It won’t be long before the fate of the largest agriculture-to-urban water transfer is decided, but the Imperial Irrigation District is already looking at the tens of millions of dollars it is set to lose should the agreement be ruled invalid.
District staff presented three options to the Board of Directors to fill the projected $18 million-a-year budget shortfall through the next three years should the Quantification Settlement Agreement go away.
It’s roughly $54 million through the 2012-2014 period, Chief Financial Officer Greg Broeking said.
The district could decide to fill the gap through a few ways, including raising water rates, cutting operating costs, dip into the reserves and creating a new water transfer, he said. If the agreement is ruled invalid, the district will likely look into a combination of those options.
The first option he presented to the board is increasing water rates, which, if that were the only solution chosen, they would have to go up by about $7.50 an acre-foot, he said. There’s no promise that rate increase would be approved through the voting process.
The second option presented would be to reduce costs, Broeking said. To cut the $18 million, it could take out 25 percent of the operating budget, which could mean as many as 100 water department employees would be laid off.
The last option would be to do a combination of rate increase, budget cuts and using reserves while another transfer is negotiated, he said. That new transfer could take between three and seven years for a final agreement.
Board members were mixed on the report given.
Director James Hanks said he’s not there to kill the messenger, but the message itself is not good. The district appears to have dug itself into a hole because he doesn’t see a way the rate could be increased as the residents won’t approve it.
It was a bad agreement to start with because it couldn’t pay for itself, he said.
“Don’t worry about a failed QSA. Get on your knees and pray that it fails,” he told the audience made up of district staff, farmers and other interested parties.
Some have said that the Sacramento judge who ruled the set of agreements invalid last year gave the IID a second chance, he said. Work needs to be done to get a cost-benefit analysis to make sure the district can pay for transferring the water.
Others saw more of a positive in the report to the board.
It is honest news, added board Vice President John Pierre Menvielle.
“Even though this looks very negative — and it is negative — I think it’s positive in the fact that we have a blueprint for how to move the district forward,” he said.
Now the board can sit down with staff and put their heads together on how to keep the district whole in order to keep the Valley whole, he said.
He added that he’s in favor of looking for a better deal for a water transfer, and if the QSA goes away, there needs to be an emergency plan in place to continue to transfer water to San Diego to keep revenue coming in.
IID staff and board will have to play the hand dealt to them, said district General Manager Kevin Kelley. The management team will be bringing options to the board in the next couple of months in order to deal with the pending issues.
However, before new deals can be negotiated, the district will have to see what happens with the QSA, which is set to go before the appellate court later this month.
“Thankfully it won’t be long before we know,” he said.
Staff Writer Elizabeth Varin can be reached at evarin@ivpressonline.com or 760-337-3441.
Meeting glance
Here are five things that happened at Tuesday’s IID Board of Directors meeting
1 - An argument arose about whether to put a hold on the system conservation plan, while the district awaits a decision on the Quantification Settlement Agreement.
2 - The IID board took an initial look at a resolution asking for the district to have the same consideration to store water in Lake Mead. The International Boundary and Water Commission is looking at an order to allow Mexico’s apportionment of Colorado River water to be stored in the reservoir.
3 - District staff presented an initial look at the district’s 2012 budget, which includes a $552 million operating budget. The board has scheduled two budget workshops for Nov. 15 in El Centro and Dec. 6 in La Quinta.
4 - The board took a look at the work staff has been doing to review the major work authorization process.
5 - Staff plans to ask for a $2 million change order to the El Centro Unit 3 project that would add a backup diesel generator in case a blackout knocks down the system. Though it is rare, if the whole facility were to lose power it would lock down for 40 hours.
District staff presented three options to the Board of Directors to fill the projected $18 million-a-year budget shortfall through the next three years should the Quantification Settlement Agreement go away.
It’s roughly $54 million through the 2012-2014 period, Chief Financial Officer Greg Broeking said.
The district could decide to fill the gap through a few ways, including raising water rates, cutting operating costs, dip into the reserves and creating a new water transfer, he said. If the agreement is ruled invalid, the district will likely look into a combination of those options.
The first option he presented to the board is increasing water rates, which, if that were the only solution chosen, they would have to go up by about $7.50 an acre-foot, he said. There’s no promise that rate increase would be approved through the voting process.
The second option presented would be to reduce costs, Broeking said. To cut the $18 million, it could take out 25 percent of the operating budget, which could mean as many as 100 water department employees would be laid off.
The last option would be to do a combination of rate increase, budget cuts and using reserves while another transfer is negotiated, he said. That new transfer could take between three and seven years for a final agreement.
Board members were mixed on the report given.
Director James Hanks said he’s not there to kill the messenger, but the message itself is not good. The district appears to have dug itself into a hole because he doesn’t see a way the rate could be increased as the residents won’t approve it.
It was a bad agreement to start with because it couldn’t pay for itself, he said.
“Don’t worry about a failed QSA. Get on your knees and pray that it fails,” he told the audience made up of district staff, farmers and other interested parties.
Some have said that the Sacramento judge who ruled the set of agreements invalid last year gave the IID a second chance, he said. Work needs to be done to get a cost-benefit analysis to make sure the district can pay for transferring the water.
Others saw more of a positive in the report to the board.
It is honest news, added board Vice President John Pierre Menvielle.
“Even though this looks very negative — and it is negative — I think it’s positive in the fact that we have a blueprint for how to move the district forward,” he said.
Now the board can sit down with staff and put their heads together on how to keep the district whole in order to keep the Valley whole, he said.
He added that he’s in favor of looking for a better deal for a water transfer, and if the QSA goes away, there needs to be an emergency plan in place to continue to transfer water to San Diego to keep revenue coming in.
IID staff and board will have to play the hand dealt to them, said district General Manager Kevin Kelley. The management team will be bringing options to the board in the next couple of months in order to deal with the pending issues.
However, before new deals can be negotiated, the district will have to see what happens with the QSA, which is set to go before the appellate court later this month.
“Thankfully it won’t be long before we know,” he said.
Staff Writer Elizabeth Varin can be reached at evarin@ivpressonline.com or 760-337-3441.
Meeting glance
Here are five things that happened at Tuesday’s IID Board of Directors meeting
1 - An argument arose about whether to put a hold on the system conservation plan, while the district awaits a decision on the Quantification Settlement Agreement.
2 - The IID board took an initial look at a resolution asking for the district to have the same consideration to store water in Lake Mead. The International Boundary and Water Commission is looking at an order to allow Mexico’s apportionment of Colorado River water to be stored in the reservoir.
3 - District staff presented an initial look at the district’s 2012 budget, which includes a $552 million operating budget. The board has scheduled two budget workshops for Nov. 15 in El Centro and Dec. 6 in La Quinta.
4 - The board took a look at the work staff has been doing to review the major work authorization process.
5 - Staff plans to ask for a $2 million change order to the El Centro Unit 3 project that would add a backup diesel generator in case a blackout knocks down the system. Though it is rare, if the whole facility were to lose power it would lock down for 40 hours.
