01-21-1997 - Amendment to Water Leases with McIntyre Investments & the City of Covina0
TO: . City Manager and City Council
FROM: Patrick J. Glover
City Engineer/Public Works Director
City of West Covina
Memorandum
AGENDA
ITEM NO. C-6c
DATE January 21, 1997
SUBJECT: AMENDMENT TO WATER LEASES WITH MCINTYRE INVESTMENTS
AND THE CITY OF COVINA
SUMMARY: Under the previously approved lease agreements with McIntyre
Investments and the City of Covina, the City of West Covina may
purchase 1870 acre feet (609 million gallons) of water per year from
Covina Irrigating Company (CIC). ' This water is less expensive than
water purchased from City's main supplier, Metropolitan Water
District. Under the terms of the current leases, the City is to receive
treated water which originates as surface runoff only (not well water).
Limitations at CIC's treatment plant and other technical .complications
have made it impossible for the City to take all 1870 acre feet of water
per year. To ensure that the City is able to obtain the maximum
amount of this less expensive water, staff proposes that the City agree
to accept both surface water and well water and that the lease
agreements be amended accordingly.
BACKGROUND
The City of West Covina owns and operates a water supply system which serves
approximately 4200 customers in the southerly part of West Covina and approximately
2800 customers in Walnut. The system distributes approximately 7000 acre feet (2.3
billion gallons) of water annually. ' i
Approximately forty percent of the City's service area lies within the Main San Gabriel
Basin or its tributary areas. The customers who reside within this area use a combined
average of 1870 acre feet of water annually: Unfortunately, even though many of the
City's customers reside within the Main San Gabriel Basin, the City does not have the
right to pump water from the Basin because the City was not a party to the original
adjudication of water rights.
In the absence of pumping rights, the City is forced to purchase the majority of its water
from the Metropolitan Water District (MWD) via local municipal water districts. Over the
past four years, the wholesale price of this ."imported" MWD water has increased
approximately thirty-two percent (32%). The current wholesale rates for MWD water from
the local municipal water districts range from $430.33 to $447.30 per acre foot (326,000
gallons).
A few years ago, Covina Irrigating Company (CIC) contacted the City and indicated it
could supply "local" water to the City system at a reduced cost. CIC is a privately held
company governed by an elected Board of Directors. It has numerous share holders
including the City of Covina and McIntyre Investments. CIC is an original party to the
1973 adjudication of water rights in the Main San Gabriel Basin. It receives an allotment
of about 9700 acre feet annually which is distributed in proportion to the amount of stock
held by each shareholder. Shareholders who do not use their allotment have arranged
with CIC to make it available to other users through negotiated leases. It should be noted
that purchasers of this surplus local water must both lease the rights to the water and also
purchase the water itself.
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In, 1994, the City, CIC, and the Water Master developed a three-way cooperative
agreementwhich made the City eligible to receive a maximum of 1870 acre feet of water
annually (when available) from the Main San Gabriel Basin via CIC. The agreement was
executed. by the City Council in November of 1994 and by CIC and the Water Master in
January_ of 1995. It was approved by the Superior Court of the State of California for the
County of Los Angeles in May of 1995.
In Fiscal Year 95/96, pursuant to the three way agreement noted above, the City leased a
total of 2017 shares of CIC stock. (including 957 shares from the City of Covina and 958
shares from McIntyre investments). Each share of CIC Stock is equivalent to 0.9789 acre
feet of water rights. Therefor, the shares leased by the City represented 1974 acre feet of
water rights.. ;
In Fiscal Year 95/96, the -City received approximately 450 acre feet of water from CIC at a
wholesale, cost of $380 .per. acre foot. The acre foot cost includes: $260 for leased water
rights,. $75.00 -to purchase the water from CIC, and $45.00 for the power to pump the
water. Because of the reduced cost of this water when compared to the more expensive
"imported" MWD water, the City realized a savings of about $30,000 in Fiscal Year 95/96.
These savings offset increases in the wholesale price of MWD water which allowed the
City to avoid a rate increase for its retail customers.
Unfortunately, the City ' was not able to receive its full allotment'of 1870 acre feet as
permitted under the three way agreement approved by the Water Master and the
Superior Court. Some of the reasons for this are outlined below.
The water leases weren't fully executed until September, 1995.
• State mandated alterations to CIC's treatment plant weren't completed until December
of 1995.
• There wasn't sufficient surface runoff water available due to water quality and
technical problems. These issues are discussed in more detail in the Analysis portion
of this report.
Since. the. Cityonly, received approximately 450acre feet in Fiscal Year 95/96, the
remaining leased water rights (1522 acre feet) were carried forward into Fiscal Year
96/97. Thus, the City only needed to lease rights town additional 348 acre feet -for Fiscal
Year. 96/97 in order to have sufficient rights to take the maximum permitted allotment of
1870 acre feet as approved by the Court and the Water Master.
During the first six months of Fiscal Year 96/97, the City has only been able to take 114
acre feet of this less expensive water from CIC. This represents about 6% of the total
permitted annual allocation of 1870 acre feet.
ANALYSIS
As noted above, the City only took a small portion of the allotment it was entitled to in
Fiscal Year 95/96. If circumstances remain unchanged, it is projected that the City will
only be able to take approximately 900 acre-feet in Fiscal Year 96/97 (less than one half
of : the total allotment it is entitled to). The four primary circumstances which are
preventing the City from receiving its full allotment are summarized below.
1. Lease Terms. The current lease agreement with CIC stipulates that the City will
receive treated surface runoff water (which originates as precipitation in the local
mountains) only. When the lease was initially negotiated, CIC informed the City that there
would be sufficient treated runoff to satisfy the City's needs (which could not exceed 1870
acre feet under the Court and Water Master approved agreement). Since there appeared
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to be sufficient treated surface water, it was agreed that the City would not have to accept
any local well water.
2. Water Quality / Turbidity. CIC has a sophisticated water treatment plant on Arrow
Highway in Glendora. This plant treats the surface runoff water from the local mountains
which, under the terms of the current lease, is the only type of water delivered to the West
Covina water system. Surface runoff (especially that resulting from heavy rains) contains
suspended soil particles which are referred to as "turbidity." When turbidity exceeds the
State mandated. limits, CIC is forced to shutdown the treatment plant and instead supply
its customers with well water only.
3. Seasonal Limitations. In general, surface water is only available during the winter
months. During the summer months, .no surface water is available and CIC delivers only
well water to its customers._ For the remainder of the year, CIC either delivers well water
or a mixture of well water and surface water.
4. Pumping / Mechanical Limitations The City pumps used to take CIC water were
originally installed only to take water from CIC in an emergency when MWD could not
deliver water due to. damage and/or required maintenance on their system. They are
single speed pumps which requires a minimum constant flow of 1500 gallons per minute
(GPM) to operate properly.
As a result of items 1 through 4 above, the City can not take treated surface water: (a) in
the summer because none is available; (b) in the winter when turbidity is excessive; (c)
when CIC can not deliver at least 1500 GPM because the City pumps will not operate
properly; and (d) when CIC must delivery a mixture of surface and well water to meet the
combined demands of all of CIC's customers. .
FISCAL IMPACTS
Currently, the City purchases MWD water from Upper San Gabriel Valley Water District
and the Three Valley Municipal Water District at the cost of $447.30 and $430.33 per
acre foot, respectively. The wholesale cost of CIC water is approximately $60.00 less
per acre foot.
• For the current fiscal year, If the City takes 900 acre feet as projected, it will result in,
a $54,000 savings when compared to the cost of MWD water.
• If, through alterations to the leases and/or through mechanical alterations, the City
could take 1200 acre feet, the City would realize a $72,000 savings when compared
to the cost of MWD water.
• If the City altered the leases to accept well water in addition to surface water and
was able to take the full 1870 acre foot allotment, it would realize a savings of
approximately $112,000.
ALTERNATIVES
1. Modify the City Pumps. As noted above, the pumps used to take CIC water are
single speed and require a constant minimum flow of 1500 GPM to operate properly.
When the available water is less than 1500 GPM, the pump is turned off and the City
receives no water from CIC. It is possible to install a variable speed control system for
approximately $30,000. From a recent meeting with CIC, it is projected that with this
type of system in place, the City would be able to take approximately 1200 acre feet in
the current fiscal year (an increase of approximately 300 acre feet over the 900 acre
feet currently projected). In the short term (considering only the current fiscal year), this
will only result in an additional savings of $18,000 in wholesale water costs while .
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costing the City $30,000 in system alterations. However, the alterations would pay for
themselves in succeeding years if the City continued to lease rights and purchase water
from CIC. When compared to Alternative No. 3, below, this alternative is not the most
cost effective solution to the current problems.
2. Maintain the Status Quo. If the City is able to take the 900 acre feet projected for
the current fiscal year, there will be significant savings when compared to purchasing all
the water from MWD. However, it is very unlikely that the City would ever be able to
take its full allotment of this less expensive water. This alternative would not maximize
the City's savings.
3. Alter the Lease Agreements. If the lease agreements were immediately altered to
accept treated surface water or well water or a mixture of both, it is projected that the City
will approach the maximum allotment in the current year and would achieve the maximum
allotment in future years. This would result in additional savings in the range of $58,000
(or a total savings of $112,000 when compared to MWD water) without any costly
alterations to the City's system.
The majority of City residents (those served by providers other than the City) are already
receiving water from the well field where the CIC wells are located. This water is treated
at the well head and is required to meet the same State Health Department Standards as
the treated surface water being accepted by the City under the current lease agreements.
RECOMMENDATION
Staff recommends that the City Council authorize the Mayor and City Clerk to execute
amendments to the existing lease agreements with McIntyre Investments and the City
of Covina which will allow the City of West Covina to receive surface water or well water
from the Covina Irrigating Company.
atrick J. Glover
City Engineer/Public Works Director
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