cagrd i&wr funding proposal · 2015. 4. 20. · post-2007 subdivisions in pinal county - cagrd...

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



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



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


• 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


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)


• 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


• 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


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


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?

cagrd i&wr funding proposal · 2015. 4. 20. · post-2007 subdivisions in pinal county - cagrd...

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