Dissolution of Los Vaqueros
Expansion Project Joint Powers
Authority
February 11, 2025
Steve Ritchie, Assistant General Manager, Water
1 Los Vaqueros Expansion (LVE) Project
Background
• Regional partnership project to expand existing reservoir owned by Contra Costa Water District (CCWD).
• Eight agencies formed the LVE Joint Powers Authority (JPA) in 2021, including CCWD and the SFPUC.
• LVE offered the SFPUC dry-year water supplies and access to Delta water markets.
• Significant State and Federal funds were preliminarily approved for the project.
• However, JPA members could not resolve significant remaining institutional and financial issues.
2 2024 Timeline of Events
• June 2024: CCWD flagged five major unresolved issues. • August 2024: Multiple partners reduced storage buy-in. LVE became undersubscribed.
• September 2024: CCWD began exploring options to exit project. • Because CCWD owns the existing reservoir, their exit would end the project. • November 2024: CCWD Board resolved to work toward JPA dissolution and withdraw LVE state funding application. 3 2025 Timeline and Next Steps
• January 2025: JPA Board resolved to terminate JPA Agreement, dissolve JPA, and conduct wrap-up activities.
• February 2025: JPA Board resolution must be ratified by 75% of JPA member agency boards.
• March 2025: JPA wrap-up activities expected to conclude. SFPUC to receive a share of remaining funds following wrap-up. 4 LVE Status within SFPUC
• Participation in LVE storage removed from FY 2026-35 10-year Capital Improvement Program.
• Alternative Water Supply program no longer includes LVE storage project.
• While regional storage project was not viable at present, the SFPUC gained more knowledge about pros and cons of accessing transfers in the Delta to supplement dry year supplies. Other projects may result in the future.
5 Today’s Resolution
1. Ratifies the termination of the Los Vaqueros Reservoir Joint Exercise of Powers Agreement;
2. Ratifies the dissolution, winding up, and liquidation of the JPA;
3. Authorizes the SFPUC General Manager, in cooperation with JPA partners, to take necessary actions to support this effort. 6 DEPARTMENT
Water Enterprise
AGENDA NO.
14 MEETING DATE
February 11, 2025
AGENDA ITEM
Public Utilities Commission
City and County of San Francisco
Calendar: Regular Calendar
Project Manager: Lillian Holmes
Ratify Termination of Los Vaqueros Reservoir Joint Exercise of Powers Agreement and Dissolution of the Los Vaqueros Reservoir Joint Powers Authority
Summary of Proposed
Commission Action:
Ratify the termination of the Los Vaqueros Reservoir Joint Exercise of Powers Agreement and the dissolution, winding up, and liquidation of the Los Vaqueros Rese rvoir Joint Powers Authority in accordance with the terms of Authority Resolution No. 1-25-01, adopted on January 8, 2025, in re sponse to Los Vaqueros Reservoir Expansion Project site owner Contra Costa Water District’s decision to end its participation in the Project.
Background: For several years, Contra Costa Water District (CCWD) and the Los Vaqueros Reservoir Joint Powers Au thority (Authority) have led the planning and development of the Phase 2 Los Vaqueros Reservoir Expansion Project (P roject) in Contra Costa County. CCWD proposed the Project, which would have expanded the capacity of the existing CCWD-owned and operate d reservoir by 115,000 acre-feet and included the construction or upgrade of other conveyance and appurtenant facilities, to enable other water agencies in the region to use the reservoir, providing broad-ranging water supply and environmental benefits throughout the Bay Area.
CCWD invited several local agencies to participate in the Project, including Alameda Count y Water District; East Bay Municipal Utility District; Grassland Water District; the San Francisco Public Utilities Commission (SFPUC); San Luis and Delta-Mendota Water Authority; Santa Clara Valley Water District; and Zone 7 Water Agency (collectively, “Local Agency Partners”). On March 26, 2019, CCWD and the Local Agency Partners entered into a Multi-Party Cost Share Agreement for Project planning. On October 6, 2021, CCWD and the Local Agency Partners formed the Authority through the execution of a Joint Exercise of Powers Agreement.
On November 6, 2024, CCWD’s Board of Directors took action to Action: Ratify Termination of Los Vaqueros Reservoir Joint Exercise of Powers Agreement and Dissolution of the Los Vaqueros Reservoir Joint Powers Authority
Commission Meeting Date: February 11, 2025
end CCWD’s participation in the Project. Because CCWD owns the Los Vaqueros Reservoir, its withdrawal from the Project effectively terminates the Project. In res ponse to CCWD’s action, on January 8, 2025, by Authority Resolution No. 1- 25-01, the Authority’s Board of Directors unanimously voted to terminate the Joint Exercise of Powers Agreement and directed Authority staff to proceed with the dissolution, winding up, and liquidati on of the Authority, subject to ratification by at least 75 percent of the Authority Members.
The Project, if implemented, woul d have provided additional water storage and dry year supply reliab ility to participating Authority Members. For the SFPUC individually, the Project could have provided up to 20,000 acre-feet of new reservoir capacity, which the SFPUC might have used to store supplemental dry-year supplies for its retail and wholesale water cust omers. To date, the SFPUC has participated in the Project planni ng process as an Authority Member and contributed funds under the Multi-Party Cost Share Agreement while evaluating whether to further invest in the Project. The SFPUC had not yet reached a decision regarding its long-term investment in the Project when CCWD announced that the Project will not proceed.
Past actions of the Commission with respect to the Project, and other key Project milestones and CCWD and Authority actions, are described in further detail below.
On December 13, 2016, by Resolution No. 16-0258, this Commission authorized the SFPUC’s initial par ticipation in the Project through a cost share agreement with CCWD and the Bay Area Water Supply & Conservation Agency (BAWSCA). The Project subsequently secured grant funds through the Californi a Water Commission and the U.S.
Bureau of Reclamation for con tinued Project development and implementation.
On March 26, 2019, by Resolution No. 19-0060, this Commission approved the Multi-Party Cost Share Agreement for Los Vaqueros Reservoir Expansion Project Pl anning (Cost Share Agreement) between CCWD and several other public entities (Local Agency Partners), including the SFPUC. Between 2020 and 2024, the parties amended the Cost Share Agreement six times to extend its duration, increase the funding contributions of the parties, add new tasks, and memorialize completion of existing tasks. The Commission authorized the most recent amendment on May 28, 2024, by Resolution No. 24-0131. The agreement’s final total not-to-exceed amount, split among the parties, was $31,525,839. Of this sum, the SFPUC’s total not-to-exceed amount was $4,597,910. To date, the Action: Ratify Termination of Los Vaqueros Reservoir Joint Exercise of Powers Agreement and Dissolution of the Los Vaqueros Reservoir Joint Powers Authority
Commission Meeting Date: February 11, 2025
SFPUC has expended le ss than this amount, paying a total of $4,413,754 to the Project under the Cost Share Agreement.
In September 2020, due to the si gnificant financial contribution needed and outstanding uncertain ties, the BAWSCA Board of Directors withdrew BAWSCA from the Cost Share Agreement and ended its independen t participation in the Project. BAWSCA continued to support the SFPUC’s participation in the Project, despite BAWSCA no longer being a Local Agency Partner.
On August 24, 2021, by Resolution No. 21-0131, this Commission authorized the General Manager to execute the Los Vaqueros Reservoir Joint Exercise of Powers Agreement with seven other Bay Area and Central Valley water agencies (Members). The agreement established the new Authority; provided for its governance and administration; and created a structure for Members to assist in the design, construction, future opera tion, and administration of the Project. Since that date, the Memb ers have worked to further the Project, including through engaging professional management and staff, developing and enhanci ng supportive relationships with stakeholders and federal and st ate partners, and in negotiating agreements with various federal and state agencies and CCWD.
By the fall of 2024, CCWD determin ed that the Project’s estimated construction costs had increased by more than 50 percent compared to the original estimate in the 2017 application for Water Storage Investment Program funding. Add itionally, CCWD estimated that regulatory actions had decreased so me of the Project’s anticipated public and non-public benefits by as much as 30 percent. CCWD also had not been able to confirm a backup water supply of desired quality that would be available for CCWD retail customers at times when the reservoir would be out of service during Project construction.
As a result, on November 6, 2024, the CCWD Board of Directors took action to end CCWD’s participa tion in the Project, to decline certain state funding for the Pr oject, and to withdraw CCWD’s application for remaining state f unding, which effectively terminated any federal funding for the Project a nd terminated the Project itself, because CCWD is the owner and operator of the reservoir.
On December 11, 2024, the Authority Board of Directors
unanimously voted to adopt Resolution No. 12-24-01, which terminated all Authority Board committees and directed Authority staff to proceed with actions necessary to dissolve and wind up the Authority. On January 8, 2025, the Authority Board of Directors Action: Ratify Termination of Los Vaqueros Reservoir Joint Exercise of Powers Agreement and Dissolution of the Los Vaqueros Reservoir Joint Powers Authority
Commission Meeting Date: February 11, 2025
adopted Resolution No. 1-25-01, whic h resolved to terminate the Joint Exercise of Powers Agreement and directed staff to proceed with the dissolution, winding up, and liquidation of the Authority on certain terms, subject to ratification by the governing bodies of at least 75 percent of the Members, pursuant to Section 8.1 of the Joint Exercise of Powers Agreement.
Authority staff have stopped work in most areas to conserve remaining Project funds. However, final administra tive activities to dissolve the Authority, which Authority staff expect to complete as early as April 2025, will require that the Authority continue to spend some Project funds. The Authority will distribute an equal share of any remaining cash held by the Authority (including remaining Project funds to be received from CCWD) to each Member who made cash contributions under the Cost Share Agreement, as described in the Authority’s Resolution No. 1-25-01.
Description of Action: The termination of the Joint Exercise of Powers Agreement and the dissolution, winding up, and liquidation of the Authority in accordance with Authority Resolution No. 1-25-01 require ratification by the governing bodies of at least 75 percent of the Members.
Parties: Authority and Authority Members: Contra Costa
Water District; Alameda County Flood Control
and Water Conservation District, Zone 7;
Alameda County Water District; East Bay
Municipal Utility District Grassland Water
District; San Francisco Public Utilities
Commission; San Luis & Delta-Mendota Water
Authority; and Santa Clara Valley Water
District.
Purpose: To terminate the Joint Exercise of Powers
Agreement and dissolve the Authority that had
been established for the planning, design,
construction, future operation, and
administration of the Phase 2 Los Vaqueros
Reservoir Expansion Project.
Location: Contra Costa C ounty and larger Bay Area.
Commencement
Date:
Upon ratification of Authority Resolution No. 1-
25-01 by the governing bodies of 75 percent of
the Members.
Action: Ratify Termination of Los Vaqueros Reservoir Joint Exercise of Powers Agreement and Dissolution of the Los Vaqueros Reservoir Joint Powers Authority
Commission Meeting Date: February 11, 2025
Budget & Costs: No additional expenditure by the SFPUC is anticipated. The Members’ previous contributions under the Cost Share Agreement will cover the costs for final Authority wrap-up activities. The SFPUC’s previous total cash contribution to the Project ($4,413,754) will cover the SFPUC’s share of such costs.
The Authority will distribute an equal share of any remaining funds to each Member who made cash contributions under the Cost Share Agreement, as described in the Authority’s Resolution No. 1-25-01.
Schedule: Conclusion of final Authority activities is expected as early as April 2025.
PUBLIC UTILITIES COMMISSION
City and County of San Francisco
RESOLUTION NO.
WHEREAS, The San Francisco Public Utilities Commission (SFPUC) is a member of the Los Vaqueros Reservoir Joint Powers Author ity (Authority), along with seven other public agencies including Contra Costa Water District (CCWD) (collectively, the “Members”); and
WHEREAS, On October 6, 2021, the Members executed the Los Vaqueros Reservoir Joint Exercise of Powers Agreement, as authorized by this Commission on August 24, 2021, by Resolution No. 21-0131, to establish the Aut hority; to provide for its governance and administration; and to create a structure for Members to assist in the design, construction, operation, and administration of the Phase 2 Los Vaqueros Reservoir Expansion Project (Project); and
WHEREAS, CCWD owns and operates th e Los Vaqueros Reservoir, and CCWD proposed the Project, which consisted of the furt her expansion of the reservoir’s capacity to 275,000 acre-feet and the construction or upgrade of other conveyance and appurtenant facilities, to enable other water agencies in the region to use the reservoir; and
WHEREAS, The Project contemplated a re gional partnership among CCWD and the other Members that would result in multiple pub lic benefits, including water supply reliability, drought resilience, regional integration and ecosystem benefits, such as water supplies to support Central Valley wildlife refuges; and
WHEREAS, The Project offered the potential to provide additional water storage and dry year supply reliability to participating Members; for the SFPUC, the Project could have provided up to 20,000 acre-feet of new reservoir capacity, which the SFPUC might have used to store supplemental dry-year supplies for its retail and wholesale water customers, if it decided to make a long-term investment in the Project; and
WHEREAS, The Bay Area Water Supply and Conservation Agency (BAWSCA), which represents the SFPUC’s wholesale water customer s, supported the SFPUC’s participation in the Project to date; and
WHEREAS, On December 13, 2016, by Resolution No. 16-0258, this Commission authorized the SFPUC’s initial pa rticipation in the Project thr ough a cost share agreement with CCWD and BAWSCA; and
WHEREAS, The Project garnered the suppor t of state and federal agencies, as demonstrated by the financial s upport discussed below, and was not legally challenged by any person or entity; and
WHEREAS, In 2018, CCWD received a Maximum Conditional Eligibility Determination award of $459,000,000 (later escalated to $477,558,343) for the Project from the California Water Commission under Proposition 1 and the Water Storage Investment Program; and
WHEREAS, On March 26, 2019, by Resolu tion No. 19-0060, this Commission approved the Multi-Party Cost Share Agreement for Los Vaqueros Reservoir Expansion Project Planning (Cost Share Agreement) between CCWD and several other public agencies, including the SFPUC, that specified the parties’ tasks and de liverables pertaining to the Project and set forth the parties’ agreement to proportionately fund actions related to the Project; and
WHEREAS, Between 2020 and 2024, the partie s amended the Cost Share Agreement six times to extend its duration, increase the funding cont ributions of the parties, add new tasks, and memorialize completion of existing tasks, with the most recent amendment authorized by this Commission on May 28, 2024, by Resolution No. 24-0131; and
WHEREAS, The amended Cost Share Agreem ent’s final total not-to-exceed amount, split among the parties, was $31,525,839; of this su m, the SFPUC’s total not-to-exceed amount was $4,597,910, and the SFPUC has, to date, expended less than th is amount, paying a total of $4,413,754 to the Project; and
WHEREAS, In 2022 and 2023, in light of the regi onal benefits and public benefits to be derived from the Project, CCWD obtained funding commitments totaling $171,945,000 from the federal government, through the U.S. Bureau of Reclamation, consisting of $92,000,000 under the Bipartisan Infrastructure Law and $79,945,000 under the Water Infrastructure Improvements for the Nation Act; and
WHEREAS, Since the formation of the Authority, the Members have worked to further the Project, including through engaging professional management and staf f, through developing and enhancing supportive re lationships with stakeholders and federal and state partners, and in negotiating agreements with various federal and state agencies and CCWD; and
WHEREAS, Over the past several years, the Project has experienced greater than anticipated cost increases, regulatory actions have reduced some of the Project’s public and non- public benefits, and CCW D has not been able to confirm a backup water supply of desired quality that would be available to CCWD retail customers at times when the reservoir would be out of service during construction of the Project; and
WHEREAS, On September 18, 2024, CCWD’s Board of Directors directed CCWD staff to develop a plan to end CCWD’s participation in the Project; and
WHEREAS, On November 6, 2024, CCWD’s Bo ard of Directors took action to end CCWD’s participation in the Project, to decline the state funding described above (with the exception of planning funds already fully expended ), and to withdraw CCWD’s application for remaining state funding; and
WHEREAS, Because CCWD is the owner and operator of the Los Vaqueros Reservoir, the ending of its participation in the Project effectively terminates the Project; and
WHEREAS, On December 11, 2024, the Authority’s Board of Directors unanimously voted to adopt Resolution No. 12-24-01 to, in per tinent part, direct Authority staff to proceed with actions necessary to dissolve and wind up the Authority, including, but not limited to, preparing a resolution concerning termination of the Joint Exercise of Powers Agreement and dissolution of the Authority; and
WHEREAS, The cost of these final acti ons necessary to dissolve and wind up the Authority will be covered by funds previously contributed by the Members under the Cost Share Agreement, as amended; and
WHEREAS, Section 8.1 of the Joint Exercise of Powers Agreement requires the approval of at least 75 percent of the Authority’s Board of Directors to terminate the Joint Exercise of Powers Agreement, and that termination must th en be ratified by the governing bodies of at least 75 percent of the Members; and
WHEREAS, On January 8, 2025, the Authority ’s Board of Directors unanimously adopted its Resolution No. 1-25-01 to terminate th e Joint Exercise of Powers Agreement and to dissolve the Authority, subject to ratification by the Members; and
WHEREAS, Based on the facts and circum stances relating to CCWD’s prior board actions and the Authority Board of Directors’ adoption of Resolution No. 1-25-01 on January 8, 2025, the SFPUC desires to ratify the termination of the Joint Exercise of Powers Agreement, as required under Section 8.1 of that Agreement, and to ratify the dissolution, winding up, and liquidation of the Authority in accordance wi th the terms of Resolution No. 1-25-01; now, therefore, be it
RESOLVED, That this Commission hereby:
1. Ratifies the termination of the Los Vaqueros Reservoir Joint Exercise of Powers Agreement, with such termination to be effective as of the first day after the last Authority Board of Directors’ meeting occurs, and requests the General Manager notify the Authority’s Executive Director of this action; and
2. Ratifies the dissolution, winding up, a nd liquidation of the Authority in accordance with the terms of Author ity Resolution No. 1-25-01, adopted on January 8, 2025; and
3. Requests the General Manage r, in cooperation with the Authority and other Members, take all necessar y or appropriate actions to effectuate the foregoing termination of the Joint Exercise of Powers Agreement and dissolution of the Authority occur in an expeditious manner.
I hereby certify that the foregoing resolution was adopted by the San Francisco Public Utilities Commission at its meeting of February 11, 2025.
Director of Commission Affairs
San Francisco Public Utilities Commission