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Home My WebLink About2006-06-13; Municipal Water District; 615; APPROVE FUTURE PURCHASE OF 5000 ACRE FEET OF DESALINATED SEAWATER FROM SDCWACARLSBAD MUNICIPAL WATER DISTRICT - AGENDA BILL 1 AB# 615 MTG. 06/13/06 DEPT. PW/M&O TITLE: APPROVE FUTURE PURCHASE OF 5,000 ACRE FEET OF DESALINATED SEAWATER FROM SDCWA DEPT. HD. x^^£p^ CITYATTY. (&^ CITYMGR^ RECOMMENDED ACTION: Adopt Resolution 1272 to purchase 5,000 acre feet of desalinated seawater from the San Diego County Water Authority's Regional Desalination Project to be counted as the District's local supply. ITEM EXPLANATION: On April 19, 2005 Resolution No. 2005-120 was adopted approving an Agreement Memorializing Certain Understandings and Establishing a Framework for Cooperation between the San Diego County Water Authority and the City of Carlsbad, Carlsbad Municipal Water District, and the Carlsbad Housing and Redevelopment Agency. This agreement was intended to commit the parties with respect to certain intergovernmental, financial and other matters relating to the "Regional Desalination Project". Under the "Operative Provisions" of this agreement, should the Water Authority implement the Regional Desalination Project, then each year that water is produced, the Water Authority will sell to the District, desalinated water in an amount, up to 5,000 acre feet, to be fixed by the District. The District is required to make a single determination fixing the amount of water it will purchase on an annual basis and will notify the Water Authority of that amount. This notification will be not later than the commencement of construction of the Regional Desalination Project or the date of adoption by the Water Authority board of directors of a drought allocation plan or methodology. A drought allocation plan was adopted by the Water Authority board on May 25, 2006. As a result, the District is now obligated to notify the Water Authority of the amount of desalinated water it wishes to buy from the Water Authority, that will be designated as the "District's Local Water". ENVIRONMENTAL REVIEW: No environmental impact as a result of this action. FISCAL IMPACT: This agreement would require that the District purchase up to 5,000 acre feet of desalinated water at the SDCWA cost to produce and transport that water to District storage facilities. The cost to produce and transport can only be determined after the project is completed. However, based on today's forecasts and based on what we know at this time, the price to produce and transport an acre foot of water would be approximately $1000 per acre foot ($900 in production costs, and approximately $100 in transportation costs). When the MWD rebate of $250 per acre foot is deducted from this total cost, Carlsbad's net cost would be about $750 per acre foot. This is about $190 more per acre foot than the $560 per acre foot Carlsbad currently pays SDCWA for imported water. Actual costs will depend on SDCWA's cost of production. Page 2 Assuming the District exercises its option to purchase the entire 5,000 acre feet of Desal water from the CWA, the cost for water would increase by about $950,000 per year ($190 per acre foot x 5,000 acre feet). Using the current cost of imported water as a guide, CMWD's current annual cost for imported water (assuming a future total consumption of 20,000 acre feet per year) would be approximately $11.2 million ($560 per acre foot x 20,000 acre feet). The added cost of purchasing desalinated water would increase CMWD's total cost to $12.15 million, an increase of about 8.5%. This increase in the cost of water supplies would result in an increase of approximately $0.11 per unit. (A unit of water equals 748 gallons.) Assuming an average water consumption of 15 units of water per month by a residential water customer, the increase would amount to $1.65 on the water bill. In accordance with the agreement, the CWA will count the 5,000 acre feet of Desal water as 'local supply'. This results in an increase of water supply reliability during drought conditions when drought allocations are initiated by the CWA. Because of this increase in reliability and the projected relatively small, incremental increase in the cost of District water in the future, staff is recommending the District purchase the full 5,000 AF of Desal water from the CWA. The projected increase in the water costs for purchase of the 5,000 acre feet of desalinated seawater would not occur until operation of the SDCWA's Desalination Treatment Facility begins deliveries. The SDCWA's Seawater Desal Facility is not anticipated to begin deliveries until 2011. Any CMWD water rates adjustments, due to its purchase of Desal water from SDCWA, would occur at that time. For South Carlsbad Coastal Redevelopment Area (SCCRA), the fiscal impact of the agreement is found largely in the financial guarantee SDCWA has provided in the form of $5.5 million for the construction of mitigation and related capital projects, and in limiting SCCRA's loss in property tax revenue by providing a guarantee of $15.3 million. SDCWA's actual obligation to pay these funds would depend on the term of private ownership and the flow of tax increment revenue to SCCRA. EXHIBITS: 1. Resolution 1272 approving future purchase of 5,000 acre feet of desalinated seawater from SDCWA. DEPARTMENT CONTACT: R. Greaney, 760-438-2722 Ext.7106, bgrea@ci.carlsbad.ca.us 22 23 24 25 OF THE CARLSBAD MUNICIPAL WATER DISTRICT WHEREAS, on April 19, 2005 Resolution No. 2005-120 was adopted approving an Agreement Memorializing Certain Understandings and Establishing a Framework for Cooperation between the San Diego County Water Authority and the City of Carlsbad, Carlsbad Municipal Water District, and the Carlsbad Housing and Redevelopment Agency; and, WHEREAS, this agreement was intended to commit the parties with respect to certain intergovernmental, financial and other matters relating to the "Regional Desalination Project"; and, WHEREAS, under the "Operative Provisions" of this agreement, should the Water Authority implement the Regional Desalination Project, then each year that water is produced, the Water Authority will sell to the District, desalinated water in an amount, up to 5,000 acre feet, to be fixed by the District; and, WHEREAS, the District is required to make a single determination fixing the amount of water it will purchase on an annual basis and will notify the Water Authority of that amount; and, WHEREAS, a drought allocation plan was adopted by the Water Authority board on May 25, 2006; and, WHEREAS, the District is now obligated to notify the Water Authority of the amount of 18 desalinated water it wishes to buy from the Water Authority, that will be designated as the 19 "District's Local Water"; 20 NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Carlsbad 21 Municipal Water District, as follows: 1. That the above recitations are true and correct. 2. That the District will confirm, with the SDCWA, that it intends to purchase 5,000 acre feet of desalinated seawater from the San Diego County Water Authority's Regional Desalination Project upon completion of the Project and the water is made available. 26 3. That this purchased desalinated water be counted as the District's 'local supply1. 27 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PASSED, APPROVED AND ADOPTED at a special meeting of the Board of Directors of the Carlsbad Municipal Water District held on the 13th day of June , 2006 by the following vote, to wit: AYES: Board Members Lewis, Hall, Kulchin, Packard, Sigafoose NOES: None ABSENT CLAUDE ATLEWIS, Preside ATTEST: (SEAL)