DATE: August 5, 2019

TO: Honorable Mayor and FROM: Mark Murphy

Council Members Chair, CWAC

SUBJECT: 2018 CWAC Annual Report

The Citizens’ Water Advisory Committee (CWAC) is pleased to transmit its 2018

Annual Report to you. The report summarizes the actions and decisions taken by the

Committee during the past calendar year.

CWAC and its subcommittees worked on a wide range of topics in 2018, including the

Annual Conservation Report and Rain Water Harvesting Programs, the Green

Stormwater Infrastructure Fund (GSI), and Tucson Water Financial Planning.

During the year, Council Member Durham from Ward 3 gave a presentation on his

perspective of water to CWAC. Ward viewpoints about water in Tucson provide this

committee valuable information, feedback and direction for future decisions.

On behalf of CWAC, I would like to thank Director Timothy Thomure and the Tucson

Water staff for their work and support throughout the year. I would also like to thank

my fellow Committee members for the opportunity to serve as Chairperson.

Attachment: 2018 CWAC Annual Report

cc: Michael Ortega, City Manager

Timothy Thomure, P.E., Director, Tucson Water

Roger Randolph, City Clerk

CWAC

ATTENDANCE REPORT/RECORD FOR CITY

BOARDS, COMMISSIONS AND COMMITTEE MEMBERS

Tucson Code Section 10A-134 (e) provides that: "A member of a body who misses four (4) consecutive meetings for any reason or who fails to attend for any reason at least forty (40%) percent of the meetings called in a calendar year is automatically and immediately removed as a member of the body".

Please keep a cumulative attendance record by entering "P" for present and "A" for absent in

the column corresponding to the month of the meeting. Include each meeting called, even if no quorum was present. This form need not be prepared for meetings cancelled for reasons other than lack of a quorum (holiday recess, summer schedule, etc).

Submit this record to the City Clerk as soon as possible following the last meeting of each calendar year, or no later than January 15.

Additionally, forward a copy of this record to the City Clerk IMMEDIATELY whenever it indicates that a member is not in compliance with Section 10A-134(e).

____________________________________ Chairperson Date

NAME OF PUBLIC BODY: CITIZENS’ WATER

ADVISORY COMMITTEE (CWAC) 2018

MEMBER'S NAME 1/10 2/7 3/7 4/4 5/9 6/6 9/5 10/3 11/7 12/5

MARK MURPHY P P P P P P P P P P

BRIAN WONG P P P A P P

CHUCK FREITAS P P P P A P P P A P

CATLOW SHIPEK P P P A P P P P P P

JEAN MCLAIN P P P A P P P P P P

MITCH BASEFSKY P A P P P P P P A P

PLACIDO DOS SANTOS P P P P P P P P P P

MARK LEWIS A P A P A P P A P P

GEORGE C WHITE P A P P P P A P P P

RYAN H LEE P P P P P P P P P P

MARK STRATTON P P P P P P P P P P

MICHELLE CROW P P P P P P P P A P

MELISSA MAUZY A P A A

VAL LITTLE P P P P P P P P P P

RORY JUNEMAN P A P P P A P P P P

ALISON JONES P P P P P

2018 CWAC Annual Report Membership Membership of the Citizens’ Water Advisory Committee (CWAC) for 2018 is shown in the table below.

Member Role Appointed by Classification

Mr. Brian Wong 1 Chairperson Mayor and Council City Manager nominee

Mr. Mark T. Murphy, PhD, R.G.

Chairperson 2 Mayor

Mr. Chuck Freitas Member Mayor and Council City Manager nominee

Mr. Catlow Shipek Member Mayor and Council City Manager nominee

Mr. Mark Stratton Member Mayor and Council City Manager nominee

Ms. Jean McLain Vice Chair Mayor and Council City Manager nominee

Mr. Mitch Basefsky Member Mayor and Council City Manager nominee

Mr. Placido dos Santos Member Mayor and Council City Manager nominee

Mr. Rory Juneman Member Mayor and Council City Manager nominee

Mr. Ryan H. Lee Member Ward 1

Ms. Michelle Crow Member Ward 2

Ms. Val Little Member Ward 3

Mr. George C. White Member Ward 4

Mr. Mark Lewis Member Ward 5

Ms. Alison Jones 3 Member Ward 6

Ms. Melissa Mauzy 4 Member Ward 6

Mr. Timothy Thomure, P.E.

Ex-Officio (Non-Voting)

Tucson Water, Director

Mr. Jackson Jenkins Ex-Officio (Non-Voting)

Pima County Regional Wastewater Reclamation, Director

1 Termed on 06/06/18 2 Elected Chair on 06/06/18 3 Appointed on 05/03/18 4 Resigned on 05/09/18

2018 CWAC Annual Report Page 2 of 12

Meetings CWAC met on ten occasions in 2018: January 10, February 7, March 7, April 4, May 9, June 6, September 5, October 3, November 7 and December 5. Actions Formal votes were taken on the following: February voted to approve a two-year water rate schedule May voted to appoint Member McLain as CWAC’s representative on the Regional

Wastewater Reclamation Advisory Committee (RWRAC)

voted to direct the Chair to prepare a presentation about CWAC’s recent activities, as requested by Mayor and Council

June voted to appoint Mark Murphy as Chairperson and Jean McLain as Vice Chair November voted to institute an annual election or reelection process for CWAC

subcommittee chairs

voted to send a Technical, Planning and Policy Subcommittee memorandum to Mayor and Council, regarding a proposed Green Stormwater Infrastructure Fund

December voted to approve the 2019 meeting schedule

voted to appoint Mark Murphy as Chairperson and Jean McLain as Vice Chair

2018 CWAC Annual Report Page 3 of 12

Sub-Committee Activities The Finance Subcommittee received several presentations and utilized meetings to review Tucson Water’s “Financial Deep Dive” follow up topics and recommendations, with main areas of focus including: Limited-Income Assistance Program; Conservation vs. Revenue Stability; Base-Rate Recovery of Fixed Costs; Reclaimed System & Rates; Differential Rates Inside/Outside City Limits; Multi-Year Financial Planning & Rate-Setting; and Volumetric Rate Structure. Tucson Water staff provided a review of the financial planning process and water rate policies in detail to better understand the drivers behind each policy. The Subcommittee and Tucson Water staff worked through materials and recommendations to submit a proposed rate package for Mayor & Council prior to submission on May 15, 2018. The subcommittee was also provided background and introductions to the creation of the Five-year Capital Budget (CIP) 2020-2024; Operations and Maintenance Budget FY2020; the 2024 update of the Financial Plan; Wages; and additional financial policies. The Finance Subcommittee used the information gathered to help form decisions and recommendations to the full CWAC. The Technical, Planning and Policy Subcommittee received several presentations about various topics such as Santa Cruz Wellfield Planning & Development; Well Rehabilitation; Tucson Water Turbidity; Dry Wells; Santa Cruz River Heritage Project; and AOP and Dioxane Remediation. The Subcommittee also preformed its annual review of the Water Checkbook and Water Service Area Policy. No recommendations for change of the policy were needed. Chair Dos Santos expressed interest in TPP Subcommittee Objectives & Operations, attaining more consistent member attendance, and revitalized discussion during a few subcommittee meetings. Over several meetings, the subcommittee discussed the Green Stormwater Infrastructure (GSI) Fund, with a focus on: City Of Tucson’s MS4 permit and program (funded by the Groundwater Protection Fee); maintenance and monitoring of existing GSI assets installed by the City; installation, maintenance, and monitoring of new GSI assets; planning and coordination with other agencies on GSI/stormwater/flood control projects; education and outreach; and GSI Fees. The Conservation and Education Subcommittee has worked diligently with Tucson Water Staff over the past couple of years to refine the Conservation Annual Report and Tucson Water’s water conservation programs. Main areas of focus included: Residential HET & Clothes Washer Rebates; Smartscape Program; WaterSense Program; Rainwater Harvesting Program; and Limited-Income Rainwater Harvesting Program. Members of the Subcommittee often praise Conservation Staff members about the information contained in the reports and continuously provide feedback to improve reporting metrics. The Subcommittee also has been working on developing new program ideas and has devoted several meetings to formulate, consolidate and rank ideas for possible implementation in the future. Other topics discussed were the Tucson Active Management Area Demand Model Findings, FY 2020 Conservation Program Budget, Environmental Education Exchange Program and Project WET Program.

2018 CWAC Annual Report Page 4 of 12

Presentations

The Committee received the following presentations throughout the year: January Cost of Service Analysis: Review & Recommendation – Staff led a review and

discussion of Tucson Water’s FY2019 Cost of Service Analysis. Mr. Steven Ritter explained that the analysis included current information about the utility’s operating costs, capital costs, customer accounts, revenues from FY2018 rates, peaking factors, and historical usage. He explained that capital and operations & maintenance costs were separated into various components, including: Base component, Extra Capacity (maximum day & maximum hour), Customer Services (billing & metering), Fire Protection, and Reclaimed. Various customer classes considered in the analysis included residential, multifamily, commercial, industrial, construction, fire protection, and reclaimed. Mr. Ritter reviewed three COS models produced by staff analysis, including Base, Traditional, and Smoothing models. The Base model examines the basic distribution of the cost of service across the various customer classes. The Traditional cost of service model reallocates some costs of reclaimed service across the other customer classes, with the goal of keeping reclaimed rates low to incentivize use of the product. Mr. Ritter pointed out that the Traditional cost of service model would result in an increase of greater than 9% to the residential customer class. He explained that the Smoothing model involved an adjustment of cost allocations across customer classes to achieve rate increases of about 7% across all classes.

Ward 3 Water Perspectives Council Member Paul Durham addressed the Committee to discuss his views on water-related topics, including sustainability, water security, stormwater management for green infrastructure and aquifer recharge, and dry well implementation. Development of CWAC Statement of Support for Water Conservation Rebate Tax Reform Staff and Member Murphy provided background on this item. Director Thomure and Mr. Greenhill indicated that the City has expressed support and continues to support efforts to make water conservation rebates non-taxable at the federal level. Mr. Murphy indicated that he would discuss a draft letter with members of the WESTCAS organization, which also supports these efforts, at that group’s next meeting, and report back to CWAC at a later date.

February Legislative Updates

Mr. Greenhill led a presentation about bills before the state legislature that are of interest to the City. He indicated that the City’s Intergovernmental Relations (IGR) office is tracking 512 bills, of which Mayor and Council have stated a position on 65. Mr. Greenhill reported that several bills this year would have an impact on city governance, such as bills that would reduce city authority or reduce funding to cities, and he reviewed other issues of concern to the City. Mr. Greenhill indicated that a list of water-related bills being tracked by City IGR can be found at:

2018 CWAC Annual Report Page 5 of 12

www.azcapitolreports.com/webreport.cfm?webreport=25936&listid=63159&print=true. He discussed the set of principles that guide Mayor & Council’s position on water-related bills, including: Support of DCP; support of DCP-plus; support of the development of a sustainable System Conservation Program; support of the use of Excess CAP for System Conservation; and support of additional participation from Southern Arizona, environmental, and tribal communities in the development of statewide water policy. Mr. Greenhill provided a review of Southern Arizona legislative leaders and their roles. He proceeded to review Senate Bill 1507, the Senate omnibus water bill, and its component bills, SB 1508-1516, providing a summary of each and a brief explanation of the City’s position on each. Questions about and discussion of the bills ensued. FY 2019 Proposed Rates: Review & Recommendation Staff presented a video about the “pricing paradox” of water, addressing the true costs of public water service (https://asunow.asu.edu/20180124-discoveries-asu-kedtalk-true-cost-water-michael-hanemann). Mr. Thomure reviewed the CWAC-endorsed Five-Year Financial Plan and compared it to previous years’ revenue requests. He indicated that the current Plan showed a decrease in revenue requests in comparison to previous Plans. Mr. Thomure reviewed the financial “deep dive” process and outcomes, including recommendations from CWAC and those from staff. He indicated that future topics for financial review would include Tucson Water’s volumetric tiers and multifamily rates, and discussions about differential rates for customers inside and outside of the City. Mr. Ritter reviewed the four-year rate design process and the cost-of-service process, including the Traditional, Smoothing, and Smoothing with Reclaimed Increase cost-of-service models. The discussion included a review of the reclaimed rate and historical changes to that rate, and a review of the projected average residential impacts of the proposed rate models. Mr. Ritter continued to review prior Mayor and Council concerns, and actions taken to address them since FY 2016. The discussion included a review of Tucson Water’s limited-income assistance program, new program options proposed by Tucson Water, and a review of water affordability metrics. Tucson Water staff recommended adoption of a four-year rate schedule, based upon the Smoothing with Reclaimed Increase cost-of-service model. Staff reported that the Finance Subcommittee had recommended adoption of a two-year rate schedule, based upon the Smoothing with Reclaimed Increase cost-of-service model.

March Review and Discussion of Tucson Water’s Proposed FY 2019 – FY 2022 Rate

Package Member Wong indicated that Tucson Water had requested that this topic be brought back to the Committee for further discussion. Mr. Thomure indicated that CWAC will continue to have an opportunity to provide input on the rate process, up to and including at the May 22 public rate hearing.

2018 CWAC Annual Report Page 6 of 12

The Director announced the dates and locations for upcoming Town Hall discussions on the proposed rate package. A listening session would also be scheduled for reclaimed water customers, as suggested by Members Wong and White, to address questions about reclaimed rate increases, and whether increases would occur over two or four consecutive years. Mr. Thomure indicated that Council members had raised questions about Tucson Water’s multi-year rate proposal, in relation to the practices of other Arizona cities He also reported that Council members inquired about the ramifications of a multi-year rate plan on the utility’s proposed Financial Plan. He indicated that Tucson Water’s proposed Financial Plan would be unchanged whether a 1-, 2-, or 4- year rate plan is adopted on May 22. Mr. Thomure explained that a 6% increase in revenues for FY 2019 would represent a “break even” point for utility operations (3% to address declining water sales, and 3% to address increased debt service). Mr. Thomure indicated that Tucson Water and CWAC are still obligated to perform an annual budget review and financial plan, even with the adoption of a multi-year rate plan. Mr. Thomure expanded on Mayor & Council’s current position on Tucson Water’s 4-year rate proposal. The Director indicated that Ward 1 had expressed concerns about multi-year rates due to low-income affordability and due to the implementation of the Water Infrastructure Incentive Program. Mr. Thomure briefly addressed Mayor and Council discussion regarding the Water Infrastructure Incentive Program, which Council had approved the previous evening on a vote of 6-1. Tucson Water will include $2.5 million per year for the program from its capital budget. Mr. Thomure also addressed Mayor and Council discussion about proposed changes to Tucson Water’s limited-income assistance program. The proposed changes would allow qualifying participants the option of waiving the monthly water service fee and the first 2 ccf of water usage, or the current option of receiving a 50% discount on the entire monthly water bill. The Director initiated a conversation with Members regarding Tucson Water’s proposed 4-year rate cycle and Mr. Thomure initiated a discussion of the proposed reclaimed rate increase. Mr. Thomure reported that staff had provided an off-agenda update to Mayor and Council regarding the limited-income assistance program. He explained that staff would be exploring ways to increase the program’s reach among qualifying customers, including working with Ward offices and developing outreach, and would also be improving the program’s ease of accessibility.

April Legislative Update Mr. Greenhill led a presentation about the Arizona State Legislature and the status of various bills of interest to the City of Tucson during the current legislative session. He briefly reviewed several topics of legislative interest to Tucson’s Mayor & Council, including highway user funds; sales taxes; opioid and substance abuse; education and workforce development funding; home rule and local authority; firearms and bump stocks; renewable energy standards; and private school zoning rules. Mr. Greenhill reported that little progress had been made on the slate of water bills before the Legislature during this session. He indicated that water priorities for the City of Tucson include policies that would protect Colorado River water supplies, and policies and practices to support conservation; the Legislature had not addressed any of these concerns during the session. Members and staff briefly discussed advice issued by the Legislature’s legal counsel regarding forbearance legislation [public statements related to this issue were sent separately to CWAC, and will be included in the meeting minutes]. Mr. Greenhill continued to review upcoming dates for

2018 CWAC Annual Report Page 7 of 12

meetings, discussions and events related to water policy and legislation, and also reviewed the names of legislative leaders on water issues.

May Review of Public Rate Town Halls and Reclaimed Users Meeting Deputy Director Sandy Elder led a review and discussion of the feedback the Department had received and compiled in response to its public Rate Town Halls, its Facebook Live presentation, and the Reclaimed Users Meeting. The materials provided to the Committee included a summary of the potable and reclaimed town halls, and e-mail feedback from the reclaimed meeting. Mr. Elder reported that staff had also presented the reclaimed rates information to the City Greens Committee, resulting in a lengthy and wide-ranging discussion about water resource issues. Legislative Update Mr. Greenhill presented a final summary of the 2018 state legislative session, following the Legislature’s May 3 adjournment. He provided a review of the total number of bills, total bills passed, total of signed and vetoed bills, the number of bills tracked by the City’s Intergovernmental Relations staff, and the number of bills on which Mayor & Council had a stated position. He briefly reviewed the non-water-related topics of importance to the City, and then discussed the water bills that had passed before the Legislature and the outcome of those bills in light of the City’s water concerns and legislative principles. He provided a review of the conflict between CAP and other Colorado River Basin water managers, and reported that not much had been done by the Legislature to resolve the state’s water challenges. He indicated that the Legislature had passed a bill that would repeal state sales taxes related to coal, a move that is seen as an attempt to entice potential buyers of the Navajo Generating Station. Mr. Greenhill also briefly reviewed modest changes to the budget for ADWR, which includes $2M for system conservation programs.

Community Gardens Program

Mr. James MacAdam reported that Tucson Water has developed a pilot program based upon discussions with Council members, the City Manager, and community representatives, during which staff was directed to find ways to improve the affordability of water meters for community gardens. He explained that the directive relates to the Urban Agriculture element of Plan Tucson, which strives to reduce barriers to community food production and community gardening. Mr. MacAdam explained that the cost of water, and new meters in particular, has been an obstacle to the growth of community gardens.

June Water Checkbook/Water Service Area Annual Review

Dee Korich, Tucson Water Chief Hydrologist, presented the Water Checkbook annual review. Ms. Korich presented on the water production progression from 1940 to 2017. Tucson Water was dependent on groundwater in 1940 and progressed to include CAP, Tucson Airport Remediation Project (TARP) and Reclaimed Water. In 2017, Tucson Water reported zero groundwater use and reported complete dependence on renewable supply. Her report identifies 111,000-acre feet of total production, 10% on reclaimed, 5% on TARP and 85% on CAP. In potable water production, she reported 99,000-acre feet, 95% CAP and 5% TARP. Ms. Korich described the Water Checkbook in detail and the water available in comparison to the water used. Ms. Korich reported 160,000-acre feet of potable water available since 2008 to 2017 and usage totaling 100,000 acre-feet leaving 58,000-acre feet for the Checkbook balance. Ms. Korich reported on the CAP recharge and reclaim water

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credits for effluent water. In 2017, 345,000-acre feet in storage for CAP and 31,000-acre feet in storage for reclaimed water, totaling 3 1/4 years of supply. Ms. Korich and Director Thomure fielded questions on the information before concluding. Richard Sarti, Tucson Water Engineering Manager and Tucson Economic Advancement Center Administrator, presented on the Water Service Area Policy. Mr. Sarti provided background on the Water Service Area Policy and its approval on August 4, 2010. Mr. Sarti explained expansion areas and potential annexation areas defining the term PADA (Pre-Annexation Development Areas). Mr. Sarti provided important milestones and dates for the Water Service Area Policy. Mr. Sarti provided information on the Water Service Area Review Board (WSARB) formation, purpose and detailed responsibilities. Statistics of approvals and denials over the course of a year were also provided. Mr. Sarti fielded questions and conversation ensued.

Santa Cruz River Heritage Project

Jeff Biggs, Tucson Water Strategic Initiatives Administrator, began the presentation. Tucson’s conservation ethic is strong and succeeding, and Tucson Water is rethinking the Recycled Water Program. The potable water demand is the same today as it was in 1985 with population increases. Reclaimed water uses have leveled off, golf courses show efficiencies with reclaimed water and the storage of Colorado River Water and Reclaimed Water shifted the opportunities for potable water use. Mr. Biggs lead into the investigative benefits and partnerships of Santa Cruz River Heritage Project; restoration of the river, partners in the environmental community, and Bureau of Reclamation. Goals of Santa Cruz River Heritage Project are to capture the reclaimed water leaving the service area and preserve the future flexibility of water supply. Maya Teyechea, Tucson Water Hydrologist and Santa Cruz River project manager, presented on the projects next steps. Mrs. Teyechea discussed river maintenance and working with flood control on river dredging and effects on vegetation with planting and seeding. Environmental consultants were hired to complete the vegetation survey scheduled to begin June 1, 2018. Tucson Water has done outreach with City leadership and local stakeholders and will continue throughout the project.

September CAP Non-Project Water Standards Update

Mr. Elder led a review and discussion about efforts among CAP sub-contractors and stakeholders to establish standards for introducing non-Colorado River water to the CAP canal and transporting it via the canal. Topics included various water quality issues raised by the introduction of non-project water, examples of possible scenarios that might involve the introduction of non-project water, a review of the stakeholders involved, progress made by stakeholders in the previous year, a summary of the shared goals and standards discussed by stakeholders, and next steps. Members and staff engaged in discussion about the topics presented, and Chair Murphy requested future updates from staff

October FY2018 Fiscal Review

Interim Deputy Director Silvia Amparano led a presentation and discussion of Tucson Water’s preliminary unaudited FY 2018 financial results, with information including: budgeted and actual revenues and expenditures; FY18 capital assets; new bonds issued in FY 18 and current bond ratings; a summary of all bonds issued and outstanding; debt outstanding at the end of FY 18; and the utility’s net financial position. She indicated that an update would be provided in January when numbers

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for the fiscal year have been finalized. Ms. Amparano fielded and answered questions from subcommittee members. Reclaimed Rate Discussion Member White provided a brief recap of the Reclaimed Users Meeting convened by Tucson Water in early 2018, as part of the FY 2019 & 2020 rate-setting process. He conveyed the concern of reclaimed users about the increase to reclaimed rates, and indicated that other pressures such as an increase of the minimum wage and declining golf club memberships were creating economic hardships for golf course and hotel owners. Member White expressed concern that these pressures would lead to an increase in business closures among reclaimed users, and conveyed his wish that these concerns be recognized by Mayor and Council and addressed by Tucson Water. Director Thomure indicated that Tucson Water and its financial consultant will develop a “value of water” report, which will include an assessment of the cost to produce reclaimed water and the appropriate cost of service to customers.

FY2018 Fiscal Review

Interim Deputy Director Amparano led a presentation and discussion of Tucson Water’s preliminary unaudited FY 2018 financial results, with information including: budgeted and actual revenues and expenditures; FY18 capital assets; new bonds issued in FY 18 and current bond ratings; a summary of all bonds issued and outstanding; debt outstanding at the end of FY 18; and the utility’s net financial position. She indicated that an update would be provided in January when numbers for the fiscal year have been finalized. Ms. Amparano fielded and answered questions from subcommittee members.

November Officer Election Discussion

Staff provided direction to the Committee for the Officer Nomination process. The nomination and election process for Chair and Vice Chair will proceed as it has in recent years, with the election to be held at the December 5, 2018, meeting.

Green Stormwater Infrastructure Fund Report

Member dos Santos indicated that Tucson Water’s draft GSI Fund Report was shared with CWAC in September, and deferred to the TPP Subcommittee for review. The Subcommittee discussed the report and produced the summary memo shared with CWAC for discussion at the current meeting. Member dos Santos explained that the memo would be forwarded to Mayor and Council for consideration, if the full Committee decided to do so. Members and staff engaged in discussion about the Report review process, and staff clarified that additional input can be incorporated before a final draft is forwarded to Mayor and Council for public discussion. FY 2020-2024 CIP Budget: Review & Comment Deputy Director Amparano and staff provided a presentation on Tucson Water’s proposed FY 2020-2014 CIP budget. Ms. Amparano explained that the CIP program is the long-term foundation for the City’s water supply and includes projects to update the water system and to address immediate needs to maintain existing service levels. She indicated that Tucson Water had recently performed annual cost-of-service reviews, rate requests, and was granted a two-year rate increase for FY 2019 & 2020. She stated that the utility’s goal for the remainder of that period would be to “live within its means” and maintain the currently adopted rate structure. Staff continued the presentation, which included a comparison of CIP budgets; a review of CIP modifications; a review of proposed new

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projects; planned vs. actual spending in previous years’ CIP budgets; and FY 2018 CIP accomplishments. Ms. Amparano concluded the presentation with a review of next steps in Tucson Water’s financial planning process. She indicated that the utility would not perform a cost-of-service and rate design review, but would instead review and revise its 5-year financial model and comprehensive financial policies. She also indicated that the subcommittee would review the utility’s proposed operating budget in December, a proposed 5-year financial plan in January, and proposed changes to the financial policy and financial metrics in February.

December Adoption of 2018 CWAC Meeting Schedule

Members briefly discussed the proposed 2019 schedule before the Committee. The Committee voted to approve the schedule as presented which passed on a voice-vote of 13-0. In 2019, CWAC will continue to meet on the first Wednesday of the month at 7 a.m.; no meetings are scheduled in July or August. Meetings will continue to be held in the 3rd Floor Director’s Conference Room, Tucson Water, 310 W. Alameda Street. CWAC Officer Elections After a brief procedural discussion, the Committee voted on the nominations to appoint Mark Murphy as Chair and Jean McLain as Vice Chair by a unanimous roll call vote of 13-0. Lower Basin Drought Contingency Plan Update Director Thomure reported on progress being made toward development of an Arizona Drought Contingency Plan, and described the framework of a deal discussed at the November 29 meeting of the Arizona Steering Committee. He referred to the deal as the “Four-Party Proposal” between Arizona Department of Water Resources (ADWR), CAP, Bureau of Reclamation (BOR), and the Gila Indian River Community (GRIC). He indicated that the proposal would protect Tucson’s interests. Key details included:

- Mitigation for Pinal agriculture from 2020-2026. For the first three years, if

the Colorado River system is in Tier 1 shortage, Pinal Ag will receive 105,000 AFY of CAP water (reduced from current allocation of 150,000 AFY); in Tier 2 shortage, CAP will be reduced to 70,000 AFY; in Tier 3, no CAP water. An estimated 40% of Pinal farmlands will be fallowed under the plan. After 2022, no CAP water will be available for Pinal Ag, and farms will return to groundwater pumping. Prior to 2023, mitigation funding will be provided to develop groundwater infrastructure; the source of mitigation may be federal funds and/or a Pinal County pump tax. Uncertainty remains over the volume of water for 2020-22 as well as the source of money for funding groundwater infrastructure. Member McLain voiced concern about the plan’s sustainability. Director Thomure pointed out that the management plan for the Pinal AMA is “planned depletion” of the aquifer, and indicated that Pinal Ag would have returned to groundwater in 2030 under existing agreements. The DCP will accelerate that timeline and, as Chair Murphy noted, “replaces a cliff with a ramp” for Pinal Ag interests.

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- Mitigation to Non-Indian Agriculture (NIA) pool. Voluntary DCP reductions plus shortage reductions will cause deep cuts to CAP allocations in the NIA pool. Because NIA users have a higher priority than Pinal Ag, NIA has a right to mitigation before Pinal Ag. The Four-Party Proposal would provide 100% NIA mitigation for Tier 1 shortage, 75% for Tier 2a, 50% for Tier 2b, and no mitigation beyond Tier 3. This would provide another “ramp” for CAP users to the level of reductions anticipated by 2026.

- Mitigation will take the form of water or money.

i. Water: Water resources include 50,000 AF from Lake Pleasant, 50,000 AF from Salt River Project, 5,000 AFY of turn-back water, and 400,000 AF of intentionally created surplus (ICS) previously left in Lake Mead by CAP. The ICS withdrawn from Lake Mead would be offset by 150,000 AF of system conservation, 50,000 AFY of fallowed Colorado River Indian Tribe (CRIT) lands for 3 years, 50,000 AF of SRP exchange water, and 250,000 AF from other tribes (largely GRIC).

ii. Money: $60 million in funding will be available over the mitigation

period. CAP will pay subcontractors to not take their allocations. State will provide $30 million. Walton Family Foundation will provide $8 million.

Other provisions not included in the Proposal at this time include: - USF to GSF transfers. Tucson would be willing to participate in such an

arrangement. - Mitigation for developers. A pending contract deal between GRIC and CAGRD

may address this issue. - 100% managed recharge credits

If the proposal passes, Director Thomure indicated that Tucson would receive its entire CAP allocation through 2026, without an increase in rates beyond the amounts already predicted. Tucson will continue to mitigate Pima Ag., and Tucson will continue to receive water from Phoenix to store in Avra Valley, under the existing intergovernmental agreement. The Council has authorized the Director to send a letter to the state legislature in support of the Proposal, as long as the deal remains intact and protective of Tucson’s interests. Tucson will continue to pursue 100% managed recharge credits, and the transfer of CAP allocations from State Trust lands to cities. FY 2020 O&M Budget Review Recommendation Deputy Director Amparano led a staff presentation and discussion of Tucson Water’s proposed FY 2020 Operations & Maintenance Budget, which included a summary of the utility’s mission and business values, a reiteration of the Department’s key budget message (maintain the currently adopted rate structure for FY 2019 & 2020), and an overview of Tucson Water’s assets and operations. She provided a summary of the requested $250.2 million budget, with a breakdown of division spending and comparison to the previous year’s financial plan. The presentation also covered a

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comparison of CAP budgets from FY 2019-2024 (including DCP), provided a summary of Department FTE positions and new position requests, and reviewed current outstanding debt service. Discussion ensued between members and staff.

Review and Approval of CWAC Memo Re: TPP GSI Fund Comments Chair Murphy asked members for comments or corrections to the draft cover letter circulated to the Committee prior to the meeting. Discussion ensued. Members agreed that the final sentence of the fourth paragraph should be struck from the letter, and that the resulting letter should be finalized and distributed to Mayor and Council, along with TPP’s comments about the draft Green Stormwater Infrastructure Fund Report. CWAC and Subcommittee Attendance & Quorum Chair Murphy pointed out recent instances of low attendance at subcommittee meetings, and asked members to make an effort to attend scheduled meetings, or to alert staff if unable to attend. Member dos Santos indicated that the TPP Subcommittee would take up this issue at its next meeting, and suggested further discussion at a future CWAC meeting