AWBA Board Meeting, March 20, 2002Tucson AMA Institutional and Policy Advisory Group (IPAG) CAP Storage & Recovery in the Tucson AMA Preliminary Observations & Policy Options from the Institutional and Policy Advisory Group (IPAG) Informational Briefing AWBA Board Meeting, March 20, 2002

Tucson AMA Institutional and Policy Advisory Group (IPAG) IPAG Background  Regional Recharge Plan (1998)  AWBA Facilities Plan for TAMA (1998)  Ongoing examination Recharge capacity & sites »Kai-Avra proposal (2000) Subcontract firming Recovery

AWBA Board Meeting, March 20, 2002Tucson AMA Institutional and Policy Advisory Group (IPAG) Analysis  Re-examination of the 1998 Regional Recharge Plan Much of the report remains valid and useful Partially outdated due to additional facilities and other factors  Updated analysis More comprehensive exploration of physical & financial variables Emphasis on AWBA activities

AWBA Board Meeting, March 20, 2002Tucson AMA Institutional and Policy Advisory Group (IPAG) Analytic Tool DEMAND by sector & provider USF & GSF capacities & fees AWBA funding & storage STORAGE by facility, storer & year SUMMARY  Series of linked, interactive spreadsheets

AWBA Board Meeting, March 20, 2002Tucson AMA Institutional and Policy Advisory Group (IPAG) AWBA Spreadsheet Cost of water, cost of storage, 4-cent tax revenue & carryover, withdrawal fees, etc. Annual & cumulative storage “Baseline” Assumptions Cost of water: CAP advisory rates through 2007, 3% growth thereafter Ad valorem tax: $1.6 million base, 3% annual growth Facility charge: flat $12, based on average cost at TAMA USFs and 2% GSF “Baseline” Assumptions Cost of water: CAP advisory rates through 2007, 3% growth thereafter Ad valorem tax: $1.6 million base, 3% annual growth Facility charge: flat $12, based on average cost at TAMA USFs and 2% GSF

AWBA Board Meeting, March 20, 2002Tucson AMA Institutional and Policy Advisory Group (IPAG) CAP Firming 200,000+ AF shortfall (30% below target) Shortfall reflects revenue constraints and cost of credits Will likely result in future groundwater mining  The AWBA’s firming target for the Tucson AMA will not be met with projected revenue

AWBA Board Meeting, March 20, 2002Tucson AMA Institutional and Policy Advisory Group (IPAG) Firming Options  Bridging the firming gap {options under consideration} –Lower the cost of credits Continue to lower water costs Seek low-cost energy Continue to lower storage costs at USFs Spread fixed costs by utilizing available capacity Increase utilization of TAMA GSFs Invest in infrastructure to GSFs willing to pay $21/AF Use Withdrawal Fee money to buy-down the $21 Lower the AWBA GSF price for the Tucson AMA

AWBA Board Meeting, March 20, 2002Tucson AMA Institutional and Policy Advisory Group (IPAG) Firming Options  Bridging the firming gap {options under consideration} –Restructure existing TAMA revenue sources Extend ad valorem revenue stream Use Withdrawal Fee money for firming –Other  It is likely that a combination of solutions will be required

AWBA Board Meeting, March 20, 2002Tucson AMA Institutional and Policy Advisory Group (IPAG) Lowering the cost of credits through buy-down of the $21/AF 80% USF; 20% GSF with $4/AF buy-down “Baseline” 98% USF Firming Options  Hypothetical Example 30% USF; 70% GSF with $4/AF buy-down

AWBA Board Meeting, March 20, 2002Tucson AMA Institutional and Policy Advisory Group (IPAG) CAP Recharge Locations Pima Mine Rd. Clearwater Lower Santa Cruz USF Avra USF BKW Kai-Red Rock Service Areas/CC&Ns Operational USFs Operational GSFs Central Arizona Project Ground water flow CMID

AWBA Board Meeting, March 20, 2002Tucson AMA Institutional and Policy Advisory Group (IPAG) Encourage & participate in dialog with CAWCD, AWBA, ADWR, et al. Further identify TAMA subcontractors’ recovery needs Explore the recovery implications of interstate storage Recovery  There is strong interest in where water is stored and how it will be recovered  Recovery planning activities

AWBA Board Meeting, March 20, 2002Tucson AMA Institutional and Policy Advisory Group (IPAG) Next Steps  Continue to refine analysis Develop recommendations  Participate in recovery discussions