West Basin posts $9 million surplus as potable revenues offset recycled water operating losses

West Basin posts $9 million surplus as potable revenues offset recycled water operating lossesThe Southern California wholesaler exceeded debt coverage targets for FY 2025 thanks to rate increases and strong imported water demand, though high operational costs continue to challenge the economics of its water recycling program.

West Basin's net position increased by $9.1 million in FY 2025, driven by $178 million in imported water sales.

Recycled water operations posted a net loss of $4.1 million, with costs of $52.6 million exceeding sales of $48.5 million.

First quarter FY 2026 potable sales are 6% over budget, generating $11.7 million in net operating revenue.

The General Manager signaled a shift in business model to recoup recycling costs as historical subsidies decline.

West Basin Municipal Water District (West Basin) secured a $9.1 million increase in net position for the fiscal year ending June 30, 2025, driven by strategic rate increases—including an 11.2% adjustment in January 2025—and robust imported water sales that offset deficits in its water recycling division. According to the Annual Comprehensive Financial Report presented to the Finance & Administration Committee on January 20, 2026, by Chief Financial Officer Wendy O’Kelly, imported water sales totaled $178.3 million against purchase costs of $143.3 million, generating net revenue of nearly $35 million. The District achieved a debt coverage ratio of 1.85, surpassing its internal policy target of 1.75, while maintaining $69 million in reserves to ensure financial stability. The District’s recycled water portfolio remains a financial challenge despite its strategic importance. O’Kelly reported FY 2025 recycled water sales of $48.5 million against operating costs of $52.6 million, resulting in a net loss of approximately $4.1 million. While O'Kelly noted this represents "continued improvement" compared to prior years, operational costs remain high. For the first quarter of FY 2025-26, recycled water operations faced unplanned equipment failures and costs associated with transitioning between contract operators, resulting in a continued minor net loss. General Manager Edward J. Caldwell addressed the structural economics of the recycling program during the meeting. He acknowledged that while subsidies previously offset costs, the District is "shifting our business model to recoup those costs." Board Chair Scott Houston noted that while recycled water secures supply, "financially it doesn't always work the way we think," citing the high expense of operations compared to revenues. Looking ahead, the District’s financial position remains bolstered by potable demand. In the first quarter of FY 2025-26, potable water sales reached 25,432 acre-feet, 6% above the budgeted 24,073 acre-feet, contributing $11.7 million in net operating revenue for the quarter.