In an earlier post, MMWD Keeps on Studying vs. Doing, I disclosed how the MMWD pretty much keeps on hiring consultants and studying issues forever. Meanwhile, the MMWD is not undertaking the actual implementation of any of the large and expensive projects that will shore up our 4-year water supply security. These include a 5,500-acre feet brackish desalination plant in Petaluma, a 20,000-acre feet capacity expansion of existing reservoirs, and a dedicated conveyance to increase prospective water imports from Sonoma.
We do not need to implement all three projects. But, we certainly do need to implement at least one of them as soon as possible. Any of these projects take years to complete even if we start them today. Raising the related bond financing, designing and specifying the project, permitting, and the actual building of such projects will take at the minimum probably about 4 years. It could well exceed 8 years for the desalination plant.
The MMWD has a sense of urgency only when it is too late, in the midst of a water shortage crisis. It is like shopping for homeowner's insurance when your house is burning.
MMWD's long history of delaying
In the graph above, you can see that we have experienced two severe water crises.
The first water crisis started in October 1976. At one point, we were only 3 months from running out of water. At the time, a temporary pipeline to EBMUD to import much water was approved and implemented within months. Nowadays, this same pipeline project would be stuck in lawsuits and regulatory delays forever. So, next time we run out of water, forget the EBMUD pipeline. Upon a replay of the 1976 water crisis with just 3 months left of water; there is no forthcoming urgent water supply available.
The second water crisis is the one we are all familiar with that started in March 2020, when we were less than 12 months from running out of water again.
The MMWD has had nearly a half-century to figure out that it does not have an adequate water supply infrastructure to support its customer base of 192,500 (closer to 170,000 back in 1976). So, since then what did MMWD do? It signed a contract in 1979 to import up to 14,000 acre-feet (AF) of water from the Sonoma County Water Agency (SCWA). That was a smart move except for the fact that the MMWD infrastructure did not allow us to import more than 10,000 AF until recently (capacity now is 11,000 AF). Also, the MMWD has bought as little water as possible from SCWA. It has never imported anywhere near capacity even when we were running out of water within months!
Besides this water contract with SCWA, the MMWD has clearly not done enough to increase its water supply infrastructure since 1979 to support 192,500 customers.
Since the first water crisis in 1976, the MMWD has undertaken numerous studies to shore up its water supply infrastructure. But, it has never followed through with any permanent implementation to increase the MMWD water supply. The EBMUD pipeline was quickly dismantled just a few years after the 1976 crisis. A successful desalination pilot program was implemented in 2005 and 2006. See the following article on the subject: Desalination Pilot Program article.
However, this desalination project was quickly abandoned. So, nearly a half-century after the 1976 water crisis, the MMWD hasn't materially shored up its 4-year water supply security besides the SCWA contract.
The proposed water rate increase is not enough to stabilize the backlog. And, it does not cover any long-term water supply projects
So, with much excitement, one could read a cover page article in the Marin IJ on May 8th: "Big rate increases to pay for water supply project." Wow, is the MMWD finally getting going with these major water supply projects? Actually, not at all. Let me clarify.
The water rate increases will fund minor projects to bring in the MMWD water supply infrastructure out of a Third World status. These include spending $4 million on the electrification of the Soulajule Reservoir. The implementation will have to wait for a PG&E analysis regarding the feasibility of the project. Another $2.2 million will fund a project to connect Phoenix Lake to Bon Tempe Lake. Phoenix Lake is very small. This project would generate only about 450 AF per year. Much less than 1/10th of what is needed to shore up our 4-year water supply security.
These projects should not be confused with the major water supply projects mentioned earlier. These are the ones that would truly provide us a much greater 4-year water supply security by generating something like 5,500 to 8,500 AF per year.
Regarding the long-term water projects, the MMWD plans on just more studies
So, what has the MMWD done regarding the major projects? It has done a heck of a lot of studying by contracting for long and expensive consulting projects.
In February of 2022, it contracted with Jacobs Engineering for an overall study of water supply project options. The study at first cost $400,000 and was expected to be completed in August of 2022. This study was most confusing and provided no actionable information to the MMWD. So, both parties agreed to extend this study till February 2023 at a cost of $650,000. At completion, this study still did not give the MMWD the information necessary to move forward. To learn more about Jacobs Engineering's performance, you can read my essay on the topic: Review of Jacobs Engineering's performance.
So, what did MMWD do? What else, it contracted more follow-up consulting studies. That was the subject of my earlier post linked at the beginning of this article. So, I am just importing the relevant sections from it.
is seeking a grant of $200,000 to further study desalination in
Petaluma. The MMWD would leverage federal funds and not use its own
monies. Nevertheless, this study's cost estimate seems very high and
will result in substantial time delays. At $300 per hour (the going
rate for consultants), this study would result in a 666-person-hours
project. That seems like a lot of time to study this single project.
The MMWD is also seeking another study on reservoir expansion. This study seems much more futile. The MMWD is seeking a grant for $662,000 matched by a $729,000 contribution in MMWD staff time on a reservoir study expansion.
The MMWD with its teams of engineers should have a better understanding of its own reservoir structure than any outside party.
So, after these two studies following the year-long Jacobs Engineering study, will the MMWD be ready to actually start going on the major projects? Apparently not. The mentioned Marin IJ article of May 8th, states that the water rate increases will fund $ millions in further "explorations" of those projects. Quoting directly from the IJ article:
"The largest investment in new water supply options will go toward exploring the longer-term, more complex water supply projects. The district proposes investing $5.8 million during the next two years and a total of $12.3 million over the next four years toward these projects."
To summarize the above, over the next four years the MMWD will spend $12.3 million on "exploring" the long-term projects... and not a dime on actually moving forward and implementing any of them.
The proposed rate increase does not suffice to stabilize the backlog
In February, the MMWD presented a financial plan disclosing how much additional revenue they needed to cover:
- operating losses;
- stabilize the backlog of capital expenditures to upgrade the deteriorating infrastructure (pumps, pipes, etc); and
- for numerous other purposes (debt service, reserves build-up, IT upgrades, small water supply capital projects, etc.).
The MMWD also presented 4 different rate scenarios. Only one of them (Scenario 4) actually did stabilize the backlog. All the others came way short of stabilizing the backlog. I covered this subject in an earlier post: The MMWD needs to implement huge rate increases. I have updated my earlier study to figure out where the current rate proposal fits in. I have also attached the relevant documents from the MMWD at the end of this essay.
Within the table below, I show rate increases for the Financial Plan, the 4 different rate scenarios (presented by MMWD in February), and the recent rate proposal (released in March) that is expected to kick in on July 1st. I extracted the proposed rate % increase from the attached MMWD documentation focusing on a typical bill for a single-family customer consuming 11 CCFs per billing period. My summary calculation is probably not an exact representation of the MMWD overall revenues forecast. But, it is directionally most representative given the MMWD disclosed information. Even if I did underestimate MMWD's overall revenue generation by up to 15 percentage points, it would not affect my conclusion. If I did so, the proposed rates would resemble Scenario 3 which still funds only half of what is necessary to stabilize the backlog.
The Financial Plan is what the MMWD truly needs to fully stabilize the backlog. Actually, it probably still falls short because the Financial Plan did not use any inflation factor. Just using a return to moderate inflation of 2.5% going forward would increase the cumulative rate increase over the 4-year period from 94.5% to 104.9%. As shown, the current MMWD proposed rates resemble very much Scenario 2. After four years, they both finish at a similar endpoint (over a 50% increase in rates).
Scenario 2 just does not even touch the backlog, and lets it run out of control forever. It is most likely that the proposed rate scenario does the same thing. Below, I mapped out and compared the increase in revenues from the Financial Plan (what MMWD truly needs) vs. the proposed rate increases.
As mapped out the proposed rates generated incremental revenues fall way short of what is necessary as budgeted in the Financial Plan. The resulting shortfall ranges from $36 million to close to $50 million per annum (orange highlight within the table).
As shown the depicted shortfall is much understated. That is because the Financial Plan does not factor inflation over a 4-year period as mentioned earlier.
In the first fiscal year (2024), the proposed rates scenario does not even fully cover the required Debt service and the Reserve build-up. That's most problematic. The proposed rate scenario does not come anywhere close to addressing the backlog. The backlog, if remained unaddressed, could grow rapidly and forever. As one example below see the backlog for pipes only.
Long-term water supply options outlook
Remember even the MMWD Financial Plan as depicted does not cover any of the long-term water supply options. Using a conservative assumption that we will eventually develop such a project that would generate 6,000 AF per year at a cost of $2,500 per AF. This would result in an additional cost of $15 million per year. This would represent another 15% increase over today's rate levels. By the time the MMWD gets to implement such projects, the costs will be way higher than currently. The Producer Price Index (PPI) will keep on trucking going forward. It won't wait for the MMWD.
Going forward most probably over the next decade, we will continue to hear the same mantra from MMWD "conservation, conservation, conservation" because in terms of generating extra water supply that is the MMWD's main move. Meanwhile, the MMWD has been really cavalier about wasting thousands of AF per year. I covered this topic in an earlier article: How the MMWD exacerbated the 2020 -2021 Water Crisis.