Increase is just 2 percent; agency proposes prudent steps to trim expenses while costs rise
- May 28: Presentation to the Board of the recommended budget for fiscal years 2016 and 2017, along with proposed 2016 rates and charges
- June 9 & 11: Workshops to review recommended budget
- June 25: Public hearing on rates; Board considers adoption of budget and rates
FY 2016 & 2017 Recommended Budget
May 28, 2015 -The San Diego County Water Authority’s general manager on Thursday recommended a $1.5 billion budget for fiscal years 2016 and 2017, up 2 percent from the current two-year budget due largely to higher costs for the purchase and treatment of water.
Expenses were held in check by lower spending on the Water Authority’s Capital Improvement Program, which decreases by 34 percent in the recommended budget as major projects near or reach completion, and is now at $2.8 billion for the lifetime cost of the projects. In addition, the Water Authority is continuing to streamline the organization through the strategic reduction and reclassification of staff positions following a series of major cost-cutting moves in prior budgets.
“While demands on the Water Authority continue to grow, we have made judicious budget decisions following a top-to-bottom review of every department to ensure that we are providing the best possible service at the least possible cost,” said Water Authority General Manager Maureen Stapleton. “That led to the strategic reduction and reclassification of positions, along with less reliance on specialized outside services – two measures that will save ratepayer money.
“We also have developed this budget anticipating the start of water purchases from the Carlsbad Desalination Project and reduced water sales due to the drought. The revenue volatility normally associated with decreased sales will be minimized by a new supply reliability charge that resulted from the Board’s proactive fiscal sustainability efforts in recent years,” Stapleton said. “Thanks to careful planning and conservative financial management, the Water Authority’s financial position remains strong today and for the foreseeable future.”
In fiscal years 2016 and 2017, the Water Authority anticipates several major projects and initiatives. They include:
- Drought response – Helping the region meet state-mandated water-use reduction targets is a key goal. The recommended budget allows the Water Authority to respond to drought conditions with outreach and conservation programs to assist customers and help member agencies avoid financial penalties by the state.
- Carlsbad Desalination Project – Launching commercial operations at the largest seawater desalination project in the Western Hemisphere is on schedule for fall 2015. The Water Authority will not only be ready to receive 50 million gallons of water a day from the plant, but also to administer the complex purchase agreement for those deliveries.
- Regulatory policy – Supporting a new section to address regulatory policy and planning is part of the proposed budget, along with increased participation necessary to meet various demands by regulatory agencies.
- Dry-year modeling – Developing a model to assist in the prudent use of stored water reserves is a critical part of drought response. The model is expected to account for variables such as weather, economic factors, and evaporation.
- Asset management – Maintaining the reliability of the Water Authority’s estimated $3 billion infrastructure is a high-priority area. With some pipelines nearly 70 years old, it’s critical to continue implementing best management practices such as condition assessments, risk assessments and prioritization of assets for rehabilitation, repair or replacement.
The Water Authority’s Board of Directors will hold two workshops in June to review the recommended budget, and the Board will consider budget adoption on June 25. The Board is also reviewing proposed 2016 water rates for possible approval during its June 25 meeting.
On May 21, the Water Authority staff announced its recommendation to increase the rates charged to its member agencies by 6.6 percent for untreated water and 5.4 percent for treated water in calendar year 2016. Proposed rates arenear the low end of projections made in 2011, and well below the double-digit increases during the last drought that were driven by steep price hikes from the Metropolitan Water District of Southern California.
The Water Authority proposes charging its 24 member agencies the municipal and industrial rate of $1,159 per acre-foot for untreated water in calendar year 2016, or $72 more than they currently pay. The Water Authority also proposes charging $1,439 per acre-foot for treated water, or $74 more than in 2015. Actual figures will vary by member agency, and each member agency will incorporate costs from the Water Authority into the retail rates it charges to residents, businesses and institutions.(Note: An acre-foot is about 325,900 gallons, enough to serve two typical four-person households in San Diego County.)
While the Water Authority sets rates annually to ensure it can more effectively manage changing conditions, the agency’s budgets span two fiscal years.Over the past two fiscal years, the Water Authority advanced several critical projects, such as completing the nation’s tallest dam raise at San Vicente Dam – the final major component of the Water Authority’s $1.5 billion Emergency Storage Project. The Water Authority also won a major victory in lawsuits against MWD’s rates from 2011-2014, which a Superior Court judge ruled were illegal. In addition, the agency restructured its debt portfolio and used the savings to provide rate relief.
The biggest reasons for the Water Authority’s recommended two-year budget increase of $34.9 million are related to the purchase and treatment of water. Those costs are projected to rise by 12 percent in fiscal years 2016 and 2017 compared to the current budget, partly because of the cost of purchases from the Carlsbad plant and scheduled increases in the cost of water from the Imperial Irrigation District as part of a long-term conservation-and-transfer program approved in 2003. Both of those initiatives provide the region with highly reliable, locally controlled water supplies and are critical pieces of the Water Authority’s long-term supply diversification strategy. As scheduled, the Water Authority is also increasing contributions for environmental mitigation in the Imperial Valley as part of the 2003 Quantification Settlement Agreement.
Those increases are partially offset by a $69.2 million decrease in funding for the Water Authority’s Capital Improvement Program in the recommended budget. After more than a decade of building major infrastructure projects, such as building Olivenhain Dam and raising San Vicente Dam, the Water Authority is transitioning to an era of less construction and greater focus on asset management. In addition, the recommended budget for operating departments is down 5 percent from the current budget due to a combination of efforts to reduce expenses.
To read the Water Authority’s recommended budget, go to www.sdcwa.org/budget.