Central Coast Blue Withdrawal and Water Rates Revision
GROVERBEACH.ORG
Matthew Bronson City Manager
Background
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Staff is returning to Council to implement policy direction to withdraw from Central Coast Blue recycled water project and related Joint Powers Authority Resolution for Council action to withdraw from project and Resolution to adopt revised water rate structure reflecting withdrawal Staff report includes information about proposed water resiliency efforts in FY 2024-25 given need for supplemental water
Withdrawal from the CCB JPA
GROVERBEACH.ORG
Council is requested to consider adoption of the Resolution shown in Attachment 1 Upon Council adoption, staff will deliver Notice of Intent to withdraw from the JPA to the General Manager and Board of Directors of the JPA to begin 180-day notice period for withdrawal 180-day period prescribed in JPA agreement though ultimate timeframe may be less pending Council direction and JPA Board approval
Revised Water Rate Structure
GROVERBEACH.ORG
Revised rate structure removes all future construction expenses for Central Coast Blue Funds operations, maintenance, and capital projects of existing water system along with reserves and debt service costs Also provides $300,000 in funding for water resiliency efforts in FY 2024-25 to work on diversifying the City’s water portfolio Revised rate structure would lead to effective revenue increase of 5.2% beginning February 1, 2024 (compared with 19.7% in adopted rate structure) Monthly cost of rate increase in 2024 would be $4.57 for average user City’s rates would continue to be lowest in the county in 2024 through 2028
Regional Comparison
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Regional Comparison
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Additional Considerations
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Withdrawal from Central Coast Blue has additional financial considerations:
Preconstruction expenses were to be capitalized through financing process which is no longer a viable alternative. $1.61M in expenses are factored into the rates to ensure Water Fund can maintain projects, O&M, as well as reserves of 25% operating and $500,000 capital expense.
Existing Water Fund Reserves are largely 2020 Water Bond proceeds assigned for capital improvements.
Water Fund (601)
Fund Balance as of 6/30/23
Assigned
2020 Water Bond
2,770,227
Unassigned
1,968,373
Total
4,738,600
Water Resiliency Efforts
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Staff is requesting Council direction on planned water resiliency efforts in FY 2024-25 Potential water deficit beginning in 2030 based on extended drought and if supply was reduced to minimum level
Water Resiliency Efforts
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Staff has recommended the Council consider actions to seek up to 510 acre-feet per year Sufficient to make up the anticipated gap in demand by 2050 and allow for an operational buffer of up to 15-20% of supply Securing supplemental water is critical to meet community needs for existing residents and businesses and to achieve additional housing and development opportunities Lack of additional water supply could lead to a limitation or potential moratorium on development or issuance of permits
Water Resiliency Efforts
GROVERBEACH.ORG
Solicit proposals from qualified water engineering firms to provide research, reports, and recommendations related to the City’s water supply alternatives Recommended work scope:
Conduct public information and engagement program for community input to inform the Council’s deliberation and decision-making Review previous estimates of water supply and demand and provide additional analysis including recommended water supply buffer amount and policy
Water Resiliency Efforts
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Develop cost estimate and cost-benefit analysis of the following list of water supply alternatives available to the City:
Desalination
Purchase of State Water
Lopez Lake spillway modifications and downstream releases Storm water retention
Conservation
Recycled water
Other emerging water supply solutions
Water Resiliency Efforts
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Provide a recommendation to Council on a short list of water supply alternatives recommended for in-depth research and consideration Prepare preliminary design, cost estimates and estimated schedules for permitting, design, approval and construction of the selected alternatives or peer review, value engineering and recommendations on existing designs Prepare a final report and recommendation to Council identifying most cost effective and feasible water supply alternative and recommendations to implement recommended alternative
Water Resiliency Efforts
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Approximately a year to fully carry out
Estimated cost of approximately $300,000
Pending direction from the Council, staff would begin this effort once the new fiscal year begins in July Council approval of an agreement with a consultant anticipated this fall Continue to work towards securing additional short-term water supply options consistent with previous Council direction on temporary measures to augment the City’s water supply
Fiscal Impact
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Revised water rates would reduce revenues no longer required given the City’s pending withdrawal from Central Coast Blue Revised structure includes:
4.2% increase in revenue to maintain and operate the existing water system and carry out capital projects 1% increase to account for the water resiliency effort and City’s exit from Central Coast Blue Results in a 5.2% increase in water rates for FY 2023-24
CCB Withdrawal and Water Rates Revision
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Questions?
Current & Future Water Rate Structure
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Adopted Structure
Revised Structure
2021 Structure
February 1, 2024
19.7%
5.2%
-
January 1, 2025
19.7%
5.2%
4% (July 1, 2024)
January 1, 2026
19.7%
5.2%
4% (July 1, 2025)
January 1, 2027
19.7%
3.5%
-
January 1, 2028
4%
3.5%
-
Review of 2021 Water Rate Structure
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Staff has done initial review of not increasing rates above 2021 rate structure Projected deficit in Water Fund with insufficient reserves forcing trade off with capital investments Staff would seek to delay or cancel water infrastructure projects and/or use bond revenue to finance costs which will come from other capital projects FY 23-24
FY 24-25
FY 25-26
FY 26-27
FY 27-28
Total Revenues
4,122,120
4,088,920
4,062,373
4,072,926
4,089,574
Total Revenue Requirements
6,046,813
4,369,189
5,027,738
4,385,626
4,806,333
Surplus/(Deficit)
(1,924,693)
(280,269)
(965,365)
(312,700)
(716,758)
Reserves, Start of Year
4,738,600
1,271,044
981,827
526,330
922,557
Reserves, End of Year
2,813,906
990,775
16,462
213,630
205,798
Ratio to Target Reserves
119%
42%
1%
9%
8%