1. WATER RESOURCES DEVELOPMENT COMMISSION FINANCE WORKING GROUP REPORT OF FINDINGS September 9, 2011

2. WATER RESOURCES DEVELOPMENT COMMISSION FINANCE WORK GROUP Focus of Finance Work Group Identification of Needed Infrastructure Projects Development of Cost Estimates for Identified Infrastructure Identify Funding and Financing Mechanisms and Sources

3. September 9, 2011 WATER RESOURCES DEVELOPMENT COMMISSION FINANCE WORK GROUP 9 Examples of Infrastructure Projects Identified Colorado River Water to serve the Coconino Plateau Colorado River Water to serve the Verde Watershed Communities Colorado River Water to serve the Sierra Vista Subwatershed Additional groundwater development and associated pipelines to serve Flagstaff, Prescott, Prescott Valley areas Development of groundwater from a mine to serve the Sierra Vista Subwatershed Surface water from C.C. Craigin reservoir to serve the Payson area Expanding capacity of CAP canal

4. September 9, 2011 WATER RESOURCES DEVELOPMENT COMMISSION FINANCE WORK GROUP Estimated Cost of Projects and the Volume of Water Identified for Each Project Ranged from: $34 million to more than $1 Billion 3,000 AFY to 300,000 AFY

5. September 9, 2011 WATER RESOURCES DEVELOPMENT COMMISSION FINANCE WORK GROUP Traditional Funding Sources such as: Revenue Bonds GO Bonds Impact Fees Appropriations Etc. Should be adequate for communities that are able to develop local groundwater to meet projected demands

6. September 9, 2011 WATER RESOURCES DEVELOPMENT COMMISSION FINANCE WORK GROUP For Communities that will be unable at sometime in the future to develop local groundwater due to the unavailability of groundwater or because continued development of t groundwater will result in unacceptable impacts, an alternative solution will be needed and most likely will involve the importation of a long-term renewable water supply

7. September 9, 2011 WATER RESOURCES DEVELOPMENT COMMISSION FINANCE WORK GROUP Options for Funding/Financing Pursue traditional forms of funding if possible, i.e. bonds, impact fees, Federal loans, appropriations, etc Establish a fund designed specifically to provide low interest loans Pursue creative means of financing such as private public partnerships.

8. September 9, 2011 WATER RESOURCES DEVELOPMENT COMMISSION FINANCE WORK GROUP Water Supply Development Revolving fund established in 2007, specifically to fund water supply development projects, but has yet to be funded

9. September 9, 2011 WATER RESOURCES DEVELOPMENT COMMISSION FINANCE WORK GROUP Water Development Fund Financial Provisions Bonds Appropriations Federal Government Loan Payments, Interest and Penalties Investment Income Gifts, Grants and Donations

10. September 9, 2011 WATER RESOURCES DEVELOPMENT COMMISSION FINANCE WORK GROUP Problem Statement/Questions How Can the Water Supply Development Fund be Funded?  Appropriations, Federal Grants, Gifts How Much Money is Necessary for an Adequate Revolving Loan Fund?  Will Statutory Provisions Be Enough?

11. September 9, 2011 WATER RESOURCES DEVELOPMENT COMMISSION FINANCE WORK GROUP Considerations The Sources of Revenue must be:  Matched to the Size of the Fund  Matched to the Timing of Loans If a large number of projects are expected over a long period, the revenue should be permanent, dependable and sufficient for a long period.

12. September 9, 2011 WATER RESOURCES DEVELOPMENT COMMISSION FINANCE WORK GROUP Conceptual Principles For Revenue Sources Dependability and Predictability Adequate Funding Mix of Sources Beneficiaries Need to Contribute

13. September 9, 2011 WATER RESOURCES DEVELOPMENT COMMISSION FINANCE WORK GROUP Potential Revenue Sources Ad Valorem Taxes Water Withdrawal Fee Transaction Privilege Tax Bottle Water Tax Impact Fees  Building Permits  New and Existing Well Fees General Fund Appropriations Revenue Bonds Federal Grants and Loans Other

14. September 9, 2011 WATER RESOURCES DEVELOPMENT COMMISSION FINANCE WORK GROUP Potential Conceptual Funding Sources Transaction Privilege Tax  5 to 10 Cents per Thousand Gallons (Estimate: $24 to $48 million per year) Impact Fees  $250 to $500 per new Building Permit (Estimate: $1.5 to $3 million per year)  Well Impact Fee (New Wells $150K & Existing Wells $1.5M)

15. September 9, 2011 WATER RESOURCES DEVELOPMENT COMMISSION FINANCE WORK GROUP Conceptual Funding Sources General Fund Appropriation  $10,000,000 Annually?? Bottle Water Tax  2¢ and 5¢ per bottle (Estimate: $20 Million to $50 Million annually)

16. September 9, 2011 WATER RESOURCES DEVELOPMENT COMMISSION FINANCE WORK GROUP Projected Revenue Assuming 3% Return Low Projections Revenue Source 10 years (2021) 25 years (2036) 50 years (2061) 100 years (2111) *Well Impact Fee$ 19 M$ 62 M$ 192 M$ 1.0 B Transaction Privilege Tax (5¢ per 1kgal) $ 285 M$ 907 M$ 2.8 B$ 15 B Impact Fee ($250 per lot & 6K lots) $18 M$ 56 M$ 174 M$ 938 M Bottle Water Tax 2¢ per bottle $239 M$ 759 M$ 2.3 B$ 12.6 B *$50 per new well & $10 per well annually

17. September 9, 2011 WATER RESOURCES DEVELOPMENT COMMISSION FINANCE WORK GROUP Projected Revenue Assuming 3% Return Low Projections Revenue Source 10 years (2021) 25 years (2036) 50 years (2061) 100 years (2111) General Fund*$ 118 M$ 376 M$ 1.2 B$ 6.3 B Total$ 679 M$ 2.2 B$ 6.7 B$ 35.8 B *assumes a $10 million annual appropriation

18. September 9, 2011 WATER RESOURCES DEVELOPMENT COMMISSION FINANCE WORK GROUP Projected Revenue Assuming 3% Return High Projections Revenue Source 10 years (2021) 25 years (2036) 50 years (2061) 100 years (2111) Well Impact Fee$ 39 M$ 124 M$ 383 M$ 2.1 B Transaction Privilege Tax (10¢ per 1kgal) $ 570 M$ 1.8 B$ 5.6 B$ 30.2 B Impact Fee ($500 per lot & 6K lots) $35 M$ 113 M$ 349 M$ 1.9 B Bottle Water Tax (5¢ per bottle) $596 M$ 1.9 B$ 5.9 B$ 31.6 B *$100 per new well & $20 per well annually

19. September 9, 2011 WATER RESOURCES DEVELOPMENT COMMISSION FINANCE WORK GROUP Projected Revenue Assuming 3% Return High Projections Revenue Source 10 years (2021) 25 years (2036) 50 years (2061) 100 years (2111) General Fund*$ 118 M$ 375.5 M$ 1.2 B$ 6.3 B Total$1.4 B$ 4.3 B$ 13.4 B$ 72.1 B *assumes $10 million annual appropriation

20. September 9, 2011 WATER RESOURCES DEVELOPMENT COMMISSION FINANCE WORK GROUP Projected Percentage Mix of Projected Total Revenue Generation Low ProjectionsHigh Projections Well Impact Fee3% Transaction Privilege Tax45%47% Impact Fee3% Bottle Water Tax30%37% General Fund19%10% Total100%

21. September 9, 2011 WATER RESOURCES DEVELOPMENT COMMISSION FINANCE WORK GROUP Another Option is the Private Public Partnership Combines project elements into a single purpose entity whose cash flows will repay the principal and interest required to build and operate the project, Clearly defines the separate roles of the public and private sector by means of a joint venture contract that is specific to the project and its special requirements, Assigns appropriate risks to each group, Predominantly uses private funds and companies to finance, build and often operate projects, but with some public sector assets at risk,

22. September 9, 2011 WATER RESOURCES DEVELOPMENT COMMISSION FINANCE WORK GROUP RECOMMENDATION Arizona’s current leaders must begin identifying solutions and allocating funds to plan, acquire and develop additional water resources to ensure a sufficient supply of water is available for Arizona’s future. Further examination of these funding sources and financing mechanisms, including the water supply development fund, be conducted to determine what options will best enable water users throughout the State to meet their future water needs taking into consideration the political, fiscal, legal, and hydrological ramifications for the State and for the individual water users.