CITY OF GROVER BEACH
CITY COUNCIL STAFF REPORT
Agenda Item No. 6
Placement: Business
Meeting Date: September 8, 2025
TO: Honorable Mayor and City Council
FROM: Matthew Bronson, City Manager
PREPARED BY: Greg Ray, Public Works Director/City Engineer Matthew Bronson, City Manager
SUBJECT: Water System Update
RECOMMENDATION
Receive a report on the status and overview of the City’s water system including water infrastructure needs, water supply conditions, and Water Enterprise Fund financial issues and provide direction to staff regarding a proposed water supply alternatives study.
BACKGROUND
This report provides an update on the status and overview of the City’s water system including water infrastructure needs, water supply, and Water Enterprise Fund financial issues. The report also provides information about a proposed water resiliency study funded in this year’s Water Fund budget. Staff is seeking Council direction on the scope of this study to evaluate the necessity and options for future alternative water supply sources to meet the City’s long-term needs before requesting proposals for the study. This agenda item is consistent with the FY 2025-27 Council Priority of Water and Sewer Infrastructure and Needed Resources.
Water Infrastructure Needs
The City's water system is comprised of approximately 48 miles of water mains, 1,600 valves, 440 fire hydrants, three 1-million-gallon water reservoirs, four wells of which three have water treatment plants, a single booster station, and 2,530 water meters. The system is predominately over 40 years old and some components as old as 60 years. For example, approximately 13 miles of water mains were constructed in the 1960s with asbestos cement pipe that has recently seen numerous failures as a result of its age. In the last fiscal year 2024-25, staff recorded 31 unexpected service interruptions due to leaks and main failures compared with a goal of no more than five.
Historically, due to a lack of sufficient funding historically in the Water Fund over many years, major maintenance of the water system has been deferred with infrastructure replacement and upgrades only occurring after system components failed. In 2010, staff developed a Water Master Plan and a 10-year Capital Improvement Program (CIP) for the water system to begin maintenance and replacement of aging system components which were long overdue. In addition, given the recommendations in this Water Master Plan to upsize certain water mains, valves and pumps for existing and future development, staff also proposed capital projects for water system capacity upgrades. However, to minimize impacts to ratepayers at the time, the 10-year CIP was modified and spread across a 20-year period resulting in greater risk of system failures and loss Staff Report: Water System Update Page 2
September 8, 2025
of service. An updated Water Master Plan and 10-year CIP was developed in 2019 which provided additional information about the condition of the City’s water system and identified the need for further upgrades and improvements to water infrastructure. Following issuance of a water revenue bond in 2020, the City made some progress in addressing these infrastructure needs but similar to 2010, the 10-year CIP was spread over a 20-year period to minimize ratepayer costs which has delayed implementation of needed projects.
At the June 10, 2024 Council meeting, staff presented information on the status of the Water Enterprise Fund and lack of funding available to complete necessary capital improvements. Below is a list of identified water projects delayed as a result of insufficient revenue shared with the Council in June 2024 and remain delayed at this time:
• Water Main Zone Valves - Replacement of existing zone valves and installation of additional zone valves are necessary in order to reduce the scope of water shutdowns for water repairs. Currently the system has a number of valves that have failed and with a relatively small number of valves, most shutdowns involve multiple blocks. • Well Facility Improvements - The City's aging well field and well field components need to be updated in order to deliver their original capacity and to assure a continuous supply of groundwater to the City.
• 16th Street Booster Station Pump and Equipment Upgrades – This project ensures approximately 25% of residential water accounts (approximately 1,300 accounts) including Grover Heights Elementary School have adequate water pressure and flow at their water meters and fire hydrants for fire suppression. • Water Meter Replacement Program - More than 50% of the City’s existing water meters are older than 10 years old. As water meters approach 10 years of age, they begin failing and underreporting the amount of water used. The result is a loss in income to the water system further depleting revenue needed for operations, maintenance and upgrades. • Automated Meter Reading - The current manual read system allows system errors such as failed meters and significant leaks to remain undetected for up to two months resulting in either significant costs to residents or significant loss of revenue to the water system.
The automated read system would provide instantaneous feedback regarding errors and improved service to the City's water customers.
• Upsizing Water Mains – There are a number of water main segments that require upsizing in order to provide adequate fire flow to certain areas of the City. Without these upgrades, there could be insufficient pressure or flow to provide adequate fire suppression. • Nitrate Plant De-commissioning - The City’s existing nitrate treatment plant is no longer needed and should be decommissioned and removed.
• Reservoir Maintenance – Significant coating maintenance and other upgrades are needed in order to keep the City’s water reservoirs in service. The City carried out a maintenance project on reservoir 3 in FY 2024-25 but similar work needs to be carried out on the other two reservoirs.
The FY 2025-26 CIP includes funding for one project (Well 1 automatic transfer switch) that is necessary for minimizing power supply disruptions during a power outage. This project needed to be done now to maintain safe functioning of the groundwater well.
Staff Report: Water System Update Page 3
September 8, 2025
Water Supply Conditions
The City currently has two water sources: Lopez Lake (Lopez) and the Santa Maria Groundwater Basin (groundwater). The total amount of water legally available to the City is 2,207 acre-feet per year (AFY) comprised of 800 AFY of Lopez water and 1,407 AFY of groundwater. In response to declining groundwater elevations observed in the late 2000s, the City and neighboring agencies also using groundwater took action to significantly reduce groundwater pumping and the City currently only pumps 500 AFY of the 1,407 AFY allocation.
Due to above-average rainfall in 2023 and 2024 and near-normal rainfall in 2025, Lopez water is currently in good condition as the Lopez Lake is approximately 85% full. As a result, the City is expected to receive its full 800 AFY allocation this year along with sufficient storage to provide the City’s full allocation for the next few years. Recent groundwater monitoring results also indicate that groundwater levels in the basin are sufficient at this time and the City should be able to rely on current levels of groundwater pumping (approximately 500 AFY) for the next few years even if an extended drought were to begin this year. Based on these conditions, there is sufficient water supply available to the City over the next few years to meet the City’s projected demand.
However, the City could be impacted by both short and long-term supply reductions given various factors. During times of extended drought, current water supply could be insufficient to serve existing customers resulting in a need for significant water use cutbacks. With incremental population growth expected, the City's long-term water demand may exceed available supply even during normal rainfall years with no supply buffer available to address drought or water system emergencies. The pending federal litigation against the County of San Luis Obispo by environmental groups claiming the County’s operation of Lopez Lake including the level of downstream releases harms endangered steelhead trout could significantly affect the long-term reliability and cost of Lopez water to the City and other agencies. In addition, building permits and development projects which have been approved but not built would result in additional demand for water which would further strain long-term supplies unless additional water was secured.
As a result of these uncertainties, staff has begun working on a number of efforts related to future water supply. First, the City currently has development impact fees for the cost of water system installations and upgrades, but there is no impact fee in place for development of future water supplies. Staff is researching the feasibility of such an impact fee and will provide further information on an impact fee study and implementation at a future Council meeting. Staff is also researching the concept of an ordinance that would implement a temporary development stay to address water supply shortage conditions in cases of extended drought conditions. Staff would also plan to provide further information on this at a future meeting.
On a broader level, a comprehensive study of potential water supply reduction scenarios and their likelihood of occurrence is valuable to inform the City on the necessity, timing and scale of additional water supply sources to meet the City’s long-term needs. This water resiliency study by an outside consultant would provide an in-depth evaluation of supply resiliency and risks compared to estimated demand and present an analysis of available alternative water supply sources with recommendations on the most feasible sources to consider along with recommendations on the timing and scale of a future water supply source(s). Below is a draft scope of work for this study:
Staff Report: Water System Update Page 4
September 8, 2025
• Develop and conduct public information and engagement program for community involvement in the study process 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. • Develop cost estimate and cost-benefit analysis of the following list of water supply alternatives available to the City (shown below in alphabetical order):
o Conservation
o Desalination
o Lopez Lake spillway modifications and downstream releases o Purchase of State Water
o Recycled water
o Storm water retention
o Other emerging water supply solutions
• Provide a recommendation to the Council on a short list of water supply alternatives recommended for in-depth research and consideration and seek Council direction on which alternatives to further pursue.
• 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 related to the recommended shortlist of alternatives selected by the Council.
• Prepare a final report and recommendation to the Council identifying the most cost effective and feasible water supply alternative and recommendations on future actions related to the recommended alternative.
Staff is seeking Council input and direction on this draft scope of work prior to releasing a Request for Proposals (RFP) process for a qualified consultant to carry out this study. The study would be led by the Public Works Department with involvement from the Community Development Department and the City Manager’s Office and funding for the study is included in this year’s Water Fund budget. The RFP process would begin this month with a consultant agreement brought to the Council by the end of the calendar year and the study report brought to the Council by the end of FY 2025-26.
Water Enterprise Fund Status
Currently, the Water Fund has an operating budget of $4.6 million with a budgeted deficit of $145,404. Following adoption of an updated water and wastewater rate structure in December 2023, the Council in May 2024 reverted water rates to the previous rate structure adopted in 2021.
Subsequently, Measure G-24 was passed by voters which repealed the adopted December 2023 rate structure and restricted the Council from increasing rates beyond the 2021 rate structure.
The City is in the final year of the 2021 rate structure and thus water rates will remain flat after FY 2025-26 until a Proposition 218 process is carried out to adopt a new rate structure. The current rate structure is insufficient to fund increased operations and maintenance costs over the long run or carry out needed capital projects needed to maintain the aging infrastructure of the system. As part of the work program for the Council Priority of Water and Sewer Infrastructure and Needed Resources, staff would plan to initiate a water rate study following the completion of the water resiliency study and bring this rate study to the Council in FY 2026-27.
Staff Report: Water System Update Page 5
September 8, 2025
Multi-Year Goals
☐ Public Safety and Community Services ☐ Economic Development and Housing ☒ Community Infrastructure ☒ Financial and Organization Sustainability Council Priorities
☒ Water and Wastewater Infrastructure ☐ Community Engagement Staff notes that there are other billing considerations that must be addressed in any future rate structure, including the City’s current use of tiered rates in light of recent case law affecting the use of tiered rates in the state as well as the City’s practice of billing for multi-family residences.
Potential changes in the City’s rate structure will have fiscal impacts to the Water Fund and staff would recommend considering changes as part of a future comprehensive review and discussion about water rates.
FISCAL IMPACT
The FY 2025-26 budget provides funding for a water resiliency study and a necessary capital project related to groundwater Well 1 along with existing operations and maintenance needs.
ALTERNATIVES
The Council has the following alternatives to consider:
1. Receive a report on the status of the City’s water system including water infrastructure needs, water supply conditions, and Water Enterprise Fund financial issues and provide direction to staff regarding a proposed water supply alternatives study; or
2. Provide alternative direction to staff.
PUBLIC NOTIFICATION
The agenda was posted in accordance with the Brown Act.