Water Authority Recommends $1.6 Billion Budget for Fiscal Years 2018 and 2019

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Water Authority Recommends $1.6 Billion Budget for Fiscal Years 2018 and 2019
Rising water supply and treatment costs largely offset by reductions in capital spending and stored water purchases

Recommended Budget

May 25, 2017

The San Diego County Water Authority’s general manager on Thursday recommended a $1.6 billion budget for fiscal years 2018 and 2019, up 2 percent from the current two-year budget due largely to increasing costs of water supplies and treatment.

The recommended budget holds expenses in check as the Water Authority continues its transition from building infrastructure to maintaining facilities, and it enables the agency to continue to make prudent investments to protect and maximize the value of the region’s water supplies and infrastructure. More than 90 percent of the recommended budget is for the purchase and treatment of water as well as building or financing infrastructure.

The biggest factors in the Water Authority’s recommended two-year budget increase are related to the purchase and treatment of water – costs that are projected to rise by $130.7 million, or 15 percent. Water purchase and treatment costs are rising because of pass-through increases in rates and charges set by the Metropolitan Water District of Southern California, scheduled increases to the price of water from the Water Authority’s independent and highly reliable Colorado River transfers and the Claude “Bud” Lewis Carlsbad Desalination Plant, and slightly higher projected water sales. Increases in water purchase and treatment costs are largely offset by reducing Capital Improvement Program spending and lowering planned stored water purchases to zero. No stored water purchases are necessary following the successful filling of Water Authority carryover supplies in San Vicente Reservoir last year. Spending reductions in these areas total $99.9 million.

“During the last two years, we accomplished a sea change in water supply reliability for the San Diego region, with new local supplies from the Claude “Bud” Lewis Carlsbad Desalination Plant helping us successfully emerge from a five-year drought with greater water supply reliability than we had going in,” said Water Authority General Manager Maureen Stapleton. “At the same time, we’ve carefully reviewed our programs and prioritized our activities to ensure we can continue our mission at the lowest possible cost to ratepayers.

“This recommended budget reflects the Water Authority’s commitment to maintaining operational excellence and cost-effectiveness of water infrastructure valued at $3.2 billion and serving 3.3 million people,” Stapleton said. “It continues the agency’s leadership on water issues statewide – upholding the public trust with our member agencies and community stakeholders – and also the prudent financial practices that last year produced the first AAA bond rating in agency history from S&P Global Ratings.”

Important focus areas and initiatives for the Water Authority in fiscal years 2018 and 2019 include:

  • Asset management – The Water Authority will inspect and maintain aging infrastructure using best management practices and cutting-edge technologies to prevent failure of pipelines or facilities, extend the useful life of facilities, and save ratepayer money through project prioritization.
  • Infrastructure and technology security – The Water Authority will safeguard its assets and increase the agency’s cyber resilience by improving technical controls and by sharing knowledge with Water Authority member agencies and federal agencies. Planned upgrades include a fiber optic communication system study, increased video surveillance at facilities and enhanced around-the-clock staffing at the Water Authority’s control room in Escondido.
  • Water-use efficiency – The Water Authority launched its Live WaterSmart campaign in July 2016 to provide residents and business with resources to maximize their water efficiency no matter the weather, and will continue to promote water efficiency as a positive, permanent lifestyle.
  • Long-term water use – The Water Authority will continue playing a leadership role in the development of the state’s long-term water-use efficiency legislation, advocating for a balanced and thoughtful approach to actions that can have significant impacts on Water Authority projects and programs.

The Water Authority also will pursue grant money to leverage ratepayer investments in water quality, supply, treatment and storage projects, as well as opportunities to reduce its energy demands and costs. Driving down energy costs helps stabilize water rates and reduce greenhouse gas emissions.

The recommended budget for operating departments is $103.2 million over the two fiscal years, up approximately 2 percent from the current two-year budget. The largest factor in the increase is rising health care costs and a required increase in employer contributions to the California Public Employees Retirement System.

Ongoing reviews of the Water Authority’s personnel needs over the past several years have helped moderate increases in the agency’s operating departments.

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 22. The Board will also review and consider adopting proposed 2018 water rates during its June 22 meeting.

On May 18, the Water Authority staff announced its recommendation to increase the rates charged to its member agencies by 3.7 percent for both untreated and treated water in calendar year 2018. The proposed rate increases are among the lowest the agency has imposed over the past decade and are in line with projections in the Water Authority’s 2015 Long Range Financing Plan.

The Water Authority proposes charging its 24 member agencies the municipal and industrial rate of $1,303 per acre-foot for untreated water in calendar year 2018, or $47 more per acre-foot than they currently pay. The Water Authority also proposes charging $1,603 per acre-foot for treated water, or $57 more per acre-foot than in 2017. 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 the annual needs of 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 began receiving supplies from the largest seawater desalination plant in the nation through a public-private partnership between the Carlsbad desalination plant’s developer and owner, Poseidon Water, and the Water Authority.

The Water Authority’s plan to draw $5 million from the agency’s Rate Stabilization Fund moderated the agency’s proposed rate increase by approximately $13 per acre-foot. A restructuring of the Water Authority’s debt portfolio during the current budget cycle reduced debt service payments by $78.3 million on a present-day basis and provided additional rate relief.

To read the Water Authority’s recommended budget, go to www.sdcwa.org/budget.