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00-1017_SOUTH COAST WATER DISTRICT_CVWD_C1_Agenda Report0 0 AGENDA ITEM October 17, 2000 To: George Scarborough, General Manager From: Lonnie Curtis, Water Services Manager Subject: Consideration of Approval of Water Service Agreement to Lease Capacity Rights in the Stonehill Drive Service Connection (South Coast Water District) RECOMMENDATION: By motion, authorize the General Manager to execute the Water Service Agreement and Lease of Capacity Rights re. Stonehill Connection and authorize initial payment of $300,000 from the Capital Improvement Fund Reserves to CIP # 12-XXXXX-4754-784. SITUATION Since 1996, the Capistrano Valley Water District has been drawing imported water into its domestic water system from a service connection to a Water Importation Pipeline on Stonehill Drive. The Water Importation Pipeline extends in three reaches from the South County Pipeline terminus to a point in the vicinity of Stonehill Drive and Del Obispo Street in the City of Dana Point. In the past, the District paid a water service charge to the Tri -Cities Municipal Water District (TCMWD) for use of the Stonehill Connection. However, the District has never purchased or leased capacity in the Water Importation Pipeline. The South Coast Water District (SCWD) replaced TCMWD as the operator of the Water Importation Pipeline, effective March 31, 2000. (It is noted that SCWD refers to this connection as the Stonehill Connection. It is also known as the Del Obispo Connection by District personnel.) The parties that hold capacity rights in the Water Importation Pipeline have invested capital for design and construction of the Pipeline's facilities. Staff has determined that it is preferable for the District to continue to use the pipeline capacity and formalize its use with a lease of the needed capacity. Upon execution of the agreement, the following payments are required: • A one-time payment of $240,000 to reimburse SCWD for the value of the District's use of Pipeline capacity in the past, up to and including June 30, 2000. • An annual payment of $60,000 per fiscal year to lease up to 1.5 cubic feet per second of capacity in the Water Importation Pipeline. FOR CITY COUNCIL AGEN .. �� Agenda Item • • October 17, 2000 •Water Service Agreement - Stonehill Drive Service Connection Page 2- A water delivery charge for the actual metered volume of water supply delivered. The water delivery charge will be equivalent to the rates, fees and charges established by the Metropolitan Water District. Staff has reviewed the attached agreement and recommends authorization of the District's General Manager to execute the agreement. COMMISSION REVIEW AND RECOMMENDATION Not applicable. FINANCIAL CONSIDERATIONS The District will incur a one-time cost of $240,000 to reimburse SCWD for the value of District's previous use for the period from July 1, 1996 through June 30, 2000. The District will also incur annual costs of $60,000 per year to lease pipeline capacity and a water delivery charge equivalent to the rates, fees and charges established by the Metropolitan Water District. The $60,000 annual lease payment was derived by South Coast Water District based on the costs to construct the original pipeline and connection and current costs to maintain that facility. These costs total approximately $50,000 per cfs. Since we are not purchasing permanent capacity this was reduced to $40,000 per cfs and pro rata to $60,000 for 1.5 cfs. To make further comparisons, this pipeline is an extension of the South County (SC -04) pipeline. The capacity charge for SC -04 is $1.1 million per cfs. The $60,000 we are paying for 1.5 cfs would amortize this cost over 27.5 years. The lease funding was not budgeted. As this payment represents a payment in -lieu of acquiring capacity in this pipeline, the funds would appropriately come from the Capital Improvement Fund reserves. District Capital Improvement Fund reserves will fund the initial payment with future annual payments to be included in the annual budget. Staff will review the impact of this item on budgeted projects and propose recommended adjustments, if necessary at mid -year. NOTIFICATION South Coast Water District ALTERNATE ACTIONS By motion, authorize the General Manager to execute the Water Service Agreement and Lease of Capacity Rights re. Stonehill Connection and authorize initial payment of $300,000 from the Capital Improvement Fund Reserves to CIP# 12-XXXXX-4754-784. 2. Request additional information from the Staff. W:\Eng\Agncy\TCMWD, SCWD\Water Service Agreement-Stonehill Connection\Stonehill WSA-agenda item.doc Agenda Item • 0 October 17, 2000 Water Service Agreement - Stonehill Drive Service Connection Page 3 - RECOMMENDATION: By motion, authorize the General Manager to execute the Water Service Agreement and Lease of Capacity Rights re. Stonehill Connection and authorize initial payment of $300,000 from the Capital Improvement Fund Reserves to CIP # 12-XXXXX-4754-784. Respectfully submitted, Lonnie R. Curtis Water Services Manager Attachments (1): Agreement W:\Eng\Agncy\TCMWD, SCWD\Water Service Agreement-Stonehill Connection\Stonehill WSA-agenda item.doc