APPROVE A WATER SERVICE AGREEMENT WITH SAN ANTONIO WATER COMPANY FOR THE TRANSFER OF WATER RIGHTS TO THE CITY OF ONTARIO

SUBJECT:

APPROVE A WATER SERVICE AGREEMENT WITH SAN ANTONIO WATER COMPANY FOR THE TRANSFER OF WATER RIGHTS TO THE CITY OF ONTARIO

RECOMMENDATION: That the City Council approve a Water Service Agreement (on file in the Records Management Department) with San Antonio Water Company (SAWCO), subject to non?substantive changes, and authorize the City Manager to execute the agreement for the transfer of water rights to the City of Ontario.

COUNCIL GOALS: Invest in the City’s Infrastructure (Water, Streets, Sewers, Parks, Storm Drains, and Public Facilities)

FISCAL IMPACT: The City owns 295 SAWCO shares which entitles the City to receive 799 acre feet of groundwater production rights per year at the current rate of $174.24 per acre-foot. The annual cost to the City is $139,218. The rate is anticipated to increase by 5% to $182.95 per acre-foot during 2009. Water production rights transferred to the City under the proposed agreement can be used to satisfy the City’s replenishment obligation. Compared to replenishment water purchased from Metropolitan Water District (MWD) of $294 per acre-foot, the 2009 SAWCO proposed water rate is approximately 38% less. There is no impact on the General Fund.

BACKGROUND: The City owns shares of the common stock of San Antonio Water Company (SAWCO). The City also leases additional shares as they become available. These owned and leased shares entitle the City to receive water from SAWCO proportionate to the number of shares held. SAWCO owned and operated a well which delivered water to Ontario for many years. The well was taken out of service in the mid-1990’s as a result of poor water quality. After several failed attempts to improve the water quality of the SAWCO wells, the City and SAWCO entered into a License Agreement in October 2001 to allow the City to produce and take delivery of its entitlement through the operation of City-owned and operated wells. The cost of water as set forth in the License Agreement was the difference between the base water rate and the prorated operation and maintenance cost of the City wells used to produce the water. The initial termination date of the License Agreement was June 30, 2004 and was subsequently extended through the end of June 2008.

The initial term of the proposed Water Service Agreement between the City and SAWCO is five years. The agreement, which is subject to renewal, will allow for the transfer of water production rights from SAWCO to the City for the calendar years 2009, 2010 and 2011 subject to Watermaster approval of each annual transaction. The City will pay to SAWCO a single annual installment equal to the result of multiplying the amount of the City’s entitlement by the current base rate for water for each calendar year. Unlike the expired License Agreement, the new agreement does not allow for deductions from the base rate of any of the operation and maintenance cost of the City wells used to produce the water.

STAFF MEMBER PRESENTING: Ken Jeske, Director of Public Works/Community Services