The Water Authority's viewpoint on a Bay-Delta fix, costs associated, and how MWD's commitments to the funding of such a fix may affect the San Diego region.

1. What We Need in a Bay-Delta Fix
A Perspective by MWD‟s Largest Customer
May 11, 2011
San Diego County Water Authority
City of San Diego
S

2. San Diego County Water Authority
Supports a Bay-Delta Fix
30% of San Diego
County’s water
supply comes from
the Bay-Delta
30%
50%
20%
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3.  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
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4.  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
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5.  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
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6.  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 their
own projects, but do not want to pay for MWD
projects
◦ Member agency managers‟ letter to Blue Ribbon
Committee underscores this point
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7.  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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8.  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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9. 50% 50% MWD
Central State Water
Valley Project
MWD
Project Contractors
Contractors
28 Other
State Water
Project
Contractors
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10. Who actually pays MWD‟s costs?
Most MWD Member Agencies buy little water
With no contracts in place, MWD revenues depend on variable sales
If the San Diego County Water
Authority was a State Water Project
Contractor, it would be the third-largest
Average MWD Water Purchases
by Member Agency (2000-09)
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11. The City of San Diego has the Biggest Stake in the
Water Authority
40%
City of
San Diego
Water Authority
Member Agencies,
by Size of Total
Financial Payments
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.
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12. At MWD, there is a disconnect between
decisions to spend and willingness to pay
 Decisions by board members
to spend money are
disconnected from their Voting structure based upon arcane 1920’s formula
agencies‟ willingness to pay •1928: 100% of revenues from property taxes
•2011: 5% of revenues from property taxes
◦ 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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13. MWD Member Agencies have Local Supply
Options Available that Compare Favorably to
Future MWD Supply Costs
$3,000
$2,750
$2,500
$2,250
2030
$2,000 $2,174
$1,750
$/AF
$1,500
$1,250
$1,000
$750
2011
$500
$744
$250
$0
Brackish Groundwater Recycled/Indirect Potable Seawater Deslination MWD Imported Water
Recovery Use
MWD Imported Water Cost Assumes $15 billion
Delta Fix and 6%/year escalation
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14.  “Today, the plant
produces
approximately 70
percent of the water
residents use.”
 “…be 100 percent
self-sufficient by
2020….”
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15.  Long Beach is reducing its reliance on
imported water supplies from MWD
2005 2010
Recycled
Recycled
Water
Water
8%
11%
Groundwater Imported Groundwater
41% Water
Imported Water 57%
51% 32%
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16.  Los Angeles plans to reduce its purchases
from MWD by 48%
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17. The Water Authority is also Increasing Local
Supply Development and Reducing its Water
Purchases from MWD
1991 2011 2020
5% 5% 5% 7% 10%
3% 6%
12% 6%
578,000 AF 17%
14% 286,000 AF 195,000 AF
95%
23%
48% 9%
13%
22%
Conservation & Recycling: Metropolitan Water District
1991=0% Seawater Desalination
2011=44%
2020=54% Local Surface Water
Imperial Irrigation District Transfer Groundwater
All American & Coachella Canal Lining
Supplies from MWD account for about
Local Conservation half of San Diego County’s supply
Recycled Water today, with planned reduction to one-
fourth by 2020 17

18. MWD is experiencing unprecedented MWD Sales
financial challenges 3.0
2.5
2.0
MAF
1.5
 MWD‟s rates are rising sharply 1.0
0.5
◦ Up 55% since 2008 0.0
2000 2005 2010
 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
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19. 19
-32% reduced sales
2,500,000 $2,500
2,000,000 $2,000
1,500,000 $1,500
$/AF
Acre-feet
+55% rate increases MWD’s Projected Sales in
1,000,000 $1,000
2020 are 24% Lower than
2000-2009 Average
Actual Sales
Projected - Expected
500,000 $500
MWD rates (actual/projected)
FS Tier 1-LRFP Forecast 2010-2020
LRFP Forecast with annual 6% rate increases
- $0
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20. MWD‟s financial reserves are Low – and Shrinking
MWD Slide (3/7/2011)
Assumed sales of 1.8 maf for 2012 thru 2015
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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?
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22.  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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23.  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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24.  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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25.  TheSan 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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