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05/14/2008 - Packet - Open House Completeness Review s .°n for Boards, Commissions and Committee Records CITY OF TIGARD Intergovernmental Water Board Name of Board, Commission or Committee 1"1(�1� `�, 2cx0R -2E XJ 40"0 sE Date of fleeting To the best of my knowledge this is the complete meeting packet. I was not the meeting organizer nor did I attend the meeting; I am simply the employee preparing the paper record for archiving. This record came from Greer Gaston's office in the Public Works Building. Kristie Peerman Print Name Signature ,3 Date Tigard Council Intergovernmental Water Board Searing Tigard, King City, Durham and Unincorporated Area NOTICEOF • QUORUM at the TIGARD /LAKEOSWEGO WATER PARTNERSHIP OPEN HOUSE Q Newsroom,Tigard Times (Fax No. 503-546-0724) Q Newsroom,The Oregonian (Fax No. 503-968-6061) D Editor,The Regal Courier (Fax No. 503-968-7397) D The City of King City (Fax No. 503-639-3771 D The City of Durham (Fax No. 503-598-8595) ■ Notice is hereby given that there may be a quorum of the Tigard City Council and the Intergovernmental Water Board at the Tigard/Lake Oswego Water Partnership Open House. ■ The Open House will be on Wednesday, May 14, 2008 from 7 to 8 p.m., in the Tigard Public Works Building, 8777 SW Burnham Street, Tigard. ■ Members of the Council and Board will be on hand to discuss the proposed water partnership with the public. For more information, please contact Intergovernmental Water Board Recorder Greer Gaston at 503.718.2595 or greer@tigard-or.gov. Welcome ! Open House on the Tigard/Lake Oswego Water Partnership Please Sl* gn In � Name Address Affiliation (if any) t I(IJ(70 V�w—TL( eL-� 4 JA 1 w Tcravie"i Welcome ! Open House Tigard/Lake O Water Partnership Please S1* 9n In Name Address Affiliation (if any) A / W5 hn �cc rcGu e ou.� Coy 4rtkhen w / Ti ny C o LCA e •T4el %mdse eh neer o 7- A1717A17171,5 1s Flo-e 116-4 e Pr C-0 T Welcome ! Open House oil the Tigard/Lake Oswego Water Partnership Please Sl* gn In � Name Address Affiliation (if any) Ile,e r L 6 7- S,An /&), /a IVI CITY OF TIGARD PRESS RELEASE 13125 SW Hall Blvd May 5,2008 Tigard, Oregon 97223 For Immediate Release Contact: Public Works Executive Assistant Greer Gaston City of Tigard 503-718-2595 greer@tigard-or.gov Tigard to Hold Open House on Water Partnership with Lake Oswego The City of Tigard will hold an Open House on Wednesday,May 14, 2008 from 7 to 8 p.m. at the Tigard Public Works Building, 8777 SW Burnham Street,Tigard. Tigard and Lake Oswego will soon consider an agreement to jointly develop and expand the Lake Oswego water system to serve both communities. The Open House is intended to educate Tigard water customers about the potential water partnership through a video, displays, and informational handouts. Staff and elected officials will be on hand to discuss the partnership. Open House attendees are encouraged to share their thoughts on water. The City of Tigard is the water provider for the Tigard Water Service Area comprised of Durham, King City, two-thirds of Tigard, and the unincorporated area to the south and west of Tigard. For more information, contact Public Works Executive Assistant Greer Gaston at 503.718.2595 or greer@tigard-or.gov. Page 1 of 1 FAX TO: 0 TIGARD TIMES 0 OREGONIAN 0 REGAL COURIER C:ID000MENTS AND SETTINGSIGREERILOCAL SETTINGSITEMPORARY INTERNET FILESICONTENT.OUTLOOKF72D82WYX1WATER PARTNERSHIP OPEN HOUSE (2).DOC 0 CITY WEB PAGE 0 OTHER: A2 ■ May 8, 2008 www.tigardtimes.com The • TuHS orchestra sounds out success on way tostate co Ile '�nes y TIGARD I tlliiiTIR I SHERWOOD =54=- 605 s L•Pmrlasd,OR 97222 r �. 1,, 0360•F�c503-620-3433 Tualatin High's orchestra will 8 {. Anatbant�ully,rhey> e� compete at the state The grog' won at re; competition Friday morning ,i tions in March and scored com P Y 9 qualify for the state corr Clark By JENNIFER CLAMPET Friday, groMayup 9,wi�oor • 3=.546-0714 gm� Perf OfTheTimes for.a time of about 20 1 r TUALATIN—For this first time in five which they will be judge r=. Chr&pna Moore years, quility of sound and mus the Tualatin High School orchestra is . 1 heading to state competition.And director group will have to perform Brandon VanDyke fully expects t1Ye reddAnnd while other sch Tualatin High orchestra to be the only.otie ,. thereto be led by>,a: teacher, n to a ast years. reached that point yet. FINANCING OPEN HouSE R"Fuc& �� for whatever on the , ju 5 MOVES Y0U.03-546-0781 Tigar&Lake Oswego Water PartnershipVPM µ Ie PeaenSM Whether it's a car,truck or minivan,let State Farm Bank Wednesday, May 14,2008 • 7 t0 8 p.m. NIP Ow I503-546-0= finance or refinance all your vehicles. Call me today for more information on our competitive rates. Tigard Public Works Budding ■ 8777 SW Burnham St.,Tigard ' s.:._ ' 503-546-0792 • i l •;' • Tigard and Lake Oswego will soon consider an agreement to jointly develop State Fa rton tt y and expand the Lake Oswego water system to serve both communities. Durham,68-1234-7013 ■ Get the specifics on the Ti ard/Lake Oswego Water Partnership T t �tfita Bus:503-684-1.1 Pe g g P 503-546-9892 paul.batton.ppx7@statefarm.com ■ Watch the Water for Tomorrow video g A ■ Visit with staff and elected officials $ ACCGiwnm .,.,�..." Rink. ■ Share your thoughts on water The City of Tigard is the water provider for the Tigard Water Service Area comprised of Durham,King City,two-thirds of Tigard,and the FDK A§wp Q unincorporated area to the south and west of Tigard. - •n.wPamgrwm�wucaopudm.sw�nma.anamum.:�ex. � 503-546-0751 ne�w��..�wu.s.�,.n,....neQe�wro•:d. .nvn Questions? ' A.B:A.T.E.of On Contact Greer Gaston at 503.718.2595.or greergdgaid-or.gov ' CUCF7i.KT'IM FEM mm StebForm Bank Fs.B. 8166 idgm.-It. www.abateofo r Executive Summary JOINT WATER SUPPLY SYSTEM ANALYSIS ES.1 BACKGROUND The Cities of Lake Oswego and Tigard (Cities) retained Carollo Engineers in June 2006 to develop and evaluate options for the possible formation of a joint water supply system for the two communities. This report, which summarizes the results of the Joint Water Supply System Analysis (JWSSA), presents a range of supply alternatives, and addresses the design, financing, permitting, governance, and public outreach issues associated with implementing the proposed joint water supply system, as well as the potential impacts of conservation and interim supply alternatives. ES.2 SUPPLY SCENARIOS The City of Lake Oswego's (City, Lake Oswego) existing water supply system is essentially at capacity. The capacity of the existing system is 16 million gallons per day (mgd), existing demands are over 15 mgd, and projected build-out demands are 24 mgd. Therefore, Lake Oswego needs to expand their supply capacity or reduce per capita water demands substantially in the near future. The water service areas for Lake Oswego and Tigard are presented in Figures ES.1 and ES.2, respectively. Four supply scenarios were developed to address the needs of Lake Oswego and Tigard. These scenarios are as follows: 1. Scenario 1: Existing Capacity (16 mgd) This scenario represents the existing demands and capacity of the Lake Oswego infrastructure. 2. Scenario 2: Future Capacity (24 mgd) This scenario represents the required capacity to treat the build-out demands of the Lake Oswego water service area. 3. Scenario 3: Senior Water Right Capacity (32 mgd) This scenario represents the capacity needed to convey the senior water rights that Lake Oswego has been permitted to withdraw from the Clackamas River. 4. Scenario 4: Combined Junior and Senior Water Right Capacity (38 mgd) This scenario represents the capacity needed to convey the combined junior and senior water rights that Lake Oswego has been permitted to withdraw from the Clackamas River. DRAFT - July 12, 2007 ES- 1 HACIienflake Oswego_POR17525A.001Deliverables\Draft Repod\Execullve Summary.doc \ _ QPG\F�G i STEPHENSON \ m 4�F P y m A �i 21 "--KNAUS Z, 7 � <� PARK M MELROSE g n r O C Z COUNTRY CLUB i = COURTNEY-Z N KRUSE ,q� ` W OAK GROVE c G z � J � 9 J Ja z � DURHAM SOUTH SHORE/ " GOHGORo xATl - W = 9 N I I JEAN Y eERGIS� n z ° avERLoorc �y ROYCE % two z cj J ` � a g CHILDS / 04,r Legend �� J Streets Tualarin Rover W Freeway Water Service Area m ZW U Lake Oswego °n 3 z N Stafford Triangle(Buildout) BORLAND �o River/Lake r2os"—�� ° Figure ES.1 0 0.5 'Mies �P LAKE OSWEGO SERVICE AREA L0707as.1-7525.a1 JOINT WATER SUPPLY SYSTEM ANALYSIS CITY OF LAKE OSWEGO AND TIGARD WATER SERVICE AREA —v.tir.- `' I j WOO Urban Rescrue Na 49 ;r t I 'RALIiLT i. � 217 F r. Q G .n L r 7� Gl.AF1(�c rA:.'JCW ALG � � - r+ r/ N fi I ( � l i cam`ve"D trJIMAJA Urban Resonro No.4B Legond a11CQLri J w S Frectivay f t— iuc�rra Winter S*imr*Area I� Q njord Urban Reterve Areae fHuid-oul ~= Urban Reserve Ri�ror.Lake = No.4T Figure ES.2 TIGARD WATER SERVICE AREA Gr ,Via; JOINT WATER SUPPLY SYSTEM ANALYSIS W707es.2-7525.ai CITY OF LAKE OSWEGO AND TIGARD WATER SERVICE AREA ES.2.1 Capital Cost of Infrastructure Improvements Lake Oswego's existing infrastructure is comprised of a raw water intake, treatment facility, conveyance, storage, and pumping. The capital costs for each of the supply scenarios are provided in Table ES.1. Table ES.1 Conceptual Cost Estimate— Capital Cost' Joint Water Supply System Analysis City of Lake Oswego and Tigard Water Service Area System Scenario 1 Scenario 2 Scenario 3 Scenario 4 Component 16 mgd 24 mgd 32 mgd 38 mgd Clackamas $2,000,000 $2,100,000 $4,440,000 $4,670,000 River Intake Raw Water Transmission NIA $19,890,000 $23,920,000 $23,920,000 Main Lake Oswego Water $3,000,000 $28,840,000 $39,430,000 $44,990,000 Treatment Plant Finished Water Transmission NIA $25,290,000 $44,300,000 $55,240,000 Main Waluga NIA $2,470,000 $3,820,000 $4,010,000 Reservoir Bonita Pump NIA NIA $1,480,000 $1,700,000 Station Total $5,000,000 $78,590,000 $117,390,000 $134,530,000 Notes: 1. Presented in November 2006 dollars. ES.2.2 Implementation Timing The following assumptions were applied to development of implementation timing of component improvements for each scenario: 1) Tigard will begin using its share of the water supply infrastructure in 2016, and 2) the components of the infrastructure that are already at their maximum capacity will be improved immediately to meet the needs of Lake Oswego. For scenarios 3 and 4, component improvements were phased to provide incremental capacity additions over time to defer costs. DRAFT - July 12, 2007 ES - 4 HAClienlLL ake Oswego_PORV525A.001Delive rablesTraft Report\Executive Summary.doc Table ES.2 Implementation Capital Costs by Scenario' Joint Water Supply System Analysis City of Lake Oswego and Tigard Water Service Area Scenario Project Completion Date Immediate Z 2016 2020 1 (16 mgd) $5,000,000 -- -- 2 (24 mgd) $76,120,000 -- $2,470,000 3 (32 mgd) $88,360,000 $29,030,000 — 4 (38 mgd) $91,450,000 $43,080,000 -- Notes: 1. Presented In November 2006 dollars. 2. Immediate improvements should be made by 2009. Throughout the report, capital costs are presented in November 2006 dollars to facilitate comparison of scenarios. However, actual costs will be subject to construction cost escalation up to the time the improvements are actually constructed. This construction cost escalation, based on the anticipated implementation schedule for each scenario, is included in the financial evaluation of alternative scenarios. It should be further noted that because construction cost escalation is projected to occur at a rate greater than the general inflation rate', scenarios that are delayed beyond the anticipated implementation schedule will likely have a higher cost than the costs shown in the report. Further evaluation of the financial implications associated with delaying implementation of the proposed improvements should be conducted before final decisions are made regarding the timing of implementing Scenarios 2-4. ES.2.3 Financial Evaluation A financial evaluation of the supply scenarios was conducted, which presents a comparison of the economic impact of the scenarios for each City. Additionally, for the City of Tigard, an evaluation of three other water supply alternatives was developed: 1) partnership with the Joint Water Commission (JWC), 2) partnership with other regional suppliers for development of the Willamette River Project, and 3)Tigard-only development of the Willamette River Project. A summary of the net present value of the scenarios over a 25-year timeframe is presented for Lake Oswego and Tigard, in Tables ES.3 and ESA, respectively. The details, limitations, and assumptions for the net present value analysis are presented in Chapter 6 and Appendix D of this Summary Report. The cost sharing allocation between Tigard and Lake Oswego, the JWC, or other regional suppliers is based on a percent capacity proportion, and may need to be revised based on the terms of the institutional arrangement agreed upon between the two governments. ' "Inflation is Set for a Strong Rebound; Steel and Rebar Prices Lead Resurgence in Construction Costs,"McGraw Hill Construction,June 2007. DRAFT-July 12, 2007 ES - 5 HAChentlLake Oswego_POR17525A.001DeliverableslDraft RepodkExecutive Summary.doc Table ES.3 Net Present Value of Lake Oswego's Supply Options (25 Year Outlook) Joint Water Supply System Analysis City of Lake Oswego and Tigard Water Service Area Lake Oswego Partner with Tigard Partner with Tigard Cost "Go it Alone" Components Scenario 2 (24 mgd) Scenario 3(32 mgd) Scenario 4 (38 mgd) Capital Costs $76,500,000 $61,500,000 $52,100,000 O&M Costs $41,300,000 $33,200,000 $31,000,000 Total Costs $117,800,000 $94,700,000 $83,100,000 Notes 1. Net Present Values are based on a 25-Year Outlook and include a discount factor of 5%, construction escalation rate of 6%, and a general escalation rate of 3.5%. Table ESA Net Present Value of Tigard's Supply Options (25 Year Outlook) Joint Water Supply System Analysis City of Lake Oswego and Tigard Water Service Area Partner with Willamette Willamette Partner with Purchase JWC With Without Lake from Cost Components Partners Partners Oswego Portland Scenario 2A Scenario 2B Scenario 2C Scenario 4 Scenario 613 Capital Costs $145,800,000 $77,900,000 $183,100,000 $80,600,000 $1,400,000 O&M Costs $17,400,000 $11,700,000 $14,600,000 $32,500,000 -- Purchased $33,600,000 $33,600,000 $33,6000,000 $27,800,000 $97,200,00 Water Costs Total Costs $196,800,000 $123,200,000 $231,300,000 $140,900,000 $98,600,000 Notes 1. Net Present Values are based on a 25-Year Outlook and include a discount factor of 5%, construction escalation rate of 6%, and a general escalation rate of 3.5%. For Lake Oswego,the lowest cost option is to develop a joint supply with Tigard at a 38 mgd capacity (Scenario 4). Tigard's lowest cost option is to purchase water from Portland via the new gravity connection with the WCSL-Tualatin Line (see Chapter 5)for nine months of the year, and to purchase water from Portland via the existing water transmission main during the peak summer months. Tigard's second lowest cost option is to partner with other regional suppliers in the development of the Willamette River Project. However, without the economies of scale associated with group development at the regional level, costs increase considerably. Therefore, the next the lowest cost option for Tigard is to develop a joint supply with Lake Oswego for 38 mgd (Scenario 4). DRAFT- July 12, 2007 ES - 6 H:1ClIenIU-ake Oswego POR17525A.00IDeliverablas0ran RaporpExecutive Summary.doc ES.3 CONSERVATION IMPACTS As part of the JWSSA,the impacts of water conservation in Lake Oswego on the overall capacity, cost, and timing of the supply scenarios was assessed. Three scenarios were considered: 1. 5% Reduction Target, resulting in 0.5% reduction In per capita demands per year for eleven years, 2. 10% Reduction Target, resulting in 1.0% reduction in per capita demands per year for eleven years, 3. 25% Reduction Target, resulting in 2.5% reduction in per capita demands per year for eleven years. Successful implementation of any of the proposed conservation strategies would enable Lake Oswego to defer the timing of the expansion of their water supply infrastructure; however, no conservation strategy will eliminate the need entirely. Therefore, Lake Oswego must still plan for the capacity expansion of their intake, raw water transmission main, treatment plant, storage, and distribution system. Depending on the conservation strategy adopted, Lake Oswego would be able to defer the timing of the expansion of supply capacity from 2017 to 2037. If supply capacity expansion is deferred beyond 2009, it is recommended that Lake Oswego implement near term reliability improvements (as identified in Scenario 1).A summary of the capital costs and timing for each of the proposed conservation strategies is presented in Table ES.5. Table ES.5 Summary of Conservation on Supply Expansion Costs and Timing Joint Water Supply System Analysis City of Lake Oswego and Tigard Water Service Area Conservation Capital Cost Implementation Timing Strategy Savings Amount Percentage Year No. of Years Deferred 5%Target N/A N/A 2017 8 10%Target N/A NIA 2025 16 25% Target $13AM 17% 2037 28 Notes: 1. Presented in November 2006 dollars. ESA INTERIM WATER SUPPLY Lake Oswego's existing emergency intertie with the City of West Linn and a possible Intertie to the City of Portland's Washington County Supply Line (WCSL-Tualatin Line) in Tigard were evaluated as possible interim peak season supplies that would allow Lake Oswego to defer near-term expansion of their existing supply system. In both cases, demands on DRAFT-July 12, 2007 ES - 7 HACIIenllLake Oswego POR17525A001DelWrables%Draft ReporllExecutive 5ummary.doc these altemative sources are such that peak season capacity would not be available to meet Lake Oswego's projected peak day needs (in excess of Lake Oswego's existing capacity); thus, they are not feasible means of deferring expansion of the Lake Oswego supply system. However, the proposed connection from the WCSL-Tualatin Line would potentially provide near-term benefits to the City of Tigard by decreasing Tigard's costs for non-peak season water purchases from Portland. If Tigard were able to purchase approximately 50% of its annual average supply from Portland through the new gravity connection, the total operating savings would be approximately 14 percent per year(actual savings will depend on required agreements with Portland and WCSL owners), resulting in a potential net savings (less construction cost)during the nine years remaining on Tigard's existing contract with Portland of approximately $1 million. In addition, Lake Oswego, Tigard and other water providers in the region would benefit by having this connection available as an emergency intertie between the Portland and Lake Oswego supply systems. Also considered as a potential source of interim supply was purchase of additional capacity from the South Fork Water Board (SFWB). As an alternative to constructing a new Lake Oswego intake, conceptual-level cost estimates were developed for purchasing raw water capacity from SFWB's existing intake on the Clackamas River. The cost for purchasing raw water intake capacity from the SFWB ranges from approximately$13 million to $16 million for Scenarios 3 and 4, respectively.This cost is dominated by the relatively large cost of the transmission pipeline and river crossing required to convey water from the SFWB intake to the Lake Oswego intake. In comparison, the cost of constructing a new Lake Oswego raw water intake for Scenarios 3 and 4 is approximately $4.4 million to $4.7 million, respectively (see Chapter 2). Given the large cost difference between the SFWB option and construction of a new intake, it is recommended that the option for purchasing raw water capacity from the South Fork Water Board be dropped from further consideration in the Joint Water Supply System Analysis. ES.5 WATER RIGHTS The State of Oregon's water rights laws are based on the prior appropriation doctrine: the first person to obtain a water right on a stream is the last to be shut-off during times of drought. Therefore, Lake Oswego's water rights on the Clackamas River have relatively high priority as compared to most other municipal water rights holders. Lake Oswego's senior water rights are the second largest on the river, at 32 mgd, and their junior water rights (6 mgd) are senior to 109 mgd of other holders rights. Recently, new regulatory requirements promulgated under House Bill 3038 (HB 3038) have modified the requirements for municipal water right extensions and the Oregon Water Resources Department's policy for perfection of municipal water rights. Under HB 3038, it is DRAFT- July 12, 2007 ES - 8 HACIleni'Lake Oswego_POR17525&OO1DellverabfeskDrafl ReportlExecufive Summary.doc expected that instream flows will be increased 20%-60% over the existing instream rights on the Clackamas River. To address the potential impacts of HB 3038, Portland State University conducted extensive modeling2 of the lower Clackamas River. This modeling indicates that in general, in typical weather years, the availability of Lake Oswego's water rights will not be impacted. This is due to two factors: 1)The timing of the City's peak demands, which typically occur in July or August, as compared to the timing of typical low stream flow, which occurs in September, and 2) Flow releases from Timothy Lake, based on existing agreements between other water rights holders and Portland General Electric. It should be noted that under the most extreme low flow conditions (based on the lowest flows on record), it is possible that Lake Oswego would need to reduce their supply by about 3.5 mgd over a two week period in the low flow season. Specifically, under average conditions (average river flows from 2000-2005 and existing withdrawals by water rights holders on the Clackamas), the PSU modeling indicates that Lake Oswego would need to reduce their withdrawals from the river by about two percent (0.5 mgd)for approximately one day per year. In extreme conditions, based on flows from 2000-2005 and assuming future demands such that all holders are fully utilizing all of their available water rights (and with releases from Timothy Lake), it is possible that Lake Oswego would need to reduce their withdrawals by about 12 percent. This would result in an average reduction for Lake Oswego of 2.6 mgd in supply over a period of 40 days. Within this 40-day shortfall period, a maximum one-day reduction of up to 18 percent (4 mgd) could occur. However, it should be noted that this very conservative condition does not consider the priority of water rights. Additionally, the total existing build-out demand projections for municipal water right holders comprise only 60 percent3 of the total existing maximum municipal rights on the Clackamas River. ES.6 ORGANIZATION AND GOVERNANCE OPTIONS As the City of Lake Oswego and the Tigard Water Service Area consider long-term water supply improvements, governance becomes a key consideration. The nature and complexity of the proposed Joint Water Supply project, and the associated significant capital investments, requires discussion and adoption of a service delivery model beyond the existing surplus water supply contract. There are five alternative governance structures for a joint water supply that could be used by the Cities: 1. An intergovernmental agreement ("IGA") 2 "Lower Clackamas River Model: Model Development, Calibration, Scenarios, Executive Summary, and Hydrodynamics,"Water Quality Research Group, Department of Civil and Environmental Engineering,Technical Report EWR-01-06-ES, October 2006. 3 It should be noted that if the current CRW applications for 96 mgd are not permitted, the build-out demand projections will be 90 percent of the maximum municipal water rights on the Clackamas River. DRAFT- July 12, 2007 ES - 9 HACIlenfU.ake Oswego_POR17525A.00113elive rablesTfraft RoporllExecullve Summary.doc 2. People's Utility District ("PUD") 3. Domestic water supply district ("Water District") 4. County Service District ("Service District") 5. Water Authority ("Water Authority"). The details on each governance structure is provided in Chapter 8. A summary and comparison of utility service delivery models is presented in Appendix G. Based on discussions with staff from both Cities, the preferred govemance structure, should a joint water supply be developed, Is an IGA, which is formed under ORS Chapter 190 by a written agreement between local governments, and approved by ordinances of each party's Council. An IGA is the simplest form of structure for water supply. Although there are some limitations, an IGA provides the most flexibility regarding the relationship between the participating entities. An IGA may be formed without a vote by the electors, the governing body of an IGA may be appointed by the participating cities, the participating entities may retain ownership in the facilities like a partnership agreement, and the agreement between the parties defines the powers of the new entity. It is also easier to withdraw from or dissolve an IGA, or to add new partners or make an amendment, than with the other governance structures. It should be noted that an IGA is limited by the inability to levy taxes or issue general obligation bonds. However, these factors are not usually major drivers in utility settings because of the ability of the entity and its underlying partners to charge utility fees and charges and system development charges. If Lake Oswego and Tigard agree to use an IGA as the basis of a joint water supply system, it is further recommended that the parties engage in a process of developing the anticipated terms of such an agreement. The list of issues identified in Appendix I of this report is intended to serve as a starting point for further discussion between the Cities. It is recommended that the financial terms of such an agreement, including fiscal authority, system ownership, and fiscal standards, be an initial priority since these terms will establish the basis for subsequent financial evaluation of the proposed joint supply system. ES.7 BENEFITS OF JOINT SUPPLY The benefits of a potential joint water supply between Lake Oswego and Tigard are presented below: COST SAVINGS Partnering with Tigard would provide Lake Oswego significant financial benefits. By jointly constructing a 38 mgd water supply system with Tigard, Lake Oswego and its ratepayers could save about$63 million in equivalent annual costs over the next 25 years, including about$23 million in one-time capital savings. DRAFT - July 12, 2007 ES 10 HAChentll.ake Oswego_POR17525A.00IDeIlverableslDreft ReportlExecutive Summary.doc Partnering will minimize and smooth future rate increases for Lake Oswego. By jointly constructing a 38 mgd water supply system with Tigard and assuming a 24mgd/14mgd (Lake Oswego/Tigard) allocation of new supply capacity, rate increases for Lake Oswego are forecasted to be increase cumulatively 56%over the next 25 years, as compared to cumulative increases of almost three times as much (148%) for the "Lake Oswego go it alone" scenario. Based on a capacity share cost allocation, the least cost options for Tigard are to purchase water from Portland via a new intertie with the WCSL-Tualatin Line or to partner with TVWD to develop a supply on the Willamette River ($98 and $123 million, respectively). However, Tigard's third lowest cost option is to partner with Lake Oswego for 38 mgd ($141 million), and would provide a supply on the Clackamas River. Although purchasing water from Portland is the least cost scenario for Tigard in the 25-year timeframe, the rate impacts of this scenario do not exhibit the same results. While the other scenarios include capital projects that can be offset with a supply SDC revenue stream, purchased wholesale water costs cannot be offset with any additional revenue source. Therefore, the resulting annual rate impacts of Tigard's water supply options are a cumulative increase of about 113% over the next 25 years to partner with Lake Oswego, 128% to partner with other regional providers on the Willamette River, or 169% to purchase water from Portland. Partnering can be the first step in a multi-step process. An agreement to form a partnership means preliminary work related to cost sharing, operating protocols, form of governance, and allocation scenarios can be initiated without burdening either City with the need to immediately finance a large capital project. WATER RIGHTS Partnering would help secure Lake Oswego's rights. Lake Oswego holds senior water rights (32 mgd) and junior water rights (6 mgd) on the Clackamas River. These rights are of relatively high priority compared with other municipal users of the river, but rights in excess of future demands may be at risk from recent increases in instream rights. Partnership with Tigard would enable Lake Oswego to secure the unused portion of their existing water rights. CONSERVATION Partnering plus water conservation would provide significant benefits to both Cities. A successful conservation program in Lake Oswego would shift a greater capacity share to Tigard. Depending on conservation savings, Tigard's share could be sufficient to completely meet its long-term build-out demands. This would result in Tigard's cost share increasing to about 70% of the cost of the supply expansion needed to meet both cities'future water demands. DRAFT- July 12, 2007 ES 11 HACllentll.ake Oswego_POR\7525A.00IDeIlverables\Draft Reporl4ExecuUve Summary.doc REGIONAL RELIABILITY Constructing an interne between Tigard and the Washington County Supply Line would save Tigard approximately$300,000 in annual operating costs and would pay for itself in about 5 years. Partnering would provide regional benefits. Lake Oswego, Tigard, and other water suppliers would benefit from connections to other regional systems for emergency backup, improved reliability and source optimization, and is consistent with the goals of the Regional Water Supply Plan. DRAFT-July 12, 2007 ES 12 HACIIMUake Oswego POR1752&k00%DellverablesIDmafl ReportWwcuUve Summery.doc Tigard Water Service Area PORTLAND SERVICE AREAS SUPPLY Name NIi41N� Rd ........ti ��N - 16 ... Tigard Water Service Boundary `f ® Tualatin Valley Water District -_---,--- -- SEP► L______==_ Tigard Water Service In TVWD d North Dakota St �� BEAVERTON ', SUPPLYG-� s¢ ru v c Barclo oDb W� t TMw— ■ � � � �4ry2� nSU�IP'PLY ■ G• St S� ull■ our Raj iC� McDonald St �` SERVED Y� BY� � ■UNINCORPORATED 1l tain Rd Bonita THE clfir OF A �..wWRD ASHINGTON TIG AS sCOUNTY *41 ■ �` ee4 e �� Durham Rd x , LAKE ■ OSWEGO ■ �� `SUPPLY ■ .�� '" MAI N IN r� Rate Summary Summary of Rates [-4—TBWSP -4--Willamette A Lake Oswego -X -Portland $75 - - $65 — - ---- -- - Aw $55 - R - — Q Q Q Q Q $45 -- --- —��- - --- -- - $25 "O Year Rate Impact Summary • Lake Oswego Expansion & Water Partnership has the lowest cumulative rate increase (89%) by 2032 • Portland Water Purchase Agreement has the highest cumulative rate increase (198%) by 2032 • Financing and growth assumptions can alter rates Rate Impact Assumptions • Isolate supply costs and potential SDC revenue stream based solely on joint supply costs • Did not consider other utility capital costs • Rate impacts are smoothed Rate Impact Assumptions • Costs escalate with general inflation � • Revenues increase with growth • Supply SDC stream assumed to be fully � available to pay debt service and meet coverage requirements • SDC based on capital cost per gallon of capacity and projected demand growth • SDC escalated annually with construction cost inflation Rate Impact Scenarios FYE 2007[a] 2008[b] 2009 2010 2011 2012 2013 2014 2015 2032 a, Annual Rate Impact 0.00% 0.001/o 12.001/o 12.00% 12.00% 12.001/o 15.00% 15.00% 15.001/o ° 0.00% 3 Cumulative Rate Impact 0.00% 0.00% 12.00% 25.44% 40.49% 57.35% 80.95% 108.101/o 139.31% 97.02% 00 Average Customer Bid[c] $ 24.83 S 26.57 $ 29.76 $ 33.33 $ 37.33 S 41.81 $ 48.08 $ 55.29 $ 63.58 " $ 52.34 w Annual Rate Impact 0.00% 0.00% 15.00% 15.00% 15.00% 20.00% 20.001/a 15.00% 10.00% 0.00% e Cumulative Rate Impact 0.00% 0.00% 15.00% 32.25% 52.09% 82.50% 119.01% 151.86% 177.04% ' 92.98% 3 Average Customer Bill[c] $ 24.83 $ 26.57 $ 30.55 S 35.14 $ 40.41 $ 48.49 $ 58.19 1 $ 66.91 $ 73.60 $ 51.27 Annual Rate Impact 0.00'/0 0.00% 12.00% 15.00% 15.001/o 8.00% 7.00% 6.00% 6.00% 0.05% 3 Cumulative Rate Impact 0.00% 0.00% 12.00% 28.80% 48.12% 59.970/671.17% 81.440% 92.320% 88.78% Average Customer Bill[c] S 24.83 $ 26.57 $ 29.76 $ 34.22 $ 3935 $ 42.50 $ 45.48 $ 48.20 $ 51.10 $ 50.16 -o Annual Rate Impact 0.00'/0 0.00% 5.00% 5.00% 5.00% 5.00% 5.00'/o 5.00% 5.001/o 3.73% A Cumulative Rate Impact 0.001/o 0.00% 5.001/6 10.25% 15.76% 21.55% 27.63% 34.01% 40.71% . 197.95% w Average Cu*mer Bid[c] $ 24.83 $ 26.57 S 27.90 $ 29.29 $ 30.76 $ 32.29 1 $ 33.91 $ 35.60 $ 37.38 $ 79.16 [a]Any FYE 2007 rate iaame is an Wp of 7%inaease already adopted by City for*is year.Both inereases included is average aateaer bill N Any HE 2008 rhe increase is on top of 7%increase keady a4w by City for this year.Both increases included i0 average cust w bill c]Based on assumed mthly usage of 10 ccf Tigard/Lake Oswego Water Partnership The City of Tigard is the water provider for the Tigard Eater Service Area (TWSA) comprised of Durham, King City, tzvo-thirds of Tigard, and the unincorporated area to the south and west of Tigard. just the Facts . . . How would this partnership work? Tigard and Lake Oswego would work together to increase the capacity of Lake Oswego's existing water system. The new system will ultimately supply 24 million gallons of water per day to Lake Oswego and 14 million gallons of water per day to Tigard. The two cities would: • Work to secure surplus water rights on the Clackamas River. �' • Jointly fund improvements to replace the river intake, expand water treatment plant capacity, construct a reservoir, and upsize transmission lines. Why do we need more water? The TWSA's current peak water demand can reach 13 million gallons a day and this number is expected to reach 20 million gallons a day by the year 2040. Current sources are not capable of meeting this increased demand for water. Where would the water come from? Water would be drawn from the Clackamas River. The source originates in the Clackamas River Basin which encompasses 940 square miles and begins in the Mount Hood National Forest. What about water quality? Finished water from this source meets and/or exceeds all federal and state drinking water standards. What will it cost? How will this affect water rates? The entire project is estimated to cost $136 million. Tigard's share of the improvements and cost to buy into Lake Oswego's existing system is estimated at $81 million. Water rates are expected to double by the year 2017. LAKE OSWEGO/TIGARD "Exploring a new water supply partnership" Intergovernmental Cooperation Agreement Concepts April 15, 2008 Shared Goals • Expanded water system to serve both communities. • Sharing capital and operating costs to reduce rate impacts. • Greater regional strength in water supply issues. • Improved system reliability and ability to respond to emergencies. • Preserving LO water rights. Background • Lake Oswego and Tigard share a long history of cooperation on water. • Agreed to jointly fund a Tigard Water Seivice Area study in summer of 2006 - retained Carollo Engineers. DRAFT ,O_ • Received Carollo Report (summer 2007) - agreed to continue working together to study options. MOU adopted December 18, 2007. Numerous meetings involving staff, consultants, and individual members of both Councils since fall 2007. Agreement Summary . No new unit of government created - IGA only • Cities commit to : -* Jointly fund and build a supply and treatment system - 2008 to 2016. • Share water from the Clackamas River: 24-mgd to LO; 14-mgd to Tigard. • Supply shortages shared equally. Shared System Components River Intake Shared System Components Water Treatment Plant } __ ryAe Yz?e: �S ya{ Shared System Components Storage Reservoir Agreement (cont. ) . Clackamas water rights retained in LO name. . Tigard acquires ownership interest in system and land in proportion to its capacity share. . Establishes schedule to bring new capacity on-line. . Excess capacity in system of one party to be leased by the other. Agreement (Cont) • Establishes existing service areas. • Acknowledges potential future service areas. • Service outside recognized service areas by mutual consent only. • Agreement does not preclude either party from pursuing other future supply options. --' VEPHENSON \ } C� w \+ gSF,p r r c i KNAUS 217 r PARK NECROSE � 3 n g cnuwrnr clue COURTNEY--a N RUSE A n17N RR ---LOAKGROVE J II2 I y DURHAM g°UTt{S110RE 3 � CD ur C iy JEAN .OVERLOOw. 'r"'� {3 Y ROYCE` O w CHILOS F Legend Streels Q ray Freeway a g Water Service Area 1-5 00 cQi\O Lake Oswego ; OStafford Triangle(Build-out) BORLAND o m River/Lake 0 0.5 Fi Ure 1.1 9 Miles y~ LAKE OSWEGO SERVICE AREA 7 Lo707fl.1-7525.ai JOINT WATER SUPPLY SYSTEM ANALYSIS CITY OF LAKE OSWEGO AND TIGARD WATER SERVICE AREA 1 L~ I - UrtrnnRcscrvc N 48 MAL Ml's �f' a 4� - F 6►APM p 0% c 1yF11D � __ Urban Rasaryo o °'I fft 48 Logand 311r-7I5 r r�� _ Fromay WAW Selvlc?ArPA j UfSzar%"r—m Ar..ae(Buld-vix :=" Urban Reserve Rir�r,Lakr = No-47 Figure 1.2 H; TIGARD WATER SERVICE AREA JOINT WATER SUPPLY SYSTEM ANALYSIS Lo507fl.2-7525.al CITY OF LAKE OSWEGO AND TIGARD WATER SERVICE AREA Agreement (Cont) . LO "managing partner" for system expansion and operations through project construction. • Costs of expansion and O&M shared in proportion to capacity ownership. Design and Construction Payments • Lake Oswego will make payments. • Tigard reimburses LO for its capacity share of costs. Agreement (Cont) . Establishes technical and oversight committees: • Technical committee: . Engineering/operations staff � from each City . Advisory to Oversight 's Committee • Oversight Committee: . 2 elected officials appointed from each City . Advisory to respective City Councils Agreement (Cont) • Some decisions will be made by each city individually: • Retail water rates • S DC's • Conservation • Some decisions will require approval by both City Councils: • New facilities • Operating budgets • Modification of the IGA Agreement (Cont) . Establishes procedures to address: • Withdrawal or Sale of Assets. • Dissolution of the Partnership. • Dispute Resolution. • Future governance structures. • New Partners. NEXT STEPS • Public process prior to adoption in late.......... June 2008. • Finalize Intergovernmental Agreement. ................, • Identify financing needs and timing 2008-2016. ........................ 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