NVF:CDW
3/8/2022
1 T-313.120.002/1903566
Council Agenda: 4-12-2022
Item No: 2.7
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
RESOLUTION NO. _____
A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN
JOSE APPROVING THE 2021 AMENDED AND RESTATED
WATER SUPPLY AGREEMENT BETWEEN THE CITY AND
COUNTY OF SAN FRANCISCO AND WHOLESALE
CUSTOMERS IN ALAMEDA COUNTY, SAN MATEO
COUNTY, AND SANTA CLARA COUNT Y AND
CONSENTING TO THE MINIMUM PURCHASE TRANSFER
FROM THE CITY OF MOUNTAIN VIEW TO THE CITY OF
EAST PALO ALTO
WHEREAS, water supply agencies in Alameda, San Mateo, and Santa Clara Counties have purchased water from the City and County of San Francisco (San Francisco) for many years; and
WHEREAS, the San Francisco Public Utilities Commission (SFPUC or Commission) operates the Regional Water System, which delivers water to communities in Alameda, San Mateo, and Santa Clara Counties, as well as to customers within San Francisco (collectively, “the Parties”); and
WHEREAS, the Parties entered into the “Settlement Agreement and Master Water Sales Contract between the City and County of San Francisco and Certain Suburban Purchasers in San Mateo County, Santa Clara County and Alameda County” in 1984 (1984 Settlement Agreement and Master Water Sales Contract); and WHEREAS, in April 2003, water supply agencies in Alameda, San Mateo and Santa Clara Counties (collectively referred to as the "Wholesale Customers" or "BAWSCA member agencies") established the Bay Area Water Supply and Conservation Agency (BAWSCA), as authorized by Water Code Section 81300 et seq.; and WHEREAS, upon expiration of the 1984 Settlement Agreement and Master Water Sales Contract, the Parties entered into the “Water Supply Agreement between San Francisco and Wholesale Customers in Alameda County, San Mateo County, and NVF:CDW
3/8/2022
2 T-313.120.002/1903566
Council Agenda: 4-12-2022
Item No: 2.7
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
Santa Clara County” (Water Supply Agreement or WSA) on July 1, 2009, authorized by the SFPUC Resolution No. 09-0069, dated April 28, 2009; and WHEREAS, in 2017, the Wholesale Customers directed BAWSCA to act as its authorized representative in discussions and negotiations with San Francisco to amend the Water Supply Agreement to address a number of substantive issues and these negotiations resulted in the Parties' adoption of the Amended and Restated Water Supply Agreement (Amended and Restated Water Supply Agreement) in 2018, authorized by SFPUC Resolution No. 18-0212, dated December 11, 2018; and WHEREAS, on October 2, 2018, City Council authorized the City Manager’s Office to negotiate and execute the 2019 Amended and Restated Water Supply Agreement, and such agreement was approved in May 22, 2019; and
WHEREAS, under Article 3 of the Amended and Restated Water Supply Agreement, the SFPUC agrees to deliver water to the Wholesale Customers up to the amount of 184 million gallons per day (MGD), referred to as the “Supply Assurance,” and the Wholesale Customers have allocated shares of the Supply Assurance among themselves, referred to as Individual Supply Guarantees (“ISG”); and WHEREAS, Section 3.04 of the Amended and Restated Water Supply Agreement enables a Wholesale Customer that has an ISG to transfer a portion of its ISG to one or more other Wholesale Customers, subject to several conditions; and WHEREAS, under Section 3.07 of the Amended and Restated Water Supply Agreement, four Wholesale Customers (Alameda County Water District and the Cities of Milpitas, Mountain View, and Sunnyvale, collectively, the “Minimum Purchase Customers”) may purchase water from sources other than the SFPUC, but they are each obligated to purchase a specific minimum annual quantity of water from the SFPUC, referred to as a “Minimum Purchase requirement”; and NVF:CDW
3/8/2022
3 T-313.120.002/1903566
Council Agenda: 4-12-2022
Item No: 2.7
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
WHEREAS, if a Minimum Purchase Customer does not meet its Minimum Purchase requirement in a particular fiscal year, it must pay the SFPUC for the difference between its metered water purchases during the fiscal year and its minimum annual purchase quantity set forth in Attachment E of the Amended and Restated Water Supply Agreement; and
WHEREAS, the Amended and Restated Water Supply Agreement does not currently allow a Minimum Purchase Customer to transfer a portion of its Minimum Purchase requirement and the associated financial obligation to another Wholesale Customer; and
WHEREAS, in September 2017, BAWSCA and the Water Management Representatives (WMRs) of the BAWSCA member agencies began reviewing the issue of Minimum Purchase Quantities, as described in Section 3.07.C of the Water Supply Agreement, and discussing the creation of a process to transfer Minimum Purchase Quantities; and
WHEREAS, throughout 2017 and 2018, the WMRs held multiple meetings during which the agencies currently subject to Minimum Purchase Quantity requirements and the other Wholesale Customers shared their interests and concerns regarding changes to the Minimum Purchase Quantity requirements and allowing transfers of Minimum Purchase Quantities; and
WHEREAS, at the time the Amended and Restated Water Supply Agreement was approved, the Parties expressed a collective interest in working together to develop a process for the expedited and permanent transfer of Minimum Purchase Quantities; and WHEREAS, in 2019, the Wholesale Customers directed BAWSCA to draft a proposed amendment to the Amended and Restated Water Supply Agreement to provide a procedure for expedited and permanent transfers of Minimum Purchase Quantities that safeguards the financial and water supply interests of Wholesale Customers not participating in such transfers; and
NVF:CDW
3/8/2022
4 T-313.120.002/1903566
Council Agenda: 4-12-2022
Item No: 2.7
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
WHEREAS, the Parties recognize that, both before and after the most recent statewide drought, after meeting drought-related conservation mandates, several BAWSCA member agencies were unable to meet their respective Minimum Purchase requirements described in Article 3.07 of the Amended and Restated Water Supply Agreement, which requires payment for water up to the required Minimum Purchase level even if such water is not delivered and used; and WHEREAS, several of the Wholesale Customers with Minimum Purchase requirements might be interested in transferring a portion of their Minimum Purchase Quantity within their respective ISGs to reduce the financial obligation to pay for imputed sales for Minimum Purchase water that is not used; and
WHEREAS, with its Alternative Water Supply Program, the SFPUC is in the early stages of planning for fourteen projects to support the Wholesale and Retail Customers' ability to respond to climate change and address future water supply challenges and vulnerabilities, such as regulatory changes, earthquakes, disasters, emergencies, and increases in population and employment; and
WHEREAS, the City of San José (San José) and the City of Santa Clara (Santa Clara) are temporary, interruptible Wholesale Customers of the SFPUC Regional Water System and both cities wish to become permanent Wholesale Customers; and WHEREAS, pursuant to Section 4.06 of the Amended and Restated Water Supply Agreement, by December 31, 2028, San Francisco must complete any necessary California Environmental Quality Act (CEQA) review and must decide whether or not to make San José and Santa Clara permanent Wholesale Customers of the Regional Water System with a combined Individual Supply Guarantee (ISG) of 9 million gallons per day (MGD) allocated equally between the two cities, as well as how much water in excess of 9 MGD it will supply to San José and Santa Clara; and WHEREAS, Section 4.06 of the Amended and Restated Water Supply Agreement provides: "San Francisco will make San José and Santa Clara permanent customers NVF:CDW
3/8/2022
5 T-313.120.002/1903566
Council Agenda: 4-12-2022
Item No: 2.7
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document. only if, and to the extent that, San Francisco determines that Regional Water System long term water supplies are available;" and
WHEREAS, according to the SFPUC's December 2021 Alternative Water Supply Planning Quarterly Update (Quarterly Update), "[f]or San José and Santa Clara to become permanent customers of the SFPUC, an additional 9 MGD of new, year-round supplies would be needed to meet historic demand levels and up to 15.5 MGD would be needed to meet planned demand through 2045;" and
WHEREAS, according to its December Quarterly Update, the SFPUC is planning with the “intention to be able to make San José and Santa Clara permanent customers,” but is prioritizing instream flow obligations to meet existing permanent customer demands, including drought supplies; and
WHEREAS, the SFPUC has budgeted $298.3 million over the next ten years to fund water supply projects; and
WHEREAS, the SFPUC, San José, Santa Clara, and BAWSCA are actively working together to consider water supply projects that may offer potential sources of supply to support San José and Santa Clara as permanent Wholesale Customers; and WHEREAS, BAWSCA and the SFPUC have identified intra-system water transfers as one potential solution to long term water reliability needs among the Wholesale Customers; and
WHEREAS, a Minimum Purchase Customer might be more inclined to transfer a portion of its ISG to another Wholesale Customer under Section 3.04 of the Amended and Restated Water Supply Agreement if it was able to include a simultaneous transfer of a portion of its Minimum Purchase requirement and the associated financial obligation; and
NVF:CDW
3/8/2022
6 T-313.120.002/1903566
Council Agenda: 4-12-2022
Item No: 2.7
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
WHEREAS, allowing simplified permanent intra-system transfers of portions of Minimum Purchase Quantity and ISG will facilitate the development of new water supplies by the SFPUC that are necessary to support San José and Santa Clara as permanent Wholesale Customers; and
WHEREAS, the Parties have developed a process to allow for the transfer of a Wholesale Customer's Minimum Purchase Quantity in conjunction with an ISG transfer pursuant to Section 3.04, which ensures that such transfers will not result in new or different risks to the water supply and financial interests of Wholesale Customers not participating in a transfer; and
WHEREAS, the Parties agree that the total aggregate amount of Minimum Purchase Quantity that may be transferred by all of the Wholesale Customers subject to Minimum Purchase requirements as first specified in Attachment E of the Amended and Restated Water Supply Agreement, over the course of one or multiple transfers, is limited to 6 MGD; and
WHEREAS, if demand for Minimum Purchase Quantity transfers exceeds 6 MGD in the future, the Parties agree to consider further amending Section 3.04 of the Amended and Restated Water Supply Agreement to increase the total aggregate cap on the amount of Minimum Purchase Quantity that may be transferred; and
WHEREAS, a proposed transfer that does not meet the requirements of Section 3.04 of the Amended and Restated Water Supply Agreement, as amended by this Resolution, may be presented as an amendment to the Amended and Restated Water Supply Agreement pursuant to Section 2.03 of the Amended and Restated Water Supply Agreement; and
WHEREAS, the Parties agree to consider a proposal by the City of Mountain View (Mountain View) and the City of East Palo Alto (East Palo Alto) to amend the Amended and Restated Water Supply Agreement to allow for the conversion of Mountain View's 2017 sale of 1 MGD of ISG to East Palo Alto into a transfer of 1 MGD of Mountain NVF:CDW
3/8/2022
7 T-313.120.002/1903566
Council Agenda: 4-12-2022
Item No: 2.7
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
View's ISG that includes the Minimum Purchase Quantity to East Palo Alto, over a period of time, and in a manner that protects the other Wholesale Customers' financial and water supply interests; and
WHEREAS, if such a conversion is approved by the Parties, the 1 MGD of Mountain View's Minimum Purchase Quantity would be counted towards the total aggregate 6 MGD cap on Minimum Purchase Quantity transfers; and
WHEREAS, the Parties now desire to adopt an amendment to the Amended and Restated Water Supply Agreement to permit Wholesale Customers with an ISG to transfer, or accept a transfer, of both a portion of a Wholesale Customer's ISG and its Minimum Purchase Quantity; and
WHEREAS, an updated Amended and Restated Water Supply Agreement, reflecting this amendment, in the form negotiated by BAWSCA (2021 Amended and Restated Water Supply Agreement), was presented to and approved by the SFPUC on January 26, 2021 pursuant to the SFPUC Resolution No. 21-0009; and WHEREAS, the amendment considered now is not a "project" for the purposes of CEQA as it involves agreements or contracts that do not result in a direct change to the environment (see 14 CCR Section 15378(b)(5)), and would not result in a direct or reasonably foreseeable indirect physical change in the environment (see 14 CCR Section 15060(c)(2)); and
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF SAN JOSE THAT THE CITY COUNCIL:
1. Approve the "2021 Amended and Restated Water Supply Agreement Between the City and County of San Francisco Wholesale Customers in Alameda County, San Mateo County, and Santa Clara County" dated January 2021 (2021 Amended and Restated Water Supply Agreement) and authorize the City NVF:CDW
3/8/2022
8 T-313.120.002/1903566
Council Agenda: 4-12-2022
Item No: 2.7
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
Manager to execute the Agreement when final execution copies are prepared and distributed; and
2. Consent to and approve the transfer of a minimum purchase from the City of Mountain View to the City of East Palo Alto.
ADOPTED this _____ day of ___________, 2022, by the following vote:
AYES:
NOES:
ABSENT:
DISQUALIFIED:
SAM LICCARDO
Mayor
ATTEST:
TONI J. TABER, CMC
City Clerk