80A - JOINT - SAFA - WATER SYS BONDS

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The Orange County Water District is the agency responsible for managing the Orange County groundwater Basin, which is Santa Ana's major source of water. OCWD is governed by a ten - member board of directors, which has the power to establish and adjust the annual Basin Production Percentage, the Basin Equity Assessment and the Replenishment Assessment by a vote of eight out of ten of its directors. Each of the cities of Anaheim, Fullerton and Santa Ana has the power to appoint one director; the remaining seven directors are elected by the residents in the geographic districts composing the balance of OCWD's boundaries. Prior to 1968, OCWD managed the Basin from the supply side. This approach did not limit the amount of water that could be taken from the Basin by any of the groundwater producers. OCWD's philosophy was for the Basin to provide sufficient water supply to meet demand regardless of growth, development or drought. In 1968, OCWD obtained authorization to implement the Basin Production Percentage (the "BPP ") as another tool to manage the Basin. The BPP is defined as the proportion of total water production that can be produced from groundwater withdrawals without incurring an additional assessment, known as the Basin Equity Assessment (the "BEA "). The BPP and BEA do not result in a rigid cap on the quantity of groundwater that may be pumped, but instead create a financial disincentive to pump in excess of the BPP. A groundwater producer may in fact pump as much groundwater from the Basin as its system capacity permits, although all water pumped above the BPP is charged the additional BEA, which effectively increases its cost to the MWD Tier II rate. Despite the financial disincentive of the BEA, the fact that the City has the ability to pump as much groundwater as the Water System can accommodate provides a reliable source of alternate water supply in the event that MWD water purchases are disrupted. For many years prior to 2004, OCWD established the Basin Production Percentage at 75 %, with a goal of replenishing the Basin with sufficient quantities of water to sustain that pumping level. Continued growth and several consecutive years of below normal precipitation, however, have decreased groundwater levels significantly. As a result, OCWD developed and implemented a new Basin management strategy that began in Fiscal Year 2003 -04. The goal of this strategy was to reverse the declining trend in water levels and ultimately to refill the Basin. To achieve this goal, OCWD has reduced the BPP in recent years. Since Fiscal Year 2005 -06, the BPP generally has ranged from 64% to 80% depending on Basin conditions. OCWD will set each fature BPP at a level that corresponds to the total amount of water that it estimates will be available for recharge that year, including replenishment water purchased from MWD. As part of this process, OCWD will take into account the level of water in the Basin, as well as hydrologic and replenishment conditions. In addition to adjusting the BPP and the BEA annually, OCWD also annually increases the pump tax or Replenishment Assessment (the "RA "), which is the cost that groundwater producers must pay to pump water from the Basin. The RA provides OCWD with the necessary revenue to construct capital improvement projects to enhance Basin production, to protect the water quality of the Basin's supply, and to purchase replenishment water from MWD when available. The RA for Fiscal Year 2013 -14 is set at $277 per acre -foot, and for Fiscal Year 2014 -15 it is estimated to be approximately $297 per acre -foot. With the energy costs and operational maintenance costs for pumping the groundwater added to the OCWD RA costs, the City pays approximately $432 for each acre -foot of groundwater produced. OCWD's Groundwater Replenishment System ( "GWRS ") became operational in January 2008. The GWRS constitutes a "new" source of supply that will increase the reliability of replenishment water for OCWD. The GWRS can produce nearly 70 million gallons per day, or a total of 72,000 acre -feet of water per year, to recharge the Basin and to support a seawater intrusion barrier in Fountain Valley. In addition, OCWD has developed a Long -Term Facilities Plan identifying capital projects that will appropriately enhance the recharge capacity of the Basin. This plan, along with the GWRS, is expected to allow the Basin to accommodate a BPP of approximately 60% to 75% in the long term, depending on the availability of replenishment water deliveries from MWD. Due to recent imported water supply challenges encountered by MWD, replenishment water is not expected to be available during the next few years and as a result, the BPP has been and will continue to be between approximately 60% and 65 %. In years when replenishment water will be available (estimated by MWD to be approximately every three out of ten yearSOA461cted to be increased to between 70% and 75 %. 21