FOR: Water Subcommittee Meeting [January 24, 2024]
TO: Honorable Water Subcommittee Members
FROM: Stephen Dopudja, P.E., Interim Utilities Manager
Toyasha Sebbag, Assistant to the City Manager
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Request that the Water Subcommittee provide feedback on the City of Rialto and Rialto Utility Authority Board Issuing a Notice of Intent Letter to the County of San Bernardino of Rialto’s Interest to Facilitate the Delivery of Water from the Cadiz Water Project to Disadvantaged Communities (25,000 Acre-Feet).
(ACTION)
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BACKGROUND:
This item was placed on the Agenda for discussion and feedback by a member of the Water Subcommittee.
On November 1, 2023, Cadiz, Inc. entered into a binding agreement with San Bernardino County, Santa Margarita Water District (SMWD), and Fenner Gap Mutual Water Company (FGMWC) to provide priority rights to water supply from the Cadiz Water Conservation and Storage Project (Cadiz Project) to public water systems serving San Bernardino County communities.
Founded in 1983, Cadiz, Inc. (NASDAQ: CDZI) is a California water solutions company that describes itself as dedicated to providing access to clean, reliable, and affordable water for people through a unique combination of water supply, storage, pipeline, and treatment solutions with 45,000 acres of land in California, 2.5 million acre-feet of water supply, 220 miles of pipeline assets, and state that they have the most cost-effective water treatment technology in the industry.
ANALYSIS/DISCUSSION
2012 Memorandum of Understanding (MOU)
On October 1, 2012 (Item No. 1), the San Bernardino County Board of Supervisors (SBC Board) adopted Resolution No. 2012-176 and approved the Cadiz Project’s Groundwater Management, Monitoring and Mitigation Plan (Plan). The SBC Board provided in the MOU that public water systems within the SBC Board area could realize two significant benefits:
1. A priority right of up to 20% of the Project’s 50,000 acre-feet of annual water supply for the life of the Project (up to 10,000 acre-feet per year for 50 years).
2. Up to 25,000 additional acre-feet of water for beneficial use (up to 500 acre-feet per year for 50 years) by the Inland Empire Utilities Agency (IEUA) or any agency as the County would subsequently designate.
After the SBC Board approved the MOU and the Cadiz Project’s Plan, Cadiz acquired a 220-mile pipeline (Northern Pipeline) running from the Cadiz property, approximately 45,000 acres of land in eastern San Bernardino County, through Newberry Springs, Daggett, and Barstow, enhancing the ability of future beneficial use to Cadiz Project water in areas currently reliant on local groundwater and State Water Project (SWP) imports. When fully operational, the Northern Pipeline is reported to have the capability to transport up to 25,000 acre-feet of water annually, equivalent to half of the Cadiz Project’s total annual water supply.
2023 Memorandum of Understanding (MOU) Amendment
The October 24, 2023, MOU amendment updated the designee eligible for the County reserved 25,000 acre-feet of water from the IEUA to Mojave Water Agency (MWA) and made the reserved water available at no cost.
The MOU amendment also added a priority right for public water systems in the county for 100% of the Project’s total annual water yield that is not subject to a binding written agreement as of the date of the amendment. Based on this priority right, for Cadiz and FGMWC to deliver water for beneficial use outside of the county, they must first provide the County 60 days written notice of intention to execute a binding agreement allowing the County, within its complete discretion, to designate a County public water system within the county to execute a substitute binding agreement on substantially similar terms. If a substitute county public water supplier is not designated or the public water supplier fails to execute a substitute agreement promptly, the priority right is waived. The map below shows the Cadiz and California water infrastructure for potential conveyance connections.
Map of Rialto and Cadiz’s California Water Conveyance Infrastructure
For water agencies to be eligible for the reserved water, they must notify San Bernardino County that they elect to participate in the project by facilitating 25,000 acre-feet of Project water delivery to disadvantaged communities. If water agencies do not elect to participate in the Project, then the County may continue making the water available to any party at its discretion. ATTACHMENT 1 is a draft letter of intent for submittal to San Bernardino County.
FINANCIAL IMPACT
On October 24, 2023, the MOU amendment made the reserved water available to agencies at no cost, and sending a letter of intent does not bind the City or Rialto Utility Authority Board to any obligation of future funds.
Nevertheless, future costs remain uncertain due to a potential waiver of priority rights if a public water supplier fails to promptly execute a substitute agreement. Furthermore, the absence of detailed provisions on water allocation and marketing at the time of availability adds to the complexity. Any forthcoming binding costs or agreements will undergo scrutiny before the Water Subcommittee, Utilities Commission, and City Council.
For water agencies to be eligible for the reserved water, they must notify San Bernardino County that they elect to participate in the project by facilitating 25,000 acre-feet of Project water delivery to disadvantaged communities. If water agencies do not elect to participate in the Project, then the County may continue making the water available to any party at its discretion. ATTACHMENT 1 is a draft letter of intent to San Bernardino County for discussion and feedback.
Operating Budget Impact
On October 24, 2023, the MOU amendment made the reserved water available to agencies at no cost, and sending a letter of intent does not necessarily bind the City Council or Rialto Utility Authority Board to any obligation of future funds.
Nevertheless, future costs remain uncertain due to a potential waiver of priority rights if a public water supplier fails to promptly execute a substitute agreement. Furthermore, the absence of detailed provisions on water allocation and marketing at the time of availability adds to the complexity. Any forthcoming binding costs or agreements will undergo scrutiny before the Water Subcommittee, Utilities Commission, and City Council.
Capital Improvement Budget Impact
The requested action will not impact the Capital Improvement Budget at this time.
RECOMMENDATION:
Request that the Water Subcommittee provide feedback on the City of Rialto and Rialto Utility Authority Board Issuing a Notice of Intent Letter to the County of San Bernardino of Rialto’s Interest to Facilitate the Delivery of Water from the Cadiz Water Project to Disadvantaged Communities (25,000 Acre-Feet).