Water Authority Adopts $1.58 Billion Budget for Fiscal Years 2018 and 2019

Short Title
Water Authority Adopts $1.58 Billion Budget for Fiscal Years 2018 and 2019
Rate increase adopted for 2018 among smallest in past decade
June 22, 2017

The San Diego County Water Authority’s Board of Directors today adopted a $1.58 billion budget for fiscal years 2018 and 2019, representing a 2 percent increase from the current two-year budget due largely to increasing water supply and treatment costs. The Board also adopted rate increases for calendar year 2018 of 3.7 percent for both untreated and treated water; actual increases will vary among the Water Authority’s 24 member agencies based on each agency’s unique circumstances.

Expenses were held in check as the Water Authority continues its transition from building infrastructure under its Capital Improvement Program to maintaining facilities and managing its diversified water supply portfolio. More than 91 percent of the budget is for water purchase and treatment costs as well as building or financing infrastructure. While the costs of buying and treating water are projected to rise by $130.7 million, they are partially offset in the adopted budget by a $99.9 million reduction in Capital Improvement Program spending and stored water purchases. No stored water purchases are necessary following the successful filling of the Water Authority’s carryover supplies in the expanded San Vicente Reservoir last year. 

“After emerging from five years of drought with greater water supply reliability than we had going in, this two-year budget enables us to continue providing safe and reliable water at the lowest possible cost for our region’s 3.3 million people and $222 billion economy,” said Mark Muir, chair of the Water Authority’s Board. “Careful reviews of staffing needs and programs have maximized our efficiency, while prudent financial practices contain our costs and maintain our strong credit ratings and reputable financial standing.”

Important focus areas and initiatives for the Water Authority in fiscal years 2018 and 2019 include:

  • Asset management – The Water Authority will inspect and maintain aging infrastructure using best management practices and cutting-edge technologies to prevent failures, extend the useful life of facilities, and save ratepayer money through careful prioritization of rehabilitation, repair or replacement projects.
  • Infrastructure and technology security – The Water Authority will safeguard its assets and increase the agency’s cyber resilience by improving technical controls and by continuing to share knowledge with Water Authority member agencies and federal agencies. Planned upgrades include a fiber optic communication system study, increased video surveillance at facilities and enhanced around-the-clock staffing at the Water Authority’s operations control room.
  • Long-term water-use efficiency – The Water Authority will continue playing a leadership role in the development of the state’s long-term water-use efficiency legislation, advocating for a balanced and thoughtful approach to regulatory or other actions that can have significant impacts to regional water supply reliability and Water Authority projects and programs.
  • Efficiencies through innovation –  The Water Authority will continue to explore, and implement where feasible, innovative programs and technologies that help advance regional water supply reliability, offset costs, or make agency operations more efficient.

The Water Authority’s recommended budget was presented to the Water Authority’s Board in May along with proposed rates for calendar year 2018. The Board also held two workshops in early June to review budget recommendations. 

Water purchase and treatment costs are projected to rise by 15 percent in fiscal years 2018 and 2019 compared to fiscal years 2016 and 2017 due to pass-through increases in rates and charges set by the Metropolitan Water District of Southern California, a scheduled increase in delivery volume of water from the Water Authority’s independent and highly reliable Colorado River transfers, slight increases in price for Colorado River water and Carlsbad desalination plant water, and slightly higher projected water sales. Both the Carlsbad plant and Colorado River water transfers provide the region with highly reliable water supplies and are critical pieces of the Water Authority’s long-term supply diversification strategy.

The budget for operating departments is $103.2 million over the two fiscal years, up approximately 2 percent from the current budget due largely to rising health care costs and a required increase in employer contributions to the California Public Employees Retirement System.

The newly adopted rates, which take effect Jan. 1, 2018, are in line with Water Authority projections, and the increases are among the smallest adopted by the agency during the past decade. The Water Authority will charge its 24 member agencies the municipal and industrial rate of $1,303 per acre-foot for untreated water in calendar year 2018, or $47 more than they currently pay. The Water Authority also will charge $1,603 per acre-foot for treated water, or $57 more than in 2017. Actual figures will vary by member agency, and each member agency will incorporate costs from the Water Authority into the retail rates it charges to residents, businesses and institutions. (Note: An acre-foot is about 325,900 gallons, enough to serve two typical four-person households in San Diego County.)

While the Water Authority sets rates annually to ensure it can more effectively manage changing conditions, the agency’s budgets span two fiscal years. Over the past two fiscal years, the Water Authority began receiving supplies from the largest seawater desalination plant in the nation through a public-private partnership with the Carlsbad desalination plant’s developer and owner, Poseidon Water. 

The Water Authority also took measures to moderate rate increases, including:

  • Debt restructuring – The Water Authority restructured its debt portfolio during the current budget cycle to reduce its debt service payments by $78.3 million over the life of the refinanced bonds.
  • Rate Stabilization Fund draw – The agency plans to draw $5 million from its Rate Stabilization Fund, which is intended to provide rate relief through smooth water rate adjustments over time.

To read the Water Authority’s budget, go to www.sdcwa.org/budget.