Recent changes in the inter and intra-annual water availability, along with the increase in water demand, have heightened the pressure on the world's limited freshwater resources. The sustainability of the groundwater system is endangered due to prolonged droughts and excessive exploitation of aquifers. This study focuses on the development of a policy tree optimization model for the reoperation of the Folsom reservoir in the American River watershed, California, incorporating floodwaters for managed aquifer recharge (Flood-MAR). Drawing upon a previously developed simulation-optimization model, a policy tree optimization model that incorporated a surrogate model for recharge was formulated for the American River Watershed downstream of Folsom. The model devised a policy tree for the operation of the system, including groundwater recharge policies. It successfully allocated water for recharge while increasing the reservoir's storage capacity compared to historical operations, suggesting the feasibility of incorporating Flood-MAR into Folsom reservoir operations.