West Basin projects revenue surplus as imported water sales offset recycled water shortfall

West Basin projects revenue surplus as imported water sales offset recycled water shortfallHigher-than-anticipated imported water demand drives a projected $16 million revenue surplus for FY 2025-26, despite operational challenges and heavy rainfall dampening recycled water sales.

Total revenues are projected to reach $259 million by fiscal year-end, approximately 7% above the adopted budget.

Imported water sales are projected to hit $187.1 million (109% of budget), driven by volumes exceeding mid-year targets by over 1,700 acre-feet.

Recycled water revenues are forecast at $52.9 million (91% of budget) due to a barrier injection shutdown and record rainfall reducing irrigation demand.

The district projects an ending fund balance of approximately $4.9 million and a debt coverage ratio of 1.94.

West Basin Municipal Water District is projecting total revenues of approximately $259 million for Fiscal Year 2025-26. This figure represents a 7% increase over the adopted budget and continues a steady upward trajectory from the $223.8 million recorded in Fiscal Year 2021-22. During the February 17, 2026, Finance & Administration Committee meeting, Chief Financial Officer Wendy O’Kelley presented the mid-year budget review, noting that the district expects to end the fiscal year with a fund balance of approximately $4.9 million after expenses, debt service, and capital improvements. Imported water sales have exceeded expectations, with mid-year actual volume reaching 46,334 acre-feet (AF) against a budget of 44,561 AF. Consequently, imported water revenue is projected to reach $187.1 million by year-end, approximately 109% of the budgeted $171.4 million. This surge in revenue is accompanied by a corresponding increase in operating expenses, specifically regarding imported water purchases, which are projected to be $153.8 million against a budget of $145.2 million. Conversely, recycled water sales are trending below budget. Staff projects year-end recycled water revenues of $52.9 million, or roughly 91% of the $58 million annual target. The General Manager attributed this shortfall to specific operational factors, noting a shutdown at the West Coast Barrier which significantly impacted overall sales. Additionally, heavy precipitation—including approximately 10 inches of rain in January 2026—reduced demand for outdoor irrigation and disinfected tertiary water. Despite the variance in recycled water performance, the district's overall financial position remains stable, maintaining a scale that ranks moderately high among Southern California municipal water districts—exceeding smaller local peers while trailing massive regional authorities. Total operating expenses are projected to reach $216.8 million, roughly 2% above the adopted budget, largely due to the pass-through costs associated with higher imported water volumes. The district anticipates a debt coverage ratio of 1.94 by fiscal year-end.