Issues and Research

Finance Issues
    1. Reserves – NID is a $90 million/year operation with $1.5 billion in assets.  Our aged infrastructure, much of which dates to the 1950s – 70s, requires on-going maintenance and improvement.  Reserves in a water district are like a savings account in our personal lives.  Just as we use a savings account to set aside money for future expenses and emergencies, NID reserves serve the same purpose allowing the organization to make needed repairs and address emergency situations.  Take a look at this document to see reserve trends. Reserves Charts
    2. Use of Property Tax Revenues — A small portion of each NID customer’s property taxes goes to NID to help augment income.  This small contribution adds up to a lot of money.  $13 million/year to be precise.  Historically, NID has used this money to fund capital improvements.  In the next 5 years, NID suggests using $21.5 million in these funds to pay operating expenses.  This means we have that much less for supporting capital investments in our aged infrastructure.  The attached document shows this suggested funding strategy.  Property Taxes for Debt Service 
    3. I commend NID for completing a 5-year budget projection as it gives the Board and NID customers an important look at the years ahead from a fiscal point of view.   Here are some things I observe:
      • Hydro’s Changing Business Conditions — This document provides an overview of the NID Hydroelectric Department’s contributions to the Water Department historically and in the future.  This is a very important trend that NID and the Board need to address.  Trends in Hydro
      • Rate Increases — I’ve attached the 2020 Budget package with the five-year budget projection.      On page 75 (of the entire document), you will see that rates presented from 2021 – 2025 reflect a cumulative 39% rate increase.  2021 Budget & Projected 5 year budget  But even with this, NID does not have a balanced budget. The February 2020 Cost of Service Study that shows the potential impact of reducing Hydro’s contribution to the Water Department.  2020 Cost of Service Study  (See page 14 of the document; page 8 of the Bartle Wells Study).  This study suggests that to correct the budget shortfall in the Water Department, raw water rates would need to increase a whopping 122%!!  Obviously, an increase anywhere close to this would put our regional agriculture out of business while also creating great hardship for property owners who rely on raw water.

Centennial Dam Issues:

  1. The Cost of Centennial Dam: It has been confusing to understand the cost of Centennial.  What follows is an excerpt from the State Water Resources Control Board regarding their review of NID’s proposal for Proposition 1 funding:                  “Economics reviewers recalculated costs using methods required by the WSIP Technical Reference Document (TR)1, resulting in present value of total costs equal to $490.0 million…”  It’s quite clear.  This is the correct estimate for the cost of Centennial.  Also, the State indicated there was zero public benefit for this dam and would provide no Proposition 1 funding.  Prior to receiving the State response, NID and incumbent Miller claimed that State would be providing funding for Centennial.  Wrong again.  We are going to be funding this dam project out of the pockets of rate payers.
  2. Funding Centennial Dam.  Just as our ability to borrow money in our personal lives is based on our ability to repay and loan risk, the same is true with businesses like NID.  Let’s take a look at NID’s ability to fund Centennial Dam.  In their 2021 budget, NID indicates they need to borrow $83 million in 2023 for the capital program.  This loan causes the District’s debt service coverage ratio to drop from a healthy 5.32 to a marginal 2.11. The District’s bond covenants require a debt service coverage ratio of 1.25.  If borrowing $83 million causes a drop of 3 points, how would NID borrow five times that amount?  The answer — they can’t.  I met with NID’s interim General Manager and he confirmed that NID cannot fund Centennial Dam.  Had NID done their due diligence on this project early on, they would have figured this out.  Debt Service Coverage Ratio
  3. If someone has told you that if we don’t build Centennial Dam, someone can take our rights to that water, they are wrong.  Get the truth by reading this summary from a water law expert: Our Water Rights Are Safe
  4. The incumbent in NID Division 3 claims that Centennial Dam will be paid for by income from hydroelectric.  This is false.  There is no hydroelectric in this project.  See the following document: No Hydro In Centennial
  5. During the public comment period for Centennial Dam, my husband and I wrote a letter to the U.S. Army Corps of Engineers regarding our concerns with this project.  Among other things, we requested that NID complete analyses that would (a) explain the need for the project, (b) describe how the project would be funded and (c) explain how project impacts would be mitigated.  After 7 years and spending $14 million of rate payer money, NID has finally presented preliminary information on the need for the project.  Unfortunately, this work is flawed; and none of the other aspects of work have been completed.  Don’t you think that before spending $14 million on a $1 billion project the incumbent would have required NID management to complete this foundational analysis?!?
More About NID’s Financial Issues

This is a critical time for NID and water management in California and Nevada and Placer counties. We need NID leadership who can look at issues thoroughly, creatively, and in the best interests of the counties NID serves now and in the longer term. Karen is this board member the division needs.

NID Operations Manager summarized his concerns at the Strategic Planning meeting held on March 5, 2020.   “We have infrastructure that was all built at the same time.  It’s falling apart at the same time.  I would like to think that the District needs to focus on that more and not so much on the future things…We cannot ignore the infrastructure we already have and let it fall apart.”

I agree.  Our customers depend on having a reliable water system.  In addition to the age of our infrastructure (50 – 150 years old), we have limited redundancy in key systems, such as canals and for treated water.  System age combined with lack of redundancy leaves us vulnerable to system failures and needs to be addressed now.

It doesn’t take a business executive to figure out things aren’t right at NID.  Here are just a few examples of the finances at NID:

  • Since 2017, the NID board has approved annual operating budgets that projected operating losses each year between $4.6 million and $13.9 million.  Is this the way you manage your finances?  I doubt it.  It is inappropriate for a $90 million organization to operate in this manner.
  • While NID income has increased 36% over 5 years, expenses have increased 50%. It doesn’t take a math whiz to understand that this creates fiscal problems.
  • NID wants to raise rates. In an NID commissioned study completed in February, they cite the need to raise untreated water rates by 122%!  This will have a profoundly negative impact on regional agriculture and the many property owners who rely on untreated water.
  • The savings account for repairing the aged infrastructure is gone!  Unrestricted reserves for the water department have dropped from $40 million in 2013 to $6 million in 2020 so there is little ability to deal with the aged infrastructure or an emergency.
  • NID has approximately $125 million in unfunded projects that need to be completed and that will require bond funding which in turn will result in increased rates.

The Board needs a director with strong fiscal and organizational experience who can help NID correct these issues.

Addressing these issues and helping build a more sustainable organization is what motivates Karen Hull to run for the NID – Division 3 board seat.   

“I will work with the Board and NID leadership to ensure that we are building a financially healthy organization grounded in fiscal responsibility and accountability to rate payers. I am excited about the opportunity to serve our community and will bring fresh perspectives, business expertise, transparency and a commitment to listening to your views.”

Read Karen’s Plan for addressing the issues with NID Board and Karen’s Commitment to voters.