A landmark $3.4 billion water deal that would expand San Antonio's supply by 20% by the end of a decade is days away from approval by the SAWS board and eventual consideration by City Council.
The SAWS board heard a presentation of the deal by President and CEO Robert Puente on Monday and will reconvene next Monday to formally vote to accept the proposal, the end product of several years of seeking an out-of-market water source that would substantially diversify the city's dependence on the Edwards Aquifer.
The deal is breathtaking in every sense: SAWS for the first time would purchase from a private entity, the Vista Ridge Consortium, enough water for 162,000 households annually that would be pumped 140 miles to San Antonio from western Burleson County where it will be drawn from the Carrizo-Wilcox Aquifer.
In the event of severe drought, litigation, or other factors that prevent Vista Ridge from pumping and delivering water, SAWS will be under no obligation to pay. Still, when the water does start to flow, SAWS will have to purchase the water even if it does not immediately need it. Once the water is flowing here as soon as 2019, SAWS will have to distribute it for use, find ways to store it if not needed, or sell is to third parties such as other area municipalities.
It will be the most expensive water ever bought or sold in South Texas. Water pumped from the Edwards Aquifer, no longer sufficient to meet the growing city's needs, costs between $331 and $541 an acre-foot. The permitted rights SAWS holds to pump aquifer water also is subject to restrictions during times of drought.
There is no way to diversity the city's water supply without paying more. Water acquired through a pipeline deal struck with nearby Gonzalez County costs $1,200 an acre-foot. The water that will flow from the SAWS desalination plant now under construction will cost more than $2,000 an acre-foot. Vista Ridge water will cost between an estimated $1,852 - $1,959, depending on interest rates.
SAWS Board Chairman Berto Guerra, a key figure in the utility's negotiations with Vista Ridge over the last few months, has repeatedly said that water at $2,200-2,600 an acre-foot will seem inexpensive a decade from now.
Perhaps, but City Council will face a significant challenge in getting SAWS staff to calculate the scale of rate increases that will be needed in the coming years to pay for the out-of-market water. Finding third parties to purchase water, an option put forward by SAWS trustee Reed Williams, who led the utility's negotiating team, can offset rate increases, but only so far.
If a fast-growing San Antonio does need more water in the future, then it is ratepayers who will foot the bill. This is likely to divide council members in the inner city, where household water use is lower and houses do not have large, landscaped lots, and council members representing the city's ever-growing suburban neighborhoods and gate communities, where household water use is significantly higher, especially in the hotter, dryer months, and most houses have landscaped lots with automatic irrigation systems.
The proposed contract includes several concessions from the Vista Ridge Consortium that were not included in the original proposal.
In the new contract, the consortium – a partnership of the Spanish conglomerate Abengoa Water and Blue Water Systems, an Austin and San Antonio-based investor group who individual members have not been made public – would bear any regulatory risk. SAWS would pay only for water actually delivered. One of the most attractive pieces, Puente said, is the capped interest rate and fixed costs/prices.
“We have a chance to purchase tomorrow’s needed water at today’s prices,” Puente said. “The cost of water will continue to climb as other cities compete for scarce water resources, so now is the time to avoid more costly water in the future. We can’t afford to miss this opportunity.”
The SAWS board will vote on the contract next Monday. Vista Ridge then has 10 days to sign the contract before it's presented to City Council in late October. Download Puente's "Vista Ridge Water Supply Contract" presentation here.
The contract promises to pipe in water from the Carrizo and Queen City aquifers in Lee and Burleson counties east of Austin to the tune of 50,000 acre-feet, about 16 billion gallons, of water a year.
The new contract includes a fixed cost of the project for 30 years, saving approximately $750 million, according to SAWS calculations.
SAWS Board Chair Guerra was originally opposed to the pipeline deal, favoring instead that resources be focused on the brackish water desalination plant, another supply diversification project.
From the SAWS Board meeting in March:
“While I appreciate various members of the public, I do not want to commit our ratepayers to $85 million a year for 30 years for a project that may or may not deliver,” Guerra said. “We stand together as a board, we stand behind our Mayor, and we stand behind Robert Puente. So here’s our message: We will diversify our water supply, but not at that price. We will listen to anything that comes before us. Reed (Williams, a trustee), myself, and Robert and our staff will sit across the table from the top contender and we will negotiate and we will diversify our water supply, but not at that price.”
During the meeting today, Guerra passionately advocated for the approval of the contract as it was presented Monday, as did Puente, who also had rejected the original project.
"The project that we have today is not the project that I rejected," Puente said.
The final contract will not be completed until later this week. The Rivard Report will provide a link to that document as soon as it becomes available.
The contract includes the agreement that Vista Ridge will be responsible to build well-field infrastructure, pipeline, and transfer facilities. The estimated cost of financing for this portion is $844 million, an $81 million equity investment by Vista Ridge.
SAWS would then be responsible for $100 million interconnection infrastructure, the projects that connect the pipeline to its existing distribution system, including a pump station, upgrades to existing pump stations, ground storage tanks, control valves, 82,000 feet of pipe construction, and a treatment system.
The potential rate impact estimated by SAWS is 16% to pay for this project alone.
"We’ve gotta stop thinking that 15% or 16 % is too expensive," Guerra said. "I believe that water is underpriced ... we want to be ahead of the curve — we want to be responsible with that abundance (of water from the Vista Ridge project)."
Puente's presentation included various options SAWS could consider to mitigate the rate impact, including implementing a new rate structure, a lifeline rate, stair-step or phased-in rate increases, and opening up opportunities for new wholesale customers.
"This is an expensive project ... Even if you say no to this project, SAWS staff will need to (develop) a different project because it's not this project or nothing, it's this project or something else," Puente said. "This rate increase is not something that will go away."
SAWS Board Vice Chair Louis E. Rowe, who joined the meeting during a video connection, requested that the vote be further delayed since the final contract is not available. Guerra denied this request.
"We've got to keep moving," Guerra said.
This exchange was case-in-point for League of Independent Voters of Texas representative Linda Curtis, who said the contract had not been given enough time for review.
"I am sort of blown away – and actually quite frightened at the fast track that this deal is on now, such that even your board member asked to delay for a week to read a contract that he doesn't even have yet," she said. "Y'all need to just take it easy."
"We are not opposed to sharing some water," said Curtis, who lives in nearby Bastrop, Texas. "But (because of other projects on the aquifer) too much water is coming out of the aquifer too fast."
As reported by the Texas Tribune:
A few billion gallons a year are already pumped from the aquifer by small towns in the county. At the same time, just across the county line in the Lost Pines Groundwater Conservation District, two water companies are fighting district officials and local landowners to pull about 15 billion gallons of water annually from the same aquifer.
During his presentation, Puente had dismissed local protests as coming from other counties.
"These are people not from Milam, not from Burleson, but they're from adjoining counties," Puente said. "Please understand that it's not coming from the two counties we want to contract with – not coming from the Post Oak Savannah Groundwater Conservation District."
Curtis assured Puente that there are indeed residents of Burleson and Milam County represented in protests.
"I have to challenge you a little bit there, sir. We have members throughout the state and we have members in Burleson and Milam County," Curtis said.
Curtis said a team of lawyers and hydrologists will be looking into the contract once it's finalized and made public.
(Read more: San Antonio Wants Too Much of Our Groundwater)
"It is expensive water and that’s not bad ... if it was cheap water, I’d be worried,” said SAWS Trustee Williams. "There is no reason for us to push back, we’ve demonstrated that we respect the local condition ... We will treat their aquifer and their people with the same level of respect we treat our aquifer and people."
The three-month process of reaching a final contract has been unprecedented in its transparency, with negotiations occurring in open sessions with members of the public allowed to observe. Several public meetings also have been held during that time.
"Usually, contracts are negotiated behind closed doors and are then rolled out to the public as a complete document. This (Water Supply Agreement Negotiating) Committee allowed for publicly posted meetings for anyone in the general public to come and watch the negation," Guerra said. "Members of the media, City Council, environmental groups, state officials and other regional officials were present at these meetings and had the ability to impact these negotiations as much as anyone else. Many people were uncomfortable with this approach ... I’m really proud that we took this unprecedented approach to transparency.”
*Featured/top image: SAWS map of the Vista Ridge pipeline project.