cagrd i&wr funding proposal · 2015. 4. 20. · post-2007 subdivisions in pinal county - cagrd...
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CAGRD I&WR Funding Proposal
CAGRD & Underground Storage Committee
August 15, 2013
Dennis Rule
CAGRD Manager
CAWCD Board Directives
• “Reduce risk” - Address implications of increasing enrollment without
sufficient long-term water supplies or the financial means
to acquire supplies in advance of replenishment obligation
• “Catch up and keep up” - Acquire sufficient long-term water supplies to meet current
replenishment obligation by 2015
- Continue acquisitions to keep up with anticipated growth
in replenishment obligation over time
• “Collect more sooner” - Reconfigure funding methodology for Infrastructure and
Water Rights to collect more of the cost of long-term
supplies earlier in the member lifecycle (Activation Fee)
- Reduce reliance on I&WR rate component (after
replenishment obligation is already being incurred)
8/15/2013 2
Enrollment Fees • MSAs ($5,000)
• MLs ($198/unit)
Activation Fees • MSAs & MLs ($196/unit)
Rates (MSAs & MLs)
• Admin ($45/AF)
• Water & Repl. ($140-$183/AF)
• Infr. & Water Rts ($245/AF)
• Repl. Reserve ($58-$75/AF)
INFR. & WATER RIGHTS
Repl. Reserve Fees • MSAs & MLs ($54-$69/AF)
Used to pay the cost to acquire rights to water and develop infrastructure necessary for CAGRD to perform its replenishment obligations
MSA = Member Service Area ML = Member Land
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Used to pay the administrative costs of CAGRD (including salaries, benefits, overhead, equipment, special services, implementation of CAGRD conservation program)
Used to pay the annual cost of water and replenishment to meet annual replenishment obligations
Used to pay the cost of establishing and maintaining a replenishment reserve of long-term storage credits
ADMIN.
WATER & REPL.
REPL. RESERVE
Membership Dues
• MSAs ($20.08/AF)
• MLs ($1.74-$13.19/lot)
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CAGRD Revenue Streams 2013/14 Rates and Fees
3 8/15/2013
CAWCD Board Directives
Additional Considerations
• Conditions on Enrollment alone will not address financial concerns
₋ Level of future enrollment is uncertain
₋ Much of the risk with respect to unfunded long-term water supply
lies with the ~100,000 acre-feet/year of current enrollment that
has not yet built out
₋ Enrollment Fee has already been paid by enrolled lots, so it is not
possible to collect more from these lots via Enrollment Fee
• Revised Activation Fee concept would apply to both
currently-enrolled-but-unconstructed lots as well as by newly-
enrolled lots
₋ Activation Fees MUST be paid before lots can be sold and
replenishment obligation incurred
8/15/2013 4
Member Lands 2010
Constructed Units
99,800
Unconstructed Units
161,900
5 8/15/2013
Existing I&WR Funding
8/15/2013 6
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Year
CAGRD Historical Member Lands Parcel
I&WR Funding Example (Cumulative)
Enrollment Fee Activation Fee I&WR Rate Component Membership Dues
. . . .
Goals for “New” I&WR Funding
• Single rate schedule for all members (e.g., enrollment
fee, activation fee, I&WR rate, AMD by AMA)
• Reasonable inter-period equity between members who
joined earlier vs. members who joined later
• Sufficient funding resources available when needed to
acquire long-term supplies prior to replenishment
obligation
- Cash
- Bonds
- Pay as you go
• Work within existing structure as much as possible without
additional legislation unless absolutely necessary
8/15/2013 7
“New” I&WR Funding Concept
8/15/2013 8
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Year
CAGRD Member Lands Parcel
"New” I&WR Funding Example (Cumulative)
Enrollment Fee Activation Fee I&WR Rate Component Membership Dues
. . . .
Shift from Existing to “New” I&WR Funding
8/15/2013 9
$0
$500
$1,000
$1,500
$2,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Year
CAGRD Member Lands Parcel "New” I&WR Funding Example (Cumulative)
Enrollment Fee Activation Fee
I&WR Rate Component Membership Dues
$0
$500
$1,000
$1,500
$2,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Year
CAGRD Historical Member Lands Parcel Existing I&WR Funding Example (Cumulative)
Enrollment Fee Activation Fee
I&WR Rate Component Membership Dues
Discussion with Stakeholders
• CAGRD has developed a conceptual
model…
• Historical acquisition cost would form the basis
of the Activation Fee
• Newly activating members would “catch up”
with members who have already activated
and paid significant amounts for water rights
acquisition (inter-period equity)
• Future water acquisition costs would be shared
equally among all activated members through
rates
8/15/2013 10
Discussion with Stakeholders
• CAGRD has developed a conceptual
model…
• Activation Fee would include a “keep up”
component to account for any lag between
activation and commencement of
replenishment
• Activation Fee would be “tailored” to each
subdivision (or MSA) based on expected
replenishment obligation
8/15/2013 11
Discussion with Stakeholders
• CAGRD has developed a conceptual
model
• The initial “catch up “was illustrated by a
hypothetical point of equilibrium in 2016
- Water supplies “caught up” to existing
replenishment obligation
- All monies collected up to that point exhausted
- Activation Fee Basis of $2,700/acre-foot
• Revised Activation Fee would be phased in
• I&WR rate component could theoretically be
reduced from what it might otherwise have
been at some point in the future
8/15/2013 12
“New” I&WR Funding Concept
• Example:
- At the hypothetical moment of being “caught up”
- Total cost of acquisition ≈ $1,800/acre-foot ($62 million ÷
35,000 acre/feet)
- 3 years of forward I&WR rate component ≈ $900
- Total Activation Fee = $2,700/acre-foot
- Total Activation Fee = $900/unit (assuming 1/3 acre-foot)
• As additional acquisitions are made, the Activation
Fee will be modified
• I&WR rate component will be updated through the
usual rate process
8/15/2013 13
Some Concerns Expressed
• Magnitude of increase in Activation Fee
• Period of time over which the Activation Fee
would be phased in
• Actual amount of Activation Fee Basis at the
time of calculation vs. the example
• Lumpiness, volatility, steepness of future
Activation Fees after the initial “catch up”
• Administrative difficulty and consistency of
tailoring Activation Fees to individual
subdivisions
• Adequacy of funding under “New” concept
8/15/2013 14
Refined I&WR Funding Concept
• The underlying concept of the proposed I&WR
funding methodology will remain the same
- Activation Fee based on historical cost
- After Activation, future costs shared through rates
• For the initial “catch up” transition, the annual
calculation of an Activation Fee Basis will be
replaced with a “target” projection and phased in
over a number of years using fixed amounts
• Activation Fee will be based on a replenishment
factor per-AMA rather than a per-subdivision basis
• Other fees, rates and assessments will continue to
be set biennially/annually as they are today
8/15/2013 15
Refined I&WR Funding Concept
• After the initial phase-in period of the transition
Activation Fee, an approach for the second
“keep up” phase will be developed
- The overall concept will continue to be based on the
“historical water cost” model
- It is anticipated that the slope of the second phase will
be less steep and that CAGRD will be able to set some
boundaries on the rate of future increases, but cannot
commit to that now
- During the initial transition period, CAGRD will continue to
calculate the historical cost periodically to monitor how
much the fixed “target” might deviate from actual cost
and give some indication of what might need to be done in the next phase
8/15/2013 16
Refined I&WR Funding Concept
8/15/2013 17
CAGRD Activation Fee
Initial "Catch Up"
Transition Phase
Second "Keep Up" Phase
Pre-set Activation Fee ramp-
up based on "target" over a
fixed period of time with
fixed annual amounts
Activation Fee set
biennially/ annually based
on actual historical costs
within certain boundaries
(TBD)
Refined I&WR Funding Concept
• Calculation of the Replenishment Factor
- CAGRD will use actual usage/obligation information from existing, fully built-out subdivisions
- Factors will be re-evaluated during Mid-Plan Review
- In addition, CAGRD will:
• Look at impacts of commitment of effluent or other
renewable supplies to meet water demands
• Adjust for the use of the groundwater account
balance
• Provide an appropriate adjustment for multi-provider
subdivisions
8/15/2013 18
Refined I&WR Funding Concept
• Calculation of the Replenishment Factor
- CAGRD will develop separate factors for pre-2007 and post-2007 subdivisions in Pinal County
- CAGRD will use the same factors for MSA lots in each
AMA, as well as use the “tipping point” to determine
payment of minimum vs. full fee
• CAGRD will establish a Minimum Activation Fee for
both pre-2007 Pinal County subdivisions and MSAs
to the left of the “tipping point,” most likely based
on the current rate schedule, at least until the Mid-
Plan Review
8/15/2013 19
Refined I&WR Funding Concept
Initial Activation Fee Basis “Target” $2,700/acre-foot
Initial Activation Fee transition timing 2019
- 6-year transition to coincide with
CAGRD mid-plan review
AMA replenishment factors
- Phoenix 0.4 acre-feet/yr
- Tucson 0.3 acre-feet/yr
- Pinal (pre-2007) minimum
- Pinal (post-2007) 0.4 acre-feet/yr
8/15/2013 20
Refined I&WR Funding Concept
8/15/2013 21
Phoenix
AMA
Pinal
AMA
Pre-2007
Pinal
AMA
Post-2007
Tucson
AMA
Acre-feet/unit 0.4 min* 0.4 0.3
Activation Fee Target $ 1,080 min* $ 1,080 $ 810
2013 196 196 196 196
2014 260 235 260 250
2015 350 282 350 320
2016 460 282 460 400
2017 610 282 610 510
2018 820 282 820 640
2019 1,080 282 1,080 810
Activation
Fee
Basis
$2700/ acre-foot
Firm Activation Fee Transition Schedule
$ Per Housing Unit
* = Existing Rate Schedule = Minimum Activation Fee
for pre-2007 Pinal AMA and pre-tipping point MSAs
Questions?