25C - AGMT - WATER PURCHASE ORDER

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Water Purchase Order Agreement with Metropolitan Water District December 16, 2014 Page 2 member agency water purchase commitments and limits the quantity of water that can be purchased at the lower, Tier 1 rate. No Purchase Order Option The No Purchase Order option allows member agencies to opt out of entering into an agreement for water purchases. If this option were selected, the City's annual water purchases at the Tier 1 rate would be limited to a maximum of 13,078 AF. Any water required in excess of this amount would be charged at the Tier 2 rate and be subject to the availability of Tier 2 water supplies. Updated Base Purchase Order Option The Updated Base Purchase Order option sets the limit of Tier 1 water available for purchase based on the highest fiscal -year sales during the 12 -year period of FY 2003 through FY 2014. Under this option the City's minimum annual purchase commitment would be 13,204 AR Current Base Purchase Order Option The Current Base Purchase Order option sets the limit of Tier 1 water available for purchase based on the highest fiscal -year sales during the 13 -year period of FY 1990 through FY 2002. Under this option the City's minimum annual purchase commitment would be 8,086 AF. The table below provides a comparison of the three options for the City of Santa Ana: Selection Criteria Annual Commitment 10 -Year Commitment Annual Tier 1 10 -year Tier Tier 1 1 (AF) AF Maximum (AF) Maximum No PO 0 0 13,078 NA Updated Base PO 13,204 132,040 19,807 198,070 Current Base PO 8,086 80,860 19,617 196,170 In recent years, total citywide water consumption has averaged approximately 40,000 AF per year. Of that total, the amount of water purchased from MWD varies from year to year, depending on a variety of operational factors, but is typically between 11,000 AF and 14,000 AF per year. Staff recommends selecting the Current Base Purchase Order option which offers the lowest purchase order commitment and, at the same time, allows the purchase of up to 19,617 AF per year of water at the lower, Tier 1 rate. For Santa Ana, the 10 -year purchase commitment is 80,860 AF with the flexibility to purchase up to 196,170 AF at Tier 1 rates. Staff estimates that, based on current water demand trends and supply sources, the purchase order commitment will be satisfied by the eighth year, two years ahead of schedule. STRATEGIC PLAN Approval of this item supports the City's efforts to meet Goal #6 Community Facilities & Infrastructure, Objective #1 (establish and maintain a Community Investment Plan for all City assets). Approval of this item also supports the City's efforts to meet Goal #4 City Financial Stability, Objective #1 (maintain a stable, efficient, and transparent financial environment). 25C -2