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<br />. <br /> <br />environmental mitigation costs related to the lID/SDCW A Transfer that are not assumed <br />to be available if there is no QSA. It is also due to the assumption that Interim Surplus <br />Guidelines special surplus water would not be available in the absence of a QSA, <br />although we believe that fair consideration of an alternative state strategy could yield <br />comparable or better results. <br /> <br />So, to return to the question that has been presented to you by the Governor's proposal, <br />should the State of California invest Proposition 50 funds in the QSA, or more <br />specifically the lID/SDCW A Transfer? I would like to make the following observations <br />and recommendations: <br /> <br />1. If there is a way to leave Proposition 50 funds to a competitive process and find <br />assistance for the lID/SDCW A Transfer elsewhere, it would likely address one of <br />the major concerns expressed by many of Metropolitan's board members and <br />member agencies. <br /> <br />2. You should not assume that the QSA is a silver bullet or panacea, or that it will <br />deliver all of the benefits promised. It has value, but could have far more value if <br />coordinated with other programs and investments in California, including new <br />and emerging water quality standards, local projects, CalFed, and Salton Sea <br />restoration plans. <br /> <br />. <br /> <br />3. <br /> <br />One of the hardest things we do in the water business is making long-term <br />investment decisions based on cost-benefit analyses with complex assumptions. <br />In the end, it's all about how you evaluate the risks. This is not an exact science. <br />Conservative assumptions are preferred. Expect the uuexpected, but we should <br />do our best to take care of the risks we do know about. <br /> <br />4. If it appears that Metropolitan is not giving you a clear and definite position on <br />the Governor's proposal, that is because we are not ready. We have cooperatively <br />worked hard to bring us to this point of decision. To help our Board make the <br />best-informed decision upon the satisfaction of the conditions precedent to the <br />execution of the QSA and related documents, the Board is currently conducting <br />informational workshops. It is also important to note that state law requires us to <br />be sure our choices are transparent and supportable (SB 221 and SB 610), and we <br />have been directed by the state to favor conservation, recycling and other local <br />projects in making new investment decisions (SB 60). As shown in Tab 10, <br />Metropolitan has provided $209 million since 1992 to SDCW A for programs to <br />meet our obligations under SB 60. In addition, we have provided information on <br />average water rates and revenues for Metropolitan's member agencies to help <br />show who bears these costs. <br /> <br />5. A major deficiency in the proposed QSA is the risk that the investments in <br />Colorado supplies will not resnlt in water delivered, if the QSA terminates <br />prematurely. This proposal still contains off-ramps and future uucertainties with <br />no risk coverage for Metropolitan, Coachella or San Diego while lID risks would <br /> <br />. <br /> <br />-5- <br />