Central Arizona Project Update

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The Central Arizona Project is planning to ask the legislature to extend a four cent tax that pays for groundwater recharge and other costs. Also, water delivered by the canal could be decreased in the coming years because of drought. David Modeer, general manager of the Central Arizona Project, will discuss those issues.

Ted Simons: An agreement was reached last week between Arizona, California, and Nevada to add more Colorado river water to Lake Mead, which provides water to the central Arizona project. Here now to discuss the deal, along with funding for groundwater recharge and other CAP concerns, is David Modeer, the gentlemen manager for the central Arizona project. Good to see you again.
David Mordeer: Good to be here.
Ted Simons: This agreement on Colorado river water, what are were we talking about here and what's Arizona's part?
David Mordeer: Well, we are talking about trying to make some in-roads into keeping more water behind Hoover dam and Lake Mead in order to stem off the effects of this 14, 15-year drought that's been ongoing there, and hopefully, delay the imposition of shortage on the lower basin states.
Ted Simons: And this, as far as Lake Mead is concerned, how close are we to seeing triggers that would really be problematic?
David Mordeer: Well, we're about eight feet now, and with the recent rains and some of it getting into Lake Mead, we could be maybe 10 feet from that. But even that doesn't provide us a whole lot of margin of protection on it. It still looks like that given the drought, continuing as it is and is not projected to have much of an impact out of the winter storms so far. Maybe near normal, which is not enough to impact the rest of us. We are looking at a drought declaration for 2017.
Ted Simons: My goodness, and right now, the lowest lake levels since it was really filled, 75 years ago.
David Mordeer: That's correct. It's the lowest level since it began filling Lake Mead behind Hoover Daniel when it was constructed, so it's a significant situation, and one that has the potential to have detrimental impacts to all the lower basin states, and particularly Arizona being the lowest priority.
Ted Simons: This deal, we would -- Arizona would put four feet of cap water back into Lake Mead or not take it out, is that how this works?
David Mordeer: Correct. We would not take it out. What we've been able to do is work with our partners here in Arizona to find ways to save about 345,000 acre feet of water, leave it behind in the dam and reservoir, get the concurrence of the department of interior, the bureau of reclamation to not allow it to be taken by anyone else out of the reservoir, and leaving that much water behind, leaves about four feet more elevation change in Lake Mead.
Ted Simons: And Nevada and California, they are onboard with this, correct?
David Mordeer: They are correct. California will save a little bit less than we will during this two-year period, and Nevada, a smaller quantity, but all of us have agreed to understand the situation is significantly serious on the Colorado, and we're all willing to work together for the first time, we have all three states to sign onto an agreement to take a positive step to stem the effects.
Ted Simons: Usually my first question is, how is the cooperation going? Is everyone getting along? Is cooperation starting to erode or getting any better? It sounds like back against the wall, everyone is starting to figure it out.
David Mordeer: I think that's correct. I think that everybody has seen that to proceed down this pathway, that the reservoir has been heading, heading for the last 16 years, is not good for any of us in our states for water supplies, for the economy, and the economies of the states are based on the availability of water, and so everybody is beginning to see that picture much more clearly and willing to come, to compromise and listen to each other.
Ted Simons: Farms impacted prior to cities with this. What kind of impact from not taking that 4 feet out of the reservoir.
David Mordeer: Well, that should not be much of an impact at all on agriculture. What we have agreed to do is to have that less water taken by agricultural within central Arizona. We will pay them a price for doing that and they will make up for that in this two-year period of time. Other people hold Colorado river rights, and also, the net effect will not be great on agriculture, with this deal. But certainly, if we would go into shortage, they would be able significantly impacted, so staving a shortage off for another year or two, and unless we can work even better deals in the future, it is a plus for the agricultural industry.
Ted Simons: The last ten feet, important stuff.
David Mordeer: It is very important for us.
Ted Simons: And now, there is also a tax collection that's expiring soon, and I don't think that people understand or know that it's there. Talk to us about this, and how important this is to cap and where the money goes and how it is collected. Again, what are we talking about here?
David Mordeer: Well, we're talking a tax that was authorized by the legislature back in the early 90s and the original intent was to build state demonstration water projects. It was a time when if we could not get all our water off the river because we did not have any place to put it. So, these allowed us to build recharged facilities and other projects to take our water and store in Arizona, and that funding was there to build those projects. It was modified over the next few years to allow us to use that revenue to help pay back our debt for the construction of the central Arizona project, to deal with extraordinary expenses that we would run into. Let's say like ngs costs, the generating costs in the future, and to be used a lot for purchasing water with the Arizona water bank to store in the ground. Four times like we're going to be facing over the next two years to offset water that we cannot get off the river by recovering that stored water in the ground. The problem with today is that taxes are set to expire in 2017, and we feel strongly that it's a positive impact to revenues needed for extraordinary expenses and for trying to store more water in the ground. The loss of that doesn't mean that cost will go up, but we have to recover the cost through existing water customers raising water rights, so it's important that we get this extended and work with our legislature to do that.
Ted Simons: I was going to ask what happens if the answer is no.
David Mordeer: Well, if the answer is no, the legislature does not choose to go forward with the extending of the tax, not changing it, not putting in a new tax but simply extending the life of it, and then those revenues that we'll need to do either water storage or to address extraordinary expenses, that will happen in this drought. With our power system, we'll have to raise water rates because we still have to deliver water delivering water from the Colorado is anywhere from funds anywhere from a third to 50% of the gross product in the state of Arizona. It's a significant asset to Arizona to have that available, there is no substitute for Colorado river water.
Ted Simons: Is bonding an option? Do you do much bonding?
David Mordeer: We have done very little bonding. We did some early in the life of cap, related to lake Pleasant, we have gotten additional bonding authority through the legislature a few years ago. And we may be starting to do some bonding with our infrastructure needs later this year.
Ted Simons: All right. So again, the tax collection, watch for that, as far as the four feet of cap water not coming out of Lake Mead, day-to-day should not see much in the way of consequences.
David Mordeer: No, and that's only our contribution, adding California, we're hoping a total of ten feet of elevation will be diverted and stay in Lake Mead rather than coming out.
Ted Simons: All right, David, good to see you again. Thanks for joining us.
David Mordeer: Thank you very much.

David Modeer:General Manager, Central Arizona Project;

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