There was a call to audience question from Mrs. Weise regarding frozen pipes during the cold weather that was addressed in the Director's Report.
Mr. Saletta introduced Tom McCann, CAP Assistant General Manager.
Mr. McCann was very instrumental in the settlement of the Tucson Area Central Arizona Reliability agreement. Mr. McCann gave a presentation regarding Water Supply Shortage Status and CAP issues.
His presentation discussed the current conditions on the Colorado River and that snowpack is 120% above normal. There no expected shortages until at least 2016. Releases are made to Lake Mead from Lake Powell to equalize the volumes of each. The Secretary of the interior declares a shortage condition. If a shortage occurs then the shortage is shared based upon an agreement between the seven basin states. There are three levels in Lake Mead that trigger shortages. These are 1075 feet, 1050 feet and 1025 feet. There are shortage guidelines that are followed for each of these. In Arizona, there is a priority of use for Colorado River water users. Municipal and Industrial users in Arizona have a high priority and impacts of shortages to their deliveries is very low. In addition to the shortage sharing agreement, Colorado River water has been stored underground in Arizona for future use to protect against future shortages.
Mr. McCann ended his presentation. The following were questions from the Commission:
-How accurate have the January 1st projections been historically? (Commissioner Milkey). The Bureau knows by its recurrent year how much water has been ordered by every one down stream and knows how much water will be released by Lake Mead. The same concept is applied with Lake Powell. The only unknown is what happens with side inflow between Lake Powell and Lake Mead because there are substantial fluctuations.
-Are Lake Powell increases based on Snowpack in the mountain states? (Commissioner Tustison). Mr. McCann indicated that it was and gave a brief explanation on the current snow pack.
-Does the level of Lake Mead have any bearing on equalization or is it just the level of Lake Powell? (Commissioner Hoffmann). It's the level of Lake Powell but the amount of equalization could be affected by the Level of Lake Mead. (Mr. McCann)
-Since Lake Mead was filled what’s the lowest its ever reached? (Commissioner Hoffmann) Mr. McCann estimated about 1082 feet a few months ago.
-How does Mexico figured into the CAP Shortage sharing? (Chair Powell) Mr. McCann explained an existing treaty between Mexico and the U.S. indicates that under extraordinary drought, deliveries to Mexico can be reduced by the proportions used in the U.S. Mexico states that they can only be reduced as long as the existing states receive a reduction. There have been ongoing discussions with Mexico for voluntary reductions. No agreement has been reached but a temporary agreement is in place allowing Mexico to store its water they couldn’t’t use in Lake Mead from a recent earth quake. The agreement could be expanded to include Mexico’s contribution to CAP water shortage guidelines. The basin States fully expect that the U.S. will reduce CAP deliveries to Mexico when the time comes. Under normal conditions Mexico receives 1.5 million AF per year.
-When are CAP deliveries scheduled relative to shortages if they occur? (Commissioner Hoffmann). Mr. McCann explained that the Secretary informs CAP July of each year what the outlook is for next year. CAP can determine and tell what their status is by the 24 month study. The schedule of deliveries for CAP customers are due by October 1 each year. By mid November customers are issued their relative schedules.
-Are there legal ramifications with weather modification for example taking moisture that is moving? (Commissioner Hoffmann). This is an argument that has been made but cannot be proven. However nothing we do in the weather modification brings out all of the moisture from the clouds. It’s a topic that’s been discussed but no legal actions have been taken challenging any of these programs. We believe this is an inexpensive program. (T. McCann).
-Is it true the upper basin states do not use their 7.5 million water supply? (Commissioner Hoffmann). Their usage has declined during the current drought for the last ten years because the water has not been in the river. They are heavily dependant on actual stream flow. In 1999-2000 the upper basin was using about 4.8 million AF. They have been consistently using about 4.0 million AF a reduction of approximately 800,000 AF.
Mr. McCann explained that the equalization line is based on what the upper basin thinks needs to be in storage to be able to protect their uses and growing methods.
-Is it true that studies performed at the University of Arizona indicate we are in a wet cycle rather than a drought cycle? (Commissioner Davis). The tree rate studies can show the dry cycles but are not that accurate with wet cycles. We need to take a closer look at the long term trends.
Mr. Saletta pointed out that Oro Valley was included in the M&I portion of the graph and is classified as one of the highest priority within CAP. Mr. Saletta pointed out we need to plan for our future water supply and part of it is continued groundwater storage. Mr. Saletta indicated that Oro Valley has long term storage credits and its own account for underground storage and that it does not have to solely rely on the Arizona Water Banking Authority firmed water practice.
The Commission thanked Mr. McCann for his presentation.
Commissioner Hoffmann reported that the Renewable Water Resources Subcommittee met Wednesday, February 9th. Included in the packets is a revised table outlining several Short Term and Long Term options for delivery of CAP Water. Last month when this item was presented there were a few undetermined values. Staff has provided additional information for this table and the subcommittee has reviewed the table in detail. Commissioner Hoffmann indicated that he would make a motion after Mr. Saletta’s report.
Mr. Saletta thanked the Finance and Renewable Water Subcommittees for their input. He mentioned that he would be asking for a motion in order to move forward with discussions with Tucson Water.
Mr. Saletta reviewed the Short Term and Long Term Options:
1,000 AF/Year -Adjusted Cost per AF $387
1,500 AF/Year -Adjusted Cost per AF $445
3,000 AF/Year -Adjusted Cost per AF $678 (higher capital costs and sunk cost $1,686,000)
Long Term Options
Option 1 - Recharge & Recovery Phase 1
5,000 AF/Year -Adjusted Cost per AF $1,180
Option 2 - Treatment & Direct Delivery Phase 1
5,000 AF/Year -Adjusted Cost per AF $1,099
These both have very high capital costs and the second phase for both these projects will be more expensive and will be determined in future plans.
Short Term Options 1,000 & 1,500 AF/Year Timeline: Earliest January 2012
3,000 AF/Year -Timeline: January 2013
The 3,000 AF/Year option is the most expensive of three Short Term options and there may be additional construction costs in order to address delivery capacities.
Councilmember Gillaspie are these additional costs beyond what is shown in the table? Mr. Saletta said yes, but Staff does not know what the additional actual costs are at this time. Tucson Water discovered problems with their system and the delivery of 4,000 AF or more to Oro Valley could hamper delivery. This issue will be addressed in the future.
Councilmember Hornat asked how much water do we use currently in our system? Mr. Saletta explained that groundwater pumping was approximately 8,000 AF per year and Reclaimed Water was 2,200 AF.
Short Term - Advantages & Disadvantages
Advantage: delivery of wet water instead of paper water
-Reduces CAGRD obligation -No significant change in water rate projections
Disadvantages 1,000 and 1,500 Short Term AF/Year: -1,000 AF Minor reduction in end of year cash balance, 1,500 AF Moderate reduction, 3,000 AF Significant reduction in end of year cash balance
Reviewed 1st year budget increases and Average Annual Budget Increases 1,000 - 3,000 AF
1,000 AF at $335,500 -Average annual budget increase at $401,358 -1,500 AF at $1,349.110 -Average annual budget increase at $473,500 -3,000 AF at $1,053,625 -Average annual budget increase at $1,460,067.
Projected financial impact to customers using 8,000 gallons of water are the same as what was projected previously in the recent Water Rates Analysis. These are as follows:
-Commodity Rates Projections: 0.6% - 1.8% over a five year period
-GPF Rate Projections: 0.7%-1.8% over a five year period
Councilmember Hornat asked are the rate projections for the total of over five years? Mr. Saletta indicated that these are range of rate projections for each year in the five year period. These rates are not considered fixed and are just projections at this time.
Are these rates the same as indicated in the water rates study? (Commissioner Milkey). Ms. Seng confirmed there were no modifications to the rates in the rate analysis. The increases shown represent the impact to the average residential customer that would be reflected on their bill. They are not the rate increase percentages.
Commissioner Tustison mentioned that the Finance Subcommittee met and spent a considerable amount of time going over the options and the five year projections. We concluded that the Short Term Wheeling solution was a viable option if phased in over a three year period. It could be managed satisfactorily from a financial point of view with our present five year plan. He emphasized that it does decrease cash reserves, and it is strictly dependent on Council’s approval of water rate increases every year for the next five years. It probably won’t work if Council holds off on rate increases.
In answer to Councilmember Hornat’s question, Mr. Saletta explained that the sunk costs were included for each project. Commissioner Hoffmann explained that the sunk costs were not additive costs.
Mr. Saletta also explained that these projects were evaluated on a comparative basis as stand alone projects. When we did our financial analysis we took into consideration the phasing in of these projects.
Commissioner Shapiro indicated that it was feasible to go from one project to the next and we would not lose any cost. She supported moving forward with the projects.
Proposed Schedule -CAP Short-Term Delivery Options
3/16: Present to TOV Council
3/17-5/20/11: Negotiate IGA with Tucson Water
6/13: OV WUC review of Draft IGA
7/??/11: Tucson Council consideration of IGA (to be determined)
7/20/11: TOV Council consideration of IGA
8/11/11: OVWU Staff commence design
10/1/11: OVWU Staff commence construction
1/1/12: Short-term 1000 af option in operation
Mr. Saletta mentioned that Tucson believes they could reduce costs to approximately $500 per AF however this is still under negotiations.
Councilmember Hornat asked we have a Groundwater Preservation Fee increase coming in October 2011, when will you come forward with increases to both the Groundwater Preservation Fee and commodity rates to make this work? Mr. Saletta indicated that staff would be evaluating the water rates on schedule in the Fall 2011. Staff suggests that Council implement the increases shortly after approval and not delay implementation. Town policy states that water rates increases be forwarded to Council annually unless the Council or Commission directs Staff to do otherwise.
Commissioner Shapiro stated that we should not hamper any cost negotiations with Tucson Water for the CAP delivery. We should give Staff the ability to negotiate this price.
Chair Powell made the request for a Motion.
MOTION: A motion was made by Commissioner Hoffmann and seconded by Commissioner Reynolds move and recommend that Oro Valley Water Utility Staff to move forward with discussions with Tucson Water regarding the options for short-term interim delivery of Central Arizona Project Water.
MOTION carried, 7-0.
There were no speakers.