Discussion and possible action to enter into an Intergovernmental Agreement between City of Peoria and City of Tucson, substantially in the form as presented, to facilitate the storage, recovery, and exchange of Central Arizona Project water. 

The City of Tucson (“Tucson”) and the City of Peoria (“Peoria”) both have annual allocations of Colorado River water delivered through the Central Arizona Project (“CAP”) canal. Peoria directly uses most of its CAP supply at surface water treatment plants, including the Pyramid Peak Water Treatment Plant (“PPWTP”) and Quintero Water Treatment Plant (“Quintero”). Unlike Peoria, Tucson does not deliver any of its CAP supply to a surface water treatment plant. Rather, Tucson recharges its CAP water underground just west of the city and recovers it using wells. Due to the nature of how each city uses its CAP supply, there is the opportunity to enter into a mutually beneficial exchange agreement that would enable Peoria to directly deliver a greater volume of CAP water than may otherwise be available during large shortage years, while benefiting the groundwater Tucson relies on.

The exchange is modeled after an existing Tucson-Phoenix CAP exchange agreement. This precedent, including the development of protocols for such an exchange by the regulatory agencies involved, helped pave the way for other cities such as Peoria to enter into similar exchanges with Tucson.

Exchange Summary:

1.     Peoria delivers a portion of its CAP supply to an underground storage facility in Tucson in years it has CAP water to store, generating long-term storage credits for Peoria

2.     In shortage years with large mandatory CAP cutbacks:

a.     Tucson recovers Peoria’s storage credits with its wells for delivery to Tucson’s distribution system;

b.     Peoria takes delivery of an equal amount of Tucson's   CAP water from the canal where Peoria needs it most so as put into Peoria's distribution system.

Despite impressive snowpack during the winter of 2022-2023, the Colorado River Basin still suffers from the consequences of over two decades of severe drought, tier 1 storage levels, and the long-term imbalance between supply and demand. Peoria understands that in order to ensure a stable Colorado River system, temporary reductions to its available Colorado River supplies could occur. Peoria’s Water Services Department is committed to exploring all tools to prepare for all potential water futures.

Tucson City Council unanimously approved the IGA under consideration on August 8, 2023. The City of Scottsdale and the Town of Gilbert approved nearly identical IGAs with Tucson on August 21, 2023 and August 15, 2023, respectively. Approval of the IGA by City Council is one-step in the process to fully execute the exchange. If Council elects to move forward with the IGA, Water Services will need to return at a later date to bring forward an Exchange Agreement between City of Peoria and Central Arizona Water Conservation District (“CAWCD”).

If Council approves Peoria entering into the IGA, Peoria will deliver 2,000 acre-feet (“AF”), equal to 5.9% of its annual CAP allocation, to the Southern Avra Valley Storage and Recovery Project (“SAVSARP”) in Pima County by the end of calendar year (“CY”) 2023 and an additional 2,000 AF in the second half of CY 2024. Additional deliveries in future years would be determined on a year-by-year basis. For Fiscal Year (“FY”) 2024, based on the SAVSARP 2023 Storage Fee of $71 per AF, the total estimated cost to Peoria is $142,000. For Fiscal Year (“FY”) 2025, based on 2024 Storage Fee of $71.63 per AF, the total estimated cost is $143,260.

Peoria Water Services does not currently have the costs for storage at SAVSARP included in its FY2024 Water Supply budget. However, under a System Conservation Implementation Agreement with the federal government, approved by Council on May 16, 2023, Peoria elected to leave up to 7,200 AF of Colorado River water in Lake Mead for CYs 2023, 2024, and 2025. The reduced delivery volume of CAP water in CY 2023 means Peoria owes less for CAP water delivery costs, resulting in a savings to the Water Supply budget for FY2024. Water Services projects this savings will cover the unbudgeted $142,000 in SAVSARP storage costs. The $143,260 in costs for FY2025 is included in the proposed FY2025 Water Supply budget.