Stable financing for a stable water supply.

• Author: Becker, Lambertus H,
• Position: Metropolitan Water District of Souther California's financing plan

In 1995, the Metropolitan Water District of Southern California updated its long-range finance plan to ensure an adequate water supply, stable rates to customers, and efficient and cost-effective financing of its capital and operating programs.

The 1980s were very favorable years for the finances of the Metropolitan Water District of Southern California (MWD). It was a relatively hot and dry period in Southern California with sufficient water available from MWD's two aqueduct import systems. MWD experienced record water sales, which resulted in the accumulation of monies in the water rate stabilization fund. Because of favorable financial conditions during this period, MWD was able to operate for seven and a half years without increasing water rates.

In the early 1990s, however, largely as a result of the prolonged California drought that ended in 1992, MWD's water supplies were curtailed, and a water-rationing program was instituted. Declining water revenues forced MWD to increase water rates 60 percent between 1991 and 1994. As this was occurring, the district's capital improvement program was moving into its peak expenditure years, requiring large revenue-bond sales. The board of directors requested an update of the long-range finance plan with development of a comprehensive financing strategy within the context of these prevailing conditions. The updated plan and how it brought about more efficient and cost-effective financing of MWD's operating and capital programs are described in this article.

MWD: A Supplemental Supply

The Metropolitan Water District of Southern California is a public agency and quasi-municipal corporation created in 1928 by a vote of the electorates of several southern California cities. Its primary purpose is to provide a supplemental supply of water for domestic and municipal use at wholesale rates to its member public agencies. MWD provides nearly 60 percent of the water used by the 16 million people residing within the service area. The service area covers 5,168 square miles and includes portions of the counties of Los Angeles, Orange, Riverside, San Bernardino, San Diego, and Ventura. Generally, the service area covers the arid coastal plain from Ventura County to the Mexican border. There are 27 member public agencies in the Metropolitan Water District: 14 cities, 12 municipal water districts, and one county water authority. MWD is governed by a 51-member board of directors, with each agency having at least one representative on the board. Representation and voting rights are based on the assessed valuation of real property within each member agency.

MWD imports water from two sources: the Colorado River via the Colorado River Aqueduct and northern California via the California Aqueduct. Owned and operated by MWD, the Colorado River Aqueduct transports approximately 1.2 million acre-feet of water per year. (An acre-foot is the amount needed to cover an acre one foot deep, or about 326,000 gallons.) The California Aqueduct is the main delivery facility of the California State Water Project, which is owned by the state and operated by the department of water...