The cost of latest CAP cut
TONY DAVIS
Arizona Daily Star
A new plan to use less Colorado River water will cost the Central Arizona Project more money, but water ratepayers in the Tucson and Phoenix areas won't feel much of the sting — at first.
CAP's governing board voted Thursday to adopt a preliminary version of a new plan to conserve 500,000 acre-feet of water annually.
It opted to stick a bit more than 75% of the cost of doing that onto property taxes paid in Pima, Maricopa and Pinal counties. Every year, landowners in those counties pay four cents per $100 in assessed value of their properties to contribute toward repaying part of the federally financed CAP's $4 billion construction cost.
The rest of the additional costs will come from urban and suburban water ratepayers, who will feel a slightly higher bite on their water bills. Board members described the latest water saving plan as an emergency measure. It's aimed at preventing Lake Mead from falling to catastrophically low levels after two years of arid weather caused it to drop much more than forecasters expected.
But the board warned these cost-sharing proportions are only guaranteed to last through 2022 and 2023. Those years will start what's
The Central Arizona Project canal carries Colorado River water to the Tucson area. CAP's governing board voted Thursday to adopt a preliminary version of a new plan to conserve 500,000 acrefeet of water annually.
M A M TA POPAT,
ARIZONA DAILY STAR
likely to be at least a five-year program of saving that much water annually.
'I don't think that anybody feels this is just a two-year problem,' CAP board president Terry Goddard said at Thursday's board meeting in Phoenix.
After 2023, it's likely, if not very likely, that water ratepayers will be required to pay more of the tab, CAP board members said.
The costs at stake are not inconsiderable. The CAP board has agreed to spend $20 million in 2022 and 2023 to compensate farmers, tribes and some urban users for giving up some of their water to leave in Lake Mead. That's out of a $200 million total cost of the entire, 500,000 acre foot water saving program — costs to be shared by Arizona, California and the U.S. Bureau of Reclamation.
The CAP hopes to cut its water use by 193,000 acre-feet for each of those two years. That's on top of 512,000 acre-feet it had already planned to cut because of a previously declared Colorado River shortage that will also start next year. By comparison, the Tucson Water utility uses about 100,000 acre-feet a year, mostly of CAP water.
The water project must also spend $13 million more in higher water costs in the next two years to make up for the fact that having less water to sell to the same number of cities and other customers will require paying more per acre-foot of water.
The purpose of leaving the water in Lake Mead is to prop up the lake, now deemed in danger of falling to precipitously low levels by 2026 at the latest. The lake fell 16 feet in the past 12 months through November, to about 1,065 feet. Since January 2020, it's fallen 29 feet.
The most recent five-year, federal projection shows that without the new 500,000 acre-foot savings, there's a 62% chance of Mead falling below 1,025 feet and a 22% chance of it dropping below 1,000 feet by 2026. At 895 feet, Mead would hit 'dead pool,' at which water couldn't be removed from it to serve farms and cities in the Colorado River Lower Basin states of Arizona and California.
At Thursday's CAP board meeting, several members said they believe water ratepayers should already be paying more for the latest conservation program.
But members, including Goddard, of Phoenix, and Vice Chairman Mark Taylor, of Tucson, generally agreed that it wouldn't be wise to impose 'rate shock' from a sudden, stiff water rate increase taking effect early next year.
As it is, CAP had already raised rates to urban water users, including those in Tucson, from $104 per acre-foot in 2021 to $137 per acrefoot in 2022. That increase is to cover extra costs triggered by the already planned, 512,000-acrefoot cutback in water deliveries. The board's latest vote to start the new round of cutbacks will boost the water rate another $7, to $144 an acre-foot.
As of now, Tucson Water hasn't yet proposed any changes in its water rates to reflect the higher cost of CAP water, utility spokesman James MacAdam said Friday. But some increases could come in the future.
The utility's current financial plan anticipated the pending increases in CAP costs that are due to implementation of the Drought Contingency Plan, he said, adding, 'Generally, these CAP price changes are no surprise.'
'As we evaluate our financial plan for the next five years, staff will evaluate whether any water rate or fee changes may be needed,' and the utility's CAP charge to users of drinking water could be impacted by increased CAP costs, MacAdam said.
The already planned cutback, called a 'Tier 1' shortage, affects mainly Pinal County farmers. It has been in the works since early 2019 when the basin states approved a seven-year drought contingency plan also aimed at helping Lake Mead.
By contrast, the latest, 500,000 acre-foot cut is 'totally new,' said Goddard, a former Arizona attorney general. 'We really knew the Tier 1 was coming for 10 years. All the additional costs due to Tier 1, that was fully anticipated. There was no surprise.'
The new water saving plan, known as '500 plus,' was first discussed in August, and 'that was a surprise,' Goddard said in an interview on Friday.
Those discussions started after the Bureau of Reclamation predicted that even with the 2019 drought plan in place, Lake Mead could, under one scenario, fall to 1,030 feet by summer 2023. That forecast triggered the Lower Colorado River Basin states — California, Arizona and Nevada — to start meeting to plan additional cuts in water use beyond those prescribed by the 2019 drought plan.
'I think all of us believe that generally, most of the cost for operations and maintenance and even ... conservation should in the end be generally supported by rates, although I think some should come from taxes,' Taylor said Friday.
'The positive effect of CAP goes way beyond the use of water — it affects the growth of this region. Everyone benefits from CAP, not just the people who drink it, and around 20% of costs of (operating) CAP comes from taxes,' Taylor said.
CAP officials try to give ratepayers an opportunity to prepare for major rate increases, because 'we know it takes time for municipalities to raise their rates, to go through the mayor and council,' he said.
If all of the new, higher costs had been put on ratepayers for 2022, 'that would have been a rate shock, especially for cities that may not have reserves for it,' Taylor said.
But at Thursday's meeting, the board altered one CAP staff recommendation in a way that transferred some of the costs from taxpayers to ratepayers.
Also, when the board voted unanimously to authorize $10 million in new spending for the '500plus' plan from taxpayer-funded reserves, it added a sentence saying this decision 'is not intended to set a precedent.'
Board member Jim Holway noted that Arizona officials had already agreed to dip into their budget to pay $40 million to support this new plan. With that, plus the financing plan the CAP staff recommended, ratepayers would only pay a few percent of the increased costs due to the latest water cutback, he said.
'I cannot fathom any justification for that split,' Holway said. 'We're looking for a clear signal to adjust who pays for this over the long term.'
Every time the region has a major drought, the water rate charged to municipal and industrial CAP users should go up, said CAP board member Mark Lewis.
The CAP board spent almost a decade trying to 'bend the curve' in water use to avoid a 20-year downturn in reservoir levels, he said.
'We careened from crisis to crisis without bending the curve. One way to avoid crisis is to bend water rates to encourage conservation,' Lewis said. 'We haven't done it. Cities are part of the problem. They won't admit their rate structure is unsustainable and they're constantly looking for Band-Aids.'
At the meeting, Warren Tenney of the Phoenix-based Arizona Municipal Water Users Association said his group supported the idea of dipping into CAP reserve funds to pay the higher costs.
But the cities represented by the association recognize they'll still be paying higher than expected rates in 2022 due to the CAP cutbacks, said Tenney, the group's executive director.
'We've been preparing for this day of a Tier 1 shortage happening in 2022,' Tenney said. 'All of the AMWUA cities have aggressive conservation programs and in all of their rate structures, there is an incentive for conservation built in. … 'We have seen significant increase, during this period of drought, in the delivery rate that we are committed to pay for our Colorado River water that you deliver for us. Those rates have gone up … in may cases above what inflation is.'
Contact Tony Davis at 520-349-0350 or tdavis@tucson.com. Follow Davis on Twitter@tonydavis987.
