Castaic Lake Water Agency

Santa Clarita, California, United States

Raftelis assisted Castaic Lake Water Agency (Agency) in conducting a financial plan and wholesale water rate study that would ensure financial sufficiency and enhance revenue stability. As part of the project, Raftelis developed a comprehensive financial plan that evaluated various financial alternatives to minimize financial risks to the Agency. The Agency received a significant portion of its revenue stream from property tax, which it used to fund capital improvement projects and costs related to its Buena Vista/ Rosedale Rio Bravo (BV/RRB) water supply. The current wholesale water rate only recovered operating costs of the system. The Agency was concerned that property tax revenue would significantly decrease in the future, which would severely impact its operations and require significant rate increases. Thus, Raftelis analyzed several alternatives to gradually fund more of the BV/RRB costs from the wholesale water rate so that it wouldn’t be so dependent on property tax revenues. Raftelis also reviewed and evaluated numerous alternative wholesale water rate structures to enhance revenue stability and promote conjunctive water use in the Santa Clarita Valley among the four purveyors within the system. Since the current wholesale water rate was 100% variable, one of the objectives of the Agency was to enhance revenue stability by incorporating a fixed charge in its wholesale rate structure to ensure recovery of a portion of its fixed costs. Raftelis presented four rate structure alternatives to the Board, and the Agency implemented a fixed and variable rate structure in which the fixed costs are recovered based on each purveyor’s previous three-year average of total water demand.