Feasibility Report – Appendix G – Cost Allocation

U.S. Department of the Interior February 2020

Feasibility Report Appendix G – Cost Allocation

Los Vaqueros Reservoir Expansion Investigation Final Feasibility Report

Mission Statements The Department of the Interior (DOI) conserves and manages the Nation’s natural resources and cultural heritage for the benefit and enjoyment of the American people, provides scientific and other information about natural resources and natural hazards to address societal challenges and create opportunities for the American people, and honors the Nation’s trust responsibilities or special commitments to American Indians, Alaska Natives, and affiliated island communities to help them prosper.

The mission of the Bureau of Reclamation is to manage, develop, and protect water and related resources in an environmentally and economically sound manner in the interest of the American public.

Feasibility Report Appendix G – Cost Allocation

Los Vaqueros Reservoir Expansion Investigation, California Interior Region 10 • California-Great Basin

prepared for Reclamation by Stantec under Contract No. R12PC20255, GS-00F-0040L

Cover Photo: A full Los Vaqueros Reservoir in the spring (Contra Costa Water District)

Contents

Los Vaqueros Reservoir Expansion Investigation Final Feasibility Report Appendix G – Cost Allocation February 2020 – i

Contents

Page

Chapter 1 Introduction ........................................................................................................ 1-1 Background ............................................................................................................................ 1-1 Study Location ....................................................................................................................... 1-2 Project Objectives .................................................................................................................. 1-3

Primary Planning Objectives ........................................................................................... 1-3 Secondary Planning Objective ......................................................................................... 1-3

Final Alternatives Considered in the Feasibility Report ........................................................ 1-4 Physical Features ............................................................................................................. 1-4 Operational Priorities ....................................................................................................... 1-8

Organization of This Appendix ............................................................................................. 1-9 Chapter 2 Process Overview, Terms, and Potential Methods ......................................... 2-1

Process Overview and Terms ................................................................................................. 2-1 Costs Allocated ................................................................................................................ 2-2 Allocating Costs to Project Purposes ............................................................................... 2-2 Apportioning Costs to Beneficiaries ................................................................................ 2-2

Potential Cost Allocation Methods ........................................................................................ 2-3 Separable Costs-Remaining Benefits Method ................................................................. 2-3 Alternative Justifiable Expenditure.................................................................................. 2-3

Chapter 3 Authorization for Financial Participation ....................................................... 3-1 Federal Authority ................................................................................................................... 3-1

Authorities for Refuge Water Supply .............................................................................. 3-2 Applicable Authorities for Cost Assignment ................................................................... 3-3

State Authority ....................................................................................................................... 3-5 Chapter 4 Initial Cost Allocation ........................................................................................ 4-1

Single-Purpose Alternative Costs .......................................................................................... 4-1 Screening and Selection of Single-Purpose Alternatives ................................................. 4-1 Description of Single-Purpose Alternative Costs ............................................................ 4-8

Separable Costs ...................................................................................................................... 4-9 Without M&I Water Supply .......................................................................................... 4-10 Without Irrigation Water Supply ................................................................................... 4-10 Without CVP Operational Flexibility ............................................................................ 4-10 Without Refuge Water Supply ....................................................................................... 4-10 Without Recreational Opportunities .............................................................................. 4-10

Joint Costs ............................................................................................................................ 4-11 Initial Cost Allocation .......................................................................................................... 4-13

Chapter 5 Initial Cost Assignment ..................................................................................... 5-1 Methodology .......................................................................................................................... 5-1 Initial Cost Assignment.......................................................................................................... 5-2 Potential Impact of State Funding .......................................................................................... 5-5

Contents

Final Feasibility Report Los Vaqueros Reservoir Expansion Investigation ii – February 2020 Appendix G – Cost Allocation

Chapter 6 Payment Capacity and Ability to Pay .............................................................. 6-1 M&I Ability to Pay Analysis ................................................................................................. 6-1 Agricultural Ability to Pay Analysis...................................................................................... 6-3

Chapter 7 Summary ............................................................................................................. 7-1 Chapter 8 References ........................................................................................................... 8-1

Figures

Figure 1-1. Major Components of Alternatives 1A, 1B, and 2A ................................................. 1-6

Figure 1-2. Major Components of Alternative 4A ....................................................................... 1-7

Figure 2-1. Process for Evaluating Financial Feasibility ............................................................. 2-1

Figure 2-2. Separable Cost-Remaining Benefit Method.............................................................. 2-4

Figure 5-1. Cost Assignment Process .......................................................................................... 5-1

Tables

Table 1-1. Summary of Facilities and Operations for the Final Alternatives .............................. 1-4

Table 3-1. Existing Authorities for Federal Financial Participation for Monetized Benefit Categories ........................................................................................................................ 3-4

Table 4-1. Summary of Estimated Costs of Recommended Plan (Alternative 1B) Single-Purpose Alternatives ........................................................................................................ 4-9

Table 4-2. Summary of Estimated Separable and Joint Costs for the Recommended Plan (Alternative 1B) ............................................................................................................. 4-12

Table 4-3. Initial SCRB Analysis and Annual Cost Allocation Summary for the Recommended Plan (Alternative 1B) ($ millions/year) ................................................ 4-14

Table 4-4. Initial Total Cost Allocation Summary for the Recommended Plan (Alternative 1B) ($ millions) ......................................................................................... 4-16

Table 5-1. Initial Cost Assignment Percentages .......................................................................... 5-2

Table 5-2. Initial Construction Cost Assignment Summary for the Recommended Plan, (Alternative 1B), Compliant with the WIIN Act ............................................................. 5-3

Table 5-3. Initial Total Annual OM&R Cost Assignment Summary for the Recommended Plan (Alternative 1B) ....................................................................................................... 5-4

Table 6-1. Average Ability to Pay Results for Representative M&I Agencies in the Bay Area .................................................................................................................................. 6-2

Table 6-2. Recommended Plan (Alternative 1B) Allocated Municipal and Industrial Water Supply Costs.......................................................................................................... 6-3

Table 6-3. Selected Crops and Average Acres for Payment Capacity Analysis ......................... 6-4

Contents

Los Vaqueros Reservoir Expansion Investigation Final Feasibility Report Appendix G – Cost Allocation February 2020 – iii

Table 6-4. Crop Budgets Applied to the Payment Capacity Analysis ......................................... 6-5

Table 6-5. Crop Prices and Yields Applied to the Payment Capacity Analysis .......................... 6-5

Table 6-6. Estimated Payment Capacity ...................................................................................... 6-6

Table 6-7. Estimated Annual Ability to Pay ................................................................................ 6-6

Table 7-1. Summary of Initial Cost Allocation by Project Purpose for the Recommended Plan (Alternative 1B) ....................................................................................................... 7-1

Table 7-2. Summary of Initial Construction and OM&R Cost Assignment for the Recommended Plan (Alternative 1B) .............................................................................. 7-2

Abbreviations and Acronyms Bay Area San Francisco Bay Area CALFED CALFED Bay-Delta Program CCWD Contra Costa Water District CCWD Board CCWD Board of Directors CEQA California Environmental Quality Act CVP Central Valley Project CVPIA Central Valley Project Improvement Act Delta Sacramento-San Joaquin Delta DWR California Department of Water Resources EBMUD East Bay Municipal Utility District EIR Environmental Impact Report EIS Environmental Impact Statement IDC interest during construction Investigation Los Vaqueros Reservoir Expansion Investigation Local Agency Partners Prospective Bay Area partner water agencies including CCWD; Alameda

County Water District; Alameda County Flood Control and Water Conservation District, Zone 7; Bay Area Water Supply and Conservation Agency; Byron-Bethany Irrigation District; City of Brentwood; Del Puerto Water District; EBMUD; East Contra Costa Irrigation District; San Francisco Public Utilities Commission; San Luis Water District; San Luis & Delta-Mendota Water Authority; SCVWD; and Westlands Water District.

M&I municipal and industrial NEPA National Environmental Policy Act NOD North-of-Delta OM&R operation, maintenance, and replacement Proposition 1 Water Quality, Supply, and Infrastructure Improvement Act of 2014 Reclamation U.S. Department of the Interior, Bureau of Reclamation Refuges SOD CVPIA-designated wildlife refuges ROD Record of Decision

Contents

Final Feasibility Report Los Vaqueros Reservoir Expansion Investigation iv – February 2020 Appendix G – Cost Allocation

SCRB separable costs-remaining benefits SCVWD Santa Clara Valley Water District SOD South-of-Delta SWP State Water Project TAF thousand acre-feet WIIN Act Water Infrastructure Improvements for the Nation Act, 2015-2016 (Public Law 114-

322)

Chapter 1 Introduction

Los Vaqueros Reservoir Expansion Investigation Final Feasibility Report Appendix G – Cost Allocation February 2020 – 1-1

Chapter 1 Introduction This technical appendix to the Feasibility Report for the Los Vaqueros Reservoir Expansion Investigation (Investigation) documents cost allocation terminology and methods, and an initial cost allocation and apportionment for Alternative 1B. The Investigation is a feasibility study evaluating alternatives to develop environmental water supplies and improve the reliability and quality of San Francisco Bay Area (Bay Area) water supplies, primarily through the expansion of Los Vaqueros Reservoir in Contra Costa County, California.

Background Los Vaqueros Reservoir is located in the coastal foothills west of the Sacramento-San Joaquin Delta (Delta) in the eastern Bay Area. Contra Costa Water District (CCWD), owner and operator of the reservoir, provides water for 500,000 customers throughout central and eastern Contra Costa County as one of the largest urban water districts in California (CCWD 2017). CCWD completed construction of the original 100-thousand-acre-foot (TAF) Los Vaqueros Project in 1997. CCWD stores water in Los Vaqueros Reservoir that is diverted from the Delta when water quality is favorable, for later release and blending when Delta water quality is degraded. An initial expansion, Phase 1, to 160 TAF was completed in 2012. The primary purposes of both phases of the project are to address seasonal water quality degradation associated with CCWD’s Delta water supplies and CCWD’s dry year water supply reliability. The 160 TAF reservoir also provides important emergency water supply storage and, as secondary benefits, recreation and flood management.

Expansion of Los Vaqueros was one of five potential surface water storage projects identified by the CALFED Bay-Delta Program (CALFED) as warranting further study. In 2001, the U.S. Department of the Interior, Bureau of Reclamation (Reclamation), California Department of Water Resources (DWR), and CCWD began appraisal-level studies of the potential to expand Los Vaqueros Reservoir to address regional water quality and supply reliability needs. The appraisal-level studies indicated that expanding the reservoir to as much as 500 TAF capacity was technically feasible and could provide water quality and supply reliability to agencies in the region, as well as providing potential benefits to fisheries sensitive to water management operations in the Delta.

Subsequently, Reclamation was directed in Public Law 108-7 (Omnibus Appropriations Act of 2003) to conduct a feasibility-level investigation of the potential expansion of Los Vaqueros Reservoir. In 2004, voters in CCWD’s service area were asked to vote on whether CCWD should consider expanding the reservoir. The advisory ballot measure won approval, and as a result, the proposed expansion project was further developed and refined through preparation of environmental documentation in accordance with the National Environmental Policy Act (NEPA) and California Environmental Quality Act (CEQA), and extensive public outreach.


Final Feasibility Report Los Vaqueros Reservoir Expansion Investigation 1-2 – February 2020 Appendix G – Cost Allocation

After the Draft Environmental Impact Statement (EIS)/Environmental Impact Report (EIR) was published in 2009 by Reclamation and CCWD, a two-step approach was implemented for expanding Los Vaqueros Reservoir. This was done in order for CCWD to move forward with addressing urgent water supply and quality needs, particularly during dry years, while the feasibility-level investigation was still in process. The initial expansion was completed as a local action by CCWD, without financial assistance from the Federal Government. Because it was done without State or Federal assistance, this feasibility-level investigation was put on hold until after completion of the initial expansion. To implement this initial expansion, the CCWD Board of Directors (CCWD Board) certified the EIS/EIR (Reclamation 2010) and approved an expansion from 100 TAF to 160 TAF on March 31, 2010. Reclamation issued a Record of Decision (ROD) in February 2011 to enter into an Integrated Operations Agreement with CCWD based on the 2010 EIS/EIR. Construction on the initial expansion began in early 2011 and was completed in 2012.

Reclamation, DWR, and CCWD continue to investigate the feasibility of larger expansion alternatives, as documented in this appendix, because the earlier appraisal-level studies indicated that an additional expansion of Los Vaqueros Reservoir beyond the initial 60 TAF would provide additional regional water supply reliability and statewide environmental benefits. This feasibility-level investigation includes updates to the project plans and studies previously performed to account for significant changes to existing conditions that have occurred since the 2010 EIS/EIR was released, as well as to account for changes that are anticipated to take place within the coming years. These changes include CCWD’s initial expansion of Los Vaqueros Reservoir to 160 TAF and the operation of this expanded storage space, other local infrastructure changes (e.g., Contra Costa Canal Replacement Project), likely water management constraints resulting from regulatory actions in the Delta and large programs such as Bay Delta Conservation Plan, and new project beneficiaries participating in the Investigation.

Study Location Los Vaqueros Reservoir is located in the Kellogg Creek watershed of Contra Costa County, California in the central and south Delta. The reservoir lies in the foothills west of the Delta in the eastern Bay Area. The study area for the Investigation includes the Los Vaqueros Reservoir watershed and associated facilities, central and south Delta, and service areas of potential local partner water agencies. The central and south Delta is roughly bound by the San Joaquin River on the north and the boundaries of the legal Delta to the south (as established in Section 12220 of the California Water Code).

Prospective Bay Area partner water agencies include CCWD; Alameda County Water District; Alameda County Flood Control and Water Conservation District, Zone 7; Bay Area Water Supply and Conservation Agency; Byron-Bethany Irrigation District; City of Brentwood; Del Puerto Water District; East Bay Municipal Utility District; East Contra Costa Irrigation District; Panoche Water



District; San Francisco Public Utilities Commission; San Luis & Delta-Mendota Water Authority,0F

1 Santa Clara Valley Water District; and Westlands Water District. . These are collectively referred to herein as Local Agency Partners.

Other potential partners include the managing agencies of South-of-Delta (SOD) Central Valley Project Improvement Act (CVPIA)-designated wildlife refuges (Refuges): California Department of Fish and Wildlife, the U.S. Fish and Wildlife Service, and Grassland Water District, in cooperation with Reclamation.

Due to the potential influence on other programs and projects, an extended study area was identified for the Investigation. The extended study area includes the Refuges, operational areas of the Central Valley Project (CVP) and State Water Project (SWP), and the service areas of other Bay Area water agencies that may be indirectly affected by project operations.

Project Objectives The Investigation focuses on using an expanded Los Vaqueros Project to accomplish the following primary and secondary planning objectives:

Primary Planning Objectives • Develop water supplies for environmental water management that supports fish protection,

habitat management, and other environmental water needs.

• Increase water supply reliability for water providers within the Bay Area to help meet municipal and industrial water demands during drought periods and emergencies or to address shortages due to regulatory and environmental restrictions.

Secondary Planning Objective • Improve the quality of water deliveries to municipal and industrial customers in the Bay

Area, without impairing the project’s ability to meet the environmental and water supply reliability objectives stated above.

1 The SLDMWA includes Banta-Carbona Irrigation District, Broadview Irrigation District, Byron-Bethany Irrigation

District, Central California Irrigation District, the City of Tracy, Columbia Cana Company, Del Puerto Water District, Eagle Field Water District, Firebaugh Canal Water District, Fresno Slough Water District, Grassland Water District, Henry Miller Reclamation District #2131, James Irrigation District, Laguna Water District, Mercy Springs Water District, Oro Loma Water District, Pacheco Water District, Panoche Water District, Patterson Water District, Pleasant Valley Water District, Reclamation District #1606, San Benito County Water District, San Luis Water District, Santa Clara Valley Water District, Tranquility Water District, Turner Island Water District, West Side Irrigation District, West Stanislaus Irrigation District, and Westlands Water District.



Final Alternatives Considered in the Feasibility Report The No Action Alternative and four Action Alternatives are evaluated in this Feasibility Report. The physical features of the alternatives are summarized in Table 1-1. The Action Alternatives are refined versions of the alternatives evaluated in the 2010 Final EIS/EIR with the exception of Alternative 3, which was rejected in the 2010 Final EIS/EIR and was not further refined or evaluated herein. These alternatives account for changes to existing conditions that have occurred since the 2010 EIS/EIR was released (e.g., expansion of Los Vaqueros Reservoir to 160 TAF, completion of other local projects). These alternatives are operated to provide varying levels of emphasis to the above project objectives.

Physical Features Alternatives 1A, 1B, and 2A would expand Los Vaqueros Reservoir storage from 160 TAF to 275 TAF, build a new Delta-Transfer Pipeline, and relocate the existing Marina Complex and Los Vaqueros Watershed trails and access roads that would be inundated by the reservoir expansion. None of these would occur under Alternative 4A. All the action alternatives would upgrade the existing Transfer Facility, build a new Transfer-Bethany Pipeline, improve Pumping Plant #1, and add facilities to deliver water to the Transfer Facility from the Rock Slough Intake, which entails building a new Neroly High Lift Pump Station.

A list of the major components for all the alternatives is provided in Table 1-1 below. Alternatives 1A, 1B, and 2A differ from one another only in the proposed operational priorities of the facilities. Figure 1-1 shows the facilities associated with Alternatives 1A, 1B, and 2A. Figure 1-2 shows the facilities associated with Alternative 4A.

Table 1-1. Summary of Facilities and Operations for the Final Alternatives

No Action Alternatives 1A, 1B, 2A1

Alternative 4A

Existing Facilities (no change) Old River Intake 250 cfs 250 cfs 250 cfs Middle River Intake 250 cfs 250 cfs 250 cfs Old River Pipeline 320 cfs 320 cfs 320 cfs Los Vaqueros Pipeline 400 cfs 400 cfs 400 cfs Transfer Pipeline (Fill/Release) 200/400 cfs 200/400 cfs 200/400 cfs EBMUD-CCWD Intertie 155 cfs 155 cfs 155 cfs

Transfer Reservoir 4 million gallons 4 million gallons 4 million gallons

Proposed Modifications to Existing Facilities

Los Vaqueros Reservoir Capacity 160 TAF 275 TAF 160 TAF Los Vaqueros Reservoir Maximum Water Surface Elevation 507 feet 560 feet 507 feet

Transfer Facility Pump Station Capacity 150 cfs 200 cfs 200 cfs



Table 1-1. Summary of Facilities and Operations for the Final Alternatives (contd.)

No Action Alternatives 1A, 1B, 2A1

Alternative 4A

Proposed New Facilities Transfer-Bethany Pipeline Capacity None 300 cfs 300 cfs Delta-Transfer Pipeline Capacity None 180 cfs None Expanded Transfer Facility Pump Station Capacity None 300 cfs 300 cfs

Expanded Transfer Facility Storage Reservoir Capacity None 5 million gallons 5 million gallons

Neroly High Lift Pump Station Capacity None 350 cfs 350 cfs

Pumping Plant #1 Capacity 200 cfs 350 cfs2 350 cfs2

Los Vaqueros Watershed Facilities Los Vaqueros Marina Complex No change Relocated upslope No change Los Vaqueros Watershed Trails None Expanded None Los Vaqueros Interpretive Center No change Improved Improved

Los Vaqueros Watershed Office Barn No change Seismically

upgraded and improved

Seismically upgraded and

improved

Notes: General: Local Agency Partners plan on constructing several projects related to the proposed Los Vaqueros Reservoir expansion.

These include the Brentwood Pipeline, the EBMUD-CCWD Intertie Pump Station, the EBMUD Walnut Creek Pumping Plant Variable Frequency Drives, EBMUD Mokelumne aqueduct relining, and ECCID Intertie. These associated local projects are not part of the Federal feasibility study but are important related improvements to Local Agency Partners’ infrastructure that would be constructed in conjunction with this project.

1 Alternatives 1A, 1B, and 2A differ from one another only in the proposed operational priorities of the facilities. Alternatives evaluated in the Investigation are refined versions of the alternatives evaluated in the 2010 Final EIS/EIR. Alternative 3 was rejected in the 2010 Final EIS/EIR and was not evaluated further in Phase 2 of the Investigation.

2 Permitted capacity is 350 cfs as defined in the Supplement to the Final EIS/EIR. 300 cfs is the capacity modeled and designed under the Feasibility Study to reflect the current operation requirements. Capacity requires improvements to the existing Rock Slough Fish Screen’s rake cleaning system, included under Pumping Plant #1 improvements in this Feasibility Report.

Key: CCWD = Contra Costa Water District cfs = cubic feet per second EBMUD = East Bay Municipal Utility District ECCID = East Contra Costa Irrigation District EIS = Environmental Impact Statement EIR = Environmental Impact Report Investigation = Los Vaqueros Reservoir Expansion Investigation TAF = thousand acre-feet



Figure 1-1. Major Components of Alternatives 1A, 1B, and 2A



Figure 1-2. Major Components of Alternative 4A



Operational Priorities All alternative plans would utilize CCWD’s existing Delta intakes at Old River, Middle River, and Rock Slough to divert water from the Delta. In addition, CCWD, Local Agency Partners, and the Refuge Water Supply Program might (subject to obtaining the appropriate water rights modifications and other approvals) receive water diverted from the Freeport Intake on the Sacramento River via the EBMUD-CCWD Intertie. Water diverted at these four locations could be directly delivered to beneficiaries or stored in Los Vaqueros Reservoir for later use.

The Refuges would receive water delivered through the Transfer-Bethany Pipeline to the California Aqueduct. The delivered water would be either direct diversions or rediversions from the Delta, or releases from Los Vaqueros Reservoir storage, depending on the alternative plan. The water would be Delta Surplus Water1F

2 or water otherwise made available from CCWD or Local Agency Partner or the RSWP. The alternatives would not change the manner in which water is conveyed by the RWSP to the various Refuges.

Similarly, water delivered to Local Agency Partners would be direct diversions or rediversions from the Delta, or releases from Los Vaqueros Reservoir storage. The water would be Delta Surplus Water or water available from Local Agency Partner water rights and contracts. In addition, some alternatives include dedicated storage space in Los Vaqueros Reservoir for Local Agency Partner storage and withdrawal, including reserved drought and/or non-drought emergency storage.

All operations were formulated to meet the project objectives while minimizing impacts and avoiding harm to other water users. The operational differences and priorities for the Action Alternatives is summarized below.

• Alternative 1A is operated to maximize deliveries for water supply reliability to the Local Agency Partners, including drought and emergency supply reliability. The operations first seek to deliver Delta surplus and/or Local Agency Partner’s water rights and contract supplies to meet current demands. Any available supplies above current demands are stored in Los Vaquero Reservoir for later use, including dry years. If additional system capacity is available after these operations, CVPIA Level 2 Refuge water is wheeled through CCWD facilities instead of C.W. Jones Pumping Plant, freeing up capacity to increase CVP SOD deliveries at C.W. Jones Pumping Plant. Last, remaining CCWD system capacity is then used to deliver water supplies south of the Delta to help meet Incremental Level 4 Refuge contract allocations. These operational priorities result in the highest water deliveries to Local Agency Partners and CVP contractors (via wheeling), and the lowest deliveries to Refuges, compared with the other alternative plans.

• Alternative 1B includes the same physical facilities as Alternative 1A but is operated to provide roughly equal water deliveries (long-term) to both Local Agency Partners and Refuges, thereby balancing the Investigation’s two primary objectives. Level 2 Refuge supplies (which result in increased CVP operational flexibility) are only wheeled through

2 “Delta Surplus Water” is water diverted when the Delta is in excess conditions as defined in the SWRCB’s Decision

1641.



CCWD facilities once the operational priorities for Local Agency Partners and Refuges are met. In addition, SOD CVP contractor deliveries that would otherwise by limited by Delta conveyance constraints are rescheduled using Los Vaqueros Reservoir expanded storage, resulting in additional CVP operational flexibility. These operational priorities result in higher benefits to Local Agency Partners (M&I and agricultural water supplies), Refuges, and CVP contractors, compared with the other alternative plans.

• Alternative 2A includes the same facilities as Alternatives 1A and 1B but is operated to maximize potential Incremental Level 4 deliveries to the Refuges. Benefits to Refuges occur from both direct deliveries conveyed via CCWD facilities, as well as water supplies stored in Los Vaqueros Reservoir. These operational priorities result in the highest benefits to Refuges, compared with the other alternative plans.

• Alternative 4A uses similar operational priorities as Alternative 1B. Alternative 4A is formulated to maximize potential project deliveries to both the Local Agency Partners and Refuges, but without the benefit of expanded storage in Los Vaqueros Reservoir. These operations result in relatively low benefits to Local Agency Partners, Refuges, and CVP contractors, compared with the other alternative plans.

Organization of This Appendix This Cost Allocation Appendix is organized as follows:

• Chapter 1, Introduction, provides an overview of the Investigation.

• Chapter 2, Process Overview, Terms, and Potential Methods, describes cost allocation terminology and methodology.

• Chapter 3, Authorizations for Financial Participation, discusses existing Federal and State of California authorities for financial participation in the Investigation.

• Chapter 4, Initial Cost Allocation, presents an initial cost allocation for the Los Vaqueros Reservoir Expansion’s Recommended Plan.

• Chapter 5, Initial Cost Assignment, presents an initial cost assignment for the Los Vaqueros Reservoir Expansion’s Recommended Plan.

• Chapter 6, Payment Capacity and Ability to Pay, presents an analysis of the ability to pay of local cost share partners under the initial cost allocation and cost assignment.

• Chapter 7, Summary, presents an abbreviated summary of the initial cost allocation and initial cost assignment.

• Chapter 8, References, lists the sources used in preparing this technical appendix.



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Chapter 2 Process Overview, Terms, and Potential Methods



This chapter provides a description of cost allocation terminology and methods, as well as applicable Federal and State governing laws to the Investigation.

Process Overview and Terms Allocation of Federal water resources project costs is conducted to derive an equitable distribution of costs among the authorized project purposes, or those purposes proposed for authorization, in accordance with existing law. This initial analysis provides an indication of the cost implications of constructing the Recommended Plan, Alternative 1B, for each authorized purpose.

Three basic steps are associated with cost allocation and apportionment:

• Identify costs to be allocated

• Allocate costs to project purposes

• Apportion costs to beneficiaries

The cost allocation process provides an important intermediary step towards evaluating the financial feasibility of potential alternatives, as illustrated in Figure 2-1.

Figure 2-1. Process for Evaluating Financial Feasibility



Costs Allocated Total project costs allocated include construction costs; interest during construction (IDC); and annual operations, maintenance, and replacement (OM&R) costs. These costs are described in more detail in Appendix C – Engineering Designs and Costs and are summarized below:

• Construction costs – Construction costs include field costs and non-contract costs to implement all elements of the project necessary to achieve the associated benefits.

• Interest during construction – IDC accounts for the financial cost of project expenditures during the period between when construction begins and when benefits are derived.

• Annual operation, maintenance, and replacement costs – OM&R costs are the costs required to assure continued benefits over the life of the project.

It should be noted that cost allocation is a financial exercise rather than an economic evaluation; consequently, project costs may be presented differently in a cost allocation than in an economic analysis.

Allocating Costs to Project Purposes Once all project costs have been identified, they are allocated to the project purposes. Specific costs are for project components that contribute to a single purpose. For each purpose, separable costs are the costs of the portion of multi-purpose facilities due to the inclusion of the purpose in question. Separable costs include specific costs and may include a portion of joint costs. They are estimated as the reduction in financial costs that would result if a purpose were excluded from an alternative. Joint costs are the costs remaining after specific and separable costs have been removed.

Methods for allocating joint costs generally fall into two categories, depending on how benefits are considered. Benefits are derived in the economic analysis. Methods that do not consider benefits may divide joint costs between beneficiaries equally or based on beneficiaries’ share of separable costs. Methods that are based on benefits divide joint costs among beneficiaries proportional to the benefits each receives. Among these, the separable costs-remaining benefits (SCRB) method has historically been used to allocate CVP facility costs. Other methods for allocating joint costs based on benefits include the Alternative Justifiable Expenditure method and the share of Total Benefits Method.

Apportioning Costs to Beneficiaries The cost allocation process is designed so that costs associated with project purposes can be apportioned to beneficiaries for repayment. Once costs are allocated to the appropriate purpose, costs can be assigned to Federal and/or State taxpayers and project beneficiaries) based on specific project authorization, existing Federal law, existing cost sharing requirements, and laws and objectives of non-Federal entities, including states, counties, and non-profit organizations.

Reimbursable costs are those that, through some form of upfront cost sharing, repayment, or other financial agreement, are repaid to the Government. Non-reimbursable costs are those borne entirely by the Government.



Potential Cost Allocation Methods This section discusses two potential cost allocation methods for multipurpose projects.

Separable Costs-Remaining Benefits Method Distribution of project cost considers both the elements of the project that are directly tied to a project purpose, as well as the elements tied to multiple project purposes. A widely used method for cost allocation in Federal water resources projects is the SCRB method, which distributes costs among the project purposes by identifying separable costs and allocating joint costs in proportion to each purpose’s remaining benefits. Project costs (i.e., construction cost, IDC, operations and maintenance costs, and indirect costs) can be grouped, with respect to project purposes, into separable and joint costs. Separable costs are the incremental costs of adding a purpose to a multipurpose project. Separable costs for a project purpose are estimated as the reduction in project costs that would result if that purpose is excluded. Joint costs are the remaining project costs after all separable costs are subtracted.

The SCRB method starts by identifying the separable costs for each project purpose. Separable costs are subtracted from the lesser of benefits or single-purpose alternative project costs to derive remaining benefits. Next, joint costs are allocated in proportion to the distribution of remaining benefits. Joint project costs are then assigned to a project purpose based on the proportion of their remaining benefits (i.e., total benefits less the separable costs of each project purpose). Total cost allocated to a project purpose is the sum of its separable and apportioned joint costs. This method was chosen for the Investigation and is illustrated in Figure 2-2.

Alternative Justifiable Expenditure The Alternative Justifiable Expenditure method is a modified SCRB method used in situations when derivation of the separable costs is not feasible. Cost allocation under the Alternative Justifiable Expenditure method is the same as under the SCRB method, except that specific costs (i.e., costs for project components that contribute to a single purpose and exclude the costs of a change in project design due to inclusion) replace separable costs. The remaining (joint) costs are apportioned among project purposes based on their total benefits. However, if no specific or separable costs can be identified, cost allocation can be directly carried out based on the distribution of benefits between project purposes.



Figure 2-2. Separable Cost-Remaining Benefit Method

Chapter 3 Authorization for Financial Participation



This section discusses existing Federal and State of California authorities for financial participation for benefits for the proposed project alternatives.

Federal Authority Authorization for Federal financial participation in implementing Los Vaqueros Reservoir Expansion is established by the Water Infrastructure Improvements for the Nation Act, 2015-2016 (Public Law 114-322) (WIIN Act).

Public Law 114-322, Section 4007 (a)(2) establishes Los Vaqueros Reservoir Expansion as a qualified State-Led storage project:

(2) State-led storage project.--The term ‘‘State-led storage project’’ means any project in a Reclamation State that —

(A) involves a groundwater or surface water storage facility constructed, operated, and maintained by any State, department of a State, subdivision of a State, or public agency organized pursuant to State law; and

(B) provides a benefit in meeting any obligation under Federal law (including regulations).

Further guidance is provided in Public Law 114-322, Section 4007(c):

(1) In General.—Subject to the requirements of this subsection, the Secretary of the Interior may participate in a State-led storage project in an amount equal to not more than 25 percent of the total cost of the State-led storage project.

(2) Request By Governor.—Participation by the Secretary of the Interior in a State-led storage project under this subsection shall not occur unless—

(A) the participation has been requested by the Governor of the State in which the State-led storage project is located;

(B) the State or local sponsor determines, and the Secretary of the Interior concurs, that--

(i) the State-led storage project is technically and financially feasible and provides a Federal benefit in accordance with the reclamation laws;

(ii) sufficient non-Federal funding is available to complete the State-led storage project; and



(iii) the State-led storage project sponsors are financially solvent;

(C) the Secretary of the Interior determines that, in return for the Federal cost-share investment in the State-led storage project, at least a proportional share of the project benefits are the Federal benefits, including water supplies dedicated to specific purposes such as environmental enhancement and wildlife refuges; and

(D) the Secretary of the Interior submits to Congress a written notification of these determinations within 30 days of making such determinations.

Therefore, Section 4007(a)(2)(B) and Section 4007(c)(2)(B)(i) define the scope for Federal interest in State-led storage projects as: (1) providing Federal benefits in accordance with the Reclamation laws, and/or (2) providing a benefit in meeting obligations under Federal law. The Recommended Plan, Alternative 1B, is formulated to provide a range of Federal benefits that include:

1. Municipal and industrial (M&I) water supply reliability to Bay Area M&I agencies, including CVP contractors.

2. Increased CVP operational flexibility, by rescheduling deliveries that would otherwise be undeliverable due to conveyance or demand constraints.

3. Irrigation water supply, by wheeling Level 2 supplies and rescheduling deliveries to south of Delta CVP contractors.

4. Refuge water supply, through increased reliability and deliveries of Incremental Level 4 water (a Federal obligation).

5. Recreation, due to the increase in size of Los Vaqueros Reservoir and recreational opportunities this provides.

Although all these benefits contribute to Federally authorized purposes, CVP operational Flexibility and Refuge water supplies are considered Federal benefits for this Investigation, consistent with WIIN Act defined scope for Federal interest in State-led storage projects.

Costs allocated to each purpose are assigned to Federal taxpayers and project beneficiaries based on the specific project authorization, existing Federal law, existing cost sharing requirements, and laws and objectives of non-Federal entities, including states, counties, and non-profit organizations. Applicable Federal authorities are summarized in Table 3-1. Note that non-Federal partners are not seeking Federal upfront financing for the implementation of this project.

Authorities for Refuge Water Supply According to Public Law 114-322, Section 4007(c)(2)(C), Refuge water supply is singled out as an example of an authorized Federal benefit:

(C) the Secretary of the Interior determines that, in return for the Federal cost-share investment in the State-led storage project, at least a proportional share of the project benefits are the Federal benefits, including water supplies dedicated to specific purposes such as environmental enhancement and wildlife refuges;



CVPIA (Public Law 102-575), Section 3406(d), establishes Federal obligations for providing Level 2 and full Level 4 water supplies to Central Valley refuges and wildlife habitat areas. Both Level 2 and Incremental Level 4 (the gap between Level 2 and full Level 4) are considered obligations under CVPIA. However, they have different requirements. Level 2 water is acquired by reallocating the CVP yield. Incremental Level 4 is water acquired through voluntary measures that do not include involuntary reallocation of project yield. Public Law 102-575, Section 3406 (d) states:

..., the Secretary shall provide, either directly or through contractual agreements with other appropriate parties, firm water supplies of suitable quality to maintain and improve wetland habitat areas on units of the National Wildlife Refuge System in the Central Valley of California;

(1)..., the quantity and delivery schedules of water measured at the boundaries of each wetland habitat area described in this paragraph shall be in accordance with Level 2 of the "Dependable Water Supply Needs" table for those habitat areas....

(2) Not later than ten years after enactment of this title, the quantity and delivery schedules of water measured at the boundaries of each wetland habitat area described in this paragraph shall be in accordance with Level 4 of the "Dependable Water Supply Needs" table for those habitat area.... The quantities of water required to supplement the quantities provided under paragraph (1) of this subsection shall be acquired by the Secretary... through voluntary measures which include water conservation, conjunctive use, purchase, lease, donations, or similar activities, or a combination of such activities which do not require involuntary reallocations of project yield.

(3) All costs associated with implementation of paragraph (1) of this subsection shall be reimbursable pursuant to existing law. Incremental costs associated with implementation of paragraph (2) of this subsection shall be fully allocated in accordance with the following formula: 75 percent shall be deemed a nonreimbursable Federal expenditure; and 25 percent shall be allocated to the State of California for recovery through direct reimbursements or through equivalent in-kind contributions.

Taken together, Public Law 114-322, Section 4007(c)(2)(C) and Public Law 102-575, Section 3406 (d) provide a clear basis for Federal interest in the Investigation.

Applicable Authorities for Cost Assignment Costs allocated to each purpose are assigned to Federal taxpayers and project beneficiaries based on the specific project authorization, existing Federal law, existing cost sharing requirements, and laws and objectives of non-Federal entities, including states, counties, and non-profit organizations. Applicable Federal authorities are summarized in Table 3-1.

The Investigation is not pursuing Federal funding for the M&I water supply, irrigation water supply, and recreation project benefit categories. The authorities listed for these project benefit categories were considered during initial determinations of Federal interest in the Investigation. Construction under these authorities would need to be authorized by a specific act of Congress but were ultimately not used to pursue Federal funding. Note also that non-Federal partners are not seeking Federal upfront financing for the implementation of this project.



Table 3-1. Existing Authorities for Federal Financial Participation for Monetized Benefit Categories

Purpose Pertinent Federal Legislation

Description

Federal Cost Share for a State-Led Project

Water Infrastructure Improvements for the Nation Act, 2015-2016 (Public Law 114-322)

Provides authorization for Federal funding in surface storage projects led by public agencies organized pursuant to State law and limits Federal participation to not more than 25% of the total cost of a State-led storage project.2

M&I Water Supply (Including Emergency Water Supply) 1

Reclamation Act of 1939, as amended

Provides for up-front Federal financing of M&I water supply purposes, with 100% repayment of capital costs (including interest during construction and interest over the repayment period); 100% of OM&R costs are non-Federal.

Irrigation Water Supply1

Reclamation Act of 1902, as amended

Provides for up-front Federal financing of irrigation water supply purposes, with 100% repayment of construction costs, without interest, and OM&R costs by beneficiaries. This could be altered with aid to irrigation for the repayment of construction costs.

CVP Operational Flexibility


Provides for Federal construction funding of CVP operational flexibility benefits consistent with Federal cost share for a State-led project.

Refuge Water Supply


Provides for Federal construction funding of Refuge water supply benefits.

Central Valley Project Improvement Act (Public Law 102-575)

Provides Federal share of up to 75% and 25% non-Federal share (State of California) for voluntary acquisition of Incremental Level 4 supplies to meet full Level 4 obligations. This authority does not apply to capital costs for construction of facilities.

Recreation 1

Federal Water Project Recreation Act of 1965, as amended by the Reclamation Recreation Management Act (Public Law 102-575)

Public Law 102-575 provides Federal share of up to 50% for separable investment costs, and non-Federal share of 100% for OM&R.



Table 3-1. Existing Authorities for Federal Financial Participation for Monetized Benefit Categories (contd.)

Note: 1 The Investigation is not pursuing Federal funding for the M&I water supply, irrigation water supply, and recreation project

benefit categories. The Investigation is pursuing Federal funding for Refuge water supply capital costs under the WIIN Act. The authorities listed for these project benefit categories were considered during initial determinations of Federal interest in the Investigation. Construction under these authorities would need to be authorized by a specific act of Congress.

2 Total cost interpreted as total capital cost. Key: CVP = Central Valley Project M&I = municipal and industrial OM&R = operations, maintenance, and replacement

State Authority In November 2014, California voters passed funding for the Water Quality, Supply, and Infrastructure Improvement Act of 2014 (Proposition 1), a $7.5 billion water bond that will make needed investments in California’s water management systems. Proposition 1 dedicates $2.7 billion for investments in water storage projects and designated the California Water Commission as the agency responsible for appropriately allocating these funds. The California Water Commission, through the Water Storage Investment Program, will fund the public benefits of eligible projects. Eligible projects must also provide measurable benefits to the Delta ecosystem or its tributaries.

Projects that may be funded by the State under Proposition 1 have been preliminarily selected by the California Water Commission through a competitive public process based on a project’s expected return on the public investment as measured by the magnitude of the public benefits provided. The public benefits categories defined by Proposition 1 include the following:

(1) Ecosystem improvements, including changing the timing of water diversions, improvement in flow conditions, temperature, or other benefits that contribute to restoration of aquatic ecosystems and native fish and wildlife, including those ecosystems and fish and wildlife in the Delta.

(2) Water quality improvements in the Delta, or in other river systems, that provide significant public trust resources, or that clean up and restore groundwater resources.

(3) Flood control benefits, including, but not limited to, increases in flood reservation space in existing reservoirs by exchange for existing or increased water storage capacity in response to the effects of changing hydrology and decreasing snow pack on California’s water and flood management system.

(4) Emergency response, including, but not limited to, securing emergency water supplies and flows for dilution and salinity repulsion following a natural disaster or act of terrorism.

(5) Recreational purposes, including, but not limited to, those recreational pursuits generally associated with the outdoors.



Article 4 of Chapter 8 of Proposition 1 identifies limitations regarding funding of public benefits. Proposition 1 limits funding in relation to quantified public benefits as follows:

(a) Ecosystem improvement benefits must be at least 50 percent of total public benefits requested for funding. If non-ecosystem public benefits are more than ecosystem public benefits, then the difference is not eligible for funding.

(b) The public benefit cost share of a project, other than conjunctive use and reservoir reoperation projects, may not exceed 50 percent of the total costs of the project.

(c) The entire package of public benefits provided by the project must be provided in a cost-effective manner.

CCWD is seeking State funding for the plan through the WSIP. The funding application for $459 million was submitted by CCWD in August 2017 and the California Water Commission made an initial funding determination in June 2018 for the full amount requested. This funding, when finalized through a contractual funding agreement between CCWD and the State of California, would contribute towards the non-Federal cost-share of public benefits. No funding from the California Water Commission is assumed in this initial cost assignment and allocation, pending completion of agreements with the California Water Commission. Reclamation has determined that Investigation construction costs associated with Refuge water supply benefits are ineligible for credit under the CVPIA cost-sharing agreement between the State and Reclamation. No funding from California’s Proposition 1 is shown in the initial cost assignment and allocation, pending completion of funding agreements with the California Water Commission.

Chapter 4 Initial Cost Allocation


Chapter 4 Initial Cost Allocation This chapter presents the cost allocation by purpose for the Recommended Plan. This initial cost allocation uses the SCRB method.

Single-Purpose Alternative Costs A single-purpose alternative cost is the cost of the most probable alternative providing the same level of benefit for that purpose as the entire multi-purpose project. The single-purpose project cost is used to determine the justifiable expenditure for any given purpose by comparing it to its respective purpose’s benefits.

Screening and Selection of Single-Purpose Alternatives Single-purpose alternatives were evaluated for the Recommended Plan for each of the project purposes for which costs could be allocated – M&I water supply, emergency water supply, irrigation water supply, CVP operational flexibility, Refuge water supply, and recreation. The sections below summarize the screening and selection process for single-purpose alternatives for the Recommended Plan.

M&I Water Supply The Recommended Plan will provide increased water supply reliability to Local Agency Partners through additional stored water in Los Vaqueros Reservoir and additional conveyance facilities for delivery of emergency supplies.

Numerous measures to address Bay Area water supply reliability are presented in Table 2-1 of Appendix A - Plan Formulation. Although many of these measures were screened out for inclusion in the multi-objective project alternatives, key measures with potential to provide Bay Area M&I water supplies were re-evaluated in the context of the single-purpose alternative. These include enlargement of the Los Vaqueros Project, other local (Bay Area) surface storage projects, increased San Joaquin Valley groundwater banking, increased M&I water transfers (i.e. spot market purchases), and construction of a desalination facility. In formulating/screening single-purpose alternatives for M&I water supply, it was assumed that, at a minimum, the single-purpose alternative would need to be capable of providing:

• M&I water supplies to all Local Agency Partners benefited by the Recommended Plan.

• M&I water supplies in dry and critical water years at a level comparable to that provided under the Recommended Plan.

During on an initial screening of alternatives, several options for the M&I water supply single-purpose alternative were screened out based on the above criteria and not evaluated further. Several local surface storage alternatives were screened out primarily because they could only provide water



supplies to a subset of the M&I water users benefited under the Recommended Plan. These include new or increased storage at Calaveras Reservoir (would only benefit agencies with existing San Francisco Public Utilities Commission contracts), San Luis Reservoir (would only benefit SCVWD), Pacheco Reservoir (would only benefit SCVWD), and Lake Del Valle (only benefit South Bay Aqueduct water users). Increased use of San Joaquin Valley groundwater banking (e.g., in Semitropic Groundwater Storage Bank and the Cawelo Groundwater Banking Project) was also screened out, primarily because it could not provide M&I water supplies to all project beneficiaries (i.e., would primarily benefit South Bay Aqueduct water users). Further, increased groundwater banking would have limited ability to provide water to project beneficiaries during multiple year droughts (as exemplified during 2014 and 2015). In addition, increasing M&I water supply transfers was screened out primarily because it would have limited ability to provide water during critical water years (due to limited availability of water supplies on the spot market).

Three potential M&I water supply single-purpose alternatives were evaluated in more detail, including the following:

• Constructing a New Bay Area Desalination Facility – This option would consist of constructing a new Bay Area desalination facility and associated conveyance facilities to allow for delivery of M&I water supplies to project beneficiaries. Based on cost estimates developed for the Bay Area Regional Desalination Project, M&I water supplies for this option would cost approximately $2,000 to $2,650 per acre-foot2F

3. Constructing a new desalination facility was screened out as a single-purpose alternative for M&I water supply primarily because it would have either higher or comparable costs for each acre-foot of increased M&I water supply compared to the below options.

• Reoperation of Los Vaqueros Reservoir and Construction of New/Upgraded Conveyance Facilities – This option would be similar to Alternative 4A but scaled down based on providing only increased M&I water supplies. After further evaluation, this option was screened out, because comparable levels of dry and critical year M&I water supplies could not be provided without additional carryover storage from expanding Los Vaqueros Reservoir.

• Expansion of Los Vaqueros Reservoir and Associated Conveyance Facilities – This option would be similar to the current Recommended Plan (Alternative 1B) but scaled down based on providing only M&I water supplies. This option was retained as the M&I water supply single-purpose alternative. Under this option, estimated single purpose alternative costs for providing only M&I water supplies would be approximately $23.6 million per year,

3 Cost estimates are based on deliveries to Alameda County Flood Control and Water Conservation District, Zone 7

and SCVWD under Scenarios 1 through 5 in the September 2011 Bay Area Regional Desalination Project Institutional Task Technical Memorandum #2 Analysis of Feasible Scenarios. Cost estimates were indexed from July 2010 dollars to October 2015 dollars based on the Bureau of Reclamation Construction Cost Trend Index composite trend. Additionally, an estimated $100 per acre-foot was added to cost estimates to account for storage and rental costs proposed by CCWD for use of their conveyance and storage facilities, as described in CCWD’s 2014 Bay Area Regional Desalination Project Site Specific Analyses Final Report Delta Modeling Tasks.



or approximately $1,067 per acre-foot (based on average annual increases in M&I water supplies).

Emergency Water Supply The Recommended Plan would provide emergency water supplies in the event of a Delta water supply outage through providing additional stored water in Los Vaqueros Reservoir and additional conveyance facilities for delivery of emergency supplies to Local Agency Partners.

Numerous measures to address Bay Area water supply reliability, including emergency water supply are presented in Table 2-1 of Appendix A - Plan Formulation. Although many of these measures were screened out for inclusion in the multi-objective project alternatives, key measures with potential to provide emergency water supplies were re-evaluated in the context of the single-purpose alternative. These include enlargement of the Los Vaqueros Project, other local (Bay Area) surface storage projects, increased San Joaquin Valley groundwater banking, increased M&I water transfers (i.e. spot market purchases), and construction of a desalination facility. In formulating/screening single-purpose alternatives for emergency water supply, it was assumed that, at a minimum, the single-purpose alternative would need to be capable of providing:

• Emergency M&I water supplies in the event of a Delta water supply outage

During on an initial screening of alternatives, several options for the emergency water supply single-purpose alternative were screened out based on the above criteria and not evaluated further. Several local surface storage alternatives were screened out primarily because they could only provide water supplies to a subset of the M&I water users benefited under the Recommended Plan. These include new or increased storage at Calaveras Reservoir (would only benefit agencies with existing San Francisco Public Utilities Commission contracts), San Luis Reservoir (would only benefit SCVWD), Pacheco Reservoir (would only benefit SCVWD), and Lake Del Valle (only benefit South Bay Aqueduct water users). Increased use of San Joaquin Valley groundwater banking was also screened out, primarily because it would have limited ability to provide water to project beneficiaries during Delta water supply outages. Recovery of banked water, which is downstream of the Bay Area on the California Aqueduct, would require exchanges with Delta diversions at the head of the California Aqueduct. Lake of these diversions during Delta outages would curtail the ability of groundwater bank to provide stored water to agencies upstream from the location of these banks. In addition, increasing M&I water supply transfers was screened out primarily because water transfers would likely not be available on the spot market during Delta water supply outages. Local groundwater supplies are limited in the Bay Area and would only cover a limited portion of the need. Only SCVWD southern portion of the system, and ACWDA would some groundwater. A new desalination facility would have limited capacity to provide the same volume of emergency M&I water supplies during a Delta water supply outage as an expanded Los Vaqueros Reservoir.

Two potential emergency water supply single-purpose alternatives were evaluated in more detail, including the following:

• Reoperation of Los Vaqueros Reservoir and Construction of New/Upgraded Conveyance Facilities – This option would be similar to Alternative 4A but scaled down



based on providing only increased emergency water supplies. After further evaluation, this option was screened out, because comparable emergency water supplies could not be provided without additional carryover storage from expanding Los Vaqueros Reservoir.

• Expansion of Los Vaqueros Reservoir and Associated Conveyance Facilities – This option would be similar to the current Recommended Plan (Alternative 1B) but scaled down based on providing only emergency water supplies. This option was retained as the emergency water supply single-purpose alternative. Under this option, estimated single purpose alternative costs for providing only emergency water supplies would be approximately $30.1 million per year, or approximately $203 per long-term average acre-foot available for emergency supplies (based on average annual increases in emergency water supplies).

Irrigation Water Supply The Recommended Plan would increase agricultural water supplies for CVP agricultural water contractors in the San Joaquin Valley. This would be accomplished through wheeling Level 2 Refuge water supplies through project facilities for delivery to refuges, freeing up capacity at C.W. Jones Pumping Plant for moving additional water to other SOD CVP contractors. In addition, additional capacity within the Los Vaqueros system could also be used to delivery SOD water to agricultural Local Agency Partners. No emergency water supplies would be provided for agricultural water use under the Recommended Plan. In formulating/screening single-purpose alternatives for agricultural water supply, it was assumed that, at a minimum, the single-purpose alternative would need to be capable of providing:

• Increased agricultural water supplies to San Joaquin Valley CVP agricultural water contractors at a level comparable to that provided under the Recommended Plan

• Increased agricultural water supplies in dry and critical water years at a level comparable to that provided under the Recommended Plan

Similar to evaluations for the M&I water supply single-purpose project, key measures presented in Table 2-1 of Appendix A – Plan Formulation with potential to increase San Joaquin Valley agricultural water supplies were re-evaluated in the context of the single purpose alternative. These include enlargement of the Los Vaqueros Project, other local surface storage projects, and increased agricultural water transfers. Constructing a new desalination facility was not considered a viable alternative. Not only is it impractical to use high quality recycled water for agricultural use, recycled water would also likely be far more expensive than other options for agricultural water supply. In addition, increased groundwater use was not considered a viable alternative due to overriding concerns related to poor groundwater quality and subsidence and related impacts to State and Federal water infrastructure and flood control facilities in San Joaquin Valley agricultural areas. This is consistent with California’s Sustainable Groundwater Management Act, which emphasizes the need to reduce groundwater use, subsidence, and related impacts in the San Joaquin Valley.

Two potential agricultural water supply single-purpose alternatives were evaluated in more detail, including the following:



• Increased Agricultural Water Transfers on the Spot Market – This non-structural alternative would be the least costly. Due to the timing (i.e., water year types) and quantity of increased agricultural water supplies under each plan, it was determined that increased purchases of agricultural water supplies on the spot market could be a feasible single-purpose alternative for the Recommended Plan. Under this option, estimated single purpose alternative costs for providing only agricultural water supplies under the Recommended Plan would be approximately $4.7 million per year, or approximately $540 per acre-foot (based on average annual increases in agricultural water supplies).

• Reoperation of Los Vaqueros Reservoir and Construction of New/Upgraded Conveyance Facilities – This option, retained for comparison, would be similar to Alternative 4A, but scaled down based on providing only increased agricultural water supplies. Estimated single purpose alternative costs for providing only these water supplies would be approximately $16.4 million per year, or approximately $1,928 per acre-foot (based on average annual increases in water supplies based on increased agricultural water supplies).

Other remaining options for the single-purpose alternative, including expanded storage in Los Vaqueros Reservoir and other local surface storage projects (e.g., expansion of San Luis Reservoir) would be far costlier. Accordingly, increasing agricultural water transfers on the spot market was selected as the agricultural water supply single-purpose alternative for the Recommended Plan.

CVP Operational Flexibility The Recommended Plan would increase CVP operational flexibility, increasing water supplies that are available SOD. No emergency water supplies would be provided for CVP operational flexibility under the Recommended Plan. In formulating/screening single-purpose alternatives for CVP operational flexibility, it was assumed that, at a minimum, the single-purpose alternative would need to be capable of providing:

• Increased SOD water supplies to CVP contractors at a level comparable to that provided under the Recommended Plan.

• Increased SOD water supplies in dry and critical water years at a level comparable to that provided under the Recommended Plan.

Similar to evaluations for the M&I water supply single-purpose project, key measures presented in Table 2-1 of Appendix A – Plan Formulation with potential to increase San Joaquin Valley agricultural water supplies, as a comparable use to the increased supplies from increased CVP operational flexibility, were re-evaluated in the context of the single purpose alternative. These include enlargement of the Los Vaqueros Project, other local surface storage projects, and increased agricultural water transfers. Constructing a new desalination facility was not considered a viable alternative. Not only is it impractical to use high quality recycled water for agricultural use, recycled water would also likely be far more expensive than other options for agricultural water supply. In addition, increased groundwater use was not considered a viable alternative due to overriding concerns related to poor groundwater quality and subsidence and related impacts to State and Federal water infrastructure and flood control facilities in San Joaquin Valley agricultural areas. This



is consistent with California’s Sustainable Groundwater Management Act, which emphasizes the need to reduce groundwater use, subsidence, and related impacts in the San Joaquin Valley.

Two potential CVP operational flexibility single-purpose alternatives were evaluated in more detail, including the following:

• Increased SOD Agricultural Water Transfers on the Spot Market – This non-structural alternative would be the least costly. Due to the timing (i.e., water year types) and quantity of increased SOD water supplies under each plan, it was determined that increased purchases of SOD agricultural water supplies on the spot market could be a feasible single-purpose alternative for CVP operational flexibility benefits provided by the project. Estimated single purpose alternative costs for providing only agricultural water supplies would be approximately $7.9 million per year, or approximately $540 per acre-foot (based on average annual increases in agricultural water supplies).

• Reoperation of Los Vaqueros Reservoir and Construction of New/Upgraded Conveyance Facilities – This option, retained for comparison, would be similar to Alternative 4A, but scaled down and including only a subset of facilities based on providing only increased CVP operational flexibility. Estimated single purpose alternative costs for providing only these water supplies would be approximately $15.8 million per year, or approximately $2,547 per acre-foot (based on average annual increases in water supplies based on increased CVP operational flexibility).

Other remaining options for the single-purpose alternative, including expanded storage in Los Vaqueros Reservoir and other local surface storage projects (e.g., expansion of San Luis Reservoir) would be far costlier. Accordingly, increasing SOD agricultural water transfers on the spot market was selected as the CVP operational flexibility single-purpose alternative for the Recommended Plan.

Refuge Water Supply The Recommended Plan would provide increased Incremental Level 4 water supplies to Refuges. In formulating/screening single-purpose alternatives for Refuge water supply, it was assumed that, at a minimum, the single-purpose alternative would need to be capable of providing:

• Incremental Level 4 refuge water supplies to San Joaquin Valley CVPIA wildlife refuges at a level comparable to that provided under the Recommended Plan.

• Incremental Level 4 refuge water supplies to San Joaquin Valley CVPIA wildlife refuges in dry and critical water years at a level comparable to that provided under the Recommended Plan.

Similar to evaluations for M&I and agricultural water supply single-purpose projects, key measures presented in Table 2-1 of Appendix A - Plan Formulation with potential to provide Incremental Level 4 water supplies to San Joaquin Valley CVPIA refuges were re-evaluated in the context of the single purpose alternative. These include enlargement of the Los Vaqueros Project, other local



surface storage projects, and increased purchases of agricultural water supplies on the spot market for delivery to refuges. Constructing a new desalination facility and increased use of groundwater were not considered viable alternatives for similar reasons as described above for the agricultural water supply single-purpose alternative. Additionally, use of recycled water was not considered a viable alternative since it would require large municipal areas in relative proximity to the refuges.

Two potential Refuge water supply single-purpose alternatives were evaluated in more detail, including the following:

• Increased Purchases of Agricultural Water Supplies on the Spot Market for Delivery to Refuges – This non-structural alternative would be the least costly. Due to the timing (i.e., water year types) and quantity of increased Refuge water supplies under each plan, it was determined that increased purchases of Refuge water supplies on the spot market could be a feasible single-purpose alternative. Although spot market purchases would be a less reliable source of Refuge water supplies than expansion of the Los Vaqueros Project, this option is included as a potential single-purpose alternative to provide a conservative estimate of the least costly single-purpose alternative. Estimated single purpose alternative costs for providing only Refuge water supplies would be approximately $22.3 million per year, or approximately $483 per acre-foot (based on average annual increases in Refuge water supplies).

• Reoperation of Los Vaqueros Reservoir and Construction of New/Upgraded Conveyance Facilities – This option, retained for comparison, would be similar to Alternative 4A, but scaled down based on providing only increased Refuge water supplies. Under this option, estimated single purpose alternative costs for providing only Refuge water supplies would be approximately $21.9 million per year, or approximately $531 per acre-foot (based on average annual increases in Refuge water supplies).

Other remaining options for the single-purpose alternative, including expanded storage in Los Vaqueros Reservoir and other local surface storage projects (e.g., expansion of San Luis Reservoir) would be far costlier. Accordingly, increasing purchases of agricultural supplies on the spot market Refuge water supply use was selected as the Refuge water supply single-purpose alternative for the Recommended Plan.

Recreation The Recommended Plan would provide increased recreation opportunities through expanded trails in the Los Vaqueros Reservoir watershed, improvements to the existing Interpretive Center, and new features at the Watershed Office Barn for visitors in addition to benefits incidental to the reservoir expansion. In formulating/screening single-purpose alternatives for recreation, it was assumed that, at a minimum, the single-purpose alternative would need to be capable of providing the following:

• Increased recreational and educational opportunities within the foothills west of the Delta in the eastern Bay Area, including additional trails and boating opportunities at a level comparable to the Recommended Plan.



• Recreational opportunities serving populations within or near the Los Vaqueros Reservoir watershed.

No key measures were developed for recreation as part of the Investigation, as these benefits were largely incidental to the expansion of the reservoir for other purposes.

Improvements to other local recreational areas would require similar costs to those expected for the expanded recreation features at Los Vaqueros Reservoir. These improvements would include providing additional trails and similar educational facilities for visitors at any one of the regional preserves located near Los Vaqueros Reservoir, such as Brushy Peak Regional Preserve or Doolan Canyon Regional Preserve. These park lands would provide nearby populations with similar educational and recreational opportunities and increases in visitor-days to the region. However, these parks do not provide the increased boating and fishing opportunities that would be realized with an expansion of Los Vaqueros Reservoir. No comparable recreational opportunities related to boating and fishing were identified in the region. Therefore, the single-purpose alternative evaluated was the following:

• Addition of Trails and Educational Facilities to Los Vaqueros Reservoir – Without expanding the reservoir, similar trails to those currently proposed for the expansion and similar facility improvements to the existing Interpretive Center and Watershed Office Barn would draw additional visitors to the reservoir. Additions to the existing Marina Complex would provide additional boating opportunities without requiring the reservoir expansion. The estimated single purpose alternative costs for providing only additional recreational opportunities would be approximately $8.0 million in capital costs and are likely to result in similar OM&R costs as the existing facilities.

Additional of trails and facilities to the existing Los Vaqueros Reservoir, as described above, was selected as the recreation single purpose alternative for the Recommended Plan.

Description of Single-Purpose Alternative Costs Single-purpose alternatives are described for the Recommended Plan as follows. Estimates of costs are shown in Table 4-1.

• M&I Water Supply – This single-purpose alternative would consist of an increase in storage capacity for Los Vaqueros Reservoir to 185 TAF. This would be sufficient carryover capacity required to provide the M&I water supply reliability benefits from the full project, especially those in critical years. The capacity of conveyance facilities would be scaled down to a capacity of about 65 cfs to carry only the average M&I water yield. Recreation facilities would not be included.

• Emergency Water Supply – This single-purpose alternative would consist of an increase in storage capacity for Los Vaqueros Reservoir to 148 TAF. This would be sufficient carryover capacity required to provide the long-term emergency water supply benefits from the full project. The capacity of conveyance facilities would be scaled down to a capacity to carry these emergency supplies to project partners. Recreation facilities would not be included.



• Irrigation Water Supply – This single-purpose non-structural alternative would consist of increased SOD agricultural water transfers on the spot market.

• CVP Operational Flexibility – This single-purpose non-structural alternative would consist of increased SOD agricultural water transfers on the spot market.

• Refuge Water Supply – This single-purpose non-structural alternative would consist of increased purchases of agricultural water supplies on the spot market for delivery to Refuges.

• Recreation – This single-purpose alternative would consist of constructing trails, an expanded marina, and related facility improvements within the existing Los Vaqueros watershed.

Table 4-1. Summary of Estimated Costs of Recommended Plan (Alternative 1B) Single-Purpose Alternatives

Item M&I Water Supply

Emergency Water Supply

Irrigation Water Supply


Refuge Water Supply

Recreation

Alternative

Build additional

conveyance, reoperation of

reservoir

Build additional

conveyance, reoperation of

reservoir

Additional SOD water transfers

Additional SOD water transfers

Additional water

transfers

Construct recreational

facilities in LV watershed

Total Capital Cost ($ million) $468.3 $598.1 $0 $0 $0 $8.0

Total Annual Cost ($ million/year) $23.6 1 $30.1 1 $4.7 $3.3 $22.3 $0.3 2

Notes: January 2018 price level. 1 Annual costs for M&I water supply and emergency water supply includes interest and amortization, annual OM&R, and energy

costs. Interest and amortization based on a 2.75 percent Federal discount rate over 100 years. 2 Annual costs for recreation interest and amortization based on a 2.75 percent Federal discount rate over 100 years. Annual

OM&R and energy costs are assumed to not increase from costs associated with existing facilities. Key: CVP = Central Valley Project LV = Los Vaqueros M&I = municipal and industrial OM&R = operations, maintenance, and replacement SOD = south of Delta

Separable Costs The separable costs of each project purpose are the difference between the cost of the multipurpose project and the cost of the project with the purpose omitted. The separable costs are subtracted from the specific project purpose benefit to determine the remaining benefit in the SCRB cost



allocation process. Following is a summary of each separable cost with the project purpose omitted. Separable costs are summarized in Table 4-2 above.

Without M&I Water Supply Without the M&I water supply purpose, the project would still require the reservoir, pumping facilities, and conveyance facilities to provide for increased CVP operational flexibility, irrigation, Refuge, and emergency M&I water supply benefits. Therefore, there would be no separable costs for the M&I water supply purpose.

Without Irrigation Water Supply Irrigation water supply benefits result from new conveyance capacity and associated project operations. Even without irrigation water supply benefits the same alternative features would be needed to provide M&I, CVP operational flexibility, and Refuge water supply benefits, along with the same levels of recreational opportunities. Therefore, there would be no separable costs for the irrigation waters supply purpose.

Without CVP Operational Flexibility CVP operational flexibility benefits result from new conveyance capacity and associated project operations. Even without CVP operational flexibility benefits the same alternative features would be needed to provide M&I, irrigation, and Refuge water supply benefits, along with the same levels of recreational opportunities. Therefore, there would be no separable costs for the CVP operational flexibility purpose.

Without Refuge Water Supply Refuge water supply benefits result from new storage and conveyance capacity and associated project operations. Even without Refuge water supply benefits the same alternative features and storage capacity would be needed to provide M&I water supply, irrigation, and CVP operational flexibility benefits, along with the same levels of recreational opportunities. Therefore, there would be no capital separable costs for the Refuge water supply purpose. However, the Refuge Water Supply Program would incur additional costs to convey water from the head of the California Aqueduct (point of delivery from the proposed facilities) to the individual Refuge boundaries. These additional conveyance costs were estimated by Reclamation to be about $50 per acre-foot of delivered Refuge water. This cost is considered a separable cost under the Refuge water supply purpose.

Without Recreational Opportunities The majority of recreational benefits result from the expanded reservoir, which is also required to provide M&I, irrigation, and Refuge water supply; and CVP operational flexibility benefits. The Los Vaqueros Marina Complex must be relocated and modified when the reservoir is expanded. However, other expanded recreational facilities – the Los Vaqueros Watershed Trails, the Los Vaqueros Center Improvement, and the Los Vaqueros Watershed Office Barn and Interpretive Features – would not be necessary to achieve the project purposes. Therefore, the capital cost of these facilities is considered a separable cost. No annual costs, other than interest and amortization of capital costs, are included as part of the feasibility report for these facilities.



Joint Costs The joint cost is the cost of facilities that serve two or more project purposes. The cost is the difference between the cost of the multipurpose project and the sum of the separable costs, as shown above. The joint cost is allocated to each purpose based on remaining benefits, which are the justifiable expenditure minus the separable costs. Most of the Investigation project costs are joint costs, as shown in Table 4-2 for the Recommended Plan.



Table 4-2. Summary of Estimated Separable and Joint Costs for the Recommended Plan (Alternative 1B) Separable Costs

Item M&I Water Supply




Refuge Water Supply

Recreation Total Joint Cost 1 Total Cost

Capital Cost ($ million)

Construction Cost $0.00 $0.00 $0.00 $0.00 $0.00 $2.38 $2.38 $892.42 $894.79

IDC $0.00 $0.00 $0.00 $0.00 $0.00 $0.03 $0.03 $47.67 $47.70 Total Capital $0.00 $0.00 $0.00 $0.00 $0.00 $2.41 $2.41 $940.08 $942.49

Annual Cost 2

($ million/year)

Interest & Amortization 3 $0.00 $0.00 $0.00 $0.00 $0.00 $0.07 $0.07 $27.69 $27.69

Annual OM&R 4 $0.00 $0.00 $0.00 $0.00 $2.44 $0.00 $2.44 $18.27 $20.72

Total Annual $0.00 $0.00 $0.00 $0.00 $2.44 $0.07 $2.51 $45.96 $48.48

Notes: General: January 2018 price levels. All values are rounded for display purposes; therefore, line items may not sum to totals. 1 Joint costs are total costs minus total separable costs. 2 100-year period of analysis. 3 Interest and amortization based on a 2.75 percent Federal discount rate over a 100-year period analysis. 4 Annual OM&R includes annual OM&R on new and expanded facilities, annual energy costs, increased replacement costs on existing facilities, and south-of-Delta conveyance costs for Refuge water supplies. Key: CVP = Central Valley Project IDC = interest during construction M&I = municipal and industrial OM&R = operation, maintenance, and replacement



Initial Cost Allocation The following provides an illustration of how costs for the Recommended Plan could be allocated to project purposes. A SCRB analysis was performed to equitably allocate costs to the project purposes.

In the SCRB analysis, annual separable costs (calculated in Table 4-3) are subtracted from the total annual cost to determine the total annual joint cost. The resulting allocated joint cost is based on the percentage of the remaining benefits of each project purpose. The total allocated costs are the sum of the separable annual costs and the allocated annual joint costs. This approach can be used for developing allocated annual OM&R, annual capital, annual total, total construction, total IDC, and total capital costs.

Table 4-3 displays the step-by-step process used to determine the annual cost to be allocated to each project purpose. Table 4-4 provides the results for the total cost allocation by each project purpose.



Table 4-3. Initial SCRB Analysis and Annual Cost Allocation Summary for the Recommended Plan (Alternative 1B) ($ millions/year)

Item Calculation

M&I Water Supply




Refuge Water Supply

Recreation Total

A B C D E F T SCRB Analysis 1 Average Annual Benefits $17.68 $22.89 $4.69 $2.87 $20.92 $0.19 $69.2 2 Single-Purpose Projects $23.60 $30.12 $4.69 $2.87 $22.30 $0.30 -

3 Justifiable Expenditure minimum of (1) or (2) $17.7 $22.9 $4.7 $2.9 $20.9 $0.2 $69.2

4 Separable Annual Costs $0.0 $0.0 $0.0 $0.0 $2.4 $0.1 $2.5 5 Remaining Benefits/ Justifiable Expenditure (3) - (4) $17.7 $22.9 $4.7 $2.9 $18.5 $0.1 $66.7

6 % Remaining Benefits (A5 to F5) ÷ (T5) 26.5% 34.3% 7.0% 4.3% 27.7% 0.2% 100.0% 7 Allocated Joint Costs (A6 to F6) x (T7) $12.2 $15.8 $3.2 $2.0 $12.7 $0.1 $46.0 8 Total Allocated Costs (4) + (7) $12.2 $15.8 $3.2 $2.0 $15.2 $0.2 $48.5 OM&R Annual Costs 1 9 Separable OM&R Cost $0.0 $0.0 $0.0 $0.0 $2.44 $0.03 $2.43 10 % Remaining Benefits (6) 26.5% 34.3% 7.0% 4.3% 27.7% 0.2% 100.0% 11 Allocated Joint OM&R Cost (A10 to F10) x (T11) $4.84 $6.27 $1.28 $0.79 $5.06 $0.00 $18.3

12 Total OM&R Allocated Costs (9) + (11) $4.84 $6.27 $1.28 $0.79 $7.50 $0.03 $20.71

Annual Capital Cost 2 13 Separable Capital Cost $0.0 $0.0 $0.0 $0.0 $0.0 $0.1 $0.1 14 % Remaining Benefits (6) 26.5% 34.3% 7.0% 4.3% 27.7% 0.2% 100.0% 15 Allocated Joint Capital Cost (A14 to F14) x (T15) $7.3 $9.5 $1.9 $1.2 $7.7 $0.1 $27.7

16 Total Capital Allocated Costs (13) + (15) $7.3 $9.5 $1.9 $1.2 $7.7 $0.1 $27.8



Table 4-3. Initial SCRB Analysis and Annual Cost Allocation Summary for the Recommended Plan (Alternative 1B) ($ millions/year) (contd.)

Notes: General: January 2018 price levels. All values are rounded for display purposes; therefore, line items may not sum to totals. Interest and amortization based on a 2.75 Federal discount

rate over a 100-year period analysis. 1 Annual OM&R includes annual OM&R on new and expanded facilities, annual energy costs, increased replacement costs on existing facilities, and south-of-Delta conveyance costs for

Refuge water supplies. 2 Capital costs include construction and interest during construction. Key: CVP = Central Valley Project M&I = municipal and industrial OM&R = operations, maintenance, and replacement SCRB = separable costs-remaining benefits



Table 4-4. Initial Total Cost Allocation Summary for the Recommended Plan (Alternative 1B) ($ millions)

Item Calculation

M&I Water Supply




Refuge Water Supply

Recreation Total

A B C D E F T Allocation of Capital Cost (Construction + IDC)

1 Separable Capital Cost $0.0 $0.0 $0.0 $0.0 $0.0 $2.4 $2.4

2 % Remaining Benefits (6) of Table 4-3 26.5% 34.3% 7.0% 4.3% 27.7% 0.2% 100.0%

3 Allocated Joint Capital Cost (A2 to E3) x (T3) $249.1 $322.6 $66.1 $40.4 $260.3 $1.7 $940.1 4 Total Allocated Capital Cost (1) + (3) $249.1 $322.6 $66.1 $40.4 $260.3 $4.1 $942.5

Allocated IDC Costs

5 Separable IDC Costs $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0


7 Allocated Joint IDC Costs (A6 to E6) x (T7) $12.6 $16.4 $3.3 $2.0 $13.2 $0.1 $47.7 8 Total Allocated IDC Costs (5) + (7) $12.6 $16.4 $3.3 $2.0 $13.2 $0.1 $47.7 Allocated Construction Costs 9 Separable Construction Costs $0.0 $0.0 $0.0 $0.0 $0.0 $2.4 $2.4


11 Allocated Joint Construction Cost

(A10 to E10) x (T11) $236.4 $306.2 $62.7 $38.4 $247.1 $1.6 $892.4

12 Total Allocated Construction Cost (9) + (11) $236.4 $306.2 $62.7 $38.4 $247.1 $4.0 $894.8

Notes: General: January 2018 price levels. All values are rounded for display purposes; therefore, line items may not sum to totals. Interest and amortization based on a 2.75 percent Federal

discount rate over a 100-year period analysis. Key: CVP = Central Valley Project IDC = Interest During Construction M&I = municipal and industrial

Chapter 5 Initial Cost Assignment


Chapter 5 Initial Cost Assignment This chapter describes the initial cost assignment of allocated costs as non-Federal costs, Federal costs, and non-Federal costs that may be potentially eligible as reimbursable Federal costs.

Methodology The assignment of costs includes all costs required to accomplish all purposes consistent with the planning objectives. Cost assignment was conducted on a purpose by purpose basis, based off relevant authorities. The process is illustrated in Figure 5-1.

Figure 5-1. Cost Assignment Process

The assignment percentages used as the basis for assigning costs are based on existing Federal authorities (see Table 3-1) and are summarized below in Table 5-1. After a first iteration based on these percentages, Federal costs were then limited to 25 percent based on stipulation of the WIIN Act (Public Law 114-322). Any excess cost was assigned to non-Federal beneficiaries.



Table 5-1. Initial Cost Assignment Percentages

Cost Type Cost Category M&I Water Supply




Refuge Water Supply

Recreation

Construction 1 Federal Costs 0% 0% 0% 100% 75% 0%

Non-Federal Costs 100% 100% 100% 0% 25% 100%

OM&R 2 Federal Costs 0% 0% 0% 100% 25% 0%

Non-Federal Costs 100% 100% 100% 0% 75% 100%

Notes: 1 The WIIN Act (Public Law 114-322) limits Federal participation to not more than 25 percent of the total cost of a State-led storage

project. Reclamation has determined that Investigation construction costs are ineligible for credit under the CVPIA cost-sharing agreement between the State and Reclamation for Refuge-related benefits.

2 Cost assignment for conveyance of Refuge water supplies from the head of the California Aqueduct to Refuge boundaries is based on the Central Valley Project Improvement Act, Public Law 102-575, which calls for 75 percent Federal and 25 percent non-Federal cost-sharing. Cost assignment for OM&R associated with Recommended Plan facilities (Los Vaqueros Project facilities) was assigned as 100 percent non-Federal, to be paid by the project proponents. The project proponents have expressed a willingness to pay this cost. For the Recommended Plan, this results in an overall assignment of OM&R for Refuge supplies of 25 percent Federal and 75 percent non-Federal.

Key: CVP = Central Valley Project Investigation = Los Vaqueros Reservoir Expansion Investigation M&I = municipal and industrial OM&R = operations, maintenance, and replacement

Initial Cost Assignment The assignment of costs includes costs to accomplish all purposes consistent with the planning objectives. The cost assignment amounts to a total construction cost of $894.8 million and a total annual OM&R cost of $20.7 million for the Recommended Plan. Pursuant to WIIN Act requirements, the proportion of Federal benefits are at least proportional to the Federal capital cost cost-share for the Recommended Plan.

Table 5-2 provides the initial construction cost assignment for the Recommended Plan. It is anticipated that Federal funding for the Recommended Plan will be provided via the WIIN Act, which caps Federal funding participation at 25 percent of the total project cost; the initial allocation in Table 5-2 meets this requirement. Of the construction costs allocated for the Recommended Plan, 25 percent of construction costs are estimated to be Federal costs and 75 percent are estimated to be non-Federal costs. As shown in Table 5-2, the Federal construction costs for the Recommended Plan would be $223.7 million.



Table 5-2. Initial Construction Cost Assignment Summary for the Recommended Plan, (Alternative 1B), Compliant with the WIIN Act Construction Cost Assignment Summary ($ million)

Purpose/Action Non-Federal Federal Total Assigned Percentage Cost Assigned

Percentage Cost Cost

M&I Water Supply 1 100% $236.4 0% $0.0 $236.4 Emergency Water Supply 1 100% $306.2 0% $0.0 $306.2 Irrigation Water Supply 2 100% $62.7 0% $0.0 $62.7 CVP Operational Flexibility 3 0% $0.0 100% $38.4 $38.4 Refuge Water Supply 4 25% $61.8 75% $185.3 $247.1 Recreation 5 100% $4.0 0% $0.0 $4.0 Total 75% $671.1 25% $223.7 $894.8

Notes: General: January 2018 price levels. All values are rounded for display purposes; therefore, line items may not sum to totals. 1 Cost assignment for M&I water supply and emergency water supply is based on Reclamation Act of 1939, as amended. The

Investigation is not pursuing Federal funding for these benefits, although this authority was considered during initial determination of Federal interest in the Investigation.

2 Cost assignment for irrigation is based on Reclamation Act of 1902, as amended. The Investigation is not pursuing Federal funding for these benefits, although this authority was considered during initial determination of Federal interest in the Investigation.

3 CVP operational flexibility funding provided through the WIIN Act (Public Law 114-322), which provides 100% Federal construction funding for actions to meet Federal obligations.

4 Cost assignment for Refuge water supply is established to meet the maximum Federal cost sharing requirements of the WIIN Act. In exchange for upfront Federal construction funding, the Federal Government will receive Refuge water supply benefits at no additional cost to the Government. The State of California will provide the non-Federal cost share through Water Storage Investment Program component of Proposition 1. Reclamation has determined that Investigation construction costs associated with Refuge water supply benefits are ineligible for credit under the CVPIA cost-sharing agreement between the State and Reclamation.

5 Federal law does not require the Federal Government to cost-share recreational benefits. The Investigation is not pursuing Federal funding for this benefit. State and local cost share funding will be applied towards the non-Federal cost assignment.

Key: CVP = Central Valley Project CVPIA = Central Valley Project Improvement Act Investigation = Los Vaqueros Reservoir Expansion Investigation M&I = municipal and industrial

As shown in Table 5-3, the Federal annual OM&R costs for the Recommended Plan would be $1.8 million. The assignment of OM&R costs is not subject to the same WIIN Act constraint on capital costs. Federal funds are requested for the Refuge water supply and CVP operational flexibility purposes. OM&R costs under the CVP operational flexibility project purpose will be assigned to beneficiaries, such as CVP contractors and other non-Federal entities, as determined through operational agreements for these supplies. In exchange for upfront Federal construction funding, the Federal Government will receive Refuge water supply benefits at no additional cost. Under the planned assignment of costs for the Recommended Plan, the RWSP would be responsible for paying conveyance costs associated with delivering water supplies from the head of the California Aqueduct to the Refuge boundaries consistent with the cost share requirements



of the CVPIA. These costs would vary by year, depending on hydrology and the amount of water delivered from the project. The RWSP may also use existing CVPIA funding to pay for conveyance costs associated with delivering water supplies from the project to the Refuges. Non-Federal OM&R costs will be funded by Local Agency Partners and the State.

Table 5-3. Initial Total Annual OM&R Cost Assignment Summary for the Recommended Plan (Alternative 1B) Annual OM&R Cost Assignment Summary ($ million/year)

Purpose/Action Non-Federal Federal Total Assigned Percentage Cost Assigned

Percentage Cost Cost

M&I Water Supply 1 100% $4.84 0% $0.00 $4.84

Emergency Water Supply 1 100% $6.27 0% $0.00 $6.27

Irrigation Water Supply 2 100% $1.28 0% $0.00 $1.28

CVP Operational Flexibility 3 0% $0.00 100% $0.79 $0.79 Refuge Water Supply – SOD Conveyance Costs 4 25% $0.61 75% $1.83 $2.44

Refuge Water Supply – Project OM&R Costs 4 100% $5.06 0% $0.00 $5.06

Recreation 5 100% $0.03 0% $0.00 $0.03

Total 87% $18.09 13% $2.62 $20.71

Notes, General: January 2018 price levels. All values are rounded for display purposes; therefore, line items may not sum to totals. 1 Cost assignment for M&I water supply and emergency water supply is based on Reclamation Act of 1939, as amended. The

Investigation is not pursuing Federal funding for these benefits, although this authority was considered during initial determination of Federal interest in the Investigation.

2 OM&R costs under the irrigation project purpose will be assigned as determined through operational agreements with individual beneficiaries.

3 OM&R costs under the CVP operational flexibility project purpose will be assigned as determined through operational agreements with individual beneficiaries. If CVP operational flexibility is used to fulfill obligations to the Refuges, cost assignment for conveyance of Refuge water supplies from the head of the California Aqueduct to Refuge boundaries would be based on the Central Valley Project Improvement Act, Public Law 102-575, which calls for 75 percent Federal and 25 percent non-Federal cost-sharing.

4 Cost assignment for conveyance of Refuge water supplies from the head of the California Aqueduct to Refuge boundaries is based on the Central Valley Project Improvement Act, Public Law 102-575, which calls for 75 percent Federal and 25 percent non-Federal cost-sharing. Cost assignment for OM&R associated with Recommended Plan facilities (Los Vaqueros Project facilities) was assigned as 100 percent non-Federal, to be paid by the project proponents. The project proponents have expressed a willingness to pay this cost. (In exchange for upfront Federal construction funding, Reclamation will receive Refuge water supply benefits at no cost.) This results in an overall cost share of Refuge OM&R of 25 percent Federal and 75 percent non-Federal.

5 Federal law does not require the Federal Government to cost-share these recreational benefits. The Investigation is not pursuing Federal funding for this benefit. State and local cost share funding will be applied towards the non-Federal cost assignment.

Key: CVP = Central Valley Project Investigation = Los Vaqueros Reservoir Expansion Investigation M&I = municipal and industrial OM&R = operations, maintenance, and replacement Reclamation = U.S. Department of the Interior, Bureau of Reclamation SOD = south of Delta



Potential Impact of State Funding As described in previous sections, CCWD is pursuing funding for $459 million towards Alternative 1B from the State of California under the WSIP component of Proposition 1. It is anticipated that funds awarded through Proposition 1 would be applied towards the non-Federal costs, with individual Local Agency Partners contributing the remainder. Since the funding request is less than the total non-Federal portion of project costs, State funding would not impact the Federal cost share. Since the funding request is less than the total non-Federal portion of project costs, State funding would not impact the Federal cost share. Reclamation has determined that Investigation construction costs associated with Refuge water supply benefits are ineligible for credit under the CVPIA cost-sharing agreement between the State and Reclamation. No funding from California’s Proposition 1 is shown in the initial cost assignment and allocation, pending completion of funding agreements with the California Water Commission.




Chapter 6 Payment Capacity and Ability to Pay


Chapter 6 Payment Capacity and Ability to Pay This chapter describes ability to pay analysis of the non-Federal beneficiaries. Reclamation law requires that Federal investments be repaid by the beneficiaries of that investment, except where that benefit is for the common welfare or defense of the Nation. Financial feasibility is ultimately based on the ability of project beneficiaries to collectively pay the costs associated with an implemented plan in accordance with Reclamation law. Costs beyond a particular beneficiaries’ repayment ability may be paid by other project beneficiaries, as Reclamation policy allows and where resources are available. If beneficiaries have the collective financial resources, in accordance with Reclamation law, to pay the costs allocated to them, then the project is considered financially feasible.

The payment capacity and ability to pay analysis of the beneficiaries is included herein to demonstrate overall project financial feasibility.

M&I Ability to Pay Analysis The financial feasibility analysis for M&I water supply benefits assesses how much water users can afford to pay for water supply improvements (i.e., payment capacity) and provides the basis to determine if their payment capacity is sufficient to pay for the allocated project costs (Reclamation 2009). Of a number of accepted methods to estimate payment capacity for M&I water supplies, the following two approaches are most commonly applied:

• Affordability Threshold Approach – The most common measures of ability to pay for municipal water supply are the percent of water costs relative to median household income and other socioeconomic measures. For potential municipal water supply beneficiaries of the Recommended Plan, ability to pay and payment capacity of potential beneficiaries is estimated with an “affordability threshold” represented as a percent of median household income. Under this approach, the threshold is applied to median household income for all households within the water service area to arrive at the total payment capacity.

• Payment Capacity Ratios Approach – This approach estimates M&I payment capacity by assessing actual water payments relative to net household income for households in the region outside the service area of project beneficiaries. The resulting ratios can be used to approximate payment capacity for the households that will benefit from the project. The payment capability ratios represent the proportion of discretionary income that households served by various utilities spend for domestic water supplies. Therefore, they are a measure of dollars spent on water service per dollar of discretionary household income. This methodology provides an estimate of ability to pay that accounts for variation in household income, household expenses, and costs of living that are not considered when using set percentages of household income (Piper and Martin 1999).



Each of these approaches will generally produce similar results depending on the selection of the affordability threshold percentage. The affordability threshold approach is used in this analysis to estimate the ability to pay of potential M&I water supply beneficiaries of the Recommended Plan. This analysis applies the affordability threshold established by the EPA. In 1980, the EPA Office of Drinking Water completed a study to assess the costs of complying with new drinking water regulations. The study determined that costs of water service exceeding 2.5 percent of household income were not affordable (EPA 1980).

The Recommended Plan could provide water supply reliability and emergency benefits to a range of CVP and SWP M&I water contractors in the Bay Area. M&I beneficiaries are located within Contra Costa, Alameda, Santa Clara Counties, San Mateo, and San Francisco counties. A regional ability to pay analysis, based on a range of representative M&I contractors in this region, is used herein. Table 6-1 shows the ability to pay information for areas served by six representative M&I agencies in Contract Costa, Alameda, and Santa Clara counties. The estimate of average annual ability to pay per household is developed using population data, number of households, median household income levels, and average water rates information for year 2015. Information sources included the 2010 US Census, 2015 Urban Water Management Plans, and the 2015 California-Nevada Water and Wastewater Rate Survey.3F

4 As described above, ability to pay is estimated as 2.5 percent of median household income. Residual ability to pay that is available to support new water projects is the difference between gross payment capacity and the current water costs.

Table 6-1. Average Ability to Pay Results for Representative M&I Agencies in the Bay Area Average Current Water Rates 1 ($/hhld/year)

Average Median household income1

Gross Household Ability to Pay 2 ($/hhld/year)

Residual Household Ability to Pay 3

($/hhld/year)

2030 Total Residual Household Ability to Pay 4 ($/year)

$590 $70,645 $1,766 $1,177 $2,046,107,589

Notes: 1 Weighted-average by number of households for East Bay Municipal Utility District, Contra Costa Water District, Alameda County

Water District, City of Morgan Hill, City of Palo Alto, and San Jose Water Company. 2 Estimated as 2.5% of Median household income. 3 Estimated as the difference between gross ability to pay and current water rates. 4 Estimated using the projected 2030 population of 4,738,984, representing 1,739,040 households within East Bay Municipal

Utility District, Contra Costa Water District, Alameda County Water District, City of Brentwood, Alameda County Flood Control District Zone 7, and Santa Clara Valley Water District.

Key: % = percent hhld = household M&I = municipal and industrial

Financial feasibility was assessed by comparing the representative M&I beneficiaries’ ability to pay with their allocated annualized costs (construction costs, interest during construction, and OM&R costs) for the project. M&I water supply beneficiaries are identified within the Local Agency

4 Published by Raftelis Financial Consultants, Inc. and California-Nevada Section of the American Water Works

Association.



Partners, including multiple SWP M&I contractors and CVP M&I contractors, including SCVWD, BBID, and EBMUD.

Table 6-2. Recommended Plan (Alternative 1B) Allocated Municipal and Industrial Water Supply Costs

Item Unit Allocated M&I Water Supply Costs

Allocated Capital Costs $million $546.02 Annual Repayment of Allocated Capital Costs (40-years, 2.75 percent interest) $million/year $22.68

Non-Federal OM&R Costs $million/year $11.18 TOTAL Annual Payment for the Recommended Plan $million/year $33.86

Annual Repayment Capacity 1 $million/year $2,046.00 TOTAL Annual Payment as % of Repayment Capacity % 1.65%

Note: 1 Refer to Table 6-1. Key: % = percent M&I = municipal and industrial OM&R = operations, maintenance, and replacement

The estimated average annual ability to pay of M&I users is large in comparison to the estimated total annual M&I water supply cost, as shown in Table 6-2 above, which indicates that the potential M&I partners that would benefit from the Recommended Plan will be able to repay their allocated annualized costs. In addition, expected increases in population and related regional income beyond 2030 will increase regional ability to pay and further support potential M&I partners’ ability to pay allocated project costs, including construction and OM&R costs.

Agricultural Ability to Pay Analysis Section 9(a) of the Reclamation Project Act of 1939 requires an investigation of proposed construction to determine “the part of the estimated cost which can properly be allocated to irrigation and probably be repaid by the water users.” Typically, agricultural water users’ ability to pay is defined as the farm-level payment capacity aggregated to the entire district, less district existing obligations, operations and maintenance costs, power costs, and reserve fund requirements.

The Investigation alternatives will provide increased water supply reliability to members of the San Luis Delta Mendota Water Authority. This analysis provides a preliminary estimate of the ability to pay for one of those potential beneficiaries. Beneficiaries will be confirmed in future agreements. The analysis may be expanded in the future to include other irrigation districts that may benefit from the Investigation alternatives. In addition, the analysis approach will be refined in accordance with recommendations from Reclamation.



The estimation of a district’s ability to pay begins with a payment capacity analysis. Payment capacity is the estimated residual net farm income of irrigators available for payment of both Federally and non-Federally assessed water costs, after deduction for on-farm production and investment expenses, as well as appropriate allowances for management, equity, and labor. Nonfarm revenues are not included in the payment capacity assessment.

The estimation of payment capacity normally begins with the identification of “representative farms” that are constructed to emulate typical agricultural operations within each region affected by the project alternatives. However, more than 60 different crops are grown within the representative SLDWMA district. As a result, it is necessary to limit the number of crops and farm types considered in the payment capacity analysis. This analysis applies available crop budgets to the crops that comprise 5 percent or more of the average irrigated acres within each district. The estimated payment capacity is then aggregated to the district level according to the proportion of the district’s total water deliveries.

The selected crops and acres are provided in Table 6-3. As shown, almonds are the most prevalent crop within each of the two districts followed by processing tomatoes, pistachios, cotton, and wheat. These five crops represent an average of approximately 62 percent of the irrigated acres within the representative SLDWMA district from 2013 through 2017.4F

5

Table 6-3. Selected Crops and Average Acres for Payment Capacity Analysis Selected Crops Representative Water District Average Acres (2013 – 2017) Almonds 83,896 Cotton 30,036 Pistachios 37,250 Tomatoes (Processing) 64,841 Wheat 28,904

Recent crop budgets for each of the five selected crops were obtained from the University of California.5F

6 All production costs were converted to 2017 dollars using the Implicit Gross Domestic Product Price Deflator. The applied crop budgets are reported in Table 6-4.

5 Crop acres for 2013 through 2017 obtained from district crop reports. 6 https://coststudies.ucdavis.edu/en/current/



Table 6-4. Crop Budgets Applied to the Payment Capacity Analysis Selected Crops Applied Crop Budget Almonds Sample Costs to Establish an Orchard and Produce Almonds, San

Joaquin Valley South, 2016 Cotton Sample Costs to Produce Cotton, Pima Variety, San Joaquin Valley, 2012

Pistachios Sample Costs to Establish and Produce Pistachios, San Joaquin Valley South, 2015

Tomatoes (Processing) Sample Costs to Produce Processing Tomatoes, Sacramento Valley and Northern Delta, 2017

Wheat Sample Costs to Produce Wheat for Grain, San Joaquin Valley South, 2013

The production costs from each budget were applied after conversion into 2017 dollars. However, district provided water costs were removed from the crop budgets. In addition, the costs of farm-supplied groundwater in the representative SLDWMA district was estimated and added to each of the crop budgets. According to available information, groundwater pumped by individual farms represents approximately 45 percent of the total water available for irrigation on an annual basis. This analysis assumed that each crop received 45 percent of its applied water requirement from groundwater. Groundwater costs for the representative SLDWMA district were obtained from estimates contained within the Statewide Agricultural Production Model that include both capital and O&M cost components.6F

7

Crop prices and yields were obtained from Fresno County and Kings County agricultural commissioner reports for 2012 through 2016. The representative SLDWMA district is located within both counties. Therefore, the crop yields and prices applied in the payment capacity analysis are the five-year averages for both counties. Table 6-5 reports the applied crop yields and prices. Consistent with the crop budget, cotton seed production was assumed to earn growers $35 per bale ($105 per acre for 3-bale cotton) after ginning costs.

Table 6-5. Crop Prices and Yields Applied to the Payment Capacity Analysis Selected Crops Units Crop Price Crop Yield Almonds tons $5,713.23 1.13 Pistachios tons $4,939.05 1.19 Tomatoes (Processing) tons $74.25 52.07 Wheat tons $263.61 2.90 Cotton (Pima)

Lint pounds $1.45 1,613.61 Seed bales $35.00 3.00

7 The estimated groundwater costs for Statewide Agricultural Production Model region 14A, which contains WWD, is

approximately $224 per acre-foot per year.



Table 6-6 provides the estimated payment capacity for each of the selected crops and the acres-weighted average payment capacity for the representative SLDWMA district is located within both counties. The weighted average payment capacity includes the estimated negative payment capacity for wheat. As shown, the estimated payment capacity ranges from -$211/acre for wheat to $778/acre for pistachios. The weighted average payment capacity is $468/acre.

Table 6-6. Estimated Payment Capacity

Selected Crops Estimated Payment Capacity ($/acre)

Almonds $714.44 Cotton (Pima and Upland) $388.41 Pistachios $778.62 Tomatoes (Processing) $311.60 Wheat -$211.09 Weighted Average Payment Capacity $468.35

The weighted average payment capacity is applied to average irrigated and harvested acres for the representative SLDWMA district from 2013 through 2017 (396,166 acres). This analysis excludes fallowed acres and adjusts for double-cropped acres. It also includes on-harvested and nonbearing acres which are assumed to be captured in the establishment costs included within the crop budgets. The total estimated payment capacity for the representative SLDWMA district is approximately $185.5 million.

Table 6-7 provides the estimated ability to pay for the representative SLDWMA district. District costs and revenues were obtained from financial statements and represent averages from 2013 through 2017. Average revenues not associated with water sales were added to the estimated total payment capacity. Average total expenses and debt obligations were deducted from the estimated payment capacity to estimate ability to pay. As shown, the estimated ability to pay is approximately $47.4 million, annually.

Table 6-7. Estimated Annual Ability to Pay Category Annual Ability to Pay District Acres $396,166 Total Payment Capacity $185,544,197 Other District Revenues $11,145,972 Reserve Fund $0 District Operations and Maintenance $130,792,630 Debt Repayment $18,451,134 Ability to Pay $47,446,405



Agricultural beneficiaries could be assigned costs of approximately $5,047,000 per year. This conservatively assumes that they will also receive the project’s CVP operational flexibility benefits, under the Recommended Plan. Therefore, under this scenario, the representative SLDWMA district would have the ability to pay its assigned share of annual costs.

The ability to pay of the non-Federal sponsor and its Local Agency Partners in the Bay Area demonstrate the financial feasibility of implementing the Recommended Plan. Analysis of a representative agricultural beneficiary also indicates likely ability to pay for agricultural water supply benefits. State funding for public benefits, provisionally awarded under Proposition 1, further increases the likelihood of financial feasibility.




Chapter 7 Summary


Chapter 7 Summary This chapter presents a summary of the initial cost allocations and cost assignments for the Recommended Plan (Alternative 1B).

Table 7-1 compares the total capital cost and annual OM&R costs allocation for each project purpose based on the SCRB analysis for the Recommended Plan. Table 7-2 shows a summary of the cost assignment of the project’s total construction and OM&R costs for the Recommended Plan.

Table 7-1. Summary of Initial Cost Allocation by Project Purpose for the Recommended Plan (Alternative 1B)

M&I Water Supply




Refuge Water Supply

Recreation Total

Total Construction Costs ($ million)

$236.4 $306.2 $62.7 $38.4 $247.1 $4.0 $894.8

(% of total) 26.4% 34.2% 7.0% 4.3% 27.6% 0.4% 100.0% Total Annual OM&R Costs ($ million/year)

$4.8 $6.3 $1.3 $0.8 $7.5 $0.0 $20.7

(% of total) 23.4% 30.3% 6.2% 3.8% 36.2% 0.2% 100.0%

Note: General: January 2018 price levels. All values are rounded for display purposes; therefore, line items may not sum to totals. Key: % = percent CVP = Central Valley Project M&I = municipal and industrial OM&R = operation, maintenance, and replacement

Chapter 7 Summary


Table 7-2. Summary of Initial Construction and OM&R Cost Assignment for the Recommended Plan (Alternative 1B)

Recommended Plan – Alternative 1B

Construction Costs ($ million) Federal Costs $223.7 (25%) Non-Federal Costs $671.1 (75%) Total Construction Costs $894.8 OM&R Costs ($ million/year) Federal Costs $2.7 (13%) Non-Federal Costs $18.0 (87%) Total OM&R Costs $20.7

Key: OM&R = operations, maintenance, and replacement

Chapter 8 References


Chapter 8 References CCWD. See Contra Costa Water District.

Contra Costa Water District. 2017. About Us. Contra Costa Water District. Available at: http://www.ccwater.com/27/About-Us. Accessed August 28, 2017.

EPA. See U.S. Environmental Protection Agency.

Reclamation. See U.S. Department of the Interior, Bureau of Reclamation.

U.S. Department of the Interior, Bureau of Reclamation. 2009. Technical Memorandum Number ED 2009 02. Evaluating Economic and Financial Feasibility of Municipal and Industrial Water Projects.

______. 2013. Reclamation Manual Program Economics, Revenues, and Contracts (PEC) 01-02: Project Cost Allocations. September 2013.

U.S. Environmental Protection Agency. 1980. Water Utility Financing Study. Office of Drinking Water, Washington, D.C.

Chapter 8 References



Documents

Feasibility Report – Appendix G – Cost Allocation