DATE:
December 3, 2024
TO:
Chair and Board Members, Water District
FROM:
Rachel Molina, General Manager
BY:
Cassandra Sanchez, Director of Public Works/City Engineer Tina Souza, Senior Project Manager
SUBJECT:
2024 Permanent Water Rights Purchases
RECOMMENDED ACTION
It is recommended that the Board of Directors of the Hesperia Water District receive and file this report regarding the calendar year 2024 purchase of 65 acre-feet and 10 acre-feet of permanent Base Annual Production water rights in the Alto Subarea from Donna Polich and Paula McKinney respectively, as well as the transfer of Carryover rights from the same.
BACKGROUND
The Adjudication (City of Barstow et al, v. City of Adelanto et al) is intended to remediate overdraft in the Mojave Basin Area by limiting the amount of water produced in specific subareas. The Free Production Allowance (FPA) is the maximum amount of water a producer may pump in one year without incurring a replacement or make-up obligation. As a result of the judgment, Hesperia Water District (District) incurs replacement water obligations in the Alto Subarea when verified production amounts exceed the FPA for the water year.
The District may meet these replacement water obligations by three mechanisms: 1) assignment of Carryover right or temporary transfer of unused FPA (i.e. lease) from interested water rights owners in the respective subarea at negotiated rates (this is a cost effective short-term option to meeting the production demands); 2) purchase water from the Mojave Basin Area Watermaster (Watermaster) at the current per acre-foot (AF) water rate which is derived from the State Water Project water rates, and/or; 3) purchase permanent Base Annual Production (BAP) rights from interested parties in the Alto Subarea at negotiated rates (purchase provides a long-term solution, but is costly and difficult to acquire).
With the ramp down related to the Adjudication, the growing demands of the District’s service area, water availability, and the competitive nature of assignment water, the District incurs a significant replacement obligation annually and has had to meet this obligation by purchasing water from the Watermaster.
It was brought to the District’s attention that Donna Polich was interested in selling 65 AF and Paula McKinney 10 AF for a total of 75 AF of permanent BAP rights. Due to the ramp down of 50.4 percent required by the Adjudication, the BAP equates to 38 AF (33 from Donna Polich and 5 from Paula McKinney) of FPA that can be used to offset annual replacement obligations. Along with this permanent BAP, each held carryover rights which may be applied one time toward replacement obligations that were transferred to the District.
ISSUES/ANALYSIS
During the 2022-23 Water Year (October 2022 to September 2023), the District produced 12,906 AF of water. The District’s FPA is 7,905 AF leaving a replacement obligation of 5,001 AF. The City owns 6,736 AF which equates to 3,665 AF of FPA that can be used to offset annual replacement obligations by leasing to the District; subsequently leaving a replacement obligation balance of 1,336 AF. The purchase of permanent water rights, while costly, provides a long-term solution to the inevitable water production overrun the District faces annually.
Opportunities to purchase permanent water are scarce and purchasing permanent water rights when feasible is a vital component to planning for future water supply. Due to the nature and sensitivity of water transactions and the need to act quickly or lose the opportunity, the purchase of water rights held by Donna Polich and Paula McKinney was presented to the District Board of Directors during a closed session. The District Board authorized staff to negotiate and finalize the purchases with Donna Polich and Paula McKinney of 65 AF and 10 AF respectively of permanent BAP at $7,025 per AF for a total cost of $526,875 ($456,625 for Donna Polich and $70,250 for Paula McKinney). The permanent BAP was inclusive of the temporary transfer of 33 AF and 5 AF, respectively, of Carryover rights in the negotiations. The total transaction amount for the permanent and temporary assignment of water rights is $526,875.
CITY GOAL SUPPORTED BY THIS ITEM
Financial Health - Maintain a balanced budget and adequate reserves.
FISCAL IMPACT
Water District cash reserves are available for the purchase of the permanent water rights. A mid-year Budget Amendment will be presented for the corresponding expenditure authority.
ALTERNATIVE(S)
None
ATTACHMENT(S)
None
City of Hesperia STAFF REPORT City of Hesperia STAFF REPORT City of Hesperia
STAFF REPORT
City of Hesperia
STAFF REPORT
Staff Report to the Chair and Board Members, Water District 2024 Permanent Water Rights Purchases
December 3, 2024