Decay and squalor at Modesto Irrigation District
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We don’t agree that everything about irrigated agriculture is corrupt beyond redemption. And we’re not saying that the Modesto Irrigation District board of directors and management is as crooked and stupid as the board of TriValley Growers was a few years ago before TVG slipped beneath the waves of Valley memory. Or should we call it, as is the fashion, “Vallinesia”?
Nor would we say that “falling water charges” resembles Pacific Gas and Electric Company’s famous and incomprehensible “stranded costs” created as an elaborate excuse (it took a flakman as talented and patient as Larry Salinas 45 minutes to explain it to reasonably literate local reporter once) to gouge the retail utility consumer.
Nor would we want to remind the farmers saying the water is all theirs that California’s irrigation-water law was written by a late 19th century Modestan, Assemblyman C.C. Wright, largely to defend farm-irrigation water quality against the widespread polluting practices of hydraulic mining companies.
But we will speculate on what the various candidates locked in ferociously expensive legislative races in Modesto might say. State Senate candidate Bill Berryhill, a Republican who might have had actual experience with MID water, his family having been in farming in Stanislaus County for a few generations, might say something practical like, “Throw the bums out before it gets worse!”
Republican Assembly candidate Jack Mobley, based on his mono-reasoning in the debate with Democrat Adam Gray last week at UC Merced, could suggest privatization. Let the free market decide the price farmers must pay for MID water and if the best deal is to sell it all to San Francisco for 50 years, thus has spoken the market and may the management get immense bonuses.
Democrats Cathleen Galgiani, state Senate candidate, and Adam Gray, Assembly candidate, are uniquely favored by the experienced counsel of Ol’ Uncle Robin Adam, Galgiani’s chief of staff and Gray’s uncle.
“We have no comment on it. It is a local situation,” will be the comments of those under the influence of Ol’ Unk Robin.
Badlands Journal editorial board
Modesto Irrigation District holds off fee talks…Garth Stapley
MODESTO -- Modesto Irrigation District officials on Thursday announced that they would publicly discuss next week a 17-year money transfer that could be illegal, then just as suddenly postponed the item.
Also Thursday, the district released year-to-year numbers showing that electricity customers have paid $89 million extra since the fee was imposed in 1995.
That's a yearly average of $5.2 million charged to 113,000 power customers to keep 3,100 farmers' irrigation rates artificially low.
An attorney hired by the district said that might violate state tax law approved by voters two years ago, in a legal analysis reported in Thursday's Bee.
"It's very much on our radar screen and has been all along," said MID board Chairman Tom Van Groningen. "We know what needs to be done; we just haven't done it."
He and the late Chuck Billington, who died in a 2006 airplane crash,wanted to even things out by raising irrigation rates in 10 percent increments in years past, but were stymied by a board majority favoring farmers, Van Groningen said.
Some farmers believe they're owed something for having established the district.
In a letter to the editor appearing on Page A-12 of today's Bee, farmer and hydrologist Vance Kennedy says everyone benefits when farmers irrigate because water seeps down, replenishing underground sources. He figures the benefit at more than $14 million per year, computed at the rate that San Francisco might have paid the MID for water if the controversial proposed sale had not been abandoned.
"Any mention of electric payers subsidizing farmers must take into account the important subsidy that the electric rate payers get from the farmers," Kennedy wrote.
Few efforts to justify surcharge
The lawyer advising the MID said the district has made little effort to justify the power surcharge in a way that would satisfy Proposition 26. That 2010 statewide initiative closed an electric utility loophole in Proposition 218, which requires a connection between services and their true costs, and voter approval to raise taxes.
That law was cited when the Howard Jarvis and Stanislaus taxpayer associations sued Modesto in 1998, saying the city illegally overcharged people for water and sewer services and sent the extra money to the city's general fund. The city initially put forth an argument similar to the MID's — that water and sewer funds in theory owed the general fund for providing utility loans decades before.
City leaders put an end to the $3.3 million-a-year transfers and agreed to reimburse $7.2 million to the water and sewer funds over time.
Van Groningen has said MID board members discussed their predicament in closed session because they expect to be sued.
"That is a fully anticipated, logical sequel to this," he said.
The board will meet at 9 a.m. Tuesday at the district office, 1231 11th St., Modesto, to discuss creation of a committee to explore options to raise millions of dollars for water infrastructure and canal system improvements.
The issue is an outgrowth of the San Francisco water sale proposal and is linked as well to the emerging subsidy controversy, Van Groningen has said. But specific discussion of the subsidy was canceled without explanation Thursday afternoon.
Electric ratepayers benefit, too…VANCE KENNEDY, Modesto…Letters to the editor
There has long been an accusation that part of the reason that irrigation water rates have been so low is that electric ratepayers are subsidizing the farmers' water. The subject came up prominently during the discussion of the proposed water sale to San Francisco. As in many cases, the situation is more complicated than it seems evident at first.
What has been ignored is the benefit that the electric ratepayers get for helping cover the costs of irrigation water.
About half of the water used by the city of Modesto has come from pumping groundwater. Without it, Modesto would be a much drier city and much more susceptible to drought. About 60 percent of groundwater recharge is due to farmers' flood irrigation, according to a U.S. Geological Survey study. Presumably, the city benefits from that groundwater recharge.
The question is, what is the value of groundwater to electric ratepayers compared to the "subsidy" provided to the farmers doing flood irrigation? There are no exact figures for either the subsidy to the farmer or the value of the farmer-provided groundwater, but an estimate can be made of the value of the farmer-provided groundwater to the city, based on the $700 per acre-foot that San Francisco offered to the Modesto Irrigation District.
The city uses annually about 35,000 acre- feet of pumped groundwater, of which more than 20,000 acre-feet presumably came from farmers through groundwater recharge. At the San Francisco rate, the farmer-provided groundwater is worth more than $14 million per year. Any mention of the electric payers subsidizing farmers must consider the important subsidy that the electric ratepayers get from the farmers.
Study faults Modesto Irrigation District subsidy…Garth Stapley
MODESTO -- Forcing electrical customers to subsidize farmers could get the Modesto Irrigation District into hot water, according to a recent legal analysis.
The subsidy — about $27 a year for each of the district's 113,000 power customers — provides no real value to those who pay and could violate a state tax law approved by voters two years ago, the document reads.
MID leaders expect a lawsuit, board chairman Tom Van Groningen said Wednesday.
The idea of selling water to San Francisco was a partial answer to correct the inequity, Van Groningen said. The board abandoned the proposal under intense public pressure but intends to form a committee, perhaps next week, to suggest options to raise money to pay for necessary canal and water-related infrastructure improvements.
The subsidy issue could have implications for other utilities such as the Turlock Irrigation District, which has a similar practice.
"For years, any (agency) with an electrical utility was using it as cash cow, padding rates and transferring the excess to the general fund," said Tim Bittle, legal affairs director for the Howard Jarvis Taxpayers Association. "Lots of (agencies) are keeping a low profile, hoping nobody sues them."
His group pushed Proposition 26 in 2010, closing a loophole used by electric and gas utilities to avoid approaching voters when raising rates. Worry over Proposition 26 prompted discussion at a June MID board meeting, leading to the legal analysis obtained this week by The Bee.
Board members discussed the document behind closed doors because they fear being sued, but could not agree on airing the issue publicly, Van Groningen said. He expects it to surface on a future agenda.
The analysis was provided to the district's contract attorney, Tim O'Laughlin, by his partner, Bill Paris. How much he was paid could not be determined by presstime.
"MID will be hard pressed to formulate any argument" justifying the subsidy, Paris wrote, because no effort has been made to show why electrical customers should pay a "falling water charge." Nor has the district established a legitimate link from those fees to costs for providing irrigation water to farmers, Paris wrote.
The term refers to water falling through Don Pedro Dam turbines, creating power sold by the district. "All customers benefit from the clean, affordable energy from Don Pedro Dam," and would have to buy power elsewhere on the open market if the dam did not exist, district spokeswoman Melissa Williams said in an e-mail.
But that value may be figured arbitrarily, according to Paris' analysis, suggesting a hidden tax that could run afoul of Proposition 26.
The district did not respond to a request for dollar amounts since the subsidy began in 1995. Paris' analysis said the fluctuating fee, which is not itemized on bills, generated $10 million at its high point in 2011 and $2.3 million at its low in 2004.
The subsidy was expected to come to $7.6 million this year, the district said in June, while farmers would be charged $2.1 million for irrigation water.
A ballot measure asking for voter approval could cure the problem, the document says, but that seems a stretch for a district straining under many months of high-profile controversy.
No rate increase urged
Meanwhile, district staff in coming weeks will not recommend a 2013 electric rate increase, Williams said, partly because natural gas prices are stable and the MID expects no new green energy projects.
Some of the MID's 3,100 farmers figure they deserve consideration because their forebears created the district and power came later, Van Groningen said. Officials years ago recognized that the inequity should be adjusted in favor of power customers, but political will has faltered, he said.
"Anything that impacts our electrical rates has an impact on our ability to attract businesses," said Bill Bassitt of the Stanislaus Workforce Alliance. The MID's historically low power rates have become comparable to competitors' in recent years, he said.
Paris presented a second scenario in his analysis that could work in the MID's favor, saying utilities charging fees unrelated to service costs might be OK if the fees were established before Proposition 26 passed in 2010, while the MID's dates to 1995. Lawsuits elsewhere should shed light when resolved in coming months, Paris said.
Refinance to save Modesto Irrigation District about $16M…John Holland
MODESTO -- A refinancing completed this week will save the Modesto Irrigation District an estimated $16 million through 2033.
The district raised about $113 million through bond sales to retire debt incurred in 2003 to build a gas-fired power plant near Ripon and for other needs, said Lou Hampel, assistant general manager for finance.
Investors buying the new bonds will earn annual interest of 2.94 percent, compared with 4.8 percent for the bonds that are being retired.
"We've never funded anything under 3 percent," Hampel said. "This is unprecedented."
Public agencies usually pay lower interest rates than private borrowers, thanks to their authority to levy taxes or service charges, such as the MID's electricity bills. Interest rates have been especially low in recent years.
The refinancing involved bonds for miscellaneous capital projects in addition to the Ripon plant, Hampel said.
Moody's Investors Service gave the district an A2 bond rating in advance of this week's issue, indicating that it is a fairly strong investment.
"The rating outlook is stable, reflecting expectations of an improved financial profile following the implementation of (power) rate increases in 2010 and early 2011," the New York City-based outfit reported.
The bonds involved about 10 percent of the MID's total debt, which includes money borrowed for other power projects and for the plant where the district treats Tuolumne River water for the city of Modesto. The district has to wait a decade before refinancing bonds. The next chance will come in 2016, Hampel said.