Water for Christmas?

California’s aging State Water System with its surface canals and pumps was designed to meet the needs of 25 million California farmers and urban users. Today, it struggles to provide sustainable water for 40 million current state residents. Fortunately, technology – at a price – can help solve the problem, especially for coastal communities, if government does the right thing by mostly getting out of the way.

Water Supply Agreement with the City of Santa Barbara

Two years after his election to the Montecito Water District Board, Floyd Wicks, the new incoming president of MWD, and Nick Turner, General Manager of MWD, both engineers and professional water managers, have reached tentative agreement at a staff level with Josh Haggmark, Water Resources Manager for the City of Santa Barbara, for a negotiated term sheet for an historic water purchase arrangement between the City of Santa Barbara and the Montecito Water District (MWD).

Robust negotiations with the City of Santa Barbara have replaced earlier efforts that have dragged on since 2015. Initially MWD’s negotiating team consisted of a pair of trial lawyers more interested in arguing liabilities than in negotiating a business deal. Then came mixed signals from the MWD Board and its previous GM as to whether a deal was needed or not.

This year, with ample assistance from negotiator and consultant David Moore of CleanEnergyCapital, staff-level dealmakers and board-level strategic planners have crafted a preliminary term sheet that was presented to the MWD Strategic Planning Committee last Thursday, December 6, and to the Santa Barbara City Council on Tuesday, December 11. Consensus at the staff level is a major breakthrough. Here is a preliminary look at the basic terms of a suggested business deal:

Proposed Terms 

Volume of Water. Rather than the initial 1,250 acre-feet per year (AFY) of water requested from the City three years ago, the volume of water to be delivered by the City would be a more ambitious 1,430 AFY regardless of rainfall.

The 1,430 AFY of new water from the City, is expected to be augmented by a second, still-to-be-negotiated 500 to 1,000 AFY of recycled wastewater deal, probably with a different partner for greater diversification in the MWD portfolio. If both deals can be successfully negotiated, MWD could enjoy two new sources of drought-free water, amounting to at least 1,930 AFY, or 50% of last year’s total Montecito water usage of 3,898 AF. These new portfolio additions of local, drought-free sources of water would substantially reduce MWD’s current 79% dependence on State Water and imported water.

Term of Agreement: 50 years, the longest term allowed under the City Charter. The intent is to provide Montecito with access to a primary supply of new, local, drought-proof, potable water for as long as possible. This would represent a super insurance policy against any potential negative impacts of prolonged climate change.

Cost of Water. Approximately $2,740 per AF. Reliable water from the City of Santa Barbara may be more costly for MWD than State Water in extremely wet years, but the new supply of City water will look cheap in dry years when factoring in Montecito’s potential cost in dead trees, scorched landscaping and a significant hit to the $10 billion in residential real estate value. For once, Montecito needs to get ahead of the future water trend curve, instead of behind it.

Included in the $2,740 per AF cost of City water is a capital charge of $1,188 per AF to pay 28.6% of the cost of the plant, based on volume delivered. The price includes one additional RO treatment train at the desal plant instead of the current 3-train configuration. Adding volume to the desal plant reduces the unit cost of water to all users. Also included in the $2,740 price per AF are operating and maintenance costs, both variable and fixed, that add another $1,112 per acre foot. Other included costs are a development and administration fee for an additional $206 per AF.

Finally, the City will charge Montecito $233 per AF for its “fair share” of a conveyance pipeline and pumping system to carry water from the City desalination plant up to the Cater Treatment plant, where it will connect to the South Coast Conduit to transport the potable water to the District’s service area. Without the conveyance pipeline, MWD would not have access to the water.

Source of City Water for Montecito. The source of supply is at the City’s option. It can be from the city-owned desalination plant – or from excess water supplies in wet years, or purchased imported water, or Gibraltar Reservoir, or even recycled water treated to a potable standard that meets State regulations. In the event the City elects not to produce water from the desalination plant, the City is obligated to maintain the desalination plant’s ability to promptly resume water production in the event that it is needed to meet its water obligations to MWD.

Quality of Water. Water delivered to MWD must meet all state and federal primary drinking water quality requirements.

Start of Service. Service to MWD cannot begin until the completion of the City’s conveyance pipe and pumps linking the seaside desalination plant with the Cater Treatment connection to the South Coast Conduit. That work could be completed as early as late 2020. The City will be making a decision in late Spring 2019 as to whether to add a fourth RO train to the desal facility, based on winter rainfall and customer demand. Both the City and MWD are projecting adequate supplies of water to service their respective customer needs through 2021. 

Current Water Supply Source

This year, 79% of the MWD supply portfolio is projected to come from an increasingly unreliable drought-prone State Water Project, dependent upon High Sierra snowpack and supplemental purchases from other districts across the State. Fixed costs for State Water, regardless of the amount of water delivered, have mushroomed from $4 million to over $6 million per year, while the contracted amount of water, 3,300 AFY, has bounced between 100% in very wet years when needed least, to only 10% in extended drought years, when needed most.

The delivery of State and imported water has been a lifeline during the drought for all South Coast water users. However, the over-promised and under-delivered State Water system suffers from crumbling infrastructure, inadequate pump and pipe capacity to move water into Lake Cachuma, massive surface evaporation, a Delta aqueduct chokepoint, vulnerability to fire and earthquakes, regulatory spills, excessive fish releases, and climbing costs.

Still, MWD and its fellow water agencies cannot divorce themselves from the State Water system because MWD and all other South Central Coast water providers need the state plumbing system to move water locally. 

Montecito’s Water Needs

Back in 2013, Montecito and Summerland customers used 6,856 AFY of water, which has become the state’s benchmark for reducing MWD water usage by 30% through conservation. Montecito met its conservation goal, initially by imposing rationing allocations with no consideration for private wells. It also implemented rationing penalties to offset decreased sales. For the past two years, voluntary cutbacks in usage, and an end to arbitrary rationing, have maintained conservation levels at greater than 30%. MWD’s total water usage has climbed slowly from 3,555 AFY in 2016-17; to 3,898 AFY in 2017-18; to an estimated 4,202 AFY in 2018-19—all well below the 6,856 AFY usage of 2013.

Goals of the MWD Strategic Plan

The intent of the MWD strategic plan has been to secure an agreement with the City for 1,250 AFY of desalinated or comparable potable water. The plan calls for supplementing that purchase with an arrangement to convert 500 to 1,000 AFY of recycled wastewater and stormwater now being dumped into the Pacific Ocean into indirect and direct potable water. The third leg of the strategic plan envisions a new Groundwater Management Plan to store water underground, locally and/or regionally, in the wet low-usage winter months for extraction in the hot, dry summer and early fall high-usage months.

Up and Coming

The challenge now is for MWD Board and City Council to approve the staff-recommended term sheet. Some feel that the best outcome comes when both parties are skeptical of not getting everything they want, which creates the foundation for a fair deal for both communities. Others prefer that both parties be happy.

As the City’s Joshua Haggmark noted, “Regional agreements, though rare and difficult to negotiate, are a good idea. It makes good sense for communities to share costs and risks.” I agree with the simplicity and elegance of that starting point and commend those leaders who have taken us down this path to greater water security.

It’s a new era in Montecito water management. Last Friday, three elected, not appointed, MWD Directors were sworn in – the impressive financial and management expert Ken Coates; the polished and competent legal mind of Cori Hayman; and the public-private partnership guru, Brian Goebel. They join the November 2016 elected holdovers of Tobe Plough and Floyd Wicks as members of the Montecito Water District Board.

On Monday, two elected, not appointed, Directors, Dana Newquist and Woody Barrett, took their seats on the Montecito Sanitary Board, pledging greater cooperation between the districts. Hope is in the air.