what we need in a bay-delta fix
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May 11, 2011
San Diego County Water Authority
City of San Diego
What We Need in a Bay-Delta FixA Perspective by MWD‟s Largest Customer
S
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30% of San Diego County’s water supply comes from the Bay-Delta
50%
20%
30%
San Diego County Water Authority Supports a Bay-Delta Fix
Who‟s at the table?
Southern California issues not addressed◦ Realistic assessment of demand
◦ Realistic assessment of willingness and commitment to pay for current or future State Water Project costs
Cost
What‟s the timeline – and consequences of further delay
3
Financial “real parties in interest” are not at the table◦ MWD is dependent on water sales revenues from its
member agencies But those revenues cannot be counted on
◦ MWD‟s only revenues are provided to it by its member agencies Those revenues are in sharp decline
Need firm financing plan and commitments to pay from real parties in interest
Delta parties are not at the table◦ Success in the Delta without support of the Delta
Community is difficult to envision
4
MWD‟s Integrated Resources Plan (IRP) proposes to overdevelop supplies by 500,000 acre-feet◦ New supplies come at the highest cost◦ Inconsistent with statewide conservation mandate◦ Inconsistent with MWD‟s member agencies‟ plans to
develop independent supplies Urban Water Management Plans due in June
MWD finalized its IRP without essential information
MWD has become a house of cards◦ Pattern and practice of inflating sales and projected
revenues
5
MWD member agencies unwilling to commit to pay for current fixed costs◦ Problem was identified more than 15 years ago by
independent MWD Blue Ribbon Task Force Report◦ MWD board has failed to act
MWD currently proposing to sell water at a discount due to member agency budget constraints But these budgets will become more, not less constrained in
the future
MWD member agencies want MWD to pay for theirown projects, but do not want to pay for MWD projects◦ Member agency managers‟ letter to Blue Ribbon
Committee underscores this point
6
Need to connect willingness to spend with willingness and commitment to pay
◦ Represented by real, enforceable contracts
◦ So far, San Diego is the only member agency willing to do that
MWD rate structure has fatal flaw in the assumptions about who will pay for a Delta Fix
San Diego is placed at unreasonable risk under MWD rate structure◦ Water Authority payments to MWD amount to 25% of total
revenue
◦ Water Authority remains largest purchaser of MWD water
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Failure to grapple with the key issues today will further delay project implementation◦ Failure to talk about cost during the planning
process will lead to another “CalFed”
Practical implementation challenges presented by absence of Delta community support
Southern California water demands won‟t be “on hold” as the disputes continue
Conservation and local projects are being implemented now
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MWD
28 OtherState Water
ProjectContractors
MWD
9
50%Central Valley Project
Contractors
50%State Water
Project Contractors
Average MWD Water Purchases
by Member Agency (2000-09)
10
If the San Diego County Water Authority was a State Water Project
Contractor, it would be the third-largest
Who actually pays MWD‟s costs?Most MWD Member Agencies buy little waterWith no contracts in place, MWD revenues depend on variable sales
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Carlsbad M.W.D. City of Del Mar City of Escondido Fallbrook P.U.D. Helix W.D. Lakeside W.D.
City of National City City of Oceanside Olivenhain M.W.D. Otay W.D. Padre Dam M.W.D. Camp Pendleton
City of Poway Rainbow M.W.D. Ramona M. W.D. Rincon Del Diable City of San Diego San Dieguito W.D.
Santa Fe I.D. South Bay I.D. Vallecitos W.D. Valley Center M.W.D. Vista I.D. Yuima M.W.D.
40%City of
San Diego
The City of San Diego has the Biggest Stake in the Water Authority
Water Authority
Member Agencies,
by Size of Total
Financial Payments
Decisions by board members to spend money are disconnected from their agencies‟ willingness to pay◦ In 1928, voting, water rights and
financial commitment matched◦ Today, there is no connection
Agencies most willing to support new projects have most aggressive plans to reduce purchases from MWD
MWD board members support a Delta Fix – but are their agencies willing to pay?
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Voting structure based upon arcane 1920’s formula
•1928: 100% of revenues from property taxes
•2011: 5% of revenues from property taxes
At MWD, there is a disconnect between decisions to spend and willingness to pay
$0
$250
$500
$750
$1,000
$1,250
$1,500
$1,750
$2,000
$2,250
$2,500
$2,750
$3,000
Brackish Groundwater
Recovery
Recycled/Indirect Potable
Use
Seawater Deslination MWD Imported Water
$/A
F
MWD Imported Water Cost Assumes $15 billion
Delta Fix and 6%/year escalation
$744
$2,1742030
2011
13
MWD Member Agencies have Local Supply Options Available that Compare Favorably to
Future MWD Supply Costs
“Today, the plant produces approximately 70 percent of the water residents use.”
“…be 100 percent self-sufficient by 2020….”
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Long Beach is reducing its reliance on imported water supplies from MWD
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Imported
Water
32%
Groundwater
57%
Recycled
Water
11%
Recycled
Water
8%
Groundwater
41%Imported Water
51%
2005 2010
Los Angeles plans to reduce its purchases from MWD by 48%
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Metropolitan Water District
Imperial Irrigation District Transfer
All American & Coachella Canal Lining
Local Conservation
Seawater Desalination
Local Surface Water
Recycled Water
Groundwater
Conservation & Recycling:
95%
5% 7%
17%
23%
22%
6%6%
9%
10%
13%
14%
3%5%5%
12%
48%
2020=54%
2011=44%
1991=0%
2011 20201991
578,000 AF
286,000 AF 195,000 AF
Supplies from MWD account for about
half of San Diego County’s supply
today, with planned reduction to one-
fourth by 2020
The Water Authority is also Increasing Local Supply Development and Reducing its Water Purchases from MWD
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MWD‟s rates are rising sharply◦ Up 55% since 2008
MWD‟s water sales are declining sharply◦ Down 32% since 2008
Leaving aside one-time budget gimmicks, the current fiscal year shows:◦ Revenue shortfall of almost $200 million◦ Annual sales at historic low, more than 300,000
acre-feet less than budget adopted by board Lowest water sales in more than two decades
◦ Next fiscal year budget also relies on inflated sales projections
18M
AF
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2000 2005 2010
MWD SalesMWD is experiencing unprecedented financial challenges
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$0
$500
$1,000
$1,500
$2,000
$2,500
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
$/A
F
Actual Sales
Projected - Expected
MWD rates (actual/projected)
FS Tier 1-LRFP Forecast 2010-2020
LRFP Forecast with annual 6% rate increases
Acre
-fe
et
MWD’s Projected Sales in
2020 are 24% Lower than
2000-2009 Average
-32% reduced sales
+55% rate increases
19
MWD Slide (3/7/2011)Assumed sales of 1.8 maf for 2012 thru 2015
20
MWD‟s financial reserves are Low – and Shrinking
21
In an era of sharply declining sales and member agency reduction in water purchases, MWD:◦ Is continuing to approve new subsidies, which further reduces
water sales◦ Is proposing expensive water supply development projects to
generate unneeded water◦ Has approved a 2010 Integrated Resources Plan that plans to
over-develop 500,000 acre-feet of buffer supplies annually Who will pay?
MWD does not have contracts with its 26 member agencies to back up its “Take-or-Pay” State Water Project Supply Contract with the State of California
◦ MWD’s 2011 obligation to the State: $573 million
◦ Current SWP contract runs through 2035
10-Year MWD “purchase orders” with its member agencies expire in 2012
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But they are unwilling to do so: ◦ “…to date, most of our board members have said „we‟re
not so sure about that.‟ And, most of our member agencies have said „No. Thanks, but no thanks, because we prefer this the way it is.‟”
◦ “Should people make those firm commitments going into the future? So far, the member agencies have opted not to. They prefer it the way it is.”
-- Excerpts of remarks by MWD General Manager Jeffrey Kightlinger, speaking at an August 10, 2010 public meeting in San Diego on MWD‟s draft 2010 Integrated Resources Plan (IRP).
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The right parties to be at the table
Realistic assessment of Southern California demands as represented by firm contracts
Assurances that water supplies and access to facilities will be provided for by contract
This is the essential foundation of a meaningful discussion about willingness to pay for a Delta Fix
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The San Diego County Water Authority will:◦ Support a realistic and affordable Bay-Delta fix
◦ Back up that support with a firm, long-term contract to pay for its share of water and facilities
◦ Will MWD‟s other 25 member agencies agree to do the same?
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