Cotati City Council
Agenda Staff Report
Item type: REGULAR AGENDA (ACTION)
To: City Council
Subject: Review of Proposed Sonoma Water Transmission System Budget for Fiscal Year 2022-23
Date: March 08, 2022
Written by: Craig Scott, Director of Public Works/City Engineer Recommendation
It is recommended the City Council adopt a motion providing direction to the City's Water Advisory Committee Member to endorse the proposed Sonoma County Water Agency FY 2022- 23 Water Transmission System Budget.
Background
The Sonoma County Water Agency (Sonoma Water) has a Technical Advisory Committee (TAC) comprised of staff from the prime water contractors (specific cities and water districts that purchase water from Sonoma Water, as named in the Restructured Agreement for Water Supply), and a Water Advisory Committee (WAC) comprised of designated elected officials from these same prime water contractors.
At the TAC meeting on March 7, 2022, Sonoma Water is to present the attached draft budget for the TAC consideration and recommendation to the WAC. At the prior joint WAC/TAC meeting on February 7, 2021, the WAC chair set April 4, 2022 as the special meeting date to have the WAC vote on the proposed FY 22/23 Water Agency water transmission system budget.
Analysis/Discussion
In accordance with the Restructured Agreement for Water Supply (the wholesale water supply agreement for the prime water contractors, including Cotati), the City’s wholesale water rate is tied to the Petaluma Aqueduct rate. The proposed overall increase to the wholesale water rate for FY 22/23 is 6.16 percent. Based on the Restructured Agreement for Water Supply, the rates are based on budgeted deliveries of 45,748 Acre-Feet (AF) which is the average annual water deliveries for the prior 36 months. The proposed Budget package prepared by Sonoma Water is attached and contains a summary, table of contents and budget detail sheet.
The elements of the budget are further described below:
OPERATIONS AND MAINTENANCE (O&M) CHARGE. This charge consists of a base O&M charge and four sub-charges that together make up the “Total O&M Charge”.
The base O&M charge would increase by $130.11/AF (19%) due to an increase in maintenance projects (cathodic protection, tank recoating, pump and valve replacements, chlorine and pH improvement projects, and SCADA upgrades), studies (Regional Water Supply Resiliency, Watershed and Water Quality Seismic Mitigation Studies, and the Local Hazard Mitigation Plan), and emergency inventory procurement.
A summary of the O&M projects is shown on the 3rd page of the attached document.
OPERATIONS AND MAINTENANCE SUB-CHARGES
The four sub-funds within the Total O&M Charge are as follows:
1. Water Management Planning. This sub-charge is used primarily to fund the Urban Water Management Plan and related activities. The plan is required by the State for years ending in zero and five. The proposed FY22/23 budget includes an increase from zero to $0.20 per AF for the Annual Water Supply and Demand Assessment, which is used to develop scope, cost, and schedule to complete a water supply and demand analysis and preparation and submittal of the required Annual Water Shortage Assessment Report to the Department of Water Resources by July 1 each year. Results of the Annual Assessment are also required to inform the work of Sonoma Water’s contractors’ Assessment Reports to DWR.
2. Watershed Planning/Restoration. This sub-charge is used primarily to fund activities required for the implementation of the Biological Opinion. This sub- charge would decrease by $99.96/AF (75.3%). The decrease is due to use of fund balance as Sonoma Water continues to be credited by the US Army Corp for expenditure of cost share. Work continues for design and right-of-way expenditures for Dry Creek Habitat Enhancement phases 5 and 6, construction of phases 4 and 5, and other required biological opinion activities. Up to $7.5 million in fund balance is being used for design and construction cots to smooth rate impact.
3. Recycled Water & Local Supply. This sub-charge is used primarily for funding recycled water and local supply projects. Fiscal Year 2022/23 rate is a decrease of $0.43/AF which is a 45.9 percent decrease. Past rate increases have accumulated sufficient fund balance for this fund.
4. Water Conservation. This sub-charge is used for funding regional water conservation efforts, such as regional media ads and supporting the regional Sonoma-Marin Water Saving Partnership. This sub-charge is to increase by $3.06/AF (6.9%). The rate increase is for program needs including for the Proposition 1 Bay Area and USBR Water Use Efficiency grant programs.
Summaries of the major expenses in each of these sub-funds can be found on pages 24-33 of the attached Proposed Sonoma Water FY 22/23 Transmission System Budget.
Financial Considerations
Approval of the budget is expected to result in an increase of 6.16 percent to the wholesale rate of water that the City purchases from Sonoma Water. The City’s 5-Year rate model, for years 2017, 2018, 2019, 2020, and 2021, has been fully implemented and is being updated. The updated fiveyear Rate Financial Plan will continue to use between a 4-6 percent assumed annual Sonoma Water rate increase. Page 3 of the attached budget shows historical Water Agency budget increases and for the five-year period of the City’s rate model, the average is 4.4 percent. However, this is a simplistic comparison as the water usage varies. Because water usage has steadily increased over this period, the City’s purchased water costs to Sonoma Water have increased.
As with the City’s financial planning, the Sonoma Water long range financial model’s goal is to provide long term rate stability while preparing for long range capital projects. The goal is to build up capacity for future projects, while avoiding large year-over-year rate increases.
Environmental Issues
None.
Attachments:
FY 22-23 Draft WT Budget (PDF)