Water Authority board approves $1.48 billion budget for fiscal years 2008 and 2009

Short Title
Water Authority board approves $1.48 billion budget for fiscal years 2008 and 2009
Board adopts water rates and charges for 2008
June 28, 2007

The San Diego County Water Authority board of directors today approved a $1.48 billion budget for fiscal years 2008 and 2009 that funds the agency’s operations and capital improvements, a 10.4 percent increase over the prior two-year budget.

“This is an ambitious but fiscally responsible budget. It represents a continued investment in the region’s water supply reliabilty and will reap water reliability dividends for decades,” said Water Authority Board Chair Fern Steiner. “We have several large water projects under way and several more scheduled over the next two years to help us move toward our goal of diversifying our water supply and building and maintaining the large-scale infrastructure needed to reliably treat, store and convey water to our customers.”

The board also adopted water rates and charges for calendar year 2008. These rates and charges determine the cost for water purchased by the Water Authority’s member agencies and equate to an estimated Municipal and Industrial treated water rate of $679 per acre-foot for calendar year 2008, an increase of $51, or 8.1 percent from calendar year 2007. The acre-foot cost is based on water sales estimates to the Water Authority’s 24 member agencies and includes fixed customer service and storage charges and variable supply and transportation charges. The new rates represent an average residential increase of $2.25 per month per household and include the increased cost of imported water from the Metropolitan Water District of Southern California, the rising cost of construction materials and energy, and new infrastructure projects and maintenance.

Capital improvements represent the largest budget component. An appropriation of $619 million, or 42 percent of the budget, will fund 11 major Capital Improvement Program projects and several smaller projects. Among them are:
    •    San Vicente Dam raise and carryover storage
    •    San Vicente Pumping Facilities
    •    East County treated water improvements

“During the course of this multiyear budget, the Water Authority will complete construction and begin operation of our 100 million-gallon-per-day water treatment plant, complete the San Vicente Pipeline and begin the All-American Canal lining project and the final phase of the Emergency Storage Project,” said Steiner. “Respectively, these projects will expand our ability to meet treated water demand, secure new water supplies for our region and increase our storage and conveyance capabilities to help serve the region’s $150 billion economy and 3 million residents.”

In addition to capital improvement and operating funds, the budget includes expenditures for water purchases, debt service, equipment replacement and Colorado River Quantification Settlement Agreement costs.

The Water Authority's approved budget expenditures are:

Capital improvement program budget     $ 618.6 million          42 percent

Water purchases                                    $ 530.0 million          36 percent

Debt service                                          $ 200.8 million          14 percent

Operating budget                                  $   94.8 million            6 percent

Other                                                   $   30.8 million            2 percent

Total                                                   $ 1.48 billion         100 percent

Water purchases represent the second largest component of the budget at 36 percent. Based on projected annual purchases of 628,700 and 624,600 acre-feet of water for the region, the Water Authority budgeted $530 million to purchase water, $265 million for each of the two fiscal years. One acre-foot of water is approximately 326,000 gallons, enough to supply the needs of two typical households of four for a year.

Debt service at $201 million over the next two fiscal years includes commercial paper and long-term debt service and represents 14 percent of the budget.

Two percent of the budget, or $30.8 million, will fund the equipment replacement fund, grant-funded expenditures, and environmental and other commitments of the Quantification Settlement Agreement.

The Water Authority's $94.8 million operating budget includes the combined budgets of all departments that implement the Water Authority's programs. It represents 6 percent of the overall budget and contains an additional $10.2 million to operate the Water Authority’s Twin Oaks Valley water treatment plant, $1.2 million for hydroelectric operations at the Rancho Peñasquitos Pressure Control/Hydroelectric Facility and Lake Hodges Pump Storage project, and $5 million for enhanced conservation and local water supply development programs.

“We have aggressively reorganized our staff and structure to focus on core priorities, maximize efficiency and minimize impacts on ratepayers,” said Water Authority General Manager Maureen Stapleton. “Staff resources have been shifted to address increased facility operation needs and to focus on achieving our water conservation goal of 100,000 acre-feet of water annually by 2030.”

Estimated revenue and other funding sources for the next two fiscal years is $1.48 billion. The largest source of revenue, $707 million, is generated through water sales, followed by debt proceeds of $520 million. Combined, these categories represent 83 percent of the Water Authority’s total income. The remaining revenue sources include capacity charges ($69 million), investment income ($57 million), Contributions in Aid of Construction ($9 million) and $112 million from infrastructure access charges, property taxes, In-Lieu charges, standby charges, fund withdrawals and other smaller revenue sources.

The Water Authority's approved budget covers the period from July 1, 2007 through June 30, 2009. The Water Authority moved to a multiyear budgeting process in 2004 to provide enhanced fiscal management of its many multiyear projects and long-range planning.

The Water Authority’s first water treatment plant will produce 100-million gallons of drinking water per day beginning spring 2008. The plant will help address the growing demand for additional treated water supplies in the region.

The completion of the San Vicente Pipeline project will connect the San Vicente Reservoir to the region’s water distribution system. The pipeline and pump stations will provide access to water set aside in the San Vicente Reservoir for emergencies, such as a major earthquake, that could cut off the county's supply of imported water. The beginning of the final phase of the Emergency Storage Project, raising the San Vicente Dam by 54 feet, will provide for additional water storage for emergencies.

The Water Authority maintains the following bond credit ratings:

Fitch AA

Moody’s Aa3

S & P AA

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