Water Authority Board Adopts Two-Year Budget and Approves 2014 Rates

 
Short Title
Water Authority Board Adopts Two-Year Budget, Approves Rates
$1.5 billion budget for fiscal years 2014 and 2015 bolsters region’s water reliability
Budget Highlights for Fiscal Years 2014 and 2015

The Water Authority’s newly adopted $1.5 billion two-year budget is 5.2 percent larger than the budget for fiscal years 2012 and 2013. Water purchases and treatment, debt service and the Capital Improvement Program account for 92 percent of expenses.

The budget includes:

  • An increase of $132.3 million related to the purchase and treatment of water
  • A $64.7 million decrease in funding for the Capital Improvement Program
  • An increase of just 1.5 percent for operating departments

The San Diego County Water Authority’s Board of Directors on Thursday approved wholesale water rates for calendar year 2014 and adopted a $1.5 billion budget for fiscal years 2014 and 2015.

The new two-year budget is 5.2 percent larger than the current budget, mostly to cover higher costs for the purchase and treatment of imported water. Wholesale rates that the Water Authority charges its 24 member agencies next year will increase by 2.6 percent for untreated supplies and 3.5 percent for treated supplies.

“This budget upholds our mission of providing a safe and reliable supply of water for San Diego County,” said Thomas V. Wornham, Chair of the Water Authority’s Board of Directors. “We’ve trimmed expenses where it’s prudent, tapped millions of dollars in grants and refinanced debt to lower the cost of borrowing. The net result will allow us to maintain our multi-billion-dollar water-delivery infrastructure and continue providing a vital resource for the region.”

The Board on Thursday held a public hearing about the 2014 rates, followed by a vote on the rates. The Water Authority budgets two years at a time, but it sets rates annually so it can most effectively adjust to changing conditions.

Water rates for 2014 were proposed in May in conjunction with an independent cost-of-service study that confirmed that the Water Authority’s rate structure complies with legal requirements, cost-of-service standards, industry best practices and Board policies. 

Next year, the Water Authority will charge its member agencies an “all-in” rate of $1,029 per acre-foot for untreated water, or $26 more than they currently pay, and $1,303 per acre-foot for treated water, or $44 more than in 2013.  An acre-foot is about 325,900 gallons, enough to serve two typical four-person households in San Diego County for a year.

“All-in” rates

The “all-in” water rate is the estimated average cost of water that includes the Water Authority’s rates for supply, treatment (if applicable) and transportation, along with charges for storage and customer service. Actual figures will vary by member agency.

The recommended budget for fiscal years 2014 and 2015 also was released in May, before two special budget workshops were held in June for the Board. It is $74 million more than the current budget.

The biggest cost drivers are related to the purchase and treatment of water, which rises by $132.3 million (19 percent) in the newly adopted budget compared to the current budget. The higher costs are linked to slightly larger sales volumes coupled with scheduled increases in the cost of water from the Imperial Irrigation District as part of a long-term conservation-and-transfer program approved in 2003. The budget for fiscal years 2014 and 2015 also accounts for the planned purchase of water to store in the newly expanded San Vicente Reservoir, along with a 5 percent increase in treated water rates by the Los Angeles-based Metropolitan Water District of Southern California. 

The Water Authority’s fiscal strategy also impacts its rates and budget, which were crafted to ensure debt-coverage ratios maintain the agency’s strong credit ratings and minimize the cost of borrowing money for construction projects. The Water Authority has credit ratings of AA+ with a stable outlook from both Standard & Poor’s and Fitch ratings, and Aa2 with a stable outlook from Moody’s.

Increased expenses are partially offset by a $64.7 million (20 percent) decrease in funding for the Water Authority’s Capital Improvement Program in the new budget, which takes effect July 1.  After more than a decade of major infrastructure projects, such as building Olivenhain Dam and raising San Vicente Dam, the Water Authority is transitioning to an era of less construction and greater focus on operations and maintenance.

The new budget for operating departments is up just 1.5 percent from the current budget, in line with changes in the Consumer Price Index for San Diego. Operating departments account for about 6 percent of the Water Authority’s overall spending.

The current budget – for fiscal years 2012 and 2013 – is 16 percent smaller than the previous two-year budget because the Water Authority aggressively adapted to changing conditions that included lower water sales and a sluggish regional economy. The Board deferred $150 million in spending on 14 capital projects, and the Water Authority eliminated 30.75 full-time staff positions.

To read the Water Authority’s recommended budget for 2014 and 2015, go to www.sdcwa.org/budget.