CONTACT: Tom Harbour Dennis Rule (623) (623)

Transcription

1 Agenda Number 5.d. CONTACT: Tom Harbour Dennis Rule (623) (623) MEETING DATE: September 5, 2013 AGENDA ITEM: Approval of Purchase and Sale Agreement for Long-Term Storage Credits (LTSCs) between the City of Tucson and CAWCD RECOMMENDATION: Staff recommends that the Board of Directors approve the Purchase and Sale Agreement for Long-Term Storage Credits between the City of Tucson and CAWCD. FINANCIAL IMPLICATIONS: Impact on CAGRD Budget: Budget Year Funds Requested CAGRD Budget Funds Included in the Budget (Over) / Under Budget 2013 $ 0 $ 0 $ 0 Additional spending authority requested: $ 0 Impact on CAGRD Reserves: Long-Term Storage Credits will be paid from the CAGRD Water Rights and Infrastructure Reserves. Payment during the initial year of the agreement (2014) will reduce the CAGRD Water Rights and Infrastructure account reserves by $785,000. No impact to CAWCD Reserves. Impact on CAGRD Rates: None. The CAGRD Water Rights and Infrastructure Rate Component is set appropriately to accommodate the acquisition of new water supplies. No impact to CAWCD Rates. LINKAGE TO STRATEGIC PLAN, POLICY, STATUTE OR GUIDING PRINCIPLE: CAWCD Board of Directors 2010 Strategic Plan Water Supply: Obtain Sufficient Water Supplies to Meet Replenishment Obligations

2 PREVIOUS BOARD ACTION/ACTIVITY: April 4, 2013 Board Executive Session discussion ISSUE SUMMARY/DESCRIPTION: CAGRD and the City of Tucson negotiated the attached Purchase and Sale Agreement for Long-Term Storage Credits (the Agreement) which was approved by the Tucson Mayor and City Council on August 6, The Agreement obligates Tucson to sell and CAGRD to purchase a total volume of 100,000 acre-feet of Long-Term Storage Credits (LTSCs) over a 20 to 25 year term. The principal terms of the Agreement include: The water supply being acquired by CAGRD consists of LTSCs accrued by Tucson through the underground storage of CAP water and effluent in the Tucson Active Management Area. The total volume of LTSCs to be sold by Tucson is 100,000 acre-feet during the term of the Agreement. CAGRD may purchase up to 5,000 acre-feet per year. The term of the Agreement is twenty (20) years with an automatic renewal for an additional five (5) years. Either party may request that the Agreement terminate after the initial 20-year term. The Agreement would become effective upon approval by the CAWCD Board of Directors. The initial year of credit purchase and transfer is The base purchase price for LTSCs transferred in 2014 is $157 per acre-foot. The annual purchase price for LTSCs transferred each year after 2014 adjusts annually by indexing to CAWCD's published rate schedule according to the following formula: Price = [( CAP fixed OM&R charge + CAP Pumping Energy charge + CAP Underground Water Storage O&M charge) x 1.02] x annual LTSC volume transferred. CAGRD agrees not to resell any of the LTSCs purchased from Tucson to any third party. This Agreement provides multiple benefits to the City of Tucson and the CAGRD and is a model for voluntary market-based water supply transactions. Tucson will benefit from this Agreement by selling LTSCs stored outside its service area that would be physically and economically impractical to recover and deliver as part of its municipal water supply. CAGRD's annual payment for the LTSCs provides a reliable source of funding for Tucson to pay for the delivery and recharge of additional CAP water within the Tucson water service area. Additionally, the annual purchase price Tucson receives per LTSC is indexed to CAP water delivery rates, allowing Tucson to cover the cost to deliver and recharge an equivalent volume of its CAP allocation in the future. This Agreement essentially allows Tucson to exchange "stranded" LTSCs located outside its service area for CAP water that can be used directly within its service area through storage at its existing recharge facilities and accessed through existing recovery wells and distribution systems.

3 CAGRD will benefit from the Agreement by acquiring a reliable water supply to meet a significant portion of its current and projected future replenishment obligations in the Tucson AMA. The negotiated purchase price reflects the fair market value for LTSCs sold in the Tucson AMA. Finally, CAGRD will pay for the LTSCs annually over twenty years which helps maintain a higher fund balance in the Water Right and Infrastructure account for additional near-term acquisition opportunities. SUGGESTED MOTION: I move that the Board of Directors approve the Purchase and Sale Agreement for Long Term Storage Credits between the City of Tucson and CAWCD. Attachment.

4 Agenda Number 5.d. Attachment.

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