ms
Replenishment
Assessment Charge

Recommended
Rate Increases

 

RAC Cost of Service Study (COSS)
 COSS is a Finance Strategic Initiative
 Rate study presented at Feb. 13 study session
 The study :

1. Establishes rate revenue requirements
2. The cost of providing service to customers
3. Recommendations for equitably collecting revenue
from customer class based on the cost of
providing them service.
4. Subject to Proposition 218
2

  

East Whitewater
Replenishment Fund (?East?)

 

Water Supply
 The District successfully

negotiated Colorado River
water transfers as part of the
Quantification Settlement
Agreement (QSA)

Projected CO River
Water Transfers in Acre-Feet
Fiscal 2015 to 2026
160,000

140,000

120,000

 Over the next decade, the

water transfers will ramp up
from 71,000 AF to 138,000 AF
in addition to the CO River
base allotment

100,000

Acre-Feet

80,000

60,000

40,000
2015

2017 2019 2021 2023 2025

4

 Water Costs
QSA water costs are projected to increase
by over $10 million in the next decade*

Who pays for QSA water?

 Replenishing groundwater overdraft
was the primary reason for securing
more water
 Since fiscal 2010, non-agricultural
customers in the East basin have
been paying for the IID water
transfer

*Does not include MWD water; this is an expense of the
West Replenishment Fund

 The COSS recommends allocating
the IID water transfer to the East
Whitewater Replenishment Fund

5

 Mitigation Costs
QSA mitigation costs are projected
to exceed $30M through 2026

Over the past decade, the
Domestic Water Fund paid for
90% of the mitigation costs
 Since 2004, the District paid $39.6 M in
mitigation payments; 90% or $35.7 M
was paid by the Domestic Water Fund;
10% by the Canal Fund via Class 2 &3
rates

($5.0M prepayment not calculated)

6

 Costs Should be
Allocated Equitably
CVWD accounts for only 24% of
the total production in the East
Replenishment Area of Benefit

Who should pay for
QSA Mitigation Costs ?
 The past practice of allocating 90% of
the mitigation cost to Domestic is
inequitable
 The COSS recommends that the QSA

Mitigation follow the QSA water
 The COSS recommends allocating the
QSA mitigation costs to all customers
in the East Replenishment Fund
7

 State Water Project (SWP) Tax
 As a State Water Project contractor,

the District is entitled to certain
amount of water from the Dept. of
Water Resources

 The tax enabled East to pay back the

Domestic Water Fund for the
construction of the replenishment
facility

 The water and its delivery system is

paid by a District-wide special tax
levy, the SWP tax.
 In 2013, the District increased the

State Water Project (SWP) tax rate
from $0.08 to $0.10
 One cent of the tax, plus AV growth,

was used for replenishment of the east
basin, based on legal counsel’s
opinion.
8

 New Attorneys, New Opinion
 The SWP tax can only be used to pay SWP invoices based

on a new opinion from the District’s legal counsel, BBK
 This adversely impacts East by over $8.0 million a year
 This revenue loss alone amounts to $66/AF based on 2014

production

9

 Negative Cash
 Complicating matters

further, East has never fully
recovered its costs due to its
rate structure
 The graph depicts negative

cash balances in the East
Fund over the past five years

10

 Recap – Issues Impacting
the East Replenishment Fund
 Negative cash balance – approx. -$4.5 M in fiscal 2015
 $8.0 M Revenue loss based on current assessed value
 IID water transfer cost increasing annually (by $10.0M

over next decade)
 QSA mitigation cost averages $3.oM/year
 New debt for East’s share of Oasis = $21.5 million
amortized over 30 years

11

 Solution – Consolidate the
Replenishment Funds
 The COSS recommends consolidating the replenishment funds rather

than allocating water supply and costs by geographical area
 Costs are spread over a larger customer base
 One basin, with a diversified water portfolio, benefits the entire

aquifer (Legal precedent – Pajaro Valley Replenishment District)
 Rates must all be the same
 Costs can still be tracked by replenishment area if necessary

12

 Recommended Rate Increases
Fiscal Year 2015-16

Fiscal Years 2017-2020

 Current rate is $52/AF

 $101/AF in fiscal 2017

 Recommend increasing rate

 $116/AF in fiscal 2018

to $59/AF in fiscal 2016; this
allows East customers one
year to plan for rate increase

(assumes consolidated
approach in this year)
 $133/AF in fiscal 2019
 $153/AF in fiscal 2020

13

 East Reserve Comparison
Individual vs. Consolidated Funds
East Replenishment Fund

Consolidated Funds

Even with substantial rate increases, by 2020, as a stand-alone entity, the East
Replenishment Fund cannot break even due to the significant costs incurred
from QSA costs, the lack of SWP tax revenue and the Oasis project
14

  

West Whitewater
Replenishment Fund (?West?)

 

Water Costs
 The West Replenishment Fund accounts for three sources of water,

budgeted at $60.6 M in fiscal 2015:
1.
2.
3.

State Water Project
Glorious Lands Co. water purchase (GLC)
Metropolitan Water District (MWD)



Historically, the SWP tax funded SWP costs and RAC funded water
purchases and other costs



A portion of the MWD water can be paid from the SWP tax based on
a recent legal opinion from BBK



This has a significant positive impact on West’s unrestricted reserves

16

 Recommended Rate Increases
Fiscal Year 2015-16

Fiscal Years 2017-2020

 The last rate increase was in

 $116/AF in fiscal 2018

fiscal 2013
 Current rate is $110.26/AF
 Recommend increasing rate
to $112/AF in fiscal 2016

(assumes consolidated
approach in this year)
 $133/AF in fiscal 2019
 $153/AF in fiscal 2020

17

 West Reserve Comparison
Individual vs. Consolidated Funds
West Replenishment Fund

Consolidated Funds

18

  

Mission Creek
Replenishment Fund (?Mission?)

 

Water Costs
 The Mission Creek Replenishment Fund accounts
for 5% of the SWP, GLC and MWD water supply
 Mission was not allocated water costs until fiscal
2014
 The fund has been operating at a loss for several
years
20

 Recommended Rate Increases
Fiscal Year 2015-16

Fiscal Years 2017-2020

 The last rate increase was in

 $116/AF in fiscal 2018

fiscal 2012
 Current rate is $98.73/AF
 Recommend increasing rate
to $112/AF in fiscal 2016

(assumes consolidated
approach in this year)
 $133/AF in fiscal 2019
 $153/AF in fiscal 2020

21

 Mission Reserve Comparison
Individual vs. Consolidated Funds
Mission Replenishment Fund

Consolidated Funds

22

 Summary -Recommended
Rate Increases Fiscal 2015-16
 East:

From $52 to $59/AF ($7.00 or 13.5% increase)
 West: From $110.26 to $112/AF ($1.74 or 1.6% increase)
 Mission : From $98.73 to $112/AF ($13.27 or 13.4% increase)

23

 Summary -Projected
Rate Increases Fiscal 2016-2020
Fiscal Year 2016-17
 East: From $59 to $101/AF ($42 or 71.2% increase)
Fiscal Year 2017-18
 East: From $101 to $116/AF ($15 or 15% increase)
 West: From $112 to $116/AF ($4 or 3.6% increase)
 Mission : From $112 to $116/AF ($4 or 3.6% increase)
Fiscal Year 2018-19
 All: From $116 to $133/AF ($17 or 15%)
Fiscal Year 2019-20
 All: From $133 to $153/AF ($20 or 15%)
24

  
    

 





Questions