Mega Dams----The not so Little Secrets of Enterprise Funds   

History and tradition shows, clearly, that in the past, large water projects, be it the Glen Canyon dam or Horsetooth Reservoir in Northern Colorado, were funded largely with Federal Dollars. Even one of the most recent, and one of the few built in the last twenty years, Animas-La Plata, appears to have been built largely with federal funding. In the past few years, the funding policy has made a major shift. In the paraphrased words of Secretary of the Interior, Gale Norton, in Denver in early May of 2003,  she said, “The days of massive federal subsidies for large water projects are over.”

Moments later, after making the above statement in May, both Ms. Norton and Colorado’s Governor Owens repeatedly pressed that Colorado cannot continue to grow without the development of water. More specifically, the meaning was, Colorado’s Front Range cannot continue to grow explosively as it has, without massive water projects. This plea of the Governor was brought forward as if it was the desire of the Front Range populous to continue to grow at an resounding rate. Strangely, the wishes of the people in the Front Range are just the opposite, as can be seen by the refusal to approve Referendum A in the last election. This desire for slowed growth, has also been supported by every reasonable survey that has been done in this region in the last five years.

What is also becoming apparent from the above statements, is that water is a growth enabler, an accommodator, and if paid for by all of the public, a growth subsidizer---or another form of “corporate” and “developer welfare”.

What has transpired is the growth industry is desperate for water in order to maintain its momentum. Uncomfortably, the traditional forms of Federal and State funding of water development, and ultimately growth, are no longer available. As a result of this turn of events, proposals for large water projects have had to “discover” new forms of raising money.

In northern Colorado, the Northern Colorado Water Conservation District (NCWCD) has a number of projects in the initial stages, including the 320,000 acre ft. Glade Reservoir, a $300-500 million dollar proposal, which is part of the Northern Integrated Supply Project (NISP). Also the NCWCD has a $200+ million reservoir system associated with Windy Gap project. These price tags are in question as the Animas-La Plata project had a 50% overrun.

With the unavailability of Federal funding (and doubtful much state money) the District (NCWCD) has turned directly to the municipal, water districts, and utility operations to attempt the funding. Each participating community has made an initial commitment to the project. There level of commitment determined the percentage of the cost they must bare. In the case of the NISP project, there are fourteen communities participating at this juncture. The community of Erie has a 12.1% obligation, thus if the project runs to $400 million, their debt load will be $48 million. In addition, Erie also has a 6.6% commitment to the Windy Gap Project, (which has nine participants) therefore, another $16.5 million of a $250 million dollar project. This all assumes the present cost projections are accurate, which at this time it appears they are not, as NCWCD has informed some communities that the price is going up. Erie’s total commitment would equal $64.5 million. In the case of Erie, they are presently carrying $20 million in debts in Enterprise Funds related to other water projects. They would be taking on an additional $64.5+ million in debt.

Both of the projects, NISP and Windy Gap, are being funded in this manner. Each participating community is to provide adequate capitol to fund their portion of the projects. Unlike the past funding by Federal and State grants and subsidies, most of the funding, if not all, must now come directly from the participating communities, water districts and utilities.

The bigger question is, how will each of these communities generate the funds necessary to service their public debts? Almost all, if not all, of the participants would generate their capitol by selling revenue bonds held in an Enterprise Fund. This capitol would be turned over to NCWCD to actually build the needed infrastructure, i.e.. reservoirs, distribution systems, and exchange mechanisms. By using Enterprise Funds, the communities are able to generate funds, and ultimately debt, without having to be subjected to TABOR rules. The Tabor amendments were put in place some years ago as the result of Douglas Bruce’s efforts to force new and large accumulations of public debt to the vote of the people, because he felt, as apparently the public did, that elected officials were not responsible in their creating of new debt. By using Enterprise Funds, the vote of the public can be avoided. It is a handy, and commonly used, way around the TABOR amendment.

 In other words, each community will be able to accumulate large amount of debt without the approval of the electorate. In the case of Erie, the water debt may go from $20 million to as much as $100 million, and there will be no vote of the people. It is true that the town board, which acts as the board of directors of the enterprise funds, will have a vote. There will be some question as to the transparency of this action, and to the amount of public input, as many of the Enterprise actions are at the end of regular city council meetings. They are separate meetings of their own, frequently lightly attended, and seldom reported on.. It would appear that few citizens are even vaguely aware of the workings of Enterprise Funds. They are set up to dodge the TABOR rules.

The issue is even more compounded by the nature of the funding stream that will be used to service the debt. In most, if not all the municipalities & water districts, that stated revenue source will be growth fees of one sort or another. These could include impact fees, tap fees, and special assessments directly associated with new development. Most citizens feel new growth should pay for the new water development. While this may seem a likely method, in that the water is being totally developed to serve the needs of new development, there is more to the story.  The catch is, should the growth fees  fall short of the anticipated revenues, and are not  great enough to service the debt, the obligation will then fall on all users of the entire water system.

This situation has already occurred in Berthoud, Colorado (Who actually has a 2.8% interest in the NISP project or $14 million!), where the community was unable to service the $6 million debt with growth fees because growth slowed. The water user fees had to be almost doubled. The cost of the system, the one made for new development, now had to be paid by all the citizens--many of them, very much opposed to the rapid growth and very much opposed to subsidizing developers.

This condition is beginning to set itself up in the many communities that are participants of these big projects. The possibility is great; projects may end up being paid for with funds from the entire community, rather than by those that are gaining the most--the developers.

There is another point of interest involving the use of Enterprise Funds serviced with growth fees. In many of the communities, the majority of citizens list rapid growth as their number one concern for the quality of life in the area. Once the indebtedness is incurred, incurred without their vote, the communities are now actually obligated to long term, and in many cases, a high rate of growth. If the growth slows naturally,  the governing bodies will have to actively work to generate more growth---even if most of the citizens are generally opposed to such action. Thus, a trap is set.

There is still another situation growing. It would appear that some communities may  be committing themselves to a debt whose payment duration will go beyond the anticipated build out. In other words, if the growth rate is such that build out will occur in twelve years, but the note on the bonds is for thirty, there would seem to be an eighteen year period where the growth fees collection may radically lower. Who will then pay?

In summary it should be noted, if the water projects proceed as planned, large amount of community debt will be incurred without the vote of the people--the same people who voted for the constitutional amendment to limit tax indebtedness. The debt itself may fall on the backs of the 75% of the citizens who are broadly opposed to rapid growth---they, then will be subsidizing it! They will be providing corporate welfare, or developer welfare. Thirdly, by incurring the debt (without a vote), the communities will be obligating themselves to many years of a high rate of growth. One only has to take a brief look at the situation in Erie to see how increasing their water debt by three to four fold will hold them to a tremendous rate of growth for decades. Understanding the not-so-little secrets of the Enterprise Fund seems to be imperative.

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