Our colleague, Steve Burke, founder of Protect our Water (POW), Vance Kennedy and Al Brizard -- two other veteran public activists in Stanislaus County -- joined forces to produce a very convincing argument against Modesto Irrigation District's proposed water transfer to San Francisco Public Utilities Commission. They write from the authoritative view that MID is a local public utility created by the Wright Act of 1887, written by C.C. Wright, state assemblyman from Modesto at the time. The act was the first in the US to create publicly governed irrigation districts to combat private water pirates like Henry Miller of Miller Lux Cattle Company, who bought riverfront land wherever he could, gaining control of the river's water through the law of riparian rights.
Burke and his associates are opposed by the aquacrats who administer MID, their cronies in San Francisco and an uncertain number of MID board members. One board member in favor of the transfer is Glen Wild, whose reasons are set forth in the third piece of this posting. The second is an article on the subject by the Modesto Bee. Wild appears to be a member of the Church of the Invisible Middle Finger, said to control our economy if only the free market and family values (no inheritance taxes) are allowed to prevail. Wild speaks in the long tradition of amnesiac petty businessmen constantly attempting to privatize what was created for the public common good.
The Bee added another dimension to the story today with its editorial included at the bottom of this post describing the hard feelings between MID and the City of Modesto, urging calm, anticipating litigation and hoping for a little less acquisitive aggreession by\ MID staff.
This is a story that continues to cut to the bone of this troubled city, a possible candidate for a future municipal bankruptcy as a result of fraud and corruption in the finance, insurance and real estate industry.
Badlands Journal editorial board
7-14-12
Modesto Bee
DEBATING MID WATER SALE: Don't let MID create an Owens Valley in Stanislaus County…Vance Kennedy, Al Brizard and Steve Burke.
The authors have all been involved in regional water issues for decades. Kennedy is a retired hydrologist; Brizard served on the Central Valley Regional Water Quality Control Board; and Burke is a citizen-activist on water and environmental issues.
http://www.modbee.com/2012/07/14/v-print/2282083/debating-mid-water-sale-dont-let.html [1]
The Modesto Irrigation District board is about to make a catastrophic mistake in signing a contract with San Francisco regarding our water rights.
The volume of water involved in the initial contract, 2,240 acre-feet, is of relatively little concern. It is a small fraction of MID's entitlement. But this contract will tie our hands on water control for 50 years and affect our ability to borrow. It will also make it impossible to avoid the 25,000 acre- foot contract in the future.
Those San Francisco lawyers aren't dumb. Hopefully we aren't, either. The contract is a huge mistake for Stanislaus County residents and cannot be rectified, once signed.
Everyone is familiar with the idea of buying insurance against unpredictable disasters. We do it for autos, for house fires and many other disasters. We can also do it for irrigation water by increasing our water rates to cover required maintenance on irrigation systems.
First, one must realize that the approximately $1.5 million per year from San Francisco for the 2,200 acre-feet of water will not be close to solving our problems. We need at least $35 million for immediate costs which are (a) required repair of a part of our irrigation system ($10 million) and (b) continued access to Don Pedro reservoir ($25 million).
San Francisco can opt out of the initial contract, so bonds cannot be sold against that proposed sale. Therefore, we must have $35 million, but San Francisco would pay only $1.5 million per year for 10 years. San Francisco doesn't begin to answer our needs.
In exchange for a contract that won't begin to fill our needs, we would agree to give San Francisco control over our potential water sales for 50 years, agree to increase charges by no more than 3 percent per year (in the late 1970s inflation exceeded 14 percent) and, worst of all, in the event of major droughts San Francisco would have first call on our water over local farmers and the city of Modesto. What a deal for San Francisco. There is an unprintable term for what happens to us.
Back to the insurance discussion. Regardless of false spin to the contrary, there is ample evidence of global warming as a fact; hence, past experience is no guide for the future. Unprecedented droughts have been occurring in the Midwest. There is no guarantee that can't happen here, in which case San Francisco wins and we lose — for 50 years!
What would the insurance to cover urgent MID irrigation needs cost? Financial experts suggest that insurance costs would be in the range of $10 to $27 per acre-foot to solve immediate problems, protect us from droughts, allow us to control our water and make inflation our friend instead of our enemy.
The cost of borrowing is at an all-time low. Unfortunately, financial mistakes in the past by MID have caused a decrease in MID's credit rating, resulting in a relatively high cost to issue bonds. The figures quoted are believed to allow for that problem, however.
Available information indicates that MID can probably borrow $35 million at 4.5 percent for 30 years or at 3 percent for 15 years. In either case the cost per acre-foot per year would be about $30, including bond-issue costs and existing charges. Note that the estimated charges assume only increased charges to farmers. Modesto residents benefit also, and hence would contribute to bond costs. (See below.)
BOND COSTS
Annual cost per acre-foot for a $35 million bond (assumes 58,000 irrigated acres assessed)
30 years at 4.5 percent: $12.20
15 years at 3 percent: $15.60
(Selling costs extra)
• • •
The statement that inflation might help involves somewhat complicated reasoning, which needs to be checked out. We would have a guaranteed borrowing cost of, let's say, 3 percent. If we treated this bond like a mortgage, which our figures assume, cash would build up in the account, which could be loaned out at higher rates when inflation occurs. That seems highly likely the way the government is printing money.
The value of farmland in the MID area is highly dependent on the availability of reliable irrigation water. To lose that reliability for a pittance from San Francisco is sheer insanity. An effort must be made to convince the MID board that the San Francisco rip-off must be rejected.
Local farmers have a marvelous deal, which they can lose if they don't face up to the fact that they have a tremendous bargain in water now and, even at $27 per acre-foot, would have a much better deal than many other valley farmers have. (See below.)
OTHER DISTRICTS' CHARGES
A comparison of charges per acre-foot of water from some irrigations districts in Stanislaus County. (Note that each district has detailed and nuanced calculations for assessing exact charges to a variety of customers. The following figures are therefore approximate, intended for comparison purposes.)
Modesto Irrigation District: $10 per acre-foot
Turlock Irrigation District: $13.50 per acre-foot
Oakdale Irrigation District: $5 per acre-foot
Del Puerto: $95 (first acre-foot)
• • •
There is tremendous variability in the ability of valley farmers to absorb an increase in water cost. This issue is a "third rail" in any discussion, yet any meaningful discussion must include that ability-to-pay factor.
All farmers are needed, and a discussion of how to handle this issue cannot be avoided. One possibility would be to relate the water costs, in part, to net profit per acre. In any case, to sell bonds, the investors must have confidence in repayment ability.
From a personal standpoint we have no ax to grind. But the Central Valley in general, and Stanislaus County in particular, are national treasures. Prime soils, ideal climate and reliable irrigation water must be protected for the long term, at all costs.
MID, Modesto officials give go-ahead to draft pact on water sale to SF…
Ken Carlson and John Holland…
http://www.modbee.com/2012/07/13/v-print/2281496/mid-modesto-officials-give-go.html [2]
MODESTO -- Two Modesto officials met Friday with Modesto Irrigation District representatives to reduce tensions over the district's proposed water sale to San Francisco.
According to an MID spokeswoman, representatives of the city and the MID agreed to have their attorneys draft an agreement that would attempt to allay the city's concerns about the sale.
An agreement with Modesto could be a linchpin for the MID's long-term plan to sell water to San Francisco and use the millions of dollars in proceeds to upgrade its irrigation canals.
Attending the meeting at the MID's downtown office were Mayor Garrad Marsh, City Manager Greg Nyhoff, MID General Manager Allen Short and attorney George Petrulakis, who is doing legal work for the district.
Marsh said members of the Modesto Chamber of Commerce asked city officials to meet with the district.
"We're trying to come to an amicable settlement over our disagreements," the mayor said after the meeting.
He added, "The meeting was constructive. I hope something good comes out of it for our city and our farmers, too."
Modesto officials have considered litigation based on opinions that the MID's proposed commitment to San Francisco would conflict with its 2005 contract with the city. That agreement is supposed to provide the city with as much as 60 million gallons of treated Tuolumne River water daily.
Modesto wants a guarantee that city water customers and local farmers will remain first in line for water from the MID. San Francisco has said it wants first priority for water during dry years.
Legal minds now will try to craft language that addresses everyone's concerns.
"I am optimistic," Marsh said. "But I was optimistic after other meetings we've had (with the MID) and nothing moved forward."
MID spokeswoman Melissa Williams said the potential agreement would be separate from the MID's sale contract with San Francisco, which is seeking a dry-year supplement that could not be claimed by Modesto. Details of the side agreement have not been determined, she said.
Vote on sale set for July 24
The MID board is scheduled to vote on the sale July 24, but it could decide to postpone it, Williams said. That's happened three times since May as the board has tried to deal with issues raised by Modesto officials, farmers and others.
Tuesday, local opponents of the water sale urged the City Council to schedule a special meeting and initiate legal action before the MID board vote July 24. Marsh told them he had authority to call a meeting, but added that it wasn't necessary.
Marsh said Friday that he cannot make decisions unilaterally for Modesto. The council doesn't have another meeting scheduled this month and the mayor doubted he would call one in the next 10 days to consider a potential agreement with the MID.
The mayor assured that the city hasn't softened its position on the water sale. "We believe the (proposed) contract with San Francisco violates our first rights on our portion of the water. They (MID) read that it doesn't," he said.
Supporters lobby council
Supporters of the water sale have lobbied council members in recent weeks, claiming there's no reason to oppose the initial sale of 2,240 acre-feet per year, which amounts to 1.6 percent of the MID's average annual deliveries to farmers and the treatment plant.
If the MID board were to approve the initial contract with San Francisco, an environmental review would be done on additional transfers of as much as 25,000 acre-feet per year.
Councilman Dave Geer, an arch opponent of the water sales, had been open to taking legal action before the July 24 MID meeting.
Geer said he wasn't aware of Friday's meeting involving city and MID representatives.
"I am still opposed to the sale, period, whether they work out language or not," he said.
DEBATING MID WATER SALE: Failure of sale will have consequences
By Glen Wild
http://www.modbee.com/2012/07/14/2282111/debating-mid-water-sale-failure.html [3]
Modesto Irrigation District's proposal to transfer water to San Francisco has been subject to much misinformation and inflammatory rhetoric. The bottom line questions are:
• Is there enough water?
• Who pays for MID's water operations?
• What are the water rate impacts?
• Who will pay if the transfer doesn't go through?
To address these questions:
Is there enough water?
Yes. Clearly and unequivocally. MID has always met our water delivery obligations to our customers. By all measures, both historic and projected, MID has enough water to continue to meet both agricultural and the city of Modesto's needs.
In fact, MID recently concluded a 12-year water transfer of up to 11,000 acre feet per year for environmental purposes. That water is no longer obligated and is available. Another annual transfer of more than 10,000 acre feet, also for environmental purposes, is currently scheduled to end in 2016, freeing up more water.
Proposed irrigation system improvements will conserve even more water.
Who pays for MID's water operations?
Since operations began at Don Pedro, MID power customers have paid not only to reduce and eliminate the bonds utilized to build the dam, but have also covered the difference in irrigation revenue and irrigation system costs. It amounts to millions of dollars each year.
Don Pedro construction cost of $105 million was funded by MID (15 percent), TID (27 percent), San Francisco (46 percent) and the federal and state governments (12 percent).
MID's portion was financed with revenue bonds paid off by electric customer revenue. MID electric ratepayers continue to pay the lion's share of the water irrigation system operational costs. In 2012, water rate revenue is forecasted at $2.35 million, but budgeted operating expenses are $14.4 million.
This shortfall is reduced with $1.4 million compensation from San Francisco for water MID releases on San Francisco's behalf for regulatory requirements, leaving MID electric ratepayers to pick up the difference of $10.7 million, about 3 percent of each electric customer's bill.
What are the water rate impacts?
MID water users currently pay a little under $10 per acre-foot. If this rate were increased to reflect true cost of service, it would grow to approximately $71 per acre-foot.
This doesn't include funding any infrastructure improvements. The MID board has been presented with recommendations from recognized industry experts to conduct $115 million of infrastructure improvements over the next 10 years. This expense could bring water rates close to $100 per acre-foot.
There have been many public statements from agricultural leaders declaring agriculture wants to pay more for water. That is good. However, the increased cost to agriculture just to get to a break-even point on water operations is huge.
San Francisco has offered to pay $700 per acre-foot for water. Revenues from a water transfer could offset price increases for farmers and electric users as well as pay for necessary infrastructure improvements.
What if the transfer does not go through?
MID's customers and water will be at risk. Regulatory agencies are likely to increase efforts to seize water for directed purposes if they deem that water is not fully utilized. They can do this without compensation to MID. MID customers would then bear the cost, not only of the water, but also to construct the infrastructure improvements necessary to generate the required water flows.
What we need to focus on is: How will we pay for infrastructure improvements; how will we eliminate the current subsidy paid by electric customers for water operations; and how will we finance the effort to defend our water rights from those who would commandeer our water?
Our options are limited. We can increase water rates significantly; we can increase MID's already significant debt load to pay for infrastructure improvements over time, adding to MID's debt; we can seek revenue from water transfers and use that revenue to offset costs impacts to all MID customers.
MID doesn't have to transfer any water, but we must pay our bills.
Wild represents Division 2, central Modesto, on the MID board.
Modesto Bee
Editorial: A calm, careful talk on need for water sale
http://www.modbee.com/2012/07/16/v-print/2284235/a-calm-careful-talk-on-need-for.html
With the Modesto Irrigation District and city of Modesto already embroiled in litigation over millions of dollars worth of construction snafus at the water treatment plant, we do not want to see these two agencies head to court over the water sale — spending even more of the public's money on lawyers.
It's a promising sign that top leaders from the two agencies met last Friday afternoon, and we applaud the Modesto Chamber of Commerce for urging the two sides to talk.
But one meeting provides no guarantee that the MID can and will satisfy the City Council's concern that the city will end up taking second fiddle to San Francisco during water sales during drought years. (Of course the 3,100 irrigators of the MID want the same kind of promise.)
The MID board still is scheduled to vote July 24 on the revised sales contract. And the City Council does not have another meeting scheduled until Aug. 8. As of Monday afternoon, there were no further talks scheduled between the MID and city leaders.
So the forecast remains cloudy, with the very real possibility that the Modesto council will sue the MID if the water sale is approved as currently drafted, in an apparent conflict with the city's contract. That's where we don't want to go.
We urge the MID to delay next week's vote and try to continue meaningful discussion to allay the city and farmers' concerns about whether the smaller sale will put them at risk during dry years.
If that issue can be answered, then the MID needs to start a fresh conversation on the much larger sale. We've always known that the larger sale, of up to 25,000 acre feet, will require a major environmental and economic review. But as part of that, there has to be greater openness by the MID and its leaders. The board should establish an advisory committee of interested parties — farmers, domestic users and others — and use that as other agencies have used citizen task forces.
We also suggest that the advisory committee and the board go back to the very beginning and identify the deficiencies in the MID irrigation system. What are the necessary improvements to meet current and future farming practices? What will they cost?
These questions need to be answered in a rational way with well-reasoned discourse — the kind of discourse that has not been happening. After a thoughtful and inclusive debate, then the options for funding the improvements can be explored. Those options likely will include raising irrigation rates for farmers and-or selling larger amounts of water if the MID truly has it available. Or even an idea that will only surface with greater involvement.
The MID board meetings have become totally unproductive — with blame on both sides. Some water sale opponents are throwing verbal grenades, raising conspiracy theories and alleging criminal wrongdoing, leaving some of the board members and staff so hunkered down in defensive posture that they won't even respond to reasonable questions.
As an aside, anger at the MID will only grow if the board approves 12 percent pay raises — spread over the next three years — for MID employees. While this topic surely will inspire further comment, it appears as though the MID bargaining units and some board members are tone deaf to the tough times confronting others in our community, both in the public and private sectors.
Meanwhile, we hope the city of Modesto and the MID can reconcile their conflict over the small water sale. That would provide time to begin a healthy discussion over the pros and cons of the larger sale, through a process that inspires spirited debate and engages a wide spectrum of interested parties. Only then will this subject shed its current toxicity.
Links:
[1] http://www.modbee.com/2012/07/14/v-print/2282083/debating-mid-water-sale-dont-let.html
[2] http://www.modbee.com/2012/07/13/v-print/2281496/mid-modesto-officials-give-go.html
[3] http://www.modbee.com/2012/07/14/2282111/debating-mid-water-sale-failure.html