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By Joe Naiman
Village News Correspondent 

Santa Margarita dam property proceeds to be used for rate stabilization fund, pension obligation drawdown


Last updated 1/23/2019 at 5:19pm

At one time the Fallbrook Public Utility District planned to use the proceeds from the sale of the Santa Margarita property to fund the Santa Margarita River Conjunctive Use Project, but a low interest rate for the Conjunctive Use Project led to an decision to use proceeds from the property sale as a contingency against dry years while also using some of the proceeds to meet their pension payment obligations.

FPUD’s board voted 5-0, Dec. 10, to utilize $6.2 million from the sale for the district’s rate stabilization fund while earmarking the other $3.8 million to offset unfunded pension obligation liabilities.

“The interest rate is so low in the SRF funding,” FPUD general manager Jack Bebee said. “It makes sense to fund the cost of the project using the SRF funding.”

In January 2017, FPUD’s board authorized an application for a State Revolving Fund loan from the State Water Resources Control Board for $45,000,000, which would be repaid over 20 years at an interest rate of approximately 1.6 percent. Water rights permits for the Conjunctive Use Project were issued Nov. 20, which allows the State Revolving Fund loan to be finalized.

Escrow on the sale of the 1,384-acre Santa Margarita property which was purchased by FPUD in the 1940s with the intent to use the land for a dam closed Dec. 19. The Wildlands Conservancy paid FPUD $10 million for the land.

The Santa Margarita Conjunctive Use Project being pursued by FPUD, U.S. Marine Corps Base Camp Pendleton and the U.S. Bureau of Reclamation will enhance groundwater recharge and recovery capability within the lower Santa Margarita River basin and develop a program which will increase available water supplies for FPUD and Camp Pendleton. Facilities within the lower basin will be constructed to capture additional surface runoff, which currently flows to the Pacific Ocean, during high stream flow periods. The surface water will be recharged through existing groundwater ponds and stored in groundwater basins during wet years while being “banked” for water rights statistics. The water will be used to augment supplies during dry years, which will reduce the reliance on imported water provided by San Diego County Water Authority sources.

The Camp Pendleton infrastructure will include piping to deliver the water to the boundary of the Naval Weapons Station and Fallbrook behind the FPUD solar facility site on Alturas Road. Construction of the facilities from the northwest boundary is FPUD’s responsibility. The water will be treated at the Alturas Road plant and delivered into FPUD’s distribution system.

The FPUD cost consists of $27.7 million for a groundwater treatment plant, $5.5 million for a distribution system to the Gheen Zone east of Stage Coach Lane, $7.9 million for the Gheen Pump Station and a storage tank along with piping, $1.8 million for construction management, supervisory control, data acquisition and data integration and $2 million for contingency.

The amount of water obtained will depend on weather conditions. FPUD will not receive any water in the event of an extreme drought. The minimum water delivery to FPUD will be 580 acre-feet for a dry hydrological year, 1,300 acre-feet for a below-normal year, 3,100 acre-feet for a normal year based on the average over the past 50 years, 5,120 acre-feet for an above-normal year and 6,320 acre-feet for a wet year. A potential additional allocation of 400 acre-feet is possible, and FPUD also has the first right of refusal for excess water sold rather than used by Camp Pendleton which would provide FPUD with up to 1,500 additional acre-feet annually while also providing Camp Pendleton with revenue for operations and maintenance.

“In dry years you can have no water from the project, but you still have debt service,” Bebee said.

Based on the project’s cost including interest payments two years of debt service equates to $6.2 million, so the use of the Santa Margarita property proceeds for the rate stabilization fund will cover that amount.

“In the dry years there’s not a rate impact,” Bebee said. “It will still be used to fund the Santa Margarita project.”

If water production exceeds what was projected and the rate stabilization fund is below its target level, the funding from the additional water sales will be placed into the reserve.

The $3.8 million for the pension obligation offset fund will be invested according to FPUD’s trust investment strategy. The earnings rate will vary based on market conditions but is expected to be similar to the California Public Employees’ Retirement System rate.


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