Technical Capability, Financial Commitments, Implementation Prepared For: House Capital Budget Committee Work Session December 5, 2014 Olympia, WA CSRIA-11-5-2014

Technical Capability, Financial Commitments, Implementation

Prepared For:

HouseCapital Budget

CommitteeWork

Session

December 5, 2014Olympia, WA

CSRIA-11-5-2014

Darryll Olsen, Ph.D.Regional Planner/Resource Economist

CSRIA Board Representative

Columbia-Snake River Irrigators AssociationOdessa Subarea Systems 1, 2, and 4 Review

Private Sector Financing-Development for Surface Water Delivery

State-USBR Project: Modified

Partial ReplacementAlternative 70,000

acresN/S-I-90

CSRIA Objective:1)Protect Economic Benefits of Irrigated Ag. 2)Optimize Water Use.3)Provide a Private Sector Financing Structure for Off-Canal Development.



Moses Lake

East Low Canal SystemUSBR EIS

Phase II Analysis:Systems 1 and 2

Detailed PreconstructionAnalysis and

Economic Costs(CSRIA.org)

System 4 AnalysisDetailed Preconstruction

Analysis and Economic Costs

(CSRIA.org)



CSRIA-11-5-2014

N-I-90 Systems 1 (2 and 4) Private Sector Package Development:

• Participants’ Water System Agreement (WSA).Financial and Development “Instrument” for System Participants.

Legal Construction Contract and Development Management.

Legally Binds Land Owners-Lease Holders to System Financial Obligation.

Structures Post Development OM&R Obligations.



CSRIA-11-5-2014

It’s the Water—New State Conditional Water Use Permit Issued to USBR:

• New State Secondary Water Use Permit Issued to USBR.

• Office of Columbia River (OCR) and Eastern Region Office, Ecology,

Working with CSRIA to Verify System 1 Groundwater Rights with

System 1 Lands—On the Ground Water Determination.

• Water Right Verification and Application to New Lands.

Use of Nameplate Acres without Relinquishment.

RCW 90.03.380 Water Spreading to Include Extension-Seasonal Transfer Lands.

Economic-Financial Viability of ALL System Projects.



CSRIA-11-5-2014



Draft Water Service Contract Submittal:

Bringing 21st Century Irrigation Development to Subarea.

• Engineering for On-the-Ground Irrigation Efficiency and Water Use.

• Optimize the Environmental Regulations (EIS), State Water Code.

• Private Sector Economics-Financial Model—There Are No State$-Federal$.

Respecting the “Invisible Hand” of Private Sector Economics.

• For System(s) development, Allow the Irrigators to Make the Decision for Willingness-to-Pay; “Let Them Do as They Will...”

• Let the Irrigators Determine Payment Structure—Multiple Zones

with Marginal Costs.• Optimized Private Sector Financial Capability with Water Spreading.

CSRIA-11-5-2014



Private Sector Irrigators vs. ECBID Public Sector Financial Models:

DevelopmentFactors

Private SectorEcon/Financing

ECBID Nov.Public Model

EngineeringStatus

Pre-ConstructionCompleted

On-Going Design?

System CostAllocation

By System/Zone, (Marginal Costs)

“Normalized” ZoneOne Ave. Cost/Acre

Financing Direct Ag. Lending LID-Rev. Bonds

Cost of Capital-Time Period-

Total Debt Serv.-

4-4.5%20-Years

5.5-6.0%(?)30-Years

>20% of Private

Total Capital &OM&R/Acre

$250-500(Annual $/Acre)

$350-400*(Annual $/Acre)

Acres SecuredParticipants

Syst.1: 14,500Syst. 2&4: 17,000

Unknown(Costs)?

Timing 2016-2017 2018?

CSRIA-11-5-2014 *CSRIA Modified Estimate.

Water System Contract Review Issues? Impeding Action?

• Water Spreading. State Water Code Prevails. Required for Financial Viability.

• EIS Configuration: All Systems Must Be Within 87,000 Acres. Within Allocated Water Supply. Real Issue Is Actually Getting All the Acres.

• USBR NED-B/C Analysis. Direct Net Value Must Be Positive Per Acre. Yes, It Is…Market Value Exceeds USBR Production

Budget Estimates.

• Direct Service Contract with Private Irrigators. Turn Key Operations Conveyed to ECBID. Wait for Master Water Service Contract? Time and

Money Indifference?



CSRIA-11-5-2014

Further Perspectives—Development Picture:• Move Now to Get Water on the Ground—Success Breeds

Success.

• Get System 1 Operational by 2017; Systems 2, 3, and 4 by 2017-2018.

• Further State/Federal Dollars for Canal? Show Some Results First!

• Financial Reality—Take Advantage of the POWER of Private Sector

Financing and Construction.

• The “Normalized” Model Does Not Add Acres, It Further Disperses Acres and Can Increase Costs—Discouraging Irrigator/Lender Participation.

• ECBID: Focus on Canal Expansion to Lind Coulee and South.

• Should the ECBID Receive More State/Federal Funds, When They Are Not Accepting the Irrigators’ Private Sector Financing for System 1 or the Other Systems ($40-100 Million of Active Private Sector Capital).

CSRIA-11-5-2014



Documents

Technical Capability, Financial Commitments, Implementation Prepared For: House Capital Budget Committee Work Session December 5, 2014 Olympia, WA CSRIA-11-5-2014