1. 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

2. 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

3. 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Analysis  Re-examination of the 1998 Regional Recharge Plan Much of the report remains valid and useful Partially outdated due to additional facilities and other factors  Updated analysis More comprehensive exploration of physical & financial variables Emphasis on AWBA activities

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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