MID Falling Water Charge: Subsidy or Slush Fund?

According to Stanislaus County Supervisor Jim DeMartini, news that local farmers have been receiving subsidies amounting to $89 million over seventeen years was as big a surprise to farmers as to anyone else.“Ninety-nine out of a hundred farmers have never heard of the Falling Water Charge,” said DeMartini last Friday.The Falling Water Charge is the controversial fee (some would say “tax”) that the Modesto Irrigation District (MID) imposes on electrical rate payers. The Modesto Bee has persisted in calling the fee a subsidy, but the MID Board of Directors may be hard-pressed to convince skeptical observers that the hidden cost really does subsidize farmers.

The MID’s own attorney recently noted that, “MID has not made an effort to identify the costs incurred by the Irrigation Division in providing water for the generation of hydroelectric power to the Electrical Division.” In fact, said the attorney in another passage, “the Falling Water Charge can (and almost certainly does) go up without a corresponding increase in costs incurred by the Irrigation Division.”

MID Director Tom Van Groningen would have MID rate payers believe that the recent proposal to sell water to San Francisco was an effort to cover shortfalls brought about by subsidizing the Irrigation District. That argument seems far-fetched to those who’ve watched the MID enter into a series of ill-advised ventures, including extending service into the Mountain House district, that ended up costing millions of dollars. Those expenses are major factors in the MID’s financial problems.

Van Groningen argued recently that the MID knew it had to raise water rates to farmers but couldn’t get enough Directors to support the increases. That’s news to close observers of the water sale controversy, who witnessed many farmers agree that higher rates were preferable to selling water to San Francisco.

In the Falling Water Charge memorandum, the MID’s attorney also noted than even though the Falling Water Charge is supposed to address issues like maintenance, the MID has never enumerated the costs of such maintenance. That may be because the MID has failed to use money generated by the Falling Water Charge for maintenance. Remember, the MID claimed a major reason for the water sale was the need for maintenance and upgrades of the irrigation system.

Wayne Zipser, Executive Director of the Stanislaus County Farm Bureau, said Friday that the MID, “has a fiduciary responsibility to charge enough for water to cover the costs of delivering it.” Zipser also noted that the MID never mentioned the Falling Water Charge during the water sale controversy.

Almost anyone with even a remote interest in the water sale controversy will agree that water rates to farmers have been far too low. Most farmers also agree and are willing to pay higher rates. But the MID will find it more than difficult to convince farmers and close observers that its financial troubles have been the result of subsidies to farmers.

In fact, it is going to take some very specific answers from the MID to explain why it has failed to list costs supposedly involved in calculating the Falling Water Charge, failed to explain why the Falling Water Charge fluctuates so wildly from year to year,  and failed to explain why the MID didn’t raise the problem of the Falling Water Charge during the water sale controversy.

Some people will even wonder where the $89 million generated by the Falling Water Charge has gone, if not for maintenance and improvement of the irrigation delivery systems. They might even ask the MID to explain the difference between a subsidy and a slush fund.