Water Replenishment District

Draft Budget Fiscal Year 12-13

Special Water Resources

Committee Meeting

Workshop 7 of 10

April 11, 2012

2

Plan & Organize

Midyear Review

Revise 11/12 Budget

Draft 12/13 Budget

Revise 12/13 Budget

Adopt 12/13 Budget

Phase I – Jan/Feb

Phase VIMay 4

Phase VApril

Phase IV – Mar/Apr

Phase IIIMarch

Phase IIFeb.

BUDGET CYCLE

Budget Process Overview

3

Fiscal Year 12-13 BudgetWorkshop Schedule

February 22 – 12 p.m. Finance Committee 11/12 Midyear Budget Review

March 2 – 9 a.m. Board of Directors 11/12 Midyear Budget Review

March 9 – 9 a.m. Special Board of Directors 12-13 Budget Workshop #1

March 14 – 12 p.m. Special Water Resources Committee 12-13 Budget Workshop #2

March 16 – 9 a.m. Board Meeting 12-13 Budget Workshop #3  

March 21 – 12 p.m. Finance Committee 12-13 Budget Workshop #4

 

4

March 28 – 12 p.m. Special Audit and Budget Advisory Committee 12-13 Budget Workshop #5

April 6 – 9 a.m. Board of Directors 12-13 Budget Workshop #6

April 11 – 12 p.m. Special Water Resources Committee 12-13 Budget Workshop #7

April 19 – 12 p.m. Special Audit and Budget Advisory Committee 12-13 Budget Workshop #8

April 20 – 9 a.m. Board of Directors 12-13 Budget Workshop #9

May 4 – 9 a.m.  Board of Directors 12-13 Budget Workshop #10

Fiscal Year 12-13 BudgetWorkshop Schedule

5

Fiscal Year 12-13 BudgetMeeting Schedule

(Tentative)

11. City of Lakewood – March 19, 2012 10 a.m.

12.Technical Advisory Committee (TAC) – March 28, 2012

13.Central Basin Small Producers Group – April 3, 2012

14.South East Water Coalition (SEWC) – April 5, 2012

15.Golden State Water Company – TBD

16.Long Beach Water Department – TBD

6

Value of Groundwater

• WRD serves 10% of the population of the state of California

• Groundwater meets approximately 40% of water demands within WRD service area

• Groundwater / imported water blends vary from purveyor to purveyor

• Those purveyors that meet demands with groundwater enjoy a cost savings over those that are more reliant on imported water

7

Value of Groundwater

Groundwater provides a buffer from imported water cost increases and possible curtailments

• WRD’s reliance on imported water has decreased as local replenishment supplies have been developed by the District and these Alternative local water sources provide cost stability

Result: Development of local replenishment sources have reduced the impact of imported water price

increases on the Replenishment Assessment

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01

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$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

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Historical Replenishment Assessment and Imported Water Rates

Current ImportedWater Rate $915/AF

WRD RA Imported Water

Current RA$244/AF

~$670/AF

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ImportedWater Rate$915/AF

Current WRD RA$244/AF

$915/AF

$244/AF

IMPORTED WATER GROUNDWATER

Cost difference between groundwater and imported water is approximately $670/AF

Value of Groundwater

$- $

5 $5

$7

$

7

$11

$

11

$11

$

11

$1

4

$1

4

$1

4

$1

4

$3

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$3

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0

$4

2

$4

4 $6

2

$8

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$9

0

$-

$100

$200

$300

$400

$500

$600

$700 19

90-9

1

1992

-93

1994

-95

1996

-97

1998

-99

2000

-01

2002

-03

2004

-05

2006

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2008

-09

2010

-11

CBMWD Surcharge

MWD Water Rate

Unavoidable Spreading Water Costs in Central Basin

10

Transition from Seasonal Spreading Water to Tier 1 Water in 2010-11

(per TAC recommendation)

*

*Central Basin Municipal Water District surcharge calculation does not include $388,800 annual service charge

11

During the 2010-11 rate setting process, the Metropolitan Water District stated that seasonal spreading water would only be available two or three years out of ten.

When reviewing the water resource options in spring of 2010, the Technical Advisory Committee (TAC) and the Central Basin Small Producers Group recommended that WRD budget for Tier 1 Water rather than seasonal spreading water to help stabilize future rates and to have funds available to purchase the water when available for the health of the groundwater basin.

12-13 Water Costs

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QUANTITY AND COST OF REPLENISHMENT WATER FOR WY 2012-13

Item Quantity (AF) Total Cost (In Dollars)  

Spreading - Tier 1 Untreated Imported 21,000 $ 15,319,800

Spreading – Tier 1 Make Up 3,500 2,488,500

Spreading – Recycled 50,000 1,858,898

Alamitos Barrier – Imported 2,540 $ 2,389,265

Alamitos Barrier - Recycled* 1,800 -

Dominguez Barrier – Imported 8,000 $ 8,756,276

Dominguez Barrier – Recycled 0 -

West Coast Barrier – Imported 4,500 $ 4,951,551

West Coast Barrier – Recycled 13,500 9,517,500

In-Lieu MWD Member 0 $ -

In-Lieu WBMWD Customer 0 -

TOTAL 104,840 $ 45,281,790

12-13 Water Costs Detail24,500 acre-feet of Imported Spreading

13

At their meeting on March 28th, the Technical Advisory Committee reviewed the water resource needs for 2012-13 and recommended the following:

1. Defer budgeting for 17,500 acre-feet of carryover water for one year.

2. Consider special Long Beach In-Lieu purchases made in 2010-11 and 2011-12 as a direct offset to spreading water.

3. Do not budget for the District’s regular In-Lieu Program in 2012-13.

4. Utilize no more than 50% of the WRD’s banked water with Long Beach for the Alamitos Seawater Intrusion Barrier (total of 2,160 acre-feet) if absolutely needed for rate relief. The TAC recommended that use of any more than 50% be brought back to the TAC for additional consideration.

12-13 Water CostsTAC Recommendation

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Other Draft Budget Assumptions:

1. Continued use of the Water Purchase Carryover Fund in the amount of $3,000,000 to help stabilize the RA as part of the five-year scenario presented during the budget process last year

2. Recovery of $8.6 million of non-payment of the 11-12 Replenishment Assessment by the five (5) non-paying cities based on their 5-year historical annual groundwater production (in order to avoid an unfair rate hike in fiscal year 2012-13, any non-payment of the Replenishment Assessment for fiscal year 12-13 will be addressed in the ensuing year’s budget)

3. 100% Imported Water at the Dominguez Gap Barrier

4. Estimated 244,500 acre-feet of production

5. Updated water rates as of April 10, 2012

12-13 Budget Assumptions

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Current scenarios reflect a net decrease in expenditures to the District’s Projects and Programs and Administrative

Departments

12-13 Budget Assumptions

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Draft 12-13 Water Costs will vary greatly depending upon water purchase scenarios. The following scenarios are being presented for the Board’s consideration:

• Scenario 1 – Do not budget for the regular In-Lieu Program, limited imported spreading water purchases

• Scenario 2 – (TAC Recommendation for water purchases) Do not budget for the regular In-Lieu Program, imported spreading water purchases of 12,200 acre-feet

• Scenario 3 – Do not budget for the regular In-Lieu, no imported spreading water purchases, no pumping from five (5) cities

12-13 Water Costs

17

12-13 Draft BudgetWater Purchase Scenario (in acre-feet)

Fiscal Year 2010-11 21,000Imported Spreading Water Purchases (24,220)Special Long Beach In-Lieu Water (6,700)

2010-11 Spreading Water Credit (9,920)

Fiscal Year 2011-12 21,000Imported Spreading Water Purchases (13,080)Special Long Beach In-Lieu Water (6,800)

2011-12 Spreading Water Credit (8,800)

Fiscal Year 2012-13 21,000

Total Replenishment Water Needed for 2012-13 12,200

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Scenario 1 – No In-Lieu, Limited Spreading

11-12 12-13 Adopted Draft Budget Budget Difference

Water Related Costs $48,485,000 $32,929,000 ($15,556,000)

Projects and Programs 9,344,000 8,863,000 (481,000)

Administrative 4,822,000 4,819,000 (3,000)

Litigation 915,000 2,553,000 1,638,000

Estimated RA $244.00Dollar Change ($0.00)

Percentage Change (0.0%)

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Scenario 2 – TAC Recommendation on Water PurchasesNo In-Lieu, 12,200 Imported Spreading

11-12 12-13 Adopted Draft Budget Budget Difference

Water Related Costs $48,485,000 $40,053,000 ($8,432,000)

Projects and Programs 9,344,000 8,863,000 (481,000)

Administrative 4,822,000 4,819,000 (3,000)

Litigation 915,000 2,553,000 1,638,000

Estimated RA $273.15Dollar Increase $29.15

Percentage Increase 11.9%(10.3 %using banked water)

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Scenario 3 – No In-Lieu, No Spreading, Neutralized Impact for Non-Paying Entities*

11-12 12-13 Adopted Draft Budget Budget Difference

Water Related Costs $48,485,000 $31,379,000 ($17,106,000)

Projects and Programs 9,344,000 8,863,000 (481,000)

Administrative 4,822,000 4,819,000 (3,000)

Litigation 915,000 2,553,000 1,638,000

Estimated RA $276.05Dollar Increase $32.05

Percentage Increase 13.1%

*Estimated Annual Production of 210,500 af (represents a decrease in production based on five (5) cities not pumping or paying for groundwater)

21

SCENARIO SUMMARY

Estimated Dollar Percentage RA Increase Increase

Scenario 1No In-Lieu, Limited Spreading $244.00 $ 0.00 0.00%

Scenario 2TAC Recommended Water Purchases $273.15 $29.15 11.90%Using banked water $269.05 $25.05 10.30%

Scenario 3No In-Lieu, No Imported Spreading, Decreased $276.05 $32.05 13.10%Production (210,500 af)

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12-13 Draft Budget

11-12 12-13 Adopted Draft Budget Budget Difference

Water Related Costs Depends upon scenario

Projects and Programs 9,344,000 8,863,000 (481,000)

Administrative 4,822,000 4,819,000 (3,000)

Litigation 915,000 2,553,000 1,638,000

23

Litigation – Estimating an additional $1,638,000 for unavoidable litigation costs due to:

• Case BS 120643 – City of Cerritos, et al. v. WRD

• Case BS 128136 – 09 Central and West Basin Storage Motion filed in Central & West Basin Judgment cases (Downey, Cerritos, Signal Hill & CBWMD)

• Case C786656 – Proposition 218 challenge to Replenishment Assessment

• Case B226743 appeal to C786656 – WRD et al v. City of Cerritos et al Court of Appeals

• Case BS 129817 – Central Basin Municipal Water District v. WRD

12-13 Litigation

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• Case C786656 – WRD/Central and West Basin Water Replenishment Districts v. Charles Adams

• Case BS 132202 – Central Basin Municipal Water District v. WRD

• Case BS 108180 – WRD/LAUSD v. County of Los Angeles

• Case BS 130308 – WRD/LACC v. County of Los Angeles

• Case BS464772/773 – WRD v. the Cities (Cities of Downey, Cerritos and Signal Hill; RA Validation Action and RA Motion for Declaratory Relief)

• Case LACV11-7531VBF(RZx) – Central Basin Municipal Water District v. WRD

• Case BS 134295 – WRD v. Central Basin Municipal Water District

12-13 Litigation

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• Case BS 134239 – Tesoro v. WRD

• Case VC060546 – WRD v. City of Downey

• Case VC060498 – WRD v. City of Cerritos

• Case VC060496 – WRD v. City of Signal Hill

• Case VC060499 – WRD v. City of Bellflower

• Case VC060592– WRD v. City of Pico Rivera

12-13 Litigation

26

California Water Code §60290 – “The district may establish an annual reserve fund in an amount not to exceed ten million dollars ($10,000,000) commencing with the 2000-01 fiscal year. The maximum allowable reserve fund may be adjusted annually commencing with the 2001-02 fiscal year to reflect the percentage increases or decreases in the blended cost of water from district supply sources”

California Water Code §60291 – “The limitation on the reserve established in §60290 does not apply to the unexpended balance of any appropriated funds in a capital improvement project construction account established to pay the cost of a project or projects under construction”

Cash Reserves

27

California Water Code §60328.1 – “The district shall apply the estimated fiscal year end balance in excess of the amount permitted in §60290 to a replenishment assessment rate reduction or to the purchase of water in the succeeding fiscal year”

In fiscal year 10-11, WRD utilized $8.27 million to lessen the impact of moving from seasonal spreading water to more expensive Tier 1 Water (see chart on slide 10)

In fiscal year 11-12, WRD continued the use of the Water Purchase Carryover Fund by authorizing the use of an additional $10 million to help stabilize the RA as part of the five-year scenario presented during the budget process last year

Cash Reserves

28

California State Auditor, Bureau of State AuditsIn its May 2002 report (page 18) the California State Auditor wrote, “The district projects that it will have a reserve fund balance of slightly more than $6 million at June 30, 2002, a level that may pose a threat to the district’s ability to maintain the current quantity of groundwater in the basins.”

This reserve level was considered to be the minimum by the State Auditor a decade ago and does not take into account the significant increase in the cost of water over the last 10 years.

Cash Reserves

29

Currently, the cities who are currently not paying the replenishment assessment are as follows:

• City of Cerritos• City of Downey• City of Signal Hill• City of Bellflower• City of Pico Rivera

Non-Payment of Replenishment Assessment

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BUDGET WORKSHOPS #8 & #9

Thursday, April 19 – 12:00 p.m. Special Audit and Budget Advisory Committee Meeting & Budget Workshop #8

Friday, April 20 – 9:00 a.m. Board of Directors Meeting & Budget Workshop #9

What’s Next?