Op-Ed | Peter Van Zant: Centennial Dam and Reservoir – What is the Cost and Who pays?

December 6, 2017 – In 2009 the Brown administration proposed the Twin Tunnel ‘Water Fix’ project to ship water from Northern California watersheds to Southern California water districts at a price tag of some $17 billion dollars. It included a financing plan: the project would be paid for by water districts and their customers getting the water. Water districts are now deciding whether to commit and many are not.

In 2014 the Nevada Irrigation District (NID) floated the Centennial Dam project. It would be between Rollins and Combie reservoirs, on the last publicly accessible free running section of the Bear River. They published the basic project statistics: 110,000 acre-feet capacity behind a 275 foot high dam and a new 1000 foot long bridge over the reservoir in the Dog Bar Road area. But it did not include a financing plan.

The cost of Centennial has been a moving target starting at $160 million and rising steadily, with the latest cost pegged at $372 million in NID’s recent application for Proposition 1 funds from the California Water Commission. NID has not provided a comprehensive line item list of all project components, costs, and financing approaches.

In frustration, the American River Watershed Institute (ARWI) published the only comprehensive cost analysis of Centennial in 2016. Construction, permitting, and mitigation costs including the replacement bridge, and the initially proposed hydro power plant are below.

Dam construction $259,203,000

Spillway $26,750,203

Hydroelectric $54,500,000

Dog Bar Bridge $56,000,000

Permits & Reports $11,000,000

Mitigations $85,000,000

Contingency $1,000,000

2016 Sub-total $493,453,000

Add in a standard 3.5% annual cost escalator and the total project cost in 2020 comes to $605,350,473. The ARWI cost analysis report showed that at 4.5% financing the total cost would be $1,104,199,891 and with the more likely 5.5% financing it would be over $1.2 billion.

Let’s look at the funding mechanisms NID has proposed so far.

State funding from Proposition 1: NID is applying for $12 million for recreation and ecosystem benefits. NID’s application is admittedly incomplete and is likely to be denied. Even if issued, $12 million is less than 2.5% of the needed funds.

State revolving loan funds: Centennial does not qualify.

Recreation income: NID currently losses money on their recreation operations.

Federal Infrastructure Funding: Congressman LaMalfa recently told a constituent that no Federal Funds will be made available and NID needs to figure this out on their own.

Hydro revenue: NID has dropped hydro from the project, although Centennial could be subsidized by existing hydro operations. However, electric power markets are undergoing dramatic change that can’t be predicted.

Public Financing: At a recent public forum the NID board president said they could issue Revenue Bonds. These are bonds sold to investors who are first in line for revenues produced by the project.

Water Sales: Since new hydro revenue is not part of this project and recreation doesn’t pay, the only other revenue source is water sales. NID’s customer base can’t buy enough water to service that debt even considering future growth. The only way to sell enough water to service the debt is to sell out of the area with the downside risk that water contracts, once executed, supersede use in the District.

Rate Payers: So that leaves you and me. NID has stated that rate payers are the financial ‘backstop’ for borrowed funds. Financial investors wait for no one. At $1.2 billion, if it all falls on rate payers, the bill is $43,514 over 30 years per customer. As a special district, NID’s taxing authority is limited and rate payers are the backstop for paying off bonds and other debt.

NID has yet to provide the public with a comprehensive estimate of the cost of, or a financing plan for, their proposed Centennial Dam. NID has also not provided the operational and hydrologic evaluation needed to show how often Centennial might fill and how its operation would address long drought periods like our recent one. In addition, Centennial would be located lower in elevation from the vast majority of current customers. And with all this, NID is grabbing water rights from our farming neighbors in the valley supplied by the South Sutter Water District. Where is the fairness in you and me paying for a dam that brings us no additional water, robs farmers of water, and requires selling our water elsewhere to service debt to private investors?

Peter Van Zant – SYRCL Centennial Dam Work Group volunteer. Peter is a former Nevada County Supervisor and a former President of the SYRCL board of directors. He lives in Nevada City with his wife Mary and three goofy pets.

2 COMMENTS

  1. Rarely mentioned is that they might seek financing from China or Saudi Arabia or some other foreign group. Foreign agents partnering with American companies with water rights will be a new problem going forward. Then the water, or “product” they capture will be used to benefit the investor regardless of local needs. The whole deal will get naughtier and naughtier as we go. Stop the madness! Stop the Dam!

  2. Excellent analysis of the financial state of NID and this dam proposal. It is a sad state of affairs when a public service agency goes ahead with an idea without properly vetting the costs and effects of such a major undertaking. The NID ratepayers and Nevada County taxpayers are poorly served by this bad financial blunder and the NID Board Members who support it.

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