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HomeMy WebLinkAboutItem 2e: Lease Agreement with California Domestic Water. IFOR^,I9y� r ;,,ge; 5, 1903 �m�nr�yot���y STAFF REPORT Public Works Services Department DATE: May 21, 2013 TO: Honorable Mayor and City Council FROM: Tom Tait, Public Works Services Director SUBJECT: AUTHORIZE AND DIRECT THE CITY MANAGER TO EXECUTE A LEASE AGREEMENT WITH THE CALIFORNIA DOMESTIC WATER COMPANY FOR 3,000 ACRE FEET OF FISCAL YEAR 2012 -13 WATER PRODUCTION RIGHTS IN THE MAIN SAN GABRIEL BASIN FOR A TOTAL COST OF $1,817,100 Recommendation: Approve SUMMARY Each year the City of Arcadia is allowed to pump a specified quantity of water from the Main San Gabriel Groundwater Basin (Main Basin) free of Replacement Water assessments. For Fiscal Year 2012 -13, the City of Arcadia's pumping right was set at 8,461.98 acre -feet of water. The quantity of water pumped from the Main Basin over the City's pumping right is replaced by purchasing Replacement Water. This Fiscal Year, it is estimated that the City's Replacement Water obligation will be approximately 4,500 acre -feet. Additionally, the Replacement Water assessment is $673 per acre -foot if purchased through the Main San Gabriel Basin Watermaster ( Watermaster). California Domestic Water Company has offered to lease the City 3,000 acre -feet of water rights for a unit cost of $605.70 per acre -foot for a total cost of $1,817,100. This lease will save the City $201,900. It is recommended that City Council authorize the City Manager to execute a lease agreement with California Domestic Water Company for 3,000 acre -feet of Fiscal Year 2012 -13 water production rights for a total cost of $1,817,100. DISCUSSION In 1973, as a result of overproduction of water from the Main Basin, a stipulated judgment was entered into that created the Watermaster. The Watermaster is a nine - person board appointed by the Los Angeles County Superior Court that administers and enforces the provisions of the Main San Gabriel Basin Judgment, which established water rights and responsibility for efficient management of the quantity and quality of the Main Basin's groundwater. California Domestic Water Company Water Rights Lease Agreement May 21, 2013 Page 2 of 2 This is accomplished in part by the Watermaster determining the total amount of water that can be pumped from the Main Basin each year, which is referred to as the Operating Safe Yield. The City of Arcadia's share of the Operating Safe Yield, free of assessments, is 4.23 %. Although there is no limit on the quantity of water that may actually be pumped by agencies from the Main Basin, groundwater production in excess of the City's annual share requires purchase of Replacement Water to recharge the Main Basin. Additionally, an agency that over pumps their share of the Operating Safe Yield can lease water rights to supplement water pumped in that same year. Typically, these leased water rights are slightly less than what the producer would pay for Replacement Water. For Fiscal Year 2012 -13, the City of Arcadia was allowed to pump 8,461.98 acre -feet of water from the Main Basin. This year, the City is projected to pump 13,000 acre -feet of water from the Main Basin. As a result, the City's total over production is estimated to be 4,500 acre -feet. Accordingly, the City is responsible to purchase Replacement Water or obtain leased water to account for the over production. The cost from the Watermaster for Replacement Water for Fiscal Year 2012 -13 is $673 per acre -foot. Normally, the City would be billed by the Watermaster in July for the City's total over production at the $673 per acre -foot rate. However, California Domestic Water Company has determined that they will not pump all of their adjudicated rights for this Fiscal Year and has offered to lease the City 3,000 acre -feet of water rights at a cost of $605.70 per acre -foot (90% of the rate set by the Watermaster), for a total cost of $1,817,100. These additional pumping rights can be used to partially satisfy the City's obligation for Replacement Water. June 30, 2013, is the end of the Fiscal Year, at which time, the City will know exactly how much water was produced for the Main Basin. It is estimated that the City will need to purchase an additional 1,500 acre -feet at the Fiscal Year 2012 -13 Assessment Rate of $673 per acre -foot. The purchase of Replacement Water at 90% of the Replacement Water assessment rate is prudent and will save the City $201,900. The City has done similar water rights leases in the past with producers in the Main Basin. FISCAL IMPACT Sufficient funds have been budgeted in the Fiscal Year 2012 -13 Water Operations Fund for the purchase of Fiscal Year 2012 -13 Replacement Water. The purchase of water under this agreement would save the City $201,900 in the Water Operations Fund. RECOMMENDATION It is recommended that City Council authorize and direct the City Manager to execute a Lease Agreement with California Domestic Water Company for 3,000 acre feet of Fiscal Year 2012 -13 water production rights in the Main San Gabriel Basin for a total cost of $1,817,100. Approved: Dominic Lazzar City Manager