City Council Agenda Report
December 5, 2023
TO: Honorable City Council
FROM: Jesus M. Gomez, City Manager
BY: Glen W.C. Kau, P.E., Director of Public Services/City Engineer SUBJECT: RESOLUTION NO. 23-69 - APPROVING A SALE AND PURCHASE
AGREEMENT FOR THE SALE OF THE ARTESIA SERVICE AREA AND
RELATED ASSETS OF THE NORWALK MUNICIPAL WATER SYSTEM
Background:
The Norwalk Municipal Water System (NMWS), which is owned and operated by the City, provides water delivery services to a portion of the City and a small portion outside of its corporate boundaries to three areas within the City of Artesia. These areas are known as the Artesia Service Area (ASA), and serve a population of approximately 2,300 residents consisting of 891 water meter connections. These areas are as shown on Attachment Nos. 1, 2, and 3.
The City purchased and acquired the ASA areas from the former County Water Company in 2003. As the ASA is outside of the City’s corporate boundaries, operations and maintenance of the ASA places a strain upon the NMWS Utilities staff. The distance and travel time required to perform the water meter read services and ability to provide response to operational emergencies is very challenging. Due to current staffing levels, contract services are required and utilized for both water meter reading and emergency water system responses. As a result, the ASA system suffers from age, requiring major capital improvements.
Pursuant to the California Public Utilities Code Section 10061(b), which authorizes the City to sell all or any part of the portion of a public utility located outside its boundaries, the City initiated the process for the sale of the ASA portion of the NMWS in late 2018. City Council directed staff to engage with the solicitation process for sale of the ASA. On April 6, 2021, City staff generated and solicited a Request for Proposal (RFP) for the Purchase of the ASA and related assets (RFP 21-649) (Attachment No. 3).
It was determined that based on the ability to provide water services, delivery and operation, solicitation to potential providers would have to be geographically adjacent to the ASA.
City Council December 5, 2023
Resolution No. 23-69 – Approving the Sale of the
Norwalk Municipal Water System Artesia Service Area
Page No. 2
7 2
5 An RFP was solicited to both Golden State Water Company (GSWC) and Liberty Utilities water companies for potential interest of purchase. The City received just one proposal from GSWC.
After careful review and consideration of the proposal, it was determined that GSWC was suitable for the acquisition of the ASA.
Federal and State water quality regulations continue to evolve and threaten an unpredictable additional cost increase to water production. The regulation of Per- and Polyfluoroalkyl Substances (PFAS) has already added monitoring and reporting costs and will likely add expensive water treatment requirements in the near future. GSWC in better situated geographically and financially to address the issues with the ASA. The City’s small operation simply cannot compete with the economy-of-scale offered by the size of the water company’s organization.
GSWC is offering a one-lump sum payment of $5,250,000 to the City for the purchase of the ASA. Over the course of the last few months, City staff, along with the City Attorney’s Office, have negotiated the terms and conditions of a proposed Purchase and Sale Agreement attached hereto in substantial form (Attachment 2). It should also be noted that under the terms of the agreement, the City will retain all of its water rights.
If the ASA Purchase and Sale Agreement is approved by City Council through the proposed Resolution No. 23-69, the next step involves City staff assisting GSWC to obtain the required approval of the sale from the California Public Utilities Commission (CPUC). The CPUC process is expected to take a number of months to finalize.
Fiscal Impact:
Upon completion of the sale transaction, the City would receive a one-time lump sum payment of $5,250,000 from GSWC.
Citizens Advised:
N/A
Strategic Plan 2023 Implementation:
N/A
Recommended Action:
Staff recommends City Council adopt Resolution No. 23-69, A RESOLUTION OF THE CITY
COUNCIL OF THE CITY OF NORWALK, FINDING THAT REQUIREMENTS PURSUANT TO CALIFORNIA PUBLIC UTILITIES CODE SECTION 10061 FOR THE SALE OF THE CITY OF NORWALK’S ARTESIA SERVICE AREA WATER SYSTEM AND RELATED ASSETS City Council December 5, 2023
Resolution No. 23-69 – Approving the Sale of the
Norwalk Municipal Water System Artesia Service Area
Page No. 3
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5 LOCATED OUTSIDE OF ITS BOUNDARIES, HAVE BEEN MET AND APPROVAL OF THE SALE, for the purchase price of $5,250,000.
Attachments:
1. Resolution No. 23-69 – Approving the Sale and Purchase Agreement
2. Draft Purchase and Sale Agreement