam mean to you? NID has a small customer base, about 25,000 homes, farms, and business, according to NIDs website. Those customers would have to repay the $1 billion in construction and interest costs, by my estimate, if the dam were financed over, say 30 years! NID would spend about $40,000 per water customer, for "backup water supply?" To repay the construction and interest costs, on average NID water rates would have to increase charges for each water customer, by $1,333 a year for the next three decades! A similar-sized dam being rebuilt by the Hetch Hetchy Water System, has 2.6 million customers to repay the costs, not 25,000!
Has NID been transparent about the cost of Centennial Dam to their customers? Only Peters and Herring understand that NID's proposal is too expensive for the district!
NID has recently announced that it will prepare a raw water master plan that will evaluate the likely future water supply and demand of the district. NID directors should have started this process four years ago to determine if or when additional water supplies are needed, and what the alternatives cost.
NID loses several million dollars a year on their water operations, yet a NID audit now admits it has already spent over $11 million on the proposed dam, including the cost of buying property along the Bear River. As Herring noted at the debate, "NID has put the cart before the horse …"
Candidates Peters and Herring will promote fiscal responsibility, efficient operations, and will make decisions and evaluations in an open and transparent process, based on sound planning and public input.
Herring, Division 2 candidate, notes that "Fiscal Responsibility Matters!" He has management experience in a manufacturing firm and directing a local high school. He knows how to get things done and balance a budget. As a former economics teacher, he expects a thorough cost-benefit analysis on all options and alternatives, including Centennial. As a former river guide, Herring also knows the value of the Bear River for recreation and the local economy.
Division 4 candidate Peters embodies the saying, "Experience Matters!" She is a water resources engineer and a problem solver (in both the public and private sectors). NID will benefit from her valuable years of experience as a civil engineer with expertise in water! Laura's knowledge of water system operations, watersheds, storage alternatives, drought management planning, and understanding of NID's water collection and delivery system, makes Laura Peters an excellent addition to NID's Board of Directors.
This November 6, cast your votes for these two highly qualified candidates!
Gary Zimmerman is a visiting professor at the Vienna University of Economics and Business in Austria, and a retired Federal Reserve senior economist. He currently lives in Nevada City.
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