bay-delta conservation plan: preliminary assessment of financing risk parameters - jan. 23, 2014
DESCRIPTION
Imported Water Committee Amy Chen, Director of MWD ProgramTRANSCRIPT
Amy Chen, Director of MWD Program
Imported Water Committee
January 23, 2014
Public draft of BDCP and EIR/EIS released December 13, 2013
◦ 120 day formal review period
◦ Public meeting scheduled for February 6, 2014 in San Diego at the Convention Center from 3:00pm – 7:00pm
Staff continues its evaluation of the public draft
2
BDCP Component Type of Cost1
Capital O&M Total
Water Facilities & Operation (CM1)
$14,571 $1,456 $16,027
Natural Community Restoration (CM2-CM11) $4,170 $237 $4,406
Other stressors (CM12-CM22) $927 $1,735 $2,661
Changed circumstances $184 - $184
Local government revenue replacement - $226 $226
Monitoring & research measures - $913 $913
Plan admin. - $336 $336
Total2 $19,851 $4,902 $24,754 1 in Millions of 2012 dollars 2 Total may not add due to rounding Source: Bay Delta Conservation Plan, Tables 8-33 and 8-34
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BDCP envisions costs will be shared between water export contractors and the state and federal governments
4
State & Federal
Contractors69%
State funding
17%
Federal funding
14%
o Exporters: Conveyance facilities and related mitigation costs
o State/Federal: Ecosystem restoration costs
Funding Source
Water Facilities & Operations
Nat.Com. Protect. &
Mgt.
Nat. Com. Restoration
Other Stressors
Monitoring Research
Etc.
Program Admin.
Total
Contractors $16,027 $266 $269 $224 $113 $31 $16,930
USBR $0 $50 $602 $1,077 $640 $100 $2,469
Other Fed Funds $0 $346 $460 $10 $200 $60 $1,076
Props 1E & 84 $0 $0 $142 $21 $0 $0 $163
2014 Water Bond $0 $184 $900 $430 $0 $0 $1,514
Future Water Bond $0 $205 $1,200 $840 $0 $0 $2,245
Other State Funds $0 $10 $40 $0 $145 $0 $195
Interest Income $0 $0 $0 $20 $0 $145 $165
Total Funding $16,027 $1,061 $3,613 $2,623 $1,098 $336 $24,758
Total Cost $16,027 $1,061 $3,610 $2,623 $1,097 $336 $24,754
Difference $0 $0 $3 $0 $1 $0 $4
1 In millions of 2012 dollars Source: Bay Delta Conservation Plan, Public Draft, Chapter 8, December 2013, Table 8-37.
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State and federal regulations require assurance of funding to issue permits under the habitat conservation plan
Federal ESA requires that HCPs specify “the applicant will ensure that adequate funding for the plan will be provided” for conservation actions – courts have interpreted broadly
ESA case law strongly supports the notion that funding must be assured and an HCP “cannot rely on speculative future actions of others”
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Cost allocation negotiations between and among state and federal water export contractors are ongoing ◦ Water Authority requested, but is not involved in cost
allocation negotiations
BDCP indicates that the actual funding share between state and federal contractors will not be determined until “near the time that permits are issued for BDCP”
Lack of cost allocation certainty hinders the ability to assess cost impacts and risks
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Because cost allocation has not been finalized, staff analysis uses a bookend approach to potential cost allocation scenarios
Scenarios 1. Contractors pay for only conveyance/mitigation costs of $16.9
billion, with costs shared 55/45 between SWP and CVP
2. All $24.8 billion of BDCP costs paid by contractors, with costs shared 55/45 between SWP and CVP
3. Contractors pay for only conveyance mitigation costs of $16.9 billion, with urban agencies from SWP and CVP paying 90 percent of costs and agricultural agencies paying 10 percent
- MWD share assumed to be 58 percent of urban share
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Scenario 1
Scenario 2
Scenario 3
Description
Contractors pay for conveyance
Cost share between SWP & CVP:
55/45
Contractors pay for all costs
Cost share between SWP & CVP:
55/45
Contractors pay for conveyance; Urban and
agricultural split: 90/10
Total Cost (Capital and O&M)
$16,930M $24,754M $16,930M
SWP (or urban in scenario 3)
$9,312M $13,617M $15,237M
MWD $4,218M $6,168M $8,832M
Water Authority $1,055M $1,542M $2,208M
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Scenario 1
Scenario 2
Scenario 3
Description
Contractors pay for conveyance
Cost share between SWP & CVP
55/45
Contractors pay for all costs
Cost share between SWP & CVP
55/45
Contractors pay for conveyance;
Urban and agricultural split: 90/10
Annualized Debt Service
$1,111M $1,563M $1,111M
SWP share (or urban) $611M $859M $1,000M
Annualized Debt Service to MWD
$277M $389M $579M
BDCP Op Scn. High Outflow
Low Outflow
High Outflow
Low Outflow
High Outflow
Low Outflow
Potential Benefit (TAF)
299 424 299 424 299 424
Incremental Unit cost ($/AF)
$926 $653 $1,302 $919 $1,938 $1,368
*Analysis varied the cost obligations only, assumes MWD’s share of the BDCP benefits remains constant –
i.e., 45.3 percent (Table A) of 55 percent (SWP share).
Funding ◦ Federal and state share – dependent on future bond
passage and/or appropriation
◦ Exporters share
Allocation not yet finalized
BDCP “Big Gulp” ◦ Contractors’ ability and willingness to capture and
store wet year supply for dry year use critical
◦ Storage fill plan and financing strategy needed at MWD
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Meeting Imported Water Committee/Board Activity
7/25/2013 Provide input on scope of proposed Water Authority analysis of BDCP alternatives; provide input on policy questions to be addressed
√
8/8/2013 Special Meeting
Overview of Bay-Delta and proposals for Delta fix, including description of alternatives
√
8/22/2013 Review of technical analysis – demand assumptions; alternative project yield assumptions; projected costs
√
9/12/2013 Special Meeting
BDCP economic study on cost-benefit of BDCP preferred alternative √
9/26/2013 Review of technical analysis (cont.), including yield review √
10/24/2013 Information: Review of technical analysis (cont.), including baselines; BDCP timeline and processes impacting implementation
√
11/14/2013 Special Meeting
Supply and demand evaluation and analysis √
Meeting Imported Water Committee/Board Activity
1/9/2014 Special Meeting
Identification of BDCP Physical features and facilities; supply/demand risk assessment
√
1/23/2014 Preliminary cost estimates and risk assessment to Water Authority
√
2/13/2014 Special Meeting
Engineering assessment of BDCP cost estimates; BDCP Governance
2/27/2014 Economic and risk assessment (cont.)
3/13/2014 Special Meeting
Summary presentation of BDCP issues; Identification of issues to be addressed in the EIR/EIS comment letter
3/27/2014 Action: Consider action on final EIR/EIS comment letter
4/24/2014 Revise BDCP schedule; discuss outstanding policy issues; timeline for future board meetings
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BDCP Update
Overview of BDCP Economic Assessment Issues ◦ Cost Estimates
◦ Funding Sources
◦ Cost Allocation
Preliminary assessment of potential financial impacts
Summary
Next Steps
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16
$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
$10,000
1-5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 41-45 46-50
Program Costs (Administration, Monitoring, Research, Other)
Other Stressors Conservation Measures (CM13 to CM 21)
Habitat Protection and Restoration Conservation Measures (CM2 to CM12)
Water Facility Conveyance (CM1, CM22)
Cap
ital
Co
sts
(Mill
ion
s o
f U
nd
isco
un
ted
201
2 D
olla
rs)
Plan Years
Estimated Capital Costs in 5-Year Increments
Source: BDCP Executive Summary, Page 28
17
$-
$100
$200
$300
$400
$500
$600
1-5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 41-45 46-50
Habitat Protection and Restoration Conservation Measures (CM2 to CM12)
Other Stressors Conservation Measures (CM13 to CM 21)
Water Facility Conveyance (CM1, CM22)
Program Costs (Administration, Monitoring, Research, Other)
Cap
ital
Co
sts
(Mill
ion
s o
f U
nd
isco
un
ted
201
2 D
olla
rs)
Plan Years
Estimated Operational Costs in 5-Year Increments
Source: BDCP Executive Summary, Page 28
Unclear whether reliance on federal funding and future state bonds will meet the “adequate funding” test for permit issuance
BDCP public draft indicates that if a shortfall in state or federal funding occurs ◦ Authorized entities will not be required to provide land,
water, or monetary resources beyond their commitment in the Plan
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BDCP public draft indicates the SWP share of new water conveyance system costs could be paid similar to how existing SWP is being paid for
◦ DWR-issued revenue bonds ◦ Take-or-pay contracts for participating SWP contractors ◦ SWP contracts will need to be amended to allow costs to be
financed beyond current term of 2035
Individual contractors may issue their own revenue bonds or collectively through a JPA
◦ BDCP public draft identifies State and Federal Water Contractors Water Agency as possible JPA to finance project
JPA formed in 2009 – majority of SWP/CVP contractors are members
19
Incremental unit costs for MWD depend on benefit it receives from BDCP yield ◦ Consumptive need for water
◦ Ability to place water in storage when available
High outflow scenario = 1.2 MAF average annual benefit compared with no action
Low outflow scenario = 1.7 MAF average annual benefit compared with no action
Range of potential average annual benefit to MWD = 299,000 acre-feet to 424,000 acre-feet
20
Aggregate annual debt service and operations costs for the conveyance facility only ◦ Average annual capital debt service costs are approx $1.1 billion from
2021 through 2055
21
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 2052 2054 2056 2058 2060 2062 2064
$ in
Millions
Figure 4
Aggregate Debt & Operations
(Conveyance only)
Debt serv O&M
Aggregate annual debt service and operations costs for conveyance plus habitat restoration ◦ Average annual capital debt service costs are approx $1.6 billion from
2021 through 2055
22
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 2052 2054 2056 2058 2060 2062 2064
$ in
Millions
Figure 5
Aggregate Debt & Operations
(Conveyance and Habitat)
Debt Serv (CM1) Debt Serv (Habitat) O&M (CM1) O&M (Habitat)