Annual report / Central Arizona Project

              c e n t r a l a r i z o n a p r o j e c t
a n n u a l r e p o r t
p e a c e i n o u r t i m e
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letter
introduction
part one: terms of the peace
operations
internal
financial highlights
the cawcd board
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04
08
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Contents
Unbeknownst to the government officials at the time, the Colorado River was in the middle
of a very wet cycle when it was apportioned among the seven states. It was believed that there were
15 million acre-feet of water available each year. Now we believe that the true figure may be closer
to 12 million acre-feet.
For many years that error did not matter. Generally speaking, there was more water available
than was being used. Then, at just about the end of the 20th Century, we began what has turned out
to be a long drought that persists today. What was an abundance of water in the River at one time
has turned into a shortage as the states experience population booms, increased water usage and
growing environmental demands—all made more pressing by the drought.
The shortages prompted each state to go into a protective mode, with each one trying to
jealously guard its share of an over-apportioned body of water. Disputes arose, threats were made,
lawsuits were prepared and the states turned on one another.
The same drought that prompted the discord also has prompted the Peace. The seven states
were informed by the federal government that they should develop a plan to deal with shortages
and work out their differences or else the federal government would impose solutions.
The result is an agreement among the states after many years of hard work, endless meetings
and still ongoing negotiations.
There could be Peace In Our Time on the River—and the leadership of Central Arizona Project
played a key role in helping achieve that peace, all the while working throughout 2006 to deliver
1,603,595 acre-feet of precious water to our customers.
peace in our time may seem like a strange title for the 2006 central arizona
project annual report. i suppose it is because most folks are totally unaware
of the disputes that have been going on for many years between the seven
states that share the colorado river.
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David S WilsonJ D A V I D S . “ S I D ” W I L S O N J R . r. G E N E R A L M A N A G E R
To our constituents
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Letter
colorado river >> ar.06
Many years ago the phrases
and “peace is at hand” were
uttered by Secretary of State
Henry Kissinger after a long
set of negotiations with
North Vietnam. Kissinger
was predicting the end
of the Vietnam War.
“peace in our time”
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henry kissinger >> ar.06
Intro
Now, many water managers, observers and users of Colorado River water are saying the phrases could
apply to the Seven Basin States and the use of Colorado River water. After years…no, decades…of
backbiting, arguing, lawsuits and even the dispatch of National Guard troops, it would seem that
the states that share the Colorado River have achieved an agreement that, when finalized, could
indeed bring “Peace in our time” to the River.
The spark to bring such a “peace” was, oddly enough, a sustained drought.
The on-going drought has lasted long enough that the states that use Colorado River water—
Arizona, California, Nevada, New Mexico, Utah, Colorado, Wyoming—along with the federal
government, realized that there could be shortages declared on the River.
The threat of shortages was not enough to spur cooperation. Even the federal government’s threat
that the seven states must reach an agreement over shortage criteria or the federal government would
impose criteria, was not enough. The threats simply spurred the states into taking proactive stances
to protect their individual share.
The Upper Basin states—Colorado, New Mexico, Utah, Wyoming—created a fund that would
be used to pay attorneys if, and when, the Upper and Lower Basin states went to court over how the
water is divided.
In response, the Lower Basin states—Arizona, California, Nevada—led by Arizona and the
Central Arizona Project (CAP) duplicated the legal fund effort. Arizona put up $200,000 and
CAP immediately matched that sum and promised to match other donations up to $1 million
should it be needed to fight a water battle in court.
Fortunately, the seven states realized they were headed to decades-long lawsuits and counter
suits and began to meet in earnest throughout 2006 to find common ground.
It worked.
Maybe.
By the end of 2006, the seven states had come to a preliminary agreement on many of the major
issues, such as conjunctive management of Lakes Powell and Mead as well as selecting the “trigger
points” when shortages would be declared.
“We have reached a tentative agreement among the states,” said Arizona Department of Water
Resources Director Herb Guenther. “It’s not done, and the devil is in the details, but it looks promising.”
Guenther also cited the efforts of CAP General Manager Sid Wilson and Deputy General Manager
Larry Dozier as invaluable to the state’s participation in the seven states negotiations.
The states vowed to continue to work into 2007
in an effort to bring Peace In Our Time.
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but it was Kissinger was right, the war did end, later…much later.
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drought cracks >> ar.06
Terms of the Peace
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It sustains a burgeoning population of more than 30 million people and a dynamic, $1.2 trillion
economy. But the river has only so much water to share and demands continue to increase.
This situation could not have been foreseen back in 1922 when the Colorado River Compact was
crafted. The agreement divides the river’s waters between the Upper and Lower Basin states and was
predicated on expected flows of 18 million acre-feet per year. Currently, with yearly flows averaging
less than 15 million acre-feet, the river is over-allocated.
Add to this the fact that several Basin states are leading the nation in growth rate and it is easy
to understand the concern and contention between the states. In fact, disputes between states have
surrounded Colorado River allocations for decades. Most of the disputes deal with limited supplies,
fear of losing out to faster growing states, impacts of potential shortages and a host of other issues.
The major issues that threatened court fights in the last few years all centered around the
question of who gets how much Colorado River water if there isn’t enough for everyone.
The Compact set the total available water for the seven states at 15 million acre-feet annually.
The states were divided into two groups, the Upper Basin (Colorado, New Mexico, Utah, Wyoming)
and the Lower Basin (Arizona, California, Nevada) with each basin getting 7.5 million acre feet.
Subsequently, the 1944 Mexican Treaty provided 1.5 million acre-feet for Mexico.
the colorado river is vital to the seven western states and ten indian tribes
that hold claim to its waters.
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Part 1
colorado river >> ar.06
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The Lower Basin’s allocation calls for California to receive 4.4 million acre-feet per year, Arizona
to get 2.8 million acre-feet and Nevada has rights to 300,000 acre feet.
In addition, the compact calls for the Upper Basin states to, essentially, release 7.5 million acre-feet
of water each year from Lake Powell, its storage reservoir, to Lake Mead, for use by the Lower
Basin. In addition, the Upper Basin must release half of the Mexican Treaty delivery requirement.
In the last few years, the most serious fights have been between Basins, which was triggered by
the drought. The issues were Lake Powell operations and the need for shortage criteria.
As the possibility of a shortage being declared on the River became more of a reality, the river
users and the federal government began to realize the necessity for establishing criteria for the decla-ration
and apportionment of a shortage. Although the states had discussed the issue for several years,
there was no real threat of shortage and no definitive solution had been offered. With the drought
and the dropping of reservoir levels providing a real threat, the Interior Secretary stated in 2004 that
should the states not produce shortage criteria by 2006, the federal government would impose a set
of standards.
Representatives of the seven states initiated a series of meetings throughout 2006 to deal with
establishing criteria. Disputes about a “call on the River” worried the Upper Basin and the Lower
Basin continued to call for all states to share in delivering the 1.5 million acre-feet to Mexico each year
that is demanded by a 1944 treaty.
Put simply, the Upper Basin states were afraid that the drawdown of Lake Powell, their storage
reservoir, would continue to the point that the Upper Basin states would have to ration their water use
in order to meet the obligation of delivering 7.5 million acre-feet of water to the Lower Basin. There
also was concern that if the water levels fell far enough, Glen Canyon Dam would no longer be able
to generate power.
One of the Lower Basin’s complaints is that the Upper Basin claimed that delivering the
1.5 million acre-feet to Mexico was strictly a Lower Basin responsibility and that the Upper Basin
did not have to provide half the Mexican water.
lake powell >> ar.06
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glen canyon dam >> ar.06
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Throughout the negotiations CAP representatives worked with the Arizona Department of
Water Resources to present Arizona’s case. In 2006, the negotiators essentially announced that
peace was at hand.
The agreement calls for the states to modify and coordinate the operation of Lakes Mead and
Powell. The lakes will be managed conjunctively. That is, when Powell’s water level is high and
Mead’s low, the Upper Basin may release additional water beyond the 8.23 million acre-feet they are
committed to provide. On the other hand, if Powell is low, the Lower Basin will accept less water.
The agreement also settles the amount of water shortage that Arizona, and CAP, will have to
accept when there is a shortage. The level of Lake Mead above sea level is the “trigger point” in
determining shortages. For example, if Lake Mead falls to elevation 1,075 then a 400,000 acre-foot
shortage would be declared. A shortage of 500,000 acre-feet would be declared if the level drops
to 1,050 and at 1,025 a 600,000 acre-foot shortage would be declared. Lake Mead has not dropped
to 1,075 since Hoover Dam was built. The agreement assumed Mexico would be allocated 16 and
two-third percent of the shortage and Arizona and Nevada would share the U.S. shortage.
In addition, other measures to supplement or augment the amount of water in the Colorado
are covered in the agreement. Among those being considered:
Weather Modification: Weather modification involves the deliberate application of chemical
particles into clouds or weather systems for the purpose of providing a nucleus where the clouds’ ice
crystals can accumulate in clumps too heavy to stay aloft. The result is some form of precipitation.
Congressional testimony from BOR officials and scientific reports place the potential for Colorado
River augmentation from this process at up to 1.5 million acre-feet per year.
Phreatophyte management: Removal of non-native plant species such as Tamarisk and
Russian Olive is called phreatophyte management. These trees are replaced with native species such
lake powell >> ar.06
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white areas show drop in levels
hoover dam >> ar.06
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as Cottonwoods and Willows. The Tamarisk Coalition estimates that approximately 1.5 million acres
in the 17 western states are infested with Tamarisk, including a substantial portion of the Colorado
River channel and its tributaries. Restoration of native species could result in water savings on the
order of 1.5 to 3 acre-feet yearly per treated acre.
Desalination: Desalination has been a serious consideration for nearly forty years. Several
studies by the Department of the Interior have concluded that desalination could contribute millions
of acre-feet of fresh water per year to the River’s supplies. Kay Brothers, deputy General Manager with
the Southern Nevada Water Authority says, “… [of the methods for] trying to get new water into the
system, probably the most palatable is desalination.”
Although additional processes exist, these methods alone could potentially represent several
million acre-feet of additional flows per year on the Colorado.
As Larry Dozier, Deputy General Manager for Central Arizona Project says, “There are lots of
ways to keep the Colorado River supply reliable but we must plan, establish funding and implement
some of those ways.”
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yuma desalination >> ar.06
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weather modification >> ar.06
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Yet, despite the challenges, concerns and issues, Central Arizona Project delivered 1,603,595
acre-feet of Colorado River water to its customers in Maricopa, Pinal and Pima counties in 2006.
CAP’s managers spent many hours in meetings negotiating solutions to the problems presented
by the on-going drought on the River.
One of the major accomplishments was the tentative Seven States Agreement that set “trigger
points” to initiate reductions in allocations of Colorado River water. The negotiated point for the first
reduction of 400,000 acre-feet was a lake elevation of 1,075 in Lake Mead. Mead finished the year
with an elevation of about 1,129 or about 54 feet above the trigger point.
Watching the lake elevation is a major concern for CAP because with the first shortage of
400,000 acre-feet, almost 300,000 acre-feet will be borne by CAP. One of the provisions set by
Congress when it authorized construction of CAP is that should there be any shortage declared on
the River, California was authorized to take its full 4.4 million acre-foot allocation before CAP took
its 1.5 million acre-foot share.
So any shortage comes out of CAP, and Arizona’s, allocation.
Although Arizona had a decent monsoon season, rain throughout the year made 2006 the wettest
since 1999 with 3.33 inches of rainfall. That was offset to some extent by the heat.
throughout 2006, central arizona project’s leaders and water managers dealt
with a series of challenges that concerned major issues with the source of its
water (colorado river) and the delivery of that water.
ca p w at e r d e l i v e r i e s 2 0 0 6 total: 1,603,595 acre feet
m+i: 1,004,295 ag: 443,514 indian: 155,786
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Operations
Operations
lake mead >> ar.06
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January was 1.6 degrees above normal, May was 4 degrees higher than normal and June exceeded
that by going 4.8 degrees above the norm. It began to taper off in July when it was only 1.7 degrees
over normal, but 12 high temperature records were either equaled or exceeded during that month.
Yet, there was no declaration of shortage in 2006 and CAP is projecting a normal water supply
in 2007. If dry conditions continue, CAP should have a normal water supply for at least 3 to 4 years,
through 2010. If there is a shortage, however, CAP diversions would be the first to be reduced and
CAP projects that in the next 10-15 years any shortage would impact the excess supply available for
recharge and agricultural uses within the CAP service area but the obligations to Indians, cities and
towns would be met.
CAP also has a “hedge” against shortages because it currently banks excess or unused water
in the ground in conjunction with the Arizona Water Banking Authority, or Water Bank. This
water, which is stored underground, could be withdrawn and used during any time of shortage
to supplement M&I supplies.
In fact, CAP opened the largest underground recharge project in the Southwest in 2006.
The Tonopah Desert Recharge Project is capable of storing more than 100,000 acre-feet of water
each year. Completion of Tonopah’s 207-acre recharge project brings the total for CAP’s six recharge
projects to more than 400 acres.
The other recharge projects are Avra Valley, Lower Santa Cruz and Pima Mine Road recharge
projects in Pima County and the Agua Fria River and Hieroglyphic Mountain recharge projects in
Maricopa County. In addition, CAP is exploring potential sites for another recharge project in the
area of Queen Creek.
In 2006, CAP stored about 211,000 acre-feet of water in underground storage facilities and,
to date, CAP has stored more than 2.5 million acre-feet.
CAP faced many challenges throughout 2006 as it completed its mission of delivering water
to its customers and putting excess water into underground facilities for future use. Some of the
milestones during the year included:
tonopah recharge >> ar.06
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tonopah desert recharge project >> ar.06
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January: the beginning of deliveries to the Tonopah Desert Recharge Project.
March: lining repairs to the canal were done around Picacho.
July: the City of Phoenix began operations at its Lake Pleasant turnout.
July: the first Remote Operated Vehicle (ROV) test at the Agua Fria Tunnel
and Siphon. Periodically, the siphons along the CAP system must be
inspected for leaks and other problems. In the past, that required an
interruption in service as the water flow was halted, the siphons were
drained and personnel physically inspected the inside of the siphons.
When the work was done, the flow of water resumed. The ROV, which
looks something like a mechanical beetle, allows for siphon inspections
to be done during regular operations and water flow.
July: storms in southern Arizona damaged the Lower Santa Cruz Recharge
Project and reduced operational capacity there by about 7,500 acre-feet.
August: the guide rails were installed for the Hassayampa pumping plant’s trash
rake. The trash rake is an automated way to remove debris from the
water before it enters the pumping plants.
August: CAP was the first Arizona utility to be awarded VPP Star status.
August: a monsoon storm knocked out power at the Salt Gila pumping plant
for 14 hours.
August: a diesel tanker truck caught on fire on the bridge just north of the
Mark Wilmer Pumping Plant near Lake Havasu. The fire spread onto
the banks of the Bill Williams and Colorado rivers and the fire came
close to the pumping plant but did no damage to CAP property.
In addition to its regular deliveries to its four basic classes of customers--Municipal and
Industrial, or M&I, agricultural users, Indian communities and recharge--CAP also made
deliveries on behalf of the Central Arizona Groundwater Replenishment District (CAGRD).
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arizona monsoon >> ar.06
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The CAGRD was created by the state legislature in 1993. It was designed to give landowners
and water providers who had no direct access to CAP water a way to secure an assured water supply.
Arizona law, under the Assured Water Supply (AWS) Rules established in 1995 mandates that
groundwater may not be the basis for any new development in the Phoenix, Tucson and in some
Pinal active management areas. The CAGRD provides a way to lessen the depletion of groundwater
resources by developers and allow them to comply with AWS Rules which require proof of a
consistently available, quality water supply for 100 years.
As members of CAGRD, the water provider or landowner can meet their obligation because
the CAGRD agrees to replace via recharge any groundwater used to meet the needs of members.
If a development does not have CAP water or other renewable supplies, it can join the CAGRD.
Membership in the CAGRD is voluntary. Any city, town, water company, subdivision or
homeowner’s association located in Pima, Pinal or Maricopa counties may join the CAGRD.
There are two types of members: Member Service Areas, which include the service area of a city,
town or private water company, including any additions to or extensions of the service area; and
Member Lands, which are individual subdivisions with defined legal descriptions.
When a city, town or water company joins the CAGRD as a member service area, it agrees
to declare its service area and all extensions thereof to be in the CAGRD. With Member Lands,
the applicant provides a projection of future population and water use. This projection serves as
a basis for estimating CAGRD’s long-term replenishment obligation for the service area.
In 2006, CAGRD enrolled 163 member lands for a total of 60,243 homes giving it a total
enrollment since it began in 1995 of 990 member lands and 226,566 homes. The CAGRD’s
replenishment obligation for 2006, which is based on the pumping by members in 2005, was
32,931.72 acre-feet of water.
cagrd >> ar.06
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It took many years to win the award and the process culminated in a multiple-day inspection
by ADOSH who stopped employees at random and questioned them about safety procedures.
CAP decided to opt for the VPP status because it wanted its employees to step up and take
responsibility for safety. It was clear that handing down mandates and providing step-by-step
processes did not sell with its educated workforce. The decision was made to create a passion
for safety among the employees.
CAP’s safety record was not below industry standards but CAP never settles for “good enough.”
The two-and-a-half year process began with putting down a foundation of trust. CAP had
to demonstrate to its 460 employees that it cared about their safety and well-being. CAP started
by developing its own programs that went beyond the OSHA standards.
The next step was to engage the workforce. The first target was the managers and supervisors.
A group was formed, the CAPS Committee—Care About People’s Safety.
The CAPS Committee was instrumental in getting the necessary buy-in from the maintenance
side of the organization. They began to look at the safety processes across departments and developed
standards that could be consistently applied. The CAPS Committee also implemented training
in 2006 cap was awarded vpp star status. vpp stands for voluntary protection
program and the award is by the arizona division of occupational safety and
health (adosh). cap is the 16th company in arizona to win the status and the
only utility to do so.
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Internal
coaters >> ar.06
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programs so that employees would begin to understand their own role in the safety process. But the
real empowerment began to come with a focused internal marketing campaign called Target Zero.
If VPP was the roadmap, Target Zero was the goal. CAP was convinced that all accidents and
injuries were preventable, so it set its sights on zero injuries. No longer would an injury be accepted
as a natural consequence of doing the job.
A Target Zero logo was developed and used on all safety correspondence. A campaign was
developed that would show how preventing the most common injuries–sprains and strains–could
keep employees doing the things they love at home. A ten-foot banner went up in the employee
cafeteria that said “Target Zero: stay in the game.” Under that was posters showing CAP employees
engaged in their favorite leisure activities. New posters were developed and distributed monthly.
That first campaign lasted a year. In the second year, the new emphasis was to let employees
know that they weren’t working safely only for themselves, or even for CAP; the real goal was to
send them home safely to their families.
Another series of posters was developed. These showed a bigger-than-life photo of an employee
at work and behind the employee was a family portrait. The slogan was: “John Smith works safely
for his family.” Employees loved seeing their families featured and began to understand the
importance of building a safety culture.
The campaign, now in its third year, continues. This campaign features responsibility by using
the slogan, “I choose safety.” The posters have a photo of an employee in the work setting with his
or her signature across the bottom. Alongside the series of posters is a banner that reads, “I made
the choice.” Next to that are four marking pens. Employees, visitors, board members, and family
have all walked up and put their signatures on the banner. Not only that, but departments have
asked for smaller versions of their own to put in their individual departments.
The program has been a success. Historically, CAP averaged between 50 and 60 injuries
a year with about 35 to 40 being lost-time injuries. That has been reduced to 10 per year with
only three involving lost time.
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safety poster >> ar.06
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In addition to the VPP safety awareness campaign, CAP’s managers and supervisors completed
Stephen Covey’s “7 Habits for Highly Effective People” training in March.
The two-day Covey training teaches building cooperative, interdependent relationships through
developing seven “habits.” Those habits include:
• Be proactive;
• Begin with the end in mind;
• Put first things first;
• Think win-win;
• Seek first to understand, then to be understood;
• Synergize; and
• Sharpen the saw.
Managers and supervisors are working toward completing a seven-week contract. During
that time, they will focus on one habit each week as they move toward interdependence.
In addition to the Covey training, CAP’s external business education efforts in 2006 began
to emphasize leadership.
Becoming and remaining a visible leader on western water issues is a primary objective of Central
Arizona Project’s Board of Directors and senior management staff. To strengthen its water leadership
position with business and community leaders as well as the general public, CAP developed a strategic
communications plan to help achieve its goals.
CAP’s identity, or “brand,” was strengthened through enhanced community outreach efforts
and targeted media campaigns. Because the budget for media campaigns can be quite expensive,
CAP decided to “share voices” with other organizations in order to leverage budget dollars.
Partners in media and outreach campaigns included Scottsdale Healthcare, Banner Health
Foundation and Salt River Project.
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seven habits at work >> ar.06
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The Scottsdale Healthcare partnership focused on a “Stay Hydrated” media campaign.
Both organizations shared in the cost of outdoor advertising at bus shelters throughout Phoenix,
in newspaper ads in Scottsdale and through radio ads on KNIX, KEZ and other stations throughout
the Valley.
Banner Health Foundation and CAP joined forces to support Andrea’s Closet, an organization
created by CAP employee Kenny Brunk to provide toys to hospitalized children.
In partnership, CAP and Salt River Project agreed to share advertising messages about the vision
of Arizona’s early leaders who saw the need for reliable water supplies to support our growing state.
Radio spots ran in the last half of the year which spoke to the visionary efforts of CAP and SRP in
enabling Valley residents to enjoy their quality of life because of the unparalleled leadership of the
two organizations.
Additional outreach efforts to enhance the visibility of CAP included creating and hosting an
educational contest for middle school students entitled H204U. The online contest, held during
the month of October, ended with the three winners receiving college scholarships and their schools
were awarded new computers.
Messages about the value of recharging Arizona’s Colorado River supplies, preserving and
protecting Arizona’s allocation of Colorado River water and attending CAP’s Leadership Forum
in September were conveyed on radio stations throughout CAP’s three county service territory.
According to Kathryn Schmitt, Director of Communications, these and other public affairs
strategies were being employed to further earn public trust in the organization, attract new leaders
to the water industry in Arizona and continue to secure CAP’s position and reputation as a leader
in local and regional water issues.
andrea’s closet >> ar.06
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community investment >> ar.06
Central Arizona Project (CAP)’s charitable contributions program was developed in 1997 as part of an
overall strategy to strengthen business relationships, answer community needs and reinforce lasting
commitments to the people and communities that CAP serves. Grants are awarded to organizations
located primarily in Maricopa, Pinal and Pima counties that are involved in water education issues and
environmental projects which support CAP’s mission. The contributions committee is comprised of
CAP Board members, management, customers and water resource specialists from throughout CAP’s
service territory.
In 2006, CAP’charitable contributions totaled $50,000. The organizations who were selected for
contributions:
• Arizona Hydrological Society for its Intern/Scholarship program.
• Arizona Meteorological Network to upgrade and move the Marana
weather station.
• Arizona Nursery Association Foundation to support three scholarships.
• Arizona State University’s Applied Learning Technologies Institute
in Tempe for the 2007 iCadamy Awards.
• Arizona State Envirothon in Phoenix to provide water education to
high school students.
• Arizona Wilderness Coalition in Tucson to raise awareness supporting
the permanent protection of Fossil Creek.
• East Maricopa Resource Management Education Center to continue
providing interactive water education to students and teachers.
• GateWay Community College in Phoenix to provide $250 scholarships
for high school and college students.
• La Pilita Museum in Tucson to reformat a portion of the children’s
education program.
• Natural Resource Education Center in Casa Grande to provide
interactive water education.
• Pima Association of Governments (PAG) in Tucson to improve
awareness and understanding of water issues.
• Prescott College to fund instructor compensation and equipment
associated with the Junior Naturalist Program.
• Sonoran Sea Aquarium in Tucson to develop an educational program.
• Tucson’s River of Words Youth Poetry and Art Contest.
• Tucson Unified School District’s Science Resource Center to support
the water education program.
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2006 community investment program
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community investment >> ar.06
Community
Investment
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The following discussion provides an overview of the 2006 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 at the end of 2006 by $283.1 million (net assets).
• Total net assets increased by $58.5 million in 2006.
• Total revenues for 2006 were $281.0 million, an increase of $27.3 million from 2005.
• Total expenses for 2006 were $222.5 million, a decrease of $16.7 million from 2005.
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 2006, total assets increased $27.1 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 $1.43 billion in 2005 to $1.4 billion in 2006. 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 ofset 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, and funds held by or advanced to the federal government. In 2006, the cash
and investments increased $53.2 million due to higher reserves dedicated to the purchase of water for
Municipal & Industrial (M&I) firming by the Arizona Water Banking Authority (AWBA), funds advanced
for the payment of interstate water banking, and higher delivery volumes resulting in greater water revenues.
Funds held by or advanced to the federal government decreased $5.9 million resulting from the increased
coal expense at the Navajo Generating Station and not selling sulfur dioxide (SO2) credits due to market
conditions and revenue planning strategies.
o 20 20 c n
Capital Assets:
Permanent service right, net $ 1,400.1 $ 1,430.5 $ (30.4) (2.1%)
Property and equipment, net 77.7 68.4 9.3 13.6%
Other Assets:
Cash and investments 313.7 260.5 53.2 20.4%
Funds held by/advanced to federal gov’t 45.7 51.6 (5.9) (11.4%)
Other 43.7 42.8 0.9 2.1%
Total assets $ 1,880.9 $ 1,853.8 $ 27.1 1.5%
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 6
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 6
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central arizona water conservation district Financials
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I e d ca a a e o l d d b increased $21.4 million in 2006 from 2005. This increase reflects
that the District is paying of the debt faster than the associated amortization and depreciation on these assets.
R c ed e a increased $6.3 million in 2006 and $0.7 million in 2005 primarily related to payables
for accrued interest, arbitrage rebate liability for the District’s revenue bonds, and the Master Repayment
Contract reserves.
r c ed e a increased $30.8 million in 2006 due to higher funds advanced for the payment of
interstate water banking, delivery volumes resulting in greater water revenues, interest rates, and water
storage inventory due to a higher year-end water level at Lake Pleasant. These increases were ofset by the
absence of SO2 credit sales that afect the Basin Development Fund (BDF).
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
2006 increased $27.3 million from 2005 to $281.0
million. In 2006, water O&M charges increased
$19.8 million primarily due to increased deliveries
across all customer categories. The most significant
increase was for interstate water banking, which is
the District’s highest-priced water. The decrease in
the water service capital charges is related to the decrease in the capital charge rate for M&I customers. Power
and BDF revenues decreased $5.4 million in 2006 mostly due to the increase in capital improvements to the
Navajo Southern Transmission System, the addition of CAP transmission lines expense to the BDF, and the
increase in coal and fuel expense. These decreases were ofset by the first year of CAP transmission system
revenue in the BDF. Property taxes increased $4.9 million in 2006 reflecting significant increases in property
assessed valuations. The 2006 increase of $5.6 million for interest income reflects higher interest rates.
Other revenue increased $3.4 million due to Tonopah Recharge Site becoming operational and higher CAGRD
water replenishment revenues due to increased rates for pumped acre-feet and member land enrollment.
( o s) 06 0 hange
Operating revenues
Water O&M charges $ 111.9 $ 92.1 $ 19.8 21.5%
Water service capital charges 19.3 20.3 (1.0) (4.9%)
Power and other BDF revenues 70.3 75.7 (5.4) (7.1%)
Reimbursements & other 13.3 9.9 3.4 34.3%
Total operating revenues $ 214.8 $ 198.0 $ 16.8 8.5%
Nonoperating revenues
Property taxes $ 51.2 $ 46.3 $ 4.9 10.6%
Interest income & other 15.0 9.4 5.6 59.6%
Total nonoperating revenues $ 66.2 $ 55.7 $ 10.5 18.9%
Total revenues $ 281.0 $ 253.7 $ 27.3 10.8%
􀁕􅔀􀁐􅀀􀁕􅔀􀁂􄈀􀁍􄴀 􀁓􅌀􀁆􄘀􀁗􅜀􀁆􄘀􀁏􄼀􀁖􅘀􀁆􄘀􀁔􅐀
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􀁤􆐀􀁩􆤀􀁢􆈀􀁳􇌀􀁨􆠀􀁦􆘀􀁴􇐀
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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 6
3 6
Total Liabilities
Total liabilities declined $31.4 million in 2006 from 2005. The two largest components of the District’s
long-term liabilities are the federal repayment obligation and the contract revenue bonds. Generally,
long-term liabilities will decrease each year as the repayment obligation and revenue bonds are paid
of. From 2005 to 2006, the long-term federal repayment obligation decreased from $1.42 billion to
$1.4 billion in 2006. This decline of $21.4 million is due to the scheduled payments. In addition,
contract revenue bonds decreased from $75.8 million in 2005 to $54.4 million in 2006 connected
with paying of the bond debt.
Other liabilities include payables, accrued interest, and current principal obligations. Overall, other
liabilities increased $11.1 million in 2006 from 2005 due to funds advanced for the payment of interstate
water banking and higher 2006 over-threshold energy purchases.
Total Net Assets
As of December 31, 2006, net assets were $283.1 million, an increase of $58.5 million from 2005.
o 20 20 c n e
Long-Term Liablilities:
Repayment obligation $ 1,396.7 $ 1,418.1 $ (21.4) (1.5%)
Contract revenue bonds 54.4 75.8 (21.4) (28.2%)
Other 7.2 6.9 0.3 4.3%
Other liabilities 139.5 128.4 11.1 8.6%
Total liabilities $ 1,597.8 $ 1,629.2 $ (31.4) (1.9%)
o o 20 20 c n
Assets
Capital Assets $ 1,477.8 $ 1,498.9 $ (21.1) (1.4%)
Other Assets 403.1 354.9 48.2 13.6%
Total assets 1,880.9 1,853.8 27.1 1.5%
Liabilities
Long-term liabilities 1,458.3 1,500.8 (42.5) (2.8%)
Other liabilities 139.5 128.4 11.1 8.6%
Total liabilities 1,597.8 1,629.2 (31.4) (1.9%)
Net Assets
Invested in capital assets, net of related debt (17.6) (39.0) 21.4 (54.9%)
Restricted 63.6 57.3 6.3 11.0%
Unrestricted 237.1 206.3 30.8 14.9%
Total net assets 283.1 224.6 58.5 26.0%
Total liabilities and net assets $ 1,880.9 $ 1,853.8 $ 27.1 1.5%
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 6
3 9
Change In Net Assets and Ending Net Assets
The change in net assets for 2006 was $58.5 million. This was a $10.6 million increase from 2005.
In 2006, operating revenue, non-operating revenue, and operating expenses increased. Overall, the
increase in the revenue was greater than the increase in the expense. The change in net assets for 2005
was $47.9 million.
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 Office Box 43020
Phoenix, Arizona 85080-3020
623-869-2167
tcooke@cap-az.com
o s o 2006 2005 change
Total operating revenues $ 214.8 $ 198.0 $ 16.8 8.5%
Total operating expenses (183.5) (164.8) (18.7) 11.3%
Operating income (loss) 31.3 33.2 (1.9) (5.7%)
Nonoperating revenues (expenses) 27.2 14.7 12.5 85.0%
Change in net assets $ 58.5 $ 47.9 $ 10.6 22.1%
Beginning net assets 224.6 176.7 47.9 27.1%
Ending net assets $ 283.1 $ 224.6 $ 58.5 26.0%
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 6
3 8
Total Expenses
Total expenses for 2006 were $16.7 million
higher than 2005. With higher water deliveries,
pumping power expenses experienced the most
significant variance requiring increased purchases
of over-threshold energy, which is our most
expensive energy source. The Arizona State
Retirement System (ASRS) increased the contri-bution
rate in July 2006. This combined with an
increase in medical claims expense resulted in a
$2.3 million increase in salaries and related
costs in 2006. Other cost increases impacting
2006 were higher depreciation expenses and expenses for emergency repairs of underground water storage
projects and the CAP infrastructure. Materials and supplies inventory was reclassified as an expense in
2006, resulting in an increase to expense and the elimination of the asset. In the future, inventory will
be expensed as it is purchased. This increase in other expenses was ofset by the $4.3 million decrease in
State Demonstration Project expense that was finished in 2005. In addition, interest expense was lower
in 2006 reflecting that the District is paying of debt associated with the federal repayment obligation
and the revenue bonds.
o s o 2006 2005 change
Operating expenses
Salaries & related costs $ 42.4 $ 40.1 $ 2.3 5.7%
Pumping power 72.9 58.1 14.8 25.5%
Amortization of PSR 30.4 30.4 – 0.0%
Other 37.8 36.2 1.6 4.4%
Total operating expenses $ 183.5 $ 164.8 $ 18.7 11.3%
Nonoperating expenses 39.0 41.0 (2.0) (4.9%)
Total expenses $ 222.5 $ 205.8 $ 16.7 8.1%
􀁕􅔀􀁐􅀀􀁕􅔀􀁂􄈀􀁍􄴀 􀁦􆘀􀁹􇤀􀁱􇄀􀁦􆘀􀁯􆼀􀁴􇐀􀁦􆘀􀁴􇐀
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􀁢􆈀􀁮􆸀􀁰􇀀􀁳􇌀􀁵􇔀􀀯􂼀
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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 6
CAWCD Board members accept a huge responsibility on behalf
of their constituents, the citizens of Maricopa, Pima and Pinal
counties. They are representing more than four 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 delivers annually. 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
next century. We are fortunate to
have them, indeed.
4 0
t h e c a w c d b o a r d
C e n t r a l A r i z o n a Wa t e r C o n s e r v a t i o n D i s t r i c t ( C AW C D )
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
C A P C O M M U N I C A T I O N S G R O U P
Editor-in-Chief Kathryn B. 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 Donna Murphy 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
t h e s e n i o r m a n a g e m e n t t e a m
C e n t r a l A r i z o n a P r o j e c t
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