The Nevada Irrigation District (NID) approved a $77 million budget for 2009 –up 21 percent on the prior year. Of this, the water division represents $69 million. Unfortunately, water sales only cover 51% of costs, so NID will use $34 million of its reserves to cover the rest.

NID’s reserves are funded by property taxes, and property taxes are also used for the (get this!) “rate augmentation fund which helps subsidize raw and treated water rates.”

So property taxes go towards lower rates and the rainy dry day account, but now NID is raiding that account to fund an even bigger operating deficit — NOT by raising prices to cover costs.

One twist may justify such borrowing from the future, but only among the truly paranoid:

There are also concerns that with mounting deficits in Sacramento, the state will once again cast a greedy eye on the district’s property tax dollars. “I worry that they haven’t taken districts like ours off the table to fix their deficit,” General Manager Ron Nelson warned board members. “We must assume the state is looking at our tax revenues,” Nelson added.

So the idea is to spend your savings now to avoid them being stolen by Sacramento. What happens next year? Rates will still be too low to cover costs, and reserves will be down (Sacramento or not), and THEN there will be a fiscal crisis. Clever. NOT!

Bottom Line: Water sales should cover the cost of service. If prices are subsidized, operating losses must be funded from somewhere else, and higher demand reduces stored water that may be VERY valuable later on. [NID’s reservoirs are at “close to average” levels, which — according to the Operations Manager — is “not a bad state of affairs as long as the precipitation comes through.” No problem — unless you read the next post…]