BOARD AGENDA MEMORANDUM
SUBJECT:
Title
Preliminary Fiscal Year 2019-20 Groundwater Production Charge Analysis Update.
End
RECOMMENDATION:
Recommendation
Discuss and provide direction on the preliminary Fiscal Year 2019-20 Groundwater Production Charge analysis prepared by staff.
Body
SUMMARY:
This agenda memo is an update to the January 14, 2019 follow-up discussion of the Preliminary Fiscal Year (FY) 2019-20 Groundwater Production Charge Analysis (Item 2.1). This item addresses Board requests to see the impact of certain adjustments on the preliminary FY 2019-20 groundwater production charge analysis. Staff is seeking Board input on the preliminary analysis to incorporate into the development of the groundwater production charge recommendation.
The groundwater production charge recommendation will be detailed in the Annual Report on the Protection and Augmentation of Water Supplies that is planned to be filed with the Clerk of the Board on February 22, 2019. The public hearing on groundwater production charges is scheduled to open on April 9, 2019. It is anticipated that the Board would set the FY 2019-20 groundwater production charges by May 14, 2019, that would become effective on July 1, 2019.
Groundwater Production Charge Projections Presented on January 8, 2019
Staff presented 5 preliminary groundwater charge scenarios on January 8, 2019 for Board review. For North County Municipal and Industrial (M&I) groundwater production, the scenarios ranged from an increase of 4.7% to 8.1% for FY 2019-20, and from 5.7% to 7.7% for South County M&I groundwater production depending on the scenario.
The overall impact of the 5 preliminary analysis scenarios for FY 2019-20 to the average household that uses 1,500 cubic feet on average per month would be an increase ranging from $2.09 to $3.60 per month in North County and from $0.88 to $1.19 per month in South County.
For reference purposes the projects and assumptions included in the original 5 scenarios are listed below:
Scenario 1) Water Supply Master Plan (WSMP) 90% Level of Service
This scenario includes the following projects and assumptions:
• Baseline Projects (according to the WSMP);
• California WaterFix (CWF) (State and Federal side);
• No Regrets Package projects;
• Potable Reuse Phase 1 to produce 24,000 AF (assume operations start in FY 28);
• Pacheco Reservoir Expansion (assumes $485 M Proposition 1 grant);
• Transfer-Bethany Pipeline;
• South County Recharge (assume facilities built beyond FY 2028-29);
• $200M contingency placeholder cost for dams and treatment plant upgrades;
• The Board’s CWF Guiding Principle #5.
Scenario 2) Water Supply Master Plan 80% Level of Service (LOS)
Includes the same projects and assumptions as Scenario 1 except as follows:
• CWF Federal side is excluded;
• Transfer-Bethany Pipeline is excluded;
• Pacheco Reservoir Expansion is paid for by a special tax, not water charges.
Scenario 3) Water Supply Master Plan 80% LOS, Reduce Potable Reuse
Includes the same projects and assumptions as Scenario 2 except as follows:
• Potable Reuse Phase 1 capital costs are reduced by 50%, with the remaining 50% assumed to be spent beyond FY 2028-29; the District “pay as you go” contribution is reduced from 30% to 15%; and the Public-Private Partnership (P3) reserve grows to $10 M by FY 2027-28 instead of $20 M;
• Transfer-Bethany Pipeline is included.
Scenario 4) Water Supply Master Plan 80% LOS, Reduce Potable Reuse, No CWF
Includes the same projects and assumptions as Scenario 3 except as follows:
• CWF State side is excluded
Scenario 5) Water Supply Master Plan 80% LOS, Reduce Potable Reuse, Add Los Vaqueros and Sites Reservoirs
Includes the same projects and assumptions as Scenario 4 except as follows:
• CWF State side is included;
• Sites and Los Vaqueros Reservoirs are included.
Board Member Comments on January 8, 2019
Staff captured the following Board member comments on January 8, 2019 in no particular order:
• Scenario 4 should be eliminated as it does not meet the 80% level of service goal (does not meet 80% of average annual water demand in drought years)
• The potential investments in Sites and Los Vaqueros reservoirs should be separated for purposes of the scenarios (include most viable option only)
• Little support for reducing the investment in potable reuse prior to FY 2028-29 and delaying the remaining investment to beyond FY 2028-29
• Support indicated for Scenario 1, which would achieve the 90% level of service goal, although there was also general support indicated for looking at scenarios that would achieve the 80% level of service goal
Groundwater Production Charge Projections Presented on January 14, 2019
Staff presented 4 additional preliminary groundwater charge scenarios on January 14, 2019 for Board review as follows:
Scenario 6) Water Supply Master Plan 90% LOS, Pacheco paid by Other Sources
Includes the same projects and assumptions as Scenario 1 except as follows:
• Pacheco Reservoir Expansion is paid for by other sources, not water charges.
Scenario 7) Water Supply Master Plan 80% LOS, Pacheco paid by Other Sources
Includes the same projects and assumptions as Scenario 6 except as follows:
• CWF Federal side is excluded.
Scenario 8) Water Supply Master Plan 80% LOS, Pacheco paid by Other Sources, Add Los Vaqueros Reservoir
Includes the same projects and assumptions as Scenario 7 except as follows:
• Includes investment in Los Vaqueros Reservoir.
Scenario 9) Water Supply Master Plan 80% LOS, Pacheco with $250M WIIN funding, WIFIA loan & Partners Pay 20%
Includes the same projects and assumptions as Scenario 8 except as follows:
• Excludes investment in Los Vaqueros Reservoir;
• Pacheco Reservoir Expansion funding includes $250M Water Infrastructure Improvements to the Nation Act (WIIN) funds, a Water Infrastructure Finance and Innovation Act (WIFIA) loan, partner agencies assumed to pay for 20% of project, remaining balance paid for by water charges or other District revenue sources
For North County Municipal and Industrial (M&I) groundwater production, scenarios 1, 6, 7, 8 and 9 range from an increase of 5.9% to 8.1% for FY 2019-20, and from 6.4% to 7.7% for South County M&I groundwater production depending on the scenario.
The overall impact of Scenarios 1, 6, 7 and 8 for FY 2019-20 to the average household that uses 1,500 cubic feet on average per month would be an increase ranging from $2.62 to $3.60 per month in North County and from $0.99 to $1.19 per month in South County.
Adjusted Scenario 9
The Board gave feedback to staff on January 14, 2019 to develop the FY 20 groundwater production charge recommendation based on Scenario 9. In addition, the Board requested to see the impact of increasing the drought reserve and including any other potential contingency funding needs, like the potential for increased future employer contributions toward the pension unfunded liability. The adjusted scenario 9 includes the following adjustments:
• PERS contribution contingency of $3.9M per year beginning in FY 22
• CIP projection refinements (negligible total cost change)
• Updated Overhead and Benefits rates (impact is roughly $2.7M per year)
• Added $3M to the Drought Reserve in FY 20 for a total reserve balance of $10M
For North County Municipal and Industrial (M&I) groundwater production, the adjusted Scenario 9 results in an increase of 6.6% for FY 2019-20, and 6.9% for South County M&I groundwater production.
The overall impact of the adjusted Scenario 9 for FY 2019-20 to the average household that uses 1,500 cubic feet on average per month would be an increase $2.93 per month in North County and $1.07 per month in South County.
Based on Board member feedback, staff is currently assuming that the proposed maximum Agricultural groundwater production charge for FY20 will be equivalent to the District Act maximum while the Board continues to deliberate its Open Space Credit Policy.
FINANCIAL IMPACT:
This preliminary analysis of the groundwater production charges does not have any direct financial impact, however, the adopted groundwater production charges will affect the future finances of the Water Utility Enterprise.
CEQA:
CEQA Guidelines Section 15273: CEQA does not apply to establishment or modification of water rates.
ATTACHMENTS:
Attachment 1: PowerPoint
UNCLASSIFIED MANAGER:
Manager
Nina Hawk, 408-630-2736
Darin Taylor, 408-630-3068