METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA (4)

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summary of the estimated benefits of the demand management programs as measured by Metropolitan's anticipated expenditures for these programs in fiscal year 2012/13 is shown in Table 1. Local Resources Program In 1998, Metropolitan's Board adopted the Local Resources Program (LRP) with the goal of developing local water resources in a cost-efficient manner. Financial incentives of up to $250 per acre-foot are provided to member agency -sponsored projects that best help the region achieve its local resource production goals of restoring degraded groundwater resources for potable use and developing recycled supplies. in both instances, the programs provide new water supplies, which help defer the need for additional regional conveyance, distribution and storage facilities. Combined production from participating recycling and groundwater recovery projects is expected to yield approximately 220,000 acre-feet of water for fiscal year 2012/13 with financial incentive payments of about $33 million. Regional recycling, recovered groundwater, and desalinated seawater production are projected to be about 658,000 acre-feet per year, by year 2025. An estimate of potential benefits as measured by Metropolitan's estimated incentive payments for recycling and groundwater recovery projects is shown in Table 2. Water Conservation Metropolitan actively promotes water conservation programs within its service area as a cost-effective strategy for ensuring the long -terra reliability of supplies and as a means of reducing the need to expand system conveyance, distribution and treatment capacity. Through the Conservation Credits Program, Metropolitan reimburses local agencies for a share of their costs of implementing conservation. projects. Since fiscal year 1990/91, Metropolitan has spent over $309 million in financial incentives to support local conservation projects. In 1991, Metropolitan agreed. to implement conservation "Best Management Practices" (BMPs). By signing the California Urban Water Conservation Council's Memorandum of Understanding Regarding Urban Water Conservation (amended March 10, 2004), Metropolitan committed to implement proven and reliable water conserving technologies and practices within its jurisdiction. Based on Metropolitan's IRP, the Conservation Credits Program, in conjunction with plumbing codes and other conservation efforts, has saved over 1,569,000 acre-feet since inception through fiscal year 2010/11. In order to comply with the Governor's mandate of reducing demand by 20 percent by the year 2020, Metropolitan is working on increasing its conservation efforts in the next ten years to meet that request. Conservation is a critical element of Metropolitan's demand management program, effectively increasing the reliability of existing water supplies by lessening the need to import additional water while at the same time deferring the need to expand system capacity. An estimate of the potential benefits of water conservation projects as measured by Metropolitan's incentive payments is given in Table 2. LONG-RANGE FINANCIAL PLANNING Metropolitan's major capital facilities are financed largely from the proceeds of revenue bond issues, which are repaid over future years. The principal source of revenue for repayment of these bonds is water sales, which is currently Metropolitan's largest source of revenue. In addition, ad valorem property taxes provide an additional limited revenue source, which is used to pay pre-1978 voter -approved indebtedness. Since the passage of Article XIHA of the California Constitution, Metropolitan has necessarily relied more on water sales revenue than on ad valorem property taxes for the payment of debt. Water sales have become the. dominant source of revenue, not only for operation and maintenance of the vast network of facilities supplying water to Southern California, but also for replacement and improvement of capital facilities. 10