San Diego County Water Authority Fiscal Years 2018 and 2019 Budget evelopment Administrative and Finance Committee January 26, 2017 Maureen A. Stapeton, Genera Manager Agenda  Overall purpose:  To solicit input from the Board on the development of the upcoming multi-year budget  Presentation will:       Provide an overview of the Water Authority Review framework of current budget Highlight accomplishments to date Identify key factors impacting upcoming budget Discuss future Board schedule Seek Board feedback Water Authority Revenues  Primary Sources of Revenues  Water Sales  Capital Contributions Other Revenues, $196,038; 16% Water Sales Net Fund Withdraws Infrastructure access charges Net Fund Withdraws; $140,231 ; 9% Build America Bonds and Investment Income Capacity Charges Water Sales, $1,162,792 ; 78% Property Taxes and in-lieu charges Water Standby availability charges ($ Millions) All Other Revenue Sources Water Authority Expenses  Primary use of funds     Water Purchases and Treatment Debt Service Operating Departments, All Others, CIP Expenditures $94,143 ; 6% $27,531 ; 2% Operating Departments CIP Expenditures $146,525 ; 9% Debt Service, $282,804 ; 19 Water Purchases & Treatment*, $957,526 ; 64% ($ Millions) Historical Staffing 120 - Regular I LDEs Contractors Positions 4O 20 0 0 <3 sun Diego can?! CIP Historical Spending $350 $300 $250 $200 $150 $100 $50 I Q90 00) 90 0% 0?0) $Mi ions San Diego WhisrAulho?iy Debt Service  Achieved AAA Financing Rating  Adoption of Carryover Storage Operational Principles & Stored Water Fund Policy  Debt Refundings have saved $78.3 million on a present value basis $140 $120 in Millions ($) $100 $80 $60 $40 $20 $- Fiscal Year Interest Principal Historical Water Sales 700,000 $700,000,000 600,000 $600,000,000 500,000 $500,000,000 400,000 $400,000,000 300,000 $300,000,000 200,000 $200,000,000 100,000 $100,000,000 0 $2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* Acre-Feet Sales Highlights during FYs 16&17  Construction completion of Carlsbad Desalination Plant and 10 mile Conveyance Pipeline  Carlsbad Desalination Plant Dedication December 14, 2015  One full year of operations Highlights during FYs 16&17  Successful When in Drought Campaign  Implementation of State Mandated Water Conservation Targets 10 Highlights during FYs 16&17  Regional water use reduced by 20%  Adoption of 2015 Urban Water Management Plan  Adoption of 2015 Long Range Financing Plan  2017-2021 Business Plan  5 year Department Operating Plans Highlights during FYs 16&17  25 years of Asset Management Program  40 miles of pipeline rehabilitated  Fiscal Years 2016 and 2017 – one of the largest shutdown schedules  Integration of desalinated water into aqueduct operations Highlights during FYs 16&17  Filled San Vicente Reservoir with Carryover and     Emergency Storage water Completing Miramar Pump Station and Nob Hill Improvements Projects Obtained $31.35 million in IWRM Grants Secured Hoover Dam Power Allocation Wind Turbine Technology Pilot at Olivenhain Dam Highlights during FYs 16&17  Settlement of San Vicente Pipeline Litigation September 2016  MWD Litigation Decision November 2015  QSA Decision Highlights during FYs 16&17  Completed Model Landscape Ordinance  Citizens Water Academy – 236 graduates through     December 2016 Organization Cybersecurity Review PeopleSoft Upgrade Voting & Queuing system in Board Room 2 Clean Audits Highlights during FYs 16&17  Workforce Management addressing aging demographics  Maintaining staffing to ensure efficient organizational operations  Implementation of Affordable Care Act requirements Fiscal Years 2018 & 2019 Focus  Integration and implementation of Water Authority      Vision 2017-2021 Business Plan implementation Adaptive management in a changing environment Accountable, forthright, transparent and legal rate setting Continuous improvement through innovation and efficient, effective use of resources Workforce development and training Factors Impacting Budget Development  Water Supply Allocations  Drought efforts     Modest economic activity increase Energy and Innovation Regulatory Policies Water Authority Operations  Workforce management  Continue to focus on efficiencies and effectiveness  Cost containment  Enhanced communication regarding MWD issues Schedule Key Board Dates January 26 Discussion on development of FYs 18&19 Recommended Budget May 25 A&F Committee Presentation of Recommended Budget Notice of Public Hearing for 2018 Rates and Charges June 6 & 8 Special A&F Committee Meeting – Budget Workshops June 22 Consideration/Adoption of Recommended Budget Hold Public Hearing on 2018 Rates and Charges Board Requested Direction  Provide Board input for consideration into the development of the Fiscal Years 2018 and 2019 multi-year budget.  Are there any significant drivers that have not been identified?  Where should the Water Authority’s efforts be focused for FY2018 and FY2019?  Are there any areas that should receive more or less attention? Legislation and Public Outreach Committee January 26, 2017 Glenn Farrel, Government Relations Manager 1     Legislature convened its 2017-18 state legislative session on January 4 January 20: Deadline for bill proposals to be submitted to Legislative Counsel February 17: Deadline for bill introduction Committee hearings will begin in March 2   Governor released 2017-2018 budget on January 10 $179.8 billion in proposed expenditures ◦ Includes all proposed spending – General Fund, Special Funds, Bond Funds  Budget proposal reflect decreased state revenues of approximately $5.8 billion ◦ Some budget solutions are identified – approx. $3.2 billion  Potential for budget deficit of up to $1.6 billion without increased revenues or additional budget solutions ◦ May Revise budget proposal will reflect any new projections to General Fund revenues 3  $180 million – emergency drought response ◦ $7 million to DWR for drought management ◦ $2 million for Save Our Water campaign ◦ $5.3 million to SWRCB for water rights    $248 million from Prop 1 for IRWM projects $19 million to DWR/SWRCB to implement Sustainable Groundwater Management Act $2.2 billion cap/trade expenditure plan ◦ $27.5 million proposed for spending on:  Energy efficient upgrades and weatherization  State water efficiency and enhancement program 4 SENATOR COMMITTEE/LEADERSHIP Senator Joel Anderson • • Senator Toni Atkins • • • • • • • • Senator Patricia Bates • • • • • Senator Ben Hueso • • • • • Budget and Fiscal Review Budget Sub. No. 5 on Corrections, Public Safety, and the Judiciary Elections and Constitutional Amendments – Vice Chair Judiciary Public Safety Health Labor and Industrial Relations Natural Resources and Water Rules Transportation and Housing Appropriations – Vice Chair Business, Professions, and Economic Development – Vice Chair Environmental Quality Legislative Ethics Transportation and Housing Banking and Financial Institutions Energy, Utilities, and Communications – Chair Governmental Organization Natural Resources and Water Veterans Affairs 5 Assemblymember COMMITTEE/LEADERSHIP Assm. Rocky Chavez • • • • • • Budget Budget Subcommittee #2 – Education Finance Education – Vice-Chair Higher Education Utilities and Energy Veterans Affairs – Vice-Chair Assm. Todd Gloria • • • • • Assm. Lorena Gonzalez Fletecher Aging and Long-Term Care Education Governmental Organization Veterans Affairs Water, Parks, and Wildlife • • • • • • • • Assm. Brian Maienschein Appropriations – Chair Human Services Local Government Public Safety Communications and Conveyance Health – Vice-Chair Human Services Judiciary 6 Assemblymember Assm. Randy Voepel • • • • • • COMMITTEE/LEADERSHIP Aging and Long-Term Care – Vice-Chair Budget Budget Subcommittee #2 – Education Finance Insurance Local Government Veterans Affairs Assm. Marie Waldron • • • • • • Arts, Entertainment, Sports, and Tourism – Vice-Chair Governmental Organization Health Local Government – Vice-Chair Rules Legislative Ethics Assm. Shirley Weber Banking and Finance Budget Budget Subcommittee #5 – Public Safety – Chair Budget Subcommittee #6 – Budget Process and Oversight Education Elections and Redistricting Higher Education • • • • • • • 7  Senate Democrats introduced CA Rebuild package ◦ SB 1 (Beall) – $6 billion/year transportation funding package ◦ SB 2 (Atkins) –Establishment of a permanent funding source for affordable housing ◦ SB 3 (Beall) –$3 billion G.O. bond on November 6, 2018 ballot to fund affordable housing programs ◦ SB 4 (Mendoza) –$600 million G.O. bond on June 5, 2018 primary election ballot to enhance freight movement and reduce emissions from freight operations ◦ SB 5 (De Leon) –$3 billion parks and water G.O. bond on June 5, 2018 primary election ballot  $1.5 billion allocated to parks and $1.5 billion allocated to drought relief and water infrastructure 8  Long-term water use efficiency  Public goods charge on water  Proposition 218 reform  Cap/Trade  Water/Resources Bond 9 Legislation and Public Outreach Committee January 26, 2017 Glenn Farrel, Government Relations Manager   On July 28, 2016, the Board approved Water Authority sponsorship of legislation to clarify statutory authority under the County Water Authority Act relative to energy matters On December 8, 2016, the Board approved Water Authority sponsorship of a legislative framework to pursue funding to fulfill the state’s obligations in various resources conflicts, including at the Salton Sea 2  Issues ◦ Legislation to statutorily implement the Governor’s proposed long-term water use efficiency framework is expected in 2017 ◦ Many uncertainties in legislation  How will framework recommendations be shaped?  Will statutory standards be acceptable to and achievable by the Water Authority and its member agencies?  Will statutory standards recognize and embody the notion of drought-sustainable water supply development?  Will legislation appropriately protect regional economies?  Will a legislative effort allow sufficient deliberation, such as afforded through a two-year bill process? 3  Proposed legislative approach ◦ Modeled after 2004 Water Authority sponsored legislation – AB 2717 (Laird)  Requested CUWCC to convene year-long stakeholder workgroup  Develop proposals for improving landscape irrigation efficiency  Paid for by nonstate agency stakeholders ◦ This proposal would: Require DWR to convene year-long stakeholder workgroup Develop new water use targets for urban water suppliers Develop methods to calculate new water use targets Avoid unintended consequences that could negative impact economy, wastewater infrastructure, or investments in drought-resiliency  Paid for by nonstate agency stakeholders     4  Approve sponsorship of legislation to create a stakeholder workgroup process through DWR – modeled after successful 2004 Water Authority sponsored legislation – for advancing long-term water use efficiency standards 5 Legislation and Public Outreach Committee January 26, 2017 Glenn Farrel, Government Relations Manager Federal Legislative Priorities (At-A-Glance) 1. Protect the Water Authority’s Colorado River supplies and ongoing implementation of the QSA. 2. Engage in the federal effort to undertake broad regulatory reform through the Congressional Review Act. 3. Undertake a rigorous relationship-building campaign with the new Administration and with new members of the California congressional delegation and key committees. 4. Engage in efforts to implement recently-enacted federal drought legislation, including pursuit of federal funding appropriations for important regional projects. 5. Closely monitor and engage in issues relative to federal tax policy, including taxexempt public financing tools for infrastructure. 6. Continue to inform the regional congressional delegation regarding the Water Authority’s energy needs and contributions. 7. Communicate the interests of the Water Authority and its member agencies in promoting potable reuse as a major regional water supply initiative. 8. Communicate the Water Authority’s interests in the California WaterFix with the San Diego congressional delegation and other key federal officials. 3    Staff is requesting suggestions for revisions and modifications from Board members and member agencies Please return to Glenn Farrel by February 6 Staff will present the proposed FINAL Federal Legislative Priorities for the Board’s consideration on February 23 6 Legislation and Public Outreach Committee Jan. 26, 2017 Mike Lee, Senior Public Affairs Representative Joni German, Water Resources Specialist Campaign Overview • Phase 1: July-December 2016 • Transition from mandatory targets to voluntary measures • Maintain regional focus on water-use efficiency • Leverage existing resources 2 Outreach Tactics • Website enhancements • Digital & social media • Bill Stuffers • Promotional items • Advertising 3 Partnerships • San Diego County Apartment Assoc. • Solana Center • Ace Hardware • I Love a Clean San Diego • Media Services Worldwide 4 Campaign Results • 17% reduction in water use (June-December vs. 2013) • 117,000+ WaterSmartSD page views • 22,000+ eGuide to a WaterSmart Lifestyle page views • 6 million ad impressions • High click-through rates 7 Campaign Results • 1,100 WaterSmart Checkups • 1,300 Rain Barrels • 925 participants in WaterSmart Landscaping classes • 650+ applicants for Sustainable Landscapes Program incentives 8 Next Steps • Hotel laundry reminders • SDSU announcements • Garden Friendly Plant Fairs • WaterSmart Checkups and classes 9 Update on Water Supply Conditions and rought Response Activities Water Planning Committee January 26, 2017 Tim ombardier Principal Water Resources Specialist  Atmospheric River events continue  Prospect of “Banner Year” for hydrology  Record setting precipitation in January 2017 2 Accumulated Precipitation 90 80 70 60 213% of Normal (January 25, 2017) 50 40 30 20 10 0 Normal WY 1983 (wettest) WY 2016 WY 2017 Source: Department of Water Resources 35 Water Content (in) 30 25 160% of Normal (January 25, 2017) 20 15 10 5 0 Normal WY 2016 WY 2017 Source: Department of Water Resources 3.5 Capacity 3.0 Million Acre-Feet 2.5 81% of Capacity 126% of Average (January 24, 2017) 2.0 1.5 1.0 0.5 0.0 Historical Average WY 2016 WY 2017 Source: Department of Water Resources BEFORE: Lake Oroville - January 21, 2016 (Bidwell Canyon Marina) - .5352 .3. no: 3355: 02:3: .5253 2.0 Capacity San Luis Reservoir Million Acre-Feet 1.5 CY 2017 current SWP Allocation: 60% 1.0 79% of Capacity 103% of Average (January 24, 2017) 0.5 0.0 Historical Average WY 2016 WY 2017 Source: Department of Water Resources   Percent of seasonal median snow water equivalent as of January 24, 2017 Upper Basin at 162% of median 9 Water Year 2017 Precipitation January 1-24, 2017 Station Actual Lindbergh 3.01 in. Field Ramona Airport 7.34 in. Since October 1 (WY 2017 to date) % Normal Actual % Normal 197% 7.91 in. 170% 260% 14.36 in. 206% "J'r . r?cipitation ?utlook 2017 . ,v Climate PredictioCente?hf I 33% Issued: 01/19/17 f? . ?Equa Ethan-mes; . I Cl I 90% 80% 70% 60% 50% 40% 33%. 40% . 80% 90% I d:o1 19 17 3? I ssue I I I. . Equa h: . - Emma: Above Update on Extension of State Water Resources Control Board (SWRCB) Emergency Regulation and Approve Resolution Declaring an End to Drought Conditions in San Diego County Water Planning Committee January 26, 2017 Presentation by: Dana Friehauf, Water Resources Manager 1 Summary of Key State Actions on Drought Response Date Action Jan 17, 2014 Governor declared a drought state of emergency due to severe drought conditions May 5, 2015 SWRCB adopted emergency regulation containing statewide mandatory reduction (ignored supply availability) May 9, 2016 Governor issued Executive Order B-37-16 directing SWRCB to adjust emergency regulation in recognition of differing supply conditions May 18, 2016 SWRCB enacted revised version of emergency regulation allowing for self-certification of supply reliability (Expires February 28, 2017) Potential Extension of Emergency Regulation  SWRCB staff January 17 proposal would extend emergency regulation until October 2017  If conditions warrant, staff will return to the SWRCB in May or June 2017 with an updated proposal  SWRCB held October 18 Public Workshop to solicit input  Water agencies throughout state support allowing regulation to expire in February  SWRCB Chair Marcus current position is to continue regulation  SWRCB scheduled to take action Feb. 8, 2017 3 Defining Drought United States Geological Survey: “The word “drought” has various meanings, depending on a person’s perspective…To a water manager, a drought is a deficiency in water supply that affects water availability and water quality” USGS (https://water.usgs.gov/edu/qadroughts.html) California Department of Water Resources: “Defining when drought occurs is a function of drought impacts to water users. Drought can best be thought of as a condition of water shortage for a particular user in a particular location” DWR (http://www.water.ca.gov/waterconditions/background.cfm) 4 Water Authority Staff Position: Allow Emergency Regulation to Expire 1. The San Diego region is not experiencing drought conditions 2. San Diego region’s customers continue to use water efficiently 3. Allowing regulation to expire is necessary to maintain credibility with customers and businesses 4. Urban water suppliers throughout state are not in drought conditions 5 Not Experiencing Drought Conditions Current Statewide Supply Situation  Northern Sierra precipitation is tracking higher than wettest year on record (1982-83)  Snowpack statewide is above April 1 average (traditional peak date)  Majority of California’s major reservoirs are above normal storage levels  Above average rainfall to date throughout San Diego County Jan 23, 2017, Near Fashion Valley 6 Not Experiencing Drought Conditions Due to Investments in Supply Reliability  Water Authority and member Seawater Desalination agencies are leaders in prudent water management  Region’s ratepayers have invested $3.5 billion to increase regional supply reliability Carryover and Emergency Storage  Includes seawater desalination and additional storage capacity  Member agencies have invested in recycling, potable reuse and desalination to further increase regional self-reliance Water Recycling 7 Not Experiencing Drought Conditions Adequate Supplies to Meet Demands  Emergency regulation self-certification Go to sdcwa.org for analysis analysis showed no supply shortages in San Diego region assuming 3 dry years  Reliability is bolstered by improved statewide supply conditions  Agencies statewide have demonstrated adequate supplies to meet demands  Some communities in California are facing shortages (e.g., Central Valley)  State involvement in those areas is critical to help meet water quality standards and water demands 8 San Diego Region’s Customers Continue to Use Water Efficiently  Residents and businesses have done an excellent job using water wisely  Even without state reduction mandates, regional potable water use from June-Dec 2016 is 17 percent below 2013 levels  Even before emergency regulation, per capita water use in San Diego region decreased nearly 40 percent between 1990 and 2015 250 235 216 200 190 Approx. 40% Decline in Total Potable GPCD 152 150 143 100 1990 2000 2005 2010 2015 9 Allowing Drought Emergency Regulation to Expire Preserves Public Trust  Extending emergency regulation in February:  Undermines state and local water agency credibility  Erodes effectiveness of communications during actual water supply emergencies  Weakens ability to attract, retain and expand businesses  Companies question reliability of our water resources  Creates uncertainty regarding investments in drought- resilient supplies  Ensure investment benefit is realized during shortages 10 Staff Recommendation Adopt resolution declaring an end to drought conditions in San Diego County and imploring Governor Brown and the State Water Resources Control Board to end the statewide drought emergency and rescind drought emergency water use regulations for areas no longer in drought conditions. 11 San Die 0 County Water authority Mitigation Needs Assessment January 26, 2017 15-5?. ?ff-?r .- ?I-im -. ii" . I I. NCCP/HCP Background  55-year permit; covering 63 plants & animals  Addresses habitat impact from CIP and O&M activities  Requires mitigation to be acquired in advance of impacts  Wildlife agencies pre-approve mitigation sites  Pre-negotiated mitigation ratios 2 Reassessment of Mitigation Needs  Evaluated CIP & O&M mitigation needs based on 2013 Master Facilities Plan Update findings  Utilized 2010 assessment methodology previously approved by wildlife agencies for regulatory consistency  Confirms excess mitigation within uplands habitat types Updated Mitigation needs by Habitat Sensitivity Tiers Uplands (acres) Planned CIP (through 2040) Future CIP (2041 to 2066) O&M (through 2066) Long-range supply & transmission projects (2041 to 2066) Tier I Tier II Tier III Subtotal 1 28 27 56 1 5 33 21 33 11 67 37 21 83 41 145 28 165 112 305 3 500 Tier II uplands habitat inventory and 2016 needs assessment 450 Existing Inventory Acres/Credits 400 350 2016 Needs Assessment 300 Difference equals potential credits for sale 250 200 150 100 50 0 468 Credits 165 Credits 6 Follow-up • Work with wildlife agencies to obtain consent to sell credits • Finalize number of credits to be made available • Conduct a mitigation credit market analysis • Consider Member Agencies’ needs • Return to Board for authorization to market and sell excess mitigation credits 7 California WaterFix Update Imported Water Committee January 26, 2017 Glenn Farrel, Government Relations Manager Twin Tunnels Plan WATER FIX COST 8: FUNDING s14.9 BILLION TUNNEL BEECH l. I'o' LII Public Water Agenda- TOTAL BILLION 51.4 BILLION OPERATIONS a. MAINTENANCE ow :Hc hr: 5! wan-cl EIJ veal: win In? Irv WIIEI Agenda. and il-?ederal Funding x? $795 MILLION MITIGATION a ASSOCIATED ACTIONS mm In by Public WaterAgencics WaterFix abandoned 50?year environmental permit; seeks year?by?year permits .. I Dc: hm . Error" i r? - CVD CALIFORNIA WATER FIX EAN. WATER.  December 22, 2016: Final EIR/EIS for California WaterFix was released ◦ 90,000 pages ◦ Addresses comments received on the Draft EIR/EIS  Water Authority staff are undertaking a comprehensive review of the responses to comments ◦ Summary at Board’s February meeting 3  Water Authority and San Diego regional interests support a Bay-Delta fix ◦ Water Authority and San Diego regional leaders worked together to pass 2009 legislation that established coequal goals:  Water Supply Reliability  Ecosystem Restoration  Water Authority Board of Directors ◦ In 2012, adopted Bay-Delta Policy Principles to guide review of a Delta fix ◦ Has not endorsed a specific conveyance project  Water Authority has produced the most comprehensive public review of any water district in California ◦ More than 36 public meetings and workshops since 2011 ◦ http://www.sdcwa.org/bdcp#bdcp-resources 4 How much will San Diego County pay? Will costs hamper local supply development? How much water will San Diego County get? Which agencies will commit to pay for the project? How will San Diego County be protected from paying an unfair share? 5  March/April 2017 ◦ ESA authorizations – USFWS, NMFS, DFW  Biological Opinion for ESA Section 7 for federally-listed species  Section 2081 Permit for state-listed species  Mid-2017 ◦ Cost allocation negotiations/financing plan ◦ ROD/NOD ◦ Water agencies’ Board actions  Later in 2017 - 2018 ◦ Additional permits - Clean Water Act – SWRCB  2018-Beyond ◦ Construction 6 Salton Sea Management Plan and  Lower Basin Drought Contingency  Plan (DCP) Update Imported Water Committee January 26, 2017 Dan Denham, Colorado River Program Director Dan Denham, Colorado River Program Director State Water Board Salton Sea Proceedings Background November 15th Workshop  Nov. 2014, IID files “Change  Petition” to condition QSA transfers  on Salton Sea Restoration  4th informational workshop to  update public and interested  parties on SSMP progress  Mar. 2015, Governor’s Office  establishes Salton Sea Task Force  Focus on air quality and human  health  Oct. 2015, AB 1095 establishes  short and long‐term restoration  goals  Presentations from:  Imperial Irrigation District  Nov. 2015, Salton Sea  Management Plan (SSMP) released  County of Imperial  State Resources Agency  Oct 2016, Phase 1 projects  identified  Non‐Governmental  Organizations 2 SSMP Update 2017:   Begin construction of Red Hill  Bay and Species Conservation  Habitat Identify additional funding 2018 ‐ 2020:  Begin Torres‐Martinez project;  evaluate “Perimeter Lake”  project 2021 ‐ 2028:   Design and construction of  New, Alamo and Whitewater  river projects Continue habitat & dust  suppression projects 3 Project Alternative Discussion Keeler Dunes Hay Bale Dust  Control Project Surface Roughening Surface Roughening Project at Elmore Farms Magnitude of Five Key Habitats at the Sea (Audubon California) Playa Shallow  flooded Mid‐ depth Deep  water Permanent  wetlands 4 Water Authority Position      Supportive of State momentum A comprehensive financing plan is still needed Air quality and habitat issues that pre‐date the QSA must be recognized Concerned with Addendum to State/Federal MOU Basin States Drought Contingency Plan (DCP) could have  significant impacts on the Salton Sea    QSA investment towards environmental  mitigation is substantial DCP investment towards environmental  mitigation not considered QSA cannot be held accountable for   impacts caused by new policies that  primarily benefit Arizona and Nevada Living  within  I         its  4.4 MAF 5 Water Authority Position  No Proposed Mitigation Changes in Place of Use and  Point of Diversion Require  Significant Environmental  Review and State Water  Board approval QSA JPA Mitigation 6 Shortage Projections and Precipitation % Chance of Lower Colorado  River Basin Shortage (Aug 2016) 2017 2018 2019 2020 2021 0% 48% 60% 60% 56% % Average  Precipitation 320,000 AF 11% January 2016 (Month to Date) 13,000 AF 4% Oct. – Dec. 2016 (Water Year) 7 Lower Basin Drought Contingency Plan 2017 to he released. DCP term sheet expected 2017 7 DECEMBER 2017 Mitigation water to the Salton Sea scheduled to end. JANUAHV 201? Sec. of Interior issues ?rder to continue efforts to L?nalize DCP and Min. 32}! Auousr 2017 Hydrology projections will determine if shortage twill he declared in 2013. 2018 JANUARY 2018 If shortage is declared, cutbacks under 200? Llnterim Guidelines begin. 2017 Transfer and Exchange Agreement ecision Timeline Imported Water Committee January 26, 2017 Dan Denham, Colorado River Program Director  In 1998 transfer and exchange agreement terms were finalized  with IID and MWD for the acquisition and transportation of  200,000 AF of independent Colorado River water  Although both agreements experienced  significant changes by 2003 with the  approval of the QSA contracts the  transfer agreement (45‐years) and  exchange agreement (35‐years)  retained mismatched duration terms Water Authority has the unilateral  ability to sync the duration of both  agreements  2 Transfer Agreement     Imperial Irrigation District (IID) Creation of conserved water  Initial term: 45 Years Option to terminate 10 years  early to match exchange term Exchange Agreement     MWD Delivery of conserved water Initial term: 35 Years Option to extend the term by 10  years to match initial transfer  3 Water Authority has the unilateral ability to  terminate the IID transfer ten years early in 2037  if one the following conditions are met: MWD “exchange rate” exceeds 125%  of the actual “point‐to point” costs  incurred by MWD to deliver IID  conserved water to San Diego 2017 Exchange Rate: $465/AF 2017 Point‐to‐Point: $100‐200/AF Exceedance: 465%‐233% Water Authority unable to reach  agreement with MWD or complete  binding arbitration, litigation or other  dispute‐resolution mechanisms  related to the MWD “exchange rate” Oral arguments for Court of Appeals  anticipated in the Spring of 2017 for  MWD rate litigation 4  Based on the November 2015 final California Superior  Court judgement upholding the Water Authority’s  claims that MWD’s transportation rates were illegal: 2017 Exchange  Rate Current Corrected Difference $465 $172 $293/ AF or $52.7 M $3.8B ‐ $7.4B over the term of the transfer agreement 5       State Water Resource Control  Board position regarding the  status of QSA mitigation and  state restoration activities Upfront costs related to the  IID transfer Alternative Conveyance Lower Basin States Drought Contingency Planning Probability of future shortages on the Colorado River Future cost of IID water and replacement water 6