May 31, 2011

Eric Sandler

Director of Finance

San Diego County Water Authority

2

46.2%

1.9%

0.2%

12.6%5.5%

33.6%

Capital Improvement Program(including CIP labor)

Water Purchases & Treatment

Debt Service

OperatingDepartments

Other Expenditures

Equipment Replacement

Increasing costs to buy, transport water

◦ From 2008-2012, MWD approved rate increases totaling 55 percent for “Tier 1” treated supply

◦ Additional rate increases expected

Investing in major water reliability infrastructure

Changing sales volumes

◦ Water Authority sales down 38 percent since 2007

3

Current budget reductions

◦ $2.4 million cut in FY 2010

◦ $3.6 million cut in FY 2011

Elimination of spot water purchases

Selling stored water

Using rate stabilization reserves

Challenging MWD’s rate structure

4

Reduced water sales forecasts

Shifting from “building” agency to “operating” agency

◦ Reorganization & consolidation for enhanced efficiency

Manage personnel costs

◦ Staffing reductions to reflect agency’s evolution

◦ Increased employee contributions to pension benefits

Seeking service efficiencies with Member Agencies

5

6

Water purchases & treatment

CIP Expenditures

Debt service

Operating departments

Hodges operations

Equipment replacement

Other expenditures

$700,474 49%

$321,129 23%

$280,394 20%

$87,715 6%

$6,052 <1%

$1,220 <1%

$20,449 1%

$1,417,434 100%

Water Purchases and Treatment

CIP Debt Service

23%49% 20%

Three categories account for 92% of the total budget:

16 percent below amended FYs 10-11 budget

Continues to fund vital water reliability projects and operations

Comprehensive effort to reduce expenses and pass savings to ratepayers

◦ Deferred CIP spending (14 projects, $150 million)

◦ Operating department budgets reduced by $6.7 million

◦ Labor and benefit costs (including CIP) reduced by $4.5 million

7

8

298.00294.00

289.55285.25

259.33253.92

249.50

220

230

240

250

260

270

280

290

300

310

FY08 FY09 FY10 FY11 FY12 FY13 FY14

Full-

Tim

e E

qu

ival

en

ts

(FTE

s)Budgeted Staff Positions

16% Reduction in FTEs (2008 – 2014)

Recommended “all-in” wholesale treated water cost in 2012: $1,148 per acre foot

7.7 percent above estimated treated water wholesale cost for 2011

9

Customer Service *

3%($2)

Supply 50%($41)

Treatment 23%($19)

Transportation12%($10)

Storage *12%($10)

10

“All-in” Increase Distribution

$82/AF

Melded Supply Rate Increase

$41/AF

*Converted to $/AF based on sales forecast

MWD Increase71%

($29)

Water Authority29%

($12)

*Includes all estimated debt service payments on senior and subordinate issuances

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0

50

100

150

200

250

2010 2015 2020 2025 2030 2035 2040 2045 2050

Fiscal Year

$ M

illio

ns

Award-winning budgeting and financial planning

High credit ratings

Favorable financing terms

◦ Saving $50 million in interest from January 2010 bond sale

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Fitch Moody’s S&P

AA+ Aa2 AA+