Pacific Grove City Council
March 16, 2022

8 Operating Procedures
The City completed construction of the LWP via a design-build contract in January of 2018. The primary purpose of the Project is to produce and distribute high quality recycled water to replace potable water used for non-potable irrigation and toilet flushing demands. The LWP consists of a

0.25 million gallon per day Water Recycling Facility with an annual production capacity of 125 acre-feet per year.

In November of 2017, the City entered into an agreement with PercWater for operations and maintenance of the LWP. The high level scope of the agreement is to provide operations, maintenance, and management of the treatment plant. The operator is also tasked with providing all monitoring, reporting and State compliance. The agreement has a fixed cost for operations at $214,968 per year for a five-year period, with an annual increase tied to the Rider Levett Bucknall Quarterly Construction Cost Report local to Los Angeles. Additionally, there is a charge per acre foot of treated water set at $196.00 per acre foot of all influent.

The Asset Management Agreement is effective for a five-year period. Upon completion of the five-year period, the City may choose to renegotiate and implement a contract extension, if this is the desired approach. PercWater has been meeting the requirements of the Operations and Maintenance Agreement and is a suitable partner to the City for the operations of the plant.

Personnel
To properly manage and operate the plant, PercWater is required to staff the facility at least 6 hours a day during weekdays, and two hours per day on the weekends and holidays, with operators possessing at least a Grade III wastewater certificate. Their team consists of two onsite employees that rotate shifts, an Area Operations Manager that completes all reporting requirements and provides management to the onsite employees, and the Vice President of Operations.

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9 Insurances
PercWater is required to maintain and require all of its subcontractors, consultants and other agents to maintain insurances noted within the agreement also. The required insurances include:

1. Workers Compensation and Employer Liability Insurance

2. General Liability Insurance

3. Automobile Liability Insurance

4. Pollution Liability Insurance

5. Professional Liability/Error & Omissions Insurance

6. Standards for Insurance Companies and Documentation

FINANCIAL DATA
Current Financial Condition
The Local Water Project initiated operations in the middle of Fiscal Year 17/18. In the first year of operations, there were remaining project expenditures of approximately $76,500 that were not covered by the State Water Resources Loan. These costs were paid through a transfer from the General Fund in Fiscal Year 19/20. In the first two full years of operations, operational costs continued to exceed operating revenues. The average operational deficit, net of transfers was approximately $260,000. This amount is reduced to $230,000 when the Fiscal Year 20/21 estimates are included in the calculation.

In Fiscal Year 20/21, the City approved a $600,000 loan from the Sewer Fund to the Local Water Project to assist in covering the negative fund balance. This 2021 LWP Interfund Loan was intended to supplement the current deficit fund balance and to allow time to assess the LWP operations and develop a financial sustainability plan. The addition of an unanticipated prior period utility payment is estimated to create a negative fund balance of $93,000 at the end of Fiscal Year 20/21.

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10 An overview of the operating trends is presented in the chart below.

The additional information included in this document provides a foundation to assist in evaluating fiscal sustainability options, as well as sample recommendations.

Cash Flow
The Local Water Project has uneven cash receipting patterns. Recycled water is consumed on a seasonal basis, with demand peaking in summer months and declining in winter or rainy seasons.

An overview of consumption trends is presented in the subsequent chart.

The Local Water Project’s revenue receipting patterns is similar to demand trends; however an annual debt service payment of approximately $206,448 is payable in February. In addition to a ($77,000)
($326,000)
($519,000)
($93,000)
-$600,000
-$400,000
-$200,000
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
FY 17/18 FY 18/19 FY 19/20 FY 20/21 Est
Revenues, Expenditures, and Available Fund Balance
Expenditures Avail. Fund Balance Revenues and Transfers -
1 2
3 4
5 6
July Aug. Sept. Oct. Nov. Dec. Jan. Feb. March April May June Million Gallons
LWP Recycled Water Demand
(in gallons)
FY 18/19 FY 19/20 FY 20/21 YTD
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11 reduction in recycled water sales during winter months, this payment contributes to the temporary decline in operating cash. Water sales are billed to external customers in the month following consumption, while cash for internal customers, such as the Cemetery and City are transferred at the point of invoice. Revenues from external customers are typically received within 30 days of billing. The chart listed below represents the Local Water Project’s cash receipting trends. Any supplementary loans or transfers have been excluded to illustrate the typical cash flow patterns.

The chart identifies the seasonal troughs which are fairly consistent within the three-year period.

The average lowest points within the period is approximately $250,000.

Debt
California State Water Resources Revolving Loan
To construct the project, the City received an $2.4 million California Prop 13, Safe and Reliable Water Sources construction grant and a $5.2 million 1% State Revolving Fund Loan. The term of the loan is from November 17, 2015 to February 1, 2048, with an annual repayment of $206,448.28.
2021 LWP Interfund Loan
In Fiscal Year 20/21, the City approved a loan from the Sewer Fund to the Local Water Project for $600,000. This loan was initiated to assist in covering the deficit fund balance, while providing additional time to review operating solutions.
-$300,000
-$200,000
-$100,000
$0
$100,000
$200,000
$300,000
July Aug Sept Oct Nov Dec Jan Feb Mar Apr May June
Cash Flow, Net of Transfers
FY 19/20 FY 18/19 FY 20/21 YTD
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12 An overview of recommended repayment strategies and terms are provided in the Recommendations section of this document.

Capital Equipment
There are numerous pieces of equipment associated with the operations of the LWP, some pieces are minor and will not require significant capital to repair or replace. These pieces of equipment are typically flowmeters, smaller pumps, compressors, and control panels.

The major pieces of equipment, which will require replacement or major maintenance and /or repair include the reuse pump station, the screens, UV disinfection, membranes, and permeate pumps.

During the first three full years of operations, there has not been a need to purchase capital equipment. The initial project documents included an Estimated Costs for the Major Maintenance, Repair and Replacement Schedule for the 0.25 MGD facility over a 30-year timeframe. This information is included in the Appendix. In addition to recovering operating costs through a new rate structure, funds for major purchases should also be incorporated into the rate. While debt financing could be considered for significant capital improvements, it is also typical to pay for planned costs through an equipment reserve. The use of financing could also be initially challenging due to debt service coverage ratios that may be required by lenders.

The base engineer’s estimate is provided, along with an estimate of the costs adjusted by a 2% CPI for the outlying years.
(1) Membrane costs allocated to be in alignment with capital expenditures. (2) Capital equipment estimate of $5,205,249 in 2015 dollars, with annual contribution of $173,508 Capital Replacement and Membranes
Replacement
Interval
Assumed
Purchase Year
Membrane
Replacement
Costs (1)
Capital
Expenditure
Total Adjusted for
current dollars at
est. 2.0% CPI (2)
1-5 FY 22/23 YR 5 $ 90,750 $ 90,750 $ 104,243
6-10 FY 27/28 YR 10 42,500 619,468 661,968 839,535
11-15 95,000 1,220,558 1,315,558 1,842,099
16-20 1,477,698 1,477,698 2,284,491
21-25 95,000 662,203 757,203 1,292,460
26-30 95,000 1,134,573 1,229,573 2,317,180
-
$ 327,500 $ 5,205,250 $ 5,532,750 $ 8,680,008
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13 The engineer estimated that an annual accrual of $173,508 the 30-year term totaling $5,205,249 for capital expenditures should be reserved. This amount was represented in 2015 dollars. When this amount is adjusted for inflation, the annual contribution to support capital expenditures and membrane replacements is $289,344 or an average of both rates at approximately $237,000.

Recycled Water Rates
The current rate for recycled water is 0.0173. The break-even rate for the last fiscal years is presented below. The first table includes the cost recovery rate for operating expenditures and debt service. The second table calculates the average cost per gallon using expenditures for the three fiscal years, along with the average capital equipment and membrane costs in 2015 dollars; and the average costs inflated by a 2% CPI over the forecast period.

Cost per Gallon Based on Actual and Estimated Costs
FY 18/19 FY 19/20 FY 20/21 Est.

Expenditures $737,088 $795,819 $675,000
Gallons sold 29,741,422 31,126,940 30,434,000
Avg. Cost per gallon $0.0248 $0.0256 $0.0222
Avg. Cost per Gallon (CPG) with Capital and Significant Equipment Replacement Costs FY 18/19 FY 19/20 FY 20/21 Est.

CPG with avg. capital costs at $184,000 $0.0310 $0.0315 $0.0282 CPG with avg. capital costs at $232,000 $0.0326 $0.0330 $0.0298 Based on the current and estimated demand, the average cost per gallon is $0.024 when considering only operating costs. When the capital costs are included in the calculation, the average three-year rate is approximately $0.0310. This would increase the rates included in the forecast period by approximately 40% to cover operational costs; or 79% to establish a reserve for capital equipment purchases. The estimated California American Water Company rate per gallon is approximately $0.0290, when surcharges, fees, and taxes are included. This calculation was based on the Cal Am online bill estimation tool, with similar estimates calculated internally and by the Golf Course lessee. A copy of the rate schedule is included in the Appendix.

The current lease agreement for the City’s golf course caps the amount the Local Water Project can charge for recycled water. This limitation prohibits full-cost recovery. An increase in demand could assist in funding fixed costs, while variable amounts, such as chemicals and utilities would PGCC 3-16-2022

14 increase with consumption. Based on the three-year data, the current demand, and customer base may not be sufficient to yield significant economies of scale. This is largely due to the amount of fixed costs, which include an annual debt service payment of $206,448; and the base operator costs of $214,968 which are adjusted for inflation.

Alternatives
Multiple scenarios were evaluated when reviewing sustainability options for the Local Water Project. The assumptions included an average increase in operating costs of 3%, debt service remaining constant, and increases greater than 2%, being phased-in over the eight-year period.

All scenarios rely on water entitlement sales to assist in repaying the 2021 Temporary Loan or to supplement operating costs through Fiscal Year 25/26. Scenarios I-VI also rely on the use of proceeds from a $625,187 promissory note. Scenarios I, IV, and V are primarily provided for illustration purposes only. They have been included in the analysis to show the potential impact when all or a portion of a potential $1.2 million promissory note is incorporated into the estimates.

These three scenarios would not be considered a viable option until an adequate agreement is reached with the developer. An overview is presented below:

Impact of Alternate Scenarios through Fiscal Year 28/29 EightYear
Increas
e
Average
Increase
Water
Entitlement
Sales
Promissory
Note Water
Entitlement
Flat
Charge
Projected
FY 28/29
rate
per gallon
Ending
Fund
Balance FY
28/29
Scenario I 16% 2.0% $650,000 $1,853,187 - 0.0202 ($630,837) Scenario II 16% 2.0% 1,025,000 625,187 $1,496,000 0.0202 25,505 Scenario III 16% 2.0% 600,000 625,187 $2,000,000 0.0202 99,087 Scenario IV 55% 6.9% 350,000 1,853,187 - 0.0292 499,010 Scenario V 61% 7.6% 350,000 1,239,187 - 0.0305 402,585
Scenario VI 66% 8.3% 625,000 625,187 - 0.0320 220,188
Scenario VII 70% 8.8% 1,000,000 - - 0.0332 99,113
A sample financial statement for Scenario VI is included in the Appendix, while an overview of the projected fund balance is presented in the chart on the subsequent page. The chart illustrates the effect of the increased rates on the estimated available fund balance, and the use of equipment reserves to fund capital improvements in Fiscal Year 27/28. In Fiscal Year 28/29, the chart also PGCC 3-16-2022

15 identifies the beginning of the fund balance replenishment process. These funds would be used to support cash flow and future improvements.

RECOMMENDATIONS
Debt Repayment Plan
A debt repayment plan needs to be established to repay the Sewer Fund for the $600,000 loan to the Local Water Project.

To assist with fiscal sustainability, consideration may be given to applying the proceeds from a $625,187 water entitlement promissory note to cover the loan repayment. This would provide the Local Water Project with a “fresh start”. The annual interest could be established based on the average interest rate that is equivalent to City’s investment portfolio. This could be charged annually against the outstanding loan balance. This would provide the Sewer Fund with the amount of interest that it would have earned if the $600,000 was retained in the Sewer Fund. The principal could be repaid to the Sewer Fund when the proceeds from the promissory note are received. It is estimated that this would be take place in Fiscal Year 22/23.

The use of operating cash or an increase in rates beyond the forecasted amount to fund the 2021 LWP Interfund Loan is not recommended due to the increase burden on ratepayers. (600,000)
(400,000)
(200,000)
-
200,000
400,000
600,000
800,000
FY 19/20 FY 20/21 FY 21/22 FY 22/23 FY 23/24 FY 24/25 FY 25/26 FY 26/27 FY 27/28 FY 28/29 Estimated Available Fund Balance
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16 If there are concerns that the promissory note would not be fulfilled, the City could elect one of the following alternatives:
• Allocate 100% of all prospective water entitlement sales to the Local Water Project. In most forecast scenarios, approximately 50-70% of the entitlement sales are allocated to the LWP fund, with the balance retained in the General Fund. While this could be an option, there is still some uncertainty as to whether the water entitlement sales will continue to perform at their current level.
• Work with the City’s auditors and legal staff to confirm the implications of a longer-term loan from the General Fund’s Strategic Opportunities Reserve. This could be a ten-year loan with interest equivalent to the average rate within the City’s debt portfolio, the City’s investment portfolio, or the current market rate.

Rate Structure and On-Going Operations
A financial plan needs to be established to assist the Local Water Project in becoming selfsufficient. Scenario VI, establishes a rate structure that ramps-up over a two-year period to cover operating costs, as well as begins to set aside funds for the recommended capital purchases through Fiscal Year 27/28. This scenario also includes a variable water rate that is applicable to all customers, rather than a fixed component, cap, or a surcharge. The rate could be adjusted based on cost recovery needs, as well as support any changing capital purchases.

While the Business Plan includes a multi-year forecast, a procedure for rate increases would also need to be established to reflect any significant variations from the Plan estimates. Updates on an annual basis may be difficult to calculate due to lead times, as well as fluctuations that may occur within a single year. An alternative would be to establish a three-year rate schedule that is based on the forecast. This would provide customers with the opportunity to incorporate the new rates into their operating budgets, as well as assist the City with budgetary planning. Future rate adjustments could be based on rolling three-year or historical consumption trends, with financial updates based on more current cost recovery needs.

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17 The implementation of a rate increase would require a change in the contract with the current Golf Course lease. The information related to preliminary discussions with the lessee will be presented outside of this Business Plan.

Reserves
A cash flow reserve should be established at approximately $250,000 to assist the Local Water Project in becoming independent. While pooled cash would be available to supplement short-term cash flow needs, it isn’t viable as a long-term solution.

A capital reserve should also be established to retain funds to pay for projected capital improvements and major maintenance costs. Scenario IV presents a plan to support these costs through the forecast period.

Similar capital-intensive entities have established rate stabilization funds to assist in smoothing rates when there is less demand, as well as emergency reserves to support unanticipated costs.

These additional reserves could be considered once the Local Water Project’s finances have been stabilized.

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18 Appendix
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California American Water Company Rate Schedule
The Local Water Project is considered Division 2, with a 4” meter PGCC 3-16-2022

CALIFORNIA-AMERICAN WATER COMPANY
655 W. Broadway, Suite 1410
San Diego, CA 92101
Revised Cal. P.U.C. Sheet No. 9899-W
Cancelling Revised Cal. P.U.C. Sheet No. 9861-W
Schedule No. MO-1C Sheet 1
GENERAL METERED SERVICE in the Monterey Service Area Tariff Area

NON-RESIDENTIAL CUSTOMERS
(Continued)
(TO BE INSERTED BY UTILITY) ISSUED BY (TO BE INSERTED BY C.P.U.C.) Advice 1318-A J. T. LINAM Date Filed
Decision DIRECTOR - Rates & Regulatory Effective
Resolution

APPLICABILITY
Applicable to all water furnished on a metered basis to non-residential customers in the service areas defined below.

TERRITORY
The incorporated cities of Monterey, Pacific Grove, Carmel-by-the-Sea, Del Rey Oaks, Sand City, a portion of Seaside, Hidden Hills and Ryan Ranch subdivisions, Bishop subdivision including the area known as Laguna Seca Ranch Estates and vicinity and certain unincorporated areas in the County of Monterey.

RATES
Quantity Rates:

Non-Residential Customers: Base Rate
Per 100 gal (CGL)
Division 1………………………………………………… $1.9329
Division 2………………………………………………… $2.1745
Division 3………………………………………………… $2.4161
Division 4………………………………………………… $4.8322
Service charge: General Metered:

Per Meter
Per Month
For 5/8 x 3/4-inch meter…………………………………… $25.27
For 3/4-inch meter…………………………………………. $37.90
For 1-inch meter……………………………………………. $63.16
For 1-1/2-inch meter……………………………………….. $126.33
For 2-inch meter……………………………………………. $202.12
For 3-inch meter……………………………………………. $378.98
For 4-inch meter……………………………………………. $631.63
For 6-inch meter……………………………………………. $1,262.26
For 8-inch meter……………………………………………. $2,021.22
The Meter Charge is a readiness-to-serve charge which is applicable to all metered service and to which is added the charge for water used computed at the Quantity Rate. (I)
(I)
(I)
(I)
PGCC 3-16-2022

CALIFORNIA-AMERICAN WATER COMPANY
655 W. Broadway, Suite 1410
San Diego, CA 92101
Original Cal. P.U.C. Sheet No. 9784-W
Schedule No. MO-1C (Continued) Sheet 2
GENERAL METERED SERVICE in the Monterey Service Area Tariff Area

NON-RESIDENTIAL CUSTOMERS
(Continued)
(TO BE INSERTED BY UTILITY) ISSUED BY (TO BE INSERTED BY C.P.U.C.) Advice 1310 J. T. LINAM Date Filed
Decision DIRECTOR - Rates & Regulatory Effective
Resolution
DEFINITIONS:

1. WATER FACTOR - “Water Factor” shall mean a rating of water efficiency established by the U.S Environmental Protection Agency and the U.S. Department of Energy through the Energy Star Program. The Water Factor is the number of gallons per cycle per cubic foot that the Clothes Washer uses. The lower the Water Factor, the more efficient the washer is. So, if a Clothes Washer uses 30 gallons per cycle and has a tub volume of 3.0 cubic feet, then the Water Factor is 10.0.

2. WATER EFFICIENT ICE MACHINE – “Water Efficient Ice Machine” shall mean a commercial ice machine that meets or exceeds Energy Star standards for air-cooled ice machines.

3. SUPPLEMENTAL IRRIGATION SYSTEM – “Supplemental irrigation system” shall mean irrigation systems other than natural precipitation.

4. WATER BUDGET FEATURE – “Water budget feature” shall mean percent up/down adjust feature such as a button or dial on an irrigation controller that permits the user to increase or decrease the runtimes or application rate as for each zone by a prescribed amount or percent, by means of one adjustment without modifying the settings for that individual zone.

5. GEAR DRIVE ROTOR SPRINKLERS – “Gear drive rotor sprinklers” shall mean Irrigation sprinklers with high uniformity rates and lower precipitation rates than conventional sprinkler heads or impact rotors resulting in more efficient irrigation.

6. MULTI STREAM, MULTI TRAJECTORY ROTATING SPRINKLERS (MSMTR) – “Multi stream, multi trajectory rotating sprinklers” shall mean slowly turning irrigation sprinklers distributing water in a number of individual streams of varying trajectories with lower precipitation rates and higher uniformity than traditional fixed spray head sprinklers.

7. HIGH EFFICIENCY FIXED SPRAY NOZZLES – “High efficiency fixed spray nozzles” shall mean precision irrigation spray nozzles with larger and more uniform droplet size resulting in better wind resistance, lower precipitation rates and higher irrigation efficiency.

8. DRIP IRRIGATION - “Drip Irrigation” shall mean a low pressure, low volume watering system that applies water slowly to plants, near or at ground level, to minimize runoff and loss to evaporation.

The term “Drip Irrigation” shall have the same meaning as “Micro Irrigation” and “Trickle Irrigation.”

9. SUB SURFACE LOW VOLUME EMITTERS – “Sub surface low volume emitters” shall mean drip or low volume, low pressure irrigation systems that deliver a low flow of water at or near the root zone of plants - measured in gallons per hour versus gallons per minute. (T)
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CALIFORNIA-AMERICAN WATER COMPANY
655 W. Broadway, Suite 1410
San Diego, CA 92101
Original Cal. P.U.C. Sheet No. 9785-W
Schedule No. MO-1C (Continued) Sheet 3
GENERAL METERED SERVICE in the Monterey Service Area Tariff Area

NON-RESIDENTIAL CUSTOMERS
(Continued)
(TO BE INSERTED BY UTILITY) ISSUED BY (TO BE INSERTED BY C.P.U.C.) Advice 1310 J. T. LINAM Date Filed
Decision DIRECTOR - Rates & Regulatory Effective
Resolution
DEFINITIONS (Continued):

10. LOW VOLUME IRRIGATION – “Low volume irrigation” shall mean drip, low volume or Micro Spray Irrigation, includes Low volume fixed spray nozzles.

11. Best Management Practices - “BMP” as referenced in Section V of the Settlement attached to D.13- 07-041.

12. Customer Classification Conservation Base Rate – “CCCBR”. the “Customer Class Conservation Base Rate” (“CCCBR”) is defined as the low block or division quantity rate from each billing customer classification under conservation rates, and is determined as the rate necessary to equal the billing classification revenue requirement given the defined rate design parameters.

SPECIAL CONDITIONS:

General Items:

1. The boundaries in which the above rates apply are as set forth in the Preliminary Statement and delineated on the Tariff Service Area Maps filed as a part of these tariff schedules.

2. This non-residential rate design shall remain in effect and until ordered otherwise by the Commission.

3. Abbreviations as used in this tariff are defined above.

4. Non-residential customers billed under this tariff shall be placed into one of four divisions for billing purposes. The determination of under which Division each individual customer shall be billed will be based on the following:
a. Division 1: Customers that are indoor/outdoor Rate BMP-compliant and have outdoor landscape irrigation of no more than 10% of total parcel size covered by the meter (or meters) meant to serve such parcel, and excluding from the total parcel size for purposes of the 10% calculation areas of natural, non-irrigated open space. Meters designated as irrigation only meters will not be included in Division 1 regardless of the 10% parcel size allowance noted above.
b. Division 2: Customers that are indoor/outdoor Rate BMP-compliant and have a business where the watering is essential to the product of the business (nurseries), golf courses and government parks, ball fields, and cemeteries.
c. Division 3: Customers that are indoor/outdoor Rate BMP-compliant and have outdoor landscape irrigation exceeding the 10% parcel limit for Division 1, as well all Rate BMPcompliant irrigation meters, as previously noted in Special Condition 6 (a). d. Division 4: Customers that are not in compliance with Rate BMPs.

5. Upon approval of the tariff all customers who respond to the request to provide self-certified Rate BMP information will be appropriately categorized into Division 1, 2, 3 or 4 immediately so that all bills issued under the new tariff reflect the provision of a completed survey.

6. Customers that are subsequently found to be non Rate BMP compliant will be given 30 days from the date of notification to achieve compliance as noted in the non-compliance letter.

7. All Del Monte Forest golf courses served with emergency potable water from the connection at the Viscaino tank will be assigned an emergency allocation of 30 AF/year. Any potable use within this allotment will be billed at customer Division 1 rates. Usage above the annual allotment would be billed at customer Division 2 rates.
(T)
(T)
(T)
PGCC 3-16-2022

CALIFORNIA-AMERICAN WATER COMPANY
655 W. Broadway, Suite 1410
San Diego, CA 92101
Original Cal. P.U.C. Sheet No. 9786-W
Schedule No. MO-1C (Continued) Sheet 4
GENERAL METERED SERVICE in the Monterey Service Area Tariff Area

NON-RESIDENTIAL CUSTOMERS
(Continued)
(TO BE INSERTED BY UTILITY) ISSUED BY (TO BE INSERTED BY C.P.U.C.) Advice 1310 J. T. LINAM Date Filed
Decision DIRECTOR - Rates & Regulatory Effective
Resolution
SPECIAL CONDITIONS (Continued):

General Items:

8. Rate BMP Compliant will be defined as follows:
a. Indoor Usage
i. Showerheads – Rain Bars, or Body Spray Nozzles shall be designed and manufactured to emit a maximum of 2.0 gallons per minute GPM.
ii. Public Washbasins shall emit a maximum of 0.5 GPM.
iii. Public Washbasins equipped with automatic shut off devices or sensor faucets shall operate with a maximum flow rate of 0.25 gallons per cycle.
iv. Private Washbasins (e.g.; Washbasins in hotel or motel guest rooms and hospital patient rooms) shall emit a maximum of 1.5 GPM.
v. All other sinks shall be restricted to flow at a maximum of 1.5 GPM. vi. Ultra low flow toilets (1.6 gallons per flush (“GPF”)), High Efficiency Toilets (1.28 GPF) or Ultra High Efficiency Toilets (0.8 GPF). All toilets replaced after December 31, 2014 will have to be High Efficiency or Ultra High Efficiency
vii. Water efficient urinals designed to flush with a maximum of 0.5 GPF. Includes High Efficiency Urinals (0.5 GPF), pint urinals (0.125 GPF), or waterless urinals. viii. Water Efficient (1.6 GPM) Pre-Rinse spray valves (as applicable), Medical and laboratory photographic, and/or X-Ray processing systems must recirculate water used in the rinse process.
ix. All Visitor-Serving Facilities must use Water Efficient Ice Machines x. All Clothes Washers must be rated with a Water Factor of 5.0 or below. There is an exception when the existing appliance was purchased between December 31, 2005 and December 31, 2012, and rates a Water Factor of 5.1-6.0. xi. Visitor-serving, Public, and Quasi-Public facilities must display placards or decals promoting water awareness and the need for conservation in visible locations in restrooms, kitchens, and dining areas.
xii. Visitor-serving facilities must offer towel and linen reuse programs by providing written notice in the rooms.
xiii. Restaurants must provide written notice that drinking water is available only upon request.

Notices must be placed on tables and/or menus. Drinking water will not be provided from the Monterey Peninsula Water Resource System, unless specifically requested. b. Outdoor Usage
i. All supplemental irrigation systems require the use of an automated irrigation controller, which must include a water budget feature and may include products, which rely on soil or weather sensors to adjust irrigation schedules.
ii. Turf grass areas that receive supplemental irrigation must be watered with gear drive rotor sprinklers, multi stream, multi trajectory rotating sprinklers, high efficiency fixed spray nozzles or sub surface low volume emitters.
iii. Low volume irrigation is encouraged for landscaped areas containing trees, shrubs and groundcover. The use of standard fixed spray nozzles will not be allowed in landscape beds measuring 3’ or less.
iv. All automated irrigation controllers must include sensors, or devices that interrupt, or delay a scheduled irrigation event due to rainfall that equals or exceeds an established threshold. v. Hoses, used to hand water landscaped areas must be equipped with a positive shut off device.

PGCC 3-16-2022

CALIFORNIA-AMERICAN WATER COMPANY
655 W. Broadway, Suite 1410
San Diego, CA 92101
Original Cal. P.U.C. Sheet No. 9787-W
Schedule No. MO-1C (Continued) Sheet 5
GENERAL METERED SERVICE in the Monterey Service Area Tariff Area

NON-RESIDENTIAL CUSTOMERS
(Continued)
(TO BE INSERTED BY UTILITY) ISSUED BY (TO BE INSERTED BY C.P.U.C.) Advice 1310 J. T. LINAM Date Filed
Decision DIRECTOR - Rates & Regulatory Effective
Resolution
SPECIAL CONDITIONS (Continued):

General Items

9. Every meter will be categorized and issued a single bill unless a customer requests that a single consolidated bill be provided and then only if the system is capable of doing so without loss of any necessary data or delays in billing.

10. Moratorium: In portions of the Monterey Service Area served, in whole or part, by Carmel River diversions, and subject to the following conditions and restrictions, California-American Water Company shall deny requests for new service connections and prohibit any increased use of water at existing service addresses resulting from a change in zoning or use:
a. California-American Water Company shall not deny such requests or prohibit such increased use where all necessary written approvals for project construction and connection to California-American Water Company’s system had been obtained prior to October 20, 2009;
b. California-American Water Company shall not deny the installation of additional meters at an existing service provided that the additional metering does not result in an increase in water use.
c. This special condition does not authorize California-American Water Company to deny service to:
i. the area served by the Carmel Area Wastewater District Water Entitlement pursuant to Monterey Peninsula Water Management District Ordinances 39 and 109 and Rule 23.5, prior to January 1, 2017 ;
ii. the area served by the Sand City Water Entitlement pursuant to Monterey Peninsula Water Management District Ordinance 132 and Rule 23.6; iii. Security National Guaranty, Inc. under its frontloading agreement; iv. a connection or increased use where an authorized official of the State Water Resources Control Board has given written approval.
(T)
(T)
PGCC 3-16-2022

CALIFORNIA-AMERICAN WATER COMPANY
655 W. Broadway, Suite 1410
San Diego, CA 92101
Original Cal. P.U.C. Sheet No. 9788-W
Schedule No. MO-1C (Continued) Sheet 6
GENERAL METERED SERVICE in the Monterey Service Area Tariff Area

NON-RESIDENTIAL CUSTOMERS
(Continued)
(TO BE INSERTED BY UTILITY) ISSUED BY (TO BE INSERTED BY C.P.U.C.) Advice 1310 J. T. LINAM Date Filed
Decision DIRECTOR - Rates & Regulatory Effective
Resolution
SPECIAL CONDITIONS (Continued):

General Items

10. Moratorium(Continued): In portions of the Monterey Service Area served, in whole or part, by Carmel River diversions, and subject to the following conditions and restrictions, CaliforniaAmerican Water Company shall deny requests for new service connections and prohibit any increased use of water at existing service addresses resulting from a change in zoning or use:
d. California-American Water Company shall not deny a request for new service or prohibit the increased use of water at an existing service address if an authorized official of the State Water Resources Control Board has given written approval for such service or increased use.
e. This special condition shall expire at the filing by California-American Water Company of a Tier 1 advice letter with the Commission transmitting the written concurrence of the Deputy Director of Water Rights of the State Water Resources Control Board with California-American Water Company’s finding that a permanent supply of water is ready to serve as a replacement for the unlawful diversions of Carmel River water

11. Customers that have heretofore been billed as mixed use customers prior to March 1, 2017 will now be reclassified into either a multi-residential or non-residential classification. Those prior mixed use customers with a large number of individual dwelling units on large parcels will be classified as a multi-residential customer after March 1, 2017 and be billed under the same methodology as all other multi-residential customers, which is based on a block use allowance per dwelling unit. All other former mixed use customers will be billed under the divisional billing parameters and rates for non-residential customers.
(T)
(T)
PGCC 3-16-2022

CALIFORNIA-AMERICAN WATER COMPANY
655 W. Broadway, Suite 1410
San Diego, CA 92101
Revised Cal. P.U.C. Sheet No. 9976-W
Cancelling Revised Cal. P.U.C. Sheet No. 9868-W
Schedule No. MO-1C (Continued) Sheet 7
GENERAL METERED SERVICE in the Monterey Service Area Tariff Area

NON-RESIDENTIAL CUSTOMERS
(Continued)
(TO BE INSERTED BY UTILITY) ISSUED BY (TO BE INSERTED BY C.P.U.C.) Advice 1326 J. T. LINAM Date Filed
Decision D. 20-08-047 DIRECTOR -Rates & Regulatory Effective Resolution
SPECIAL CONDITIONS (Continued):

Fees and Surcharges

1. All bills are subject to the reimbursement fee set forth in Schedule No.UF.

2. A surcharge is included on each bill to collect franchise taxes and/or business license fees paid to various municipalities. The amount collected is based on a percentage of the gross revenues of each bill. The percentages are as follows:

Franchise Fees: Ryan Ranch 1.00%, City of Pacific Grove 2.00%, City of Carmel-by-the-Sea

2.00%, City of Seaside 1.00%, City of Del Rey Oaks Franchise Fee 2.00%, City of Monterey 1.00%, and unincorporated areas of Monterey County 1.00%.

Business Fees: City of Del Rey Oaks 0.11% and City of Sand City 0.12%.

Per D.18-12-021 a three-year conservation budget of $2,298,500 for 2018-2020 for Monterey Service Area. Effective November 23, 2020, the Conservation Surcharge will be removed from customer bill.

3. Per Advice Letter 1230-B, a surcharge of $1.81 for the Customer Assistance Program (CAP) Balancing Account will be collected from all non-customer assistance program water and wastewater customers

4. Per Advice Letter 1152, a fee of 8.325%, imposed by the Monterey Peninsula Water Management District (MPWMD), will be assessed against the customer’s monthly base bill to fund MPWMD’s environmental mitigation, water supply, and conservation programs, as well as other activities. The fee will remain in effect until otherwise directed by the Commission.

This fee is applicable to customers in the Monterey Main, Bishop, Hidden Hills and Ryan Ranch areas.

6. Per Advice Letter 1199, the balance of the 2017 Non-Residential WRAM/MCBA is $2,762,923 as of December 31, 2017. The surcharge is shown in the table below and will remain effective until December 2021.

Non-Residential
Monterey Main, Hidden Hills,
Ryan Ranch, & Bishop Systems:

Surcharge
per 100 gal Months
Division 1 $0.1363 18
Division 2 $0.1533 18
Division 3 $0.1703 18
Division 4 $0.3407 18
(C)
(C)
PGCC 3-16-2022

CALIFORNIA-AMERICAN WATER COMPANY
655 W. Broadway, Suite 1410
San Diego, CA 92101
Revised Cal. P.U.C. Sheet No. 9935-W
Cancelling Original Cal. P.U.C. Sheet No. 9790-W
Schedule No. MO-1C (Continued) Sheet 8
GENERAL METERED SERVICE in the Monterey Service Area Tariff Area

NON-RESIDENTIAL CUSTOMERS
(Continued)
(TO BE INSERTED BY UTILITY) ISSUED BY (TO BE INSERTED BY C.P.U.C.) Advice 1322 J. T. LINAM Date Filed
Decision DIRECTOR - Rates & Regulatory Effective
Resolution
SPECIAL CONDITIONS (Continued):

Fees and Surcharges

7. In accordance with Decision 16-12-003, the WRAM/MCBA balance through 2014 for the Monterey Service Area shall be recovered over five years with interest at the 90-day commercial paper rate.

The surcharge is shown in the table below and will remain effective for 60 months upon approval of Advice Letter 1146-A, ending February 28, 2022.

Meter Size Meter Surcharge
For 5/8” x 3/4" meter $4.21
For 3/4" meter $8.42
For 1” meter $12.63
For 1-1/2” meter $21.05
For 2” meter $33.68
For 3” meter $63.15
For 4” meter $102.25
For 6” meter $210.50
For 8” meter $336.80

8. Per Advice Letter 1322, the under-collected balance in the Monterey Service Area Consolidated Expense Balancing Account will be recovered through a quantity-based surcharge of $0.0669 per 100 gallons over 12 months effective March 18, 2021. This total amount will be recovered from all classes of customers except Chualar customers.

9. Per D.18-12-021 a meter based bill credit for the 2018 Excess Non-Plant Accumulated Deferred Income Tax will be refunded to customers over the 24-month period beginning October 17, 2019.

Meter Size
Refunds by Meter
Equivalents
5/8 x 3/4 $1.47
3/4 $2.21
1 $3.68
1 1/2 $7.35
2 $11.77
3 $22.06
4 $36.77
6 $73.54
8 $117.66
10 $169.14

10. Per Advice Letter 1265-A, the net under-collected balance of the 2018 Non-Residential WRAM/MCBA is $106,180, including interest. D.18-12-021 raises the cap on WRAM/MCBA surcharges to 15% of the authorized revenue requirement. Rates will be established through a separate Tier 1 filing to update the tariff language and surcharge based upon the then current authorized amortization.
(C)
(C)
(C)
PGCC 3-16-2022

CALIFORNIA-AMERICAN WATER COMPANY
655 W. Broadway, Suite 1410
San Diego, CA 92101
Revised Cal. P.U.C. Sheet No. 9822-W
Cancelling Revised Cal. P.U.C. Sheet No. 9815-W
Schedule No. MO-1C (Continued) Sheet 9
GENERAL METERED SERVICE in the Monterey Service Area Tariff Area

NON-RESIDENTIAL CUSTOMERS
(Continued)
(TO BE INSERTED BY UTILITY) ISSUED BY (TO BE INSERTED BY C.P.U.C.) Advice 1312 J. T. LINAM Date Filed
Decision DIRECTOR - Rates & Regulatory Effective
Resolution
SPECIAL CONDITIONS (Continued):

Fees and Surcharges:

11. Per Advice Letter 1291-A, the net under-collected balance of the 2019 residential WRAM/MCBA is $982,007, including interest. D. 18-12-021 raises the cap on WRAM/MCBA surcharges to 15% of the authorized revenue requirement. Rates will be established through a separate Tier 1 filing to update the tariff language and surcharge based upon the then current authorized amortization.

12. Per D.18-12-021 a meter-based bill credit for the 2018 Excess Plant Related Accumulated Deferred Income Tax will be refunded to customers over the 12-month periods beginning January 21, 2020.

Meter Size
Refunds by Meter
Equivalents
5/8-inch meter $0.30
3/4-inch meter $0.45
1-inch meter $0.75
1-1/2-inch meter $1.51
2-inch meter $2.41
3-inch meter $4.52
4-inch meter $7.53
6-inch meter $15.05
8-inch meter $24.08
10-inch meter $34.62

13. Per Advice Letter 1311, a surcharge is applied to each bill to offset increases in purchased water costs imposed by Monterey Peninsula Water Management District (MPWMD). The offset results in a needed increase of $405,474 or 0.53%. The surcharge of $0.2011 per cgl is added to the quantity charge beginning October 21, 2020.

14. Per D.18-12-021 a meter-based bill credit for the 2019 Excess Plant Related Accumulated Deferred Income Tax will be refunded to customers over the 12-months periods beginning November 1, 2020.

Meter Size
Refunds by Meter
Equivalents
5/8x3/4inch meter $0.21
3/4-inch meter $0.32
1-inch meter $0.53
1-1/2-inch meter $1.07
2-inch meter $1.70
3-inch meter $3.20
4-inch meter $5.33
6-inch meter $10.66
8-inch meter $17.05
10-inch meter $24.51
(C)
PGCC 3-16-2022

CALIFORNIA-AMERICAN WATER COMPANY
655 W. Broadway, Suite 1410
San Diego, CA 92101
Revised Cal. P.U.C. Sheet No. 9614-W
Cancelling Original Cal. P.U.C. Sheet No. 9544-W
Schedule No. MO-1C (Continued) Sheet 90
General Metered Service in the Monterey County District Tariff Area

NON-RESIDENTIAL CUSTOMERS
(Continued)
(TO BE INSERTED BY UTILITY) ISSUED BY (TO BE INSERTED BY C.P.U.C.) Advice 1302 J. T. LINAM Date Filed July 7, 2020
Decision 19-12-049 DIRECTOR - Rates & Regulatory Effective August 6, 2020 Resolution

SPECIAL CONDITIONS
Fees & Surcharges: (continued):

1. Per Decision (D.) 19-12-048, intervenor compensation paid to the Surfrider Foundation will be recovered through a meter surcharge for six billing cycles upon approval of Advice letter 1295. The total amount of $441,448.05 will be recovered from all classes of metered customers.

Meter Size Surcharge
5/8 x 3/4 $1.21
3/4 $1.82
1 $3.03
1 1/2 $6.07
2 $9.71
3 $18.20
4 $30.34
6 $60.68
8 $97.09
10 $139.57
12 $200.25

2. Per Decision 19-12-049, intervenor compensation paid to the Salinas Valley Water Coalition will be recovered through a meter surcharge for six billing cycles upon approval of Advice Letter 1302. The total amount of $496,798.25 will be recovered from all classes of metered customers.

Meter Size Surcharge
5/8 x 3/4 $1.64
3/4 $2.46
1 $4.10
1 1/2 $8.20
2 $13.12
3 $24.60
4 $41.01
6 $82.01
8 $131.22
10 $188.62
12 $270.63
(N)
(N)
PGCC 3-16-2022

CALIFORNIA-AMERICAN WATER COMPANY
655 W. Broadway, Suite 1410
San Diego, CA 92101
Revised Cal. P.U.C. Sheet No. 9852-W
Cancelling Original Cal. P.U.C. Sheet No. 9843-W
Schedule No. MO-1C (Continued) Sheet 91
GENERAL METERED SERVICE in the Monterey Service Area Tariff Area

NON-RESIDENTIAL CUSTOMERS
(Continued)
(TO BE INSERTED BY UTILITY) ISSUED BY (TO BE INSERTED BY C.P.U.C.) Advice 1314 J. T. LINAM Date Filed
Decision DIRECTOR - Rates & Regulatory Effective
Resolution
SPECIAL CONDITIONS:

Fees & Surcharges (continued):

3. Per Decision 20-02-060, intervenor compensation paid to Landwatch Monterey County will be recovered through a meter surcharge for three billing cycles upon approval of Advice Letter 1313.

The total amount of $107,231.63 will be recovered from all classes of metered customers.

Meter Size Surcharge
5/8 x 3/4 $0.59
3/4 $0.88
1 $1.47
1 1/2 $2.94
2 $4.70
3 $8.81
4 $14.68
6 $29.37
8 $46.99
10 $67.54
12 $96.91

4. Per Decision 20-02-058, intervenor compensation paid to the Planning and Conservation League Foundation will be recovered through a meter surcharge for four billing cycles upon approval of Advice Letter 1314. The total amount of $215,019.80 will be recovered from all classes of metered customers.

Meter Size Surcharge
5/8 x 3/4 $1.18
3/4 $1.77
1 $2.95
1 1/2 $5.90
2 $9.45
3 $17.71
4 $29.52
6 $59.04
8 $94.46
10 $135.78
12 $194.82
(P)
(P)
(N)
(N)
PGCC 3-16-2022

CALIFORNIA-AMERICAN WATER COMPANY
655 W. Broadway, Suite 1410
San Diego, CA 92101
Original Cal. P.U.C. Sheet No. 9924-W
Schedule No. MO-1C (Continued) Sheet 92
GENERAL METERED SERVICE in the Monterey Service Area Tariff Area

NON-RESIDENTIAL CUSTOMERS
(Continued)
(TO BE INSERTED BY UTILITY) ISSUED BY (TO BE INSERTED BY C.P.U.C.) Advice 1321 J. T. LINAM Date Filed
Decision DIRECTOR - Rates & Regulatory Effective
Resolution

SPECIAL CONDITIONS
Fees & Surcharges (Continued):

5. Per Decision 20-08-040, intervenor compensation paid to Public Water Now will be recovered through a meter surcharge for 8 billing cycles upon approval of Advice Letter 1321. The total amount of $10,095 will be recovered from all classes of metered customers.

Meter Size Surcharge
5/8 x 3/4 $0.02
3/4 $0.03
1 $0.05
1 1/2 $0.10
2 $0.16
3 $0.30
4 $0.49
6 $0.99
8 $1.58
10 $2.27
12 $3.25
(N)
(N)
PGCC 3-16-2022

Engineer’s Estimated Capital Purchases
PGCC 3-16-2022

PGCC 3-16-2022

PGCC 3-16-2022

Draft Financial Statements
PGCC 3-16-2022

Cost per gallon Cost per gallon Cost per gallon Cost per gallon Cost per
gallon
$ 0.01721 0.0207 0.0248 0.0258

20.0% 20.0% 4.0%
Year 2 Year 3 Year 4 Year 5 Year 6
FY 19/20 FY 20/21 FY 21/22 FY 22/23 FY 23/24
Beginning Fund Balance (326,361) (527,571) (93,219) (37,261) 39,210 Revenues
Reclaimed Water 524,041 536,000 642,901 771,481 802,340 Interest Earned 421 800 9,721 421 392
Other - - - - -
524,462 536,800 652,622 771,902 802,732
Expenses
Contract Services 356,606 327,000 336,810 346,914 357,322 Legal Services - - - - -
Postage - - - - -
Telephone - - - - -
Utilities 206,168 140,000 144,200 148,526 152,982
Internal Service Charges 4,357 5,000 4,356 4,356 4,356
Indirect Costs 28,600 24,000 25,200 25,830 26,476
Equipment Repair - - - - -
Misc. Expense - - - - -
595,731 496,000 510,566 525,626 541,135
Net operating difference (71,269) 40,800 142,056 246,276 261,597 Non-Operating
Capital Outlay (104,243)
One-time water entitlement sales - 125,000 750,187 125,000 Loan Proceeds - Sewer Loan 600,000 -
Debt Service - State Loan (206,448) (206,448) (206,448) (206,448) (206,448) Debt Service - Sewer Loan - (4,650) (609,300)
Interfund Transfers 76,507 - - - -
(129,941) 393,552 (86,098) (169,804) (81,448)
Net Operating Difference (201,210) 434,352 55,958 76,471 180,149 Ending Fund Balance (527,571) (93,219) (37,261) 39,210 219,359 Fund Balance Allocation
Unassigned (527,571)
-
(527,571) (93,219) (37,261) 39,210 219,359
Scenario VI - Original
(93,219) (37,261) -
Cash Flow - - - 39,210 2 19,359
Capital Equip. Reserve - - - -
PGCC 3-16-2022

Beginning Fund Balance
Revenues
Reclaimed Water
Interest Earned
Other
Expenses
Contract Services
Legal Services
Postage
Telephone
Utilities
Internal Service Charges
Indirect Costs
Equipment Repair
Misc. Expense
Net operating difference
Non-Operating
Capital Outlay
One-time water entitlement sales
Loan Proceeds - Sewer Loan
Debt Service - State Loan
Debt Service - Sewer Loan
Interfund Transfers
Net Operating Difference
Ending Fund Balance
Fund Balance Allocation
Unassigned
Cash Flow
Capital Equip. Reserve
Cost per
gallon
Cost per
gallon
Cost per
gallon
Cost per
gallon Cost per gallon

0.0268 0.0279 0.0290 0.0304 0.0320

4.0% 4.0% 4.0% 5.0% 5.0%
Year 7 Year 8 Year 9 Year 10 Year 11
FY 24/25 FY 25/26 FY 26/27 FY 27/28 FY 28/29
219,359 417,432 636,504 751,637 56,647
834,434 867,811 902,524 947,650 995,032
2,194 6,261 9,548 11,275 850
- - - - -
836,627 874,073 912,071 958,924 995,882
368,041 379,083 390,455 402,169 414,234
- - - - -
- - - - -
- - - - -
157,571 162,298 167,167 172,182 177,348
4,356 4,356 4,356 4,356 4,356
27,138 27,816 28,511 29,224 29,955
- - - - -
- - - - -
557,106 573,553 590,490 607,931 625,893
279,521 300,520 321,581 350,993 369,989
(839,535)
125,000 125,000 - - -
(206,448) (206,448) (206,448) (206,448) (206,448)
- - - - -
(81,448) (81,448) (206,448) (1,045,983) (206,448)
198,073 219,072 115,133 (694,991) 163,541
417,432 636,504 751,637 56,647 220,188
0 (0) 0 (0)
250,000 56,647 220,188
167,432 386,504 501,637 - -
417,432 636,504 751,637 56,647 220,188
0 2 50,000 250,000
Scenario VI - Original
PGCC 3-16-2022

Scenario VI - Updated for Fiscal Year 20/21 Actuals
Cost per gallon Cost per gallon Cost per gallon Cost per gallon Cost per
gallon
$ 0.01721 0.0207 0.0248 0.0258
Actual Actual 20.0% 20.0% 4.0%
Year 2 Year 3 Year 4 Year 5 Year 6
FY 19/20 FY 20/21 FY 21/22 FY 22/23 FY 23/24
Beginning Fund Balance (326,361) (527,571) (36,689) 31,781 123,745 Revenues
Reclaimed Water 524,041 597,833 658,348 790,017 821,618 Interest Earned 421 - 9,721 421 1,237
Other - - - - -
524,462 597,833 668,069 790,438 822,855
Expenses
Contract Services 356,606 335,610 345,678 356,049 366,730 Legal Services - - - - -
Postage - - - - -
Telephone - - - - -
Utilities 206,168 138,317 142,467 146,741 151,143
Internal Service Charges 4,357 5,000 4,356 4,356 4,356
Indirect Costs 28,600 20,000 21,000 21,525 22,063
Equipment Repair - 1,576 - - -
Misc. Expense - - - - -
595,731 500,503 513,501 528,670 544,292
Net operating difference (71,269) 97,330 154,568 261,768 278,563 Non-Operating
Capital Outlay (104,243)
One-time water entitlement sales - 125,000 750,187 125,000 Loan Proceeds - Sewer Loan 600,000 -
Debt Service - State Loan (206,448) (206,448) (206,448) (206,448) (206,448) Debt Service - Sewer Loan - (4,650) (609,300)
Interfund Transfers 76,507 - - - -
(129,941) 393,552 (86,098) (169,804) (81,448)
Net Operating Difference (201,210) 490,882 68,470 91,964 197,115 Ending Fund Balance (527,571) (36,689) 31,781 123,745 320,860 Fund Balance Allocation
Unassigned (527,571) (36,689) - - -
Cash Flow - - 31,781 123,745 250,000
Capital Equip. Reserve - - - - 70,860
(527,571) (36,689) 31,781 123,745 320,860
PGCC 3-16-2022

Beginning Fund Balance
Revenues
Reclaimed Water
Interest Earned
Other
Expenses
Contract Services
Legal Services
Postage
Telephone
Utilities
Internal Service Charges
Indirect Costs
Equipment Repair
Misc. Expense
Net operating difference
Non-Operating
Capital Outlay
One-time water entitlement sales
Loan Proceeds - Sewer Loan
Debt Service - State Loan
Debt Service - Sewer Loan
Interfund Transfers
Net Operating Difference
Ending Fund Balance
Fund Balance Allocation
Unassigned
Cash Flow
Capital Equip. Reserve
Cost per
gallon
Cost per
gallon
Cost per
gallon
Cost per
gallon Cost per gallon

0.0268 0.0279 0.0290 0.0304 0.0320

4.0% 4.0% 4.0% 5.0% 5.0%
Year 7 Year 8 Year 9 Year 10 Year 11
FY 24/25 FY 25/26 FY 26/27 FY 27/28 FY 28/29
320,860 536,723 775,041 910,418 236,929
854,483 888,662 924,208 970,419 1,018,940
3,209 8,051 11,626 13,656 3,554
- - - - -
857,691 896,713 935,834 984,075 1,022,494
377,732 389,064 400,736 412,758 425,141
- - - - -
- - - - -
- - - - -
155,677 160,347 165,158 170,112 175,216
4,356 4,356 4,356 4,356 4,356
22,615 23,180 23,760 24,354 24,962
- - - - -
- - - - -
560,380 576,947 594,009 611,580 629,675
297,311 319,765 341,825 372,495 392,819
(839,535)
125,000 125,000 - - -
(206,448) (206,448) (206,448) (206,448) (206,448)
- - - - -
(81,448) (81,448) (206,448) (1,045,983) (206,448)
215,863 238,317 135,377 (673,488) 186,371
536,723 775,041 910,418 236,929 423,300
- - - - -
250,000 250,000 250,000 56,647 220,188
286,723 525,041 660,418 180,282 203,112
536,723 775,041 910,418 236,929 423,300
Scenario VI - Updated for Fiscal Year 20/21 Actuals
PGCC 3-16-2022

www.FinanceDTA.com
Newport Beach | San Jose | San Francisco | Riverside | Dallas | Houston | Raleigh | Tampa January 7, 2022
To: Tori Hannah
Daniel Gho
From: Andrea Roess, Managing Director, DTA
Steve Runk, Vice President Engineering, DTA
Subject: Peer Review of City Business Plan
The City of Pacific Grove (“City”) recently constructed a 0.250 MGD reclaimed water treatment plant (“Plant”) for the purpose of replacing potable water deliveries with reclaimed water to three principal customers, Pacific Grove Golf Links, El Carmelo Cemetery and Point Pinos Lighthouse landscaping. A detailed background of the existing physical and financial conditions of the reclaimed water system can be found in Pacific Grove Local Water Project Business Plan dated June 21, 2021 (“Business Plan”). City has asked DTA to conduct a peer review, consisting of: 1) an evaluation of the assumptions, methodology and calculations used to determine the proposed reclaimed water rate described in the Business Plan; and 2) provide a break-even rate analysis.

After review of the City’s Business Plan and rate analysis, DTA has determined that the City’s analysis of revenues and costs, debt service and available fund balances on an annual basis is rational, supportable and is consisted with industry practice. The City’s financial model follows closely with the recommendations of American Water Works Association (AWWA) Manual of Water Supply Practices, M1. Furthermore, DTA has determined that to achieve a sustained, breakeven operation, City must impose steep increases in early years to reach a rate level of over $0.03 per gallon with modest increases thereafter.

EVALUATION OF THE BUSINESS PLAN
City looked at proposed revenues and expected expenses through FY28/29 (Year 11) for seven different revenue and cost assumption scenarios. Scenarios I-VII considered various combinations of supplementary water entitlementsales and debt repayment of operating loans. An overview of the findings for the seven scenarios can be found in the “Alternatives” section of the Business Plan. A rate analysis for Scenario VI, titled LWP Proforma, Scenario VI, was provided by City (“rate model”). This rate model was subsequently updated by City to include actual operating costs for FY20/21 as well as adjustments for recent average water demand. This analysis included one-time water rights sales in years 4 through 8.

Also included are proceeds in year 3 from a $600,000 sewer fund loan, with loan repayments plus interest occurring in years 4 and 5. Operating costs were adjusted for inflation in subsequent years. Investment earnings on annual reserve balances included as a revenue source.

Revenues
The rate revenue in any given year is determined by multiplying the expected reclaimed water consumption, in gallons of reclaimed water, by the assumed rate, in dollars per gallon for that year. The expected consumption for each fiscal year is based on historical data and is discussed in the Business Plan. Other revenue shown in Scenario VI included one-time sales of water rights in years 4 through 8, and interest earned on fund balances.

Operating Expenses
Annual expenses such as contract services and utilities are based on actual costs incurred for FY20/21 and adjusted for inflation every year thereafter. In FY20/21 equipment repair and maintenance costs were incorporated into the contract services line item, in the amount of $21,000. Indirect costs are adjusted annually for inflation. Internal service charges are PGCC 3-16-2022

City of Pacific Grove
Peer Review January 7, 2022
assumed constant at $4,356 annually. Membranes have a useful life significantly greater than one year and therefore its replacement cost is considered a capital outlay.

Capital Outlay
Capital outlay costs, which include capital expenditures and membrane replacement, are identified in the Business Plan by fiscal year. In this model capital outlays occur in FY22/23 and FY 27/28. The remainder of the 30-year C.I.P. expenses occur in fiscal years beyond this study horizon. Funding for the capital outlay will be on a pay-as-you-go basis from the fund balances and therefore there will be no debt service related to capital outlays. The amount and timing of capital outlays are based on engineering estimates and are as shown in the Business Plan.

Debt Service
The rate model includes annual debt service payments for a State Revolving Loan of $206,448. In FY 21/22 and FY22/23 the project will repay a sewer fund loan of $600,000, with interest, in lump sum payments.

City Rate Increase Recommendations and Fund Balances
In Scenario VI the City proposes rate increases of 20% in Year 4 and Year 5, with 4% and 5% annual increases thereafter.

This will result in positive fund balances in year 4 and each year thereafter, with a positive fund balance of $423,300 in Year 11. A substantial fund balance in year 11 is necessary to assist in providing sufficient funds in later years to pay for the remainder of the C.I.P. program.

BREAK EVEN ANALYSIS
As stated in the Business Plan, the project has been operating at an annual loss. City Staff has asked DTA to provide an independent analysis of rates that assumes that 1) annual revenues will cover annual expenses, and 2) provide fund balances that can pay for capital improvements in the near term as well as establish a reserve fund that will assist in funding future capital improvements beyond the horizon of this analysis. For the purposes of DTA’s analysis, it is assumed that steep increases are imposed in the first two years to remove all annual negative operating balances, with modest increases thereafter. For instance, the attached model shows that rate increases of 35% and 21% in the first two years are required to prevent negative operating fund balances, and annual increases of 3% thereafter will build a fund balance of just under $500,000 in year 7 that will assist in meeting the C.I.P. requirements in later years.

Revenue, Expense and Debt Service Assumptions
DTA’s analysis uses the same annual water consumption and annual expense data shown in the City’s rate model discussed above. Also, the Capital Outlay expenses are repeated from the City’srate model. This analysisincludes annual debt service payments for a State Revolving Loan. The interfund transfer of $76,507 was provided by the General Fund and repayment was not required. In FY20/21 the project received a loan of $600,000 from the sewer fund, as well as $37,000 in temporary funds to assist with cash flow. City staff assumes that this will be repaid through other sources also, rather than operating revenues shown herein. This analysis also assumes that any water rights sales that occur during this study period are not made a part of this analysis.

Findings
Based on the above assumptions, DTA finds that rate increases of 35% in Year 4, 21% in year 5 and 3% per year in Years 6 through 11 are necessary to achieve positive fund balances from this point forward, while accumulating a fund balance of just under $500,000 by year 11, to be used to fund capital improvements in later years. Steep increases in Years 4 and 5 are necessary to increase the rate levels from 0.017 per gallon to around $0.03 per gallon by Year 8. A rate level of around $0.03 per gallon with modest annual increases thereafter will enable City to not only achieve a break-even operation but allow fund balances to accumulate so that by year 11 these balances can carry forward to help fund future C.I.P. projects.

PGCC 3-16-2022

City of Pacific Grove
Peer Review January 7, 2022
If the City choses to increase rates at a slower pace, the enterprise will continue to experience annual budget shortfalls, which will need to be offset by other sources.

BREAK EVEN ANALYSIS MODEL
Key Assumptions:

No water rights sales revenue Included in this model
Debt repayment for sewer fund loan made from other sources Interfund transfer repayment made from other sources
Cost per
gallon
Cost per
gallon
Cost per
gallon
Cost per
gallon
Cost per
gallon
Cost per
gallon
Cost per
gallon
Cost per
gallon
Cost per
gallon
Cost per
gallon
$ 0.01721 0.0232 0.0281 0.0290 0.0298 0.0307 0.0316 0.0326 0.0336 Actual Actual 35.0% 21.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 FY 19/20 FY 20/21 FY 21/22 FY 22/23 FY 23/24 FY 24/25 FY 25/26 FY 26/27 FY 27/28 FY 28/29 Beginning Fund Balance (326,361) (527,571) 311 21,003 77,924 250,740 436,308 635,624 849,180 237,954 Operating Revenues
Reclaimed Water 524,041 597,833 740,641 896,176 923,061 950,753 979,275 1,008,654 1,038,913 1,070,081 Interest Earned 421 - 107 495 1,643 3,435 5,360 7,424 5,436 Non Opereating Revenues
One Time Entitlement Sales
Interfund Transfers 76,507
Operating Loan Proceeds - 637,000 - - - - - - - -
Subtotal - Revenues 600,969 1,234,833 740,641 896,282 923,556 952,396 982,711 1,014,013 1,046,337 1,075,516 Expenses
Contract Services 356,606 335,610 345,678 356,049 366,730 377,732 389,064 400,736 412,758 425,141 Legal Services - - - - - - - - - -
Postage - - - - - - - - - -
Telephone - - - - - - - - - -
Utilities 206,168 138,317 142,467 146,741 151,143 155,677 160,347 165,158 170,112 175,216 Internal Service Charges 4,357 5,000 4,356 4,356 4,356 4,356 4,356 4,356 4,356 4,356 Indirect Costs 28,600 20,000 21,000 21,525 22,063 22,615 23,180 23,760 24,354 24,962 Equipment Repair - 1,576 - - - - - - - -
Misc. Expense - - - - - - - - - -
subtotal - Expenses 595,731 500,503 513,501 528,670 544,292 560,380 576,947 594,009 611,580 629,675 Net operating difference 5,238 734,330 227,140 367,612 379,264 392,016 405,763 420,004 434,757 445,841 Non-Operating:

Capital Outlay (104,243) (839,535)
Debt
Debt Service - State Loan (206,448) (206,448) (206,448) (206,448) (206,448) (206,448) (206,448) (206,448) (206,448) (206,448) Repayment of Interfund Transfer - - - - - - - -
Debt Service - Sewer Loan -
sub total - Debt (206,448) (206,448) (206,448) (206,448) (206,448) (206,448) (206,448) (206,448) (206,448) (206,448) Net Revenue/Deficit (201,210) 527,882 20,692 56,921 172,816 185,568 199,315 213,556 (611,226) 239,393 Ending Fund Balance (527,571) 311 21,003 77,924 250,740 436,308 635,624 849,180 237,954 477,347 DTA Break Even Analysis
PGCC 3-16-2022

City Council
City of Pacific Grove
Local Water Project
Business Plan
February 16, 2022 [email protected] 1
PGCC 3-16-2022

February 16, 2022 [email protected] 2
2010
Project concept
originated.

Use of potable is not
sustainable/
environmentally
sound
Project Purpose: convert wastewater for irrigation purposes 2015
City issued RFP for
design-build.

Funded by $2.5M
grant and 1% State
Loan
2018
Construction
completed
&
plant
operating
PGCC 3-16-2022

 City has agreement with PERC
Water for operations
 5-year agreement commenced
in January of 2018
 Customers include: Golf Course
(CourseCo) Cemetery, Point
Pinos Lighthouse grounds, and
truck fill
February 16, 2022 [email protected] 3
PGCC 3-16-2022

Reclaimed water is sold at $0.017/gallon
February 16, 2022 [email protected] 4
Acre Feet of Water Sold per Calendar Year
Location 2018 2019 2020
Golf Course 80.23 77.09 72.13
Cemetery/Lighthouse 14.28 17.1 19.17
Truck Fill 1.3 1.52 2.07
Total 95.81 95.71 93.37
2021 Totals 99.7 Acre Feet ; not noted in business plan PGCC 3-16-2022

 LWP is operating in a deficit
 Primarily due to lack of sales
 Utility Cost
 Debt Service
 Need to set aside for reserves
February 16, 2022 [email protected] 5
PGCC 3-16-2022

February 16, 2022 [email protected] 6
• October 2020: Staff presented potential option to pursue at LWP  Perform Energy Audit
 Renegotiate CourseCo lease
 Lease facility
 Perform operations "In House"
 Do nothing
• Council directed staff to prepare a Business Plan
• Plan presented to City Council in June of 2021
• Council directed staff to obtain a peer review of the plan • Review to evaluate break even analysis
PGCC 3-16-2022

February 16, 2022 [email protected] 7
• October 2021: Council authorized agreement with DTA
• Evaluation costs, revenue needs, and break-even
calculations
• DTA provided memo to City Dated January 7, 2022
• Memo provides peer review of Business Plan
• DTA determined that City's analysis is rational,
supportable and consistent with industry practice
• DTA recommends increases in water rates
PGCC 3-16-2022

Business Plan Financial Goals
 Assess the current operations
 Understand contributing factors
 Resolve immediate operating concerns
 Repayment of interfund loan
 Begin process to achieve on-going fiscal sustainability  Incorporate best practices
 Continually evaluate operations
 Potential rate study in two-three years
 Confirm with peer review
2/16/2022 Tori Hannah, [email protected] 8 The business plan presents long-term information for the purpose of capital planning; however, it also needs to be evaluated on an on-going basis and shortterm basis PGCC 3-16-2022

Revenues, Expenditures, and Available Fund Balance
Fiscal Year 20/21 Actual Available Fund Balance ($37,000) 2/16/2022 Tori Hannah, [email protected] 9 $600,000 Interfund
Sewer Loan
($77)
($326)
($519)
($93)
-$600
-$400
-$200
$0
$200
$400
$600
$800
$1,000
$1,200
FY 17/18 FY 18/19 FY 19/20 FY 20/21 Est
Thousands
Expenditures Avail. Fund Balance Revenues and Transfers PGCC 3-16-2022

Local Water Project Assessment
Challenges Opportunities
 New operation, three full years of data
 Cap placed on Golf Course water sales,
prohibited full cost recovery
 Unplanned water treatment costs
 Initial costs of approx. $79,000 not
covered by loan proceeds
 Demand not as high as in original model
 Recovering existing deficit and provide
for future planning
 Cash flow
 Equipment replacement reserve
 Rainy day reserve
 Work with golf course concessionaire
to remove or adjust cap
 Account for full-cost recovery when
developing rate
 Consider gradual ramp-up of rates
 Consider supplementing with water
entitlement sales
 Seek cost reduction strategies
 Consider applying a percentage or flat
amount from water entitlement sales
to reduce or pay-off the $600,000
loan from the Sewer Fund.
 Explore other alternatives
February 16, 2022 Tori Hannah, [email protected] 10 PGCC 3-16-2022

Assess Cash Flow Needs
Cash Flow, Net of Transfers
2/16/2022 Tori Hannah, [email protected] 11 -$300,000
-$250,000
-$200,000
-$150,000
-$100,000
-$50,000
$0
$50,000
$100,000
$150,000
$200,000
$250,000
July Aug Sept Oct Nov Dec Jan Feb Mar Apr May June
FY 19/20 FY 18/19 FY 20/21 YTD
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Incorporate Capital Replacements and Membranes
2/16/2022 Tori Hannah, [email protected] 12 Capital Replacement and Membranes
Replace
Interval
Assumed
Purchase Year
Membrane
Replace.

Costs (1)
Capital
Costs
Total Adjusted for
current dollars
at est. 2.0%
CPI (2)
1-5 FY 22/23 YR 5 $ $ 90,750 $ 90,750 $ 104,243
6-10 FY 27/28 YR 10 42,500 619,468 661,968 839,535
11-15 95,000 1,220,558 1,315,558 1,842,099
16-20 1,477,698 1,477,698 2,284,491
21-25 95,000 662,203 757,203 1,292,460
26-30 95,000 1,134,573 1,229,573 2,317,180
-
$ 327,500 $ 5,205,250 $ 5,532,750 $ 8,680,008
PGCC 3-16-2022

Review Estimated and Actual Information
Cost per Gallon Based on Actual and Estimated Costs
FY 18/19 FY 19/20 FY 20/21 Est.

Expenditures $737,088 $795,819 $675,000
Gallons sold 29,741,422 31,126,940 30,434,000
Avg. Cost per gallon $0.0248 $0.0256 $0.0222
2/16/2022 Tori Hannah, [email protected] 13 Avg. Cost per Gallon (CPG) with Capital and Significant Equipment Replacement Costs
FY 18/19 FY 19/20 FY 20/21 Est.

CPG with avg. capital at $184,000 $0.0310 $0.0315 $0.0282 CPG with avg. capital at $232,000 $0.0326 $0.0330 $0.0298 PGCC 3-16-2022

Multiple Scenarios
Estimated Available Fund Balance: Original Scenario VI
2/16/2022 Tori Hannah, [email protected] 14 (600,000)
(400,000)
(200,000)
-
200,000
400,000
600,000
800,000
19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28 28/29 Savings begins for capital improvements
Significant investment in Fiscal Year 27/28
Capital set-aside resumes in Fiscal Year 27/28
Revised Scenario VI included in packet and analysis to reflect drought demand PGCC 3-16-2022

City Scenarios and Peer Review
The difference primarily relates to how we get to sustainability  City Scenarios
 Include multiple options
• Gradual ramp-up scenarios
• Subsidize with water entitlement revenues, not an on-going revenue • Combination of rates and subsidies
 Includes reference to loan repayments, reflects the accounting  Estimated break-even point with capital: Approximately $0.03 per gallon  Consultant Independent Scenario
 Does not include subsidies
 Two-year significant increases, lower increases in future years  Assumes loan repayment and negative fund balance covered outside of operation  Estimated break-even point with capital: Approximately $0.03 per gallon 2/16/2022 Tori Hannah, [email protected] 15 PGCC 3-16-2022

Loan Repayment Plan
2/16/2022 Tori Hannah, [email protected] 16  Option: Provide a “fresh start” by not using operating revenues to cover prior year deficits
 Commit water entitlement promissory note payment in the amount of $625,187 to be used for the loan repayment
 Interest on loan charged based on the City’s investment portfolio for the complete loan term, with quarterly interest payments  Provides the Sewer Fund with the same amount of interest that it would have earned if the funds were retained within the Sewer Fund
 Lump sum payment of loan principal due upon receipt of the promissory note proceeds
PGCC 3-16-2022

Receive the Peer Review of Pacific Grove Local Water
Project Business Plan prepared by DTA, validating the
City’s assumptions noted in the Business Plan, and
authorize staff to being negotiations with CourseCo;
and approve a loan repayment plan for the Sewer
Fund Interfund Loan.

February 16, 2022 [email protected] 17
PGCC 3-16-2022

City Council
City of Pacific Grove
Questions?
February 16, 2022 [email protected] 18
PGCC 3-16-2022

Agenda No. 12 C

CITY OF PACIFIC GROVE
300 Forest Avenue, Pacific Grove, California 93950
TO: Honorable Mayor and Members of the City Council
FROM: Bill Peake, Mayor
MEETING DATE: March 16, 2022
SUBJECT: PG Hotel Homekey Project This item was continued from the February 16, 2022 and March 2, 2022 meetings.

CEQA: Does not constitute a “Project” per California Environmental Quality Act Guidelines Section 15378

RECOMMENDATION
Direct City Manager to begin public outreach on a potential Homekey project no later than March 16, 2022.

DISCUSSION

INTRODUCTION
On January 19, 2022, Council authorized an application to the CA Department of Housing and Community Development (HCD) for up to $15,000,000 for the conversion of a hotel located in Pacific Grove into a Homekey project. The application was subsequently filed with HCD.

Council also authorized the City Manager to fund, acquire, rehabilitate, and operate (with partners) the hotel located in Pacific Grove Homekey project.

DISCUSSION
Our community has a decades long history of welcoming residents in need. They include: The Bridge Restoration Ministry (addictions), Gateway Center (intellectual disabilities), Vista Point Apartments (low-income seniors), and New Start Recovery Solutions – formerly Beacon House (addictions). The addition of a Homekey project to help those experiencing homelessness, including youth and those with disabilities is in keeping with this tradition of helping others.

As with any new facility or program, Council and the community should understand how the program works and what is city government’s role. A sound public outreach program could answer questions and allay concerns including:

City responsibilities
a. What does the state require of the city for the life of this 55-year project? b. What responsibilities will the city have in its partnership with Shangri La Industries? c. What responsibilities will the city have in its partnership with Step Up Second Street? PGCC 3-16-2022

Finances
What is the budget and funding sources for the first 5 years (acquisition, rehabilitation, operation, and resident supportive services)?
d.

If funding sources decline after 5 years, what is the financial backstop for operation and resident supportive services expenses?
e.
f. What is the expected municipal tax loss?
Neighborhood
g. Will this program attract more homeless people than can be housed? h. Could local drug use or crime increase and how would that be prevented? i. What assurance exists that the site will continue to be well maintained and attractive? Residents
j. Will locals be given priority to rent?
k. Will on site supportive services for residents be available round the clock? l. Will supportive services include transportation to meet needs not available nearby? m. What is the quota system for categories of residents? n. Will residents include families?

OPTIONS
N/A
FINANCIAL IMPACT:

There is no fiscal impact in the writing of this agenda report.

GOAL ALIGNMENT: Transparency, Accountability and Communication: Implement programs, processes, revisions, and training to improve and advance the City's efforts.

Attachments
Summary
Letter of Operating Support
Mayor PPT
Staff PPT

SLI PPT
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PGCC 3-16-2022

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PGCC 3-16-2022

Mayor Bill Peake
City of Pacific Grove
PG Hotel Homekey Project
February 16, 2022
PGCC 3-16-2022

PG Hotel Homekey Project

RECOMMENDATION
 Direct City Manager to begin public outreach on a
potential Homekey project no later than March 16.

PGCC 3-16-2022

PG Hotel Homekey Project

INTRODUCTION
 January 19 Council authorized an application to HCD for $15,000,000 for a hotel located in PG
 Homekey application was filed January 31.
 Council authorized City Manager to fund, acquire, rehabilitate, and operate with partners.
 Total of 4 Authorizations by Council
PGCC 3-16-2022

PG Hotel Homekey Project
UPDATE
 The original hotel identified is not under
consideration.
 A new location is needed.

PGCC 3-16-2022

PG Hotel Homekey Project
Public Outreach needed - City responsibilities
a) What does the state require of the city for the life of this 55-year project?
b) What responsibilities will the city have in its partnership with Shangri La Industries?
c) What responsibilities will the city have in its partnership with Step Up Second Street?
PGCC 3-16-2022

PG Hotel Homekey Project
Public Outreach needed - Finances
a) What is the budget and funding sources for the first 5 years (acquisition, rehabilitation, operation, and resident
supportive services)?
b) If funding sources decline after 5 years, what is the financial backstop for operation and resident supportive services expenses?
c) What is the expected municipal tax loss?
PGCC 3-16-2022

PG Hotel Homekey Project
Public Outreach needed - Neighborhood
a) Will this program attract more homeless people than can be housed?
b) Could local drug use or crime increase and how would that be prevented?
c) What assurance exists that the site will continue to be well maintained and attractive?
PGCC 3-16-2022

PG Hotel Homekey Project
Public Outreach needed - Residents
a) Will locals be given priority to rent?
b) Will on site supportive services for residents be available round the clock?
c) Will supportive services include transportation to meet needs not available nearby?
d) What is the quota system for categories of residents? e) Will residents include families?
PGCC 3-16-2022

End
PGCC 3-16-2022

February 16, 2022, City Council
City of Pacific Grove
Project Homekey
PGCC 3-16-2022

City Council Action
Direct staff to begin public outreach on
Project Homekey no later than March
16th.
Potential dates available at the
Community Center are March 14th or
March 28th.

PGCC 3-16-2022

Project Homekey Information
 AN FAQ is posted on the City’s Housing Website:
https://files.cityofpacificgrove.org/Document_Cen
ter/Departments/Community%20Development/Ho
using/Main%20Page/Memo_Homekey%20FAQS
_2-14-22.pdf
 The City will host a public outreach meeting in March to discuss the Homekey program and the development of verylow income housing.

PGCC 3-16-2022

STEP UP IN PACIFIC GROVE

CREATING SOLUTIONS TO HOMELESSNESS
PGCC 3-16-2022

HOMEKEY
• HomeKey = Permanent Supportive Housing (PSH)
• PSH = Solution to Homelessness
• Housing infused with rich supportive services
• Homekey was based in part on work of Step Up and Shangri La (SLI) • Over past fifteen years, we’ve worked to hone the motel conversion to PSH model • Step Up and SLI – 8 motel conversions since 2012
• Poised to do 14 new HomeKey projects
• National experts on motel conversions
PGCC 3-16-2022

OUR HOMEKEY PARTNERSHIP
• City of Pacific Grove – Step Up – Shangri La Industries (SLI) partnership • Every Homekey project has three components;
• Acquisition/Rehab
• Rent Subsidy
• Services
PGCC 3-16-2022

WHO DOES WHAT?
• Acquisition & Rehab
• Funded by Homekey and SLI
• City of PG has no obligation for acqu/rehab costs
• Rental Subsidies
• All tenants are low income
• Securing rental subsidies through HomeKey, the county and other sources • Services Funding
• Securing funding through Homekey and local sources
PGCC 3-16-2022

WHO DOES WHAT?
• City of Pacific Grove
• Submitted HomeKey application
• Support securing rental subsidies from county, HomeKey and other sources • Support securing services funding from county, HomeKey and other sources • Shangri La
• Secure sale agreement
• Perform rehab construction to convert motel into studio apartment building • Create ownership entity across SLI and Step Up
• Step Up
• Provide on site supportive services
• Provide on site property management services
PGCC 3-16-2022

ABOUT STEP UP
• Full service mental health agency since 1984
• Started in Santa Monica, now across CA, GA, TN and FL • We’ve housed thousands of chronically homeless individuals • We have 14 current permanent supportive housing projects • Recognized as one of the best service providers in the country • 97% retention rate of individuals who move into housing PGCC 3-16-2022

THE STEP UP MODEL
• We use Housing First- an evidenced based practice used worldwide • Three full time supportive services staff on site
• Dedicated to working solely with tenants on a day-to-day basis • That’s a 1:16 staff to tenant ratio, about the best in the business • Tenants go through a stabilization process in first 3- 12 months • Staff assist in transition from sleeping on the floor to sleeping in a bed PGCC 3-16-2022

SUPPORTIVE SERVICES

ACTIVITIES OF DAILY LIVING AND SERVICE COORDINATION
• Activities of Daily Living (ADL)
• Cooking, cleaning, shopping, budgeting, etc.
• Learning or relearning responsibilities of a housed daily life • Checking in daily
• Focus for first 6- 12 months
PGCC 3-16-2022

SUPPORTIVE SERVICES

ACTIVITIES OF DAILY LIVING AND SERVICE COORDINATION
• Service Coordination
• Developing goal plan with each tenant
• Identify and secure community services to support that plan • Aligning all resources to support tenants
• Transport tenants to appointments as needed
• 5- 6 days/week coverage
PGCC 3-16-2022

PROPERTY MANAGEMENT SERVICES
• Resident Manager
• Lives on site
• Rent collection, maintenance, etc.
• Eyes and ears on weekends and evening
• Coordinates with supportive services daily
• Step Up will have four staff on site focused solely on the 49 tenants PGCC 3-16-2022

Support
Service Staff
External
Community
Services
Property
Management
Stff
Successful
Tenants
PGCC 3-16-2022

“In a matter of months, not years, Shangri La and Step Up gave some of the most vulnerable Californians the dignity of a key, a lock a door and a place to call home. This is an example of the kind of innovation we need to take this crisis on.”
Governor Newsom on our San Bernardino Homekey project, 2021 PGCC 3-16-2022

Agenda No. 12 D

CITY OF PACIFIC GROVE
300 Forest Avenue, Pacific Grove, California 93950
TO: Honorable Mayor and Members of the City Council
FROM: Daniel Gho, Public Works Director / Deputy City Manager MEETING DATE: March 16, 2022
SUBJECT: Autobahn Car Event
CEQA: Categorical Exemption, CEQA Guidelines Section 15301, Class I, Existing Facilities

RECOMMENDATION
Approve the Legends of Autobahn as a full cost recovery special event to be held on the front nine of the golf course on Thursday, August 18, 2022.

DISCUSSION

BACKGROUND
In 2017, the City Council approved a special event at the Pacific Grove Golf Links, allowing Worldwide Auctioneers to utilize the 18th hole of the golf course for an auto auction during Car Week.

As part of this effort, the City made improvements to the 18th hole, and entered into a five-year contract with Worldwide Auctioneers to allow the event to take place annually on the golf course during the five-year period with a corresponding annual installment payment from Worldwide Auctioneers to the City for the 18 th hole golf course improvements. Event organizers hosted the auction for the first two years of the contract, but unfortunately, the Covid-19 global pandemic and corresponding Monterey County Shelter In Place Order hampered staging of the event during years 3 and 4 of the five-year agreement (one year of the agreement remains). Worldwide Auctioneers has advised the City that they will not be returning to Pacific Grove to stage the special event. On December 29, 2021 the City received a $66,716.19 check from Worldwide Auctioneers for the remaining balance of the golf course improvements.

The departure of Worldwide Auctioneers has opened the door for Pacific Grove and the Golf Links to host a prestigious car week event, the Legends of the Autobahn. The proposed event would be held at the Golf Links, during car week, on Thursday, August 18, 2022, by the Pacific Grove Chamber of Commerce (Chamber) in conjunction with the BMW Club of American (Club). The Legends of Autobahn event has historically occurred locally in Carmel Valley. In 2021, the event was moved to the Monterey County Fairgrounds. The event coordinators are now looking for a new site to host the event for multiple years.

A high-level event concept was presented to the City Council on December 15, 2021, and then brought forth as part of the special events calendar at the January 31, 2022 Recreation Board meeting and at the February 16, 2022 City Council meeting. Event approval was postponed; the Council requested staff to work with event organizers to finalize event details in advance of returning to Council. Subsequently, PGCC 3-16-2022

staff met with the event organizers to discuss logistics and obtain a site map and traffic plan (Attachment 1).

EVENT DETAILS
The Legends of Autobahn event, which will display 400-500 cars, manufactured by BMW, Mercedes and Audi, on the 2nd and 8th holes.

The event will take place on the front nine of PG Golf Links on Thursday, August 18, 2022, between 8:00 am and 9:00 pm. This includes event setup and breakdown. The event will be open to the public, free of charge, from 9:30 am until approximately 4:00 pm.

EVENT SETUP
· August 17, 2022 - Event setup will begin at approximately noon. These activities include delivery trucks delivering tents, tables, and chairs. These activities will have minimal impact. · August 18, 2022 (Event Day)- Event day set up will begin around 6 am. Between 8 and 9 am, 400-500 display cars will arrive to be shown on the 2nd and 8th golf course.

TRAFFIC & PARKING
Traffic around the event will be slightly elevated, as it is anticipated that 1500 spectators will cycle through the show between the hours of 9:30 am and 4:00 pm. However, it is only anticipated that a few hundred spectators will be at the event at any given time.

Spectator parking will occur on the 1st, 3rd and 9th hole of the golf course, with access from Del Monte and 17 Mile Drive. Spectator parking will stop at 2:30 pm. Signage and event volunteers will be present to guide both show cars and spectators to the parking locations. No parking signs will be erected along Del Monte, Crest and 17 Mile Drive, with advanced warning signs for the special event and spectator parking. This plan has been reviewed and approved by the City’s traffic engineer.

EVENT BREAKDOWN
All cleanup will be done the day of the event, concluding by 9:00 pm, with the exception of picking up a few items the next day, such as portable potties.

ADDITIONAL EVENT DETAILS
The event will be catered by La Crème Catering / Point Pinos Grill.

The golf course will remain open for golf play on the back nine, with the golf course lot being reserved strictly for golfers and patrons of the Point Pinos Grill.

OPTIONS

1. Do not approve the event

2. Provide alternative direction
FINANCIAL IMPACT:

There is no fiscal impact to the City by allowing this event to proceed. This event will be a full cost recovery special event and all cost that are inquired will be recovered by event organizers.

GOAL ALIGNMENT: Not Applicable.

Attachments
PGCC 3-16-2022

Site plan and traffic plan
PGCC 3-16-2022

3/2/22, 11:36 AM Mail - Daniel Gho - Outlook
https://outlook.office365.com/mail/id/AAQkADA0OGRlZWY0LWQzYTUtNDAyMi04ZGJjLTc0M2I1ZGYxMGNkOQAQAFiDxj8DREGtsSJuzsqic%2BU%… 1/1 PGCC 3-16-2022

7821 W. SUNNYVIEW AVE
VISALIA, CA 93291
559 ­ 732 ­ 0393
TRAFFIC CONTROL PLANS
LICENSE # 507950 (A,C31)
SHEET:

IF KRC SAFETY CO INC IS NOT
PERFORMING THE ACTUAL TRAFFIC
CONTROL, THEN IT IS
THE RESPONSIBILITY OF THE
CONTRACTOR OR SUBCONTRACTOR
TO ENSURE THAT PROPERLY TRAINED
PERSONNEL MAINTAIN AND MAKE
NEEDED FIELD ADJUSTMENTS
FOR UTMOST VEHICULAR AND
PEDESTRIAN SAFETY. IF A TRAFFIC
CONTROL SET UP VARIES FROM,
AND OR CHANGES ARE MADE TO THE
APPROVED TRAFFIC CONTROL PLAN,
THE CONTRACTOR SHALL ASSUME
ALL RESPONSIBILITY AND RISK
ASSOCIATED WITH IMPLEMENTATION,
MAINTENANCE AND REMOVAL
OF THE TRAFFIC CONTROL.

TCP 1
DATE SUBMITTED:

CIRCUIT:

CONTRACTOR:

CONTACT:

AGENCY/ LOCATION:

TD#:

START DATE:

WORK HOURS:

DURATION:

REVISED DATE:

TCP DRAWN BY:

Josh T ([email protected])
BMW CAR CLUB
SUBSTATION:

N/A
N/A
N/A

8.18.2022
7AM­3PM
1 DAY

2.14.2022
1 OF 2
PACIFIC GROVE
DEL MONTE BLVD
& CREST AVE
WAYNE WUDRAM
559­280­8336

1. IT IS THE RESPONSIBILITY OF THE CONTRACTOR TO INSTALL THE TRAFFIC CONTROL DEVICES AS SHOWN HEREON, AS WELL AS ANY ADDITIONAL TRAFFIC CONTROL DEVICES AS MAY BE REQUIRED TO ENSURE THE SAFE MOVEMENT OF TRAFFIC AND PEDESTRIANS THROUGH OR AROUND THE WORK ZONE, AND PROVIDE MAXIMUM PROTECTION AND SAFETY TO CONSTRUCTION WORKERS.

2. ALL TRAFFIC CONTROL DEVICES AND THEIR PLACEMENT SHALL CONFORM TO THE REQUIREMENTS OF THE CALIFORNIA MANUAL ON UNIFORM TRAFFIC CONTROL DEVICES (CA­MUTCD), 2014 EDITION ­ REVISION 6.

3. PLAN IMPLEMENTATION AND DEVICE PLACEMENT SHALL BE PERFORMED BY TRAINED PERSONNEL.

4. ALL FLAGGERS SHALL BE CERTIFIED AS REQUIRED BY CAL OSHA.

5. TRAFFIC CONTROL DEVICES MUST BE MONITORED AND MAINTAINED BY THE CONTRACTOR AT ALL TIMES.

6. TRAFFIC CONTROL DEVICES SHALL NOT BE PLACED ON PRIVATE PROPERTY.

7. CONTRACTOR SHALL MAINTAIN ACCESS TO ALL DRIVEWAYS, RESIDENCES AND BUSINESS AT ALL TIMES UNLESS OTHERWISE NOTED. CONTRACTOR SHALL NOTIFY ALL AFFECTED RESIDENCES AND BUSINESSES 72 HRS IN ADVANCE PRIOR TO CLOSURE OF A DRIVEWAY OR ACCESS.

8. ALL TRAFFIC CONTROL DEVICES SHALL BE REMOVED AT THE END OF THE WORKING DAY.

NOTES: LEGEND
SIGN
(shown facing left)

SPECIAL
EVENT
AHEAD
SC5(CA)

SPECTATOR
MOD SIGN 3

SPECTATOR

PARKING

SPECTATOR
MOD SIGN 2

SPECTATOR

PARKING

SPECTATOR
MOD SIGN 1

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PARKING
LOCATION OF
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EVENT

LOCATION
VICINITY MAP
BMW CAR CLUB ­ PACIFIC GROVE ­ DEL MONTE BLVD & CREST AVE  ­ 2.14.2022 PGCC 3-16-2022

7821 W. SUNNYVIEW AVE
VISALIA, CA 93291
559 ­ 732 ­ 0393
TRAFFIC CONTROL PLANS
LICENSE # 507950 (A,C31)
SHEET:

IF KRC SAFETY CO INC IS NOT
PERFORMING THE ACTUAL TRAFFIC
CONTROL, THEN IT IS
THE RESPONSIBILITY OF THE
CONTRACTOR OR SUBCONTRACTOR
TO ENSURE THAT PROPERLY TRAINED
PERSONNEL MAINTAIN AND MAKE
NEEDED FIELD ADJUSTMENTS
FOR UTMOST VEHICULAR AND
PEDESTRIAN SAFETY. IF A TRAFFIC
CONTROL SET UP VARIES FROM,
AND OR CHANGES ARE MADE TO THE
APPROVED TRAFFIC CONTROL PLAN,
THE CONTRACTOR SHALL ASSUME
ALL RESPONSIBILITY AND RISK
ASSOCIATED WITH IMPLEMENTATION,
MAINTENANCE AND REMOVAL
OF THE TRAFFIC CONTROL.

TCP 1
DATE SUBMITTED:

CIRCUIT:

CONTRACTOR:

CONTACT:

AGENCY/ LOCATION:

TD#:

START DATE:

WORK HOURS:

DURATION:

REVISED DATE:

TCP DRAWN BY:

Josh T ([email protected])
BMW CAR CLUB
SUBSTATION:

N/A
N/A
N/A

8.18.2022
7AM­3PM
1 DAY

2.14.2022
2 OF 2
PACIFIC GROVE
DEL MONTE BLVD
& CREST AVE
WAYNE WUDRAM
559­280­8336
N
SC5(CA)
SC5(CA)
SC5(CA)
SC5(CA)

SPECTATOR
MOD SIGN 1

SPECTATOR
MOD SIGN 1

SPECTATOR
MOD SIGN 2

SPECTATOR
MOD SIGN 3
NO PARKING SIGNS
SHALL BE PLACE AROUND
THE GOLF COURSE
SHOWN IN RED
SPACED 75' APART
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Agenda No. 13 A

CITY OF PACIFIC GROVE
300 Forest Avenue, Pacific Grove, California 93950
TO: Honorable Mayor and Members of the City Council
FROM: Joe Amelio, Councilmember, Luke Coletti, Councilmember MEETING DATE: March 16, 2022
SUBJECT: Coastal Wildlife Protection Subcommittee
CEQA: Does not constitute a “Project” per California Environmental Quality Act Guidelines Section 15378

RECOMMENDATION
Direct the City Attorney to return with a draft ordinance to form a Wildlife Protection Commission (WPC) comprised of seven members with three having coastal expertise. The WPC will consider wildlife and natural habitat protection issues citywide.

DISCUSSION
At its November 3, 2021 meeting, the City Council formed a subcommittee to consider recommendations from both the Coastal Wildlife Protection Advisory Committee (CWPAC) and Beautification and Natural Resources Commission (BNRC). The BNRC considered the CWPAC recommendations at their July 13, 2021 and August 17, 2021 meetings.

The CWPAC and BNRC both recommend the formation of a wildlife protection commission with an emphasis on coastal wildlife and habitat. Our subcommittee concurs but believes wildlife and habitat protection is a citywide concern.

Pacific Grove has a unique history of preserving and protecting wildlife and natural habitat:

By 1927 Pacific Grove had acquired nearly all waterfront land in order to keep it from being developed. The final parcel (Lovers Point) was acquired in 1934.

In 1931 the State of California granted Pacific Grove title to its waterfront (submerged lands) to a depth of 60 feet, with the state ceding its title to the same area (attachment #1).

In 1932 the City Council adopted Ordinance 284 (attachment #2) establishing the area as a “Refuge and Marine Gardens.” This ordinance is still in effect – PGMC Chapter 14.04.

In 1974 this area was designated an Area of Special Biological Significance by the State Water Resources Control Board.

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Pacific Grove is surrounded by three California Marine Protected Areas, which also require our attention (attachment #1).

Furthermore, our General Plan and Local Coastal Program include polices and requirements to preserve and protect our wildlife and natural habitat:

GOAL 1 Comprehensively manage Pacific Grove’s vegetation and wildlife habitat.

POLICY 2 Develop a vegetation and wildlife habitat management program.

POLICY 6 Review the role of the City Beautification Committee with respect to the management of Pacific Grove’s vegetation and wildlife.

POLICY 7 Develop procedures to more effectively focus the abundance of environmental and other volunteerism available to the City.

GOAL 2 Protect Pacific Grove’s coastal resources.

GOAL 4 Protect Pacific Grove’s water and marine resources.

GOAL 6 Protect endangered species.

POLICY 12 Develop methods to maintain endangered species within the Asilomar Dunes neighborhood, Asilomar State Beach and Conference Grounds, the U.S. Coast Guard Reservation, the Pacific Grove shoreline, and other appropriate areas (LUP, 2.3.6.2)

GOAL ALIGNMENT

1. Environmental Stewardship

2. City Asset Stewardship

OPTIONS

1. Provide other direction.

2. Take no action.

FINANCIAL IMPACT:

None.

GOAL ALIGNMENT: See Goal Alignment within Discussion section.

Attachments
Map
Ord 284
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µ
0 0.25 0.5 1 Mile
Legend
City Owned Coastal Parcels (APN)
City Owned Submerged Lands (Grant ID G08-04)
Asilomar SMR
Lovers Point - Julia Platt SMR
Pacific Grove Marine Gardens SMCA
City of Pacific Grove Boundary
Coastal Resources - 2022
Notes:

APN: Assessor Parcel Numbers (11)
006-021-099, 006-031-099, 006-061-099,
006-071-099, 006-081-099, 006-155-099,
006-181-095, 006-181-096, 006-211-098,
006-741-004, 007-011-001
SMR: State Marine Reserve
SMCA: State Marine Conservation Area
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Agenda No. 14 A

CITY OF PACIFIC GROVE
300 Forest Avenue, Pacific Grove, California 93950
TO: Honorable Mayor and Members of the City Council
FROM: Anastacia Wyatt, Housing Program Manager
MEETING DATE: March 16, 2022
SUBJECT: Housing Element and Regional Housing Needs Allocation (RHNA) CEQA: Does not constitute a “Project” per California Environmental Quality Act Guidelines Section 15378

RECOMMENDATION
Receive update.

DISCUSSION
The Pacific Grove Housing Element
The Housing Element is part of the City's General Plan, as required by state law. It sets forth Pacific Grove’s goals, policies and programs for housing, helping ensure the City plans for adequate housing to meet current and projected needs. In accordance with state requirements, it includes an analysis of housing needs across income levels and types of households, and identifies sites to meet the need for new housing as well as programs to preserve existing housing. Importantly, the Housing Element must demonstrate that the City has the necessary zoning, development regulations, and supportive policies and programs to facilitate housing production consistent with projected needs at different income levels, as established through a state-mandated process called the Regional Housing Needs Allocation, or RHNA.

Pacific Grove’s existing Housing Element was adopted in March 2016 and covers the planning period from 2015 to 2023. The next planning period covers the period from June 30, 2023 to December 15, 2031. The state deadline for adopting the new Housing Element is December 2023.

Key Components of the Housing Element
There are a number of requirements that every California city’s Housing Element must consider and respond to. The main components include:

Housing Needs Assessment, analyzing the demographic, employment and housing trends and conditions that affect housing needs in Pacific Grove.

Evaluation of Past Performance, documenting our success in implementing the policies and programs of our current housing element and key lessons learned.

Housing Sites Inventory, identifying available sites for housing development or redevelopment to ensure that there is adequate capacity to address RHNA (see next section).

Community Outreach and Engagement, demonstrating that the City has a robust community outreach and engagement program, with a particular focus on outreach to traditionally underrepresented groups.

Constraints Analysis, analyzing and recommending remedies for existing and potential PGCC 3-16-2022

governmental and nongovernmental barriers to housing development.

Policies and Programs, setting forth the policies and programs we are adopting to fulfill our identified housing needs and meet our goals.

Recent Changes to Housing Element Law
A number of recent state laws establish new requirements for the Housing Element and create additional consequences for not being in compliance. Further, the state recently established a Housing Accountability Unit that is charged with monitoring and enforcing compliance with housing element law and ensuring that local jurisdictions are helping to facilitate the development of new units and complying with fair housing requirements.

Some of the key changes include:

A big increase in the number of units the City needs to plan for including, in particular, an increase in the number of lower income units needed to be planned for.

New requirements for the inventory of housing sites. These include limits on the extent to which sites can be reused that are included in the current housing element and increased scrutiny of small, large, and non-vacant sites when these sites are proposed to accommodate units for very low- and low-income households.

New requirements for “affirmatively furthering fair housing.” The City needs to ensure inclusive engagement in the Housing Element process as well as careful attention to ensuring that the selection of Housing Element sites and other housing policies and programs do not result in segregation or concentration of poverty and that they increase access to areas of opportunity.

New parameters for rezoning. In previous Housing Elements, a jurisdiction had three years in which to complete any rezoning needed to provide for planned housing capacity. While that remains true, if the Housing Element is not certified within 120 days of the statutory deadline, the rezoning must now be completed within a year of certification. If the experience of other regions is an indication, the likelihood of getting a certified element within the established timeframe is low, in part due to the next point…
Additional time required for review. HCD has 90 days for review of submitted draft elements, and there are more requirements for public review periods, too. Given the number of new requirements, most jurisdictions are finding that multiple rounds of review with HCD are being required in order to get to a certified element.

RHNA Methodology and Pacific Grove’s e-Draft Allocation In the 2015 – 2023 planning period, Pacific Grove’s “Regional Housing Need Allocation” (or RHNA) was 115 units. In the draft methodology recently approved by the AMBAG Board in January 2022, the number of units allocated to Pacific Grove is 1,125. This is much higher than the draft projections shared with Council in December 2021, which ranged from 300 to 440 total units.

While the overall increase for AMBAG jurisdictions compared to the previous planning period is higher due to an increase in the projected regional housing need (33,274 units projected for the AMBAG region as a whole, compared to 10,430 previously) Pacific Grove’s increase under the adopted draft methodology is also due to the AMBAG Board’s decision to adopt a methodology that weights housing allocations towards “high resource communities” and incorporated areas—both of which apply to Pacific Grove. Other factors considered in the methodology include the number of jobs and the balance between jobs and housing units, among others.

Table 1 in Attachment B summarizes Pacific Grove’s allocation based on the draft RHNA 6 methodology compared to the numbers that were allocated in RHNA 5 (for the 2015 – 2023 planning period) as well as housing unit production, by income category, during that period. Table 2 in Attachment B provides a summary of all the Monterey County jurisdictions’ RHNA 5 and RHNA 6 PGCC 3-16-2022

allocations as well as a comparison of their RHNA 6 allocation of units to estimates of the current number of housing units in each jurisdiction. These numbers are provided to help contextualize and compare Pacific Grove’s “pre-draft” allocation with those of others.

The increase in the RHNA allocations are particularly pronounced in the Monterey Peninsula communities, with Pacific Grove having the second largest increase in allocations compared to RHNA 5 (878%) and Carmel-by-the-Sea the highest (1,026%). However, comparing the allocation to the number of existing housing units is also instructive and provides a different understanding of the allocations.

While Carmel has the highest increase in comparison to the RHNA 5 allocations, it has among the lowest increases in comparison to the number of units already existing in the City (3,438 existing units, with an allocation of 349 units, for an increase of 10% during the planning period). By comparison, Pacific Grove’s allocation of 1,125 units is an increase of 878% from RHNA 5, but translates to an increase of 14% from the current number of units (estimated at 8,219), which is consistent with the increase in units from RHNA 6 applied countywide.

The proposed draft methodology also allocates units by income category. For Pacific Grove, the increase in the allocation (compared to RHNA 5) of very low income units is 1,111%, low income is 1,128%, moderate income is 662%, and above moderate income is 744%. While these numbers are much higher than anticipated, it is important to keep in mind that the recently completed work of the Welcome Home Initiative highlighted the significant workforce and affordable housing needs in the community, and the mismatch between the housing needed and the City’s existing housing stock.

Building lower income units requires heavier subsidies and incentives to support the development of those units. While the City itself does not build housing, the housing element must demonstrate that the city has in place the necessary zoning, regulatory standards and other policies and programs to facilitate the development of that housing. This will require rezoning in multiple areas of the city and the redevelopment of existing non-vacant sites (see Attachment C). As a result, this may also require reconsideration of the city’s Land Use Map and potentially other parts of the Pacific Grove General Plan to ensure they are consistent with the level of planned housing growth.

Regardless of Pacific Grove’s final RHNA, it is recommended to plan for a 10 to 15% higher capacity than the actual RHNA number. The reason for this is to ensure an adequate inventory for the duration of the eight-year planning period in compliance with the state’s “No Net Loss” rule. This helps to avoid the need for rezoning additional sites midway through the planning period due to the loss of sites to lower density or higher income development.

RHNA Number Appeals
There is a step in the RHNA process during which jurisdictions and others can appeal the draft allocations (their own as well as those of others). With the AMBAG Board having approved the draft methodology, that methodology is now being reviewed by HCD to ensure compliance with state law requirements. Assuming it is found in compliance, the next step is for the Board to approve draft regional housing need allocations, by income category, for every jurisdiction based on the approved methodology. At that point, the appeal period begins. Following the review of appeals, the AMBAG staff and Board will then approve or deny each appeal. Appeals must be focused on identifying errors in the methodology and/or underlying data. Based on the experience in other regions of the state, appeals that claim the numbers of units can’t be achieved due to land or resource constraints or community impacts are unlikely to be successful.

Water Issues
A key issue in planning for and actually facilitating the level of growth called for in Pacific Grove’s allocation based on the draft RHNA methodology is the continuing moratorium on new water PGCC 3-16-2022

connections for communities served by Cal-Am, including Pacific Grove. Water limitations will need to be considered in the required analysis of constraints on development, with proposed actions for reducing or eliminating the constraints identified. This will be an important discussion in the element, and with HCD through the review process. However, the current moratorium will not be eliminated or directly addressed through the housing element update. There are separate processes underway to develop viable strategies for addressing the peninsula’s water issues. Until those strategies are agreed upon and implemented, the City’s housing element will need to proceed with planning for and implementing zoning and development regulation changes necessary to accommodate Pacific Grove’s final RHNA, whether that ends up being 1,125 units or something else.

Facilitating the Development of Lower Income Housing Units The Housing Element is first and foremost a planning requirement (the City itself is not a developer).

Through the housing element update process, the City will need to ensure that local zoning, development regulations and development review processes help facilitate housing development consistent with the final RHNA. The City will also need to ensure we have policies and programs in place that further support the development of affordable housing, including potential incentives or requirements, which may include City contributions in the form of funding, fee waivers, land contributions, grant applications, and collaborative efforts with other agencies and developers.

There are many factors that will affect whether or not the number of units identified in the RHNA are actually realized—namely market conditions (including both demand and development costs) and issues such as water availability, which the City will work to influence (consistent with policies that will be articulated in the Housing Element) but which it does not directly control.

RHNA Schedule
The state’s deadline for completing the update and being certified for compliance with state law is December 2023. In order to achieve certification by December 2023, development of the draft element will need to be completed in late 2022, with initial public review and public hearings in the first quarter of 2023. Following the initial public review, there is an initial 90-day review period by HCD, and then time for refinements, final adoption, and submittal for certification by the December 2023 deadline.

State law provides for a 120-day grace period (through March 2024). The schedule reflects the intent to complete rezoning in conjunction with the update. If that proves infeasible, the intent is to complete rezoning within one-year of the December 2023 deadline (by December 2024) which is the maximum timing allowed in the event the City does not achieve a certified element by the state deadline. If the City achieves certification by the deadline, rezoning must be completed within three years (by December 2026).

Community Engagement
Building off the community engagement process and outcomes from the Welcome Home initiative, the Housing Element Update process will continue to involve the Pacific Grove Housing Advisory Group (which will become the Housing Element Steering Committee) as advisors to staff on engagement planning as well as potential policy and action priorities. Staff is planning for a sequence of broad community participation activities (virtual and in-person), including focused outreach to areas under consideration for rezoning, coupled with targeted equity-focused outreach to ensure that the voices of traditionally underrepresented groups are heard. City staff and interns are also handing out flyers at the City's Farmer's Market and taking other opportunities for less formal outreach. Staff is also working regionally to support and participate in regional meetings.

The engagement work will happen in four overall phases:

Community Education about the Housing Element
March 2022 – May 2022
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What it is and why it matters
How it relates to and builds on the Welcome Home work
RHNA and State requirements
Affirmatively Furthering Fair Housing
When and how to be involved
Creating New Housing Opportunities
June 2022-October 2022
Evaluating potential rezoning strategies “Balancing Act” engagement tool Focusing on affordability Objective Design Standards input
The Draft Plan
January – March 2023
Public review and input on the draft plan
Plan Adoption
Fall 2023
Planning Commission and Council adoption

OPTIONS
Provide further direction on the Housing Element Strategy and community engagement process.

FINANCIAL IMPACT:

Although there is no financial impact to hearing this update, it is important to note that the 2023-2031 Housing Element update and outreach is paid for through grant funding. Intern work is assisting with outreach efforts.

GOAL ALIGNMENT: Increase Affordable Housing: Determine policies, projects and programs that will advance the effort to create new affordable housing in the City.

Attachments
Housing Element Update Attachments A through C
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ATTACHMENT A
City of Pacific Grove Housing Element Information
(for use in public outreach)
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City of Pacific Grove
Housing Element Information
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What is a Housing Element?
Since 1969, Housing Elements have been a mandatory chapter of local General Plans in California. A Housing Element provides an analysis of a community’s housing needs for all income levels and strategies to provide for those housing needs. It includes goals, policies, programs, and objectives to guide future housing growth to meet the needs of residents of all income levels in the City of Pacific Grove. It also identifies projected housing needs by income category and requires certification by the State Department of Housing and Community Development (HCD) for compliance with state housing laws. An HCD certified Housing Element enables the City to be eligible for various state grants and funding sources. The State requires that Housing Elements be updated and certified regularly to reflect the most recent trends in demographics and employment that may affect existing and future housing demand and supply. The Housing Element is updated every eight years.

Why is the Housing Element Important?
Updating the Housing Element presents a real opportunity for communities to be forward thinking and strategic in their overall planning process. The benefits of updating the Housing Element include: providing timely access to State infrastructure bonds to construct needed capital improvement projects; implementing redevelopment/revitalization initiatives and smart growth principles to help shape the community’s physical form; achieving a jobs-housing balance to reduce commute patterns, retaining a local employment base and providing the capacity for attracting new business; engaging the public stakeholders in developing a common basis of understanding; devising land use strategies and achieving consensus on common goals; and directing growth in the community.

Why Update the Housing Element?
State Department of Housing and Community Development (HCD) is responsible for determining the regional housing needs assessment (RHNA) within each region’s planning body known as a “council of governments” (COG). RHNA quantifies the need for housing during specified planning periods. Each COG is then responsible for allocating the housing need amongst all the jurisdictions within that region during specified planning periods. The RHNA allocation for the City of Pacific Grove is 1,125 units. The City of Pacific Grove’s council of governments is known as Association of Monterey Bay Area Governments (AMBAG).

Housing Element law does not require the City construct the 1,125 units but rather that it implements a plan to accommodate for these units throughout the City. The Housing Element serves as a tool to address housing problems and aims to identify constraints, barriers, and provide realistic solutions where feasible.

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What are the most important issues that must be addressed in the Housing Element?
The major issues that must be addressed in the Housing Element are:
• How City policies, plans and regulations help to meet the region’s housing needs for people at all income levels.
• How City land use regulations accommodate the special housing needs of persons with disabilities or other difficulties.

Every community is dependent on a variety of low- and moderate-income workers in jobs such as child and elder care, medical support, business and personal services, retail trade, and maintenance. While governmental programs provide funding assistance for affordable housing, city plans and regulations determine the type of housing that can be built. Therefore, a sufficient supply of affordable housing is dependent on both financial assistance and city development regulations.

Under State law all cities are required to plan for additional housing to accommodate population growth and existing housing problems such as overcrowding and high housing cost. State law recognizes that most housing is built by private developers, not cities. However, cities are required to adopt policies, plans, and development regulations to encourage a variety of housing types that are affordable for persons at all income levels, including multi-family rental housing and accessory dwelling units (“ADUs”). The Regional Housing Needs Assessment (“RHNA”) is the process by which each jurisdiction’s share of new housing needs is determined.

Additionally, under State law, cities must ensure that their plans and regulations encourage the provision of housing for persons with special needs including providing for:
• Reasonable accommodation for persons with disabilities. • Transitional and supportive housing.
• Residential care facilities.
• Emergency shelters and “navigation centers.”
What is “affordable” housing?
By definition, housing is considered “affordable” when total housing cost, including utilities, is no more than 30% of a household’s gross income. State law describes five income categories, which are based on the county’s median income. These categories, and their current maximum income classification for a household of four are shown in the table on the next page along with the Maximum Affordable Rents for Monterey County in 2021.

Monterey County Area Median Income in 2021 was $81,600
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Monterey County Maximum Affordable Rents (2021)
Household size: 1 2 3 4
Acutely Low $8,600 $9,800 $11,050 $12,250
Extremely Low $21,350 $24,400 $27,450 $30,500
Very Low Income $35,600 $40,700 $45,800 $50,850
Low Income $56,950 $65,100 $73,250 $81,350
Median Income $57,100 $65,300 $73,450 $81,600
Moderate Income $68,550 $78,300 $88,100 $97,900
What is the “RHNA” and why is it important?
Each California City is required to plan for new housing to accommodate a share of regional needs. The Regional Housing Needs Assessment (“RHNA”) is the process established in State law by which each city’s housing needs are determined.

Prior to each Housing Element planning cycle the region’s total housing need is determined by the California Department of Housing and Community Development (“HCD”) based upon economic and demographic trends, existing housing problems such as overcrowding and overpayment, and additional housing needed to ensure reasonable vacancy rates and replace units lost due to demolition or natural disasters. The total housing need for the region is then distributed to cities and counties by AMBAG based upon criteria established in State law.

AMBAG prepares a RHNA plan that allocates a share of the RHNA to each jurisdiction in the region.

Is the RHNA a construction quota or mandate?
The RHNA allocation identifies the amount of additional housing a jurisdiction would require in order to have enough housing at all price levels to fully meet the needs of its existing population plus its expected population growth over the next 8 years while avoiding problems such as overcrowding and overpayment. The RHNA is a planning requirement that identifies housing need, not a construction quota or mandate. Jurisdictions are not required to build housing or issue permits to achieve their RHNA allocations, but State law establishes specific requirements when housing production falls short of RHNA allocations. One such requirement is streamlined review of housing development applications that meet specific standards.

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What must cities do to comply with the RHNA?
The Housing Element must analyze the city’s potential capacity for additional housing based on an evaluation of land use patterns, development regulations, development constraints, and real estate market factors. The analysis must be prepared to identify properties where additional housing could be built consistent with current regulations. This evaluation is referred to as the “sites inventory.” State law requires the inventory to demonstrate that the city has adequate capacity to fully accommodate its RHNA allocation for each income category. If the sites inventory does not demonstrate that adequate capacity exists to fully accommodate the RHNA, the Housing Element must describe what steps will be taken to increase capacity commensurate with the RHNA – typically through amendments to land use and zoning regulations that could facilitate additional housing development.

Under State law, areas that are zoned to allow residential or mixed-use development at a density of at least 20 units/acre in small cities such as Pacific Grove are considered appropriate for affordable housing in the very-low and low – income categories. Accessory dwelling units (“ADUs”) can also accommodate future housing need in all income categories.

Why does Pacific Grove have to plan for more housing?
California law requires each city and county to plan for their “fair share” of the State’s housing growth needs. Based on economic and demographic forecasts, the State has determined that the Association of Monterey Bay Area Governments (AMBAG) region needs to accommodate 33,274 additional housing units between 2023-2031 to meet housing demand. AMBAG is the agency responsible for distributing the fair share allocation among its 3 counties and each of the cities within the counties. In Monterey County, the 11 cites in addition to Pacific Grove are Carmel-by-the-Sea, Del Rey Oaks, Gonzales, Greenfield, King City, Marina, Monterey, Salinas, Sand City, Seaside, and Soledad. Based on the draft methodology adopted by the AMBAG Board in January 2022, the number of units that Pacific Grove will need to plan for is 1,125 (an increase of about 14% above the number of units we have in the city today).

What do communities do when they run out of vacant and buildable land? Communities with little or no remaining vacant land cannot escape RHNA – they must still update their Housing Element to accommodate the RHNA. In these cases, the Housing Element may evaluate existing developed properties as “underutilized sites.” Such properties may be available for intensification, or they may be non-residential sites with potential for re-designation and redevelopment for housing or mixed-use development. Examples of land with potential for recycling may include fragmented sites suitable for assembly, publicly owned surplus land, areas with mixed-use potential, properties facing substantial functional obsolescence, and blighted areas with abandoned or vacant buildings. Second units (accessory dwelling units) also provide a PGCC 3-16-2022

means of accommodating additional housing in built-out communities. Under limited circumstances, a portion of the City’s RHNA may be met through conversion of existing market rate apartments to affordable levels; preservation of affordable units at-risk of conversion to market rate; and substantial rehabilitation of substandard apartment units combined with long term affordability covenants.

What role does community input play in the Housing Element update? Community input is a very important part of the Housing Element Update. State planning law requires that communities make diligent efforts to engage in public participation that includes all stakeholders and income groups. The public process for the Housing Element will include educational workshops on housing issues, policy formation and program development. Later in the process, the Planning Commission and City Council will conduct formal hearings to adopt the updated Housing Element. Written public comment regarding issues related to housing are always welcome.

What is “certification” of the Housing Element and why is it important? The State Legislature has delegated authority to the California Department of Housing and Community Development (HCD) to review Housing Elements and issue findings regarding the elements’ compliance with the law. If HCD issues a finding that the Housing Element is in substantial compliance with State law it is referred to as “certification” of the Housing Element.

Achieving certification of the Housing Element is important for two main reasons:
• Maintaining local control. The General Plan establishes the foundation for the City’s land use plans and regulations, and the Housing Element is part of the General Plan. If the City were challenged in court on a planning or zoning matter and the Housing Element were found by the court to be out of compliance, the court could order changes to the City land use plans or regulations and assume control over some City land use decisions.

HCD certification establishes a “rebuttable presumption of validity” that the Housing Element complies with State law, which would support the City’s legal defense. Recent laws also allow for courts to impose fines if a jurisdiction fails to adopt a compliant Housing Element.
• Eligibility for grant funds. Some State grant funds are contingent upon Housing Element certification.

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How can I find out more about the 2023 Housing Element update? A webpage has been established on the City’s website for the Housing Element update at:
www.cityofpacificgrove.org This webpage will be updated periodically with meeting notices, documents and other materials regarding the Housing Element update. If you have questions not addressed on the website, you can contact Housing Program Manager, Anastacia Wyatt at:
[email protected].

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ATTACHMENT B
Table 1: Pacific Grove’s Regional Housing Needs Allocation based on Draft Methodology RHNA 5
Allocation
(2015 – ’23)
Units
Produced
(as of 12/21)
RHNA 6 (2023 – ’31)
based on Draft AMBAG
Methodology**
% Change,
RHNA5 to
RHNA6
AMBAG Region Total 10,430 - 33,274 219%
Pacific Grove Total 115 81* 1,125 878%
Very Low Income 28 1 339 1,111%
Low Income 18 12 221 1,128%
Moderate Income 21 18 160 662%
Above Moderate Income 48 50 405 744%
*While 81 total units were produced, there has been a shortfall of 36 units when accounting for production by income category. **The current numbers are based on the draft methodology adopted by the AMBAG Board on January 12, 2022; that methodology is currently being reviewed by the state for compliance with state law requirements; after that the AMBAG Board will adopt official draft allocation numbers and begin the appeals period. Final RHNA numbers are not expected until late 2022.

Table 2: Monterey County RHNA 5 / RHNA 6 and Existing Units Comparisons Jurisdiction RHNA 5 RHNA 6
% RHNA
increase
Est. Housing
Units (2021)
Est. Housing
Units + RHNA 6
% increase
in units
Carmel-By-The-Sea 31 349 1026% 3,438 3,787 10%
Del Rey Oaks 27 184 581% 741 925 25%
Gonzales 293 1,266 332% 1,987 3,253 64%
Greenfield 363 730 101% 4,014 4,744 18%
King City 180 702 290% 3,480 4,182 20%
Marina 1,308 685 -48% 7,862 8,547 9%
Monterey 650 3,654 462% 13,717 17,371 27%
Pacific Grove 115 1,125 878% 8,219 9,344 14%
Salinas 2,229 6,674 199% 43,579 50,253 15%
Sand City 55 260 373% 197 457 132%
Seaside 393 616 57% 10,921 11,537 6%
Soledad 191 724 279% 4,174 4,898 17%
Balance of county 1,551 3,326 114% 39,936 43,262 8%
Countywide 7,386 20,295 175% 142,265 162,560 14% :

Sources: State of California, Department of Finance, E-5 Population and Housing Estimates for Cities, Counties and the State — January 1, 2011-2021. Sacramento, California, May 2021; AMBAG Board of Directors, Option Z RHNA (pg. 85); AMBAG Regional Housing Needs Plan 2014 - 2023
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ATTACHMENT C
Potential Strategies for Creating Additional Housing Capacity in Pacific Grove Setting aside the water issue, and recognizing that the RHNA number of 1,125 is based on the draft methodology that has not yet been approved and may therefore change, what are the potential strategies that could be pursued during the housing element to meet this significant increase in projected housing need?
Following is a very high level outline of potential strategies. These are provided to illustrate the potential focus and extent of work during the update process. They are not proposals.

Housing Sites Identified in the 2015 Housing Element 120 to 150 units Most sites listed in the existing element are small in size and have lower density zoning, or have site-specific constraints; overall capacity is limited.

Accessory Dwelling Units 168 to 352 units
In recent years the city has issued about 21 ADU permits per year, but in the most recent year issued 44 permits. We can project within that range for the coming 8 years, or top of that range if we adopt policies and programs that further incentivize or streamline ADU approvals.

Downtown and Commercial Corridors Rezoning 120 to 200 units Allowing greater density downtown, through changes in dwelling units per acre, increased height, increased FAR and/or changes in parking standards —especially if structured to give preference to residential—could provide enough incentive for redevelopment on key sites. Will need to consider market feasibility along with inclusionary requirements or incentives.

Forest Hill Area Rezoning 350 to 550 units
Updating the Forest Hill Specific Plan and rezoning to encourage multi-unit residential can create significant new housing opportunities but will need to ensure economic feasibility, area cohesion and careful attention to fair housing issues (avoiding concentration of affordable housing in one area).

Middle Housing Rezoning 55 to 75 units
Enacting changes to R3 zoning and expanding the areas where it applies can encourage duplex, triplex and townhome development in areas close to downtown and commercial corridors. Will need to ensure standards are market-feasible in comparison to single family homes, and may need to restrict new single family home development in multi-unit zones.

Facilitating Lot Splits and Smaller Lots 15 to 50 units Building off the provisions of Senate Bill 9, establish local policies and procedures that facilitate the creation of smaller lots (through subdivision) and duplex developments in R-1 zones. This could also include rezoning the R-1-B3 zone outside the coastal zone to R-1 (removing the 10,000 sf minimum lot size).

TOTAL: 828 to 1,377 units
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