Protecting Your Ratepayers: Financial Practices of MWD

and the Risk to Your Ratepayers

Water Authority's Concerns with MWD's Fiscal Practices

History Of M W D's Poor Fiscal Management

1 OVERCHARGED OVERSPENT MWD overcharged SoCal MWD overspent its water users $847 million budget by $1.2 billion

2012 - 2015

3 BORROWED MWD authorized $900 million in unplanned borrowing

RATES CLIMB MWD rates have doubled over the last decade and will continue to needlessly rise

2017 - ?

MWD' R pon e?

► MWD's only response has to been to label this information "false and misleading'

► MWD has not disputed any of these numbers, and it can't: they're MWD's own numbers

Data Source: MWD 3

MWD' La t Long-Range Financial Plan wa 2004

900

800

-+-2004 LRFP High Rate Forecast

2004 LRFP Low Rate Forecast ./6.

- ... -Actual MWD "Average" Rate ~ 700 -·r-L-----------____J----~-~---------

600

500

400 -·------------------------

300 -1------.--------.---~-~--~-~--.~---.----~-~

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Data Source: MWD 6

• l t •

MWD Claim it Make D tai I d Fore ca t "

MWD Forecast

201 5 budget: FY 201 7 reserves $ 506 million

201 5 budget: Senior Bond Debt Coverage in 2018: 2.0x

MWD 201 5-16 biennial budget: 100% ($268 million) of 2016's capital expenditures from cash & reserves (PayGo and R&R Fund)

"Caref u I, Cali brat d

Reality

201 7 0.5.: reserves $338 million to $388 million ($250 million to $300 million borrowed)

2017O.S.: l.lSx

Debt-financed more than $1 90 million of the actual $232 million in CIP expenditures.

MWD's 201 7 water sales: 1.57 201 7 water sales: 1.33 MAF MAF

Source: MWD 9

• fl , ) ,

Docum nt and Data ourc

► Data used throughout this presentation comes directly from MWD 0 Links to source documents can be found at

www.MWDFacts.com/behind-the-numbers

10

Jeffrey Kightlinger, General Manager Rincon del Diablo Water- Board Meeting August 8, 2017

26 Members Agencies

Imports water from Northern Sierra and the Colorado River

5200 Square Miles/Six Counties

Service area about 19 million people

The nation’s largest water wholesaler

Supports $1 trillion economy

Metropolitan Overview

MWD SERVICE AREA

Water for one of every two Californians

Sacramento &Feather Rivers

Northern Sierra

Colorado RiverAqueduct

25%

Colorado River

Bay- Delta

MWD Service AreaLocal Supplies:

45% • Los Angeles Aqueduct• Conservation• Groundwater• Recycling• Desalination

Securing Water for California

State Water Project

30%Los Angeles Aqueduct

Upper Colorado River Basin

I I I I I

I - - _.;.. _ L - - - -.- -

I I

I I I I I I I I

Initial Deliveries 1941

First water deliveries to the San Diego Region on  

November 1947

Initial Deliveries 1972

Metropolitan is the largest of 29 State contractors committed to finance bonds for construction

State Water Project

r

. .,,,,.~ :..;;...:.~ ... ,

-c.·A : -

• Adaptive water portfolio through IRP• Conservation, recycling, desalination• Storage• State Water Project• Colorado River

• Investments in technology for water quality and infrastructure

• Link investments to energy, wastewater, stormwater and watershed management

• Strengthen partnerships

Reliable Water Supplies for the future

State WP (22%)

Colorado (14%)

Local Supply (31%)

Conservation  &Recycling(33%)

State WP (33%)

Colorado (27%)

Local Supply (34%)

Conservation  &Recycling(7%)

Heavy dependence on imported supplies

Emphasis on conservation, recycling, & local supplies 

Average Year Water Supply –1990 vs. 2035Diversifying for Tomorrow

1990 - 41% Local

Managing StorageDecision on California WaterFixColorado River Drought• Mexico Minute 323

• System Conservation

• Drought  Contingency Plan

1.1 1.1 1.4 1.5 1.41.8

2.21.8

1.1 1.01.7

2.42.7

2.3

1.2 0.91.3 1.3

0

1

2

3

4

5

Million Ac

re‐Feet

Emergency Storage

2016 EOY Dry‐Year Storage

Storage programs Identified/secured

Management actionsnot yet secured

0.6

1.3

0.9

Current 2017 End of Year Dry-Year Storage Balance Projection

=c•

- -1- -111111 11111111

WaterFix in Two Minutes

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

Regional Stormwater Capture

Groundwater/Stormwater Recovery

Recycled Desalination

Supp

ly Cost  ($/AF)

$634‐$2,102/AF

$720‐1,568/AF

$1,222‐$3,227/AF

$1,859‐$2,367/AF

California WaterFix Maintains Rate Stability

12

MWD Tier 1 Treated with Delta Improvements = $1,089 to $1,118/AF *

19 Million = ~$5/mo/hh

Joint Special Committee on Bay‐Delta and WP&S Item 3a  Slide 13 July 25, 2017

0

20,000

40,000

60,000

80,000

100,000

120,000

Nov Dec Jan Feb

Delta Outflo

w or D

elta Exports (cfs)

Delta Outflow to Ocean

Actual SWP/CVP Exports

Potential SWP/CVP Exportswith 9,000 cfs Facility

Increased export with California WaterFix ~ 781,000 acre‐feet (thru Feb 17)SWP/CVP export losses due to BioOp ~ 800,000 AF (larger amount of SWP loss)Analysis by State Water Contractors – Feb 2013

(14 days –880,000 af)(14 days –880,000 af)

(14 days –1,100,000 af)(14 days –1,100,000 af)

Winter 2012-2013Winter 2012-2013Metropolitan Analysis of Excess Storm Flow

Storm Event #2

Storm Event #1

Joint Special Committee on Bay‐Delta and WP&S Item 3a  Slide 14 July 25, 2017

1 California WaterFix EIR/EIS No Action Alternative, existing conditions with 2025 climate change impacts2 2015 Delivery Capability Report Existing Conveyance High Outflow scenario3 2015 Delivery Capability Report Existing Conveyance Low Outflow scenario4 California WaterFix EIR/EIS Alternative 4A‐H4, initial operating criteria lower range5 California WaterFix EIR/EIS Alternative 4A‐H3, initial operating criteria upper range

4.71

3.52 to 3.93

4.74 to 5.35

0

1

2

3

4

5

6

Existing Conditions Future withoutCA WaterFix

Future withCA WaterFix

SWP‐CV

P Ca

pability (M

AF)

Total Average Delivery Capability With and Without CA WaterFix

0

2

4

6

8

10

12

14

16

18

Runo

ff (M

AF)

Actual Normal Forecast

Historic 16‐year Drought

10.83 MAF 

LitigationOver BuildingOver Spending, Over Collecting

Largest conservation program in the nation

• $450 million in FY 14/15 ‐ 15/16

Transforming the landscape• Removal of the equivalent of 3,000 football fields of turf

Cost: ~$600/AF over 30 years

Strategic Investments: Drought Response

SDG&E Lands (2001)~ 9,000 valley acres~ 6,600 mesa acres

(2001)

Verbena Lands (2015)~ 12,000 valley acres

Price Justification• Reduced Fallowing Costs• Managed Water Benefit• Rents

Strategic Investments Palo Verde Land

Emergency pathway  

0

100

200

300

400

500

600

700

800

Deliveries  (TAF

)

Exchange for IID‐SDCWA Transfer Exchange for SDCWA Canal Lining

470 TAF (1995‐2015 Avg. MWD Delivery)

I I

w~-ter Authof ty ,& M~VD Trn1fr

· · e 'Nater .Authority · as a · ur-me.m er dele.gatlion ro the Metropolitan Water District of Southern Califom~a {i"iViD) Board of Directors. They are: Dare .... , · Mid@et ~ l e; !;ing._r,

Hsa 53xo and em Steiner.

Tour pa-rtf.:clpants e1t:perien.ce -first::-hand hew legislative and re.gulatorJl po./.ides affect the av.;.ilabf'lity of impor/Jed W&,rer.

Each yeai~ •·. Jese d~rec rs st · o ~ifs-ca led inspectio 1 tii p-5-- · hat prov1i c1'e :elected am appo·· d :lct officials, l:Jusi· e.ss and envimnmema co mu ijty : eade , civic eader:S, media representatives, educators, ·, d intere.sted sttaketmlders viitl1 · he opporwnity to le:ar . ,a. out .. · rt t :r: and historical water issues affecting e region fmr ,. l1 :Sra ewi e and lm:al perspectives. The -ro rs also provide a : r t-lhancl. ook at · he magnitude of the water delivery S}1ste1 s · , at fee Southern C:ll ifomija by visitf ng numerous sites and ~ cm -es across the st.ate.

s,erved oasis.

September 22-233

:2 1

Oc-tober 28-29, 2017

IHaYCh 1 -181 2018

Rt~ istr.ation for each · ur typi at y ens abou six v-Ve.eks , · rjor to the tour date. Ap ications ,a e accep ed on a ; rst-c.ome, n1-r-

ElsaS,axod

Fem Steiner

l iiehael Hogan &

Keith Lewinge:r

Keith Lewinger

Fern steinel'

:ElsaSaxod

State ri,:aier

Project/ Ba · Delta

State , ~.ia er Project/

Bay Delt

Hoo-rnr Dam ,&

Color-ad- Rh-i-er

Aquednot S};gtem

state \'\"ater 1':roject/

iSaJ Delta

Colorado R.i'rn:r

Aqueduo System

Colorado 1Uver

Aqueduc. System

:Register here. Deadline to apply is

Ang,nst 16, 20:17 •

.Register here.

Deadline to apply-is

September 20~ 2.017.

Registratimi is not

yet ,in'aiilable.

Regisb·ation is not

~ et ,available...

Re.gisb-ation is not ~ret a,1,aUable.

Registration is not yet ,m::ru1abfo.

STATE WATER PROJECT/BAY DELTA TOURS •

Tl1ese !!DU" s fo , so · he largest S!Iate-bui .t ~. at r

~t stern i t e at i'"' n. bU e_ts 1 i LL . llso r abo ~-

nu· e· ou Det a.

· roj ect r~ c, it iesJ

receive cl e i e p e-en atlons and upd""' ~s fmm Ba~ D tt experts.

an s Pumpi g Pl.a ,t

COLORADO RM:R AQUEDUCT TOURS T

These tou .sf. c son e 242-rnite-Lo g sy.stem of pum ~ng pla nit s a ca a Ls t l1 a b rm ngs C . to ra o River va~er i' to 5: ia.

Tllese tou s st - alo the l:_O' , e Colora o · m. rre mo ,e1 d ,ay ~ndu e vis~ts ·o Hoo, er Da 1 e All-American Canal, the CoacheUa Cana~ a ot her c ·rica l m o ents o1f is· o ~c Quantiftca ion Settlement Agreement. Guests maj ha'i,,e the o ·o · ni~ • to visi faci lities locate near a · i the Si3J Diego

G Ill fr gion; S C as e . ' ·ater A tt10a. · 5 OUvenhain Da arid Reservoir, Sa Vicente, Dam, a d Twin Oaks Valley Water Treat et1tt Plant as veu as r-1~ i 1

- s Diar ond Val ey Lake and Robert A. Ski ner Wa T~eattrn nt Pilant

C lor.::1 D Ri ~er. qued ct

s re ovfde by M\l D. i it ed s ing is avai l.ab e . ead i tour. . er, t backgrou 11d f1ecks may be re uired to Vlisit

o receive e ai tices atJio J co i fater utl oti y c-: li u s o vltati I s t GOt f ease e ai L M~'D Rro g a ro,u rs@sdcwa.org.

20

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•

Billi S ARE AT STAKE IN SAN DIEGO APPEAL BY BILL WELLS, MATT HALL, RON MORRISON & STEVE VAUS

T he San Diego County Water Authority in June won substantial victmies in a state Court of Appeals deci­sion on rates set by the Metropolitan Water District

of Southern California (MWD) that will affect how much ev­eryone in this region pays for water. These victories are po­tentially worth more than $1 billion for San Diego ratepay­ers.

While that seems like a lot of money- and no doubt it is -there are still billions more at stake, which is why the water

SEE APPEAL• B2l

,. '

E

PAUL LACHINI

RESmENTS PAY Bill FOR ENDLESS COU T FIGH S BY RANDY RECORD

After seven years and about $40 million in legal costs stemming from lawsuits filed by the San Diego County Water Authmity, no ruling to date will notice­

ably change local water bills or address a single important regional water challenge. All ratepayers lose the longer the water authority's fighting drags on.

The court process is not entirely over for these initial cases brought against the Metropolitan Water Disttict of Southern California and the system that provides about 80

SEE LAWSUITS• B

I

I <

FROM 20 authorit-y must continue to pur­sue this liti1ea tion on behalf of San Diego CoU1iL-:i1 ratepayers. TD do othe~.se vrould be a_tct.n to qrop­ping out of a marathon atter 22 miles.

Following the cou.rt ruling, M:\v"D was quoted saying that tl1e water authority should give up now rn we can all get along. On one level, it's an attractive senti­ment- no one relishes the prospect of yea.rs ofaddi:tional litigation, and it would Lr1deed be wonderful ifwe could always see eye to eye.

Unfortunately, the world isn't quite as simple as MWD would have us believE. While MWD says no ratepayers win when large water agencies spend years in court, the realiL-y is that under !VfiliiD's CUlTent 1'5.tes, some agen­cies do win. In fact, ali MWD 's other customers benefit to San Diego's detriment when I\ifWD adds the costs oms State Water Project supplies onto the cost of transporting our independent water supplies from the Colorado River.

Those State Wate1· Project

FROM B20 percent of San Diego Count"y's water supply. The First Dist1ict Cow·t of Appeals has rejected the water authority's request for a rehearing of cases decided largely i.nfavorofMetrnpol.itanjustover a month ago. A Supreme Court appeal would be the water au­thotity's l4St resort, yet the agen­cy's leaders somehow declared a recent victory.

It seems the water authority i.s not leveling with its ratepayers about just how w1SU.ccessful and needless this fighting has been.

This is an uruortunate battie on two fronts . TI1ere is the legal campaign under w-ay since 2010, with six lawsuits and counting. A.rid there is an expensive public rela tions campaign financed by tens of thousands of San Diego ratepayer dollars every month seeking to discredit my agency in the court of public opinion.

This all be1ean after the water auth01i ty in 2003 purchased a %ry expens ive supply of Colorado Ri·;er wa tet· from the Impe1ial I1'ligatio11 District but chose not to build the h1frastructure f;o deliver it. Metropolitan's board

0 ra ~e aye s w1 costs are significant - tens of millions of dollars per year - and !;hey ru·e going to grow ifMWU successfully pushes through the $17 billion plan to build tv,,in ttm-

San Diego Count , ratepayHs for da.ri.ng to chciienge its rates i.n court.

\Vhen the water authority filed its firs t rate case lawsuit in 2010,

For years, unrela ede r transporting Sa water s p ly fr nels under the Saeramento-San Joaquin Bay-Delta. IvfWD rate­payers lLl{ely will picl·.: up at least 25 percent-or north of$4 billion - of that tab. IfMWD 12an apply those costs to charges for trans­porting San Diego County's water from the Colorado River, ~rou can be sure it will 2.s a way to punish our region and lighten the load on other MWD member agencies.

If that sounds retaliatory, it is. If you don't th.ink MWD would do that, think a.gain. The June 21 Court of Appeals decision said Iv[WD has been using an w1cm1Sti­lutional contract clause for years to pw:Iish the water authoiit-y and

lvfWD responded by canceling full.ding for local supply and con• servati.on projects in San Di•c!go Cow11;Jr.

At the same time, it kept charging local ratepayers millions of dollars annually to fund other districts that already wrongfully benefit from. "MWD overch~""il.1g San Diego County.

The good news from the Court of Appeals is that the judges sided with San Diego County on all but one major issue. They ruled that: l\{WD breached its contract with the water authority; MWD col­lected tens of millions ofdoi!ai.·sh1 illegal charges for "water stew-

ard hip"; and that S2.nDiego has the right to tE:llS ofthou~artdS of acre-fee t more watH each year thanMWD hadcredi:ted.

A correct calculation confirms

the water authmii;y's preferential rights to tens of thousands of acre-feet more water annually for the San Diego region - a water supply about lwo times the amount produced annually by the $1 billion Carlsbad Desalina tion PrQJect.

The sole issue tllat the water authority has appealed to the state Supnsme Court has state­wide signi...fi.cance - whether MWD mus t base its rates on the costs it actually incurs in provid­ing its various service 3 . For years, MWD has been addL11gunrelated charges to its fees for transport­ing-San Diego's independent

i s liUga io_ wa l;er u p ply from the Colorado Riv•=f - water that 1s consen;ed in the Im perial Valley i:i.nd delivered to the water authority through M WD 's aqueduct.

The appellate court ruling undermines statewide errm·ts to make efficient use of water re­sources; adding unrela ted fees will hamper wa ter tnmsfers that would otherv.1se taJr..e the pres­sure off environmentally sensitive waterboc!ies such as the Sacra­mento-San Joa q_uh1 Bay-Delt;i.

And the appella te court ruling torpedoes the state's con11n.it ­ment to ensuring that govern• ment agencies only cha .. -rge t0 recover the costs of their various services, as articulated in stal:e law, the state Constitution and voter-approved Proposition 26.

If you think about it, cost­based rates are good f.x e· reryons because they ensure no one is being charged for benefits re ­ceived by others. And that"s a fow1dational prh1ci1:ik, worth the fight.

W1=lls is mayor of El Cajon. Hall is mayor of Carlsbad, Morrison is ma11or oi National City. Vaus is ma)'or of Poway.

Agency's targeting of MWD is unsuccessful, needless voluntarily agTeed to use its dis­tribution system to exchange supplies and delivel' an equal a.n1ow1t ofits water to San Diego County through the Metropolitan

sy.3tem. Thenin20ll, the water autho1ity decided to challenge in court the vel'y agreement it re­quested.

Metropolitan st1ives to deliver a blend of imported supplies from the Colorado River and Northern California. Each of our 26 member agencies is charged the same blended transportation rates. Yet the water authority was hoping to fm•ce a special lower rate foe itself that excluded costs associated v,iith transporting water from Nortl1en1 California, while the rest of Southern California pa.id those costs. By its own estimates, the water authmi ty wanted t,3

shift $7.4 billion to othel' ratepay­ers in the six-count;-y Metropolitan sei-vice area.

On this issue, the appellate coUii; decided entirely in favor of

Metropo!itan's practice of charg­ing all customers the same trans­portation rate that includes tlle costs of the Northe11.1 Califon·,ia system. That seems fair. There were other issues before the court, but financially they pale in compari..son, or have no monetary or water supply impact at all. In fact, when the cases finally come to a close, the water authmity may have spent more on litigation costs than any financial award it receives.

Since those initial lawsuits, the water auth01ity has e,qJanded its legal attack to challenge M:etro­politan's efiorts to collect funds to

ftnancia.!Iy support the devel­opment oflocal water supplies and more conservation. We think that i.ricreasing local supplies and lowering water demands are

vitally important. But the water authorit-y wants to malce devel­opment and consei-vation oflocal supplies more difficult by cutting off th.is funding source. W110 wins there?

The water auth01ity's recent public relations campaign alleges that Metropolitan spends and bon-ows too much. The agency criticizes actions by our board to i11vest in valuable land assets and support the nation's largest turf removal p rogram during the peal{ ot the drought - stra tegic invest­me11ts that help advance our region's long-term Integrated Resources Plan. Yet the water

auth01ity's ovm reprasentatives joined our board's unanimous vote i.!1 favor of our most expen­sive land .investment. And San Diega.nsembraced the turfpro­gram (promoted by the water authority at the time). Now the water authorit-y's public relations campaign c1iti.ci.zes these deci­sions. How hypocritical is that?

Californians face se1ious water issues. Our Northern California supply is at tislclong-term be­cause of an aging system in the Sacramento-San Joaau.i..n Delta • that needs ciitical rei.nvestJ.nent. Water from the Colorado River is at 1islc w1til supplies and de­mands are brought into balance.

Throwing mud and endlessly fighting in courts are losing strat­egies for everybody but the lav.1 firms that have pocketed m.i.l!i.ons ofyour dollars. Ratepayers who e:;,.1Ject us to worl{ professionally with one another are the real losers.

Record is the chai;man of lhe Metropolitan Water Disirict of Southern California board of directors and represents Eastern Municipal Water District on the board,

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