MID board debates farm water subsidy while class-action lawsuit looms

An office staff decision not to raise water prices this year led to a lively debate Tuesday among Modesto Irrigation District leaders over whether electricity customers truly subsidize farmers’ water.

The dispute ought to be settled in court and not the boardroom, said some leaders of MID, which faces an important legal battle over the issue.

All evidence in past years points to a massive subsidy. MID staff last year said the gap between farm water revenue ($3.82 million) and the district’s cost to deliver it ($21.2 million) came to more than $17 million. Decades of district audits and bonding documents back up that picture.

In the past three successive years, the board – sensitive to public perception of the subsidy – raised farm water prices 10 percent, then 40 percent, then 20 percent, while leaving power prices alone. That pattern meant to John Mensinger – the only board member representing mostly city people, as opposed to farmers – a conscious move in the right direction, even though the gap between true cost and revenue remains large.

However, MID staff last week told growers not to worry about higher rates this year, prompting Mensinger Tuesday to publicly question why MID apparently has abandoned the steady price increase strategy. After all, rates charged by MID’s sister district on the Tuolumne River – the Turlock Irrigation District – are about 20 percent higher than MID’s, Mensinger said.

That brought a rebuke by board members Jake Wenger, Larry Byrd and Nick Blom. Wenger, for example, said TID upped water rates 107 percent to cover equipment upgrades, while MID has nothing of substance to show for its cumulative 70-percent rate hike.

MID knew that farmers would need to pump more groundwater than normal in the recent drought, Wenger said. But with this winter’s record storms, he said, MID should encourage farmers to water as much as possible to recharge aquifers.

Byrd said to Mensinger, “Your loyalty should be to your constituents of MID.” Byrd said he believes MID’s current rates are sufficient.

Assistant General Manager John Davids acknowledged a “delta” between farm water costs and revenue in years past, but also said replenishing groundwater benefits everyone. Past calculations of the pricing gap apparently don’t take that benefit into account.

Blom revealed that the district is preparing a new cost-of-service study and hinted that this time it will include the groundwater angle. Results should show that costs and revenue are “relatively close,” Blom said, asking for patience until the study is done.

Mensinger and others said they look forward to seeing results of the study. After the meeting, spokeswoman Melissa Williams said such studies help inform decisions on rates.

Wenger repeatedly urged the board not to stray into legal discussions. “I think you’re stepping on some dangerous waters here when we’re involved in a lawsuit on this very issue,” he said. Any amount of board bickering is irrelevant because it won’t change the outcome of the class-action lawsuit, Wenger said.

The MID board has not raised power rates since before their attorney in 2012 warned that doing so without letting customers vote might be illegal under state law.

The district’s average profit from selling electricity, or income minus expenses, has been more than $93 million a year since 2010, according to bonding documents. MID uses the extra money to repay debt, build reserves and cover the farm water subsidy.

The next court date in the class-action lawsuit is scheduled for July 31.

The MID board unanimously agreed Tuesday that:

▪ Growers can start taking water about March 22.

▪ Customers will get 42 vertical inches of water, plus 6 inches more, if they want it. The extra is deemed “replenishment water” for its contribution to the aquifer.

▪ Individuals can move water among parcels that each owns, leases or rents. Other drought-time programs, such as selling portions of one’s water share on the open market to other MID customers, are discontinued.

This story was originally published March 14, 2017 at 4:22 PM with the headline "MID board debates farm water subsidy while class-action lawsuit looms."