Metro Water District Growth Policies

White Paper on: Growth-Related Infrastructure Cost Recovery For Wholesale Water Providers
(January 2008)
Prepared by Red Oak Consulting
725 South Figueroa Street
Los Angeles, CA 90017


As I had ended my last post, I find it important to evaluate Southern California's existing wholesale water supplier's (Metropolitan Water District of Southern California) growth policies.

As a baseline, I found this white paper to be a good starting point.

Much to my naivete's surprise, many of my grandiose ideas of tier-structured growth fees are already in existence.

Let me start by saying that I know full well it is not the place of Metropolitan Water District (MWD) to promote or curtail growth.

However, I thought it important to see how they levee taxes and fees for imminent population and industrial growth in light of continuing widespread drought and political battles to the north.

The classic mechanism to recover costs for growth is a one-time service connection fee.  This is still very popular in smaller districts.  MWD has grown much too big and complex for this to be their only option, though.

New facilities often need to be built as growth causes capacity boundaries to be broken.  The cost of the new facilities needs to be recovered.  Most of these recovery costs are levied against new demand.  The fees are usually proportionately shared to pay for new capital investments.  New development and existing customers all should benefit from new infrastructure.   

System development charges can be thought of as:

(Buy-in Fee for Existing Facilities) + (Incremental Fees for New Facilities)

Each of the two components is a composite of several technical components, of which I will not get into at this time.
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Red Oak's Recommendation:


This white paper contains Red Oak’s review of various financial mechanisms for
determining, implementing, and administering growth-related charges – either as a
recurring rate or as a one-time fee – and provides policy options and objective ranking
criteria for consideration by Metropolitan’s Board.
Based on the criteria developed in Section 5, it is recommended that the Long Range
Finance Plan Rate Structure Group (LRFP) evaluate, provide comments and rank these
criteria.  In addition it is recommended that the LRFP confirm and provide suggestions
on the associated growth-related fee options, as mentioned in Section 6.  Based on LRFP
comments and suggestions, Red Oak, along with Metropolitan staff, can determine which
growth-related fee should be analyzed and developed for Board consideration.

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Basically, "having growth pay for growth".

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The size of development fee can be parsed into different tiers so that the fees assessed (either once or incrementally) is proportionate to the growth.

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Technically sound, yet technically boring.