A N N U A L R E P O R T

Transcription

1 S A N D I E G O C O U N T Y W A T E R A U T H O R I T Y 2004 A N N U A L R E P O R T

2 A N N U A L R E P O R T contents Board Officers and General Manager s Message page 2 Quantification Settlement Agreement page 4 Water Transfers page 8 Seawater Desalination page 12 Regional Water Treatment page 15 Water Conservation and Recycling page 16 Imported Water page 20 Increased Storage page 24 Community Support page 28 Financial Stability page 30 Selected Financial Highlights page 32 Continuing Disclosure of Financial Information page 35 Capital Improvements page 23 Appendix page 46

3 piecing together S A N D I E G O C O U N T Y S W A T E R F U T U R E The finalization of the water transfer agreement helped the San Diego County Water Authority achieve its goals of water supply diversification and improved water. The parties involved: San Diego County Water Authority Imperial Irrigation District Coachella Valley Water District Metropolitan Water District State of California U.S. Bureau of Reclamation up to 21.5 million acre-feet of water made available to the Water Authority over the next 110 years 8 years of negotiations 21 percent projected share of the Water Authority s 2020 water supply portfolio made up by the Water Authority/IID Transfer 9 percent projected share of the Water Authority s 2020 water supply portfolio made available by the All-American and Coachella canal lining projects 277,700 additional acre-feet of water annually to the region through implementation of the QSA A N N U A L R E P O R T

4 As we look back over the past fiscal year, it is like watching a 5,000- piece jigsaw puzzle finally take shape. We had to work long and hard at it. Like jumbled puzzle pieces, intricate and complex water issues put our ingenuity to the test. We concentrated on the areas that we knew would fit the picture in our mind s eye. We visualized a peaceful, mutually beneficial picture of a well-managed Colorado River, winding through the basin states, linking together plans for California cities, other states, agriculture, Native Americans and the environment. Once we built the borders of the puzzle, we could look at what would fit within that framework. AT TIMES THE PROCESS WAS PERPLEXING. Just when we thought we found the links to unite the adjoining interests, someone at the game table would say a piece was missing. Yet we remained determined. As unclear as it seemed at times during the eight years it took to negotiate, THE PUZZLE HAD TO BE SOLVED. And fiscal 2004 proved we had the perseverance needed to put it all together. OCT. 16, 2003, WAS THE DAY EVERY THING CONNECTED. All the representative groups, including cities, other states, agriculture, Native Americans and environmentalists, assembled with the U.S. Secretary of the Interior Gale Norton. With the magnificent Hoover Dam as a backdrop, we celebrated the signing of the Quantification Settlement Agreement. Our determination and resolve had paid off. This landmark event in San Diego County water history is why we are especially proud to issue this annual report. THIS FISC AL YEAR M ARKS SIGNIFIC ANT PROGRESS IN OUR ONGOING EFFORTS to secure a safe, diversified and reliable water supply for the San Diego region. These efforts were strengthened in September 2003, when the governor signed legislation that focused on the role of water supplies in regional planning. The bill, AB 316, by Assemblymember Christine Kehoe (D-San Diego), ensures that any regional infrastructure strategy is consistent with the Water Authority s water planning. Another highlight of the year occurred on Left to right: James H. Bond, Vice Chairman; Maureen A. Stapleton, General Manager; Bernie Rhinerson, Chairman; George I. Loveland, Secretary. June 9, 2004, when THE WATER AUTHORIT Y M ARKED ITS 60TH ANNIVERSARY. Over the years, the agency has transformed from fulfilling its original charge of building and maintaining a regional water delivery system, to its efforts today to secure a safe and reliable water supply through diversification of its water supply portfolio and continued development of major water facilities. With the right pieces now in place, the Water Authority and its 23 member agencies are positioned to implement plans, programs and projects that will continue to support our region s $130 billion economy and QUALIT Y OF LIFE FOR OUR 3 MILLION RESIDENTS. 2 A N N U A L R E P O R T

5 Bernie Rhinerson Chairman James H. Bond Vice Chairman George I. Loveland Secretary Maureen A. Stapleton General Manager A N N U A L R E P O R T

6 the pieces O F S A N D I E G O C take O U N T Y S W A T E R P U shape Z Z L E Quantification Settlement Agreement On Oct. 16, 2003, officials from the San Diego County Water Authority, Imperial Irrigation District, Coachella Valley Water District and the Metropolitan Water District of Southern California joined the governor of California and the U.S. Secretary of the Interior for the QSA signing ceremony at Hoover Dam. This historic agreement provides California with a transition period to implement water transfers and supply programs that will reduce California s overdependence upon the Colorado River and reduce the state s draw to its 4.4 million acre-foot basic annual apportionment. The QSA commits the state to a restoration path for the environmentally sensitive Salton Sea and provides full mitigation for these water supply programs. The QSA assures California up to 75 years of stability in its Colorado River water supplies. The QSA was finalized at a signing ceremony at the Hoover Dam in October An additional 277,000 acre-feet of water will be provided annually to the San Diego region through the finalization of this agreement. 4 A N N U A L R E P O R T

7 conservation S T R A T E G I E S The Aviara Golf Club began using recycled water as soon as the delivery pipeline was installed in By using recycled water, the golf course conserves approximately 160 million gallons or 480 acre-feet of water annually. The recycled water is purchased from the city of Carlsbad and is produced at the Meadowlark plant in San Marcos. Prior to Aviara s use on both its golf course and hotel grounds, this recycled water was disposed of into the ocean. Of the 180-acre golf course, 97 percent is irrigated with recycled water. In addition, the seven lakes (12 surface acres) utilize recycled water. Each year, the hotel and residence club use approximately 50 million gallons or 153 acre-feet of recycled water. The 60 acres of landscape at the hotel and residence club is irrigated with recycled water. The Aviara Golf Club staff receives training annually in the use of recycled water. Four Seasons Resort Aviara includes 200 landscaped acres of lush gardens and an 18-hole golf course. The Aviara Golf Club at Four Seasons 5

8 QSA Legislation The Water Authority was a chief proponent of three legislative bills needed to implement the QSA: SB 277 by state Senator Denise Moreno Ducheny (D-San Diego), SB 317 by state Senator Sheila Kuehl (D-Santa Monica) and SB 654 by state Senator Mike Machado (D-Linden). These bills were signed into law and became effective Jan. 1, SB 277 established the Salton Sea Restoration Fund to provide money for Salton Sea restoration projects. SB 317 authorized, under certain conditions and as part of broader environmental protections, the take of fully protected species as part of QSA actions. The bill also directed the resources secretary to complete a Salton Sea restoration study by Dec. 31, SB 654 extended the project deadline for the All-American and Coachella canal lining The QSA commits the state of California to a restoration plan for the environmentally sensitive Salton Sea; in fiscal 2004 the state provided $20 million to fund development of this plan. projects to It also authorized the Department of Fish and Game to enter into an agreement with QSA participants regarding funding for QSA environmental mitigation costs. These bills were a vital part of the QSA and the agreement could not have been completed without their passage. 6

9 Funding from the Water Authority through the water transfer agreement will pay for conservation measures in the agricultural Imperial Valley. A N N U A L R E P O R T

10 the pieces O F S A N D I E G O C take O U N T Y S W A T E R P U shape Z Z L E 8 Water Transfers A N N U A L R E P O R T Sections of the All-American and Coachella canals in Imperial County will be lined with concrete, providing 77,700 acre-feet of water each year to the Water Authority for 110 years. The QSA enables California to reduce its historic overuse of Colorado River water through voluntary agriculture-tourban water transfers and other water supply programs. Voluntary agricultural transfers provide water for urban use and, over the life of the QSA programs, more than 30 million acre-feet of water moves from primarily agricultural use to primarily urban use. The agreement allows renewed access to surplus Colorado River water, when available, under the federal Interim Surplus Guidelines. The QSA settled disputes about Colorado River water use that were formerly roadblocks to implementing water transfers. With the approval of the QSA, the Water Authority was able to execute its historic water transfer agreement with the Imperial Irrigation District. By the end of calendar year 2003, 10,000 acre-feet of conserved water was transferred to the Water Authority from the Imperial Valley. Another 20,000 acre-feet of water is being transferred in calendar year The amount of transfer water delivered each year will increase until it reaches the full annual water transfer yield of 200,000 acre-feet of water in This program, the largest long-term agriculture-tourban water transfer in U.S. history, will provide a major source of highly reliable water to the San Diego region for up to 75 years. Another component of the QSA involves lining two major earthen canals with concrete to prevent seepage and conserve 77,700 acre-feet of water annually for transfers. An additional 16,000 acre-feet per year from the canal lining projects will go to several Indian bands located near the San Luis Rey River in northeastern San Diego County to resolve a long-standing local water rights dispute. The water transfer and canal lining projects in the QSA will collectively provide San Diego County with up to 21.5 million acre-feet of water over the 75- to 110-year terms of the agreement. The QSA significantly improves water supply reliability for all of California.

11 conservation S T R A T E G I E S In recent years, CP Kelco s San Diego plant has replaced water scrubbers with carbon absorption systems, replaced fresh water with cooling tower water for tank scrubbers, installed automated cooling tower conductivity controllers and reduced boiler blowdown with reverse osmosis water. In fiscal 2004, the following projects were completed: 1) recycling reverse osmosis reject water to use in a scrubber; and 2) using cooling tower water instead of fresh water to remove condensate out of heat exchangers. Since 1999, these same projects conserved a total of 425 acre-feet of water. The San Diego plant manufactures biopolymers and other fermentation-based products used in the food, health, personal care, industrial and oil drilling segments of the global economy. The main products are Xanthan and Gellan gums, which are used to increase viscosity and aid in stabilizing liquids like oil and water with flavor agents as is done in salad dressing. The plant operates 24 hours a day, seven days a week. CP Kelco 9

12 QSA Water Transfers Transfer, ramping up to 200,000 acre-feet of water per year from IID to the Water Authority for up to 75 years; Extending the term of the transfer of up to 110,000 acre-feet of water per year from IID to MWD for 13 additional years; Transfers ramping up to 103,000 acre-feet of water per year from IID to the Coachella Valley Water District; Potential water transfers between 25,000 and 111,000 acre-feet of water annually from the Palo Verde Irrigation District to MWD; Several Indian bands located near the San Luis Rey River will receive water from the All-American and Coachella canal lining projects. Lining of the All-American and Coachella canals, providing 77,700 acre-feet of water annually to the Water Authority for 110 years; and, 16,000 acre-feet per year of additional canal-lining water provided to the San Luis Rey Settlement Parties to implement a 1988 federal law that resolved decades-old litigation. 10

13 As part of the Quantification Settlement Agreement, the Water Authority obtained rights to 77,700 acre-feet of water conserved annually for 110 years by lining the All-American and Coachella canals. The All-American Canal system is located in the southeastern corner of California, conveying water from the Colorado River to California s Imperial and Coachella valleys. A N N U A L R E P O R T

14 the pieces O F S A N D I E G O C take O U N T Y S W A T E R P U shape Z Z L E Seawater Desalination Seawater desalination, converting seawater into high-quality water suitable for drinking and other potable water uses, represents a new, safe, and drought-proof water supply that will reduce the San Diego region s overreliance on imported water from the Colorado River and Northern California. While a secure supply of imported water is fundamental to the region s water supply reliability, seawater desalination emerged as a preferred means of developing new local water supplies. Seawater desalination provides multiple benefits from a single investment. A new, drought-proof water supply, it also provides high-quality treated drinking water to the region. It is a critical component of the Water Authority s water supply diversification program. The Water Authority initiated an environmental impact report for a 50-million-gallon-per-day regional seawater desalination facility. The facility, proposed for the coastal Encina Power Station in the city of Carlsbad, would initially produce 56,000 acre-feet of water annually, making it the largest seawater desalination facility in the U.S. Locating the seawater desalination facility adjacent to a power plant provides significant cost-saving efficiencies for the project. The Water Authority is studying other potential desalination plant sites on the coastline, including the San Onofre Nuclear Generating Station and locations in South San Diego County. Initial studies prepared for the Water Authority suggest that seawater desalination could provide up to 15 percent of the county s water supply by A N N U A L R E P O R T As seawater passes through layers of reverse osmosis membranes, water molecules are separated from salts and other impurities to produce high-quality drinking water.

15 conservation S T R A T E G I E S SDG&E and the Water Authority developed a unique partnership between energy and water industries to provide conservation information to both energy and water customers in the region. SDG&E conducts a series of workshops for business owners. To educate these customers on both energy and water saving opportunities, SDG&E has invited the Water Authority to speak about water-saving products at these workshops. In fiscal 2004, the Water Authority presented at a workshop titled, Cooling Towers for Non-Engineers: A Workshop for Property Managers. Conservation savings for using cooling tower conductivity controllers can be as much as 800,000 gallons of water per year. A conductivity controller can dramatically reduce operating expenses and save significant amounts of water by accurately transmitting information to the valves that control the amount of water drained from the cooling tower reservoir. In fiscal 2004, 42 cooling tower conductivity controllers were installed. San Diego Gas & Electric 13

16 Seawater Desalination Funding To reduce the cost of seawater desalination to the region, the Water Authority is pursuing external sources of funding. This year, thanks largely to the efforts of San Diego County representatives Duncan Hunter and Randy Duke Cunningham, the Water Authority secured a federal grant in the amount of $723,000 for seawater desalination program activities. The Water Authority also received state funding for feasibility studies on seawater desalination in other areas of the county. When looking for new water sources, it is logical to look to the world s largest reservoir the vast Pacific Ocean. 14

17 the pieces O F S A N D I E G O C O U N T Y S W A T E R P U Z Z L E take shape During its regional planning process, the Water Authority identified another critical need for San Diego County. Increasing demands for treated drinking water will be difficult to meet without a new regional water treatment facility. Today, approximately 50 percent of the county s treated water supply is treated at the Skinner Filtration Plant in Riverside County. The Skinner plant is owned and operated by the Metropolitan Water District of Southern California. Approximately, 48 percent of the county s treated water supply is treated at 11 local treatment plants owned and operated by nine of the Water Authority s 23 member agencies. A small percentage of treated water approximately 2 percent comes from wells. In June 2004, the Water Authority board authorized requests for proposals for design-build-operate procurement for a Water Authority-owned treatment plant near San Marcos that could produce up to 100 million gallons of treated water a day. Environmental review for the $106 million project is under way. The plant is expected to be completed by Regional Water Treatment A rendering of the Water Authority s future Twin Oaks Valley Water Treatment Plant, which could treat water for up to 220,000 typical households each year. Landscaping the site and applying color to the buildings could help the facility blend in with its surroundings and minimize visual impacts to nearby residents. A N N U A L R E P O R T

18 the pieces O F S A N D I E G O C take O U N T Y S W A T E R P U shape Z Z L E Signs placed throughout San Diego County designate where recycled water is used for irrigation and other purposes. Water Conservation and Recycling In fiscal 2004, the Water Authority and its member agencies conserved nearly 43,000 acre-feet of water through aggressive water conservation programs. Key programs this year included the expansion of the Commercial- Industrial-Institutional water conservation program to include incentives for hospitals to install water-saving X-ray film processing machines. Through the CII voucher program, the San Diego Zoological Society has replaced almost all of the urinals at both the San Diego Zoo and the San Diego Wild Animal Park with waterless urinals. Each waterless urinal saves 40,000 to 50,000 gallons of water per year. The Water Authority encouraged other businesses, such as restaurants and tourist attractions, to install high-pressure prerinse spray nozzles to conserve water. The Water Authority assumed administrative responsibility for the Water Conservation Garden at Cuyamaca College. The demonstration garden s exhibits are open to the public and introduce colorful and lush planting options designed to save water and maintenance. During the hot summer months, the Water Authority successfully executed a treated water demand management program that included an emphasis on efficient landscape irrigation. The agency s water recycling program received another boost this year when the State Water Resources Control Board and U.S. Bureau of Reclamation awarded the Water Authority $715,000 for its Phase II Regional Recycling Study. The study explores regional obstacles to greater water recycling, finds ways to overcome the obstacles, and investigates how to provide funds to the Water Authority s member agencies for water recycling projects. Federal funds amounting to $6.9 million, out of a total $18.17 million in Title XVI funds for the Lower Colorado River region, were earmarked this year for San Diego area water recycling projects. 16 A N N U A L R E P O R T

19 conservation S T R A T E G I E S The San Diego Zoo installed 54 waterless urinals in December A waterless urinal typically saves 40,000 to 50,000 gallons of water per year. The zoo is conserving approximately 2.16 million gallons of water per year. The zoo also purchased several water brooms, which are used instead of a hose to clean sidewalks, patios, pool decks, commercial kitchens and other large surface areas. Water brooms can reduce water by as much as 60 percent. The city of San Diego honored the Zoological Society of San Diego with its prestigious Recycler of the Year Award. The award is part of the city s 2004 Waste Reduction & Recycling Awards Program designed to recognize companies and organizations for their innovative waste reduction programs that contribute to diverting waste from landfills and conserving natural resources. The Zoological Society is a not-for-profit organization that operates the San Diego Zoo and the San Diego Wild Animal Park. The Zoological Society of San Diego is a conservation, education and recreation organization dedicated to the reproduction, protection and exhibition of animals, plants and their habitats. San Diego Zoo 17

20 Water Conservation Policy Throughout the state legislative session, the Water Authority continued its leadership on California water conservation policy. The board voted to sponsor four conservation bills. AB 2299, by Assemblymember George Plescia (R-San Diego), would require, after Jan. 1, 2007, commercial dishwashing prerinse spray valves to use less than 1.6 gallons of water per minute. After the bill was introduced, the Schwarzenegger Administration announced it would implement the bill s requirements administratively. AB 2470, by Assemblymember Christine Kehoe (D-San Diego), would initiate a voluntary program for real estate agents to provide information on local water conservation programs to prospective property buyers. Assemblymember Kehoe also authored AB 2572 requiring Golf courses in San Diego County use recycled water to help conserve the region s local water sources. urban water suppliers to install, by Jan. 1, 2025, water meters on all unmetered service connections older than Recognizing that volumetric pricing is an essential element to conserving water, the bill also requires suppliers by 2010 to charge each customer for water based on the actual volume of deliveries the meter records. Finally, Assemblymember John Laird (D-Santa Cruz) carried a bill, AB 2717, requesting the California Urban Water Conservation Council convene a stakeholders workgroup to recommend proposals for improving water use efficiency in urban irrigated landscapes. 18

21 The Water Conservation Garden at Cuyamaca College proves a water-wise landscape can also be inviting and attractive. A N N U A L R E P O R T

22 the pieces O F S A N D I E G O C take O U N T Y S W A T E R P U shape Z Z L E 20 Imported Water A N N U A L R E P O R T The Water Authority purchases its imported water supply from MWD and the Imperial Irrigation District. State Water Project supplies are transported through MWD s facilities from the Bay-Delta in Northern California and the Colorado River supplies are transported through the Colorado River Aqueduct. Progress the Water Authority makes in local seawater desalination, conservation, groundwater recovery and recycling reduces pressure for water from the environmentally sensitive San Francisco Bay- Sacramento/San Joaquin River Delta. The State Water Project delivers water from the Bay-Delta, accounting for up to one-half of San Diego County s imported water supply. A supporter of the California Bay-Delta Authority, the Water Authority works to promote measures to improve the Bay-Delta s water reliability, water quality, ecosystem and levees. The Water Authority s support of cost-effective improvements to the Bay-Delta will improve the quality and reliability of the Bay-Delta s water supply to San Diego County. Water supply reliability was at the heart of the Water Authority s Preferential Rights lawsuit against the Metropolitan Water District. The Water Authority sought a final determination of the legality of MWD s method of allocating water under its system of Preferential Rights. The Water Authority, MWD s largest member agency, has firm rights to only about half the water it purchases each year from MWD. Because of Preferential Rights, San Diego County s water supply is subject to cutbacks in times of shortage. At the close of the fiscal year, the state Supreme Court denied the Water Authority s appeal, which ended the legal challenge and clarified the Water Authority s rights to MWD s supply. The court s decision confirmed it was more important than ever for the Water Authority to further diversify its water supplies and reduce its over-dependence on MWD s supplies.

23 conservation S T R A T E G I E S Public schools and parks in San Diego County that conserve water by installing artificial turf on sports fields and playgrounds can receive incentives of $77 per acre-foot of water saved. In fiscal 2004, three schools replaced grass turf with artificial turf. Rancho Buena Vista and Vista high schools each replaced 80,350 square feet, received $7,268 from the Water Authority, and will conserve 94.4 acrefeet of water over the 10-year life of the turf. Pershing Middle School installed 214,191 square feet of artificial turf, received $20,846, and will conserve acre-feet of water over 10 years. To maintain natural grass turf quality, staff must take the grounds out of play about one quarter to one third of the year for refurbishing. Coolseason grasses are one of the most water-thirsty landscape components. The Water Authority developed this program to provide financial assistance to public organizations to replace grass sports fields with artificial turf. Sports field managers are interested in artificial turf because of water and maintenance savings, as well as demand to keep sports fields open year-round. A standard football field retrofitted with artificial turf will save eight to 10 acre-feet of water each year and 95 acre-feet of water over the 10-year life of the turf. Artificial Turf Saves Local Schools Money 21

24 WATER AUTHORITY S SERVICE AREA FISCAL 2004 Total Population - 2,867,237 (increase of 23,540 people since fiscal 2003) Total acreage - 920,463 Total miles of pipeline The Bay-Delta provides more than 22 million Californians, including San Diego County residents, with at least a portion of their drinking water. KEY WATER FACTS Total Water Delivered via Water Authority System Water Placed into Water Authority Storage Account Deliveries into Olivenhain Reservoir Surface Storage Operating Agreement Deliveries into Storage Emergency Deliveries of Mexico s Treaty Water to Mexico Surface Storage Operating Agreement Deliveries from Storage Total Sales to Member Agencies 720,700 acre-feet -1,140 acre-feet -15,550 acre-feet -70,000 acre-feet -339 acre-feet 10,290 acre-feet 643,961 acre-feet Total Savings from Conservation in Service Area (INCLUDES SAVINGS FROM WATER SYSTEMS AUDIT AND REPAIR PROGRAM) 42,245.4 acre-feet 22

25 the pieces O F S A N D I E G O C O U N T Y S W A T E R P U Z Z L E take shape In June 2004, the Water Authority board of directors voted unanimously to add seawater desalination and 21 other major water facilities to the agency s Capital Improvement Program. This action, the largest investment in water supply reliability and system infrastructure in the Water Authority s 60-year history, more than doubled the agency s CIP from $1.3 billion to $3.1 billion. In fiscal 2004, the Water Authority spent $113.6 million on construction projects, which placed the program ahead of schedule at the midpoint of the two-year appropriation. The water supply and capital improvements currently under way and planned for the future are designed to serve the region s needs through Besides seawater desalination, they include new pipelines and pump stations to convey the water, a water treatment facility, improvements to the existing water delivery system and projects to increase storage capacity throughout the county. In September 2003, the Water Authority dedicated the newly constructed Olivenhain Dam and began filling the 24,000-acre-foot reservoir with imported water from the Second Aqueduct. The $200 million dam completes the first phase of the Emergency Storage Project, an $834 million program to provide emergency water in the event a major earthquake or other disaster disrupts imported water deliveries to San Diego County. The Water Authority also worked on the design and environmental process for the next phase of the storage project, the San Vicente Pipeline. This 11-mile-long tunnel and pipeline will connect the Water Authority s Second Aqueduct in Rancho Peñasquitos to the San Vicente Reservoir in Lakeside. The San Vicente Pipeline will provide access to water set aside in the reservoir for emergencies. The pipeline will also improve the Water Authority s ability to move water around the county. Capital Improvements The 318-foot-high Olivenhain Dam is the tallest rollercompacted concrete dam in North America. DAM/RESERVOIR FACTS Height 318 feet Length 2,552 Feet Cost $200 Million Storage Capacity 24,000 Acre-Feet Surface Area 200 Acres Roller-Compacted Concrete 1.4 Million Cubic Yards A N N U A L R E P O R T

26 the pieces O F S A N D I E G O C take O U N T Y S W A T E R P U shape Z Z L E Increased Storage The San Vicente Reservoir is also playing a significant role in this year s addition of 22 water reliability projects to the Water Authority s $3.1 billion Capital Improvement Program. Under this program, and subject to additional environmental review, the Water Authority plans to raise the existing San Vicente Dam by 110 feet. This will increase storage capacity in the reservoir by 152,000 acre-feet. Of this amount, 52,000 acre-feet will be held in reserve as part of the Water Authority s Emergency Storage Project. The remaining 100,000 acre-feet will be available regionally to meet peak demands, or to carry over from wet to dry years. The San Vicente Dam raise will greatly enhance the Water Authority s water supply reliability. The project team expects to begin construction on the dam raise in An enlarged San Vicente Reservoir will provide needed emergency and carryover storage. 24 A N N U A L R E P O R T

27 Small Business Program Increases Competition The San Diego County Water Authority s Small Contractor Outreach and Opportunities Program (SCOOP) is designed to maximize participation of diverse, qualified contractors, consultants and vendors seeking to do business with the Water Authority. Through SCOOP, the Water Authority improves competition for contracts in areas such as project design and implementation, engineering, construction, public affairs and technical support. With the addition of 22 major capital improvement projects, such as development of regional seawater desalination, water treatment facilities and additional local water storage, additional contract opportunities will be available through the Water Authority s SCOOP. Outreach efforts to small contractors attract small businesses to bid on Water Authority construction projects. CONTRACTS AWARDED TO SMALL BUSINESSES IN FISCAL (56 percent) small businesses of 524 total firms bid on construction projects 184 (40 percent) small businesses of 462 firms were awarded contracts $15,452,861 (22 percent) of $69,760,244 awarded to small businesses 75 of 83 contracts awarded were valued at less than $1 million 6,245 firms are in the Water Authority s SCOOP databases 25

28 Aqueduct Protection Program The Aqueduct Protection Program is an important component of the Capital Improvement Program. The program s mission is to prevent losses and service interruptions to the Water Authority s member agencies caused by pipeline or other facility failures. Under this program, engineers and inspectors detect deterioration in the pipelines so the pipelines may be repaired or replaced before they fail. Since the program was initiated in 1990, no section of inspected pipe has failed. Under the Water Authority s program, the agency strategically shuts down and drains sections of its 281 miles of pipeline each winter when water demands are lowest. Engineers then enter the pipeline and inspect them internally. When deterioration is discovered, staff repairs or replaces the affected sections of pipe. Water Authority staff proactively inspect and repair pipelines to prevent leaks or other failures. Fiscal 2004 was the largest pipeline shutdown season in Water Authority s history. Staff conducted five scheduled shutdowns and two unscheduled shutdowns, covering some 61.4 miles. This included inspection of 10 different sections of the Water Authority s First and Second aqueducts, including both treated and untreated pipelines and related facilities. During the fiscal 2004 shutdown season, staff performed eight urgent repairs. In addition to regular pipeline condition assessments, the staff also performed warranty inspections on pipelines, vaults, a pressure control facility and the Twin Oaks Valley Diversion Structure. 26

29 Colorado River water winds its way to San Diego County, making up 66 percent of the region s imported water supply. A N N U A L R E P O R T

30 the pieces O F S A N D I E G O C take O U N T Y S W A T E R P I shape C T U R E Community Support Water Authority staff member discusses the San Vicente Pipeline project with community members. To be successful, capital improvement construction, water conservation, seawater desalination and the Quantification Settlement Agreement all depend on the support and participation of the San Diego County community. Together, the Water Authority and its member agencies work to build that community support. Outreach efforts to small contractors attracted more local businesses to bid on Water Authority construction projects. Public outreach to communities where construction took place kept neighboring residents and businesses informed of activity and progress. The Water Authority s conservation experts concentrated on working with commercial and industrial businesses to save more water through conservation. Business and civic organizations throughout the San Diego region helped the Water Authority s programs by passing resolutions and writing letters of support for legislation that furthered the QSA and seawater desalination. The Water Authority also manages its own regional school education program. The program offers students from kindergarten through high school a wide array of educational opportunities including the Splash Science Mobile Lab, Traveling Library, Splashtastic Magic Show, curriculum materials, water testing kits and computer programs. The education program is available to more than 400 elementary schools, more than 80 middle schools and more than 60 high schools. Water Authority staff make classroom presentations to teachers and students. During the school year, Water Authority staff reached more than 67,700 students. 28 A N N U A L R E P O R T

31 Summary Fiscal 2004 was the year the many pieces of the water diversification puzzle began falling into place. The Water Authority-Imperial Irrigation District water transfer clicked in when all the parties agreed on the way the components of the QSA fit together. Then the Water Authority board found that no water supply reliability puzzle would be complete without seawater desalination and regional water treatment. Closely linked were increasingly aggressive water conservation and recycling programs and programs to improve the quality and reliability of imported water supplies. Other key puzzle pieces were the addition of 22 new capital projects. Strong community support and financial stability were the final elements to complete the picture. The shape of San Diego County s water future is clear. With these programs, the San Diego County Water Authority and its 23 member agencies will continue to provide a diversified, safe and reliable water supply to support this region s vibrant economy and quality of life for decades to come. San Diego Skyline 29

32 Financial Stability In May 2004, the Water Authority board accepted a recommendation from a Member Agency Rate Impact Review Committee, comprised of member agency general managers. The committee, over a six-month period, analyzed how construction of CIP projects will impact water rates in the future. Their report affirmed the need for the projects and that they could be built at affordable costs to ratepayers. Thanks to the strong leadership and hard work of the member agency general managers, the Water Authority developed a long-range financing plan that balances affordability and reliability. The rate plan will finance the majority of the debt over 30 years. The committee concluded that an average family of four using half an acre-foot of water per year will pay an additional $3.75 more per month in 2016 to pay for the 22 additional CIP projects. The Water Authority has an AA rating by Standard and Poor Rating Services, and AA- ratings by Moody s Investor Service and Fitch Ratings Ltd. These high ratings lower the cost of borrowing for the Water Authority and help keep water rates affordable. This year, the agency once again earned the Distinguished Budget Presentation Award from the Government Finance Officers Association and the Excellence in Operational Budgeting Award from the California Society of Municipal Finance Officers. It also received a Certificate of Achievement for Excellence in Financial Reporting from the GFOA and the Outstanding Financial Reporting Award from the CSMFO for its comprehensive annual financial report. In addition, the Association of Public Treasurers of the United States and Canada recognized the agency for excellence in investment policy. 30

33 contents F I N A N C I A L I N F O R M A T I O N Selected Financial Highlights page 32 Statements of Net Assets Income Statements Portfolio Master Summary Sources and Expenditures of Cash Continuing Disclosure of Financial Information page 35 Member Agency Voting Entitlements Summary of Debt Outstanding Summary of Water Rates Water Source and Use Gross Water Receipts by Member Agency Historical Operating Results Investment Policy Portfolio Master Summary Economy of San Diego Appendix page 46 Analysis of MWD s Water Supplies Member Agency Map and Water Authority Board of Directors S A N D I E G O C O U N T Y W A T E R A U T H O R I T Y 31

34 Statements of Net Assets { Fiscal Years Ended June 30, 2004 and 2003 } ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 50,878,000 $ 63,144,000 Investments 21,190,000 24,961,000 Accounts and Taxes Receivable 66,815,000 48,803,000 Inventories 8,351,000 1,374,000 TOTAL CURRENT ASSETS 147,234, ,282,000 NONCURRENT ASSETS Restricted Cash and Cash Equivalents 17,712,000 19,669,000 Restricted Investments 279,602, ,431,000 Capital Assets, Net 1,302,291,000 1,195,104,000 Intangible Assets 82,629,000 Unamortized Bond Issuance Costs 5,398,000 5,938,000 TOTAL NONCURRENT ASSETS 1,687,632,000 1,606,142,000 TOTAL ASSETS 1,834,866,000 1,744,424,000 LIABILITIES CURRENT LIABILITIES Accounts Payable and Other Liabilities 77,857,000 67,120,000 Current Portion of Long-Term Debt 158,089, ,610,000 TOTAL CURRENT LIABILITIES 235,946, ,730,000 Noncurrent Liabilities 739,206, ,615,000 TOTAL LIABILITIES 975,152, ,345,000 NET ASSETS Invested in Capital Assets, Net of Related Debt 541,316, ,041,000 Restricted for Construction Projects 199,111, ,221,000 Restricted for Rates Stabilization 56,502,000 64,437,000 Unrestricted 62,785,000 52,380,000 TOTAL NET ASSETS $ 859,714,000 $ 821,079, S E L E C T E D F I N A N C I A L H I G H L I G H T S

35 Income Statements { Statements of Revenues, Expenses and Changes in Net Assets for Fiscal Years Ended June 30, 2004 and 2003 } WATER SALES $ 298,468,000 $ 283,044,000 OPERATING EXPENSES Cost of Sales 241,137, ,347,000 Depreciation and Amortization 17,894,000 17,645,000 Operations and Maintenance 9,542,000 9,057,000 Planning 3,888,000 3,812,000 General and Administrative 11,944,000 11,933,000 TOTAL OPERATING EXPENSES 284,405, ,794,000 OPERATING INCOME 14,063,000 16,250,000 NONOPERATING REVENUES (EXPENSES) Property Taxes and In-Lieu Charges 8,712,000 8,079,000 Investment Income 7,132,000 19,955,000 Infrastructure Access Charge 11,016,000 10,091,000 Other Income 1,812, ,000 Interest Expense (29,104,000) (25,603,000) Other Expenses (380,000) (318,000) Operating Reserve Distribution (11,990,000) (14,000,000) TOTAL NONOPERATING REVENUES (EXPENSES) (12,802,000) (802,000) NET INCOME BEFORE OTHER REVENUES, EXPENSES, GAINS, LOSSES, AND TRANSFERS 1,261,000 15,448,000 Capital Contributions 37,374,000 48,128,000 INCREASE (DECREASE) IN NET ASSETS 38,635,000 63,576,000 Net Assets at Beginning of Year 821,079, ,503,000 NET ASSETS AT END OF YEAR $ 859,714,000 $ 821,079,000 S A N D I E G O C O U N T Y W A T E R A U T H O R I T Y 33

36 Portfolio Master Summary { Fiscal Years Ended June 30, 2004 and 2003 } INVESTMENTS As of June 30, 2004 and 2003, restricted reserve fund cash balances were as follows: Construction $ 5,197,000 $ 122,088,000 Rate Stabilization 56,502,000 64,437,000 Pay-As-You-Go 180,509, ,468,000 Debt Service Reserve 55,106,000 55,106,000 QSA Commitment Fund 10,377,000 Equipment Replacement Fund 8,100,000 7,090,000 TOTAL $ 315,791,000 $ 412,189,000 As of June 30, 2004 and 2003, unrestricted cash balances were as follows: Operating $ 53,591,000 $ 81,015,000 Sources and Expenditures of Cash { Fiscal Years Ended June 30, 2004 and 2003 } SOURCES OF CASH TO FUND EXPENDITURES Water Sales $ 298,468,000 $ 283,044,000 Taxes 8,712,000 8,079,000 Interest Income* 12,452,000 17,959,000 Standby Charge 10,702,000 10,743,000 Capacity Charge 27,021,000 26,305,000 Infrastructure Access Charge 11,016,000 10,091,000 Other Revenue 1,812, ,000 Capital Reimbursement (349,000) 11,079,000 Rate Stabilization Transfer 8,151,000 1,400,000 Net Pay-As-You-Go Deposit (21,101,000) (18,531,000) Net Construction Draw 110,060, ,032,000 Net Operating Fund Draw 7,604,000 Rate Stabilization Deposit (1,933,000) Net Equipment Replacement Draw 318,000 TOTAL $ 472,933,000 $ 477,195,000 EXPENDITURES Water Purchases $ 241,137,000 $ 224,347,000 Operating Budget 25,721,000 25,326,000 Capital Budget 113,603, ,049,000 Debt Service** 69,419,000 80,407,000 Operating Reserve Distribution*** 11,990,000 14,000,000 QSA Environmental Commitments 10,744,000 Equipment Replacement Fund 319,000 TOTAL $ 472,933,000 $ 473,129,000 ***Interest income shown net of unrealized gain/loss on investments. ***Debt Service is net of amortization of discounts and premiums and deferred refunding. ***Refund to member agencies due to change in the Operating Fund Reserve Policy replacing its 60-day minimum ending balance with a 45-day maximum ending balance. 34 S E L E C T E D F I N A N C I A L H I G H L I G H T S

37 Continuing Disclosure of FINANCIAL INFORMATION The purpose of this document is to provide information about the San Diego County Water Authority for the fiscal year ended June 30, The document provides continuing disclosure for the Water Authority s six fixed-rate debt issues currently outstanding. The economic and demographic data contained in this document has been collected from sources believed to be accurate. The Water Authority, however, makes no assurances about the accuracy or reliability of this information. The Water Authority does not intend that the enclosed information be relied on as specific offering information in connection with any issuance of bonds. Investors may receive further documentation about the Water Authority by requesting its most recent official statement from the Municipal Securities Rulemaking Board or a Nationally Recognized Municipal Securities Information Repository. Requests may also be directed to: Karen P. Brust, Director of Finance/Treasurer San Diego County Water Authority 4677 Overland Ave. San Diego, CA (858) kbrust@sdcwa.org San Diego County Water Authority Management Maureen A. Stapleton, General Manager Paul A. Lanspery, Deputy General Manager Dennis A. Cushman, Assistant General Manager Karen P. Brust, Director of Finance/Treasurer Daniel S. Hentschke, General Counsel S A N D I E G O C O U N T Y W A T E R A U T H O R I T Y 35 35

38 O V E R V I E W O F T H E S A N D I E G O C O U N T Y W A T E R A U T H O R I T Y GENERAL The Water Authority was organized by nine member agencies in 1944 for the primary purpose of supplying water to San Diego County for distribution to the Water Authority s member agencies. The Water Authority currently has 23 member agencies. A member of the San Diego County Board of Supervisors also serves as a representative to the Water Authority board of directors. As a wholesaling entity, the Water Authority has no retail customers, serving only its member agencies. The Water Authority has broad powers related to acquiring, developing, storing, transporting, selling and delivering water both inside and outside its boundaries. The Water Authority is authorized to fix and collect rates or other charges for the purchase and delivery of water or the use of facilities for service. The Water Authority may borrow money, incur indebtedness and issue bonds and other evidences of indebtedness. The Water Authority currently receives a minor amount of revenue from hydroelectric power sales. Legislation enacted in September 2000 expands the Water Authority s power generation authority to include the purchase, sale and transmission of energy. Member Agency Voting Entitlements { As of Jan. 1, 2004 } Total Financial Contribution 1 Votes 2 Percentage Carlsbad Municipal Water District $ 204,890, % City of Del Mar 19,168, City of Escondido 200,770, Fallbrook Public Utility District 159,171, Helix Water District 475,550, City of National City 3 53,013, City of Oceanside 297,838, Olivenhain Municipal Water District 142,490, Otay Water District 268,353, Padre Dam Municipal Water District 211,956, Camp Pendleton Marine Corps Base 11,326, City of Poway 128,226, Rainbow Municipal Water District 265,910, Ramona Municipal Water District 98,143, Rincon del Diablo Municipal Water District 96,960, City of San Diego 2,572,396, San Dieguito Water District 71,236, Santa Fe Irrigation District 91,653, South Bay Irrigation District 3 167,391, Vallecitos Water District 122,619, Valley Center Municipal Water District 349,358, Vista Irrigation District 173,250, Yuima Municipal Water District 20,679, TOTAL $ 6,202,359,727 1, % 1 Total financial contribution equals base revenues plus fiscal 2003 revenues. 2 Rounded values. 3 Comprise Sweetwater Authority. The 23 voting member agencies currently served by the Water Authority consist of six cities, 16 special districts and one federal agency. Under the County Water Authority Act, California Statutes 1943, Chapter 545, a member agency s vote is based on its total financial contribution to the Water Authority since the Water Authority was organized in Total financial contribution includes all amounts paid in taxes, assessments, fees and charges to or on behalf of the Water Authority or the Metropolitan Water District of Southern California excluding charges for water treatment. The act authorizes each board member to cast one vote for each $5 million, or major fractional part thereof, of the total financial contribution paid by the member agency. 36 C O N T I N U I N G D I S C L O S U R E O F F I N A N C I A L I N F O R M A T I O N

39 S U M M A R Y O F D E B T O U T S T A N D I N G The table below summarizes the Water Authority s outstanding fixed-rate debt, including final maturities, original par amounts, amounts outstanding and applicable debt service reserve fund requirements. This information is presented as of June 30, Fixed-Rate Debt Outstanding { Fiscal Year Ended June 30, 2004 } Final Original Amount Debt Service Issue Name Maturity Par Amount Outstanding Reserve Funds Water Revenue Certificates of Participation, Series 1991B 2011 $ 136,700,000 $ 56,700,000 $ 21,329,000 1 Water Revenue Refunding Certificates of Participation, Series 1993A ,650,000 61,665,000 13,565,000 1 Water Revenue Refunding Certificates of Participation, Series 1997A ,315, ,210,000 15,196,610 Water Revenue Certificates of Participation, Series 1998A ,000, ,000,000 15,392,000 Water Revenue Certificates of Participation, Series 2002A ,000, ,065,000 18,375,500 TOTAL $ 914,665,000 $ 723,640,000 1 Balance satisfied with surety bond. Source: San Diego County Water Authority, Comprehensive Annual Financial Report, June 30, COMMERCIAL PAPER PROGRAM The Water Authority has a commercial paper program through which it can borrow up to $250 million for periods of up to 270 days. Currently, the amount that can be borrowed is limited to $110 million, the amount of the revolving credit and term loan agreement that supports a portion of the program. The revolving credit and term loan agreement, unless otherwise extended, will terminate on Nov. 7, During the term of the agreement, the Water Authority is obligated to pay a usage fee of 0.16 percent on the commitment. Currently, no advances have been made under the revolving credit and term loan agreement. The Water Authority maintains remarketing arrangements with two dealers at a total cost of 0.05 percent on the outstanding commercial paper. The commercial paper notes are secured and payable solely from net water revenues and are subordinate to the water revenue certificates of participation. As of June 30, 2004, $110 million of commercial paper was outstanding. FUTURE DEBT ISSUANCE Future debt issuance is largely governed by the Water Authority s current Capital Improvement Program. The CIP, discussed elsewhere in this annual report, has a projected cost of $3.1 billion through the fiscal year ending June 30, The use of debt is prescribed by the Water Authority s Long-Range Financing Plan, which considers overall projected revenues and expenditures, reserve fund balances and debt service coverage factors through The Water Authority s adherence to the Long-Range Financing Plan ensures that when additional debt is issued, revenues and reserves will be available to meet debt service coverage requirements throughout the life of the issue. The current projection of funding sources is approximately 71 percent long-term debt proceeds, 16 percent short-term debt proceeds and 13 percent cash (payas-you-go funds). In fiscal 2005, the Water Authority plans to issue approximately $425 million in new long-term debt. The Water Authority annually assesses its capital financing needs through the budget process. S A N D I E G O C O U N T Y W A T E R A U T H O R I T Y 37