Finance and Insurance Committee Item 6a January 7, 2019
Section I: Brief History Section II: Physical Features Section III: Statutory Authorities Section IV: Contractual Terms Section V: Significant Legal Decisions Section VI: Cost Allocation Framework Finance & Insurance Committee Item 6a Slide 2 January 7, 2019
Finance & Insurance Committee Item 6a Slide 3 January 7, 2019
Gold discovered Statehood 1840 Finance & 1850 Insurance Committee 1860 1870 1880 Item 6a Slide 1890 4 1900 1910 1920 January 7, 2019 1930
First investigation of Central Valley and Sierra watersheds Col. B.S. Alexander, USACE Five-year study of Sacramento Valley rivers William Hammond Hall First State Engineer 1840 Finance & 1850 Insurance Committee 1860 1870 1880 Item 6a Slide 1890 5 1900 1910 1920 January 7, 2019 1930
First L.A. Aqueduct completed Raker Act William Mulholland, 1905 Hetch Hetchy Valley, 1908 O Shaughnessy Dam completed Constructing Hetch Hetchy Aqueduct, 1925 1840 Finance & 1850 Insurance Committee 1860 1870 1880 Item 6a Slide 1890 6 1900 1910 1920 January 7, 2019 1930
Metropolitan formed First CRA deliveries CRA completed 1850 Finance & 1860 Insurance Committee 1870 1880 1890 Item 6a Slide 1900 7 1910 1920 1930 January 7, 2019 1940
First statewide water project concept Robert Marshall First State Water Plan developed Edward Hyatt CVP Act enacted 1920 1900 Finance & 1930 1910 Insurance Committee 1940 1920 1950 1930 1960 1940 Item 6a Slide 1970 1950 8 1980 1960 1990 1970 2000 1980 1920 January 7, 2019 2010 1990 1930
Feather River Project presented to Legislature California Water Plan issued and initial work on Feather River Project A.D. Edmonston Harvey O. Banks Gov. Edmund Brown 1920 Finance & 1930 Insurance Committee 1940 1950 1960 Item 6a Slide 1970 9 1980 1990 2000 January 7, 2019 2010
Burns-Porter Act passed Metropolitan contract signed State Water Resources Development System 1920 Finance & 1930 Insurance Committee 1940 1950 1960 Item 6a Slide 1970 10 1980 1990 2000 January 7, 2019 2010
1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 $ Million Metropolitan s State Water Contract Pre-Delivery Payments 40 30 20 10 0 First deliveries prior to to South any Bay deliveries (ACWD) $118M total 1 st MWD Deliveries Coastal Branch EBX I West Branch 1972 East Branch 1973 EBX 2 1920 Finance & 1930 Insurance Committee 1940 1950 1960 Item 6a Slide 1970 11 1980 1990 2000 January 7, 2019 2010
Finance & Insurance Committee Item 6a Slide 12 January 7, 2019
Pumping plants Thermalito Diversion Dam Thermalito Lake Oroville Hyatt Gianelli San Luis Reservoir Hydroelectric power plants Pumping generating plants Miles of canals, tunnels, and pipelines Storage facilities Warne Castaic Edmonston Alamo Mojave Devil Canyon Finance & Insurance Committee Item 6a Slide 13 January 7, 2019
Sacramento River Bay Delta San Luis Reservoir Lake Oroville Feather River San Joaquin River California Aqueduct LAKE OROVILLE HYATT POWERPLANT DEVIL GIANELLI CANYON LAKE CASTAIC PERRIS POWERPLANT PUMPING- LAKE EDMONSTON CASTAIC POWERPLANT GENERATING PUMPING PLANT PLANT BANKS PUMPING PLANT SAN LUIS RESERVOIR Finance & Insurance Committee Item 6a Slide 14 January 7, 2019
Finance & Insurance Committee Item 6a Slide 15 January 7, 2019
Establishes overarching legal structure for construction, operation and financing of state Central Valley Project (CVP); includes: Feather River Project and Sacramento-San Joaquin Delta Diversion Projects as set forth in California Water Plan Such further modifications as the Department of Water Resources may adopt Authorizes issuance of revenue bonds for construction of CVP facilities Allows any units/portions of Feather River and Delta Diversion projects to be constructed, operated and maintained separate and apart from other parts of CVP Finance & Insurance Committee Item 6a Slide 16 January 7, 2019
Permits DWR to contract with any entity for the purchase or for the use of water, water flow, water storage, electric power, or other resources and facilities made available by the project Allows DWR to set prices, rates and charges for use of project resources and facilities Contains certain revenue requirements: prices, rates and charges must be sufficient to pay all project costs Finance & Insurance Committee Item 6a Slide 17 January 7, 2019
Incorporates all CVP Act provisions by reference Authorizes issuance of $1.75 billion in General Obligation (GO) bonds for construction of State Water Resources Development System (SWRDS), which includes State Water Project (SWP) Establishes priorities for use of income and revenues derived from use of SWRDS resources and facilities Pledges SWRDS-derived revenues and income as additional security for GO bonds Finance & Insurance Committee Item 6a Slide 18 January 7, 2019
Requires fish and wildlife enhancement and recreation (FWER) to be incorporated as features of CVP/SWRDS, to extent consistent with other uses Designates FWER costs as non-reimbursable costs to be paid for by State Requires prices, rates and charges for use of water and power facilities to include costs of fish and wildlife preservation Finance & Insurance Committee Item 6a Slide 19 January 7, 2019
Finance & Insurance Committee Item 6a Slide 20 January 7, 2019
Issued by Gov. Edmund G. Brown on January 20, 1960 Costs are to be allocated among: water supply, flood control, recreation, enhancement of fish and wildlife, drainage, quality control such other functions as may be authorized and performed by the particular facility or facilities under consideration Charges for water and power and for other reimbursable items are to be based on recovery of costs Costs allocated to water supply are to be divided between Delta Water Rate and Transportation Rate Finance & Insurance Committee Item 6a Slide 21 January 7, 2019
Intended to guide development of prototype contract Helpful to understand parties intent with respect to original contract terms and conditions Not binding with respect to subsequent contract modifications and amendments Finance & Insurance Committee Item 6a Slide 22 January 7, 2019
1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 $ Million Contract provides participation rights; it does not guarantee a particular amount of water Obligation is to repay actual costs associated with water supply purpose; no fixed charge for water Contractors pay costs regardless of amount of water received Contractors began paying for costs long before first deliveries were made 40 30 20 10 Metropolitan s State Water Contract Pre-Delivery Payments 0 Finance & Insurance Committee Item 6a Slide 23 January 7, 2019
Division between water supply and conveyance facilities defined mostly by reference to Burns-Porter Conservation (Supply) Facilities: Include master levees, control structures and channel improvements to the extent they serve the purposes of water conservation in the Delta, water supply in the Delta and transfer of water across the Delta Transportation (Conveyance) Facilities: Include an aqueduct system for transportation of water from a point or points at or near the Sacramento-San Joaquin Delta consisting of intake and diversion works, conduits, tunnels, siphons, pipelines, dams, reservoirs, and pumping facilities Collected through Delta Water Rate and Transportation Rate Finance & Insurance Committee Item 6a Slide 24 January 7, 2019
Articles 1, 22 and 23 recognize dual supply and conveyance functions of SWP facilities located at or near Delta: Banks Pumping Plant California Aqueduct (Reaches 1-3) San Luis Forebay San Luis Reservoir Contract gives DWR some flexibility in determining which project costs are reimbursable and how to allocate such costs between Delta Water Rate and Transportation Rate DWR s determinations cannot be arbitrary, capricious or unreasonable Finance & Insurance Committee Item 6a Slide 25 January 7, 2019
Terms water and water supply are used to distinguish between reimbursable/non-reimbursable project purposes, not to identify specific functions of particular facilities Costs for major SWP facilities constructed after 1987 have not been included in Delta Water Rate or Transportation Rate; have been billed separately in annual Statement of Charges (SOC) Certain costs may be reclassified upon further review: Among Project Purposes: Delta Facilities, Lake Perris Within a Project Purpose: Oroville relicensing costs Within a Cost Category: Hyatt turbine rehabilitation Finance & Insurance Committee Item 6a Slide 26 January 7, 2019
Established pro rata sharing of shortages Provided greater flexibility in use of SWP by contractors Allowed storage of SWP water outside District Allowed conveyance and storage of non-project water Provided carryover storage in Oroville and San Luis Provided flexible storage in Lake Perris and Castaic Lake Improved financial integrity of SWP, including credits for excess systems revenues Finance & Insurance Committee Item 6a Slide 27 January 7, 2019
Finance & Insurance Committee Item 6a Slide 28 January 7, 2019
MWD v. Marquardt (1963): Validated prototype contract Warne v. Harkness (1963): Held Burns-Porter Act and CVP Act provided independent bases for financing SWP Goodman v. County of Riverside (1981): Upheld use of ad valorem taxes to pay SWP costs as voterapproved indebtedness under Prop 13 Noted contractors ultimately responsible for indebtedness and State was mere conduit for contract payments SDCWA v. MWD (2017): Held SWP transportation system is an integrated part of Metropolitan s transportation system Finance & Insurance Committee Item 6a Slide 29 January 7, 2019
Finance & Insurance Committee Item 6a Slide 30 January 7, 2019
State Water Resources Development System State Water Facilities Additional facilities authorized by legislature as part of CVP or CA Water Plan Additional facilities deemed necessary or desirable by DWR State Water Project San Joaquin Valley drainage Local Projects Conservation (Supply) Facilities Transportation (Conveyance) Facilities Major Post-1987 Facilities Finance & Insurance Committee Item 6a Slide 31 January 7, 2019
Water Supply and Conveyance Paid by State Water Contractors Recreation, Fish & Wildlife Enhancement Paid by State Flood Control Paid (Mostly) by Federal Government Finance & Insurance Committee Item 6a Slide 32 January 7, 2019
San Luis Reservoir Lake Oroville California Aqueduct Water Supply and Conveyance Recreation, Fish and Wildlife Enhancement Flood Control Delta Facility Castaic Dam and Lake East Branch Enlargement Lake del Valle Perris Dam and Lake Finance & Insurance Committee Item 6a Slide 33 January 7, 2019
Conservation (Supply) Facilities Has been applied to initial SWP facilities Based on function of conserving available water supply Costs allocated based on Table A Billed under Delta Water Charge in annual SOC Transportation (Conveyance) Facilities Has been applied to initial SWP facilities Based on function of transporting available water supply Capital costs allocated based on PUFF; power costs allocated based on actual energy usage Billed under Transportation Charge in annual SOC Major Post-1987 Facilities Has been applied to major SWP facilities constructed after 1987 Negotiated arrangement for cost allocation among contractors Billed separately in annual SOC Finance & Insurance Committee Item 6a Slide 34 January 7, 2019
COASTAL BRANCH AQUEDUCT NORTH SOUTH BAY INTAKE BAY AQUEDUCT RELOCATION ENLARGEMENT TEHACHAPI SECOND AFTERBAY DEVIL CANYON SECOND AFTERBAY EAST BRANCH EXTENSION Finance & Insurance Committee Item 6a Slide 35 January 7, 2019
Existing statutes, contract and case law provide basic authority and structure for: Construction, operation and financing of project Allocation of project costs among reimbursable and nonreimbursable purposes State s focus is on recovery of costs on a project-wide basis, not on allocation of costs at the local level Existing contract reflects that focus: Division of charges between Delta Water Rate and Transportation Rate has been applied to costs for initial SWP supply and conveyance facilities Post 1987, other major SWP facilities have been billed separately pursuant to negotiated arrangements Finance & Insurance Committee Item 6a Slide 36 January 7, 2019
California WaterFix Cost Allocation: CWF Project Overview California WaterFix Cost Allocation: Recommended Functionalization of Costs Finance & Insurance Committee Item 6a Slide 37 January 7, 2019