Committee backs creating $25 million crop-loss reserve, seeks advisor via RFQ

The Diversion Authority Finance Committee recommended creating an oversight subcommittee and authorized staff to issue a request for qualifications to hire an investment adviser for a proposed crop-loss reserve fund.

John Shockley, presenting the item, said the authority had committed to a program to address agricultural producers’ losses that federal crop insurance may not cover when the diversion structures are closed. Staff calculated a probable maximum loss of $25,000,000 for the upstream area and proposed a fund that the authority would seed and manage over time. "It was estimated to be $25,000,000," Shockley said, describing the probable maximum loss calculation.

Shockley told the committee that buying aftermarket insurance would have required an annual premium of about $7,000,000 — far higher than earlier estimates — so staff recommended creating a reserve that could grow under professional management. Under the proposal the authority would pay the first $5,000,000 of a covered loss as a self-deductible and then tap the reserve, with governance provided by a three-member subcommittee and an independent advisor.

The committee voted to establish the oversight subcommittee (chair, vice chair and a third member to be determined) and to authorize the executive director to issue an RFQ for investment management and advisory services so staff can hire a financial advisor to finalize the fund design. The motions carried by roll call.