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Conjunctive operation of surface water and groundwater systems is a key element in integrated water resource management. The cyclic storage of available water in both surface impoundments and groundwater aquifers reliably maximizes efficient use of available resources with minimum cost. Very large reservoirs are often needed to increase the marginal reliability of the naturally available surface waters. However, this option may result in high costs, extensive evaporation, and increasingly negative effects on the environment. The authors present a semidistributed optimization model for design and operation of a proposed cyclic system. The model includes interacting components of surface water and groundwater subsystems with the objective of minimizing total system costs. A generalized and modified unit response matrix method is developed and embedded into the optimization model. Water suppliers can use this information to develop their own model in order to manage their resources and go even further in banking their water. Includes 21 references, tables, figures.