Annual report / Central Arizona Project

              Done
Deal! CENTRAL ARIZONA PROJECT 2007 ANNUAL REPORT
To Our Constituents
Introduction
External Milestones
Internal Milestones
Financial Highlights
The CAWCD Board
02
06
10
22
34
40
07 C O N T E N T S
As we reflect on Central Arizona Project’s (CAP) accomplishments
during 2007, there are certain activities that especially
stand out as we delivered 1,700,023 acre-feet of water to our
customers. Leadership of the organization and its 450-plus
employees faced enormous challenges with strength and
determination to succeed. We are proud to recognize some
of 2007’s most important milestones that will sustain central
and southern Arizona with a reliable, cost-effective Colorado
River water supply for years to come.
In terms of external duties and responsibilities, in December
we were key participants in the completion of a Seven Basin
States Agreement for Shortage Sharing that:
• identifies the circumstances and extent
of shortages that will be shared;
• provides for the joint operation of the two major
reservoirs – Mead and Powell – to reduce the
risk and severity of shortage;
• provides for conservation and augmentation
activities within and between the upper and
lower basin states;
• has been hailed as the most significant accord
on the River since the passage of the 1922
Compact; and
• provides significant benefit to CAP and the
State of Arizona.
To our constituents 07 L E T T E R
02
04 05
The Arizona Water Settlements Act was finalized in the
courts, including a complete and final resolution of CAP’s
financial dispute with the United States. This quantifies the
benefits and obligations of both federal and non-federal
entities, concluding more than a decade of negotiation,
litigation, and legislation.
Under the amended Navajo Power Marketing Plan, CAWCD
and its partners agreed to sell to Salt River Project (SRP) a
standard block of Navajo surplus energy for the period 2012
through 2031, after expiration of the existing Four Party
Agreement. This sale, when combined with subsequent sales
of Navajo surplus energy, provides a very high probability of
providing CAWCD’s complete annual debt repayment.
The Yuma Desalting Plant (YDP) was operated for approxi-mately
three months by the Bureau of Reclamation as a
demonstration of the YDP’s operational capability, thanks
to sustained leadership from CAP over the past five years.
CAP, Bureau of Reclamation (BOR) and Western Area
Power Administration (WAPA) reached agreement on the
resolution of long-standing transmission issues which will
provide for improved cost containment and maintenance
of CAP transmission facilities.
Finally, we saw the dedication of the first “on-the-ground
facilities” associated with the Multi-Species Conservation
Program – the most significant mitigation plan yet imple-mented
in the United States, ensuring a 50-year period of
David S WilsonJr. S U S A N B I T T E R S M I T H PRESIDENT, CAWCD BOARD OF DIRECTORS D A V I D S . “ S I D ” W I L S O N J R . GENERAL MANAGER, CAP SusanBitter Smith
operations for power and water benefits on the Colorado
River while meeting environmental compliance requirements.
But not all efforts were directed to external matters.
Internally, CAP’s leadership made significant progress as
we dealt with many challenges.
Maintenance Excellence made strides, earning a self-assessment
score of 650, an increase of 50 points over
the previous assessment and consistent with our goals of
continued improvement.
CAP moved a record-setting volume of water and set a
record in water delivered on behalf of the Arizona Water
Banking Authority.
Safety continued to be a priority. Mark Wilmer Pumping
Plant celebrated 1,000 injury-free days and the CAPS
Committee and Employee Safety Committee were replaced
by one joint committee.
Finance completed our first two-year budget period and
developed our second two-year budget.
Three departments successfully migrated their files to
Livelink and co-workers from various departments have
joined pathways teams to help with the transition to
Livelink which improves our records management.
A record number of co-workers participated in the 2007
Health Fair.
Employees increased their contributions to Charities of
Choice by more than 10 percent over their 2006 donations.
Equipment failures at Mark Wilmer were dealt with swiftly
and professionally to ensure our continued water delivery
reliability.
Our Apprenticeship Program received statewide recognition
for its accomplishments.
Thanks to all of our elected Board members, our employees,
customers and stakeholders for collaborating with us to
make 2007 a truly exceptional year. Next year, and beyond,
we will continue to deliver water and improve our reputation
as a regional water supplier, manager and problem solver
with the best interests of Arizona in mind.
<
An acre-foot of
water is about
326,000 gallons.
CAP delivered
more than 1.7
million acre-feet
in 2007.
Susan Bitter Smith
David S. “Sid” Wilson, Jr.
It was a cold November day
in 1922 when delegates met
at Bishop’s Lodge in Santa Fe,
New Mexico to discuss and
eventually create the Colorado
River Compact which is
considered to be one of the
most significant and defining
documents regarding the manner
in which the Colorado River
is managed.
Even though there had been months of negotiations leading up
to the meeting, it still took them 15 days to work out the final
details and, on Nov. 24, 1922, the Compact was signed
in the Palace of the Governors in Santa Fe. 07 I N T R O D U C T I O N
>
RIGHT:
Herbert Hoover
presides over the
signing of the
Colorado River
Compact in
November 1922.
The agreement
divided Colorado River
water between
upper and lower
basin states.
BOTTOM:
Workmen using
a compressed air
vibrator for
compacting concrete
adjacent to forms.
1934
Photos Courtesy U.S. Department of Interior, Bureau of Reclamation
<
TOP:
View of Boulder Dam and the intake towers. 1938
MIDDLE:
Boulder Canyon. A special water tank beneath the utility tower. 1944
BOTTOM:
View looking toward the downstream toe of the dam. 1934
>
Boulder Canyon.
View from the top
of the dam valve
houses with water
discharging from
84-inch valve.
Done Deal! 1938
08 09
It was 85 years later, on a cold December day in 2007
when officials met in Caesar’s Palace Resort and Casino in
Las Vegas, Nevada, and signed the Colorado River Interim
Guidelines for Lower Basin Shortages and the Coordinated
Operations for Lake Powell and Lake Mead. The agree-ment,
also known as the Seven Basin States Agreement for
Shortage Sharing, is the second-most significant agreement
governing the use and management of Colorado River water.
Throughout the intervening 85 years there were agree-ments
among the states governing the river. But the
bookends, the 1922 Compact and the Seven Basin States
Agreement of 2007, definitely are the most important.
In 1922, the Compact apportioned, or divided, the waters
of the Colorado River between the Upper and Lower Basin
states. The Upper Basin states—Colorado, Utah, New
Mexico and Wyoming—get half of the projected 15 million
acre-feet of water available each year. Arizona, California
and Nevada—the Lower Basin states—also received 7.5
million acre-feet annually.
Through the years disputes and problems arose among
the states and were settled, often by agreements and,
occasionally, the judicial system.
In 1928, the Boulder Canyon Project Act was approved
and it ratified the 1922 Compact and also authorized the
construction of Hoover Dam. It also apportioned the Lower
Basin states annual 7.5 million acre-feet of water among the
three states, giving California 4.4 million acre-feet, Arizona
2.8 million acre-feet and Nevada 300,000 acre-feet.
The California Seven Party Agreement of 1931 helped
settle the state’s internal disputes over how its share of the
Colorado River was divided.
The river’s problems and bickering did not stop for World
War II.
In 1944, the U.S. signed the Mexican Water Treaty which
committed 1.5 million acre-feet annually to our neighbors
south of the border.
The Upper Colorado River Basin Compact of 1948 divided
the Upper Basin state’s water rights and the Colorado River
Storage Project of 1956 provided for the construction of Glen
Canyon, Flaming Gorge, Navajo and Curecanti dams for
river regulation and power production.
In 1963, Arizona v. California was decided in the U.S.
Supreme Court and it upheld the division of water among
the Lower Basin states; effectively ending a long standing
dispute between the two states.
Central Arizona Project was authorized as part of the
Colorado River Basin Project Act of 1968 and in 1970 the
Criteria for Coordinated Long-Range Operation of the
Colorado River Reservoirs provided for the reservoir opera-tions
in the Upper and Lower Basin states and set condi-tions
for water releases from Lake Powell and Lake Mead.
The U.S. agreed to reduce the salinity of water being
delivered to Mexico in 1973 when it agreed to Minute 242
of the U.S.-Mexico International Boundary and Water
Commission of 1973.
The Colorado River Basin Salinity Control Act of 1974
authorized salinity control projects, including the Yuma
Desalting Plant, to improve the river’s quality.
There also were a series of agreements and discussions
between 1974 and 2007’s action, including the Quantification
Settlement Agreement which was designed to “wean”
California off its use of more than its share of Colorado River
water. California, for years, was using an annual average of
5.2 million acre-feet and the agreement was designed to get
the state back to its legal 4.4 million acre-foot allocation.
Then came the drought…and it did not go away.
The sustained drought forced the seven states to seri-ously
consider and decide how to deal with shortages on the
river. The handling of the shortage created a series of issues
and disputes that seemed to drag on until the Secretary
of the Interior essentially said that the seven states could
develop criteria for dealing with a potential shortage, or the
federal government would develop and impose them.
Cooperation immediately improved and, in December
2007 in Las Vegas, the second-most significant river agree-ment
was signed, the Seven Basin States Agreement.
With the stroke of seven pens a new, historic agreement
was sealed, ending years of threats, complaints, arguments,
disagreements and contentious meetings. Representatives of
the seven states will continue to maintain the hard-won rela-tionships,
understanding and partnerships.
Done Deal!
TOP:
The CAP canal
is 80 feet wide,
24 feet deep and
the water
travels about
4 miles per hour.
BOTTOM:
The impact
of drought is
minimized
because of CAP.
ABOVE:
U.S. Secretary
of the Interior Dirk
Kempthorne signed
a sweeping interstate
water sharing
agreement during
the 2007 Colorado
River Water Users
Association meeting.
The document signed
by the Secretary
establishes guidelines
for determining
surpluses and
shortages of river
water and for
operating the key
Lake Mead and Lake
Powell reservoirs.
BELOW:
Colorado River.
10
07 E X T E R N A L
M I L E S T O N E S
ABOVE: Seven states,
Indian nations and
25 million people share
Colorado River water.
RIGHT: Hoover Dam
creates Lake Mead,
one of the two most
critical Colorado River
reservoirs to Arizona.
Certainty.
The major accomplishment of 2007 for CAP’s Board and
management was to secure certainty in its water entitlement
and in its finances.
One key to achieving certainty was completing the Seven
Basin States Agreement for Shortage Sharing. That agree-ment,
signed in December, formalized rules among the states
to cooperate during the ongoing drought by establishing a
series of shortage triggers based on water levels in Lake
Mead, allows states to conserve and bank the water saved in
Lake Mead, calls for Lake Mead and Lake Powell to be oper-ated
in tandem and calls for finding new ways to stretch the
water supply through desalination of groundwater, removal of
non-native plants, weather modification and improved system
management.
“This is the most important agreement among the seven
basin states since the original 1922 compact,” said Interior
Secretary Dirk Kempthorne at the signing ceremony.
Arizona Department of Water Resources Director Herb
Guenther echoed Secretary Kempthorne.
“It’s the beginning of a new era of water management,”
Guenther said.
The agreement, which is in effect through 2026, sets out
the timing and amount of water lost by Arizona if a shortage
is declared on the river.
12 13
In order to get Congress to authorize construction of
Central Arizona Project—the 336-mile-long system that brings
Colorado River water to Maricopa, Pinal and Pima counties—
the state had to agree to accept junior water rights. That means
in time of shortage, California could take its full 4.4 million
acre-foot allocation before CAP takes any of its 1.5 million
acre-foot allocation.
The shortage will be based on the water level in Lake Mead.
Should the water level in Mead drop to a level between 1,075
to 1,050 feet above sea level, Arizona’s share of water would
be reduced by 320,000 acre-feet. If the level falls to a level
between 1,050 and 1,025 Arizona would lose 400,000 acre-feet.
Should the level reach 1,025 or lower, the reduction is 480,000
acre-feet.
Any shortage to Arizona would be absorbed by agricultural
users and the cities would continue to receive their normal
supplies.
To help delay or offset Lower Basin shortages, the agree-ment
also calls for conjunctive management of Mead and
Powell. That means the lakes will be operated in tandem.
The Lower Basin states also can impose conservation
measures and “bank” or leave the saved water in Lake Mead
for later use. This also will help delay reaching the trigger
points for a shortage declaration.
Finally, the states agreed to enhance the water supply as
much as possible. Cloud seeding will be done in the winter.
CAP contributed $60,000 to the effort in 2007 and will give an
additional $100,000 in 2008. The states will also cooperate in
removing non-native species and replacing them with native
species. For example, replace the high water use tamarisk
tree with cottonwoods, which use less water. CAP is scheduled
to contribute $40,000 to this effort in 2008.
Although CAP’s Board and managers were heavily
involved in the Seven Basin States agreement, that wasn’t
the only major accomplishment of 2007. CAP officials helped
launch and dedicate the first Multi Species Conservation
The “bathtub rings” or white lines clearly
show the effects of the drought on Lake Mead
(above) and Lake Powell (left). One solution
is to augment the supply of water by cloud
seeding (right) to generate more snow.
14 15
Program (MSCP) site, the Imperial Ponds Conservation Area
Project near Martinez Lake northeast of Yuma. The site is a
key step to implementing the Lower Colorado MSCP program
that involves 720,000 acres in Arizona, California and Nevada.
“We’re very pleased to be a partner in this effort,” said
CAWCD President Susan Bitter Smith. “It is an important
and very good example of how collaborative projects can be
successful.”
Bitter Smith, along with Bureau of Reclamation
Commissioner Robert Johnson, was among the approximately
65 dignitaries dedicating the Imperial Ponds project. The
project includes six large ponds at the Refuge that provide
80 acres of new habitat for the razorback sucker and bonytail,
both endangered fish that are native to the lower Colorado.
Over the next few years, a 12-acre marsh will be added to
provide habitat suitable for marsh birds and waterfowl, and
34 acres of native cottonwood-willow trees will be planted to
create habitat for threatened, endangered and other bird species.
The MSCP is a 50-year conservation plan that will allow
Arizona to comply with the Endangered Species Act and
protect 26 species and their habitat in the Lower Colorado
River Basin. CAP’s Board has agreed to pay approximately
$52 million over 50 years as its share of the cost of the program.
Implementation of MSCP will allow water and power users
to continue to operate without interruptions because of endan-gered
species issues. The program includes protection for six
endangered and threatened species: the Yuma clapper rail,
the southwestern willow flycatcher, the desert tortoise, the
bonytail, the humpback chub, and the razorback sucker.
The program covers Arizona activities that include on-going
diversions of Colorado River water by users such as
CAP, future diversions, including transfers of Colorado River
entitlements and changes in the points of diversion
of up to 200,000 acre-feet of water per year, and on-going
and future use of hydropower from Hoover,
Parker and Davis dams.
The MSCP was implemented in 2005 and will
continue until 2055. The MSCP already has
ABOVE:
Salamander,
Sonoran tiger
(Ambystoma
tigrinum
stebbinsi)
BELOW:
Ocelot (Leopardus
pardalis)
Arizona endangered species
TOP LEFT:
Owl, Mexican spotted
(Strix occidentalis lucida)
TOP RIGHT:
Chub, Yaqui
(Gila purpurea)
ABOVE:
Jaguarundi, Sinaloan
(Herpailurus yagouaroundi
tolteca)
RIGHT:
Ferret, black-footed [XN]
(Mustela nigripes)
Photo by Bill Radke
Photo by Richard Seaman
Photo by Zooillogix
Photo by Arizona Game and Fish
Photo by DK Images
16 17
provided Endangered Species Act coverage for the shortage
guidelines adopted in December.
CAP officials also worked tirelessly to complete the neces-sary
conditions to implement the Arizona Water Settlements
Act in 2007. The Act ensures the CAP repayment settlement
giving certainty to CAP of its water supply and repayment
obligation.
Among other things, the act, negotiated over many years,
provides for 47 percent of CAP water going to Indian uses and
directs the Secretary of the Interior to reallocate 65,647 acre-feet
of water to municipal and industrial (M&I) users.
The Settlements Act also calls for amending the Navajo
Power Marketing Plan.
CAP has 14 pumping plants which lift the Colorado River
water nearly 2,900 vertical feet during its 336-mile journey
from Lake Havasu to south of Tucson. CAP’s pumping plants
use electricity which comes from several sources, including the
Navajo Generating Station in northern Arizona, Hoover Dam,
New Waddell Dam and power purchases on the open market.
The Navajo Power Marketing Plan, a responsibility
of BOR, describes how to market power from the Navajo
Generating Station in excess of the needs of CAP. In the early
1990’s, BOR, Western Area Power Administration (WAPA)
and CAP entered into two contracts to sell power to Salt River
Project. In 1994, these contracts were wrapped into the Four
Party Agreement, which expires in 2011. The parties in the
agreement are the BOR, CAP and WAPA as sellers and Salt
River Project (SRP) as purchaser.
Since the Settlements Act calls for amending the Navajo
Power Marketing Plan, BOR completed its required consulta-tion
with CAP, the State of Arizona and WAPA and secured
approval within the Department of Interior amending the plan.
Consistent with terms and conditions of the Amended
Navajo Power Marketing Plan; BOR, CAP and WAPA sold a
portion of Navajo Surplus for a term of 20 years beginning
in 2012, after the Four Party Agreement expires. This sale is
The Navajo Generating Station in Page, AZ (above)
produces almost all the electricity needed by CAP
to move Colorado River water into central Arizona.
CAP also produces hydropower at Lake Pleasant’s
Waddell Dam (below).
18
expected to contribute in excess of $25 million annually which
will be applied to repayment of CAP construction costs.
Another long-term issue that made progress in 2007 was
the Yuma Desalting Plant (YDP) 90 day operating test. In
addition to testing the plant’s operational viability, water
sampling was done to provide data on any potential impacts
of the YDP operations. The Bureau of Reclamation (BOR)
is analyzing the test run and preliminary results and their
findings will soon be released.
With all that activity, CAP still managed to deliver
1,700,023 acre-feet of water to its customers in Maricopa,
Pima and Pinal counties. CAP has four groups of customers:
municipal and industrial (M&I), agriculture, Indians and
recharge.
In addition to charging for each acre-foot of water delivered,
CAP also collects an ad valorem property tax of 12 cents per
$100 of assessed valuation in the three county service area.
That tax is divided into two parts. One part, 4 cents per $100
of assessed valuation, goes to the Arizona Water Banking
Authority (Water Bank) and the funds are used to purchase
and store water underground. The rest of the tax, 8 cents per
$100 of assessed valuation, goes to CAP. In 2007 the CAP
Board voted to reduce that tax by 2 cents per $100 of assessed
valuation so in 2008, the tax will be 6 cents per $100. The 4 cent
tax for water storage will remain the same for a total ad valorem
property tax of 10 cents per $100 of assessed valuation.
Some of the water that does not go to the cities, agricultural
users or Indians goes to the Water Bank. The Water Bank then
recharges or stores the water underground as a hedge against
future drought. In times of shortage, that stored water will be
pumped back out of the ground and delivered to CAP customers.
In 2007, 260,868 acre-feet of water was stored in under-ground
storage facilities on behalf of the Water Bank. In 2006,
CAP opened the Tonopah Desert Recharge facility in Maricopa
County which is permitted to store more than 100,000 acre-feet
of water each year. In addition, CAP also operates the
Avra Valley, Lower Santa Cruz and Pima Mine Road recharge

Indian: 154,227 acre-feet
M&I: 876,791 acre-feet
AG: 408,137 acre-feet
2007 Total Water Deliveries: 1,700,023 acre-feet
Direct Recharge: 260,868 acre-feet
52%
24%
15%
9%
CAP has a total of six recharge projects in Pima
and Maricopa counties and is going to begin
construction of a seventh facility in 2008.
20 21
projects in Pima County. In Maricopa County, CAP operates
the Agua Fria, and Hieroglyphic Mountain recharge projects.
The CAP Board authorized creation of CAP’s seventh recharge
facility; the Superstition Mountains recharge facility near
Queen Creek. It is slated to begin construction in 2008. When
it is completed, in 2009, it will have a capacity to store about
50,000 acre-feet of water each year.
CAP also made deliveries on behalf of the Central Arizona
Groundwater Replenishment District (CAGRD).
Established in 1993, the CAGRD is designed to give
homeowners (member lands) and water providers (member
service areas) who have no direct access to CAP water an
assured water supply. Simply put, the CAGRD replaces
(replenishes) groundwater pumped to supply its members.
In 2007, CAGRD enrolled 62 member land subdivisions
for a total of 24,100 homes giving it a total member land
enrollment since 1995 of 1,050 subdivisions representing
249,000 homes. In 2007 CAGRD also revised its member
service area agreement with Johnson Utilities and enrolled
the Town of Gilbert as a new member service area,
giving CAGRD a total of 23 member service areas. The
CAGRD’s replenishment obligation for 2007, which is
based on the groundwater pumped by its members in 2006,
is 39,855 acre-feet.
With the Seven States Agreement, the Settlements Act,
progress on MSCP at Imperial Ponds, the successful test
of the YDP and more than 1.7 million acre-feet of water
delivered in 2007, it was a busy year…and one that ended
with a Done Deal!
ABOVE:
The Tonopah
Desert Recharge
facility in
Maricopa County
is permitted
to store more than
100,000 acre-feet
of water each year.
22
External issues and relations with other states and water
organizations were not the only thing occupying CAP’s Board
and management. Internal issues also presented a series of
challenges as the organization continues to evolve and change
to meet the needs of CAP customers and Arizona’s residents.
There were several new initiatives by the CAP Board of
Directors, including the creation of a Public Policy Committee.
The Committee, made up of Board members, recommends
positions on legislation and other policy issues to the full Board.
The legislation which is carefully tracked and considered
by the committee deals with both state and federal matters.
In addition, the Board aggressively opposed the Oberstar
bill which, if approved, would greatly expand the role of the
U.S. Corps of Engineers with respect to how to determine
“waters of the US” and change the Clean Water Act. Approval
of the bill would severely impact CAP operations by limiting
CAP’s ability to move water from the Colorado River into Lake
Pleasant for storage.
The Board also created and began leading a public partici-pation
process to determine the appropriate entity or entities
to obtain new water supplies for central Arizona. The process,
which brings together virtually all parties interested in water
and where the “next bucket” of water will come from are involved
in the process. Meetings have begun and it will be many months
before any recommendations are made to the full Board.
07
>
Lake Pleasant,
created by the
construction
of New Waddell
Dam, is the
storage reservoir
for CAP.
I N T E R N A L
M I L E S T O N E S
CAP adopted
Maintenance
Excellence (ME)
several years ago
to provide employees,
such as those
pictured here,
with a safe work-place
that assures
reliability and
improves CAP’s
efficiency.
24 25
In order to continue and increase CAP’s operating avail-ability
(87 percent in 2007); CAP adopted a program called
Maintenance Excellence (ME) several years ago. It may sound
like another corporate buzzword, but ME is a strategic system
for organizing and managing an effective maintenance program
for the system’s 336-mile-long aqueduct which includes 14
pumping plants.
The premise behind ME is this: If you can predict, orga-nize,
plan, and schedule your maintenance activities, you will
improve safety, assure reliability, minimize failures, maximize
asset utilization, improve labor efficiency, and ultimately
increase your bottom line; i.e., reliable cost effective delivery
of the CAP water supply.
It is important to realize that, although costs will decrease,
ME is not a cost-cutting measure, nor is it intended to reduce
the size of the workforce. On the contrary, ME will “right-size”
the workforce by reassigning people and resources from reac-tive
to proactive and predictive activities.
ME is not a run-to-fail program. Run-to-fail is simply one
of three strategies within the ME model. There are three ways
to approach maintenance, depending on the asset. Predictive
Maintenance is a condition-based approach that uses data to
determine when to do preventative maintenance on a piece
of equipment. Preventative Maintenance is a calendar-based
approach that schedules PMs based on a rotation cycle,
regardless of the condition of the equipment. Run-to-fail is a
cost/benefit approach that eliminates the maintenance per-formed
on a piece of equipment and simply replaces it when it
fails. Run-to-fail is the strategy most of us use on the TV that
ME
26 27
we have in our home. Although it may be one of our more valu-able
assets, we spend little time or effort maintaining it. When
it breaks, we buy a new one. Any other strategy would be silly.
We would not, however, consider that same strategy for our
cars. Different equipment, different strategy.
Preventative maintenance is the foundation of any effective
maintenance program, and getting it right requires solid
collaboration between the engineers who develop the processes
and the craftsmen who do the work.
However, in 2007 CAP determined during an ME assessment
that this collaboration wasn’t what it could be. Workers in the
field felt they had no input and, as one anonymous employee
later put it, “if you want to drive ME from the field, you have to
move the steering wheel to the field.”
ME leadership decided to take heed by launching the
Preventative Maintenance Optimization (PMO) program.
PMO is an effort to improve preventative maintenance (PM)
procedures by getting field employees involved. It’s designed
to utilize and leverage the knowledge and experience of CAP’s
craftspeople.
The PMO group is comprised of four teams, each consisting
of a team leader, an administrative assistant, the craftspeople
who perform the PM, the supervisor, the maintenance engineers,
and the Safety Department. Their collective goal is to write a
procedure-based PM that is accurate, consistent, and site-specific.
The teams began at four pumping plants, Twin Peaks,
Brady, Hassayampa, and Mark Wilmer. They determined
the best procedures available for their respective plant. The
Engineers do some foundation work, and then the procedure
Preventative
maintenance
is the foundation
of any effective
maintenance
program and
getting it right
requires solid
collaboration
by the
employees.
28 29
goes to the plant supervisor and his crew for review. Once it’s
marked up, it goes back to the PMO group where all involved
decide what changes should be adopted.
There are two significant improvements in the new proce-dures.
First, while the old procedures were grouped by task,
the new ones are sequential. The second difference is that all
the potential safety hazards are embedded as part of the PM
rather than listed in a separate Job Safety Analysis.
Standards such as hard hats or steel-toed boots are not listed
in the procedures so they do not become watered down. Only
the unexpected or unusual hazards are identified, keeping the
procedures meaningful and site-specific.
Once the procedure is complete and accurate, it is stored
online in a program called Livelink so it can be pulled up when
the PM comes up in the maintenance rotation.
Livelink is a fully operational enterprise content manage-ment
system that employees are starting to use to migrate
legacy documents (documents that already exist) and to manage
official content, forms, and drawings. To make the program
more effective, five teams were created in 2007 to help employees
utilize Livelink.
The CAP Communications Group also excelled in 2007 by
producing a series of educational video programs for a variety of
audiences. The videos dealt with everything from CAP 101, an
introduction to CAP, to a series of three videos dealing with the
complicated and complex world of power generation, acquisition
and transmission.
An inside (right) and
outside (opposite page)
look at one of CAP’s
14 pumping plants
that move Colorado
River water 336 miles.
31
Students became engaged directly with CAP with the
second H2O4U online educational competition that teaches
students about Arizona water and water issues. In its initial
year, there were about 350 students entered into the contest.
In 2007, there were about 2,500 entries into H2O4U.
The initial competition in 2006 awarded one winner in
each of the three counties with a $1,000 scholarship and a new
computer and monitor for their school. In 2007, H2O4U was
expanded to include high school students. Two winners per
county were awarded a $1,000 scholarship and their schools
received a new computer and monitor.
CAWCD Director Jim Hartdegen
(left) awarded a $1,000
scholarship to one
of the H2O4U winners and
a computer and monitor to his
school. Screen shots (right)
of the H2O4U contest.
07
32 33
CAP’s Community Investment Program
continues to be an integral part of CAP’s overall
goal to support water education programs in the
communities it serves. In 2007, the program drew
more applications than any previous year.
Twice each year, CAP awards $25,000 in grants
for a total of $50,000 per year. The grants, which
are up to $5,000 each, are awarded to non-profit
organizations that provide public programs to
educate people of all ages about water and environ-mental
resources throughout southern and central
Arizona. The recipients are from CAP’s three county
service area, Maricopa, Pinal and Pima counties.
For details about grants or how to apply for
funding, visit the Charitable Contributions link
on CAP’s website at www.cap-az.com.
2007
Community
Investment
Program
<
Grants awarded
through CAP’s
Community
Investment Program
allow students and
adults to spend time
studying water
resource issues
in central and
southern Arizona.
I N T E R N A L
M I L E S T O N E S
07 F I N A N C I A L
H I G H L I G H T S
The following discussion provides an overview of the 2007 financial activities for the Central Arizona Water
Conservation District (CAWCD or District) and reflects changes in financial position for the current year.
• Assets exceeded liabilities (net assets) at the end of 2007 by $378.6 million.
• Total net assets increased by $95.5 million in 2007.
• Total revenues increased $42.2 million in 2007 from 2006.
• Total expenses increased $5.2 million in 2007 from 2006.
The District’s activities are accounted for using the accrual method and incorporate the requirements of
GASB Statement No. 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments.
Total Assets
In 2007, total assets increased $109.4 million due to several factors. The largest component of the District’s
capital assets is the permanent service right (PSR), net of accumulated amortization. The PSR (net)
decreased from $1.4 billion in 2006 to $1.37 billion in 2007. The PSR represents the District’s right
to operate the Central Arizona Project (CAP) system and collect revenues from operations, for which the
District has incurred a repayment obligation to the United States. While capital assets grow annually as a
result of ongoing capital projects, such additions are presently more than offset by amortization of the PSR,
which is approximately $30 million per year. As a result, net capital assets tend to decrease each year.
Other asset categories include cash, receivables and other current assets, restricted and unrestricted reserves
and investments, funds held by or advanced to the federal government, and agriculture water rights. In 2007,
the cash and investments increased $42.9 million due to an increase in funds held on behalf of Arizona
Water Banking Authority (AWBA), an increase in Central Arizona Groundwater Replenishment District
(CAGRD) cash equivalents and restricted income, and back capital charges and interest related to the
reallocation of 65,647 acre-feet of municipal and industrial (M&I) water resulting from the Arizona Water
Settlement Act (AWSA). Funds held by or advanced to the federal government decreased $6.2 million
resulting from lower land sales and increased coal expense at the Navajo Generating Station. These were
partially ofset by the sale of sulfur dioxide (SO2) credits.
As part of the AWSA, the District agreed to make future federal debt payments owed by non-Indian
agricultural districts that relinquished their CAP subcontract entitlements in accordance with the AWSA.
The total amount of debt for which CAWCD will ultimately be responsible is $78.1 million. CAWCD’s first
payment will not be due until 2027. CAWCD anticipates that it will recover the full amount of its obligation
from M&I water users to whom the relinquished CAP water is reallocated.
(dollars in millions) 2007 2006 change
Capital Assets:
Permanent service right, net $ 1,369.7 $ 1,400.1 $ (30.4)
Property and equipment, net 87.1 77.7 9.4
Other Assets:
Cash and investments 356.6 313.7 42.9
Funds held by/advanced to federal gov’t 39.5 45.7 (6.2)
Agriculture water rights 78.1 – 78.1
Other 59.3 43.7 15.6
Total assets $ 1,990.3 $ 1,880.9 $ 109.4
central arizona water conservation district
Fi n a n c i a l H i g h l i g h t s f o r y e a r e n d e d d e c e m b e r 3 1 , 2 0 0 7
central arizona water conservation district
Fi n a n c i a l H i g h l i g h t s
f o r y e a r e n d e d d e c e m b e r 3 1 , 2 0 0 7
34 35
Invested in capital assets, net of related debt, increased $36.8 million in 2007 from 2006. This increase reflects
that the District is paying of the debt faster than the associated amortization on the PSR and the reduction in
debt associated with the redemption of the Series B bonds and paying of the Series A 1990 bonds.
Restricted net assets decreased $10.7 million in 2007 due to the redemption of the Series B contract revenue
bonds.
Unrestricted net assets increased $69.4 million primarily due to additional revenues of $43.6 million for the
reallocation of 65,647 acre-feet of back capital charges and interest associated with the AWSA.
Total Revenues
The District’s principal sources of revenues are water delivery O&M charges, water service capital charges,
power and BDF revenues, property taxes, interest earnings and other revenue. Total revenues for 2007
increased $42.2 million from 2006. The majority of the variance is associated with the reallocation of
65,647 acre-feet of M&I water resulting from the AWSA. The revenue for back capital charges
($31.5 million) and interest income ($12.1 million)
was recorded in 2007. In addition, property taxes
increased in 2007 due to higher assessed valuations,
net of a reduction in combined ad valorem tax rates
from $0.12 per $100 of assessed valuation to $0.10.
This is ofset by lower water O&M charges and power
and BDF revenues. Power and BDF revenues were
lower in 2007 resulting from land sales of $18.9
million that occurred in 2006, but did not happen
in 2007. However, $10.8 million of SO2 credits
were sold in 2007, which did not occur in 2006.
(dollars in millions) 2007 2006 change
Operating revenues
Water O&M charges $ 108.8 $ 111.9 $ (3.1)
Water service capital charges 46.7 19.3 27.4
Power and other BDF revenues 64.1 70.3 (6.2)
Reimbursements & other 14.8 13.3 1.5
Total operating revenues $ 234.4 $ 214.8 $ 19.6
Nonoperating revenues
Property taxes $ 57.0 $ 51.2 $ 5.8
Interest income & other 31.8 15.0 16.8
Total nonoperating revenues $ 88.8 $ 66.2 $ 22.6
Total revenues $ 232.2 $ 281.0 $ 42.2
􀁕􅔀􀁐􅀀􀁕􅔀􀁂􄈀􀁍􄴀􀀡􂄀􀁓􅌀􀁆􄘀􀁗􅜀􀁆􄘀􀁏􄼀􀁖􅘀􀁆􄘀􀁔􅐀
􀀥􂔀􀀲􃈀􀀳􃌀􀀱􃄀
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􀀥􂔀􀀹􃤀􀀱􃄀
􀀥􂔀􀀷􃜀􀀱􃄀
􀀥􂔀􀀵􃔀􀀱􃄀
􀀥􂔀􀀳􃌀􀀱􃄀
􀀥􂔀􀀡􂄀􀀱􃄀
􀁘􅠀􀁂􄈀􀁕􅔀􀁆􄘀􀁓􅌀
􀁐􅀀􀀧􂜀􀁎􄸀
􀁤􆐀􀁢􆈀􀁱􇄀􀁪􆨀􀁵􇔀􀁢􆈀􀁭􆴀
􀁤􆐀􀁩􆤀􀁢􆈀􀁳􇌀􀁨􆠀􀁦􆘀􀁴􇐀
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􀁣􆌀􀁥􆔀􀁧􆜀
􀁕􅔀􀁢􆈀􀁹􇤀􀁦􆘀􀁴􇐀 􀁪􆨀􀁯􆼀􀁵􇔀􀁦􆘀􀁳􇌀􀁦􆘀􀁴􇐀􀁵􇔀􀀡􂄀􀀧􂜀
􀁰􇀀􀁵􇔀􀁩􆤀􀁦􆘀􀁳􇌀
􀀥􂔀􀀡􂄀􀁎􄸀􀁊􄨀􀁍􄴀􀁍􄴀􀁊􄨀􀁐􅀀􀁏􄼀􀁔􅐀
􀀲􃈀􀀱􃄀􀀺􃨀 􀀲􃈀􀀲􃈀􀀳􃌀
􀀳􃌀􀀱􃄀􀀱􃄀􀀸􃠀
􀀳􃌀􀀱􃄀􀀱􃄀􀀷􃜀
􀀵􃔀􀀸􃠀
􀀲􃈀􀀺􃨀
􀀳􃌀􀀺􃨀
􀀷􃜀􀀵􃔀 􀀸􃠀􀀱􃄀
􀀶􃘀􀀸􃠀 􀀶􃘀􀀲􃈀 􀀵􃔀􀀷􃝣
central arizona water conservation district
Fi n a n c i a l H i g h l i g h t s f o r y e a r e n d e d d e c e m b e r 3 1 , 2 0 0 7
Total Liabilities
Total liabilities increased by $13.9 million in 2007 from 2006. The largest component of the District’s
long-term liabilities is the federal repayment obligation. In 2007, as part of the AWSA, the District has
incurred a liability of $78.1 million for the non-Indian agriculture water rights to 87,269 acre-feet.
Generally, long-term liabilities will decrease each year as the repayment obligation and revenue bonds are
paid of. The long-term federal repayment obligation decreased $25.2 million in 2007 from 2006 due
to the annual scheduled payments. In addition, contract revenue bonds decreased from $54.4 million in
2006 to $27.7 million in 2007 as the result of paying of the bond debt. The Series B Bonds were redeemed
and the Series A 1990 revenue bonds were paid of during 2007.
Other liabilities include payables, accrued interest, and current principal obligations. Overall, other
liabilities decreased $12.7 million in 2007 from 2006 primarily due to lower interstate water banking
deliveries and over-threshold energy payables.
Total Net Assets
As of December 31, 2007, net assets were $378.6 million, an increase of $95.5 million from 2006.
(dollars in millions) 2007 2006 change
Long-Term Liablilities:
Repayment obligation $ 1,371.5 $ 1,396.7 $ (25.2)
Contract revenue bonds 27.7 54.4 (26.7)
Non-Indian Ag 9(d) debt 78.1 – 78.1
Other 7.6 7.2 0.4
Other liabilities 126.8 139.5 (12.7)
Total liabilities $ 1,611.7 $ 1,597.8 $ 13.9
(dollars in millions) 2007 2006 change
Assets
Capital Assets $ 1,456.9 $ 1,477.8 $ (20.9)
Other Assets 533.4 403.1 130.3
Total assets 1,990.3 1,880.9 109.4
Liabilities
Long-term liabilities 1,484.9 1,458.3 26.6
Other liabilities 126.8 139.5 (12.7)
Total liabilities 1,611.7 1,597.8 13.9
Net Assets
Invested in capital assets, net of related debt 19.2 (17.6) 36.8
Restricted 52.9 63.6 (10.7)
Unrestricted 306.5 237.1 69.4
Total net assets 378.6 283.1 95.5
Total liabilities and net assets $ 1,990.3 $ 1,880.9 $ 109.4
central arizona water conservation district
Fi n a n c i a l H i g h l i g h t s f o r y e a r e n d e d d e c e m b e r 3 1 , 2 0 0 7
36 37
Change In Net Assets and Ending Net Assets
Net assets increased $95.5 million in 2007. In 2007 operating revenue, non-operating revenue, and operating
expenses increased. Overall, the increase in the revenue was greater than the increase in the expense.
Contacting The District’s Financial Management
The information contained in the Financial Highlights is intended to provide a general overview of the
District’s finances and accountability for the money it receives. If you have questions or need additional
financial information, contact Theodore C. Cooke, Assistant General Manager of Finance and Information
Technologies at:
Post Ofice Box 43020
Phoenix, Arizona 85080-3020
623-869-2167
tcooke@cap-az.com
(dollars in millions) 2007 2006 change
Total operating revenues $ 234.4 $ 214.8 $ 19.6
Total operating expenses (190.2) (183.5) (6.7)
Operating income (loss) 44.2 31.3 12.9
Nonoperating revenues (expenses) 51.3 27.2 24.1
Change in net assets $ 95.5 $ 58.5 $ 37.0
Beginning net assets 283.1 224.6 58.5
Ending net assets $ 378.6 $ 283.1 $ 95.5
central arizona water conservation district
Fi n a n c i a l H i g h l i g h t s f o r y e a r e n d e d d e c e m b e r 3 1 , 2 0 0 7
Total Expenses
Total expenses for 2007 were $5.2 million higher than 2006. The majority of the increase is related to
pumping power, which was $4.9 million greater due to higher water delivery volumes. Increases in the Arizona
State Retirement System (ASRS) contribution rate and merit increases resulted in a $1.6 million increase
in salaries and related costs. Other increases include depreciation, CAGRD’s purchase of an M&I allocation,
and transmission and capacity charges. These increases are ofset by lower interest expense corresponding
with the reduction of the federal repayment obligation debt and revenue bonds. Materials and supplies
expense decreased due to the one-time reclassification of inventory in 2006.
􀁕􅔀􀁐􅀀􀁕􅔀􀁂􄈀􀁍􄴀􀀡􂄀􀁦􆘀􀁹􇤀􀁱􇄀􀁦􆘀􀁯􆼀􀁴􇐀􀁦􆘀􀁴􇐀
􀀥􂔀􀀹􃤀􀀱􃄀
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􀀥􂔀􀀵􃔀􀀱􃄀
􀀥􂔀􀀳􃌀􀀱􃄀
􀀥􂔀􀀡􂄀􀀱􃄀
􀁱􇄀􀁰􇀀􀁸􇠀􀁦􆘀􀁳􇌀 􀁴􇐀􀁢􆈀􀁭􆴀􀁢􆈀􀁳􇌀􀁪􆨀􀁦􆘀􀁴􇐀 􀁢􆈀􀁮􆸀􀁰􇀀􀁳􇌀􀁵􇔀􀁪􆨀􀁻􇬀􀁢􆈀􀁵􇔀􀁪􆨀􀁰􇀀􀁯􆼀 􀁪􆨀􀁯􆼀􀁵􇔀􀁦􆘀􀁳􇌀􀁦􆘀􀁴􇐀􀁵􇔀 􀁰􇀀􀁵􇔀􀁩􆤀􀁦􆘀􀁳􇌀
􀀥􂔀􀀡􂄀􀁎􄸀􀁊􄨀􀁍􄴀􀁍􄴀􀁊􄨀􀁐􅀀􀁏􄼀􀁔􅐀
􀀵􃔀􀀵􃔀 􀀵􃔀􀀳􃌀
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􀀸􃠀􀀹􃤀
􀀸􃠀􀀴􃐀
􀀴􃐀􀀹􃤀 􀀴􃐀􀀺􃨀 􀀴􃐀􀀹􃤀 􀀴􃐀􀀺􃩣
central arizona water conservation district
Fi n a n c i a l H i g h l i g h t s f o r y e a r e n d e d d e c e m b e r 3 1 , 2 0 0 7
38 39
(dollars in millions) 2007 2006 change
Operating expenses
Salaries & related costs $ 44.0 $ 42.4 $ 1.6
Pumping power 77.8 72.9 4.9
Amortization of PSR 30.4 30.4 –
Other 38.1 37.8 0.3
Total operating expenses $ 190.2 $ 183.5 $ 6.7
Nonoperating expenses 37.5 39.0 (1.5)
Total expenses $ 227.7 $ 222.5 $ 5.2
CAWCD Board members accept a huge responsi-bility
on behalf of their constituents, the citizens of
Maricopa, Pima and Pinal counties. They are repre-senting
more than five million people, roughly 80
percent of the state’s population, and all of Arizona’s
largest cities including Phoenix, Tucson, Mesa,
Glendale, Peoria and Scottsdale. The decisions Board
members make have long-term consequences related to
the quantity, price and distribution of the approximately
1.5 million acre-feet of Colorado River water Central
Arizona Project annually delivers. They arrive at their
decisions by building trust, developing relationships
and considering all the options, all the time.
The 15-member Board serves staggered six-year
terms without pay. Every two years, as part of the
general election ballot, the
public elects one-third of the
15-member CAWCD Board.
Candidates are drawn from
CAP’s three-county service
area: Maricopa, Pinal and
Pima counties. The candidates
must be residents of the county
they wish to represent.
The composition of the
Board is based on population,
so 10 are from Maricopa
County, 4 from Pima County
and 1 from Pinal County.
The Board generally meets
monthly at CAP headquarters
in Phoenix.
The leaders on the CAWCD
Board receive, review and
comprehend extraordinary
quantities of information in
order to make informed and
educated decisions related
to water policy and practice.
CAWCD Board members
have consistently proven
themselves as prudent and
responsible governors of the
system. In a world where ego
sometimes dictates decision-making,
the Central Arizona
Project is fortified by a Board
of fair and responsible leaders
who are intelligently planning
for this state’s water future
well into the 21st century.
T H E C A W C D B O A R D
Central Arizona Water Conservation District (CAWCD)
B C D E
F G H J
K L M N
A
I
O
CAP’s Board of Directors
M A R I C O P A C O U N T Y
A Susan Bitter Smith T E R M E N D I N G 2 0 1 0
B Daniel J. Donahoe T E R M E N D I N G 2 0 1 0
C Timothy R. Bray T E R M E N D I N G 2 0 1 0
D Paul Hendricks T E R M E N D I N G 2 0 1 0
E Mark Lewis T E R M E N D I N G 2 0 1 0
F Pam Pickard T E R M E N D I N G 2 0 1 2
G Jean McGrath T E R M E N D I N G 2 0 1 2
H Janie Thom T E R M E N D I N G 2 0 1 2
I Lisa Atkins T E R M E N D I N G 2 0 1 2
J Gayle Burns T E R M E N D I N G 2 0 1 2
P I M A C O U N T Y
K Mike Boyd T E R M E N D I N G 2 0 0 8
L Diana Kai T E R M E N D I N G 2 0 0 8
M David Modeer T E R M E N D I N G 2 0 0 8
N Carol Zimmerman T E R M E N D I N G 2 0 0 8
P I N A L C O U N T Y
O Jim Hartdegen T E R M E N D I N G 2 0 0 8
40
CAP COMMUNICATIONS GROUP
Editor-in-Chief Kathryn Schmitt
Editor Robert Barrett
Contributing Writers Crystal Thompson
Vicky Campo
Cathy Carlat
Kelli Ramirez
Photography Philip Fortnam
Design & Illustration Squeeze, Inc.
A David S.“Sid” Wilson, Jr. GENERAL MANAGER
B Donna Micetic EXECUTIVE ASSOCIATE
C Tom Delgado ASSISTANT GENERAL MANAGER,
EMPLOYEE SERVICES
D John Newman ASSISTANT GENERAL MANAGER,
MAINTENANCE
E Larry Dozier DEPUTY GENERAL MANAGER,
OPERATIONS, PLANNING &
ENGINEERING
F Douglas Miller GENERAL COUNSEL
G Kathryn Schmitt DIRECTOR, COMMUNICATIONS,
PUBLIC AFFAIRS &
GOVERNMENTAL RELATIONS
H Ted Cooke ASSISTANT GENERAL MANAGER,
FINANCE & INFORMATION TECHNOLOGY
B C D
E F G
A
H
The Senior Management Team
Central Arizona Project
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􀁃􄌀 􀁓􅌀 􀁂􄈀 􀁅􄔀 􀁚􅨀
􀁑􅄀 􀁊􄨀 􀁄􄐀 􀁂􄈀 􀁄􄐀 􀁉􄤀 􀁐􅀀
􀁓􅌀 􀁆􄘀 􀁅􄔀 􀀡􂄀 􀁓􅌀 􀁐􅀀 􀁄􄐀 􀁌􄰀
􀁕􅔀 􀁘􅠀 􀁊􄨀 􀁏􄼀 􀀡􂄀 􀁑􅄀 􀁆􄘀 􀁂􄈀 􀁌􄰀 􀁔􅐀
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􀁃􄌀 􀁓􅌀 􀁂􄈀 􀁘􅠀 􀁍􄴀 􀁆􄘀 􀁚􅨀
􀁔􅐀 􀁂􄈀 􀁏􄼀 􀀡􂄀 􀁙􅤀 􀁂􄈀 􀁗􅜀 􀁊􄨀 􀁆􄘀 􀁓􅌀
􀁔􅐀 􀁏􄼀 􀁚􅨀 􀁅􄔀 􀁆􄘀 􀁓􅌀 􀀡􂄀 􀁉􄤀 􀁊􄨀 􀁍􄴀 􀁍􄴀
􀁃􄌀 􀁍􄴀 􀁂􄈀 􀁄􄐀 􀁌􄰀 􀀡􂄀 􀁎􄸀 􀁐􅀀 􀁖􅘀 􀁏􄼀 􀁕􅔀 􀁂􄈀 􀁊􄨀 􀁏􄼀
C E N T R A L A R I Z O N A P R O J E C T
P.O. B O X 4 3 0 2 0
P H O E N I X , A Z 8 5 0 8 0 - 3 0 2 0
6 2 3 8 6 9 2 3 3 3
w w w. c a p - a z . c o m