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Home My WebLink About65A - WATERFIX PROJECT UPDATEREQUEST FOR COUNCIL ACTION CITY COUNCIL MEETING DATE: CLERK OF COUNCIL USE ONLY: APRIL 3, 2018 TITLE: APPROVED DISCUSSION AND REVIEW OF THE ❑ As Recommended CALIFORNIA WATERFIX PROJECT E] E] E]OOrrdinance on 1n Reading UPDATE ❑ Ordinance on 2nd Reading (STRATEGIC PLAN NO. 6,1H) ❑ Implementing Resolution ❑ Set Public Hearing For CONTINUED TO r-- FILE NUMBER C111 PANAGER RECOMMENDED ACTION Discuss and review of the California WaterFix project update and consideration of the City Council's position on the matter. DISCUSSION For over a decade, the Metropolitan Water District (MWD) and other State Water contractors have been working with State and Federal agencies to modernize the Bay -Delta water conveyance system through the construction of twin tunnels which would address Southern California water needs as well as enhance the Bay -Delta ecosystem and habitat restoration. The environmental restrictions through the years have reduced pumping operations in the Delta which severely impacts expected water exports to Southern California. The proposed project known as the California WaterFix (WaterFix) seeks to take water north of the Delta through two 40 -foot diameter tunnels to south of the Delta. The bypass would reduce reverse flows which impact sensitive habitats and fish, and which have led to reduction of Delta water exports. The California State Department of Water Resources (DWR) approved the WaterFix in July of 2017. In the fall of 2017, State Water Project (SWP) and Central Valley Project (CVP) Contractors were asked by DWR for their participation and financial commitment to the project. Mostly all of the SWP Contractors agreed to fully participate, including MWD [1]. However, due to certain institutional and financial structures, some of the largest CVP Contractors chose not to fully participate, in particular Westlands Water District, resulting in 1/3 of the Full Project being unsubscribed. Staged Approach To align committed agencies, Governor Brown announced a new "Staged Approach" where the Full project would be broken into two stages [2]: 65A-1 Discussion and Review of the California WaterFix Project update April 3, 2018 Page 2 • Stage 1 (2/3 of 9,000 cfs = 6,000 cfs) — Construct one tunnel, one intermediate forebay, two intakes, and one pumping station • Stage 2 (1/3 of 9,000 cfs = 3,000 cfs) — Construct second tunnel, third intake, and second pumping station This Staged Approach would start with a single tunnel to accommodate the subscription of the SWP Contractors that signed on; and construct the second tunnel at a later date when additional capacity is needed. Recent Developments In February 2018, MWD staff presented to the Board the water supply analysis and cost comparison of the Governor's "Staged Approach" with the Full Project. Overall, the Staged Approach provides water quality, water transfer, seismic, and environmental benefits, but they are not equal to the Full Project, in particular the water supply benefits. Stage 1 would cost about a 1/3 less, but the water supply benefits would also be impacted. Capital costs would be reduced from $16.7 billion to $11.1 billion; howeverthe water supply reduction would be reduced by 400,000 AF. Based on cost comparisons, the MWD Board asked staff to evaluate the costs and benefits of MWD financing the unsubscribed portion which is roughly 3,000 cfs or 1/3 (in other words, MWD financing the second tunnel). At a MWD Board Workshop on March 27, 2018 MWD staff provided analysis of investing in the construction of the two tunnels. Below is MWD's financial exposure of taking on the 33% unsubscribed share: 65A-2 Discussion and April 3, 2018 Page 3 Review of the California WaterFix Project update o Such an endeavor would increase MWD's share to 64.6% and result in an annual cost impact increase from 1.1 % to 2.2%, or two times the original amount. o The water supply benefit to MWD would increase from 410,000 AF (under Staged Approach) to 840,000 AF under average conditions. Financing and purchasing the unsubscribed share of the California WaterFix would require a new Master Agreement with DWR to ensure all benefits accrue to MWD. MWD would want to maintain the ability to sell and lease excess capacity and/or water to ensure a return on investment. MWD desires to set terms, compensation amounts, and capacity to other State or Federal Contractors for the life of the Project. MWD believes this provides the flexibility to help balance supplies from both the State Water Project and the Colorado River. Source of Santa Ana Water The City of Santa Ana's water supply comes primarily from groundwater (about 75%). A blend of imports from northern California and the Colorado River make up the remaining 25%. MWD Board Meetinq An item has been added to the upcoming April 10, 2018 MWD Board meeting Agenda to discuss this matter. MWD staff is seeking to have the Board consider two main actions: o MWD's share of the project is 67% (31.6% of the total) o Additionally, MWD and others would finance the unsubscribed 33% through the SWP Buyer's Group with contracts executed obligating CVP Participants to pay up to 33% of the cost The Cities of Santa Ana, Fullerton, and Anaheim are scheduled to meet on April 3, 2018 with their MWD Board Directors to discuss the actions being considered. STRATEGIC PLAN ALIGNMENT This item supports Strategic Plan Item 6. Community Facilities & Infrastructure, 1. Establish and maintain a Community Investment Plan for all City assets, h. Complete water/waste water rate study to ensure adequate resources to capture critical long-term capital needs. 65A-3 Discussion and Review of the California WaterFix Project update April 3, 2018 Page 4 FISCAL IMPACT The fiscal impact will require careful review and analysis by staff before a determination can be made for City Council review and consideration. Edwin "William" ez, P.E. Acting Executive Director Public Works Agency 65A-4