Discussion and possible action to enter into a Cost Share Agreement with Salt River Project, Central Arizona Water Conservation District and participating entities, substantially in the form as presented, to fund the technical review of the Salt River Project-Central Arizona Project Interconnection Facility.

Peoria Water Services staff is seeking approval from Council to enter into an Agreement to Share Costs for the Technical Review of the SRP-CAP Interconnection Facility Among Cost-Share Partners and Salt River Project Agricultural Improvement and Power District (“Cost-Share Agreement”). The Cost-Share Agreement funds the Technical Review Phase of proposed infrastructure allowing water from the Salt River Project (“SRP”) water delivery system to be pumped into the Central Arizona Project (“CAP”) canal and delivered to customers outside of the SRP service area. Peoria’s participation in the Technical Review Cost-Share Agreement obligates Peoria to pay up to $86,716, inclusive of a 20% contingency. This payment is equivalent to, but does not guarantee, approximately 7.6% of capacity in the facility.

The SRP-CAP Interconnect Facility (“SCIF”) would facilitate the movement of Salt and Verde River water into areas of Peoria where it cannot currently reach due to infrastructure limitations, helping ensure maximum flexibility for leveraging our renewable resources. In August 2022, Council approved Peoria to enter into a nonbinding Memorandum of Understanding (“MOU”) between SRP, Central Arizona Water Conservation District (“CAWCD”) and Participating Entities, which generally described four phases necessary for completion of the SCIF: (1) plan; (2) design and permit; (3) construct; and (4) operate. The MOU also described the cooperative efforts, roles and responsibilities of the Participating Entities during each of those phases, including cost shares. This Cost-Share Agreement corresponds to the first half of Phase Two of the MOU—design—and is the next step toward Peoria’s participation in this new and highly beneficial interconnection between two vital water conveyance infrastructures.

Peoria is actively involved in a few ongoing regional projects aimed at securing additional renewable water resources. The SCIF is a necessary infrastructure component to realize the full benefit of such potential supplies.

SCIF use example:

·        Peoria delivers Salt and Verde water through the SCIF to a CAP user downstream in exchange for that users CAP water delivered further upstream to PPWTP, functionally moving Salt and Verde water to north Peoria without needing a new pipeline. Peoria is participating in two Council-approved efforts that may result in additional Salt and Verde water for use in north Peoria:

o   Modified Bartlett Dam:  Increasing the size of the existing Bartlett Dam along the Verde River to capture additional water during wet years and

o   Roosevelt Flood Control Space (“FCS”) Modified Operations:  Releasing water from the Flood Control Space behind Roosevelt Dam more slowly for project participants to use

There are currently twelve (12) Cost-Share Partners in the Cost-Share Agreement, including several Arizona Municipal Water Users Association (“AMWUA”) members, Carefree Water Company, CAWCD, SRP, Town of Queen Creek, and City of Apache Junction. SRP has requested all interested parties execute the Cost-Share Agreement by June 15, 2023.

The Cost Share Agreement covers four primary items of the Technical Review Phase:

(1)   Administrative and Pre-Environmental Planning review costs associated with the Bureau of Reclamation (“Reclamation”) Phoenix Area Office;

(2)   Technical Review costs associated with Reclamation Technical Services Center;

(3)   Design support from the engineering firm HDR, Inc. (“HDR”); and

(4)   Geotechnical Investigations completed by HDR, with includes an additional $100,000 contingency dependent on the necessity of use of a helicopter to access certain areas of the project.

Of the $1,142,352 Cost-Share Agreement total, inclusive of a 20% contingency, Peoria’s share is $86,716 (7.6% or 31 cfs). If the cost-share estimate increases above the contingency amount as project plans are developed, the Parties shall convene according to the Agreement to determine how they wish to proceed. It is important to note that entering into the Cost-Share Agreement does not legally obligate Peoria to participate in any future phase of the SCIF project. However, as mentioned, participation in each successive phase, including future associated cost-share agreements, is required to purchase capacity in the SCIF without paying a substantial penalty. If Council chooses to continue supporting Peoria’s participation in the project, subsequent Cost-Share Agreements will cover permitting and construction costs.

At the August 23, 2022 Council meeting, Council approved Peoria to enter into the “Memorandum of Understanding to Support the Planning, Design, Permitting, Construction, and Operation of the SRP-CAP Interconnection Facility Among Salt River Valley Water Users’ Association, Salt River Project Agricultural Improvement and Power District, Central Arizona Water Conservation District, and Participating Entities.”

Staff recommends approving authorization to enter into the Cost-Share Agreement in substantially similar form.

There is sufficient funding available in the FY2024 CIP for costs identified in the Agreement to Share Costs for the Technical Review of the SRP-CAP Interconnection Facility Among Cost-Share Partners and Salt River Project Agricultural Improvement and Power District.