San Diego County Taxpayers AssociationSan Diego County Taxpayers AssociationSan Diego County Taxpayers AssociationSan Diego County Taxpayers AssociationBoard of DirectorsBoard of Directors

Nov. 18, 2011Nov. 18, 2011

Michael T. Hogan, Chair, Board of DirectorsMichael T. Hogan, Chair, Board of DirectorsDennis Cushman, Assistant General ManagerDennis Cushman, Assistant General Manager

The amount of money the Water Authority sent to the Metropolitan Water District last year:

$241,000,000 The amount of money at stake in the Water

Authority’s rate lawsuit vs. MWD (over 45 years):

$1,300,000,000 -$2,100,000,000

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November 1946: Water Authority annexes into the Metropolitan Water District of Southern California

By 1949 the Water Authority is buying half of By 1949, the Water Authority is buying half of all MWD water supplies◦ MWD’s Colorado River Aqueduct had becomeMWD s Colorado River Aqueduct had become

operational in 1941, but MWD had low water sales Until MWD began selling water, all MWD revenues

came from from property taxescame from from property taxes Today, 80% of all MWD revenues come from water

sales

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By the 1990s, Water Authority remains MWD’s largest member

b i 30% f MWD’1991

Local Supplies:agency, buying ~30% of MWD’s water and providing ~30% of all of MWD’s revenues

Local Supplies:26,000 AF

(5%)

Supplies from MWD account for 95% of all water used in San Diego County

MWD Supplies:552,000 AF

(95%)County◦ San Diego’s economy and quality of

life for its residents were at significant i k d i i f h

(95%)

risk during times of water shortage◦ Region had almost all of its “eggs” in

one basket: MWD

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2011(estimated)199172 TAF26 TAF

2020

552 TAF (95%)

80 TAF (13%)

80 TAF (10%)

72 TAF (12%)

26 TAF (5%)

44TAF (6%)

56 TAF

103 TAF (13%)

190 TAF

75 TAF (12%)

28 TAF (5%)

20 TAF (3%)

(95%)

285 TAF (47%)

231 TAF (30%)

27 TAF (4%)

56(7%)

190 TAF (24%)

51 TAF (8%)

Total = 578 TAF

48 TAF (6%)

Total = 779 TAFTotal = 611 TAF

Metropolitan Water District

Imperial Irrigation District Transfer Seawater Desalination

Recycled Water

All American & Coachella Canal Lining

Local Surface Water

Groundwater

Conservation (existing and additional) 6

Water Authority buys more than 25% y yof MWD’s water and provides more

than 25% of MWD’s revenues

Average MWD Water Purchases by Member Agency (2000-09)

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In October 2003, Colorado River QSA is executed:◦ Water Authority signs 45- to 75-year deal to buy

200 000 AF annually from the Imperial Irrigation200,000 AF annually from the Imperial Irrigation District◦ Water Authority agrees to line the All American and

C h ll l d i 80 000 AF ll fCoachella canals and receive 80,000 AF annually for 110 years◦ Requires transportation rate from MWD to move

supplies to San Diego through MWD’s system

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MWD had to disaggregate its uniform water rate to develop a transportation charge for the Water Authority’s transfer supplies

Facing a loss of water sales revenues due to Facing a loss of water sales revenues due to the Water Authority’s supply diversification, MWD took vast majority of its water supplyMWD took vast majority of its water supplycosts and misallocated them to its transportation charge to move the Water

fAuthority’s IID and Canal Lining transfer supplies

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< 2003 2003>MWD

UniformWater

MWDSystemCosts

Water

New Rate Structure Misallocates Water Supply Costs to Transportation Charge

WaterRate

WaterSupplyCosts

SystemAccess

Rate

PowerRate

WaterStewardship

Rate

WaterSupply

Rate

MWD Must Disaggregate

Charged for Transportation

Rate RateRate

Water Supply Costs

gg gIts Costs

Charged for Purchase of MWD Water10

Water Supply CostsMWD System Costs

Water Supply CostsMWD System Costs

System PowerWater SystemAccess

Rate

PowerRate

WaterSupply

Rate

Charged for Transportation

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Charged for Purchase of MWD Water

--$0.6$0.6--$0.3$0.3$0 2$0 2

City of AnaheimCity of AnaheimCity of Beverly HillsCity of Beverly HillsCity of BurbankCity of Burbank

OverchargeOverchargeUnderchargeUndercharge

--$0.2$0.2--$2.5$2.5

--$1.5$1.5--$0.1$0.1

--$2.1$2.1$0 2$0 2

City of BurbankCity of BurbankCalleguas MWDCalleguas MWDCentral Basin MWDCentral Basin MWDCity of ComptonCity of ComptonEastern MWDEastern MWDFoothill MWDFoothill MWD--$0.2$0.2

--$0.3$0.3--$0.4$0.4

--$1.6$1.6--$0.5$0.5$0 8$0 8

Foothill MWDFoothill MWDCity of FullertonCity of FullertonCity of GlendaleCity of GlendaleInland Empire Utilities AgencyInland Empire Utilities AgencyLas Virgenes MWDLas Virgenes MWDCity of Long BeachCity of Long Beach--$0.8$0.8

--$6.3$6.3--$5.3$5.3

--$0.5$0.5$31.0$31.0

$0 0$0 0

City of Long BeachCity of Long BeachCity of Los AngelesCity of Los AngelesMWD of Orange CountyMWD of Orange CountyCity of PasadenaCity of PasadenaSan Diego County Water AuthoritySan Diego County Water AuthorityCity of San FernandoCity of San Fernando$0.0$0.0

$0.0$0.0--$0.4$0.4--$0.3$0.3

--$1.4$1.4$0 4$0 4

City of San FernandoCity of San FernandoCity of San MarinoCity of San MarinoCity of Santa AnaCity of Santa AnaCity of Santa MonicaCity of Santa MonicaThree Valleys MWDThree Valleys MWDCity of TorranceCity of Torrance

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--$0.4$0.4--$0.5$0.5

--$2.9$2.9--$2.0$2.0

City of TorranceCity of TorranceUpper San Gabriel MWDUpper San Gabriel MWDWest Basin MWDWest Basin MWDWestern MWDWestern MWD

Present Value $ in MillionsPresent Value $ in Millions

$1,637 $1,637 $1 311$1 311

$2,105 $2,105 

$330$330 $330$330

$1,033 $1,033 $1,311 $1,311 

$330 $330  $330 $330 

LowLow HighHigh

Next 10 YearsNext 10 Years 35 Year Term35 Year Term 45 Year Term45 Year Term

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Case assigned to San Francisco Superior Court Judge KramerJudge Kramer

Case has been designated as “complex”◦ Assigned to single judge for all purposes◦ Complex cases generally get more attention and

resources from the court Estimated trial court decision in mid-2012st ated t a cou t dec s o d 0 Imperial Irrigation District and UCAN are

litigants on Water Authority’s sideW A h i f l O 27 2011 Water Authority successful at Oct. 27, 2011 trial hearing to amend complaint◦ Added five causes of action

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Added five causes of action:◦ (1) Breach of contract (Exchange Agreement)◦ (2 & 3) Breach of the covenant of good faith and fair◦ (2 & 3) Breach of the covenant of good faith and fair

dealing and declaratory relief (RSI clause; cancellation of conservation and recycling

t )agreements)◦ (4) Breach of fiduciary duty (MWD directors owe a

duty of loyalty to the “full constituency of the Metropolitan service area”)◦ (5) Preferential Rights (MWD failed to include

payments for transportation from calculation ofpayments for transportation from calculation of Water Authority’s Preferential Right to MWD water)

http://www.sdcwa.org/mwdrate-challenge

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Adopt resolution supporting Water Authority i th t liti tiin the rate litigation

File amicus curiae brief at appropriate time during litigationduring litigation

Provide written and oral testimony at MWD 2013 rate-setting hearings (early 2012)P bli h i d l h Publish commentaries and letters to the editor supporting Water Authority position

Feature in Taxpayers Association publications Feature in Taxpayers Association publications Feature prominently on Taxpayers’ web site

and social media activities

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