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I I I ,I I I I I I I I I I I I I I t I users are issued 6,773 shares (27.72%). TIris allocation favors supplemental users during a illy year. Initial Allocation S3 Normal- YearlII Allocation Method (S3): Initial allocation S3 modifies allocation S I by the distribution of possible storage water held for specific irrigators. In this case, we use an example of 4,000 acre-feet held for supplemental users. As was the case with initial allocation Sl, under this method 18,049 shares would be issued to all LA WMA members: 49.46% going to supplemental users, 17% going to sole-source flood users and 32.75% going to sole-source sprinkler users. The difference, however, is that under this allocation storage water would be assigned exclusively to the shares issued to users who held preferred shares. Note, however, that this water is only released during dry year scenarios. During normal years, each share entitles its owner to 1 af of replacement water (i.e., the share index equals 1.00). For dry years, supplemental users would get additional storage water. The share index would be higher for supplemental users compared to sole-source users. For example, in a dry year a sole-source user might have an index value of 0.83 where as a supplemental user would have an index of 1.29. Relative to a normal year, the sole-source cuts back, but the supplemental user can actually increase. LAMW A Revenues Revenues are always the same no matter what share allocation is used. Each share has a fixed bill per year that is shares fraction of LA WMA's total expenses. Total revenue is the bill per share times the total number of shares. TIris revenue is constant no matter what climate conditions exits or how the shares are initially allocated or subsequently traded. The bill per share acts like a fIxed fee rate structure in that LA WMA revenues are not sensitive to actual usage. The reliance of water districts on fixed fees has been criticized because such charges do not give water users an incentive to consurne water efficiently. To mitigate this effect we suggest that the shares organization be couple with a secondary market for water. Secondary Market for Shares and Leased Water LA WMA will need to create secondary markets for the exchange of water among members once the initial allocation is determined. There would be two markets: a) a market for the exchange of shares~ and b) a market for the temporary lease of water. In order for LA WMA to maintain its overall water balance when a share is either traded or leased, the new user can only pump based on his specific share to pump ratio. For example, assurne that a supplemental irrigator sells 50 shares to a sole-source flood irrigator. The supplemental irrigator was able to pump 277 af (50 x 5.54) of water with these shares. The sole-source flood irrigator can only pump III af (50 x 2.22) of water based on his specific replacement to plllTIping ratio. The following describes these two markets. EnWater Resource Consultants September 5, 1997 Final Report 31