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Home My WebLink About2025-01-28; City Council; 10; San Diego County Water Authority - 2025 Rates and ChargesCA Review CKM Meeting Date: Jan. 28, 2025 To: Mayor and City Council From: Geoff Patnoe, City Manager Staff Contact: Jason Haber, Intergovernmental Affairs Director jason.haber@carlsbadca.gov, 442-339-2958 Subject: Districts: San Diego County Water Authority - 2025 Rates and Charges All Recommended Action Receive an informational report from the San Diego County Water Authority on its rates and charges for calendar year 2025. Executive Summary/Explanation & Analysis The San Diego County Water Authority, a public agency created in 1944, delivers wholesale water supplies to 22 retail water providers, including the Carlsbad Municipal Water District. The Water Authority’s member agencies are six cities, five water districts, three irrigation districts, seven municipal water districts, and the Camp Pendleton Marine Corps Base. Member agencies are represented on a 34-member Water Authority Board of Directors. A member of the San Diego County Board of Supervisors also serves as a non-voting representative to the Water Authority Board. Each year, the Water Authority Board of Directors sets water rates and charges to recover the cost of providing service to its member agencies, in keeping with legal requirements and industry standards. The rate-setting process occurs generally from March to June, in a public forum with the board. The retail customer rates are set by the governing bodies of the member agencies. This item is an informational report from the Water Authority’s Deputy General Manager Tish Berge summarizing the authority’s 2025 rate-setting process. Fiscal Analysis This item has no fiscal impact. However, Water Authority rates and charges will be incorporated into the proposed retail customer rates to be approved by the Carlsbad Municipal Water District Board. Jan. 28, 2025 Item #10 Page 1 of 2 Next Steps The Carlsbad Municipal Water District Board is scheduled to receive a presentation and set a public hearing date for proposed multi-year rates for potable water, recycled water and wastewater services on Feb. 11, 2025. The proposed rates have incorporated the Water Authority’s 2025 approved rates. Environmental Evaluation This action does not require environmental review because it does not constitute a project within the meaning of the California Environmental Quality Act under California Public Resources Code Section 21065 in that it has no potential to cause either a direct physical change or a reasonably foreseeable indirect physical change in the environment. Exhibits None. Jan. 28, 2025 Item #10 Page 2 of 2 Wholesale Water Rates: Strategies for Long-Term Stability Tish BergeJanuary 28, 2025 Carlsbad City Council Chief Operating Officer 2 Serving a Vibrant Region •Established in 1944 •22 member agencies •3.3 million people •$268 billion economy 3 1990s Crisis Sparked Change 4 Strategic Investments in Supply Reliability $3 billion in infrastructure creates water security for region QSA Water Transfer & Canal Linings Water-Use Efficiency Investments Pipeline ReliningPotable Water Reuse & Purple Pipe Pipeline Relining Local Surface Water Storage Carlsbad Seawater Desalination Twin Oaks Valley Water Treatment Plant 5 Infrastructure Risk Reduction Supports Region Maintaining system reliability protects ratepayers, businesses •Water Authority maintains 308 miles of large-diameter pipelines •Deferred maintenance would create significant risks due to the scale of Water Authority system •CIP maintenance budget prioritized 6 Debt Management & Credit Ratings Play Key Role $- $20 $40 $60 $80 $100 $120 $140 $160 $180 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030 FYE 2031 FYE 2032 FYE 2033 FYE 2034 FYE 2035 FYE 2036 FYE 2037 FYE 2038 FYE 2039 FYE 2040 FYE 2041 FYE 2042 FYE 2043 FYE 2044 FYE 2045 FYE 2046 FYE 2047 FYE 2048 FYE 2049 Series 1998A Series 2015A Refunding Series 2016AB Refunding Series 2019 Series 2010B BABs Series 2020A (CIP)Series 2021A (CIP)Series 2021B (CIP) Refunding Series 2022A Anticipated FY 2026 $2 Billion Outstanding Debt & Debt Service Payment Schedules 7 After multiple years of drought, 2023 and 2024 delivered above-average precipitation, raising reservoir levels statewide and significantly reducing water sales. Climate Whiplash Creates New Threats 8 Structural Challenges Facing Water Authority Costs are largely fixed, but revenues vary significantly year to year . Debt Service 16% Water Purchases and Treatment 64% Capital Improvements 10% Operating Departments 7% Other 3% Ex p e n s e s Re v e n u e s Variable 69% Rigid 14% Rolling 17% 9 Water Affordability is Everyone’s Business Long-term decline in state, federal investments creates challenges for aging infrastructure 10 Many Factors Drove Rates Up for 2025 Most costs beyond control; impacts flow from agency to agency MWD +4% Supply Costs +3% SDCWA Finance & Infrastructure +3% External Factors Detachment +4% 11 Rate Relief Efforts Span Water Authority 14% rate increase was half the initial projection due to numerous actions Rate Relief $19 million federal grant $40 million savings from three-party water exchange $200 million in applied rate relief since 2020 (litigation proceeds and reserves) $17 million reduction in cost of desal water Budget Cuts $4.8 million reduction across Operating Departments $7 million capital project deferred $1 million equipment replacement deferred Note: All figures are rounded. 12 Member Agency Opportunity to Lessen Rate Impact Pilot program provides member agency discounts for pre-paying fixed charges Opt-in program provides 4% discount on all fixed charges Designed to be revenue neutral Enables Water Authority to increase non-rate revenue (investment earnings) Signed agreements due December 2024 with payments due January 2025 Looking Ahead 14 Key Drivers of 2026 Rates Potential for a double-digit increase; actual increase will be determined by several factors •Water sales •Passthrough costs (water/power) •Infrastructure needs •Exchanges and transfers •Grant funds and other non-rate revenues Schedule September 2024 – Internal budget processes begin March 2025 – Initial rate discussion w/ Board April – Refined rate discussion w/ Board May 6 & 8 – Budget workshops May – Draft proposal for 2026 rates June – Public hearing; adoption of rates and budget 15 Strategies for Long-Term Stability & Affordability All options being explored over next 3-5 years •Control costs •Restructure rates to boost fixed revenues •Minimize cost of debt through refinancing and strong credit •Increase grant funds •Secure water transfers and exchanges •Assess long-term water contracts Seek and deploy innovative solutions with partners. SanDiegoCountyWaterAuthority @sdcwa @sdcwa Thank You!