PUD over budget upgrading Donner Lake water system; discussing possible land sales
January 27, 2004
In a workshop discussion about the Donner Lake water system earlier this month, Truckee Donner Public Utility District staff presented an updated budget and a number of financing options for the project to the TDPUD board of directors.
At issue were a number of costs associated with the project and whether those costs should be borne by customers of the Donner Lake assessment district or by the TDPUD as a whole, a decision that will affect the amount Donner Lake customers pay in a monthly surcharge for the next 20 years.
The utility district is getting closer to completing the upgrade of the Donner Lake water system, which it took over from previous owner Del Oro Water Company in 2001 because the system was deteriorating and badly in need of repairs.
According to a budget worksheet presented during the meeting, the TDPUD initially budgeted a total of $13,605,001 for the purchase and upgrade of the Donner Lake water system.
As of the end of December 2003, the district had spent $11,521,114, and TDPUD staff estimated that another $3,416,000 would be necessary to finish the work for a total cost of $14,937,114 – an overrun of $1,332,113.
Part of the reason the district is over its original budget for the Donner Lake project is the total cost of acquiring the system from Del Oro was greater than expected. In 2001, when the utility district took over the system, the TDPUD believed it to be worth $500,000, noting that Del Oro owner Robert Fortino had paid that much for the system eight years earlier and hadn’t made any improvements to it since that time. Del Oro representatives claimed the system was worth much more – $7 million according to sources within the TDPUD – and the matter went into private arbitration.
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In October 2003, Judge Keith Sparks ruled that the Donner Lake water system was worth $1,263,250, bringing the cost of the TDPUD’s acquisition of the system to $1,873,217 when attorney’s fees, the arbitrator fee and the cost of expert witnesses were figured in to the total.
The TDPUD had initially budgeted $780,461 to acquire the system, and the $1,092,756 difference is a major reason for the projected cost overrun.
To pay for the upgrades done to the Donner Lake water system, former Del Oro and Donner Tract water system customers have become part of a Donner Lake assessment district and will face a monthly surcharge in addition to their regular water bill.
At the Jan. 14 meeting, TDPUD General Manager Peter Holzmeister presented his recommendations on what those surcharges should be if all goes as planned with the rest of the system upgrades.
The good news for Donner Lake customers is that Holzmeister does not think Donner Lake customers should be charged for $329,889 worth of unanticipated maintenance the TDPUD had to do to the Donner Lake system in order to lift the boil water order that had been in effect when they took the system over from Del Oro.
In addition, Holzmeister argues that Donner Lake customers should not have to pay a $500,000 “source” fee – which would have covered approximately one third of the cost of drilling a well to serve the Donner Lake system – because the TDPUD was able to obtain 990 acre-feet of water rights in the takeover, water rights the district anticipates using sometime in the future.
“We think that the water right has such value to the district that we should make use of that value and not charge the Donner Lake people double,” Holzmeister said.
If Holzmeister’s recommendations are followed, Donner Lake customers will face a monthly surcharge of $4.60 over 20 years rather than the $8.30 they would face if both the $500,000 source fee and the $329,889 maintenance fee were included in the total cost of the system.
District’s property could be sold
While all five directors on the TDPUD board agreed that the $4.60 monthly surcharge was preferable, the issue of whether to sell some of the land owned by the TDPUD water utility drew more controversy.
Holzmeister broached the subject of the potential for selling four district properties because of inquiries he’s received from developers and other parties interested in purchasing the district-owned lands.
The properties the district is considering selling include four adjacent lots at the west end of South River Street and a 160-acre lot just west of Northwoods Boulevard below Tahoe Donner, both of which have already been declared surplus by the TDPUD. Also up for consideration are two adjacent lots near Interstate 80 at Euer Valley Road (on which the utility district hopes to build a corporation yard) and an approximately 10-acre lot next to the Hilltop property and Cottonwood Restaurant, neither of which has been declared surplus at this time.
Directors Ron Hemig and Joe Aguera were generally favorable about the idea of selling land that the district had deemed surplus and that wasn’t going to be used by the district in the future.
“At least from a policy point of view, these pieces of land are an asset, but they may not be the best asset,” Hemig said, adding that “Converting them to cash may be a better use as long as they are disposable and they aren’t useful to the PUD… So I’m in favor of a sale which would allow us to do a lot of things we aren’t able to do right now.”
Director Aguera agreed. “I think it’s a good idea because we can offset some of the costs by the sale of those properties. We’re never going to use them for office buildings or anything… so I think it’s a good idea,” he said. “The essence is that we have to be sure there is no strategic value (to the property) and that there is no better use for that asset.”
However, Director Pat Sutton advised the board to move slowly in selling off the district’s land assets:
“My feeling is that these (properties) are assets that came to the district probably 50 or 60 years ago and they’ve been held in trust for the benefit of the district and the people who live in the area for all this time, and I don’t believe that they are ever going to be detrimental for the district to keep them and not use them up all at once,” she said. “I would really like to see the district go slow on this and only sell parcels for which they have a particular use for the money.”
Before any district-owned land can be sold it must be deemed surplus by a board vote and then offered to other public agencies. If the district chose to sell any of its properties, the money from the sale would go into the TDPUD’s “Surplus Land Trust Fund,” from which the district’s water utility can borrow if it needs to construct water facilities.
The next TDPUD board meeting is scheduled for Wednesday, Feb. 4 at 6 p.m. The TDPUD board of directors meets regularly on the first and third Wednesday of each month at 6 p.m. in the TDPUD board room. The meetings are open to the public, and time is set aside for public comment at each meeting.