Preliminary DR AF T — Sep tember 8, 2014 Preliminary DRAFT September 8, 2014 2015 CE NT R AL AR I ZO NA G RO U N DWATE R R E PLE N I S H M E NT D I STR I C T PLAN OF OPERATION Preliminary DR AF T — Sep tember 8, 2014 ACKnowledgements BOARD OF DIRECTORS PAMELA PICK ARD, President WARREN TENNEY, Vice-President LISA ATKINS, Secretary GAYLE BURNSPAT JACOBS GUY CARPENTERMARK LEWIS FRANK FAIRBANKSHEATHER MACRE TERRY GODDARDSHARON MEGDAL JIM HARTDEGENCYNTHIA MOULTON JIM HOLWAYCAROL ZIMMERMAN CAGRD & UNDERGROUND STORAGE COMMITTEE OF THE BOARD LISA ATKINS, Chair GUY CARPENTER FRANK FAIRBANKS JIM HARTDEGEN JIM HOLWAY SHARON MEGDAL CYNTHIA MOULTON CAWCD STAFF DAVID MODEER, General Manager DENNIS RULE, CAGRD Manager PERRI BENEMELIS JESSICA FOX TERRI BOXLEY GARY GIVEN CHRIS BROOKS WARREN GRECO TED COOKE TOM HARBOUR CANDI COXTOM MCCANN PATRICK DENT JENI MARTIN GLENN EMANUEL KEN SEASHOLES MARSHA ESMEIER SUZANNE TICKNOR A special thanks to K ATHRYN ROYER and VICK Y CAMPO for their assistance in preparing this document. An additional thanks to KIM MITCHELL, BRIAN RICHARDSON and SHEILA STR ATFORD, our external consultants, for all of their support and expertise in helping us complete the report on schedule. CAGRD would also like to thank the CAGRD Stakeholder Working Group for their participation and input in developing this Plan. 2015 // Plan of Operation i Preliminary DR AF T — Sep tember 8, 2014 TABLE OF CONTENTS XXACKNOWLEDGMENTS XX XX TABLE OF CONTENTS XX XX LIST OF TABLES XX 22.214.171.124 Parcel Replenishment Obligations XX LIST OF FIGURES XX 126.96.36.199 Member Service Area Replenishment XX EXECUTIVE SUMMARY XX 188.8.131.52.1 Contract Replenishment Obligations XX 184.108.40.206.2 Water Availability Status Contract XX CAGRD Plan of Operation Requirements XX 1.0 BACKGROUND 2.2 Historic Replenishment Obligations 2.2.1 Groundwater Replenishment Obligations Obligations Replenishment XX 1.1 Historical Background and Creation of CAGRD XX 2.3Satisfaction of Historic Obligations XX 1.1.1 Early Groundwater Management Efforts XX XX 1.1.2 1980 Groundwater Management Act XX 220.127.116.11 Constructed Underground Storage XX 1.1.3 Post-Groundwater Code Assured and Adequate XX 18.104.22.168 Groundwater SavingsFacilities Water Supply Program XX 1.1.4 Unsuccessful Attempt at First Draft Rules of the 2.3.1 Methods of Satisfying Obligations Facilities XX22.214.171.124 Purchase and Extinguishment of AAWS Program – 1988 XX 1.1.5 Formal AWS Rules Adopted – 1995 XX 1.2 CAGRD’s Water Resource Management Role XX 1.3 Membership Types Existing Long-term Storage Credits XX 2.4 Comparison of Obligations Incurred to Replenishment Satisfied X X 1.3.1 Member Service Areas XX XX 1.3.2 Member Lands(Subdivisions) XX XX 1.3.3 Water Availability Status Members XX3.2 Demand 3.0 OBLIGATION AND ENROLLMENT 3.1 Methodology XX1.4 Chronology of Plans of Operation XX 3.2.1 Existing Demand XX 1.4.1 Initial Plan of Operation XX 3.2.2 New Demand XX 1.4.2 Second Plan of Operation XX 3.2.3 Spatial Housing Unit Distrbution XX 1.4.3 Mid-Plan Review XX 3.2.4 Housing Unit Distribution by Plan Period XX 1.4.4 Third Plan of Operation XX 3.2.5 Gallons per Housing Unit per Day XX1.5 Stakeholder Process XX 3.3 Supply Utilization XX3.3.1 Supply Fulfillment XX 2.0 HISTORIC OPERATIONS XX 2.1 Enrollment History XX XX 126.96.36.199 Member Lands XX 188.8.131.52 Member Service Areas XX 184.108.40.206 Water Availability Status Member XX 2.1.2 Membership in the Pinal AMA XX 220.127.116.11 Member Lands XX 18.104.22.168 Member Service Areas XX 2.1.3 Membership in the Tucson AMA XX 22.214.171.124 Member Lands XX 126.96.36.199 Member Service Areas XX ii 2.1.1 Membership in the Phoenix AMA 2.1.4 Historic Enrollment 2015 // Plan of Operation XX3.4 Replenishment Obligation XX 3.4.1 Member Service Areas XX 3.4.2 Member Lands XX 3.4.3 Estimated 20-Year Obligations for Current Members XX 3.4.4 Estimated 100-Year Obligations for Current and Future Members XX3.4 Enrollment Preliminary DR AF T — Sep tember 8, 2014 XX 4.0 WATER SUPPLIES XX 7.0 FUNDING MECHANISMS XX4.1 Replenishment Obligation XX 7.1 Sources of Revenue XX4.2 Current CAGRD Water Supply Portfolio XX 7.2 Fees XX 4.2.1 CAGRD CAP Entitlements XX XX 4.2.2 Effluent Lease XX 188.8.131.52 Enrollment Fee for Member Lands XX 4.2.3 Long-term Storage Credits XX 184.108.40.206 Enrollment Fee for Member Service Areas XX220.127.116.11 Description of Long-term Storage Credit Purchase Agreements XX4.3 Current CAGRD Water Supply and Projected 7.1.1 Enrollment Fees XX 7.2.2 Activation Fee XX 7.2.3 Replenishment Reserve Fee XX18.104.22.168 Replenishment Reserve Fee for Member Obligations XX 4.4 CAGRD Water Supply Acquisition Program XX XX Lands XX22.214.171.124 Replenishment Reserve Fee for Member 4.4.1 Water Supply Acquisition Program Principles 4.5 Description of Water Supplies Planned for Use 2015 – 2034 Service Areas XX 7.2 Membership Dues XX 7.4 Rates/Assessments/Taxes XX4.5.1 Long-term Storage Credits XX 7.4.1 Annual Rate Setting Process XX 4.5.2 CAP Water XX 7.4.2 Rate Components XX 4.5.3 Effluent XX126.96.36.199 Water and Replenishment Rate Compo- XX 4.5.4 Colorado River Supplies XX 188.8.131.52 Wheeling of Non-project Supplies 4.6 Description of Water Supplies Planned nent XX 184.108.40.206 Administrative Rate Component XX220.127.116.11 Infrastructure and Water Rights Rate for Use 2035 – 2114 Component XX XX 5.0 REPLENISHMENT RESERVE 18.104.22.168 Replenishment Reserve Rate Component XX 7.4.3 Collection of Replenishment Assessments and 5.2 Ten-Year Replenishment Reserve Activities XX 7.4.4 Contract Replenishment Taxes 5.3 Planned Replenishment Reserve Activities XX 7.5 CAGRD Revenue Bonding XX 7.6 CAGRD’s Financial Capability XX 5.1 Reserve Target XX XX XX 5.3.1 Existing CAWCD LTSCs Taxes XX5.3.2 Use of “Excess” Water in CAGRD’s Planned Water Supply Portfolio XX XX 5.3.3 Use of Excess CAP Water 6.0 STORAGE FACILITIES PLANNED FOR USE XX 6.1 Description of Storage Facilities Available XX APPENDIX A List of Abbreviations XX APPENDIX B Chapter 2 – Historic Operations XX APPENDIX C Chapter 5 – Replenishment Reserve XX APPENDIX D Chapter 6 – Storage Facilities Planned For Use XX APPENDIX E Chapter 7 – Funding Mechanisms to the CAGRD XX 6.1.1 Underground Storage Facilities (USFs) Constructed by CAWCD XX 22.214.171.124 CAWCD Policy Regarding Priority Access to CAWCD USF Capacity XX 6.1.2 Groundwater Savings Facilities (GSFs) XX 6.1.3 Effluent Storage Facilities Available to the CAGRD XX 6.2 Potential Storage Facilities 2015 // Plan of Operation iii Preliminary DR AF T — Sep tember 8, 2014 LIST OF TABLES 2.1 CAGRD Member Land Enrollment Through December 31, 2013 2.2 CAGRD Member Service Area Enrollment Through December 31, 2013 2.3 Excess Groundwater Deliveries and Completion of Replenishment Obligation – West Phx AMA 2.4 Excess Groundwater Deliveries and Completion of Replenishment Obligation – East Phx AMA 2.5 Excess Groundwater Deliveries and Completion of Replenishment Obligation – Pinal AMA 2.6 Excess Groundwater Deliveries and Completion of Replenishment Obligation – Tucson AMA 2.7 Total Obligations & Replenishment 1995–2013 3.1 Supply Assumptions 3.2 Supply Utilization Assumptions 3.3 Projected Member Service Area Demand & Obligation by AMA 3.4 Projected Member Land Demand & Obligation by AMA 3.5 Estimated 20-Year Replenishment Obligations for Current Members 3.6 Estimated 100-Year Replenishment Obligations for Current and Future Members 4.1 Water Supplies Acquired by the CAGRD Water Supply Program 4.2 Water Supplies Planned to Use, 2015–2034 and Supplies Potentially Available for Use, 2035–2114 5.1 Projected 100-Year Replenishment Obligation 5.2 Replenishment Reserve Target by AMA 5.3Replenishment Reserve Activity by AMA 5.4 Existing CAWCD Long-term Storage Credits Dedicated to CAGRD Replenishment Reserve 5.5 Available Replenishment Reserve Credits 5.6 Replenishment Reserve Targets and Available Long-term Storage Credits 6.1 Available Storage Capacity B-1 Water Delivered to City of Scottsdale D-1 Inventory of Storage Capacity Available for Use by CAGRD at Selected Recharge Facilities iv 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 LIST OF FIGURES 2.1 Map Showing CAGRD Members in the Phoenix AMA 2.2 Map Showing CAGRD Members in the Pinal AMA 2.3 Map Showing CAGRD Members in the Tucson AMA 2.4 CAGRD Member Land Enrollment Through December 31, 2013 2.5 Obligations and Replenishment Activity 2004 through 2013 in the Phoenix AMA 2.6 Obligations and Replenishment Activity 2004 through 2013 in the Pinal AMA 2.7 Obligations and Replenishment Activity 2004 through 2013 in the Tucson AMA 3.1 Service Area Housing Unit Growth by TAZ 2010 – 2040 3.2 CAP: SAM Water Provider Service Area Coverage 3.3 Enrolled/Unbuilt Member Land Lots by AMA 3.4 Projected Member Land Housing Units by Plan Period 3.5 Member Land Actual Versus Projected Demand 3.6 Projected Municipal Demand New and Exisiting 3.7 Fulfillment by Supply Type 3.8 Excess Groundwater Projection 3.9 Projected CAGRD Obligation by Member Type 3.10 2015 Plan Member Land Construction 3.11 2015 Plan Member Land Enrollment 7.1 CAGRD Revenue Streams B-1 Scottsdale Water Availability Status Replenishment Area D-1 Storage Facilities Available for Use by CAGRD 2015 // Plan of Operation v Preliminary DR AF T — Sep tember 8, 2014 executive summary vi 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 executive summary 2015 // Plan of Operation vii Preliminary DR AF T — Sep tember 8, 2014 CAGRD PLAN OF OPERATION REQUIREMENTS Arizona Revised Statutes (A.R.S.) § 45-576.02.C mandates that CAWCD, acting in its capacity as the Central Arizona Groundwater Replenishment District or “CAGRD”, submit a Plan of Operation to the Director of the Arizona Department of Water Resources (“ADWR”) every ten years. This 2015 CAGRD Plan of Operation must be submitted by December 31, 2014. The purpose of the Plan, as defined by statute, is to describe the activities that CAGRD proposes to undertake during the 100 calendar years following submittal of the Plan. The Plan must include the following information for the Phoenix, Pinal and Tucson Active Management Areas (“AMAs”): viii a.CAGRD’s groundwater replenishment obligations and the extent to which those obligations have been met in the 10 years preceding submittal of the Plan. b.An estimate of CAGRD’s current and projected groundwater replenishment obligations, as that term is defined and used in Title 48, Chapter 22, for current members for the 20 calendar years following the submission of the Plan; and an estimate of CAGRD’s projected groundwater replenishment obligations for current members and potential members for the 100 calendar years following the submission of the Plan based on reasonable projections of real property and service areas that could qualify for membership in the 10 years following the submission of the Plan. c.A description of the water resources that CAGRD plans to use for replenishment purposes during the 20 calendar years following submission of the Plan and water resources potentially available to CAGRD for groundwater replenishment purposes during the subsequent 80 calendar years. d.A description of CAGRD’s current replenishment reserve activities in each active management area for the 10 years preceding the current Plan and planned replenishment reserve activities for the ensuing 10 years to be undertaken pursuant to ARS § 48-3772, subsection E. e.A description of any facilities and projects to be used for replenishment and the replenishment capacity available to CAGRD during the 20 calendar years following submission of the Plan. f. g.A description of CAGRD’s capability to meet the current and projected groundwater replenishment obligations for the 20 calendar years following the calendar year in which the conservation district submits the Plan. h. Any other information that the Director may require. An analysis of potential storage facilities that may be used by CAGRD for replenishment purposes. 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 ADWR REVIEW AND APPROVAL PROCESS Within 60 days of receiving CAGRD’s Plan of Operation, the Director of ADWR must determine whether CAGRD has submitted sufficient information to determine whether the Plan is consistent with the management goals of the Phoenix, Pinal and Tucson AMAs. If the Director determines that the information is insufficient for such a determination, the Director shall notify CAGRD of the insufficiency in writing and shall specify what additional information is required. CAGRD must provide the additional information within a reasonable time as specified by the Director. On determining that the Plan is complete, the Director must publish a notice in a newspaper of general statewide circulation once each week for two consecutive weeks. The public notice shall request public comment concerning the information supplied by CAGRD in its Plan and shall set a date and location of a public hearing to be held to provide any person, including ADWR, an opportunity to comment on or to present evidence concerning the submitted Plan. CAGRD must respond in writing to all public comments whether received at the hearing or otherwise received by a date announced by the Director. Within 120 days after the public hearing, the Director must issue a decision for each AMA (Phoenix, Pinal and Tucson) determining whether or not the Plan submitted with respect to the AMA shall be designated as being consistent with achieving the management goal of the AMA. If the Director determines that the Plan is consistent with achieving the management goal of the particular AMA, the designation for that AMA remains effective until it expires. The Director’s determination expires on December 31 of the year following the year in which CAGRD is required to submit its next plan, or the date the Director issues a decision determining that the next plan is consistent with achieving the management goal of the AMA, whichever occurs first. The Director shall make a determination that CAGRD’s plan is consistent with achieving the management goal for each AMA if all of the following have been demonstrated: •CAGRD has identified sufficient water supplies to meet its replenishment obligations for current members during the 20 calendar years following submission of the Plan and has identified water supplies potentially available for CAGRD’s projected groundwater replenishment obligations for 100 calendar years following submission of the Plan for current members and potential members based on reasonable projections of real property and service areas that could qualify for membership in the ten years following the submission of the plan. •The replenishment reserve target for each AMA was calculated as prescribed in A.R.S. § 48-3772.E, and CAGRD is developing a replenishment reserve in each AMA pursuant to that statute. •CAGRD has identified sufficient capacity at storage facilities and projects to be used for replenishment purposes during the 20 calendar years following submission of the Plan. •CAGRD has made a reasonable estimate of its projected replenishment obligations for the 100 calendar years following submission of the Plan. If at any time between the second anniversary and the eighth anniversary of the Director’s determination of consistency with the management goal, the Director finds that there has been either an unexpected increase in CAGRD’s projected groundwater replenishment obligations or an unexpected reduction in water supplies available to meet CAGRD’s current obligations such that the Plan no longer demonstrates consistency with the management goal for one or more AMAs, the Director shall require CAGRD to submit a revised Plan of Operation. The revised plan must be submitted within one calendar year of the date that the Director notifies CAGRD of such a determination, unless the Director extends this time for good cause. The Director shall review, hold a hearing on and make a determination on the revised plan just as described above, except that the Director shall only hold a public hearing regarding those conditions that have changed. If CAGRD is unable to submit a revised plan that satisfies the Director’s concerns for one or more AMAs, then CAGRD’s Plan shall expire for the respective AMA(s). 2015 // Plan of Operation ix Preliminary DR AF T — Sep tember 8, 2014 1.0BACKGROUND 1.1 HISTORICAL BACKGROUND AND CREATION OF CAGRD In 1993, the Arizona Legislature (“Legislature”) passed the Groundwater Replenishment District Act. The 1993 Act added groundwater replenishment authorities to the statutory authorities already assigned to the Central Arizona Water Conservation District (“CAWCD”). CAWCD’s unique duties and operations under these authorities are commonly referred to as the Central Arizona Groundwater Replenishment District (“CAGRD”). This section provides a short chronology of significant water management events that led to the creation of CAGRD. It begins with a brief history of the 1980 Groundwater Management Act and the state’s first attempt to adopt Assured and Adequate Water Supply rules some ten years later. Also provided is a description of how CAGRD evolved out of the water community’s response to the state’s initial rule-making attempt and the need for a politically viable option in proving water supplies for future developments to support the state’s economic growth. 1.1.1 Early Groundwater Management Efforts Groundwater development in Arizona began around the turn of the century, increasing gradually through the 1930’s. Over time however, increasing mining and agricultural activities, and the associated groundwater demand resulted in several areas of the state reaching a condition of ongoing groundwater overdraft and severely declining water levels. Over the years, the Legislature has engaged in several attempts to address the groundwater overdraft issue within the state. Arizona’s first groundwater code was enacted in 1948 and attempted, mostly unsuccessfully, to curb groundwater overdraft in “critical groundwater areas”. In 1973, the Legislature charged the Arizona Water Commission (predecessor of ADWR) with administering a new Adequate Water Supply Program. That program was created to address mounting concerns over land fraud in the state, where tracts of desert land with little or no available water supply were sold to uninformed buyers. The 1973 Adequate Water Supply Program required that initial buyers of subdivided land be notified of the adequacy or inadequacy of the water supply; the lack of an adequate water supply for the subdivision, however, did not prevent the sale of land. 1.1.2 1980 Groundwater Management Act In 1977, the Legislature created the Groundwater Management Study Commission (“Study Commission”) to investigate alternatives to improve Arizona’s groundwater law. It was expected that the Study Commission’s recommendations would generate changes which ultimately would bring groundwater pumping and natural recharge more closely into balance. The work of the Study Commission, coupled with continuing declines in groundwater levels due to overdraft, and Secretary of the Interior Cecil Andrus’s decision to condition continued funding for the Central Arizona Project (“CAP”) on the state’s enactment of stricter groundwater regulations, led to the adoption in 1980 of a comprehensive groundwater code. This code is known as the Groundwater Management Act (“GMA”; “Groundwater Code”)1. 1 A.R.S. §§ 45-401 through 45-704. 2015 // Plan of Operation 1-1 Preliminary DR AF T — Sep tember 8, 2014 Among other provisions, the GMA created ADWR and charged it with administering the Groundwater Code’s provisions. The GMA also established Active Management Areas (“AMAs”), which are geographic areas in the state where groundwater overdraft was most critical. The Groundwater Code imposed new regulations on groundwater use within the AMAs, including limits on new groundwater users and the drilling of new wells. The GMA also mandates water conservation measures and requires all new developments within an AMA to prove access to a reliable water supply for a 100-year period. 1.1.3 Post-Groundwater Code Assured and Adequate Water Supply Program With the passage of the Groundwater Code in 1980, the 1973 Adequate Water Supply Program was replaced with the Assured and Adequate Water Supply (“AAWS”) Program. The AAWS Program required developers to prove to ADWR that the development had an “adequate” water supply, if the development is located outside an AMA, or that the development has a 100-year “assured” water supply (“AWS”), if the development is located inside an AMA. For new development within the AMAs, the AAWS Program significantly shifted the approach from a consumer information program to a consumer protection program. If the findings of the water supply evaluation for a development concluded that an AWS could not be demonstrated, the plat would not be approved and lots could not be offered for sale. Section 1.2 describes the criteria that must be met in order to prove an AWS. In the first few years following passage of the Groundwater Code, ADWR continued to operate the AAWS Program under guidelines similar to the criteria developed for the Adequate Water Supply Program in the 1970s. It was recognized however, that the allowable overdraft, or acceptable decline in groundwater level, as outlined in the guidelines could not continue and still be considered “consistent with the management goal” within those AMAs where the management goal was safe yield (a long-term balance between the annual amount of groundwater withdrawn and the annual amount of water recharged to the aquifer). 1.1.4 Initial Draft Rules of the AAWS Program – 1988 In 1988 the first draft rules of the AAWS Program were released to the public. The draft rules described management criteria to transition from overdraft to safe yield with proposed reductions in the allowable rate of water-level decline. Very low rates of water-level decline were proposed for undeveloped areas. New developments, which were typically in more rural areas of the AMAs, would be required to find alternative sources of water supply. This requirement would have limited new growth in these undeveloped areas unless a conveyance system could be constructed to the nearest supply, or the proposed area could be included in the service area of a designated water provider, or there was access to CAP water supplies. The draft rules also effectively restricted the density of new development and, in the view of the state’s agricultural interests, severely limited the value of agricultural land sold for new residential development. Many cities and towns without access to CAP water, agricultural interests, and the real estate and development community strongly opposed the draft rule package, each for their own reasons. In response to this opposition, ADWR withdrew the draft rule package and continued to operate under the existing guidelines for the next several years. 1-2 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 1.1.5 Formal AWS Rules Adopted – 1995 Given the lack of alternative sources of supply in many areas of the AMAs, much concern remained over the potential impacts of any proposed AWS rules on growth. In the early 1990s, ADWR spent over three years developing a series of draft rules that included an extensive public participation process. ADWR also commissioned an economic impact study2 to evaluate the impact of projected scenarios on employment, income, housing, retail sales, and population. The study concluded that impacts were small throughout the three-county service area, assuming that a replenishment district was available to provide the new water supplies. Without the replenishment district, impacts were greater, as water providers may have been required to buy and store a 100-year water supply. The inevitability that ADWR would promulgate rules to significantly reduce reliance on mined groundwater supplies by new development led to concurrent legislative activity to create groundwater replenishment districts within both the Phoenix and Tucson AMAs. However, the Santa Cruz Valley Water District in Tucson failed to become permanent and the Phoenix Groundwater Replenishment District, although authorized in statute, was never formed. In 1992, ADWR developed a concept paper for the AWS program that evaluated three possible approaches to addressing the consistency with management goal criteria. Comparison of the approaches resulted in an ADWR preferred alternative of a replenishment model that allowed for orderly transition to renewable supplies and was most consistent with existing augmentation authority and replenishment district legislation. ADWR’s proposal favoring a replenishment model within the safe-yield AMAs, combined with the failure of the other attempts to create replenishment districts in the Tucson and Phoenix AMAs, were the impetus for development of proposed legislation that resulted in the creation of CAGRD. In 1993, the Legislature passed the Groundwater Replenishment District Act. This Act authorized the CAWCD to perform replenishment for groundwater use that exceeded the amount of pumping allowed, as proposed in the draft AWS Rules. The replenishment authority, operated by CAWCD, is referred to as CAGRD and operates throughout that portion of CAWCD’s three-county service area that is within an AMA. CAGRD recharges CAP water or other alternative water supplies to replenish Excess Groundwater3 withdrawals by municipal water users that have become CAGRD members. Membership is voluntary and members can meet AAWS program requirements without directly utilizing renewable resources. The 1993 legislation provided a workable mechanism that satisfied both the needs of developers and the requirements of ADWR in achieving compliance with the AAWS program. This mechanism allowed those without CAP subcontracts or direct access to renewable water supplies to demonstrate consistency with the management plan and management goal for the AMA (i.e., achieving safe yield). Once this general consensus was reached in the water community, development of the rule package proceeded and formal AWS Rules were subsequently adopted by ADWR in February, 1995. 2 acro and Microeconomic Impacts of the Arizona Department of Water Resources Proposed Assured Water Supply Rules Within M Arizona Active Management Areas, June 28, 1993. Prepared by L. William Seidman Research Institute, Economic Outlook Center of ASU in cooperation with Elliott D. Pollack and Company. 3 xcess Groundwater is defined in A.R.S. § 48-3701.7 as the amount of groundwater delivered to a member in a calendar year in E excess of the amount of groundwater that may be used by the member in that calendar year consistent with the applicable Assured Water Supply rules adopted by ADWR for the AMA where the member is located. It should be noted that the agreements between CAGRD and its members generally identify a minimum volume that must be reported as Excess Groundwater in each calendar year. This minimum volume is calculated based on the total volume of groundwater used by a member in that year. If a member uses no groundwater in a given calendar year, then its Excess Groundwater use is also zero for that year. 2015 // Plan of Operation 1-3 Preliminary DR AF T — Sep tember 8, 2014 1.2 CAGRD’S WATER RESOURCE MANAGEMENT ROLE CAGRD’s role in water resource management cannot be fully understood without a basic understanding of the state’s AWS Rules. Within the AMAs, the Rules are designed to protect groundwater supplies and to ensure that people purchasing subdivided land have a water supply of adequate quality and quantity. Thus in each AMA, the developer of a new subdivision must demonstrate to ADWR that a 100-year AWS is available to serve the subdivision before sales can begin. An AWS can be demonstrated in one of two ways. First, a municipal water provider may apply for and obtain a Designation of Assured Water Supply (“DAWS”) for its entire service area. In this case, new subdivisions that will be served by the designated provider are automatically deemed to have proven an AWS. Alternatively, if the municipal water provider that will serve a new subdivision has not received a DAWS for its service area, the developer of the subdivision must apply for a Certificate of Assured Water Supply (“CAWS”) and prove an AWS for the individual subdivision. There are five basic criteria that an applicant for an AWS must prove: 1.A sufficient quantity of water is physically, legally and continuously available to satisfy the water demands of the subdivision or service area for 100 years; 2. The water source meets applicable water quality standards; 3. The proposed use of water is consistent with the AMA management plan; 4. The proposed use is consistent with the AMA water management goal, and 5.The applicant is financially capable of installing the necessary water distribution and treatment facilities. The consistency with management goal section of the AWS Rules limits the quantity of mined groundwater that an applicant may use to demonstrate an AWS. The effect of this groundwater pumping limitation is to prevent new development from relying solely on mined groundwater to serve its water demands. Development, however, is not necessarily stymied for those landowners and water providers who have no direct access to CAP water or other renewable supplies. If a water provider or a landowner has access to groundwater and desires to rely exclusively on the availability of groundwater to demonstrate a 100-year water supply, it may do so provided it joins CAGRD. Membership in CAGRD provides a means by which an AWS applicant can show that the proposed water use is consistent with the water management goal of the particular AMA (criterion #4 above). As a member of CAGRD, the landowner or municipal water provider must pay CAGRD to replenish any groundwater pumped by the member that exceeds the pumping limitations imposed by the AWS Rules, thereby making the member’s groundwater use consistent with the AMA management goal. 1-4 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 In 1999, the Legislature expanded CAWCD’s replenishment authorities by passing the Water Sufficiency and Availability Act. This Act authorizes CAGRD to play a limited role in helping a municipal water provider prove to the Director of ADWR that the provider has a continuously available supply of water for 100 years (criterion # 1 above). Under the Act, the CAWCD Board of Directors (“CAWCD Board”) may grant water availability status to a municipal provider by adopting a Board resolution that commits CAGRD to replenish a specified average annual volume of water in a location where the municipal provider may physically access it for service to its customers. On June 15, 2000, the Director of ADWR issued a determination that CAGRD has the capability to grant water availability status to Member Service Areas in the three AMAs. By law, water availability status membership is limited to a maximum total of 20,000 acre-feet (“AF”) per year and CAWCD cannot grant water availability status to members after December 31, 2010. Recommendations from the December 2001 Final Report of the Governor’s Water Management Commission resulted in additional CAGRD authorities and responsibilities. Legislation adopted in 2003 requires CAGRD to establish and maintain a Replenishment Reserve of long-term storage credits (“LTSCs”) to ensure that CAGRD is able to meet its replenishment obligations while also enhancing rate stability for its members. In addition, CAGRD’s planning requirements were made more stringent and criteria under which ADWR is to review and approve CAGRD plans were more clearly defined. 1.3 MEMBERSHIP T YPES Membership in CAGRD is voluntary. Any city, town, private water company, subdivision or homeowner’s association located in the Phoenix, Pinal or Tucson AMA may join CAGRD. CAGRD is comprised of two types of members: Member Service Areas (“MSAs”) and Member Lands (“MLs”). 1.3.1 Member Service Areas A city, town, district or water company enrolls in CAGRD when it adopts a resolution and executes an agreement that declares its service area and all extensions to be an MSA of CAGRD. These agreements are referred to as MSA Agreements. Under an MSA Agreement, the municipal provider is required to submit reports to CAGRD annually identifying the volume of Excess Groundwater delivered within the service area. The MSA Agreement also requires the municipal provider to pay CAGRD replenishment taxes based on the amount of Excess Groundwater delivered within the service area each year. When applying to enroll a service area in CAGRD, the applicant provides a projection of future population and water use. This projection serves as a basis for estimating CAGRD’s long-term replenishment obligation for the service area. However, changing political and economic conditions could impact population growth and/or the service area boundaries, and consequently CAGRD’s long-term obligation. Therefore, the commitment made by CAGRD through enrollment of an MSA will not be fully known until many years into the future. A municipal provider’s enrollment in CAGRD as an MSA allows the provider to obtain a DAWS for its service area. 1.3.2 Member Lands (Subdivisions) An individual subdivision enrolls as a ML of CAGRD when: (1) its owner executes and records an irrevocable declaration of covenants, conditions and restrictions (“ML Declaration”) running with the land that includes the land in CAGRD and subjects it to the replenishment assessment; and (2) the owner and the municipal provider that will supply water to the subdivision execute and record an agreement (“ML Agreement”) under which the water provider agrees 2015 // Plan of Operation 1-5 Preliminary DR AF T — Sep tember 8, 2014 to submit the water delivery information necessary to calculate the replenishment assessment for each parcel of land annually to CAGRD. Individual parcels within a CAGRD ML are categorized as Category 1 MLs or Category 2 MLs. Category 2 MLs are those parcels that are part of a golf course and that choose not to participate in CAGRD’s replenishment reserve program (as described in Chapter 5 of this Plan). Category 1 MLs are all ML parcels that do not qualify as Category 2 MLs. The commitment made by CAGRD upon enrollment of MLs is well defined. The boundaries of the subdivision define the ML and, once enrolled, may be modified, amended or revoked only by written consent of CAWCD, ADWR, and the owner(s). In addition, the applicant must establish the number of individual units (homes, businesses, etc.) that are to be built within the subdivision before it can receive a CAWS from ADWR. This is the best available information for projecting the ML’s long-term water use. Enrollment of a proposed subdivision as a ML allows the developer/ landowner to obtain a CAWS for a development. 1.3.3 Water Availability Status Members Water Availability Status Members (WAS members) are CAGRD member service areas that have been granted water availability status in accordance with the 1999 Water Sufficiency and Availability Act. See Section 1.2 above. 1.4 CHRONOLOGY OF PLANS OF OPERATION 1.4.1 Initial Plan of Operation The initial Plan of Operation was submitted on June 1, 1994 and adopted by ADWR on February 24, 1995. The Decision and Order for the Phoenix, Pinal and Tucson AMAs designated that the initial Plan was consistent with the goals of the AMAs. With these designations of consistency, CAGRD began the process of enrolling MLs and MSAs. The initial Plan was effective through October 31, 2005, when the Director approved the second Plan of Operation. 1.4.2 Second Plan of Operation CAGRD’s second Plan of Operation was submitted on November 8, 2004 (referred to in this report as the “2005 Plan”). The Director of ADWR issued the Decision and Order on October 31, 2005 determining that the Plan was consistent with achieving the management goals of the Phoenix, Pinal and Tucson AMAs. The 2005 Plan expires on December 31, 2015 or the date the Director of ADWR issues a decision determining that this Plan is consistent with achieving the management goal of the AMA, whichever occurs first. 1.4.3 Mid-Plan Review In 2011, seven years following adoption of the 2005 Plan, a Mid-Plan Review was completed by CAGRD. Following the wide-spread crisis in the financial sector and the associated depressed housing economy, particularly affecting growth states like Arizona, the Mid-Plan Review was prepared to provide an update on the status of CAGRD’s projected enrollment and replenishment obligations. 1.4.4 Third Plan of Operation This third CAGRD Plan of Operation (referred to as the “2015 Plan” or “this Plan”) must be submitted to the Director of ADWR by December 31, 2014, and will cover the ten-year period from 2015-2024. 1-6 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 1.5 STAKEHOLDER PROCESS CAGRD initiated a stakeholder process intended to facilitate discussion on numerous topics concerning CAGRD and the 2015 Plan. Approximately 70 participants attended nine public meetings held between April and September, 2013. The meetings were open to all interested parties. The CAGRD stakeholder process was largely focused around the CAGRD Guiding Principles adopted by the CAWCD Board in September of 2012. The Guiding Principles identified and provided guidance to staff on a number of key issues that the Board wanted CAGRD staff to address in a stakeholder process prior to developing the 2015 Plan. A Stakeholder Working Group was formed through a self-selection process, providing representation of 22 entities throughout the water community. The task of each member of the Working Group was to communicate and reflect the interests of the other stakeholders they represent, state their position in order for the process to move forward and provide feedback and suggestions for areas of concern on the key “scoping” issues as described in the Guiding Principles. Likewise, CAGRD staff committed to keep the Working Group and CAWCD Board informed, to conduct an open and transparent process allowing everyone to have a voice as well as a commitment to allow the Working Group to raise additional issues relevant to the 2015 Plan and the concepts in the scoping issues. At the outset of the stakeholder process, a series of informational topics were reviewed to provide relevant information to the Working Group during discussions. These topics include statutory Plan requirements, the 2005 Plan and 2011 Mid-Plan Review. Key scoping issues discussed with the Working Group during the Stakeholder Process were as follows: • Mitigation of Financial Risk of Acquiring Water • Member Land De-Enrollment • Enhanced Annual Reporting and Mid-Plan Review • Location of Pumping/Replenishment • Direct Delivery by CAGRD • CAGRD Conservation Program • Alternatives to CAGRD Model • Cost of Development on Member Lands vs Within Member Service Areas • Tribal Water Availability • Mitigating Risks of Water Acquisition •Other Issues to be part of additional stakeholder discussions after submittal of the Plan The meeting summaries and the status and proposed implementation of these issues can be found on the CAGRD website at www.cagrd.com and the PowerPoint presentation of the October 24, 2013, meeting of the CAGRD & Underground Storage Committee. 2015 // Plan of Operation 1-7 Preliminary DR AF T — Sep tember 8, 2014 2.0 HISTORIC OPERATIONS The statutory requirements relating to past obligations and replenishment for the CAGRD Plan of Operation are identified below. A.R.S. § 45-576.02.C.2 …the plan shall include the following information for each active management area in which a member land or member service area is located: A.R.S. § 45-576.02.C.2(a) The conservation district’s groundwater replenishment obligations and the extent to which those obligations have been met in the ten years preceding submittal of the plan. This chapter addresses these elements with a summary of current enrollment, the replenishment obligations of the past ten years, and the extent to which those obligations have been fulfilled or completed. A compilation of tables is provided below, which compares Excess Groundwater Deliveries and completion of the groundwater replenishment obligation associated with those deliveries for each AMA for the period 2004 through 2013 (Tables 2.3 through 2.6). Information in this chapter is based on enrollment and obligations / replenishment through December 31, 2013. Appendix B presents the Conservation District Annual Reports submitted to ADWR for the ten years preceding submittal of this Plan. These reports include the full details of each year’s replenishment activities. 2.1 ENROLLMENT HISTORY 2.1.1 Membership in the Phoenix AMA 126.96.36.199 MEMBER LANDS A total of 828 subdivisions have enrolled as MLs in the Phoenix AMA. These 828 subdivisions represent 175,025 homes. Of these 828 ML subdivisions, 533 are located in the west portion of the Phoenix AMA (representing 131,335 homes) and 295 are located in the east portion of the Phoenix AMA (representing 43,690 homes)1. 1 A .R.S. § 48-3772.I. requires that for the Phoenix AMA, CAGRD, to the extent reasonably feasible, shall replenish groundwater in the east portion of the AMA and in the west portion of the AMA in the approximate proportion that the groundwater replenishment obligation is attributable in a particular year to members located in the respective portions of the AMA. Therefore, CAGRD tracks enrollment and replenishment obligations for the Phoenix AMA based on their location within the AMA. 2015 // Plan of Operation 2-1 Preliminary DR AF T — Sep tember 8, 2014 2.1.1. 2 M E M B E R S E RV I C E A R E A S A total of nine municipal water providers have enrolled their water service areas as MSAs in the Phoenix AMA. Of these, four are in the west portion of the AMA and five are in the east portion, indicated as follows: MSAS IN THE WEST PHOENIX AMA • City of Avondale • City of El Mirage • City of Goodyear • City of Surprise 2.1.1. 3 MSAS IN THE EAST PHOENIX AMA: • Apache Junction WUCFD (Water Utilities Community Facilities District) • Chaparral City Water Company • City of Scottsdale • Johnson Utilities, LLC • Town of Gilbert WAT E R AVA I L A B I L I T Y S TAT U S M E M B E R The City of Scottsdale (“Scottsdale”) is the only WAS Member of CAGRD. See Chapter 1, Section 1.3 for a general description of water availability status membership. On October 4, 2001, the CAWCD Board adopted a Water Availability Status Resolution which granted water availability status to Scottsdale and approved both the Water Availability Status Contract and the Member Service Area Agreement between CAWCD and Scottsdale (“WAS Agreements”). Pursuant to the WAS Agreements, CAWCD committed to deliver up to 3,460 AF of replenishment water per year to Scottsdale’s turnout. And, Scottsdale committed to either store this water at replenishment facilities where Scottsdale may physically access the stored water for service to its customers or to directly deliver this water to its customers. The location where this replenishment must occur is shown on Figure B-12 in Appendix B. On March 7, 2013, the CAWCD Board approved Amendment No. 1 to the Water Availability Status Contract and Amendment No. 1 to Scottsdale’s Member Service Area Agreement. Among other things, the amendment reduced CAWCD’s obligation to deliver replenishment water to Scottsdale’s turnout from 3,460 AF/yr to 2,910 AF/yr. 2.1.2 Membership in the Pinal AMA 2.1. 2.1 MEMBER LANDS A total of 137 subdivisions have enrolled as MLs of CAGRD in the Pinal AMA. These 137 subdivisions represent 62,308 homes. 2.1. 2. 2 M E M B E R S E RV I C E A R E A S The following four municipal water providers have enrolled their water service areas as MSAs of CAGRD in the Pinal AMA: 2 2-2 • City of Casa Grande Formerly Copper Mountain Ranch CFD (Community Facilities District) • City of Eloy • Johnson Utilities, LLC • Town of Florence lternatively, replenishment water provided by CAGRD may be delivered by Scottsdale directly to its customers that would A otherwise use groundwater pumped from within the replenishment area shown in Figure B-1. Such direct deliveries are authorized under A.R.S. § 48-3772.B.11 on the condition that CAWCD determines that direct deliveries will not harm other CAP customers or increase the replenishment taxes and rates for other CAGRD members. 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2.1.3 Membership in the Tucson AMA 2.1. 3.1 MEMBER LANDS A total of 129 subdivisions have enrolled as MLs of CAGRD in the Tucson AMA. These 129 subdivisions represent 26,474 homes. 2.1. 3. 2 M E M B E R S E RV I C E A R E A S The following ten municipal water providers have enrolled their water service areas as MSAs of CAGRD in the Tucson AMA: • City of Tucson • Flowing Wells Irrigation District (FWID) • Metropolitan Domestic Water Improvement District (MDWID) • Metropolitan Domestic Water Improvement District (MDWID) – West • Sahuarita Water Company • Spanish Trail Water Company • Town of Marana • Town of Oro Valley • Vail Water Company • Willow Springs Utilities, LLC Figures 2.1, 2.2 and 2.3 illustrate the location of CAGRD MLs and MSAs in the Phoenix, Pinal and Tucson AMAs, respectively. These figures also identify those MLs with reported obligation vs MLs without reported obligation. 2015 // Plan of Operation 2-3 2-4 2015 // Plan of Operation Location of the CAGRD Members through 2013 PHOENIX AMA FIGURE 2.1 0 SCALE MILES 10 NORTH Preliminary DR AF T — Sep tember 8, 2014 Location of the CAGRD Members through 2013 PINAL AMA FIGURE 2.2 0 SCALE MILES 10 NORTH Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation 2-5 2-6 2015 // Plan of Operation Location of the CAGRD Members through 2013 TUCSON AMA FIGURE 2.3 0 SCALE MILES 10 NORTH Preliminary DR AF T — Sep tember 8, 2014 Preliminary DR AF T — Sep tember 8, 2014 2.1.4 Historic Enrollment Table 2.1 provides a summary of CAGRD ML enrollment from inception through December 31, 2013 for the Phoenix, Pinal and Tucson AMAs. Figure 2.4 graphically illustrates ML enrollment as housing units for the same time period. TABLE 2.1 CAGRD MEMBER LAND ENROLLMENT Through December 31, 2013 PHOENIX AMA YEAR West Phx AMA PINAL AMA TOTAL TUCSON AMA East Phx AMA MLs ML HOMES MLs ML HOMES MLs ML HOMES MLs ML HOMES MLs ML HOMES 1995 1 132 1 16 0 0 2 35 4 183 1996 11 2,715 18 1,830 1 11 7 524 37 5,080 1997 18 4,516 25 2,658 5 394 16 1,279 64 8,847 1998 10 1,784 36 2,635 4 347 2 354 52 5,120 1999 21 4,740 35 3,833 11 794 5 669 72 10,036 2000 22 5,803 31 3,802 17 12,815 7 6,485 77 28,905 2001 29 13,254 11 2,040 13 5,119 9 3,503 62 23,916 2002 30 6,439 10 4,379 5 490 7 2,533 52 13,841 2003 75 16,906 18 2,882 6 1,266 16 2,039 115 23,093 2004 91 12,737 10 2,344 9 2,509 13 2,031 123 19,621 2005 101 13,747 25 4,554 14 3,502 13 2,639 153 24,442 2006 74 27,519 34 5,532 25 23,833 11 2,229 144 59,113 2007 27 10,490 12 4,146 13 7,803 10 1,377 62 23,816 2008 11 5,669 19 1,336 10 3,092 4 602 44 10,699 2009 3 1,275 2 85 1 56 2 34 8 1,450 2010 2 175 2 535 2 116 3 70 9 896 2011 1 852 0 0 1 6 0 0 2 858 2012 3 1,481 0 0 0 0 2 126 5 1,607 2013 3 1,101 6 1,083 0 0 0 0 9 2,184 TOTAL 533 131,335 295 43,690 137 62,153 129 26,529 1,094 263,707 TABLE NOTES: — Member Lands (MLs) refers to subdivisions enrolled in CAGRD. — Enrollment numbers may vary slightly from earlier Plan(s) due to on-going reconciliation. 2015 // Plan of Operation 2-7 Preliminary DR AF T — Sep tember 8, 2014 FIGURE 2.4 CAGRD MEMBER LAND ENROLLMENT THROUGH 2013 Portrayed as Residential Units 60,000 HOUSING UNITS 50,000 40,000 30,000 20,000 10,000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 WEST PHOENIX AMA EAST PHOENIX AMA PINAL AMA 2012 2013 TUCSON AMA Figure 2.4 illustrates the trends in CAGRD enrollment activity from inception through 20133. Prior to 1995, in anticipation of the impending AWS Rules, many developers obtained plat approvals for new subdivisions years before construction was scheduled to begin, as reflected by slow CAGRD activity in the early years. In 2000 and 2001, increased enrollment likely was a result of developers anticipating stricter regulations associated with the state’s Growing Smarter legislation and proposed growth initiatives. In the years following, residential construction was increasing rapidly along with the state’s population growth. Home prices continued to escalate together with this high pace of home construction, resulting in a real estate bubble that peaked in 2006. At the same time, another policy-driven spike in enrollment occurred in the Pinal AMA in anticipation of a pending change in the AWS Rules that would increase restrictions on groundwater in 2007. Importantly, although enrollment was on the rise, the number of unconstructed subdivisions also continued to grow. Following the burst of the Arizona real estate bubble in late 2006 and the widespread financial crisis of 2007-2008, housing prices plummeted resulting in unprecedented numbers of evictions, foreclosures, and high rates of unemployment, all of which contributed to several years of virtually no new home construction in the state. 3 2-8 AGRD Mid-Plan Review: Enrollment, Demand and Obligation, October 20, 2011 provides additional inforC mation on the effect of the housing crisis on CAGRD’s demand and projected obligations. 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 Table 2.2 provides a summary of CAGRD MSA enrollment from inception through December 31, 2013 for the Phoenix, Pinal and Tucson AMAs. TABLE 2.2 CAGRD MEMBER SERVICE AREA ENROLLMENT Through December 31, 2013 MEMBER SERVICE AREA AMA MEMBERSHIP DATE Vail Water Company Tucson 11/20/1995 Town of Marana Tucson 12/12/1995 Metropolitan Domestic Water Improvement District Tucson 12/13/1995 EPhx 2/15/1996 City of Tucson Tucson 12/19/1996 Town of Oro Valley Tucson 3/18/1997 Spanish Trail Water Company Tucson 12/14/1997 City of Avondale WPhx 1/16/1998 City of Surprise WPhx 7/21/1998 Town of Florence Pinal 1/11/1999 Tucson 7/26/1999 City of El Mirage WPhx 8/23/1999 City of Eloy Pinal 2/3/2000 Johnson Utilities, LLC EPhx 5/18/2000 8/27/2007 Johnson Utilities, LLC Pinal 5/18/2000 8/27/2007 City of Goodyear WPhx 10/4/2001 10/21/2010 City of Scottsdale EPhx 11/21/2001 City of Casa Grande (Copper Mountain Ranch CFD) Pinal 6/20/2002 Chaparral City Water Company EPhx 4/7/2004 Tucson 12/19/2005 NTucson 5/27/2006 Tucson 10/22/2006 EPhx 4/17/2007 Apache Junction WUCFD Sahuarita Water Company Metropolitan Domestic Water Improvement District – West Flowing Wells Irrigation District Willow Springs Utilities, LLC Town of Gilbert AMENDED AGREEMENT DATE 2/12/2009 2015 // Plan of Operation 2-9 Preliminary DR AF T — Sep tember 8, 2014 2.2 HISTORIC REPLENISHMENT OBLIGATIONS 2.2.1 Groundwater Replenishment Obligations CAGRD’s annual groundwater replenishment obligation for each AMA is defined in statute as the cumulative Member Land Parcel Replenishment Obligation plus the cumulative Member Service Area Replenishment Obligation in that AMA for the particular calendar year (A.R.S. § 48-3701.9). 2. 2.1.1 M E M B E R L A N D PA R C E L R E P L E N I S H M E N T O B L I G AT I O N S ML Parcel Replenishment Obligations reflect the volume of Excess Groundwater delivered by municipal water providers serving CAGRD ML subdivisions. For each ML subdivision that it serves, the municipal water provider is required by statute to file an annual report with CAGRD indicating the volume of groundwater and the volume of Excess Groundwater delivered to each parcel in the subdivision (A.R.S. § 48-3775.A). These reports must be submitted to CAGRD by March 31st of each year, and the volumes reported represent deliveries from the previous year (the “Report Year”). Thus, CAGRD incurs Parcel Replenishment Obligations in the calendar year following that in which the Excess Groundwater is actually delivered to ML subdivision parcels. A.R.S. § 48-3771.A requires CAGRD to “complete” the replenishment of its Parcel Replenishment Obligations within three calendar years after they are incurred. By statute, CAGRD Parcel Replenishment Obligations are fulfilled or “complete” when CAGRD’s conservation district account has been credited to reflect either the storage of replenishment water or the transfer of LTSCs in sufficient volume to meet the parcel replenishment obligation. 2. 2.1. 2 M E M B E R S E RV I C E A R E A R E P L E N I S H M E N T O B L I G AT I O N S These obligations reflect the volume of Excess Groundwater deliveries that MSA providers make within their service areas. MSA’s are required by statute to file an annual report with CAGRD 4 indicating the volume of groundwater and the volume of Excess Groundwater delivered within their service area (A.R.S. § 48-3775.B). These reports must be submitted to CAGRD by March 31st of each year, and the volumes reported represent deliveries from the previous year (the “Report Year”). Thus, CAGRD incurs Member Service Area Replenishment Obligations in the calendar year following that in which the Excess Groundwater is actually delivered. CAGRD must complete its Member Service Area Replenishment Obligations within three calendar years after they are incurred. 2. 2.1. 2.1 CO N T R AC T R E P L E N I S H M E N T O B L I G AT I O N S These obligations represent the amount of groundwater that CAGRD replenishes in a year on behalf of an MSA in advance of that member’s use of Excess Groundwater; this advance replenishment is made pursuant to a specific contract with the municipal provider. CAGRD may perform contract replenishment on behalf of any MSA. Metropolitan Domestic Water Improvement District (MDWID) entered into a contract to replenish for 586 AF in 2005. This Contract Replenishment obligation was satisfied through a transfer of credits from MDWID’s long-term storage account to CAGRD’s Conservation District Account. 2. 2.1. 2. 2 WAT E R AVA I L A B I L I T Y S TAT U S CO N T R AC T R E P L E N I S H M E N T As set forth in Section 188.8.131.52, the City of Scottsdale is the only entity with whom CAWCD has entered into a water availability status contract. From October 2001 through March 2013, CAWCD was obligated to deliver up to 3,460 AF of replenishment water per year to Scottsdale’s turnout. On March 7, 2013, CAWCD and Scottsdale agreed to amend Scottsdale’s Water Availability Status Contract to reduce this annual volume from 3,460 AF/yr to 2,910 AF/yr. Annual volumes of water delivered to Scottsdale are shown in Table B-1 in Appendix B. 4 2-10 B y statute, the municipal provider must also submit a copy of each annual report to ADWR. 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2.3 SATISFACTION OF HISTORIC OBLIGATIONS 2.3.1 Methods of Satisfying Obligations CAGRD has satisfied its replenishment obligations through underground storage (constructed underground storage facilities and groundwater savings facilities), purchase and extinguishment of LTSCs, direct deliveries, and long-term storage credit transfers. CAGRD’s Replenishment Rate Setting Policy5 states that CAGRD replenishment “will be accomplished at reasonably priced facilities in consideration of water resource management goals”. This means that CAGRD will, to the best of its ability, replenish as close to member pumping as possible, provided that such replenishment is hydrologically sound. The following describes each method of replenishment used to date by CAGRD. 2. 3.1.1 CO N S T R U C T E D U N D E R G R O U N D S T O R AG E FAC I L I T I E S CAGRD has satisfied a portion of its replenishment obligations using constructed Underground Storage Facilities (“USFs”). Recharge was accomplished using spreading basin recharge facilities constructed and operated by CAWCD. The locations of these facilities are shown on Figure D-1 in Appendix D. 2. 3.1. 2 G R O U N D WAT E R S AV I N G S FAC I L I T I E S CAGRD has satisfied a portion of its replenishment obligations using Groundwater Savings Facilities (“GSFs”). The groundwater savings program is authorized by state law; it allows an entity to deliver renewable water supplies to an irrigation district rather than to a USF. The irrigation district uses the renewable water supplies in lieu of groundwater the district otherwise would pump and the entity that delivered the renewable water supply receives a LTSC for the amount of groundwater saved. The locations of these facilities are shown on Figure D-1 in Appendix D. 2. 3.1. 3 PU R C H A S E A N D E X T I N G U I S H M E N T O F LO N G -T E R M S T O R AG E C R E D I T S CAGRD has satisfied a portion of its replenishment obligations through the purchase of LTSCs. A.R.S. § 48-3713.B.11 allows CAWCD to assign its LTSCs to CAGRD, provided that CAGRD pays “fair value” for the LTSCs. CAGRD has purchased LTSCs, and has allowed several MSAs to transfer LTSCs to CAGRD to fulfill those MSAs replenishment obligations. This mechanism for satisfying groundwater replenishment obligations was authorized by the CAWCD Board in its CAGRD Assessment Rate Setting Policy. This policy states: To the extent allowed by state law, a member with a CAP subcontract entitlement may schedule all or a portion of its entitlement for delivery to a recharge/replenishment facility acceptable to CAGRD and transfer the resulting storage credits to the CAGRD for use in meeting the groundwater replenishment obligation incurred as a result of that member’s excess groundwater pumping. The corresponding cost savings realized by CAGRD will be reflected in that member’s replenishment assessment/tax. In other words, a MSA can reduce its replenishment assessment/tax by transferring LTSCs to CAGRD. CAGRD, in turn, uses these credits to offset the transferring entity’s groundwater replenishment obligations. 5 AGRD Replenishment Rate Setting Policy originally adopted by the Board of Directors on April 5, 2001, and C subsequently revised and adopted on June 17, 2004, and May 6, 2010. The portion of the policy relating to location of replenishment has remained constant since the original policy was adopted. 2015 // Plan of Operation 2-11 Preliminary DR AF T — Sep tember 8, 2014 2.4EXCESS GROUNDWATER DELIVERIES AND COMPLETION OF REPLENISHMENT OBLIGATION Tables 2.3 (West Phoenix), 2.4 (East Phoenix), 2.5 (Pinal), and 2.6 (Tucson) list the volumes of Excess Groundwater delivered/withdrawn from 2004 through 2013 and identify the extent to which the replenishment obligations resulting from those deliveries have been completed from 2006 through 2013. The following explanation is offered to assist in interpreting Tables 2.3, 2.4, 2.5 and 2.6. Please refer to Table 2.3, showing a comparison of the Excess Groundwater deliveries to completion of replenishment obligation for the West Phoenix AMA. The top row shows the year in which deliveries or withdrawals of Excess Groundwater occurred. For example, the 2005 column illustrates that a total of 14,453 AF of Excess Groundwater was delivered to MLs and withdrawn from MSAs in 2005. Fulfillment of this obligation occurred over a two-year period: 11,725 AF in 2007 and 2,728 AF in 2008. The two rows toward the bottom of the table showing the volume “completed to date” and “unmet to date” reflect ongoing replenishment activities to fulfill or complete the obligation associated with Excess Groundwater deliveries reported in 2012 and 2013. Figures 2.5, 2.6, and 2.7 graphically portray the deliveries of Excess Groundwater and the method of replenishment that has been employed to complete replenishment obligations in the Phoenix, Pinal, and Tucson AMAs, respectively. It is important to note that the information portrayed in these figures is similar to but not exactly the same as provided in Tables 2.3, 2.4, 2.5, and 2.6. These figures portray the actual activities of CAGRD for this time period and not the satisfaction of the replenishment obligation. 2-12 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 TABLE 2.3 EXCESS GROUNDWATER DELIVERIES AND COMPLETION OF REPLENISHMENT OBLIGATION For West Phoenix AMA EXCESS GROUNDWATER OBLIGATION YEAR OBLIGATION COMPLETED WEST PHOENIX AMA by Report Year¹ (AF) 2004 2005 2006 11,286 14,453 17,338 2007 2008 2009 2010 2011 2012 2013 20,130 20,320 13,259 14,997 14,450 14,620 14,062 TOTAL SATISFIED BY YEAR 2004 0 2005 0 2006 11,286 11,286 2007 11,725 2008 2,728 11,725 20,066 17,338 2009 20,130 2010 25,242 5,112 15,208 15,263 55 2,359 15,564 2012 12,569 12,569 2013 69 2011 AMOUNT COMPLETED TO DATE 13,204 14,450 18,198 3,679 11,286 14,453 17,338 20,130 20,320 13,259 14,997 14,450 3,679 AMOUNT UNMET TO DATE TOTAL OBLIGATION 0 0 154,916 0 0 0 TOTAL COMPLETED 0 0 129,913 0 10,941 0 14,062 TOTAL UNMET 25,003 TABLE NOTES: ¹ Report Year refers to year in which Excess Groundwater was delivered to each ML or withdrawn from each MSA; volumes reported in hundredths have been rounded to whole numbers for this Plan, resulting in minor discrepancies of 1 AF in some cumulative totals. 2015 // Plan of Operation 2-13 Preliminary DR AF T — Sep tember 8, 2014 TABLE 2.4 EXCESS GROUNDWATER DELIVERIES AND COMPLETION OF REPLENISHMENT OBLIGATION For East Phoenix AMA EXCESS GROUNDWATER OBLIGATION by Report Year¹ (AF) EAST PHOENIX AMA 2004 2005 2006 6,582 8,562 11,123 2007 2008 2009 2010 2011 13,358 12,872 12,627 13,260 15,957 2012 2013 15,429 16,909 0 YEAR OBLIGATION COMPLETED 2004 2005 545 545 2006 5,629 5,629 2007 408 2008 8,377 7,969 592 2009 8,888 426 9,906 2,235 12,932 15,167 2010 12,872 13,063 191 75 12,511 2012 12,644 12,644 2013 541 2011 12,436 AMOUNT COMPLETED TO DATE 6,582 AMOUNT UNMET TO DATE 0 TOTAL OBLIGATION 15,957 19,751 3,254 8,562 11,123 13,358 12,872 12,627 13,260 15,957 3,254 0 126,678 0 0 0 TOTAL COMPLETED 0 0 97,594 0 12,175 0 16,909 TOTAL UNMET TABLE NOTES: ¹ Report Year refers to year in which Excess Groundwater was delivered to each ML or withdrawn from each MSA; volumes reported in hundredths have been rounded to whole numbers for this Plan, resulting in minor discrepancies of 1 AF in some cumulative totals. 2-14 TOTAL SATISFIED BY YEAR 2015 // Plan of Operation 29,084 Preliminary DR AF T — Sep tember 8, 2014 TABLE 2.5 EXCESS GROUNDWATER DELIVERIES AND COMPLETION OF REPLENISHMENT OBLIGATION For Pinal AMA EXCESS GROUNDWATER OBLIGATION by Report Year¹ (AF) YEAR OBLIGATION COMPLETED PINAL AMA 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 100 79 134 380 141 282 213 246 318 704 TOTAL SATISFIED BY YEAR 2004 0 2005 0 2006 97 2007 3 2008 97 79 76 3 2009 136 133 1 2010 365 364 16 2011 135 119 22 282 2012 305 1 212 2013 234 22 224 1 225 AMOUNT COMPLETED TO DATE 100 79 134 380 141 282 213 246 1 0 AMOUNT UNMET TO DATE 0 0 0 0 0 0 0 0 317 704 TOTAL OBLIGATION 2,597 TOTAL COMPLETED 1,576 TOTAL UNMET 1,021 TABLE NOTES: ¹ Report Year refers to year in which Excess Groundwater was delivered to each ML or withdrawn from each MSA; volumes reported in hundredths have been rounded to whole numbers for this Plan, resulting in minor discrepancies of 1 AF in some cumulative totals. 2015 // Plan of Operation 2-15 Preliminary DR AF T — Sep tember 8, 2014 TABLE 2.6 EXCESS GROUNDWATER DELIVERIES AND COMPLETION OF REPLENISHMENT OBLIGATION For Tucson AMA EXCESS GROUNDWATER OBLIGATION by Report Year¹ (AF) YEAR OBLIGATION COMPLETED TUCSON AMA 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 8,077 8,743 10,496 6,561 4,402 5,4112 3,523 3,515 3,021 2,933 TOTAL SATISFIED BY YEAR 2004 324 324 2005 5,205 5,205 2006 2,362 6,115 2007 186 2,628 2008 8,477 12,079 9,265 1,231 2009 5,359 4,128 2,432 2010 3,037 604 3,798 6,694 2,897 3,376 2011 2,471 905 2012 43 1,738 936 880 2,578 734 0 2013 AMOUNT COMPLETED TO DATE 8,077 AMOUNT UNMET TO DATE 0 TOTAL OBLIGATION 8,743 10,496 6,561 0 56,681 0 0 2,718 4,402 5,411 3,523 3,515 734 0 0 0 0 0 2,286 2,933 TOTAL COMPLETED 51,462 TOTAL UNMET 4,192 5,119 TABLE NOTES: ¹ Report Year refers to year in which Excess Groundwater was delivered to each ML or withdrawn from each MSA; volumes reported in hundredths have been rounded to whole numbers for this Plan, resulting in minor discrepancies of 1 AF in some cumulative totals. 2 The 2009 obligation of 5,411 AF includes 77 AF that was unreported for 2003. The actual 2009 obligation is 5,334 AF. In 2004, after the 2003 Annual Report was filed, the Town of Marana amended their 2003 Annual Report, resulting in a 77 AF increase in CAGRD 2003 obligation. The correct total obligation for 2003 is 7,403 AF. 2-16 2015 // Plan of Operation Obligations and Replenishment Activity 2004 through 2013 PHOENIX AMA FIGURE 2.5 0 SCALE MILES 10 NORTH Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation 2-17 2-18 2015 // Plan of Operation Obligations and Replenishment Activity 2004 through 2013 PINAL AMA FIGURE 2.6 0 SCALE MILES 10 NORTH Preliminary DR AF T — Sep tember 8, 2014 Obligations and Replenishment Activity 2004 through 2013 TUCSON AMA FIGURE 2.7 0 SCALE MILES 10 NORTH Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation 2-19 Preliminary DR AF T — Sep tember 8, 2014 Table 2.7 shows that CAGRD has completed a total of 336,065 AF of its groundwater replenishment obligations through the end of 2013 and has 60,326 AF of replenishment obligations that have not yet been completed. The majority of this unsatisfied obligation is the result of CAGRD members’ use of Excess Groundwater in 2012 and 2013. TABLE 2.7 TOTAL OBLIGATIONS & REPLENISHMENT 1995 – 2013 AMA TOTAL REPLENISHMENT COMPLETED (AF) Phoenix (West) 175,243 146,504 Phoenix (East) 139,523 114,176 Pinal 2,805 1,785 Tucson 78,820 73,600 396,391 336,065 TOTAL ALL AMAS 2-20 TOTAL OF OBLIGATIONS INCURRED (AF) 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 3.0 OBLIGATION AND ENROLLMENT The statutory requirements related to projected groundwater replenishment obligations for the CAGRD Plan of Operation are identified below. A.R.S. § 45-576.02.C.2 …the plan shall include the following information for each active management area in which a member land or member service area is located: A.R.S. § 45-576.02.C.2(b) An estimate of the conservation district’s current and projected groundwater replenishment obligations… for current members for the 20 calendar years following the submission of the plan and an estimate of the district’s projected groundwater replenishment obligations for the 100 calendar years following the submission of the plan for current members and potential members based on reasonable projections of real property and service areas that could qualify for membership in the 10 following the submission of the plan. For purposes of this plan, the period of estimation for obligations for current members will be 2015 through 2034. Projected obligations for current and potential members will be estimated for the period 2015 through 2114, with the estimates based on projected membership enrollment through 2024. In reviewing CAGRD’s Plan of Operation, ADWR must be satisfied that the projected replenishment obligations and enrollment are reasonable. The following sections include descriptions of the projection methodologies used and summary results. 3.1METHODOLOGY Projections of CAGRD enrollment, demand, and obligation require consideration of supply and demand for the entire CAP service area, coupled with detailed subdivision-level analysis, and the application of specific statutes, rules and policies. Considering only the existing membership, CAGRD projections must account for nearly 1,100 ML subdivisions with over 263,000 associated lots, along with 22 MSAs, each of which has a unique supply portfolio and a wide range of historic CAGRD reliance. Projections also consider new CAGRD enrollment and potential changes in current membership status. Additional complexity is added because of the unprecedented volatility in the housing market since development of the previous Plan. The volatility has compounded the uncertainty of population and housing forecasts, and has resulted in a large backlog of ML lots that are enrolled, but not yet constructed. In the Pinal AMA alone, nearly 90 percent of enrolled lots are currently unconstructed (56,693 lots out of 63,353 enrolled). Changes in water use patterns continue to occur as well, including declines in per capita use and the utilization of a wider variety of supplies, notably increased leasing of CAP water and LTSC accrual activity. 2015 // Plan of Operation 3-1 Preliminary DR AF T — Sep tember 8, 2014 To tackle these challenges and produce credible projections of enrollment and obligation, CAGRD relies primarily on a supply and demand model developed by CAP staff. The CAP service area model — ”CAP:SAM” — can be used to simulate a wide range of future conditions and to generate a comprehensive set of results, including estimates of CAGRD enrollment and obligation. The model was developed using GoldSim software, which is a graphical, object-based modeling environment that allows complex mathematical relationships to be defined and calculations to be performed that would be difficult or impractical to implement using spreadsheets or traditional computer code. CAP:SAM performs a large number of interrelated supply and demand calculations, broadly organized into three conceptually simple steps: 1) project demands, 2) determine available supplies, and 3) fulfill demands on the basis of the legal and physical availability of supplies. Additional descriptions of these steps, along with analysis and results that are pertinent to this Plan, are provided in the following sections. 3.2DEMAND To simulate municipal water demand, CAP:SAM produces individual projections for 80 representative public and private water providers in the CAP service area. These providers account for more than 99% of the demand in the municipal sector. To help differentiate the effects of observed long-term declines in water use from future growth-related trends, the model separately considers existing and new municipal demand. 3.2.1 Existing Demand Existing municipal demand represents baseline water use prior to the consideration of future growth. Water providers have experienced an average annual decline in per capita demand of about 2.0% per year over the previous 10 years as a result of changes in water rates, household size, landscape changes, and fixture replacements, among other factors. To simulate this effect, the model begins with the initial (2012) baseline demand specific to each water provider. A conservative -0.5% reduction in existing demand per year is then applied, representing approximately ¼ of the annual decline experienced historically. Additionally, a floor of 200 gallons per housing unit per day (“GPHUD”) and/or an overall 15% reduction in GPHUD was used to restrict demand from reaching unrealistic lows. Using these assumptions, the projection of demand by existing units is shown in Figure 3.5. 3-2 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 3.2.2 New Demand New municipal demand is defined as water use attributed to forecasted development in the Service Area. CAP:SAM models new demand as a function of projected housing units, which provide a stronger relationship with demand than population growth. Housing unit projections used for this Plan originate from Maricopa Association of Governments (MAG), Central Arizona Governments (CAG), and Pima Association of Governments (PAG). The geographic projections provided by the Associations are based on growth modeling that incorporates a large number of factors, including demographic data from the U.S. Census, construction data, planned developments, land uses, employment patterns, and transportation infrastructure. The population and housing data used for the Plan also match the county-level totals that the Arizona Department of Administration uses as the state’s official forecast. This approach results in a consistent set of data for all three counties in the CAP service area. 3.2.3 Spatial Housing Unit Distribution The model’s ability to run spatial growth projections is critical to the Plan. The projected location of future development determines which water provider will serve that development, along with the water use characteristics and water supply portfolio of that provider. Shown in Figure 3.1, the growth projections were supplied at a level of geographic detail — Transportation Analysis Zone — that was sufficient to generate provider-specific projections by overlaying a GIS layer of each water provider’s projected service area. These areas were defined by CAP staff on the basis of a provider’s current service territory, as well as Municipal Planning Areas, Certificates of Convenience and Necessity, and incorporated boundaries. Figure 3.2 provides a map of the projected water provider service areas for reference. As a result of recent volatility in the housing market, observed growth rates in the CAP Service Area from the 2010 Census through 2014 have trailed forecasts generated by the Associations of Governments. To account for this lag, annual growth assumptions in CAP:SAM are set to catch up with long-term projections, resulting in aggressive housing recovery activity in the near-term. 3.2.4 Housing Unit Distribution by Plan Period The projected timing of future development heavily influences subsequent demand and obligation to CAGRD, due to the relationship of new development to CAGRD and the applicable AWS rules. While new development in existing MSAs is easily incorporated in the service area demand of each water provider, the timing and location of development that will be served by ML water providers is more complex. Due to the large backlog of enrolled but unconstructed lots, the model needed to account for how many of the projected housing units will be associated with new MLs, versus currently enrolled MLs that have unconstructed lots. 2015 // Plan of Operation 3-3 Preliminary DR AF T — Sep tember 8, 2014 FIGURE 3.1 SCALE SERVICE AREA HOUSING Unit Growth by TAZ 2010 – 2040 3-4 2015 // Plan of Operation 0 5 10 NORTH MILES Preliminary DR AF T — Sep tember 8, 2014 FIGURE 3.2 SCALE CAP:SAM Water Provider Service Area Coverage 0 5 10 NORTH MILES 2015 // Plan of Operation 3-5 Preliminary DR AF T — Sep tember 8, 2014 Therefore, modeling of MLs begins with the housing unit projection described above, and the current balance of unconstructed lots, by water provider and Plan period (Initial Plan and 2005 Plan). Then, for each undesignated provider, the model dynamically allocates housing units among five possible categories: • • • • • exempt lots (e.g., pre-1995 subdivisions, non-subdivisions); unconstructed lots enrolled in Initial Plan; unconstructed lots enrolled in 2005 Plan; lots that will be enrolled and constructed in 2015 Plan; Post-2015 Plan lots. The allocation among these five categories is based on distribution ratios that change through time. The model first allocates housing units to the “exempt lots” category. For this Plan, the allocation ratio to this category was set at 10%, based on an analysis of county assessor data and the occurrence of residential construction in older subdivisions. The remaining housing units are distributed among the other buckets based on assigned ratios. Those ratios were based on a general assumption that construction is somewhat more likely in recently platted subdivisions compared to subdivisions platted much earlier. In other words, a subdivision that was platted two years ago is more likely to construct than one that has been platted but unconstructed for 15 years1. If an individual water provider does not have any remaining unconstructed lots in one category, the model recalculates the ratios among the remaining categories for that provider. These dynamic allocation ratios add complexity to the model, but provide a systematic means of analyzing assumptions about new versus existing enrollment and limit overestimation of obligation. Under the baseline projection used for this Plan, 62% of the current inventory of enrolled but unconstructed lots is eventually constructed by 2034 (86,700 lots of 140,200 currently unconstructed). Figure 3.3 shows this decline in currently enrolled but unbuilt lots through time. The drop in unbuilt lots shown in 2016 is due to the inactivation of Buckeye ML lots (nearly 24,000 lots) after the water provider is converted to an MSA. The remaining 38% of unbuilt enrolled lots are incorporated into the projection of demand for the subsequent 80-year period (2035–2114). 1 3-6 T his assumption does not affect the total number of constructed units, but does strike a balance between assuming that growth will occur primarily in already enrolled subdivisions, and assuming growth will be associated primarily with new enrollment. 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 FIGURE 3.3 ENROLLED/UNBUILT MEMBER LAND LOTS By AMA 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 2013 2015 2017 2019 2021 PHOENIX AMA 2023 2025 2027 PINAL AMA 2029 2031 2033 2035 2037 2039 2041 2043 2045 TUCSON AMA Figure 3.4 shows projected ML housing unit construction by the Plan period in which it enrolled. Demand associated with post-2015 Plan lots is not included as part of this Plan. FIGURE 3.4 PROJECTED MEMBER LAND HOUSING UNITS By Plan Period 12,000 HOMES ENROLLED AS MLS 10,000 8,000 6,000 4,000 2,000 0 2013 2015 2017 PRE-PLAN 2019 2021 2023 INITIAL PLAN 2025 2027 2029 2005 PLAN 2031 2033 2035 2015 PLAN 2037 2039 2041 2043 2045 POST-2015 PLAN 2015 // Plan of Operation 3-7 Preliminary DR AF T — Sep tember 8, 2014 3.2.5 Gallons per Housing Unit per Day (GPHUD) To develop new municipal demand projections for each water provider (including those who serve MSAs and MLs), each new housing unit is multiplied by a provider-specific GPHUD factor that includes both the demand from the housing unit itself and a fraction of the ancillary growth-related demands (e.g., new parks, commercial land uses, etc.). There are several methods for estimating this demand factor. For this Plan, the factor is calculated by dividing total (2010) provider demand by total housing units in the provider’s service area in the 2010 Census. This method was selected because it provides more conservative (i.e., higher) demand estimates than other alternatives. A modest demand reduction of -0.1% per year was then applied to the GPHUD for newly constructed housing units, which are assumed to have a lower conservation potential compared to existing units due to the saturation of conservation technology such as low-flow fixtures. 3. 2. 5.1 MEMBER LAND GPHUD In addition to the aggregate GPHUDs for each water provider, specific GPHUDs were developed for each of the nearly 1,100 ML subdivisions. Certificates of Assured Water Supply associated with MLs have historically over-projected water demands. As a result, an adjustment factor was developed based on a regression analysis2 of 305 of the ML subdivisions that met a “stabilization” test. The test required three criteria be met by the ML in order for its water demand to be considered “stabilized”: 1) 2) 3) >90% of the housing units are constructed; 3-year parcel water use variance <+/-10%; Large-lot adjustments and subdivisions with golf courses excluded. FIGURE 3.5 ACTUAL VERSUS PROJECTED DEMAND (n = 305) ACTUAL DEMAND, STANDARDIZED (AF) 2,000 200 20 2 3 30 300 3,000 PROJECTED DEMAND, AWS (AF) 2 3-8 Regression is a statistical technique for assessing the predictive relationship between variables. In this study linear regression was used to compare the actual water use of stabilized subdivisions to the projected water use from their Certificates of AWS. The resulting equation is: Stabilized use = 0.62 * AWS projection, with an r2 value of 0.92. The very high r2 value (a value of 1 indicates that the regression line perfectly fits the data), and the relatively large sample size, provide confidence that the equation can be used to project water use. Note, however, that this result is not an adequate substitute for the plat-level analysis of demand that is performed during the CAWS application process. 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 This analysis identified a strong association between the stabilized water use and the projected water use identified on the associated Certificate of Assured Water Supply, multiplied by a reliance factor of 0.62. This analysis provided the foundation for estimating the unique projected demand for the ML lots that have not yet been constructed. With the ML housing units distributed among providers and Plan periods, it is possible to calculate the associated demands. For each provider, the Initial Plan and 2005 Plan housing units are multiplied by a GPHUD that is based on the individual ML demand projections (using the “stabilization” ratio method), weighted by the number of unconstructed lots for those MLs. For 2015 Plan housing units, ML demand is estimated by multiplying by 80% of the water provider’s aggregate GPHUD. The 20% reduction is intended to adjust for the fact that ML demand only applies to the subdivision itself, not ancillary demands or water that is lost or unaccounted. Figure 3.5 shows the final projected demand for both new and existing housing units for all municipal providers (not just those served by CAGRD) through 2045. FIGURE 3.6 PROJECTED MUNICIPAL DEMAND New and Existing (AF) 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 EXISTING NEW 2015 // Plan of Operation 3-9 Preliminary DR AF T — Sep tember 8, 2014 3.3 SUPPLY UTILIZATION The projected demands shown in Figure 3.6 will be met with a variety of supplies by each provider. CAP:SAM evaluates 16 different water supply types3, including Excess Groundwater4 reported to CAGRD. However, the projection of Excess Groundwater can only be estimated after all other supply types available to water providers have been considered. The modeling steps include: calculation of the overall availability of the supply type; tracking each provider’s legal and physical entitlement to the supplies; and incorporating supply use patterns and preferences by provider. The data and methods used to establish supply availability and entitlements vary by supply type, as shown in Table 3.1. TABLE 3.1 SUPPLY ASSUMPTIONS SUPPLY TYPE ASSUMPTIONS EFFLUENT Based on reported non-potable use, with increasing availability tied to providers’ percent housing growth rate SURFACE WATER Based on stochastic availability of 3-year average delivery volumes as reported to ADWR on Annual Reports (2010 – 2012) CAP Based on non-shortage conditions on the Colorado River LONGTERM STORAGE CREDITS Initial long-term storage account volumes based on ADWR reported balances GROUNDWATER ALLOWANCE Based on balances supplied by ADWR; both incidental recharge rates and pledged extinguishment credits were obtained from Designation Orders. Additional allowance data were collected for the Pinal AMA to allow the effects of the 2007 AWS rule modifications to be properly modeled. EXEMPT GROUNDWATER Based on remediated groundwater use for designate d providers, extended past 2025, and demand from pre-1995 subdivisions, non-subdivisions, and lost and unaccounted water for undesignated providers. Modeling for this Plan does not include any leasing activity beyond currently known short- and long-term leases. This is a conservative assumption that likely overestimates the volume of Excess Groundwater that MSAs will report as their demands grow. 3-10 3 I ncluding Effluent; SRP surface water; Other surface water; CAP P3 Priority; CAP M&I Priority; CAP Indian Priority; CAP NIA Priority; CAP Ag Settlement Pool; CAP Other Excess; Long-term Storage Credits, CAP; Long-Term Storage Credits, Effluent; Groundwater, Allowance; Groundwater, Excess; Groundwater, Exempt; Groundwater, In-Lieu; and Unknown. 4 C AGRD is obligated to replenish Excess Groundwater per A.R.S. § 48-3701.7. 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 3.3.1 Fulfillment In CAP:SAM, demand and supply are reconciled by iterating through each supply type, incrementally fulfilling each providers’ demand (limited by their entitlements), until the entire demand is satisfied5. The primary fulfillment sequence is: effluent (non-potable); exempt groundwater; surface water; CAP; long-term storage credits; groundwater allowances; and Excess Groundwater. In general, the modeling for the Plan assumes that supply usage patterns and preference by water providers mirror past practices, unless there is specific knowledge of a change (e.g., a pending DAWS application, anticipated lease, etc.). The combination of supply preference and iteration allows the model to generate results that dynamically incorporate changes through time, such as the availability of CAP NIA priority water, or the exhaustion of groundwater allowance accounts. This approach allows the development of a range of scenarios, but also allows for testing of assumptions and calibration with historic data in ways that can add confidence to the rigor of the assumptions. Table 3.2 summarizes major supply utilization assumptions. TABLE 3.2 SUPPLY UTILIZATION ASSUMPTIONS SUPPLY TYPE ASSUMPTIONS EFFLUENT Based on non-potable base-year use; fully used by provider to meet non-potable demands when available SURFACE WATER Based on historic reporting patterns; fully used by provider when available CAP Entitlements based on existing long-term contract volumes, recommended NIA Priority reallocation volumes, and known leases, exchanges and assignments; fully used by provider, up to entitlement, with specific adjustments for undesignated providers; percent of providers’ remaining supply used to accrue LTSCs LTSCS Based on initial balances and annual accrual; debit of 1% per year to meet demands GROUNDWATER ALLOWANCE Uses a maximum of 5% balance per year when available in Phoenix and Tucson AMA; greater use by providers in Pinal AMA EXEMPT GROUNDWATER Fully used by provider when available EXCESS GROUNDWATER Used by CAGRD members to meet up to remaining demands An output of CAP:SAM, Figure 3.7 shows the supplies projected to fulfill all municipal demands through 2045. Non-replenished groundwater includes exempt groundwater, the use of groundwater allowances, and groundwater use by pre-1995 subdivisions not required to report to CAGRD. Excess Groundwater shown represents groundwater use that will be reported to CAGRD as obligation. Other groundwater represents demands that are fulfilled with groundwater in the model, and may be subject to CAGRD replenishment under future Plans if it is not met with other supplies by the provider. 5 T he model also accounts for the use of CAP and effluent for LTSC accrual (i.e., above what is needed to meet annual demand). 2015 // Plan of Operation 3-11 Preliminary DR AF T — Sep tember 8, 2014 FIGURE 3.7 FULFILLMENT By Supply Type (AF) 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 EFFLUENT SURFACE WATER CAP NON-REPLENISHED GW EXCESS GW OTHER GW 3.4 REPLENISHMENT OBLIGATION CAGRD’s replenishment obligation results from Excess Groundwater reported by MSAs and water providers serving MLs (illustrated in Figure 3.8). As noted in the previous section, Excess Groundwater is one of the supply types that CAP:SAM uses when fulfilling demands and it is generally last in the sequence of the supply types used to meet demands. However, the actual modeling steps are more complex, and must incorporate factors such as the likelihood that a projected housing unit will be associated with an existing versus new ML, and the interplay between Excess Groundwater and Groundwater Allowance use. The projection methodology for MSAs versus MLs is described in the following sections. 3-12 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 FIGURE 3.8 EXCESS GROUNDWATER PROJECTION (AF) 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 2001 3.4.1 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 Member Service Areas For MSAs, the projection of Excess Groundwater use is relatively straightforward. The overarching assumption is that reporting Excess Groundwater to CAGRD is the option of last resort because the utility’s ratepayers will bear the comparatively high cost6. This assumption is reflected in the sequence the model uses to fulfill water provider demand as described above, in which renewable supplies are generally used before groundwater. To the extent an MSA relies on groundwater, a portion of the demand is met with the provider’s Groundwater Allowance, which does not require replenishment, and any remainder is met with Excess Groundwater, which does. In the Phoenix and Tucson AMAs, groundwater allowances are essentially finite volumes (growing only through incidental recharge and the addition of extinguishment credits), so the Plan assumes that the allowances will be used sparingly (maximum of 5% of balance per year). In the Pinal AMA, the AWS provisions related to groundwater allowances and extinguishment credits are more generous, so the modeling assumptions rely more heavily on the allowance to satisfy annual demands7. To generate an MSA obligation forecast that complies with the statutory requirements and is comparable to the ML forecast (detailed below), it is necessary to project the obligation that the MSA will incur by the end of the Plan period (2024), plus any obligation that will result from subdivisions that the provider has committed to serve during the Plan period, but that have not yet constructed by 2024. To accomplish this, the committed demand is estimated 6 $574/AF for Phoenix AMA in 2014/15. 7 he model employs a utilization sequence in the Pinal AMA that matches ADWR’s “Calculation Decision T Tree”: Base Allowance > Account balance > Extinguishment Credits > Excess Groundwater. 2015 // Plan of Operation 3-13 Preliminary DR AF T — Sep tember 8, 2014 by extending the forecast out two additional years. This approach is consistent with methods used by ADWR in an AWS context, and by CAGRD as part of the calculation for Annual Membership Dues. For the City of Buckeye, which is projected to convert from an ML provider to an MSA in 2015, the committed demand has been further increased to reflect the projected demand of the unconstructed, inactivated ML lots (over 9,800 AF). As indicated in Table 3.3, the majority of the MSAs have portfolios of supplies that allow them to avoid any reliance on CAGRD through the end of the Plan period. TABLE 3.3 PROJECTED MEMBER SERVICE AREA DEMAND & OBLIGATION By Active Management Area (AF) ACTIVE MANAGEMENT AREA Phoenix AMA Demand Pinal AMA Demand Tucson AMA Demand TOTAL 3.4.2 Obligation Obligation Obligation Demand Obligation 2015 2020 2025 2030 2034 126,600 139,400 159,400 179,900 200,000 10,300 7,900 13,000 14,100 14,100 5,600 7,600 10,500 13,400 16,400 700 1,200 2,300 2,500 2,500 143,200 148,300 154,200 159,100 162,800 1,400 2,300 4,600 5,200 5,200 275,400 295,300 324,100 352,400 379,200 12,400 11,400 19,900 21,800 21,800 Member Lands Projecting ML obligation is more complex than projecting MSA obligation. Undesignated water providers that serve (or will serve) MLs do not have the same motivation to reduce their reliance on CAGRD as MSAs. The cost of replenishment is collected through an assessment on the property tax for the owner of the individual parcel rather than the water provider itself. Once the ML demand has been calculated, it is multiplied by the water provider’s overall groundwater reliance. Reliance is calculated as the ratio of groundwater use to total demand. The resulting ML groundwater demand is further adjusted based on groundwater allowance usage. Most ML water providers report the minimum two-thirds of their groundwater use as Excess Groundwater, with the remainder debited from their allowance. Once their allowance is exhausted, 100% of the groundwater use is reported as Excess Groundwater to CAGRD. 3-14 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 Total ML projected demand and obligations are shown in Table 3.4. Annual obligations for MLs and MSAs for the 20-year planning horizon are combined and shown in Figure 3.9. TABLE 3.4 PROJECTED MEMBER LAND DEMAND & OBLIGATION By Active Management Area (AF) ACTIVE MANAGEMENT AREA 2015 2020 2025 2030 2034 125,500 138,100 150,500 158,800 Phoenix AMA Demand 116,700 Obligation 24,000 29,800 40,300 48,400 54,500 Pinal AMA Demand 21,300 23,600 27,200 30,800 34,300 100 300 1,300 2,400 3,200 Tucson AMA Demand 15,100 17,100 19,600 22,000 23,800 Obligation 1,900 3,300 5,300 6,800 7,500 Demand 153,100 166,200 184,900 203,300 216,900 Obligation 26,000 33,400 46,900 57,600 65,200 Obligation TOTAL FIGURE 3.9 PROJECTED CAGRD OBLIGATION By Member Type (AF) 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 2001 2003 2005 2007 2009 2011 MSAs 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 MLs 2015 // Plan of Operation 3-15 Preliminary DR AF T — Sep tember 8, 2014 3.4.3 Estimated 20-Year Obligations for Current Members In summary, CAGRD is required to provide an estimate of its current and projected groundwater replenishment obligations for current members for the 20 calendar years following the submission of this Plan (A.R.S. § 45-576.02.C.2(b)). Table 3.5 provides these estimates for each AMA during 5-year intervals in the period of 2015 to 2034. These volumes reflect estimated obligations for CAGRD members — both MLs and MSAs — enrolled through December 31, 2014. They assume that currently enrolled MSAs and MLs will remain so, with the exception of the City of Buckeye converting from an ML to an MSA in 2015. TABLE 3.5 ESTIMATED 20YEAR REPLENISHMENT OBLIGATION For Current Members (MSAs and MLs) (AF) 3.4.4 ACTIVE MANAGEMENT AREA 2015 2020 2025 2030 2034 Phoenix AMA 34,300 35,400 44,900 48,700 52,200 Pinal AMA 800 1,200 2,300 2,500 2,500 Tucson AMA 3,300 4,600 7,200 7,900 8,000 TOTAL 38,400 41,200 54,400 59,100 62,700 Estimated 100-Year Obligations for Current and Future Members CAGRD is further required to provide an estimate of its projected groundwater replenishment obligations for the next 100 calendar years for current members and members expected to enroll during the ten-year Plan horizon (through December 31, 2024) (A.R.S. § 45-576.02.C.2(b)). Table 3.6 provides these estimates for each AMA across the period of 2015 to 2114. The 100-year obligation projection includes demand associated with lots that are enrolled but unbuilt by the ESTIMATED 100YEAR REPLENISHMENT OBLIGATION For Current and Future Members (MSAs and MLs) (AF) 3-16 ACTIVE MANAGEMENT AREA 2015 2020 2025 2030 2034 2114 Phoenix AMA 34,300 37,700 53,300 62,500 68,600 84,200 Pinal AMA 800 1,500 3,600 4,900 5,700 15,500 Tucson AMA 3,300 5,600 9,900 12,000 12,700 13,300 TOTAL 38,400 44,800 66,700 79,400 86,900 113,000 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 end of the 20-year projection, December 31, 2034. To account for this, an estimate of 40% of currently enrolled but unconstructed units described in the housing unit section have an associated obligation of approximately 15,000 AF added in the 100-year obligation forecast. 3.5ENROLLMENT The Plan of Operation statute requires an estimate of both current enrollment and potential enrollment over the ten-year Plan period (2015–2024). Current enrollment includes all MLs and MSAs enrolled before the start of this Plan period. Potential (new) enrollment of MLs during the Plan period is estimated using the housing unit distribution methodology described in Section 3.2. No new municipal providers are projected to enroll as MSAs during the Plan, with the exception of Buckeye, a current municipal provider serving MLs who is expected to become a designated provider at the beginning of the Plan period. As shown in Figure 3.4, CAP:SAM generates housing unit projections that are differentiated by Plan period. The model projects that 2015 Plan housing units will be constructed over a period of several decades (see Figure 3.10). However, each of those 2015 Plan housing units had to have been enrolled during the ten-year Plan period. New ML enrollment is therefore modeled by summing all of the housing units designated as 2015 Plan housing units, and distributing them within the ten-year Plan period (see Figure 3.11). To reach a more adequate estimate of 2015 Plan enrollment, an additional enrollment factor of 10% was later applied to account for subdivisions that enroll but have not constructed by 2045. This results in an additional 10,800 enrolled and constructed units with an associated replenishment obligation of 2,800 AF. Overall 119,000 new ML housing units are projected to enroll during the Plan period. 2015 // Plan of Operation 3-17 Preliminary DR AF T — Sep tember 8, 2014 FIGURE 3.10 2015 PLAN MEMBER LAND CONSTRUCTION HOUSING UNITS 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2013 2015 2017 2019 2021 PHOENIX AMA 2023 2025 2027 PINAL AMA 2029 2031 2033 2035 2037 2039 2041 2043 2045 TUCSON AMA FIGURE 3.11 2015 PLAN MEMBER LAND ENROLLMENT HOUSING UNITS 15,000 12,500 10,000 7,500 5,000 2,500 0 2013 2015 2017 2019 PHOENIX AMA 3-18 2015 // Plan of Operation 2021 2023 2025 2027 PINAL AMA 2029 2031 2033 TUCSON AMA 2035 2037 2039 2041 2043 2045 Preliminary DR AF T — Sep tember 8, 2014 4.0 WATER SUPPLIES The statutory requirements related to describing CAGRD water supplies for the CAGRD Plan of Operation are identified below. A.R.S. § 45-576.02.C.2 …the plan shall include the following information for each active management area in which a member land or member service area is located: A.R.S. § 45-576.02.C.2(c) A description of the water resources that the conservation district plans to use for replenishment purposes during the 20 calendar years following submission of the plan and water resources potentially available to the conservation district for groundwater replenishment purposes during the subsequent 80 calendar years. For purposes of compliance with the statutes cited above, two terms are referenced frequently in this chapter: water resources the conservation district “plans to use” and water resources “potentially available”. The following explanation is offered to assist in understanding how these terms are used in order to ensure compliance with statutory requirements. The term “plans to use” refers specifically to water resources that CAGRD may use (or “plans to use”) to meet its replenishment obligations during the 20 years following submittal of the Plan to ADWR. As detailed in this chapter, CAGRD has identified several categories of water resources that are currently available and most likely to be used in this time frame. CAGRD also has identified a range of volumes for each of these supplies likely to be available during the next 20 years. The term “potentially available” refers to water supplies that may be available for CAGRD to use during the subsequent 80-year period. Similar to the “plan to use” water supplies, these “potentially available” water supplies are identified as a range of volumes likely to be available over the 80 year timeframe. Both individually and collectively, the volumes of these water supplies are significantly larger than CAGRD’s projected replenishment obligation, either for the next 20 years or for the subsequent 80 years. The labeling of various water supplies as those that CAGRD “plans to use” does not indicate that CAGRD intends to or will acquire each of these supplies or the entire volume of any supply category listed. It also does not indicate that CAGRD has assumed that it will acquire any specific water supply at a specific date or in a specific volume. Rather, CAGRD will pursue acquisition of these water supplies consistent with the objectives of the CAGRD Water Supply Program as described later in this chapter. This chapter describes CAGRD’s current water supply portfolio and water supply acquisition program. Water supplies that CAGRD plans to use to meet its replenishment obligations during the next 20 years and supplies that are potentially available to meet replenishment obligations during the subsequent 80-year period are further described and identified in Tables 4.1 and 4.2. For purposes of this Plan, the 20-year period following submission of this Plan is 2015 through 2034, and the subsequent 80-year period is 2035 through 2114. 2015 // Plan of Operation 4-1 Preliminary DR AF T — Sep tember 8, 2014 4.1 REPLENISHMENT OBLIGATION To fully address the requirements set forth in A.R.S. § 45-576.02(c), CAGRD must first identify the projected annual replenishment obligation for three distinct time periods: (1) the present; (2) the 20-year period following submission of this Plan; and (3) the subsequent 80-year period. Current Replenishment Obligation (as of 2013): CAGRD’s current, actual replenishment obligation for the year 2013 was approximately 35,000 AF. The 20-year Period Following Submission of the Plan: As set forth in Chapter 3, the estimated annual replenishment obligation in the 20th year following submission of this Plan (2034), associated with current members and projected members is 86,900 AF. For purposes of this chapter, the term “current members” means MLs and MSAs enrolled through 2014, and the term “projected members” means new members projected to enroll in the 10-year period following submission of this Plan, or 2015 through 2024. The Subsequent 80-year Period: As further set forth in Chapter 3, the annual replenishment obligation associated with current members and projected members will continue to grow after 2034, because not all enrolled lots will be constructed by 2034. These enrolled, unconstructed lots are expected to generate an additional 26,100 AF of annual replenishment obligation at “build-out” sometime during the subsequent 80-year period. Therefore, the maximum annual replenishment obligation in 2114 for current members and projected members is approximately 113,000 AF. 4.2 CURRENT CAGRD WATER SUPPLY PORTFOLIO Summary of Current Entitlements: To date, CAGRD has secured rights to 31,081 AF of annual, long-term water supplies. This portfolio includes: (1) a CAP M&I subcontract entitlement of 7,996 AF/yr; (2) an allocation of 18,185 AF/yr of CAP Non-Indian Agricultural (“NIA”) Priority water recently recommended by the ADWR pursuant to the Arizona Water Settlements Act of 2004; (3) a 100-year tribal lease of 2,500 AF/yr of White Mountain Apache Tribe CAP NIA Priority water; and (4) a 100-year lease of 2,400 AF/yr of effluent from Liberty Utilities. In addition to these long-term supplies, CAGRD has acquired and currently owns nearly 90,000 AF of LTSCs. Also, CAGRD has contracted to acquire an additional 455,200 AF of LTSCs in the future through various shortterm and longer-term credit purchase agreements. The sum of all the LTSCs currently owned by CAGRD and those to be acquired in the future pursuant to executed purchase agreements is 545,200 AF. If these LTSCs were annualized as a 100-year supply, they would represent an annual entitlement of approximately 5,452 AF. Adding the long-term entitlements of 31,081 AF/yr to the annualized LTSC volume of 5,452 AF brings the current CAGRD water supply portfolio to 36,533 AF of annual long-term water supplies. Each of these supplies is described in more detail and is shown in Table 4.1. 4-2 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 CAGRD also has access to Excess CAP water1 pursuant to CAWCD Board policy, commonly referred to as the Access to Excess Policy, (“CAWCD Procedure for Distributing Excess CAP water for the Period of 2015 through 2019” approved by the CAWCD Board on March 6, 2014). This policy grants CAGRD up to 35,000 AF of Excess CAP water annually to meet its replenishment obligations. Under the policy, the Excess CAP water pool is a secondary alternative for CAGRD replenishment obligations — that is, CAGRD will first use water resources in its water supply portfolio (except for LTSCs) to meet annual replenishment obligations; if those resources are insufficient, then CAGRD may access the Excess CAP water pool, up to the 35,000 AF limit. This policy is in place through 2019, at which time it will be revisited by the CAWCD Board. Projections by CAP staff indicate that in normal water supply years Excess CAP water will continue to be available for at least the next 20 years. However, the availability of excess water for CAGRD use will continue to depend on other demands for that water and future adjustments made by the CAWCD Board to the Access to Excess policy. CAGRD will continue to use Excess CAP water, when available and needed to fill gaps between its existing water supply entitlements and annual replenishment obligations. However, as described below, CAGRD will continue to acquire additional water supplies to meet its replenishment obligations, which will ultimately eliminate CAGRD’s reliance on Excess CAP water. Lessening CAGRD’s reliance on Excess CAP water has the secondary benefit of reducing the amount of credits that must be maintained in the Replenishment Reserve account, which is based on a percentage of the quantity of the future replenishment obligation that is projected to be met by supplies with an expected availability of 20 years or less, including year-to-year availability like that of Excess CAP water. 4.2.1 CAGRD CAP Entitlements CAP M&I Entitlement: CAGRD holds an annual entitlement to 7,996 AF of CAP M&I Priority water pursuant to the “Supplemental Contract between the United States and the Central Arizona Water Conservation District for Delivery of Central Arizona Project Water, Contract No. 14-06W-245, Amendment No. 1, Supplement No. 1, as amended,” (“Supplemental Contract”). The Supplemental Contract is for permanent water service. Reallocation of CAP NIA Priority Water: On January 16, 2014, the State of Arizona, through ADWR, issued its “Recommendation for Reallocation of Non-Indian Agricultural Priority Central Arizona Project Water” pursuant to Section 104(a)(2)(C)(i)(III) of the Arizona Water Settlements Act of 2004. The recommendation included a recommended volume for CAGRD of 18,185 AF/yr of CAP NIA Priority water. Lease of White Mountain Apache Tribe CAP NIA Priority Water: Pursuant to the White Mountain Apache Tribe Water Rights Quantification Agreement and the White Mountain Apache Tribe Water Rights Quantification Act of 2009 (the “Act”), the White Mountain Apache Tribe has leased 2,500 AF/yr of its CAP NIA Priority water to CAWCD for CAGRD purposes. The term of the lease begins 30 days after the enforceability date, as that term is defined in Section 12(c) of the Act, and ends 100 years thereafter. 1 xcess CAP water is all water available for delivery through the CAP canal in excess of the quantities scheduled under long-term E contracts and subcontracts. 2015 // Plan of Operation 4-3 Preliminary DR AF T — Sep tember 8, 2014 4.2.2 Effluent Lease On February 6, 2014, CAWCD and Liberty Utilities (“Liberty”) executed a lease agreement under which Liberty agreed to lease to CAWCD, for CAGRD purposes, 2,400 AF/yr of effluent. The agreement also provided for the development of an Effluent Recharge Project to store such effluent. The term of the lease begins on the date the Effluent Recharge Project is substantially complete and ends 100 years thereafter. The leased effluent includes treated wastewater produced from the Liberty’s Palm Valley Wastewater Reclamation Facility and effluent produced at any other wastewater treatment plant that may be owned or controlled by Liberty. The agreement also grants CAGRD a 100-year right to purchase LTSCs generated by Liberty through storage at the Effluent Recharge Project. It is anticipated that the Effluent Recharge Facility will be completed by 2017, allowing CAGRD to begin recharging its effluent entitlement in that year. As a result of this agreement, CAGRD will be able to offset pumping by CAGRD MLs in the west Phoenix AMA through replenishment in the area of hydrologic impact. This innovative partnership provides significant benefits to Liberty Utilities, CAGRD and its members — it provides a mechanism to offset CAGRD ML pumping by providing a low-cost source of both water and credits for replenishment, it grants CAGRD and its members access to infrastructure that possibly would not have been constructed without the financial contribution of CAGRD, and it offers hydrologic benefits of groundwater recharge to Liberty and MLs located near the Effluent Recharge Project. 4.2.3 Long-term Storage Credits CAGRD currently owns approximately 90,000 AF of LTSCs. In addition, CAGRD holds rights to approximately 455,200 AF of LTSCs that will be transferred to CAGRD in the future pursuant to several multi-year credit purchase agreements. (These agreements are described in Section 184.108.40.206.) In total, CAGRD holds entitlements to approximately 545,200 AF of LTSCs. CAGRD projects that it will have approximately 330,000 AF of LTSCs available for replenishment purposes over the next 20 years. If these LTSCs were annualized over a 100-year term, the annual volume of LTSCs available to the CAGRD for next 100 years would be 5,452 AF. Some LTSCs may be consumed within a shorter time frame, depending on the availability of other supplies during the 20-year planning period of this 2015 Plan and the statutory requirements for the Replenishment Reserve, as further discussed in Chapter 5. LTSCs are highly suited to meeting the CAGRD replenishment obligation. They provide flexibility in CAGRD’s water supply portfolio, particularly as a back-up supply to fill in temporary gaps in the availability of other water supplies. The LTSCs currently in the CAGRD accounts for the Tucson and Phoenix AMAs, comprise a significant component of CAGRD’s water supply portfolio, and could be used to fulfill much of CAGRD’s replenishment obligation for the next 20 years, when coupled with the other supplies in the portfolio. Despite their benefits, LTSCs also pose challenges from a water supply perspective. The challenges result from the common view of LTSCs as “paper” water and the expressed preference for CAGRD to meet its replenishment obligations with “wet” water supplies, especially long-term, annual entitlements. Clearly, long-term entitlements provide considerable certainty for meeting CAGRD replenishment obligations and are simple to represent within a portfolio of long-term supplies. However, since all water in the CAGRD portfolio becomes stored water at some point, it could be argued that there is no difference between “wet” water and “paper” water when it comes to meeting CAGRD’s replenishment obligation, except that purchasing LTSCs actually eliminates an intermediary step. Further, in accounting for LTSCs in a water supply portfolio, it is necessary to represent a finite quantity of water as a multi-year entitlement. To some extent this is simplified when LTSCs are purchased as part of a multi-year commitment, but in the end all credits represent a finite supply and must be treated as such in determining how best to allocate them to meet replenishment obligations. 4-4 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 4. 2. 3.1 D E S C R I P T I O N O F LO N G -T E R M S T O R AG E C R E D I T PU R C H A S E AG R E E M E N T S Completed Single-Year Credit Purchase Agreements: Between 2008 and 2013 CAGRD made one-time purchases of 54,455 LTSCs from several entities, including: • • the Cities of Goodyear and Glendale, and Gold Canyon Sewer, in the Phoenix AMA, and Fidelity National Title Trust and Rocking K Acquisitions, in the Tucson AMA. Those purchases, combined with credits purchased in 2013 and 2014 through the multi-year purchase agreements described below, have resulted in the current CAGRD credit balance of approximately 90,000 LTSCs noted above. LPSCO Credit Purchase Agreement: On June 6, 2013, CAWCD and Litchfield Park Service Co. (LPSCO) executed a Purchase and Sale Agreement for Long-Term Storage Credits. Under the terms of that agreement LPSCO has agreed to sell to CAGRD all storage credits accrued (in the Phoenix AMA) by delivering effluent to Roosevelt Irrigation District from 2013 to 2017. This agreement is expected to add approximately 11,500 AF of LTSCs to the CAGRD portfolio when concluded. However, if the recharge project contemplated in the agreement between CAWCD and Liberty Utilities (dba LPSCO) described in 4.2.2 (the 100-year Agreement) is constructed and operational before 2017, the terms of the 100-year Agreement will supersede this credit purchase agreement. Liberty will commence transferring LTSCs to CAWCD under the 100-year Agreement. It is anticipated that CAWCD will purchase approximately 248,000 LTSCs over 100 years pursuant to the 100-year Agreement. City of Tucson Credit Purchase Agreement: On August 6, 2013, CAWCD and the City of Tucson (Tucson) executed a Purchase and Sale Agreement for Long-Term Storage Credits. Tucson agreed to sell and transfer 100,000 AF of Tucson AMA LTSCs to CAGRD over 20 years. CAGRD has committed to purchasing 4,000 to 5,000 credits each year over the term of the agreement. Mojave Ventures Credit Purchase Agreement: On November 7, 2013, CAWCD and Mojave Ventures executed a Purchase and Sale Agreement for Long-Term Storage Credits. Pursuant to that agreement, Mojave Ventures agreed to sell and transfer to CAWCD (for CAGRD purposes) a total of approximately 18,356 AF of LTSCs (14,311 AF of credits accrued in the Phoenix AMA and 4,044 AF of credits accrued in the Tucson AMA) every year for seven years, commencing in 2014 and ending in 2020. (The total volume of LTSCs to be acquired under this contract is 128,483 AF.) 4.3 CURRENT CAGRD WATER SUPPLY AND PROJECTED OBLIGATIONS As identified in Section 4.1, the estimated annual replenishment obligation in the year 2034 associated with current members and projected members is 86,900 AF; the maximum annual replenishment obligation in the year 2114 associated with current members and projected members is approximately 113,000 AF. Further, as outlined in Section 4.2 and illustrated in Table 4.1, CAGRD currently holds rights to 36,534 AF of annual long-term water supplies. Accordingly, to meet the projected 2034 replenishment obligation, CAGRD will need to acquire additional water supplies of approximately 50,370 AF of annual entitlement (or an equivalent combination of shorter-term supplies and LTSCs) over the next 20 years. Beyond that, to meet the projected 2114 replenishment obligation, CAGRD will need to acquire an additional 26,100 AF of annual entitlement (or an equivalent combination of shorter-term supplies and LTSCs) over the subsequent 80 years. The CAGRD will acquire these new water supplies through the CAGRD Water Supply Acquisition Program, which is described in Section 4.4. 2015 // Plan of Operation 4-5 Preliminary DR AF T — Sep tember 8, 2014 TABLE 4.1 SUMMARY OF CAGRD WATER SUPPLIES ACQUIRED (through 2014) WATER SUPPLY QUANTITY ( ACRE-FEET ) DESCRIPTION LOCATION YEAR SUPPLY FIRST AVAILABLE TERMS OF ACQUISITION TOTAL ANNUAL --- 7,996 Phoenix AMA 2006 Contract is for permanent water service 1 CAP Water (M&I Priority) M&I Subcontract entitlements transferred from Litchfield Park Service Co. (LPSCO), New River Utility Co., Sunrise Water Co., West End Water Co., and Valley Utilities Water Co. CAP Water (NIA Priority) Recommended volume for CAGRD in ADWR's NIA Reallocation recommendation --- 18,185 2 Within CAP Service Area 2017 Contract will be for permanent water service Tribal lease of CAP NIA Priority Water Lease of White Mountain Apache Tribe NIA Priority water --- 2,500 Within CAP Service Area 2017 100-year lease Long-term Storage Credits Storage credits acquired through 2014 64,879 649 Phoenix AMA 2014 One-time purchases and credit purchase agreements Long-term Storage Credits Storage credits to be acquired in the future 335,982 3,360 Phoenix AMA 2015 Credit purchase agreements Long-term Storage Credits Storage credits acquired through 2014 25,093 251 Tucson AMA 2014 One-time purchases and credit purchase agreements Long-term Storage Credits Storage credits to be acquired in the future 119,264 1,193 Tucson AMA 2015 Credit purchase agreements Effluent Long-term lease of effluent from Water Reclamation Facility operated by Liberty Utility; includes access to infrastructure sufficient to recharge the purchased effluent at USF to be built by Liberty --- 2,400 Phoenix AMA 2016 100-year lease of 2,400 AF of effluent TOTAL ANNUALIZED SUPPLY: 36,534 TABLE NOTES: 1 Long-term storage credits are presented as a 100-year supply by dividing the total by 100. 2 Although NIA water likely will not be available every year because of predicted shortage reductions, the Replenishment Reserve account is intended to firm these supplies for CAGRD use. 4-6 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 4.4 CAGRD WATER SUPPLY ACQUISITION PROGRAM In 2010, the CAWCD Board adopted a Strategic Plan that included the following strategic objectives regarding CAGRD water supply acquisition: (1) re-evaluate the water supply acquisition activities outlined in the 2005 Plan of Operation (e.g., timing, types of supply and projected costs); (2) aggressively acquire water supplies as outlined in the 2005 Plan; and (3) develop and implement revenue generation mechanisms (e.g., bonding, rates, fees) that are sufficient to carry out a successful water supply acquisition program. In March of 2011, the CAWCD Board authorized staff to conduct a Water Supply Acquisition Study (“Study”) to support the re-evaluation of the water supply acquisition program of the 2005 Plan. A consulting services contract was awarded to Montgomery & Associates and WestWater Research to provide technical assistance to CAGRD staff to complete the study. The results of the Water Supply Acquisition Study were presented to the CAWCD Board in April 2012. The study involved four main tasks: (1) inventory and characterize the type and quantity of water supplies available for acquisition; (2) estimate the economic value of supplies; (3) recommend an acquisition strategy; and (4) recommend an acquisition implementation plan. One of the main deliverables of the Study was the Acquisition Strategy and Implementation Plan (“Implementation Plan”) which combined with the Study, provided CAGRD with technical tools and a “roadmap” for a well-informed, strategic water acquisition program. The Study and Implementation Plan contained the most reliable and up-to-date information about the extent of available water supplies (type and volume), the economic value of those supplies (probable acquisition cost), and the likely time needed to acquire each supply type. Over 500 individual water supplies were inventoried and classified into priorities for acquisition based on a decision support model that considered criteria such as quantity, reliability, known availability, clear administrative processes and price. In May of 2012, the CAWCD Board directed CAWCD management to implement a more robust CAGRD Water Supply Acquisition Program (“Program”), using the Study and Implementation Plan as the basis or starting point for the Program. The CAWCD Board authorized additional staffing to support this initiative. The primary goal of the Program is to acquire a diverse portfolio of water supplies through voluntary, market-based transactions with willing entities. To date, the Program has allowed CAGRD to meet its statutory responsibility to acquire water supplies in a timely and cost-effective manner. 2015 // Plan of Operation 4-7 Preliminary DR AF T — Sep tember 8, 2014 4.4.1 Water Supply Acquisition Program Principles The CAWCD Board has delineated several key principles to guide implementation of the Program. Those principles are as follows: 1.CAGRD does not have condemnation authority and will not partner with other entities to use their condemnation authority to acquire water supplies through condemnation. 2.When considering agreements involving Colorado River entitlements held by irrigation districts, CAGRD acknowledges that the districts are the local governmental body best situated to assess any impacts to landowners and farmers within the districts and therefore, will negotiate directly with the districts. 3. CAGRD will assert its fiduciary responsibility to its members by negotiating a fair and reasonable price for the acquisition of water supplies based on the best available information regarding the fair market value of said supplies. 4. CAGRD will consider potential third-party impacts to the local community associated with any proposed water acquisition/transfer. 5.CAGRD will acquire new water supplies in a manner that generally coincides with increases in CAGRD replenishment obligations as they occur over time. Additionally, CAGRD staff has incorporated the following considerations into the implementation of the Program: 4-8 •Because CAGRD is not a water provider it has additional flexibility in the types of water supplies that can be used to meet the replenishment obligation. Therefore, the Program is seeking a diverse portfolio of water supplies that can limit CAGRD’s reliance on certain types of supply that may be subject to particular risks of curtailment. This also helps to minimize the risk of adverse impacts to any particular water-using sector from which supplies may be obtained. •The Program relies on the best available information regarding the value of supplies to ensure that the price paid for a supply is supported by the market. •The Program initially seeks supplies where there is a high probability of success in completing the transaction and a clear administrative or regulatory process in approving the transaction. •The Program is currently seeking to develop a portfolio of supplies with 50% of the supplies being short-term entitlements and the balance being long-term entitlements. It is assumed that short-term supplies provide approximately 30 years of supply, while long-term supplies are available for at least 100 years. •Because of the foregoing considerations, the Program is likely to pursue a number of smaller supply acquisitions rather than a few large ones and will generally be pursuing numerous supplies simultaneously. •The Program seeks to emphasize physical replenishment with CAGRD water supplies that is done in ways that advance the management goals of the AMA in which those supplies are used. •The Program will seek to complete transactions within the context of agreements that can provide multiple, mutual benefits to our partners. 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 4.5 DESCRIPTION OF WATER SUPPLIES PLANNED FOR USE 2015–2034 As discussed in Section 4.4 above, the CAGRD Water Supply Study identified an inventory of available water supplies. These water supplies are listed in Table 4.2 (by supply type and volume). The CAGRD plans to acquire some of the water supplies identified in Table 4.2 to meet its replenishment obligations for the period 2015–2034. CAGRD also plans to use its existing entitlements identified in Section 4.2, including Excess CAP water to the extent that it is available, to meet its replenishment obligations for the period 2015–2034. Table 4.2 illustrates that CAGRD has identified an inventory of between 460,000 AF to 920,000 AF of available water supplies, which far exceeds CAGRD’s target of additional water supply acquisition for 2034 demands of 50,370 AF. Accordingly, CAGRD anticipates acquiring a mix of supplies from this “universe” of supplies over the course of this 2015 Plan. Many of these supplies have been identified as acquisition targets within the next 20 years but will only be acquired consistent with the Program objectives outlined in Section 4.4. While CAGRD plans to use a subset of these supplies, as suggested by Table 4.2, it is anticipated that many of these supplies will also be available to meet future replenishment obligations during the subsequent 80 year period, 2035–2114. Section 4.6 discusses only those supplies that CAGRD expects to be available for use beyond 2034, but the supplies discussed in this section should also be available during that time period because the volumes of those supplies that are to be acquired by CAGRD in the next 20 years are small compared to the quantity available. The quantity ranges that are listed in Table 4.2 for each of these supplies assume a “high” estimate of available supply, which includes all the water within that category that might be available for acquisition. The “low” estimate assumes that only 50% of that available supply might successfully be acquired, except where noted. Other assumptions that are incorporated into the estimates for individual supply categories are described within the discussion of individual supply types below and listed in the footnotes to Table 4.2. 4.5.1 Long-term Storage Credits CAGRD will continue to pursue acquisition of LTSCs. There is currently a large volume of LTSCs available in the three AMAs and the market for purchasing them is well-established, with predictable prices and administrative simplicity. Additionally, these are supplies that are already stored in the ground so they are, in a sense, “pre-replenished”. Particularly when those credits are stored near reportable Excess Groundwater pumping by CAGRD members, LTSCs provide an excellent fit for meeting CAGRD replenishment obligations. As Table 4.2 shows, CAGRD has identified potentially available LTSCs that would represent an annualized, 100-year supply of 11,000 to 22,000 AF/yr. This represents 1.1 million to 2.2 million AF of uncommitted credits that currently exist within the Phoenix, Pinal, and Tucson AMAs, as well as within the Harquahala INA. CAGRD anticipates acquiring some of these available credits to meet replenishment obligations during the next 20 years. In addition, it is likely that some entities that are currently using a portion of their CAP supplies to generate marketable LTSCs will continue to do so in the future, as supply availability permits, thus creating additional credits that may be available to CAGRD. 2015 // Plan of Operation 4-9 Preliminary DR AF T — Sep tember 8, 2014 4.5.2 CAP Water CAGRD will pursue available CAP entitlements to increase the permanent water supplies in its portfolio. These entitlements include unused M&I entitlements and future allocations of NIA priority water. In addition, several existing tribal water rights settlements that include CAP entitlements have provisions to allow, at the discretion of the tribe, leasing of significant amounts of settlement water to other water users within Arizona. Some of this water is currently under lease and, therefore, unavailable; some is not. As identified in Table 4.2, CAGRD estimates the total volume of CAP water that is currently not being delivered pursuant to a long-term contract or subcontract and, hence, may be available for acquisition over the next 20 years is between 279,700 AF/yr and 559,300 AF/yr. To arrive at this estimate, CAGRD has assumed that any CAP water not currently utilized as part of a long-term commitment, i.e. dedicated to an Assured Water Supply or otherwise committed to a long-term direct use by the entitlement holder, may be available during the next 20 years. This includes all supplies that CAP subcontractors have not ordered for the past four years, with some adjustments in cases where CAGRD has specific knowledge of a subcontractor’s future plans for full utilization of a supply. This also includes any CAP supplies that are currently being delivered under a short-term (five years or less) lease agreement and any CAP water that is being delivered to a USF or GSF solely for the purpose of earning LTSCs. The CAGRD estimate of CAP water that may be available or is potentially available includes tribal CAP entitlements that are currently being used to earn LTSCs, are being leased under short-term agreements or are being actively marketed for use by others. For instance, the Gila River Water Storage LLC is actively marketing CAP water and LTSCs. The CAGRD estimate of potentially available tribal CAP water is reduced in volume over time in consideration of assumed additional on-reservation use to meet tribal economic development goals. The estimate of available CAP supplies also includes water currently being delivered as part of the Agricultural Settlement Pool, which at present is comprised of Excess CAP water and excess diversions from the Colorado River. While this water is currently being fully utilized, the amount of water in this pool begins to decline starting in 2017 and is completely eliminated in 2030 under current agreements. Some of this water may become available to other water users such as CAGRD as Excess CAP water. CAGRD is pursuing some portion the Arizona State Land Department’s (“ASLD”) entitlement of approximately 32,000 AF/ yr of CAP M&I Priority water. This water was allocated to ASLD in order to provide water supplies for development of State land. Current ML developments that are located on former State lands have incurred a total replenishment obligation of approximately 1,700 AF and at build-out will incur an additional annual replenishment obligation of 1,000 AF/yr. CAGRD also has estimated future ML enrollment of ASLD lands using the ASLD Five-Year Plan. Using an estimated 1 AF per acre water demand figure, CAGRD estimates the future excess water demand associated with ASLD lands that could become MLs is 3,000 AF/yr. In its 2010 Strategic Plan, the CAWCD Board directed CAGRD staff to work with ASLD on the transfer of 2,906 AF of ASLD’s M&I subcontract water to CAGRD. It is hoped that future replenishment obligations associated with ASLD lands that become MLs could be met with CAP M&I water transferred from ASLD. CAGRD is currently seeking reallocation of a 161 acre-foot M&I allocation that was recently relinquished by the Pine Water Company, an exchange contractor in Gila County. Additionally, there may be other CAP M&I allocations that are currently unutilized by the subcontract holder and are unlikely to be fully utilized. CAGRD was allocated over 18,000 AF of CAP NIA Priority water by ADWR in its recent reallocation recommendation. CAGRD also will pursue a second allocation from this supply when ADWR reallocates the remaining 41,000 AF from that pool within the next 10 years, assuming CAGRD’s projected replenishment obligations justify such an allocation at that time. 4-10 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 4.5.3 Effluent CAGRD also will pursue additional effluent supplies where such acquisitions can be accomplished in ways that further the goals of developing long-term renewable supplies at reasonable prices. As identified in Table 4.2, CAGRD has identified between 59,600 and 119,200 AF/yr of effluent that is currently discharged from water reclamation facilities and not reused or recharged to earn LTSCs. In many cases the municipalities or water providers who own these effluent supplies do intend to fully utilize these resources at some point in the future to assist in meeting potable demands. However, these effluent supplies may be available for use by CAGRD through short-term or intermediate leases or, where those supplies would eventually be used to generate LTSCs, the CAGRD could partner with the effluent owner to construct infrastructure that might accelerate the utilization of the resource in exchange for LTSCs or a share of the effluent. This is the model that was implemented in the Liberty Utilities agreement discussed in Section 4.2.2 above. 4.5.4 Colorado River Supplies CAGRD will pursue the acquisition or lease of Colorado River entitlements in the future. As identified in Table 4.2, CAGRD has identified between 109,800 and 219,700 AF/yr of Colorado River water (Priority 4 or higher) that could be available for use by CAGRD by means of transfers, leases, or fallowing agreements. These amounts assume that it may be possible to acquire the consumptive use portion of individual contract holder entitlements in addition to fallowing/lease agreements with other entitlement holders. To estimate the amount of Colorado River water potentially available through fallowing agreements, CAGRD assumed that up to 20% of the consumptive use associated with all irrigated acreage within each county (based on data from 2010 to 2013) could be made available. The limits on fallowing employed in developing these estimates are consistent with technical guidance developed and utilized by the United States Bureau of Reclamation (“Reclamation”) for federal irrigation projects in California. The “low” estimate in Table 4.2 is simply 50% of the “high” estimate. CAGRD has developed a pilot fallowing program with the Yuma Mesa Irrigation & Drainage District that could be used as a model for additional fallowing agreements with on-river irrigation districts. Such agreements would result in unused Colorado River water that could be wheeled to the CAP service area. One significant attribute of this supply is that it is non-Project water and as such, will need to be wheeled through the CAP canal. Section 220.127.116.11 below discusses the status of the development of a program for wheeling non-Project water, including the joint development by CAWCD and Reclamation of a standard form wheeling agreement. 4. 5.4.1 W H E E L I N G O F N O N - P R O J EC T S U P P L I E S Wheeling involves using the CAP system to transport and deliver non-Project water. “Project Water” is defined as Colorado River water available to CAP, along with certain Agua Fria inflows captured in Lake Pleasant. Therefore, non-Project water includes any other water and can include additional Colorado River water or imported groundwater. Wheeling is authorized in the 1988 Master Repayment Contract between CAWCD and the United States Bureau of Reclamation (“Master Repayment Contract”). The Master Repayment Contract includes specific provisions related to wheeling non-Project water and specifies that CAWCD and Reclamation will jointly develop a standard form of wheeling agreement. Reclamation has indicated that development and approval of that agreement requires a formal negotiation process, which includes an authorization process within Reclamation and compliance with federal public participation requirements. In anticipation of that process, for the past several years CAWCD and Reclamation have engaged in technical discussion that have identified potential operational and contractual issues. Those discussions have helped CAP staff develop concepts that have been turned into a staff proposal for wheeling non-Project water. 2015 // Plan of Operation 4-11 Preliminary DR AF T — Sep tember 8, 2014 In March of 2013, CAP staff developed a wheeling proposal that included a draft standard form wheeling agreement, proposed modifications to the CAP operating agreement and several white papers. That proposal was presented at a public workshop in the spring of 2013. In the fall of 2013, staff also created an interactive computer model that simulates how key provisions of the staff proposal would work, including the interplay between Project Water deliveries and water wheeled pursuant to both federal and CAP rights (respectively, Section 8.17 and 8.18 of the Master Repayment Contract). In anticipation of the formal negotiation phase with Reclamation, CAP staff undertook a focused stakeholder process to refine and improve the 2013 staff proposal. The goal of the stakeholder process was to have a revised set of documents that could serve as the starting point for formal negotiations with Reclamation. CAP held four wheeling stakeholder meetings during the period from March through June 2014. As a result of those meetings, and requests from stakeholders for greater clarity and flexibility in the implementation of a wheeling program, staff developed a revised wheeling proposal, which includes modifications to the draft standard form wheeling agreement and a document titled “Supplement Staff Position Statements on Wheeling Non-Project Water.” All elements of the CAP staff wheeling proposal are posted on CAWCD’s website, as well as the meeting summaries and presentations from the four wheeling stakeholder meetings. The process for developing of a wheeling program and a standard form of wheeling agreement is well underway. CAGRD is confident that by the time it acquires a non-Project water supply and is ready to transport that supply into the 3-county service area, a wheeling program will be in place and CAGRD will be able to enter into a wheeling agreement to have that supply transported through the CAP system. TABLE 4.2 WATER SUPPLIES PLANNED FOR USE Water Supplies the CAGRD Plans to Use, 2015–2034 & Supplies Potentially Available for Use, 2035–2114 SUPPLY CATEGORY Long-Term Storage Credits SUPPLY LOCATION ( AF/YR, 100 YRS) SUPPLIES CAGRD PLANS TO USE NEXT 20 YEARS SUPPLIES POTENTIALLY AVAILABLE TO CAGRD SUBSEQUENT 80 YEARS LOW ( AF/YR, 100 YRS) HIGH ( AF/YR, 100 YRS) LOW ( AF/YR, 100 YRS) HIGH ( AF/YR, 100 YRS) AMA, Tucson AMA, Harquahala INA 88,900 1 11,000 2 22,000 11,000 22,000 Effluent Phoenix AMA, Pinal AMA, Tucson AMA 407,600 3 59,600 4 119,200 76,100 5 152,300 Central Arizona Project All Contracts, Subcontracts, and Unallocated Supplies 1,415,000 6 279,700 7 559,300 207,700 415,500 8 Colorado River Arizona Entitlements Excluding CAP Supplies 1,143,700 9 109,800 10 219,700 109,800 219,700 Imported Groundwater Harquahala, Butler, McMullen Valleys 269,000 11 0 0 119,600 12 239,100 Arizona Desalination Yuma-area, Phoenix AMA 40,000 13 0 0 14,000 14 40,000 3,364,200 460,100 920,200 538,200 1,088,600 TOTAL: 4-12 TOTAL CURRENT SUPPLY 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 TABLE NOTES: 1 Equivalent to total existing LTSCs in Phoenix AMA, Pinal AMA, Tucson AMA, Harquahala INA. Data source: ADWR LTSC accounting, April 8, 2014. 2 Potentially available LTSC supply (high end) includes LTSCs not currently owned (or subject to an existing purchase agreement) by CAWCD, CAGRD or AWBA, and LTSCs not currently pledged to a Designation of Assured Water Supply. The low end of potentially available supply assumes a 50% acquisition success rate. 3 Equivalent to total current annual effluent production in Phoenix, Pinal, and Tucson AMAs. Data source: 2013 Effluent Survey by WestWater Research for CAGRD. 4 20-year effluent supply (high end) includes all effluent that is currently discharged and unused, i.e. not directly reused or recharged. The low end of potentially available supply assumes a 50% acquisition success rate. 5 80-year effluent supply is equivalent to the 20-year supply escalated for 20 years at the anticipated annual rate of population change in Maricopa, Pinal, and Pima counties. Population projections published by the Arizona Department of Administration Office of Employment and Population Statistics were relied upon. This adjustment is intended to account for growth in effluent production over time. 6 Total CAP supply is the sum of all CAP contract, subcontract, and unallocated volumes. Data source: October 1, 2013 subcontracting status report. 7 Potentially available 20-year CAP supply (high end) includes all supplies that were not delivered from 2010 through 2013, all Indian supplies delivered under short-term (1-5 yr) lease agreements, and all Indian supplies delivered to permitted recharge facilities. Supplies currently owned or leased by CAGRD are not included. Downward adjustments were made based on knowledge of planned uses for individual supplies that are currently unused. The low end of potentially available supply assumes a 50% acquisition success rate. The purpose of developing a range of potentially available supplies is to recognize that multiple factors including Agricultural Settlement Pool commitments could reduce the quantity of CAP water that CAGRD is able to acquire. 8 80-year CAP supply is equivalent to the 20-year supply, with the quantity of water potentially available from Indian contracts reduced by 50% to account for anticipated growth in on-reservation uses. 9 Total supply of Colorado River entitlements equals Arizona’s consumptive use minus CAP diversions, averaged from 2010 through 2013. Data source: Colorado River Decree Accounting Reports. 10 11 Potentially available Colorado River supply (high end) is 20% of Arizona’s average annual on-river agricultural consumptive use, 2010-2013. The 20% limit is based on Reclamation’s guidelines for approving water transfers in California, “limiting cropland idling to 20 percent…should limit economic effects.” The low end of potentially available supply assumes a 50% acquisition success rate. For comparison purposes, more than 60% of cropped acres on Arizona’s Colorado River are planted to alfalfa, grasses, cotton, grains and/or other crops that are agronomically amenable to temporary fallowing. Total supply of groundwater authorized for importation includes 6 million AF from McMullen Valley (ARS 45-552), 6.5 million AF in recoverable storage in Butler Valley (ADWR, Arizona Water Resources Assessment, 1994 vol. II), and 14.4 million AF from Harquahala Valley (Southwest Groundwater Consultants, 2011). The sum of this total supply is divided by 100 to estimate the annual supply. 12 Potentially available imported groundwater supply (high end) includes 36,000 AF/yr from McMullen Valley (12,000 historically irrigated acres at 3 AF/acre), 65,000 AF/yr from Butler Valley (total supply), and 138,149 AF/yr from Harquahala Valley (HVP PAD, Southwest Groundwater Consultants, 2010). Low end assumes a 50% acquisition success rate. 13 Total Arizona Desalination supply includes 25,000 AF/yr of Yuma-area groundwater (Cherry Water Management, 2013) and 15,000 AF/yr of Buckeye waterlogged area groundwater (Carr, 2010). 14 Potentially available Arizona Desalination supply consists of 2,000 AF/yr (Carr, 2010) to 25,000 AF/yr of Yuma-area groundwater (Cherry Water Management, 2013), and 12,000 AF/yr to 15,000 AF/yr of Buckeye waterlogged area groundwater (Carr, 2010). Contaminated groundwater is not included due to lack of clear quantification and regulatory uncertainties. 2015 // Plan of Operation 4-13 Preliminary DR AF T — Sep tember 8, 2014 4.6DESCRIPTION OF WATER SUPPLIES PLANNED FOR USE 2035–2114 Many of the supplies discussed in Section 4.5 will not be needed to meet projected replenishment obligations until sometime after 2034. Therefore, CAGRD considers those supplies to be potentially available to meet replenishment obligations beyond 2034, as reflected in Table 4.2. Also, quantities of available LTSCs and effluent are likely to increase over time as some entities continue to accrue credits that may be available for purchase and communities continue to grow into their existing wastewater treatment capacity and construct new facilities. The volume of effluent identified in Table 4.2 as potentially available over the subsequent 80 years assumes an increase in available effluent due to projected population growth within the Tucson, Pinal, and Phoenix AMAs. As identified in Table 4.2, there are other water supplies that may become available at some point after 2034 and are included in the potentially available category. These supplies, however, are currently too speculative or uncertain to consider as supplies that CAGRD might use in the next 20 years. The first of these supplies and the one most likely to be incorporated into regional supplies in the future is imported groundwater. Arizona law permits the importation of groundwater from three groundwater basins in the western portion of the state into the three counties that make up the CAP service area. These are the Harquahala, Butler, and McMullen Valleys. Imported groundwater from these basins is another potential source of supply for CAGRD that would require a wheeling agreement to move the supplies through the CAP canal. CAGRD estimates that approximately 120,000 to 239,000 AF/yr (over 100 years) could be pumped from all three of these basins. Development of these supplies would also require extensive infrastructure within the groundwater basins to pump and potentially treat the water before discharging it to the CAP canal. The infrastructure needed to pump and transport these supplies results in a very high cost per acre-foot compared to the other supplies described in the previous section. These supplies are assumed to be available, and may be considered for acquisition by CAGRD, after 2034 because lower-cost supplies are available to meet replenishment obligations in the near-term. Another potential supply that will be considered only after lower-cost supplies are no longer available is in-state desalination. The cost of removing salts, disposing of waste products from desalination, and transporting this water results in a potentially high-cost water supply that would not be targeted for acquisition until after 2034. One location of this potential supply is in the Yuma area, where saline groundwater is currently removed from shallow aquifers to prevent crop damage. This water could be pumped and treated for local uses, then exchanged for Colorado River water transported via the CAP canal. Another area of saline groundwater is along the Gila River near Buckeye. In that case, however, the water is perhaps more likely to be used by local water providers to reduce reliance on replenishment by CAGRD. Previous studies have suggested that between 14,000 and 40,000 AF per year of saline groundwater could be pumped and treated from these two areas to provide additional water supplies in the future. 4-14 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 5.0 REPLENISHMENT RESERVE The statutory provisions relating to the Replenishment Reserve are identified below. A.R.S. § 45-576.02.C.2 …the plan shall include the following information for each active management area in which a member land or member service area is located: A.R.S. § 45-576.02.C.2(e) A description of the district’s current replenishment reserve activities in each active management area for the ten years preceding the current plan and the planned replenishment reserve activities for the ensuing ten years to be undertaken pursuant to section 48-3772, subsection E. Additional statutory language related to establishing and funding the Replenishment Reserve is included in Appendix C. The Replenishment Reserve consists of LTSCs that CAGRD accrues in a Replenishment Reserve subaccount established for each AMA within which CAGRD operates. The purpose of the Replenishment Reserve is to help ensure that CAGRD will be able to meet its replenishment obligations and to enhance rate stability. During periods of water supply shortage or infrastructure failure, CAGRD will use LTSCs from the Replenishment Reserve to offset its replenishment obligations, rather than purchasing spot-market water, which may be more costly during shortage or outage conditions. 5.1 RESERVE TARGET The volume of LTSCs to be accrued in the Replenishment Reserve is known as the “Reserve Target.” A Reserve Target must be identified for each AMA based on that AMA’s projected obligation and the water supplies planned to be used to meet that obligation as described in the Plan of Operation. The Reserve Target is re-calculated for each new Plan of Operation based upon the specifics of each Plan. The Reserve Target volume also must be maintained over time. If Replenishment Reserve credits are used to offset obligation, CAGRD must accrue replacement credits in order to maintain the full Reserve Target volume. The Reserve Target for each AMA is equivalent to 20% of the difference between the total 100-year replenishment obligation for that AMA and the total volume of long- and intermediate-term water supplies planned to be used to meet the obligation. The projected obligation for Category 2 MLs (golf courses) and the obligation associated with WAS membership (i.e., the City of Scottsdale) are excluded from the total 100-year replenishment obligation. Water supplies with less than 20 years of availability also are excluded from the total volume of water supplies when determining the Reserve Target volume. 2015 // Plan of Operation 5-1 Preliminary DR AF T — Sep tember 8, 2014 Expressed as a formula, the Reserve Target calculation can be summarized as follows: Reserve Target = (Obligations – Supplies) * 20% Where: Obligations = CAGRD’s total projected groundwater replenishment obligation1 over the next 100 years; Supplies =The sum of those water supplies identified in the CAGRD Plan of Operation as water that CAGRD plans to use to meet its replenishment obligations in the AMA (adjusted for availability). CAGRD’s projected 100-year groundwater replenishment obligations for each AMA are detailed in Chapter 3. Chapter 4 describes the water supplies that CAGRD plans to use to meet its replenishment obligations. Of the supplies identified in Chapter 4, some supplies can be attributed to a specific AMA; others are available to meet obligations in any AMA. One AMA-specific supply is the CAP M&I subcontract water that CAGRD has acquired from certain water providers in the Phoenix AMA. As a condition of that acquisition, those supplies are to be used, to the extent needed, to offset obligation within the Phoenix AMA and are to be replenished as close as feasible to the service areas associated with the original allocations. In addition, effluent purchases and storage, as well as LTSC accruals and purchases, are specific to the AMA within which they occur, unless these credits are later recovered and moved to another AMA. At this time, due to the higher cost of recovering and moving the credits to another location, it is assumed that these credits remain within the AMA within which they are accrued. The remaining sources are assumed to be distributed among all three AMAs, as needed, in order to meet replenishment obligations. Table 5.1 shows the projected 100-year replenishment obligation volume per AMA. TABLE 5.1 PROJECTED 100YEAR REPLENISHMENT OBLIGATION By AMA 1 1 5-2 PHOENIX AMA (AF) PINAL AMA (AF) TUCSON AMA (AF) TOTAL (AF) Projected 100-Year Replenishment Obligation Volume 6,061,731 480,356 1,133,802 7,675,889 Category 2 ML and WAS Membership Obligation Volume1 23,070 0 7,800 30,870 Final Projected 100-Year Replenishment Obligation (minus Category 2 MLs and WAS Membership) 6,038,661 480,356 1,126,002 7,645,019 Assumes 600 AF/yr obligation for Scottsdale in 2015 and 2016, with no further obligation; assumes Category 2 ML volume equal to 30 years of 2013 obligations. E xcluding the projected obligation for Category 2 MLs (golf courses) and obligation associated with the City of Scottsdale’s WAS membership. 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 Table 5.2 shows the Replenishment Reserve Target per AMA based upon the projected 100-year replenishment obligation and water supplies planned to meet this obligation. Existing supplies that are AMA-specific are listed as such. Other existing supplies that are available for use throughout the CAGRD service area will be used over time to meet replenishment obligations in the most cost-effective and efficient manner possible. In addition, future acquisitions of long-term water supplies (consistent with the CAGRD’s goal of meeting at least 50% of its replenishment obligation with long-term water supplies) will be distributed throughout the CAGRD service area in the same manner. TABLE 5.2 REPLENISHMENT RESERVE TARGET By AMA PLANNED WATER SUPPLIES PHOENIX AMA (AF) PINAL AMA (AF) TUCSON AMA (AF) TOTAL (AF) CAP M&I Entitlement (100 years) 799,600 0 0 799,600 WMAT Lease (100 years) TBD TBD TBD 164,150 1 CAP NIA Entitlement (100 years) TBD TBD TBD 1,194,000 2 Liberty Effluent Lease (100 years) 235,200 0 0 235,200 3 LTSC Purchases (100 years) 400,861 0 144,357 545,218 4 Other 100-year water supplies TBD TBD TBD 884,348 5 Total Water Supplies 3,019,331 240,178 563,001 3,822,510 6 Total 100-year Obligation 6,038,661 480,356 1,126,002 7,645,019 Obligations minus Supplies 3,019,330 240,178 563,001 3,822,509 Target (20%) 603,866 48,036 112,600 764,502 TABLE NOTES: 1 Assumes 2,500 AF/yr available beginning in 2017; assumes 67% reliability over 100 years. 2 Assumes 18,185 AF/yr available beginning in 2017; assumes 67% reliability over 100 years. 3 Assumes 2,400 AF/yr available beginning in 2017; assumes 100% reliability over 100 years. 4 Assumes 5,453 AF/yr available beginning in 2015; assumes 100% reliability over 100 years. 5 Assumes 50% of 7,645,019 AF total 100-year replenishment obligation is long-term (3,822,510 AF). 6 Assumes all other CAGRD water supplies are of 20-year or less term. The Reserve Targets identified in Table 5.2 will remain in effect until CAGRD prepares its next Plan of Operation, unless there is a significant change in (1) the projected replenishment obligations identified in Chapter 3 or (2) the water supply acquisition plan identified in Chapter 4. Per A.R.S. § 48-3772 E.2, if CAGRD experiences or anticipates significant change in either or both of these conditions prior to preparation of the next Plan of Operation, the Reserve Targets may be adjusted with approval from the Director of ADWR. 2015 // Plan of Operation 5-3 Preliminary DR AF T — Sep tember 8, 2014 5.2 TEN-YEAR REPLENISHMENT RESERVE ACTIVITIES CAGRD has accrued a significant number of LTSCs in its Replenishment Reserve subaccounts. Table 5.3 shows the number of credits accrued in each AMA over the past ten years. These credits have been accrued through a combination of storage in constructed USFs, storage at GSFs and the purchase of pre-existing LTSCs from CAWCD. REPLENISHMENT RESERVE ACTIVITY By AMA (Volume in AF) AMA BALANCE through 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 1 TOTAL 21,036 11,431 14,583 5,614 17,7842 18,708 142,622 Phoenix 4,145 2,000 6,060 4,748 Pinal 0 0 270 0 0 2,329 171 0 230 0 243 286 3,529 Tucson 2,873 3,428 3,672 3,882 2,297 4,019 1,158 4,077 1,500 7 2,577 3,001 32,491 TOTAL 7,018 5,428 10,002 8,630 22,681 29,477 22,365 15,508 16,313 5,621 20,604 21,995 185,642 20,384 23,129 TABLE NOTES: 1 Estimated based on 2014 water order and projected purchase of CAWCD credits. 2 Excludes 5 AF not credited to CAGRD due to over-flex at Queen Creek Irrigation District. 5.3 PLANNED REPLENISHMENT RESERVE ACTIVITIES The following sections describe water supplies that CAGRD plans to use to meet the Replenishment Reserve Targets for each AMA. In addition to LTSCs CAGRD already has accrued in its Replenishment Reserve accounts, as summarized in Table 5.3, a significant number of existing LTSCs held by CAWCD have been dedicated for the Replenishment Reserve. These existing credits and additional water supplies will be used as needed and in a manner to facilitate the most cost-effective establishment and maintenance of individual AMA-specific Replenishment Reserve Targets. 5.3.1 Existing CAWCD Long-term Storage Credits On October 6, 2005, the CAWCD Board approved a policy (see Appendix C) dedicating all unencumbered LTSCs currently held by CAWCD to CAGRD for purposes of establishing the Replenishment Reserve. In addition to advancing the goals of ensuring the CAGRD’s ability to meet its replenishment obligations and avoiding rate shock, the CAWCD Board policy specifically is intended to help reduce competition for water supplies among CAGRD and other water users within CAWCD’s service area. These dedicated LTSCs are located in all three AMAs served by CAGRD and CAWCD. They include those accrued by CAWCD in the early to mid-1990s using its own reserve funds, as well as those accrued by CAWCD in the mid-1990s using money from the State Water Storage Fund (also known as State Demonstration funds). Table 5.4 provides a summary of the dedicated CAWCD LTSCs. The CAWCD Board policy requires CAGRD to pay CAWCD for the LTSCs when they are actually transferred at a rate equal to the then-current rate for Excess CAP water that could otherwise be used by CAGRD to accrue LTSCs. If Excess CAP water is not available to CAGRD to accrue LTSCs when a transfer takes place, CAGRD is to pay CAWCD the same rate paid by CAP M&I subcontractors for water delivered, plus the then-current M&I capital charge. 5-4 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 TABLE 5.4 EXISTING CAWCD LONGTERM STORAGE CREDITS Dedicated to CAGRD Replenishment Reserve DESCRIPTION PHOENIX AMA VOLUME (AF) PINAL AMA VOLUME (AF) TUCSON AMA VOLUME (AF) TOTAL (AF) CAWCD LTSCs dedicated to CAGRD Replenishment Reserve 302,832 307,088 2,327 612,247 Table 5.5 summarizes the total LTSCs available for the CAGRD Replenishment Reserve in each AMA, including existing CAGRD Replenishment Reserve credits and dedicated CAWCD credits. TABLE 5.5 AVAILABLE REPLENISHMENT RESERVE CREDITS By AMA AMA ACCRUED LTSCS (AF) DEDICATED LTSCS (AF) TOTAL AVAILABLE LTSCS (AF) Phoenix 149,622 302,832 452,454 Pinal 3,529 307,088 310,617 Tucson 32,491 2,327 34,818 TOTAL 185,642 612,247 797,889 Table 5.6 presents a summary of the AMA Replenishment Reserve Targets, dedicated CAWCD credits and existing CAGRD Replenishment Reserve credits, and the balance of available credits per AMA. TABLE 5.6 REPLENISHMENT RESERVE TARGETS AND AVAILABLE LONGTERM STORAGE CREDITS By AMA AMA TARGET (AF) AVAILABLE LTSCs (AF) BALANCE (AF) Phoenix 603,866 452,454 (151,412) Pinal 48,036 310,617 262,581 Tucson 112,600 34,818 (77,782) TOTAL 764,502 797,889 33,387 It is apparent that sufficient water supplies are available to CAGRD to meet the total Replenishment Reserve Target through a combination of its existing Replenishment Reserve subaccount balance and the dedicated CAWCD LTSCs. It also is apparent that a significant volume of dedicated CAWCD LTSCs in the Pinal AMA are available, if needed and appropriate, to be re-positioned to help meet the targets for the Phoenix and Tucson AMAs. 2015 // Plan of Operation 5-5 Preliminary DR AF T — Sep tember 8, 2014 While the volume of potentially available LTSCs slightly exceeds the total Replenishment Reserve Target, it is important to remember that CAGRD not only must achieve the Replenishment Reserve Target but also must maintain the Target amount within each AMA. Therefore, CAGRD will not seek to re-position all of the “excess” LTSCs in the Pinal AMA but will plan to will rely on a significant volume of these “excess” LTSCs to maintain the Pinal AMA target amount in the future. Moving LTSCs from the Pinal AMA to the Tucson or Phoenix AMAs could be more expensive than other options available to the CAGRD. If deemed appropriate to move some of these LTSCs in the future, however, re-positioning may be accomplished either by direct or indirect recovery of the LTSCs from Pinal AMA and replenishment in the other AMAs or by implementation of one or more exchange agreements. CAWCD and AWBA have developed a conceptual joint recovery plan that includes recovery of AWBA LTSCs in the Pinal AMA. CAGRD will work cooperatively with CAWCD and AWBA to evaluate opportunities to participate in future recovery plans in the Pinal AMA and elsewhere, if appropriate. Exchange agreements could involve other Pinal AMA entities that have entitlements to CAP water. Under such agreements, existing LTSCs in Pinal AMA could be recovered and delivered to the CAP entitlement holder and the “exchanged” CAP water could be stored in the Phoenix or Tucson AMAs to accrue LTSCs in the Replenishment Reserve. Another possibility is that CAGRD could enter into an “exchange” with itself. Under this scenario, CAGRD could use existing Pinal AMA LTSCs to offset its Pinal AMA replenishment obligation in a given year, and the surface water that CAGRD would have otherwise transported to and replenished in the Pinal AMA could be replenished in the Phoenix or Tucson AMAs to accrue LTSCs in the Replenishment Reserve. However, both of these exchange mechanisms implicate certain policy issues that will need to be fully addressed with the CAWCD Board prior to being implemented. CAGRD will further evaluate these opportunities and, if appropriate, will address these policy issues with the CAWCD Board. The CAWCD dedicated LTSCs effectively provide a secure “insurance policy” that will ensure that CAGRD will be able to fully meet its Replenishment Reserve Targets regardless of future water supply conditions within the service area. 5.3.2 Use of “Excess” Water in CAGRD’s Planned Water Supply Portfolio The water supplies that CAGRD plans to use to meet its replenishment obligations are described in Chapter 4. Some volume of these planned water supplies could be used to help meet the Replenishment Reserves Targets in the Phoenix and Tucson AMAs. CAGRD will make future decisions on if, how and when to use excess water supplies based on the most beneficial and efficient use of all its available water resources. 5.3.3 Use of Excess CAP Water Per A.R.S. §48-3772.E.8, CAGRD has been granted access to Excess CAP water for purposes of establishing and maintaining the Replenishment Reserve. Although there is a significant possibility of a Colorado River shortage declaration in 2017 that could eliminate Excess CAP water as an available water supply, it is anticipated that CAGRD will have intermittent access to Excess CAP water in future years. Therefore, CAGRD will plan to make appropriate use of Excess CAP water, when it is available, to most cost-effectively achieve and maintain its required Replenishment Reserve subaccounts in all three AMAs. 5-6 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 6.0 STORAGE FACILITIES PLANNED FOR USE The statutory obligations relating to storage facilities and projects for the CAGRD Plan of Operation are identified below. A.R.S. § 45-576.02.C.2 …the plan shall include the following information for each active management area in which a member land or member service area is located: A.R.S. § 45-576.02.C.2(e) A description of any facilities and projects to be used for replenishment and the replenishment capacity available to the conservation district during the 20 calendar years following submission of the plan. A.R.S. § 45-576.02.C.2(f) An analysis of potential storage facilities that may be used by the conservation district for replenishment purposes. A.R.S. § 45-576.03.N.3 The Director shall make a determination that the conservation district’s plan is consistent with achieving the management goal for each active management area if all of the following have been demonstrated: . . . The conservation district has identified sufficient capacity at storage facilities and projects to be used for replenishment purposes during the twenty calendar years following the submission of the plan. This chapter addresses these required elements with a description of existing storage facilities and a comparison of the operational capacity of storage facilities to the replenishment capacity available to CAGRD. Tables are provided summarizing available AMA storage capacity (Table 6.1) and identifying details of the storage facility inventory (Appendix D; Table F-1). 6.1 DESCRIPTION OF STORAGE FACILITIES AVAILABLE TO THE CAGRD CAGRD is required to demonstrate in its Plan of Operation that sufficient capacity is available at storage facilities to meet CAGRD’s projected replenishment obligations. Existing statutes require CAGRD to replenish within the AMA in which obligations are incurred. Consistent with current CAWCD policy, CAGRD attempts to replenish within the same sub-basin in which obligations are incurred whenever possible1. The CAGRD has access to significant underground storage capacity existing at USFs constructed by CAWCD and a number of GSFs, as described below. 1 I n addition to CAWCD policy, in the Phoenix AMA, CAGRD is required by law, “to the extent reasonably feasible” to “replenish groundwater in the east portion of the AMA and in the west portion of the AMA in the approximate proportion that the groundwater replenishment obligation attributable in a particular year to member lands and member service areas located in the east portion of the AMA bears to the groundwater replenishment obligation attributable in that year to member lands and member service areas located in the west portion of the AMA. . .” A.R.S. § 48-3772.I. 2015 // Plan of Operation 6-1 Preliminary DR AF T — Sep tember 8, 2014 6.1.1 Underground Storage Facilities Constructed by CAWCD CAWCD currently owns and operates six USFs in the three AMAs, with a combined annual total permitted capacity2 of 421,500 AF. Four of these USFs are located in the Phoenix AMA: the Tonopah Desert Recharge Project, Hieroglyphic Mountains Recharge Project, Agua Fria Recharge Project, and the Superstition Mountains Recharge Project. The total annual operational storage capacity3 of the four Phoenix AMA USFs is 235,000 AF. However, the City of Peoria owns 15% of the storage capacity at the Agua Fria Recharge Project and the Hieroglyphic Mountains Recharge Project, and pursuant to a partnership agreement between CAWCD and Salt River Project (“SRP”), SRP has a first right of refusal to 15,000 AF of storage capacity at the Superstition Mountains Recharge Project until 2023. Subtracting these third party rights, CAWCD has exclusive access to a total of 211,000 AF of annual underground storage capacity in the Phoenix AMA. By 2020, an additional 31,500 AF of storage capacity is expected to be available when CAWCD completes Phase 2 of the Superstition Mountains Recharge Project. The remaining two USFs owned and operated by CAWCD are located in the Tucson AMA: the Lower Santa Cruz Recharge Project and the Pima Mine Road Recharge Project. The total annual operational storage capacity of the two Tucson AMA USFs owned and operated by CAWCD is 72,000 AF. However, approximately 2,300 AF of annual storage capacity at the Lower Santa Cruz Recharge Project is reserved as system reliability for the Northwest Providers.4 Further, the City of Tucson owns 50% of the annual storage capacity at the Pima Mine Road Recharge Project, and 6,000 AF of the remaining annual storage capacity at Pima Mine Road is reserved for system reliability for Tucson. Subtracting these third party rights, CAWCD has exclusive access to a total of 48,700 AF of annual underground storage capacity in the Tucson AMA. Additionally, CAWCD may have access to a modest portion of the annual storage capacity at the Avra Valley Recharge Project, owned by Metropolitan Domestic Water Improvement District (MDWID). Table D-1 lists the storage capacity potentially available to CAGRD for each USF owned and operated by CAWCD and the Avra Valley Recharge Project (Appendix D). The volume of storage capacity potentially available to the CAGRD identified in Table D-1 assumes that all storage capacity remaining after the satisfaction of the contractual obligations outlined above will be available, if needed, for CAGRD replenishment purposes. 6 .1.1.1 C AWC D P O L I C Y R EG A R D I N G P R I O R I T Y ACC E S S T O C AWC D U S F C A PAC I T Y The CAWCD Board approved a new policy regarding capacity priority for CAWCD USFs in May, 2013 (Appendix D). Numerous water users currently store their CAP water at CAWCD’s six USFs pursuant to water storage agreements issued by CAWCD. Requests for new water storage agreements continue to be submitted to the CAWCD Board for consideration of approval. The development of the USF Capacity Priority Policy (“Policy”) arose from concerns about the lack of formal guidelines for scheduling and prioritization of storage at these facilities in the event that requests for storage capacity exceed available capacity. Although nearly all customer requests for storage capacity of CAWCD’s USFs have been met to date, the Policy establishes a priority for storage capacity when there are competing demands. 6-2 2 P ermitted capacity represents the maximum annual volume allowable by ADWR. 3 O perational capacity represents the maximum volume the facility operator has determined can be stored in a given year. Differences between permitted and operational capacity for USFs may vary depending on factors such as infrastructure and infiltration rates. 4 T he Northwest Providers are the parties identified in the January 4, 2011 Agreement for Tucson Reliability. They are: The City of Tucson, the Town of Marana, the Town of Oro Valley, Metropolitan Domestic Water Improvement District and Flowing Wells Irrigation District. 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 The Policy describes a methodology for scheduling storage capacity that initially follows CAWCD’s existing water scheduling policy. Specifically, if insufficient storage capacity exists, CAWCD will contact requesters to determine their willingness to reduce or relocate their storage. If voluntary reductions/relocations are insufficient, a meeting will be held to provide a forum for all requesters to come to agreement on sharing storage capacity. If an agreement cannot be reached, CAWCD will use the following priorities to establish the final storage schedules: • • • • • Entities with contractual rights to CAP storage facilities CAGRD replenishment obligations Entities with statutory firming obligations, co-equal priority for AWBA, CAGRD, and U.S. (Indian Firming) Individual CAP long-term contract entitlements Individuals storing water under a CAP excess contract The Policy allocates the highest priority for USF capacity to CAGRD after contractual commitments are met, and therefore preserves significant storage capacity within CAWCD’s USFs for use by CAGRD for replenishment purposes. 6.1.2 Groundwater Savings Facilities In addition to the USFs directly owned and operated by CAWCD, CAGRD has existing agreements with numerous operators of GSFs in each of the AMA’s. CAGRD’s access to capacity within these GSFs is subject to greater uncertainty and variability than those owned by CAWCD. However, in the past our GSF partners have provided significant storage capacity to CAGRD. Storage capacity at GSFs is expected to be available as the volume of Excess CAP water and the Agricultural Settlement Pool5 reduce over time. GSF operators are likely to have strong interest in continued partnership with CAGRD. The GSFs available to CAGRD are detailed in Table D-1 and illustrated in Figure D-1 (Appendix D). In the Phoenix AMA, there are four GSF’s listed in Table D-1: Tonopah Irrigation District, Queen Creek Irrigation District, New Magma Irrigation and Drainage District and Maricopa County Municipal Water Conservation District No. 1. These districts have a total of approximately 58,600 AF of annual storage capacity potentially available to CAGRD, In the Pinal AMA, two GSFs are identified: Maricopa Stanfield Irrigation and Drainage District and the Central Arizona Irrigation and Drainage District. These Districts have a total of approximately 97,700 AF of annual storage capacity potentially available to CAGRD. Finally, in the Tucson AMA the Kai Farms (Red Rock) GSF has slightly more than 11,000 AF of annual storage capacity available, with only a small portion of that capacity available to CAGRD. The volume of GSF capacity identified in Table D-1 as potentially available to CAGRD was determined by subtracting the average storage over the last six years by non-CAGRD GSF partners from the operational capacity of the GSF. The analysis of available capacity is limited to the facilities that have a current CAGRD storage permit. The operational storage capacity is assumed to be the permitted capacity of the GSF. 5 T he Agricultural Settlement Pool is a category of Excess CAP water provided to CAP non-Indian agricultural users through 2030 in return for relinquishing their long-term entitlements to Non-Indian Agriculture priority water for reallocation to Indian and M&I users in accordance with the Arizona Water Settlements Act of 2004. The Agricultural Settlement Pool is initially sized at 400,000 AF/yr, declining to 300,000 AF/yr in 2017, and to 225,000 AF/yr in 2024 and finally to zero in 2030. 2015 // Plan of Operation 6-3 Preliminary DR AF T — Sep tember 8, 2014 A summary of the total combined USF and GSF storage capacity available to CAGRD is provided in Table 6.1. This summary compares the inventory of all USF and GSF storage facilities available for use by CAGRD as provided in Table D-1 (Appendix D) with the replenishment obligations forecasted to be incurred by CAGRD. It is clear that sufficient storage capacity is available to CAGRD to meet its estimated replenishment obligations for the next 20 years. TABLE 6.1 AVAILABLE STORAGE CAPACITY 1 Storage Capacity Available to CAGRD (AF) Combined USF and GSF PHOENIX AMA PINAL AMA TUCSON AMA 2015 2020 2025 2030 2034 Capacity Available 269,600 301,100 316,100 316,100 316,100 CAGRD Obligation 34,300 37,700 53,300 62,500 68,600 Excess Capacity 235,300 263,400 262,800 253,600 247,500 Capacity Available 97,700 97,700 97,700 97,700 97,700 CAGRD Obligation 500 1,500 3,600 4,900 5,700 Excess Capacity 97,300 96,200 94,200 92,800 92,100 Capacity Available 50,222 50,222 50,222 50,222 50,222 CAGRD Obligation 3,300 5,600 9,900 12,000 12,700 Excess Capacity 46,922 44,622 40,322 38,222 37,522 TABLE NOTE: 1 Volumes do not include capacity at projects for effluent supplies. 6.1.3 Effluent Storage Facilities Available to the CAGRD Currently, CAWCD’s USFs are permitted exclusively for the storage of CAP water and do not include effluent as a permissible water source for storage, although CAWCD has entered into agreements that provide for effluent recharge at other, non-CAWCD facilities6. The future storage of effluent at a CAWCD recharge facility would require modification of the USF Permit issued by ADWR and approval of a commensurate Aquifer Protection Permit issued by the Arizona Department of Environmental Quality. If CAGRD needs additional effluent storage resources in the future, existing effluent USFs and unused storage capacity will be identified and CAGRD will pursue storage agreements with the facility owners. If existing storage capacity is unavailable, then CAGRD could pursue modification of a CAWCD recharge facility permit to allow the storage of effluent or undertake development of a new USF. 6 6-4 n February 6, 2014, the CAWCD Board approved an agreement with Liberty Utilities that included a 100-year effluent O lease for recharge at a facility to be constructed and operated by Liberty. 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 6.2 POTENTIAL STORAGE FACILITIES The above analysis of storage capacity available to the CAGRD identifies significant USF and GSF storage to fully meet CAGRD’s replenishment obligations. However, there may be circumstances where facilities not identified above may be used to meet CAGRD replenishment objectives. These circumstances would include facilities or partnerships that reduce the cost of replenishment to CAGRD. In addition, the CAGRD may construct facilities or pursue partnerships that facilitate replenishment nearer the area of hydrologic impact of groundwater withdrawals. CAGRD will continuously evaluate additional facilities that may reduce costs to its members and meet the broader water resource goals of its groundwater management mission. 2015 // Plan of Operation 6-5 Preliminary DR AF T — Sep tember 8, 2014 7.0 FUNDING MECHANISMS Statutes require that all operations of CAGRD be funded completely by its members. Statutes also provide CAGRD with the authority and responsibility to establish fees, rates and dues and collect revenues through assessments and taxes necessary to meet its statutory obligations. The CAWCD Board has adopted policies for establishing its fees, rates and dues on a basis no less frequently than every two years, providing CAGRD with flexibility as economic and operational conditions change. 7.1 SOURCES OF REVENUE CAGRD collects a number of fees and rates and also membership dues from its membership, as described further below. There are several different means of collection. Generally, fees, rates and dues are collected from MSAs as part of an annual replenishment tax, and fees, rates and dues are collected from MLs as part of an annual replenishment assessment. Some fees are collected from members for specific services as provided. Each type of fee and rate component and the membership dues are dedicated to specific purposes, including CAGRD’s administrative costs, the annual replenishment obligation, the Replenishment Reserve and infrastructure and water rights. A chart illustrating the various sources of revenues and their dedicated uses is shown in Figure 7.1. While certain arithmetic relationships among various rates and fees and the membership dues have been established in statute and in policy, there is no aggregate limit on the amount of revenue CAGRD may collect to meet its statutory responsibilities. Some sources of revenue may be used primarily as a “pay as you go” funding mechanism for ongoing operating costs. Examples of these revenues are the Water and Replenishment Rate Component (described in Section 18.104.22.168) and the Administrative Rate Component (Section 22.214.171.124). Other revenue sources may be reserved for expenditures that occur from time to time, such as the Replenishment Reserve Fees (Section 7.2.3) and the Replenishment Reserve Charge (Section 126.96.36.199) and the revenues reserved for infrastructure and water rights: the Enrollment Fee (Section 7.2.1), the Activation Fee (Section 7.2.2), the Membership Dues (Section 7.3) and the Infrastructure and Water Rights Rate Component (Section 188.8.131.52). In addition, the revenue sources dedicated to Infrastructure and Water Rights may also be pledged towards revenue bonds (Section 7.5). 2015 // Plan of Operation 7-1 Preliminary DR AF T — Sep tember 8, 2014 FIGURE 7.1 CAGRD REVENUE STREAMS ENROLLMENT FEES PAID WITH APPLICATION TO ENROLL • MSAs • MLs ADMIN Used to pay the administrative costs of CAGRD (including Salaries, Benefits, Overhead, Equipment, Special Services, Implementation of CAGRD Conservation Program) ACTIVATION FEES • MSAs & MLs PAID PRIOR TO SALE OF HOME REPL. RESERVE FEES • MSAs & MLs WATER & REPL. Used to pay the annual cost of water and replenishment to meet annual replenishment obligations INFR. & WATER RIGHTS Used to pay the cost to acquire rights to water and develop infrastructure necessary for CAGRD to perform its replenishment obligations RATES (MSAs & MLs) PAID ANNUALLY BASED ON EXCESS GROUNDWATER USE • ADMIN • WATER & REPL. • INFR. & WATER RTS • REPL. RESERVE TO BE PAID ANNUALLY REGARDLESS OF GW USE MEMBERSHIP DUES • MSAs • MLs REPL. RESERVE Used to pay the cost of establishing and maintaining a replenishment reserve of long-term storage credits MSA = Member Service Area ML = Member Land 7.2FEES CAGRD collects three different fees from its members: an Enrollment Fee, an Activation Fee and a Replenishment Reserve Fee. Each of these fees is described below. 7.2.1 Enrollment Fee The Enrollment Fee must be paid when an applicant submits an application to enroll a ML subdivision or MSA into CAGRD. The fee is paid directly to CAGRD. 7. 2.1.1 E N R O L L M E N T FE E FO R M E M B E R L A N D S The Enrollment Fee is based on the number of housing units in each ML. On May 1, 2008, the CAWCD Board adopted a policy entitled “CAGRD Enrollment Fee and Activation Fee Policy.” The policy describes how the ML Enrollment Fee is established. A copy of this policy is included in Appendix E of this Plan. Except for a small allocation for CAGRD’s conservation program ($2/acre-foot), all revenues generated by the ML Enrollment Fee are to be used to acquire water rights and develop infrastructure necessary for CAGRD to meet its replenishment obligations. 7-2 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 7. 2.1. 2 E N R O L L M E N T FE E FO R M E M B E R S E RV I C E A R E A S The MSA Enrollment Fee is set at a minimum of $5,000 and is to be used to cover the administrative costs of processing the specific enrollment application. 7.2.2 Activation Fee The Activation Fee must be paid for all subdivisions within CAGRD MLs and MSAs before the Arizona Department of Real Estate will issue a public report allowing the sale of parcels within the subdivision. The CAGRD Enrollment Fee and Activation Fee Policy (see Appendix E) describes how the Activation Fee is established. Revenues generated by the Activation Fee are to be used for purchasing water rights and developing infrastructure necessary for CAGRD to meet its replenishment obligations. On November 7, 2013, the CAWCD Board approved an Infrastructure and Water Rights Funding Proposal that increased the amount of the Activation Fee in order to collect a more significant portion of the funding for infrastructure and water rights prior to homes being built and replenishment obligations being incurred (see Appendix E). In April 2014, SB 1487 was passed by the Arizona Legislature and signed into law allowing homebuilders to pay 50% of the Activation Fee at the time of the public report and 50% one year later. 7.2.3 Replenishment Reserve Fee The district must levy a Replenishment Reserve Fee against Category 1 (non-golf-course) MLs and against MSAs (A.R.S. § 48-3772.E). Revenues generated from the Replenishment Reserve Fee are to be used to accrue LTSCs for use in establishing and maintaining the Replenishment Reserve in the AMA where the fee was levied. 7. 2. 3.1 R E P L E N I S H M E N T R E S E RV E FE E FO R M E M B E R L A N D S For Category 1 MLs that enroll in CAGRD on or after January 1, 2004, a Replenishment Reserve Fee must be paid to CAGRD before the Arizona Department of Real Estate will issue a public report for each final plat within the ML (A.R.S. § 45-576.C). The fee is equal to twice the applicable Replenishment Reserve Rate Component (described in Section 184.108.40.206) multiplied by the total projected average annual replenishment obligation for the subdivision. For MLs that enrolled in CAGRD prior to January 1, 2004, there is no requirement to pay the Replenishment Reserve Fee. 7. 2. 3. 2 R E P L E N I S H M E N T R E S E RV E FE E FO R M E M B E R S E RV I C E A R E A S For MSAs that enroll in CAGRD on or after January 1, 2004, the municipal water provider serving the MSA must pay an annual Replenishment Reserve fee to CAGRD. In addition, an annual Replenishment Reserve Fee must also be paid to CAGRD if any municipal water provider with a MSA, regardless of its enrollment date, modifies its DAWS in a manner that increases CAGRD’s projected annual replenishment obligation. The fee is equal to twice the applicable Replenishment Reserve Rate Component (described in Section 220.127.116.11) multiplied by the Excess Groundwater increment reported by the MSA’s municipal water provider each year. CAGRD cannot levy a Replenishment Reserve Fee for replenishment activities performed under a Water Availability Status resolution. 2015 // Plan of Operation 7-3 Preliminary DR AF T — Sep tember 8, 2014 7.3 MEMBERSHIP DUES In 2010, legislation was passed that granted CAGRD the authority to collect Annual Membership Dues (A.R.S. § 48-3779). The dues are to be collected from all enrolled members, regardless of the existence of a replenishment obligation. The use of the Membership Dues is dedicated exclusively to infrastructure and water rights. The statute specifies a complex arithmetic relationship among the amounts collected as Membership Dues and the other amounts collected that are dedicated to infrastructure and water rights (Enrollment Fees, Activation Fees and the Infrastructure and Water Rights Rate Component), and how the total amount collected as Membership Dues in any year is to be allocated between MLs and MSAs, but there is no overall limitation on the amount of aggregate revenues that may be collected for these purposes. In addition, the CAWCD Board approved a relevant policy in April of 2011, “Policy on Collection of CAGRD Annual Membership Dues” (Appendix E). 7.4 RATES, ASSESSMENTS AND TAXES 7.4.1 Annual Rate Setting Process The CAWCD Board is required by law to establish and levy an annual replenishment assessment against MLs and an annual replenishment tax against MSAs. This replenishment assessment/tax must be levied on or before the third Monday in August of each year and must be levied separately for each AMA in an amount sufficient to cover the costs and expenses of replenishing groundwater for CAGRD members. The assessment must be levied at a per-acre-foot rate. On May 6, 2010, the CAWCD Board adopted the current “CAGRD Assessment Rate Setting Policy,” which describes the methods and schedule to be used in establishing annual rates. A copy of this policy is included in Appendix E. 7.4.2 Rate Components Under the CAGRD Assessment Rate Setting Policy, CAGRD establishes four separate rate components, which are briefly described below. Each component is more fully described in the policy included in Appendix E. 7.4. 2.1 WAT E R A N D R E P L E N I S H M E N T R AT E CO M P O N E N T This component is computed separately for each AMA and is based on the cost to purchase and replenish adequate water supplies to meet CAGRD replenishment obligations in the particular AMA. 7.4. 2. 2 A D M I N I S T R AT I V E R AT E CO M P O N E N T CAGRD establishes a single administrative component that is in effect for all three AMAs. This component covers the costs of administering CAGRD. 7-4 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 7.4. 2. 3 I N FR A S T R U C T U R E A N D WAT E R R I G H T S R AT E CO M P O N E N T This component is computed separately for each AMA and is based on the costs of development of infrastructure and securing rights to water supplies needed by CAGRD to meet its replenishment obligations in the particular AMA. In practice, certain costs, such as the costs for most water supplies, will be pooled, and the rate components for the AMAs may be similar or even identical unless there are separate costs associated with specific AMAs (e.g., infrastructure). 7.4. 2.4 R E P L E N I S H M E N T R E S E RV E R AT E CO M P O N E N T This component is computed separately for each AMA based on CAGRD’s statutory requirement to establish and maintain a Replenishment Reserve of LTSCs in each AMA. By law, this component cannot be levied against Category 2 MLs (golf courses) or WAS Members. In addition, statutes limit the length of time that this component may be collected from each member based on that member’s date of enrollment, A.R.S. §§ 48-3774.01, 48-3780.01. For those members that enrolled in CAGRD on or after January 1, 2004, CAGRD may only levy this charge for a total of 23 years. For members that enrolled prior to January 1, 2004, and did not pay a Replenishment Reserve Fee as described in Section 7.1.3, this charge may be assessed for 25 years. 7.4.3 Collection of Replenishment Assessments and Taxes Collection of CAGRD’s annual assessments and taxes is a fairly long and complex process. By March 31st of each year, municipal water providers that serve MLs and MSAs must submit annual reports to CAGRD that indicate the volume of Excess Groundwater delivered to each ML parcel and each MSA during the previous calendar year. When all municipal provider reports for the entire AMA have been filed, CAGRD determines its total replenishment obligation for that AMA. CAGRD then computes the total projected cost to satisfy this replenishment obligation. This total cost is prorated among all of the members of CAGRD in the AMA based on the volume of Excess Groundwater used by each member, and is the basis for establishing the Water and Replenishment Rate Component described in Section 18.104.22.168 above. Once the CAWCD Board establishes rates each year as described above, reports are prepared and sent to each county in which MLs are located (Maricopa, Pinal and Pima). The reports identify the amount to be levied against each ML parcel located in the respective county. The counties add the assessments to each parcel’s property tax bill and collect them along with the property taxes. The county transfers the collected assessments to CAGRD for use in meeting its replenishment obligations. Collection of replenishment taxes from MSAs occurs through direct invoicing. Once the CAGRD rates are established, an invoice is sent to each municipal provider that serves a CAGRD MSA. The municipal provider is required by law to pay the replenishment tax directly to CAGRD by October 15 of each year. 7.4.4 Contract Replenishment Taxes The process for assessing and collecting Contract Replenishment Taxes differs from other CAGRD taxes. Contract replenishment is performed for a specific MSA under a special contract. The terms of the contract can provide for the use of specific water supplies and/or replenishment facilities in satisfying contract replenishment obligations. Therefore, all costs associated with contract replenishment are borne by the MSA water provider that executes the contract. Collection of contract replenishment taxes occurs through direct invoicing by CAGRD. 2015 // Plan of Operation 7-5 Preliminary DR AF T — Sep tember 8, 2014 7.5 CAGRD REVENUE BONDING In 2010, legislation was passed that granted CAGRD authority to issue revenue bonds to develop infrastructure and acquire water rights necessary to perform its replenishment obligations (A.R.S. § 48-3772.B.13). Only revenues that are dedicated to infrastructure and water rights purposes (Membership Dues, Enrollment Fees, Activation Fees and the Infrastructure and Water Rights Rate Component) may be pledged to the repayment of such bonds. 7.6 CAGRD’S FINANCIAL CAPABILIT Y As described above, CAGRD has a number of revenue sources available to it to fulfill its obligations. CAWCD’s Board has adopted policies for establishing its fees, rates and dues not less frequently than every two years. CAGRD maintains reserve funds for each revenue source. Various revenue sources may be used for “pay as you go” purposes, reserved for periodic expenditures or, in the case of Infrastructure and Water Rights revenues, pledged towards revenue bonding. Accordingly, CAGRD has a great deal of financial flexibility as economic and operational conditions change. The variety of mechanisms in place will ensure that CAGRD will always be able to meet its statutory obligations using funds collected exclusively from its members. 7-6 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 APPENDIX A LIST OF ABBREVIATIONS A B B R E V I AT I O N D E S C R I P T I O N AF acre-feet AF/Yr acre-feet per year AMA Active Management Area A.R.S. Arizona Revised Statutes AWBA Arizona Water Banking Authority AWS Assured Water Supply ADWR Arizona Department of Water Resources ASLD Arizona State Land Department CAP Central Arizona Project CAWCD Central Arizona Water Conservation District CAGRD Central Arizona Groundwater Replenishment District cfs cubic feet per second DAWS Designation of Assured Water Supply GIS Geographical Information System GPHUD Gallons per Housing Unit per Day GSF Groundwater Savings Facility LTSC Long-term Storage Credit MAG Maricopa Association of Governments M&I Municipal and Industrial ML Member Land MSA Member Service Area PAG Pima Association of Governments USF Underground Storage Facility WAS Member An MSA granted water availability status by CAWCD WSA Act Water Sufficiency and Availability Act of 1999 2015 // Plan of Operation A-1 Preliminary DR AF T — Sep tember 8, 2014 APPENDIX B [CHAPTER 2 – HISTORIC OPERATIONS] 1. Table B-1: Water Delivered to Scottsdale by CAWCD under WAS Contract 2. Figure B-1: Scottsdale WAS Replenishment Area 3. Conservation District Annual Reports – 2004 through 2013 2015 // Plan of Operation B-1 Preliminary DR AF T — Sep tember 8, 2014 TABLE B-1 WATER DELIVERED TO CITY OF SCOTTSDALE Under Water Availability Status Contract B-2 REPORT YEAR ANNUAL VOLUME (AF) 2001 0 2002 0 2003 759 2004 981 2005 722 2006 827 2007 892 2008 884 2009 542 2010 610 2011 509 2012 512 2013 477 2015 // Plan of Operation Water Availability Status Replenishment Area SCOTTSDALE FIGURE B-1 0 SCALE 2015 // Plan of Operation MILES 1 2 NORTH Preliminary DR AF T — Sep tember 8, 2014 B-3 2004 PHOENIX AMA Preliminary DR AF T — Sep tember 8, 2014 B-4 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-5 2004 TUCSON AMA Preliminary DR AF T — Sep tember 8, 2014 B-6 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-7 PINAL AMA 2004 Preliminary DR AF T — Sep tember 8, 2014 B-8 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-9 2005 PHOENIX AMA Preliminary DR AF T — Sep tember 8, 2014 B-10 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-11 2005 TUCSON AMA Preliminary DR AF T — Sep tember 8, 2014 B-12 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-13 PINAL AMA 2005 Preliminary DR AF T — Sep tember 8, 2014 B-14 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-15 2006 PHOENIX AMA Preliminary DR AF T — Sep tember 8, 2014 B-16 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-17 2006 TUCSON AMA Preliminary DR AF T — Sep tember 8, 2014 B-18 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-19 PINAL AMA 2006 Preliminary DR AF T — Sep tember 8, 2014 B-20 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-21 2007 PHOENIX AMA Preliminary DR AF T — Sep tember 8, 2014 B-22 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-23 2007 TUCSON AMA Preliminary DR AF T — Sep tember 8, 2014 B-24 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-25 PINAL AMA 2007 Preliminary DR AF T — Sep tember 8, 2014 B-26 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-27 2008 PHOENIX AMA Preliminary DR AF T — Sep tember 8, 2014 B-28 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-29 2008 TUCSON AMA Preliminary DR AF T — Sep tember 8, 2014 B-30 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-31 PINAL AMA 2008 Preliminary DR AF T — Sep tember 8, 2014 B-32 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-33 2009 PHOENIX AMA Preliminary DR AF T — Sep tember 8, 2014 B-34 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-35 2009 TUCSON AMA Preliminary DR AF T — Sep tember 8, 2014 B-36 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-37 PINAL AMA 2009 Preliminary DR AF T — Sep tember 8, 2014 B-38 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-39 2010 PHOENIX AMA Preliminary DR AF T — Sep tember 8, 2014 B-40 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-41 Preliminary DR AF T — Sep tember 8, 2014 B-42 2015 // Plan of Operation 2010 TUCSON AMA Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-43 Preliminary DR AF T — Sep tember 8, 2014 B-44 2015 // Plan of Operation PINAL AMA 2010 Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-45 Preliminary DR AF T — Sep tember 8, 2014 B-46 2015 // Plan of Operation 2011 PHOENIX AMA Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-47 Preliminary DR AF T — Sep tember 8, 2014 B-48 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-49 2011 TUCSON AMA Preliminary DR AF T — Sep tember 8, 2014 B-50 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-51 2011 PINAL AMA Preliminary DR AF T — Sep tember 8, 2014 B-52 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-53 2012 PHOENIX AMA Preliminary DR AF T — Sep tember 8, 2014 B-54 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-55 Preliminary DR AF T — Sep tember 8, 2014 B-56 2015 // Plan of Operation 2012 TUCSON AMA Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-57 Preliminary DR AF T — Sep tember 8, 2014 B-58 2015 // Plan of Operation PINAL AMA 2012 Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-59 Preliminary DR AF T — Sep tember 8, 2014 B-60 2015 // Plan of Operation 2013 PHOENIX AMA Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-61 Preliminary DR AF T — Sep tember 8, 2014 B-62 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-63 2013 TUCSON AMA Preliminary DR AF T — Sep tember 8, 2014 B-64 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-65 PINAL AMA 2013 Preliminary DR AF T — Sep tember 8, 2014 B-66 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation B-67 Preliminary DR AF T — Sep tember 8, 2014 APPENDIX C [CHAPTER 5 – REPLENISHMENT RESERVE] 1. Statutory language related to establishing and funding the Replenishment Reserve 2.Policy Regarding the Dedication of CAWCD’s Existing Underground Storage Credits to CAGRD for Use in Establishing the Replenishment Reserve (Approved October 6, 2005) 2015 // Plan of Operation C-1 Preliminary DR AF T — Sep tember 8, 2014 STATUTORY LANGUAGE RELATED TO ESTABLISHING AND FUNDING THE REPLENISHMENT RESERVE A.R.S. § 48-3772. Duties and powers of district regarding replenishment E. The district shall establish and maintain a replenishment reserve as follows: 1. The district shall calculate a reserve target for each of the three active management areas within the district and shall identify the reserve target in the plan of operation prepared pursuant to section 45-576.02. The reserve target for each active management area shall be calculated as follows: (a)Establish the projected one hundred year replenishment obligation for each active management area. For the purposes of this subdivision, each active management area’s projected one hundred year replenishment obligation does not include replenishment obligations under resolutions adopted pursuant to subsection B, paragraph 10 of this section or replenishment obligations for category 2 member lands. (b)Subtract from the active management area’s projected one hundred year replenishment obligation the sum of the following volumes of water derived from sources identified in the plan as water that the district plans to use to meet its replenishment obligations for that active management area: (i)The annual volume of each nondeclining, long-term municipal and industrial subcontract for central Arizona project water multiplied by one hundred. (ii) The annual volume of water under leases or contracts that can be made physically and legally available to the district consistent with the rules adopted pursuant to section 45-576, subsection H, multiplied by the number of years, not to exceed one hundred, in which the water is to be made available to the district. The water need not be continuously available to be included in this item. A lease or contract shall not be considered under this item if the water to be made available under the lease or contract is for a term of less than twenty years. (iii) The total volume of groundwater that the district plans to transport to the active management area during the next one hundred years as allowed by title 45, chapter 2, article 8.1. (iv) The total volume of all sources of water not identified in items (i), (ii) or (iii) of this subdivision that will not be held by the district under a lease or contract. Volumes to be included under this item must be consistent with the rules adopted by the director pursuant to section 45-576, subsection H. (c) Multiply the result from subdivision (b) of this paragraph by twenty per cent. The result is the reserve target for the active management area. 2. The reserve target for an active management area may be adjusted by the district, subject to the approval of the director of water resources, based on changes in either of the following: C-2 (a) The active management area’s projected one hundred year replenishment obligation. (b) The volumes of water identified in the plan of operation prepared pursuant to section 45-576.02 as water that the district plans to use to meet its replenishment obligations for that active management area. 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 3. The district shall include a replenishment reserve charge in the annual replenishment assessment levied against all parcels of category 1 member land as provided in section 48-3774.01 and in the annual replenishment tax levied against all municipal providers that have member service areas as provided in section 48-3780.01. The replenishment reserve charge for each active management area is established annually by the district based on the reserve target for that active management area. 4. The district shall levy a replenishment reserve fee against category 1 member lands pursuant to section 48-3774.01 and against member service areas pursuant to section 48-3780.01. For category 1 member lands the fee is equal to twice the applicable replenishment reserve charge multiplied by the total projected average annual replenishment obligation for the member lands as reported by the director of water resources pursuant to section 45-578, subsection F. For member service areas the fee is equal to twice the applicable replenishment reserve charge multiplied by the excess groundwater increment. With the approval of the district and the director of water resources, long-term storage credits as defined in section 45-802.01 may be assigned to the district’s replenishment reserve subaccount in lieu of paying the replenishment reserve fee. 5. The district shall use replenishment reserve charges and replenishment reserve fees collected within each active management area together with all interest earned on the charges and fees to store water in that active management area in advance of groundwater replenishment obligations for the purpose of developing long-term storage credits as defined in section 45-802.01 that shall be credited to the replenishment reserve subaccount for that active management area as provided in section 45-859.01. 6. Beginning on January 1, 2030 or earlier, on approval of the director of water resources pursuant to section 45-859.01, subsection K, the district may transfer credits from a replenishment reserve subaccount to a conservation district account as provided in section 45-859.01 to satisfy its groundwater replenishment obligations. 7. If the district transfers credits from the replenishment reserve subaccount for an active management area pursuant to section 45-859.01, subsection E, the district shall include in the annual replenishment assessment levied against all parcels of category 1 member land in that active management area and, except as provided in section 48-3780.01, subsection B, in the annual replenishment tax levied against all municipal providers that have member service areas in that active management area a reserve replacement component to fund the replacement of the transferred credits. The district shall use all monies from the reserve replacement component collected within an active management area together with all interest earned on the monies to develop long-term storage credits as defined in section 45-802.01 within that active management area to be credited to the replenishment reserve subaccount for that active management area as provided in section 45-859.01. 8. For the purposes of establishing and maintaining the replenishment reserve, the district shall have access to excess central Arizona project water equivalent to but no more than the access the Arizona water banking authority has for the purposes specified in section 45-2401, subsection H, paragraph 2. 2015 // Plan of Operation C-3 Preliminary DR AF T — Sep tember 8, 2014 C-4 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation C-5 Preliminary DR AF T — Sep tember 8, 2014 C-6 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 APPENDIX D [CHAPTER 6 – STORAGE FACILITIES PLANNED FOR USE] 1. Table D-1: Inventory of Storage Capacity Available for Use by CAGRD at Selected Recharge Facilities 2. Figure D-1: Storage Facilities Available for Use by CAGRD 3.CAWCD Underground Storage Facility Capacity Priority Policy (Approved May 2, 2013) 2015 // Plan of Operation D-1 Preliminary DR AF T — Sep tember 8, 2014 ermitted capacity represents the maximum annual volume allowable by ADWR. Volumes do not include capacity P at projects for effluent supplies. Operational capacity represents the maximum volume the facility operator has determined can be stored in a given year. Differences between permitted and operational capacity for USFs may vary depending on factors such as infrastructure and infiltration rate limitations. 3 Storage capacity for CAWCD USF facilities determined to be all available storage after contractual obligations were met. Storage capacity for GSFs was determined by subtracting the average storage over the last six years by non-CAGRD GSF partners from the operational capacity and by coordination with the GSF operators. 4 City of Peoria owns 15% of storage capacity. 5 Salt River Project has first right of refusal to 15,000 AF/yr of storage capacity until 2023. 6 Upon completion of SMRP, Phase 2 (~ 2020), an additional 31,500 AF/yr of storage capacity expected to be available to CAWCD. 7 Approximately 2,300 AF/yr of storage capacity reserved as system reliability for Northwest Providers. 8 City of Tucson owns 50% of annual storage capacity; 6,000 AF/yr of remaining storage capacity reserved for Tucson’s system reliability. 9 Owned by Metropolitan Domestic Water Improvement District (MDWID); Available storage capacity for CAGRD provided by MDWID staff. 1 2 D-2 2015 // Plan of Operation Available for Use by CAGRD STORAGE FACILITIES FIGURE D-1 0 SCALE 2015 // Plan of Operation MILES 5 10 NORTH Preliminary DR AF T — Sep tember 8, 2014 D-3 Preliminary DR AF T — Sep tember 8, 2014 D-4 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation D-5 Preliminary DR AF T — Sep tember 8, 2014 D-6 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 APPENDIX E [CHAPTER 7 – FUNDING MECHANISMS] 1. CAGRD Enrollment Fee and Activation Fee Policy (Adopted May 1, 2008) 2. CAGRD Assessment Rate Setting Policy (Adopted May 6, 2010) 3.Policy on Collection of CAGRD Annual Membership Dues (Approved April 7, 2011) 4.Infrastructure and Water Rights Funding Proposal (Approved November 7, 2013) 2015 // Plan of Operation E-01 Preliminary DR AF T — Sep tember 8, 2014 E-02 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation E-03 Preliminary DR AF T — Sep tember 8, 2014 E-04 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation E-05 Preliminary DR AF T — Sep tember 8, 2014 E-06 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation E-07 Preliminary DR AF T — Sep tember 8, 2014 E-08 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation E-09 Preliminary DR AF T — Sep tember 8, 2014 E-10 2015 // Plan of Operation Preliminary DR AF T — Sep tember 8, 2014 2015 // Plan of Operation E-11 C E N T R A L A R I ZO N A PR OJ E C T P.O. B OX 43020 PH O E N I X , A Z 85080 -3020 C AG R D.CO M © CO P Y R I G H T 2014 C E N T R A L A R I ZO N A P R OJ E C T. A L L R I G H T S R E S E R V E D.
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