9. A Beneficial Owner sh all give notice to elect to have its Securities purchased or tendered, through its Direct or Indirect Participant, to the Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Direct or Indirect Participant’s interest in the Securities, on DTC’s records, to the Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transfer red by Direct Participants on DTC’s records and followed by a book -entry credit of tendered Securities to the Agent’s DTC account.
10. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.
11. Issuer may decide to discontinue use of the Enterprise of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.
12. The information in this section concerning DTC and DTC’s book- entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
H-1
APPENDIX H
ADOPTED RATE RESOLUTION
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
H-1
APPENDIX I
CLIMATE BOND VERIFIER’S REPORT
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | www.kestrelverifiers.com
Verifier’s Report
EXECUTIVE SUMMARY
ISSUER
City of San José Financing Authority
OPINION ON
Wastewater Revenue Bonds, Series 2022B (Green Bonds - Climate Bond Certified)
STANDARD AND SECTOR CRITERIA
Water Infrastructure
PAR
$275,570,000 (Preliminary, subject to change)
KEYWORDS
Wastewater treatment, sustainable management of natural resources, pollution prevention, odor control, energy efficiency, net zero aligned, San Francisco Bay, California
EVALUATION DATE
November 2, 2022
SUMMARY OF FINDINGS
Kestrel Verifiers is of the opinion that the City of San José Financing Authority’s (the “Authority”) Wastewater Revenue Bonds, Series 2022B (Green Bonds - Climate Bond Certified) (“Series 2022B Bonds”) are impactful, net zero aligned, conform with the four core components of the Sustainability Bond Guidelines 2021, and conform with the Climate Bonds Standard (Version 3.0) as follows:
Use of Proceeds
The Series 2022B Bonds refund the Authority’s Subordinate Wastewater Revenue Notes, Series A (“Notes”) that financed improvements (“Treatment Plant Projects”) to the San José-Santa Clara Regional Wastewater Facility (the “Treatment Plant”). The projects incorporate best available technologies to improve treatment processes, reduce emissions from wastewater treatment , and reuse biosolids. The financed activities support climate resilience, sustainability, and environmental stewardship. The Series 2022B Bonds align with the Water Infrastructure Sector Criteria under the Climate Bonds Standard. Process for Evaluation and Selection of Projects & Assets The Treatment Plant Projects are part of a comprehensive Master Plan adopted in 2013 to address aging infrastructure, regulations related to effluent quality, projected increase in flows and loads, and sea level rise. Priorities identified in the Plant Master Plan have been incorporated into the City’s long-term Capital Improvement Plan.
Management of Proceeds
The Series 2022B Bond proceeds will refund the Subordinate Wastewater Revenue Notes, Series A and pay costs of issuance. Proceeds will directly refund the Notes in full within 90 days of issuance and will be held in temporary permitted investments prior to spending. Reporting
The City will post certain financial and operating information to the Municipal Securities Rulemaking Board (“MSRB”) annually through the Electronic Municipal Market Access (“EMMA”) system. Voluntary updates on the Series 2022B projects will be available in the City’s quarterly Capital Improvement Program reports located on the website: https://www.sanjoseca.gov/your- government/departments- offices/environmental-services/water-utilities/regional-wastewater-facility/capital-improvement- program/cip-document-library. Kestrel Verifiers will provide one post-issuance report.
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report Executive Summary ii Impact and Alignment with United Nations Sustainable Development Goals By financing improvements to the wastewater system that increase redundancy, prevent negative impacts to the environment and human health, and increase energy efficiency, the Series 2022B Bonds advance UN SDG Goals 6: Clean Water and Sanitation, 7: Affordable and Clean Energy, 9: Industry, Innovation, and Infrastructure, 12: Responsible Consumption and Production, and 13: Climate Action. Assurance Conclusion
Based on the Reasonable Assurance procedures we have conducted, in our opinion, the Series 2022B Bonds conform, in all material respects, with the Climate Bonds Standard, and the bond-financed activities are aligned with the Water Infrastructure Sector Criteria.
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 1
Verifier’s Report
Legal Name of Issuer: City of San José Financing Authority Issue Description: Wastewater Revenue Bonds, Series 2022B (Green Bonds - Climate Bond Certified)
Project: Wastewater System Capital Improvements
Standard: Climate Bonds Standard (Version 3.0)
Sector Criteria: Water Infrastructure
Keywords: Wastewater treatment, sustainable management of natural resources, pollution prevention, odor control, energy efficiency, net zero aligned, San Francisco Bay, California
Par: $275,570,000*
Evaluation Date: November 2, 2022
*Preliminary, subject to change
CLIMATE BONDS DESIGNATION
City of San José Financing Authority (the “Authority”) will issue Wastewater Revenue Bonds, Series 2022B (Green Bonds - Climate Bond Certified) (“Series 2022B Bonds”) to finance improvements to the Wastewater System, including the San José-Santa Clara Regional Wastewater Facility (the “Treatment Plant”).
This report reflects Kestrel Verifiers’ view of the City’s projects and financing, allocation and oversight, and conformance of the Series 2022B Bonds with the Climate Bonds Standard (V ersion 3.0) and Water Infrastructure Sector Criteria. In our opinion, the Wastewater Revenue Bonds, Series 2022B (Green Bonds – Climate Bond Certified) are impactful, net zero aligned, and conform with the internationally accepted Climate Bonds Standard (Version 3.0) and the Water Infrastructure Sector Criteria (Version 3.2).
ABOUT THE ISSUER
The City of San José Financing Authority was created in 1992 to provide financial assistance to construction of public capital improvement projects in the city of San José . Located at the southern end of the San Francisco Bay, San José is the third most populated city in California with a population of approximately 976,482. The City of San José (the “City”) owns and operates a sanitary sewer collection system which provides wastewater collection, treatment, and disposal service for the city. The sewer collection system includes 2,030 miles of wastewater collection pipeline, 39,500 manholes, 17 sanitary lift stations, two soil beds, one injection station , and a 2,600 acre treatment plant site with buffer land lagoons and saltwater ponds. Collected wastewater is transported to the San José Water Pollution Control Plant (commonly known as the San José-Santa Clara Regional Wastewater Facility) (the “Treatment Plant”), the largest advanced wastewater treatment plant in the western United States. The facility serves 1.4 million residents, more than 17,000 businesses in eight cities, and four sanitation districts in Silicon Valley.
The Treatment Plant was originally constructed in 1956, upgraded in 1964 and 1979, and has capacity to manage up to 167 million gallons of wastewater per day. Jointly owned by the City of San José and the City of Santa Clara , and the Treatment Plant is operated by the City of San José Environmental Services DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 2
Department. The primary purpose of the facility is to protect the health, environment, and economy of the South San Francisco Bay by cleaning wastewater to near drinking water standards before it is discharged to the Bay. Approximately 20% of treated water is used by South Bay Water Recycling for beneficial reuse.
The regional water recycling program produces recycled water for irrigation and in doing so , reduces the amount of freshwater that is discharged to the native salt marshes surrounding South San Francisco Bay .
This helps to protect salt marshes from conversion to brackish and freshwater marshes.
The City of San José has set ambitious goals to address climate change through the Envision San José 2040 General Plan which integrates goals from the City’s earlier sustainability plans: Green Vision (2007-2014) and Climate Smart San José. The City aims to reach carbon neutrality by 2030, receive 100% of electrical power from renewable sources, recycle or beneficially reuse 100% of wastewater, and divert solid waste from landfills.1
To address targets related to sustainable wastewater management, aging infrastructure, and climate risk, the City developed the Plant Master Plan. The Plant Master Plan outlines a $2 billion effort to update 30-year- old infrastructure at the facility and prioritizes a sustainable approach to wastewater management, including:
Improving biogas efficiency, with a goal of using biogas to become 100% energy self-sufficient; Producing 45,000 tons of biosolids which are applied to adjacent landfills to mitigate windblown debris and meet goals for biosolids diversion;
Protecting 201 acres of buffer land as habitat for Western Burrowing Owls and restoring wetland habitat for endangered fish species such as steelhead and longfin trout;2 and Planning for sea level rise through regional partnerships.
The Treatment Plant has received many awards for building improvements and des ign, including the 2022 Organizational Excellence Award and the 2021 Resiliency and Innovation Excellence Award from the California Association of Sanitation Agencies. Additionally, the Treatment Plant was awarded the 2021 National Award of Merit from the Design Build Institute of America in the Water/Wastewater category.
CONFORMANCE WITH CLIMATE BONDS STANDARD AND SECTOR CRITERIA The Authority engaged Kestrel Verifiers to provide an independent verification on alignment of the Series 2022B Bonds w ith the Climate Bonds Standard (V ersion 3.0) and Certification Scheme, and the Water Infrastructure Sector Criteria. The Climate Bonds Initiative ( “CBI”) administers the Standard and Sector Criteria. Additionally, Kestrel Verifiers examined alignment of the Series 2022B Bonds with the United Nations Sustainable Development Goals (“UN SDGs”).
Kestrel Verifiers is a Climate Bonds Initiative Approved Verifier. The Kestrel Verification Team included environmental scientists , social scientists, and financial pro fessionals. We performed a Reasonable Assurance engagement to independently verify that the Series 2022B Bonds meet relevant criteria, in all material respects.
For this engagement, Kestrel Verifiers reviewed the Authority’s bond disclosure documentation, Green Bond Framework, documentation on the allocation and uses of bond proceeds, as well as relevant plans and alignment with the Authority’s overarching climate objectives. We examined public and non -public information and interviewed key staff from the City. Our goal was to understand the planned use of proceeds, procedures for managing proceeds, and plans and practices for reporting in sufficient detail to verify the bonds.
Relevant Climate Bonds Sector Criteria and Other Standards The Series 2022B Bonds align with the Climate Bonds Standard (V ersion 3.0) and Water Infrastructure Criteria (Version 3.2).
1 “ San José Green Vision,” City of San Jos é, 2007, https://www.sanjoseca.gov/your-government/environment/climate-smart-san- jos/green-vision.
2 “Protecting our Environment,” City of San Jos é, accessed October 18, 2022, https://www.sanjoseca.gov/your- government/environment/water-utilities/regional-wastewater-facility/protecting-our-environment.
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 3
Assurance Approach
Kestrel Verifiers’ responsibility was to conduct a Reasonable Assurance engagement to determine whether the Series 2022B Bonds meet, in all material respects, the requirements of the Climate Bonds Standard.
Our Reasonable Assurance was conducted in accordance with the Climate Bonds Standard (Version 3.0) and the International Standard on Assurance Engagements (ISAE) 3000: Assurance Engagements Other than Audits or Reviews of Historical Financial Information. Information relating to this engagement and the Verifier’s and Issuer’s Responsibilities, and Independence and Quality Control are available in Appendix C.
Kestrel Verifiers has relied on information provided by the City and the Authority. There are inherent limitations in performing assurance, and fraud, error or non- compliance may occur and not be detected.
Kestrel Verifiers is not responsible or liable for any opinions, findings or conclusions if based on information provided by the City and the Authority that is incorrect. Our assurance is limited to the review of the City’s and the Authority’s policies and procedures that are, in Kestrel’s view, relevant to the key components of the Climate Bonds Standard (Version 3.0). The distribution and use of this verification report are at the sole discretion of the Authority. Kestrel Verifiers does not accept or assume any responsibility for distribution to any other person or organization.
Use of Proceeds
The 2022B Bonds refund the Authority’s Subordinate Wastewater Revenue Notes, Series A (“Notes”) that financed improvements to the San José-Santa Clara Regional Wastewater Facility (the “Treatment Plant”).
The improvements (collectively the “Treatment Plant Projects”) incorporate best available technologies to improve treatment processes , r educe emissions, provide recycled water, and reuse biosolids. The Treatment Plant Projects are part of the $2 billion Plant Master Plan a nd support climate resilience, sustainability, and environmental stewardship. Table 1 includes construction status and budgets for the Treatment Plant Projects. The Series 2022B Bonds finance and refund the following Projects:
Digester and Thickener Facilities Upgrade
The Notes financed rehabilitat ion of four digesters and added the capability t o produce Class A biosolids and increase d biogas production through a Temperature Phased Anerobic Digestion system (“TPAD”). Digesters use anerobic bacteria to digest sludge and produce methane gas which fulfills on-site energy needs. Addition of the TPAD system and digester upgrades is expected to result in a 10% increase in biogas production. The Notes also financed r eplacement of pipes in digester tunnels to hold higher concentrations of gas and accommodate increased treatment capacity.
Energy Generation Improvements
The Notes financed new construction and upgrades related to energy generation and management.
Financed projects improve energy efficiency and reduce energy use. Projects include construction of a building for new advanced generation internal combustion engines, heat recovery systems, and control and monitoring systems. Gas pipelines and a treatment system for digester gas were constructed, and storage tanks and emergency generators were added to improve resilience. Heat recovery systems allow the facility to capture and reuse heat energy from treatment processes and reduce energy use.
New Headworks
The Notes also financed a new state-of-the-art headworks system, which includes large screens to remove debris and grit chambers to remove heavier sediments such as sand and gravel. The new headworks system3 is built to accommodate up to 400 million gallons per day (MGD) and includes an odor control mechanism to reduce impacts on the surrounding community. Additionally, the new headworks system is an integral component of a flood management strategy that aims to divert sewer flows during significant storms in order to avoid sewage spills. A new grit removal facility was built to reduce sediment inputs to sensitive coastal ecosystems.
3 “Environmental Services News,” City of San José , accessed October 14, 2022, https://www.sanjoseca.gov/Home/Components/News/News/1552/308.
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 4
Aeration Tank and Blower Rehabilitation
The Series 2022B Bonds fund modern controls and instrumentation upgrades to aeration tanks and blowers. These projects include installation of new motors, instrumentation and controls for ten existing blowers, and decommissioning of four blowers. Aeration tanks pump air into wastewater to produce aerobic bacteria to remove organic pollutants. The additional instrumentation and installation will result in increased reliability, efficiency, and redundancy in the biological treatment process.
Nitrification Clarifier Rehabilitation
Financed improvements also include rehabilitation of 16 nitrification clarifiers. Nitrification clarifiers separate solid particulates from effluent by removing nutrients, allowing heavier materials to sink and form a sludge. The clarified effluent is then sent to the next step of the treatment process without contaminants, improving flow and water quality. Digested Sludge Dewatering Facility
The digested sludge dewatering facility project consists of a new mechanical dewatering facility and support systems to replace outdoor sludge storage lagoons and open-air solar drying beds. Upgrades to the dewatering facility will replace lagoons and drying beds, moving biosolid production indoors into an odor-controlled building, and reducing emissions. Construction of the new facility will allow the treatment plant to reduce odors and the total area needed for biosolids processing. The new facility supports compliance with California’s statewide targets to reduce organic waste disposal by 75% by 2025 relative to a 2014 baseline.4
Table 1. Treatment Plant Project budgets and completion dates. Dates in the future represent anticipated completion dates
Project Financed by
Notes
Total Project
Budget
Completion Date
Digester and Thickener Facilities Upgrade $100 million $219 million October 2022 Energy Generation Improvements $61 million $114 million December 2020 New Headworks $44 million $152 million December 2023
Aeration Tank and Blower Rehabilitation $22 million $50 million February 2023 Nitrification Clarifier Rehabilitation $9 million $52 million August 2023 Digested Sludge Dewatering Facility $8 million $174 million November 2025
Env ironmental Benefits
The Treatment Plant Projects enhance the resilience and efficiency of operations. Improvements to digesters increase energy efficiency by using the generated gas to power the site and treatment proces s. Biosolids from the facility are used to cover the Newby Island Landfill to reuse biosolids, reduce odor and windblown debris, and meet California’s requirements for reducing disposal of treated biosolids. The City has exemplary wetland restoration practices to protect the local environment and threatened species. The Treatment Plant Projects will improve effluent water quality and reduce impacts on the San Francisco Bay ecosystem, providing protection for local species and enabling wetland restoration.
Net Zero Alignment
Use of proceeds bonds are net zero aligned if bond- financed activities advance goals to reach net zero greenhouse gas emissions by 2050. Financing improvements to the Treatment Plant directly advance goals to reach net zero greenhouse gas emissions by 2050 by incorporating state -of-the-art technology to maximize energy efficiency of blowers and aeration tanks, improve the heat recovery system , increase biogas production, and maintain comprehensive energy management systems. While wastewater facilities
4 California code of Regulations Title 14, Division 7, Ch 3 (SB 1383).
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 5
are large consumers of electricity, the Treatment Plant Projects have incorporated features to minimize energy use and maximize beneficial reuse of wastewater treatment byproducts.5 Improvements to biogas generation will allow the Treatment Plant to meet 60% of energy needs. The Series 2022B Bonds and the Treatment Plant Projects include features that support the City’s climate action goal to reach carbon neutrality by 2030. Certified Climate Bonds are aligned with goals of the 2015 Paris Climate Agreement and the transition to a low-carbon, climate resilient future.
Sector Criteria for W ater Infrastructure (Version 3.2) The Treatment Plant Projects align with CBI’s Water Infrastructure Sector Criteria and the associated Mitigation and/or Adaptation and Resilience requirements.
Mitigation Requirements: Compliance with the City’s 2040 General Plan and GHG Reduction Strategy ensures that the Plant Master Plan and the Series 2022B projects are consistent with statewide greenhouse gas emission reduction targets. The Environmental Impact Reviews associated with the Plant Master Plan confirm alignment with these statewide emissions targets.6 Bond-financed projects include multiple activities which will significantly increase operational energy efficiency, including replacement of aging or inefficient infrastructure, heat recovery systems, blower rehabilitation, and energy generation and monitoring systems. Stewardship of natural resources, including management of buffer lands and the water recycling program, support preservation and enhancement of ecosystem functions to minimize emissions.
Replacement of outdoor biosolid lagoons and open -air drying beds will eliminate methane and other greenhouse gas emissions from these sites.
Adaptation and Resilience Requirements: A detailed vulnerability assessment including evaluation of Allocation, Governance, Diagnostics, Nature Based Solutions, and Adaptation Plan Assessment shows that the Authority has sufficient infrastructure and planning processes to meet the requirements of the Adaptation and Resilience component of the Water Infrastructure Criteria (Appendix D). In each area, the Authority achieved a score of at least 60%.
Process for Project Evaluation and Selection
The Treatment Plant Projects are part of the comprehensive Plant Master Plan developed in 2013 to address aging infrastructure, regulations related to effluent water quality, projected increase in flows and loads, and sea level rise. Priorities identified in the Plant Master Plan were incorporated into the City’s long-term Capital Improvement Plan. Projects are prioritized by infrastructure conditions assessments and overall environmental and social benefits.
The Plant Master Plan and the Capital Improvement Program are overseen by the City, and authorized and approved by the Treatment Plant Advisory Committee, an advisory body consisting of representatives from the City, Santa Clara, and three Tributary Agencies.
Management of Proceeds
The Series 2022B Bond proceeds will refund the Subordinate Wastewater Revenue Notes, Series A and pay costs of issuance. Proceeds will directly refund the Notes in full within 90 days of issuance and will be held in temporary permitted investments prior to spending . The Trustee maintains the Wastewater Revenue Bonds Series 2022B Refunding Fund and will oversee allocation of proceeds to the Notes.
Reporting
The City will submit certain financial and operating information to the Municipal Securities Rulemaking Board (“MSRB”) through the Electronic Municipal Market Access ( “EMMA”) system as long as the Series 2022B Bonds are outstanding. In accordance with the Climate Bonds Standard, Kestr el Verifiers will provide one Post-Issuance Report within 24 months of issuance to confirm continued conformance of the Series 2022B Bonds with the relevant Standards and Criteria. Additionally, the City provides voluntary quarterly Capital
5 “Energy Efficiency for Water Utilities,” EPA, accessed October 18, 2022, https://www.epa.gov/sustainable-water-infrastructure/energy- efficiency-water-utilities.
6 “Regional Wastewater Facility Master Plan,” Fil e No. PP11 -043 SCH #201105274 Resolution No. 76858 , November 19, 2013, https://www.sanjoseca.gov/your-government/departments/planning-building-code-enforcement/planning-division/environmental- planning/environmental-review/completed-eirs/regional-wastewater-facility-master-plan.
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 6
Improvement Plan reports with capital project summaries. It is expected that these reports will be made available o n the City’s website: https://www.sanjoseca.gov/your- government/departments- offices/environmental-services/water-utilities/regional-wastewater-facility/capital-improvement- program/cip-document-library.
IMPACT AND ALIGNMENT WITH UN SDGS
Projects financed through the Series 2022B Bonds support and advance the vision of the United Nations Sustainable Development Goals (“UN SDGs”) 6, 7, 9, 12 and 13. By funding Treatment Plant improvements that increase efficiency and resource recovery, the Series 2022B Bonds advance Targets 6.5, 9.4 and 12.2.
Improvements to digesters and incorporated features to reduce climate-related risks support Target 13.1.
Projects that improve wastewater treatment processes and support a system with water recycling advance Target 6.3. Reduction in greenhouse gas emissions and focus on increasing renewable generation capacity support Targets 7.2 and 7.3.
Full text of the Targets for Goals 6, 7, 9, 12 and 13, is available in Appendix A, with additional information available on the United Nations website: un.org/sustainabledevelopment
Clean Water and Sanitation (Targets 6.3, 6.5)
Possible Indicators
Amount of treated wastewater
Documentation of integrated water resource management Optimized operation of sustainably managed wastewater systems
Affordable and Clean Energy (Targets 7.2, 7.3)
Possible Indicators
Renewable generation capacity
Reduction in greenhouse gas emissions as a result of on-site power generation or energy efficiency improvements
Industry, Innovation and Infrastructure (Target 9.4)
Possible Indicators
Increased resource-use efficiency (energy or other)
Responsible Consumption and Production (Target 12.2)
Possible Indicators
Increased energy use efficiency
Reduction in grid energy demand due to digesters
Improved water quality as a result of financed activities
Climate Action (Target 13.1)
Possible Indicators
Features incorporated to add resiliency and reduce climate risk
ASSURANCE STATEMENT AND CONCLUSIONS
Based on the Reasonable Assurance procedures we have conducted, in our opinion, the Wastewater Revenue Bonds, Series 2022B (Green Bonds – Climate Bond Certified) conform, in all material respects, with the current Climate Bonds Standard, and the bond- financed activities are completely aligned with the Water Infrastructure Sector Criteria. The projects incorporate best available technologies to improve treatment processes and support climate resiliency, sustainability, and environmental stewardship.
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 7
Sincerely,
April Strid, Lead Verifier
Kestrel Verifiers
Hood River, Oregon, United States
November 2, 2022
© 2022 Kestrel 360, Inc.
Reproduction, repackaging, transmittal, dissemination, or redistribution of this content in whole or in part is prohibited without the express written approval of Kestrel 360, Inc. and is protected by copyright law.
ABOUT KESTREL VERIFIERS
For over 20 years Kestrel has been a trusted consultant in sustainable finance. Kestrel Verifiers, a division of Kestrel 360, Inc. is a Climate Bonds Initiative Approved Verifier qualified to verify transactions in all asset classes worldwide. Kestrel is a US-based certified Women’s Business Enterprise. For more information, visit kestrelverifiers.com.
For inquiries about our green and social bond services, contact:
Melissa Winkler, Senior Vice President
[email protected]
+1 720-384-4791
Verification Team
Monica Reid, CEO
April Strid, Lead ESG Analyst
Melissa Sherwood, Senior ESG Analyst
Jordynn Paz, ESG Analyst
Madison Alcalay, ESG Analyst
DISCLAIMER
This Opinion aims to explain how and why the discussed financing meets the CBI Climate Bonds Standard based on the information that was provided by the Authority or made publicly available by the Authority and relied upon by Kestrel only during the time of this engagement (October-November 2022), and only for purposes of providing this Opinion.
We have relied on information obtained from sources believed to be reliable and assumed the information to be accurate and complete. However, Kestrel Verifiers can make no warranty, express or implied, nor can we guarantee the accuracy, comprehensive nature, merchantability, or fitness for a particular purpose of the information we were provided or obtained.
By providing this Opinion, Kestrel Verifiers is neither addressing nor certifying the credit risk, liquidity risk, market value risk or price volatility of the projects financed by the Climate Bonds. It was beyond Kestrel Verifiers’ scope of work to review for reg ulatory compliance, and no surveys or site visits were conducted by us. Furthermore, we are not responsible for surveillance, monitoring, or implementation of the project, or use of proceeds.
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 8
The Opinion delivered by Kestrel Verifiers is for informational purposes only, is current as of the date of issuance, and does not address financial performance of the Climate Bonds or the effectiveness of allocation of its proceeds. This Opinion does not make any assessment of the creditworthiness of the Authority, no r its ability to pay principal and interest when due. This Opinion does not address the suitability of a Bond as an investment, and contains no offer, solicitation, endorsement of the Bonds nor any recommendation to buy, sell or hold the Bonds. Kestrel Ver ifiers accepts no liability for direct, indirect, special, punitive, consequential or any other damages (including lost profits), for any consequences when third parties use this Opinion either to make investment decisions or to undertake any other business transactions.
This Opinion may not be altered without the written consent of Kestrel Verifiers. Kestrel Verifiers reserves the right to revoke or withdraw this Opinion at any time. Kestrel Verifiers certifies that there is no affiliation, involvement, f inancial or non- financial interest in the Authority or the projects discussed. We are 100% independent. Language in the offering disclosure supersedes any language included in this Opinion.
Use of the United Nations Sustainable Development Goal (SDG) logo and icons does not imply United Nations endorsement of the products, services, or bond-financed activities. The logo and icons are not being used for promotion or financial gain. Rather, use of the logo and icons is primarily illustrative, to communicate SDG-related activities.
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 9
Appendix A.
UN SDG TARGET DEFINITIONS
Target 6.3
By 2030, improve water quality by reducing pollution, eliminating dumping and minimizing release of hazardous chemicals and materials, halving the proportion of untreated wastewater and substantially increasing recycling and safe reuse globally
Target 6.5
By 2030, implement integrated water resources management at all levels, including through transboundary cooperation as appropriate.
Target 7.2
By 2030, increase substantially the share of renewable energy in the global energy mix Target 7.3
By 2030, double the global rate of improvement in energy efficiency Target 9.4
By 2030, upgrade infrastructure and retrofit industries to make them sustainable, with increased resource- use efficiency and greater adoption of clean and environmentally sound technologies and industrial processes, with all countries taking action in accordance with their respective capabilities Target 12.2
By 2030, achieve the sustainable management and efficient use of natural resources Target 13.1
Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 10 Appendix B.
ASSURANCE PROCEDURES
REQUIREMENT ASSURANCE PROCEDURES
1. Use of Proceeds
1.1 Project Documentation Review documentation of the Nominated Projects assessed as likely to be Eligible Projects, and list of Nominated Projects that Issuer will keep up to date during the term of the bond.
1.2 Valuation Review net proceeds of the bond to ensure they are not greater than the value of the project.
1.3 Multiple Nominations for
Certified Debt
Instruments
Review Nominated Projects for previous nominations to other Certified Climate Debt Instruments, green bonds, or other designated instruments.
1.3.1 Nominations to Other
Debt Instruments
Review Nominated Projects to determine whether certain po rtions are being financed by separately designated Certified Debt Instruments.
1.3.2 Refunding Existing
Certified Climate Debt
Review and confirm whether Nominated Projects have been refinanced by other Certified Debt Instruments or bonds under assessment will refinance existing Certified Debt Instruments.
2. Process for Project Evaluation and Selection
2.1 Environmental Statement
& Process (2.1.1-2.1.4)
Review statement of the climate -related objectives of the bond. Review documentation of the process that the Issuer followed to identify projects and confirm eligibility requirements for inclusion of Nominated Projects in the bond.
Review planning documents which establish goals, priorities and potential impact.
2.2 Eligibility (2.2.1-2.2.2) Review additional documentation Issuer provided on further aspects of identification process including strategic directions and standards. Review the Issuer’s environmental and social integrity policy, and/or Green Bond Framework, and confirm its coverage of the Nominated Projects.
2.3 Taxonomy & Technical
Criteria
Test Nominated Projects to determine whether they meet the minimum technical requirements of the Climate Bonds Standard and relevant Sector Criteria (Part C: Eligibility of Projects and Assets).
3. Management of Proceeds
3.1 Documentation of
Processes & Procedures
Confirm that the policies, processes and procedures for tracking financial flows of the bond proceeds to the Nominated Projects are in place.
3.1.1 Tracking of Proceeds Review the allocation of funds to ensure they can be tracked against Nominated Projects.
3.1.2 Managing of Unallocated
Proceeds
Review documentation for the management of bond proceeds for funds that are not allocated to a Nominated Project and review eligible temporary investments for unallocated proceeds.
3.1.3 Earmarking Funds Confirm that the policies, processes and procedures to identify flows of proceeds related to the Bond have been established.
4. Reporting
4.1 Bond Disclosure
Documentation
Review the Issuer’s Green Bond Framework and confirm plans to make the document publicly available. Confirm inclusion of necessary information within the Green Bond Framework.
4.1.1 Confirmation of
Alignment
In the Green Bond Framework, confirm documentation and review areas of investment align with the Climate Bonds Standard and review statements of alignment with other relevant standards.
4.1.2 Uses of Proceeds In the Green Bond Framework, confirm documen tation and review expected uses of proceeds and the amounts allocated to activities in relevant sectors and subsectors.
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 11
REQUIREMENT ASSURANCE PROCEDURES
4.1.3 Decision-making Process In the Green Bond Framework, confirm documentation of decision -making processes and positioning in the context of the Issuer’s overarching objectives.
4.1.4 Sector Criteria
Assumptions and
Methodologies
In the Green Bond Framework, confirm documentation of assumptions and methodologies to evaluate conformance with Sector Criteria.
4.1.5 Temporary Investment
Instruments
In the Green Bond Framework, confirm documentation of allowable temporary investment instruments.
4.1.6 Reporting Approach In the Green Bond Framework, confirm disclosure of intended approach to providing Update Reports and/or undertaking periodic Assurance Engagements during term of bond to reaffirm conformance with the Climate Bonds Standard.
4.1.7 List of Nominated
Projects
In the Green Bond Framework, confirm disclosure of list of Nominated Projects likely to be eligible.
4.1.8 Refinancing In the Green Bond Framework, confirm disclosure of proportion of proceeds for refinancing, if applicable.
4.2 Disclosure
Documentation
Confirm incorporation of key information in Disclosure Documentation.
4.2.1 Sector Criteria Disclosure Confirm “investment areas,” or alignment with the Climate Bonds Taxonomy and relevant Sector Criteria for Nominated Projects.
4.2.2 Temporary Investments Confirm disclosure of eligible temporary investments for unallocated proceeds.
4.2.3 Verifier Confirm disclosure of Verifier selected for Pre -Issuance and Post -Issuance Engagements.
4.2.4 Ongoing Reporting Confirm disclosure of intended ongoing reporting on the Nominated Projects and allocation of proceeds.
4.2.5 CBI Disclaimer Confirm incorporation of the CBI Disclaimer as provided in the Certification Agreement.
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 12 Appendix C.
RESPONSIBILITIES AND QUALITY CONTROL
Verifier’s Responsibilities
Kestrel Verifiers’ responsibilities for confirming alignment of the Series 2022B Bonds with the Climate Bonds Standard and Water Infrastructure Criteria include:
Assess and certify the Authority’s internal processes and controls, including selection process for projects and assets, internal tracking of proceeds, and the allocation system for funds; Assess policies and procedures established by the Authority for reporting; Assess the readiness of the Authority to meet the Climate Bonds Standard (Version 3.0) and Water Infrastructure Sector Criteria; and
Express a Reasonable Assurance conclusion.
Issuer’s Responsibilities
Issuer was responsible for providing detailed information and documents relating to:
The details of the Nominated Projects and Assets and the project selection process; Maintaining adequate records and internal controls designed to support the Climate Bond Pre- Issuance Certification process; and
The collection, preparation, and presentation of the subject matter in accordance with the Climate Bonds Standard and Criteria.
Independence and Quality Control
Kestrel Verifiers provides green, social and sustainability bonds advisory services for corporate and public finance issuers. The Kestrel Verification Team is committed to providing robust, transparent, and accurate verifications. For over 20 years Kestrel has been a trusted advisor to state and local governments, nonprofits, and cor porations. Kestrel certifies that there is no affiliation, involvement, financial or non- financial interest in the issuer or the projects discussed. Accredited as an Approved Verifier by the Climate Bonds Initiative, Kestrel is qualified to evaluate bonds against the Climate Bonds Initiative Standards and Criteria.
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 13 Appendix D.
CLIMATE BONDS STANDARD WATER
INFRASTRUCTURE ADAPTATION & RESILIENCE
SCORECARD
CONTENTS
1. Allocation
2. Governance
3. Technical Diagnostics
4. Nature Based Solutions
4.1. Site Inventory
4.2. Ecological Baselines For Management
4.3. Data Inventories of Localized & Indigenous Assets
4.4. Broader Ecosystem Impacts
4.5. Monitoring & Management Systems
5. Adaptation Plan
CRITERIA: The project must score at least 60% of the maximum potential score in all parts of the Scorecard. Section 4 only needs to be completed for “Nature Based and Hybrid Infrastructure” only (see Criteria for detail)
Vulnerability Assessment - Section 1: Allocation
(To be completed for all Water Infrastructure assets)
Max
Score
Actual
Score
Requirement:
Evidence and/or
Evidence Comments
1.1 Are there accountability
mechanisms in place for the
management of water
allocation that are effective
at a sub‐basin and/or basin
scale?
1 1 Evidence Several Plans outline management of water allocation both locally in San José and at basin scales.
The City of San José Municipal Water System (SJMWS)
prepared a 2020 Urban Water Management Plan (UMWP) to
comply with legislative requirements of the UWMP Act and California Water Code Requirements. It is required by the Department of Water Resources to evaluate the agency’s
water supply reliability in five-year increments over a 25- year planning horizon. It assesses the projected water
demands and water supplies. SJMWS supplies water to north San José/Alviso, Evergreen, Edenvale, and Coyote Valley and in 2020, provided water to approximately 12% of the city. The supply sources are from San Francisco Public
Utilities Commission (SFPUC), Valley Water with water from the Sacramento-San Joaquin Delta, and groundwater and
recycled water
(
https://www.sanjoseca.gov/home/showpublisheddocument/
422/637602045327100000).
Valley Water (originally Santa Clara Valley Water) supply comes from local groundwater recharge and surface water supplies and from rivers that flow into the Sacramento-San Joaquin River Delta. It is brought into the county through infrastructure of the State Water Project, federal Central Valley Project, and San Francisco’s Hetch Hetchy system (https://www.valleywater.org/your-water/where-your-water- comes
). The State Water Project is a collection of canals,
pipelines, reservoirs, and hydroelectric power facilities that delivers clean water throughout the state. The Central Valley Project (CVP) is a network of dams, reservoirs, canals, and hydroelectric facilities. The project improves Sacramento River navigation, supplies domestic and industrial water, DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 14 Vulnerability Assessment - Section 1: Allocation
(To be completed for all Water Infrastructure assets)
Max
Score
Actual
Score
Requirement:
Evidence and/or
Evidence Comments
generate electric power and conserves fish and wildlife. The CVP include federal statues here:
https://www.usbr.gov/mp/cvpia/index.html. The San
Francisco Hetch Hetchy system is a reservoir with voluntary plans on river management from the state (Bay-Delta Plan) and Modesto and Turlock Irrigation Districts
(http://www.tuolumnerivermanagementplan.com/). The
Bay-Delta plan establishes water quality objectives to
maintain the health of the Bay-Delta ecosystem.
Bay area water supply and conservation agency provides
regional water reliability planning and conservation
programming for member agencies, including the City of
San José (https://bawsca.org/)
State Water Regency Control Board (“SWRCB”) establishes water quality objectives to maintain the health of the Bay- Delta ecosystem which SWRCB is required by law to review the plan.
Bay Area Water Supply and Conservation Agency (BAWSCA)
provides regional water reliability planning and conservation programming to member agencies. There is a Long-Term
Reliable Water Supply Strategy which identifies the water supply reliability and needs through 2040.
1.2 Are the following factors
taken into account in the
definition of the available
resource pool?
7 a. Non‐consumptive uses
(e.g., navigation,
hydroelectricity)
1 1 Evidence Yes, navigation systems are considered in planning for the Treatment Plant and SFPUC
b. Environmental flow
requirements
1 1 Evidence Yes, the “Ensure Sustainability” strategy in Valley Water’s Water Supply Master Plan can help improve water reliability.
These include securing and optimizing the use of current supplies and infrastructure as well as expanding water
recycling and long‐term conservation.
c. Dry season minimum
flow requirements
1 1 Evidence Yes, the Drought Risk Assessment determines ability of current supplies to meet demand and will implement
responses to reduce water demands with the Water
Shortage
Contingency Plan.
d. Return flows (how much
water should be returned
to the resource pool,
after use)
1 1 Evidence The Wastewater Treatment Plant returns flows to the San Francisco Bay.
e. Inter‐annual and inter‐
seasonal variability
1 1 Evidence Yes for SFPUC Hetch Hetchy Reservoir, a report was conducted in 2012 to assess the sensitivity of runoff into Hetch Hetchy Reservoir due to climate change. There is a vulnerability-based planning approach to develop adaptation plans (p. 85,
https://www.sanjoseca.gov/home/showpublisheddocument/4
22/637602045327100000 )
The Urban Water Management Plan also addresses inter-
annual and inter-seasonal variability of the resource pool. f. Connectivity with other
water bodies
1 1 Evidence The resource pool is connected to different river and groundwater sources leading out to San Francisco Bay.
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 15 Vulnerability Assessment - Section 1: Allocation
(To be completed for all Water Infrastructure assets)
Max
Score
Actual
Score
Requirement:
Evidence and/or
Evidence Comments
g. Climate change impacts 1 1 Evidence Discussed and considered in San José Water Shortage Contingency Plan and the Urban Water Management Plan.
1.3 Is there a distinction
between the allocation
regimes used in “normal”
times and in times
of “extreme/severe” water
shortage?
1 1 Evidence SFPUC address allocation in both normal times and extreme water shortages. SFPUC depends on reservoir storage for reliability but during dry periods, SFPUC allocates water using a water shortage allocation plan. The program is early in planning stages but is intended to meet future water supply changes and vulnerabilities from climate change.
Valley Water addresses allocation in both baseline conditions and extreme water shortages with plans for normal years as well as a five-year drought.
The San José Plant Master Plan measured the wastewater
flow to the plant over the past 15 years to determine flow during the dry season and the wet season (p. 21,
https://www.sanjoseca.gov/home/showpublisheddocument/2
06/636611441889800000).
1.4 Are arrangements in place to
accommodate the potentially
adverse impacts of climate
change on the resource
pool? (E.g., using best
available science to plan for
future changes in
availability, undertaking
periodic monitoring and
updating of available pool.)
1 1 Evidence The San Jos Urban Water Management Plan and the San José Water Shortage Contingency Plan addresses and
accommodates projections of potential adverse impacts from climate change in areas related to wastewater, drought
conditions, and flood protection. The city continues to review and update new strategies to mitigate climate change on water resources. The California Water Code requires climate change considerations to be included as part of drought risk assessments as stated in the urban water management
plan.
The city continues to review and update strategies,
regulations and facilities, and mitigation and adaptation techniques such as:
Promoting recycled water use.
“• Developing long-term plans that utilize climate change adaptation elements.
• Making use of groundwater resources.
• Promoting water use efficiency for urban, agricultural, commercial, and industrial water users.
• Increasing investments in infrastructure that promote adaptation strategies and mitigate the loss of existing supplies that are susceptible to climate change impacts.” The Bay Area integrated Regional Water Management Plan
includes an assessment of the potential climate change
vulnerabilities of the region’s water resources, including SFPUC. SFPUC has a 2012 report which assesses the
sensitivity of the Hetch Hetchy Reservoir to a range of changes in temperature and precipitation and continue
reporting climate projections from 2020-2070.
https://drought.ca.gov/state-drought-response/statewide- emergency-water-conservation-regulations/
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 16 Vulnerability Assessment - Section 1: Allocation
(To be completed for all Water Infrastructure assets)
Max
Score
Actual
Score
Requirement:
Evidence and/or
Evidence Comments
1.5 Are there plans to define
“exceptional” circumstances,
such as an extended
drought, that influence the
allocation regime? (E.g.,
triggers water use
restrictions, reduction in
allocations according to pre‐
defined priority uses,
suspension of the regime
plan, etc.)
1 1 Evidence The San José Water Shortage Contingency plan provides a plan of action during various stages of water shortage in compliance with the California Water Code. In drought
years, it may be necessary to reduce water demands up to 12% to offset a water supply shortfall. The plan also includes plans for water shortage levels up to 10 percent, up to 20 percent, up to 30 percent, 40 percent, 50 percent, and
greater than 50 percent. The plan describes a contingency plan with a multiple dry year allocation reduction(
https://www.sanjoseca.gov/home/showpublisheddocument/7
4987/637602046315870000)
1.6 For international / trans
boundary basins, is there a
legal mechanism in place to
define and enforce water
basin allocation
agreements?
1 0 Evidence Not identified
1.7 Are water delivery
agreements defined on the
basis of actual in situ
seasonal / annual availability
instead of volumetric or
otherwise inflexible
mechanisms?
1 0 Evidence Not applicable.
1.8 Has a formal environmental
flows (e‐ flows)/sustainable
diversion limits or other
environmental allocation
been defined for the relevant
sub‐basin or basin? (If there
is a pre-existing plan, then
has the environmental flows
program been updated to
account for the new
project?)
1 1 Evidence The Bay-Delta watershed management plan provides a regulatory framework for environmental flow allocation which will be adopted by SFPUC in 2022. The Modesto and Turlock Irrigation Districts plan also includes framework for
environmental flow management, which is also used by
SFPUC (
http://www.tuolumnerivermanagementplan.com/).
1.9 Have designated
environmental flows /
allocation programs been
assured / implemented?
1 1 Evidence In stream flow criteria is mandated under the Bay-Delta Plan which is monitored by the State Water Resources Control Board which will be implemented in 2022
(
https://www.waterboards.ca.gov/waterrights/water_issues/ programs/bay_delta/)
1.10 Has a mechanism been
defined to update the
environmental flows plan
periodically (e.g., every 5 to
10 years) in order to account
for changes in allocation,
water timing, and water
availability?
1 1 Evidence The San José Urban Water Management Plan requires an update every 5 years to ensure current conditions and
includes an assessment of water availability and allocation changes.
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 17 Vulnerability Assessment - Section 1: Allocation
(To be completed for all Water Infrastructure assets)
Max
Score
Actual
Score
Requirement:
Evidence and/or
Evidence Comments
1.11 Is the amount of water
available for consumptive
use in the resource pool
linked to a public planning
document? (E.g., a river
basin management plan or
another planning document –
please indicate)
1 1 Evidence The State Water Board implements the Basin Plan with all consumptive uses tied to the plan, describing the beneficial uses and water quality objectives for the region
(
https://www.waterboards.ca.gov/sanfranciscobay/basin_pla nning.html).
The SWRCB adopted amendments to the Water Quality
Control Plan for the San Francisco Bay/Sacramento-San
Joaquin Delta Estuary (Bay-Delta Plan Amendment) to
establish water quality objectives to maintain the health of the Bay-Delta ecosystem.
1.12 If present, is the river basin
plan a statutory instrument
that must be followed rather
than a guiding document?
1 1 Evidence The Bay Delta plan provides a regulatory framework but may not be adopted or incorporated until after 2022 (p. 86, https://www.sanjoseca.gov/home/showpublisheddocument/4
22/637602045327100000)
Total Allocation Score 18 16/18
Eligibility Criterion 1 passed/not passed 89% Passed
Vulnerability Assessment - Section 2: Governance
(To be completed for all Water Infrastructure assets)
Max
Score
Actual
Score
Requirement:
Evidence and/or
Evidence Comments
2.1 Have water entitlements been defined
according to one of the following?
Purpose that water may be used for
Maximum area that may be irrigated
Maximum volume that may be taken in
a nominated period
Proportion of any water allocated to a
defined resource pool
1 1 Evidence The California State Water Board defines water entitlements as authorizing water to be
diverted from a specified source and put to
beneficial, non-wasteful use. The exercise of
some water rights requires a permit or license
with the objective to ensure that the state’s
waters are put to the best possible use and
public interest is served. The beneficial uses
include navigation, human consumption,
irrigation, industrial use, and ecosystem
services
(
https://www.waterboards.ca.gov/drought/drou
ght_tools_methods/delta_method.html).
California allocates water proportionally based
on maximum volume available, primarily used
during droughts. The State Water Resource
Control Board can curtail water rights based on
availability and priority. This is under the Water
Unavailability Methodology to identify when
water is unavailable for diversion by water right
holders
(
https://www.waterboards.ca.gov/drought/drou
ght_tools_methods/delta_method.html).
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 18 Vulnerability Assessment - Section 2: Governance
(To be completed for all Water Infrastructure assets)
Max
Score
Actual
Score
Requirement:
Evidence and/or
Evidence Comments
2.2 Is the surface water system currently
considered to be neither over allocated nor
over‐used?
N.B. Over‐allocated would be if e.g.
current use is within sustainable limits but
there would be a problem if all legally
approved entitlements to abstract water
were used.
Over‐used would be if existing abstractions
exceed the estimated proportion of the
resource that can be taken on a
sustainable basis.
1 1 Evidence The City of San José blends surface water from a variety of sources and groundwater to form
the local water supply. The 2019 Urban Water
Management plan shows that surface water is
not over-allocated, and that the City is able to
meet water demands through 2045.
https://www.sanjoseca.gov/home/showpublish
eddocument/422/637602045327100000
2.3 If monitored and the investment uses
groundwater, is the groundwater water
system currently considered to be neither
over‐ allocated nor over‐used?
N.B. Over‐allocated would be if e.g.
current use is within sustainable limits but
there would be a problem if all legally
approved entitlements to abstract water
were used.
Over‐used would be if existing abstractions
exceed the estimated proportion of the
resource that can be taken on a
sustainable basis.
1 1 Evidence The groundwater system is not considered to be over-allocated or over-used according to an
Annual Groundwater Report from Valley Water
(
https://www.valleywater.org/sites/default/files
/2018-
08/2017%20Annual%20GW%20Report_Web.pdf
)
2.4 Is there a limit to the proportion (e.g.
percentage) of water that can be
abstracted? How might this need to
change if water supplies become more
variable due to climate change? (e.g. will
having sufficient amounts to meet basic
human needs take precedence over
others?)
1 1 Evidence Permitted extraction must be followed in
accordance with the Urban Water Management
Plan and Water Shortage Contingency Plan.
The Water Shortage Contingency Plan has six
different levels of potential drought plans which
focus on restricting landscape and recreational
irrigation to prioritize water for human basic
needs.
2.5 Are governance arrangements in place for
dealing with exceptional circumstances
(such as drought, floods, or severe
pollution events), especially around
coordinated infrastructure operations?
1 1 Evidence California state water control board has
emergency water rights curtailments which
mandates that the State Water Resources
Control Board must curtail water diversions
when sufficient flows are not available (
https://www.waterboards.ca.gov/drought/resou
rces-for-water-rights-
holders/docs/curtailments-2022.pdf).
Urban Water Management Plan have adaptation
and mitigation strategies such as increasing
investments in infrastructure the mitigate the
loss of existing supplies susceptible to climate
change. Additionally, the Integrated Water
Infrastructure Program addresses water supply
challenges and plans to provide access to local
water supplies with cost effective solutions.
2.6 Is there a process for re‐evaluating recent
decadal trends in seasonal precipitation
and flow OR recharge regime, in order to
evaluate “normal” baseline conditions?
1 1 Evidence The Urban Water Management Plan is a
periodic review document, based on recent
trends in water usage and flows and must be
updated every 5 years.
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 19 Vulnerability Assessment - Section 2: Governance
(To be completed for all Water Infrastructure assets)
Max
Score
Actual
Score
Requirement:
Evidence and/or
Evidence Comments
2.7 Is there a formal process for dealing with
new entrants?
1 1 Evidence The California State Water Resource Control Board regulates and defines the water rights
permitting application process as detailed on
the website:
https://www.waterboards.ca.gov/waterrights/w
ater_issues/programs/applications/. There is a
permit application process that oversees the
amount of water used, environmental
conditions and effects, and permit issuance for
new entrants.
2.8 For existing entitlements, is there a
formal process for increasing, varying,
or adjusted use(s)?
1 1 Evidence The California State Water Resource Control Board must approve all changes in increasing
or varying water use
(
https://www.waterboards.ca.gov/waterrights/b
oard_info/water_rights_process.html#process).
Substantially adjusting operations, including
withdrawal or discharges, requires permit
adjustments. Adjustments or changes to
drinking water supply sources or allocations
requires notification and assessment through
the California State Water Resource Control
Board permitting process.
2.9 Is there policy coherence across sectors
(agriculture, energy, environment, urban)
that affect water resources allocation, such
as a regional, national, or basin‐wide
Integrated Water Resources Management
(IWRM) plan?
1 1 Evidence The Integrated Water Resources Management
Plan is supported by federal, state, and local
agencies and Tribes which have established 48
regional water management groups.
(
https://water.ca.gov/Programs/Integrated-
Regional-Water-Management)
2.10 Are obligations for return flows and
discharges specified and enforced?
1 1 Evidence The San José Regional Wastewater Facility mist meet requirements of more than 30 federal,
state, and regional regulations for treated water
discharge, use of recycled water, and disposal
of biosolids. This is regulated by the National
Pollutant Discharge Eliminati
on System which is
administered by the EPA. The facility produces
an annual self-monitoring report to maintain
and satisfy regulations.
(
https://www.sanjoseca.gov/your-
government/environment/water-
utilities/regional-wastewater-
facility/regulations-reports)
2.11 Is there a mechanism to address impacts
from users who are not required to hold a
water entitlement but can still take water
from the resource pool?
1 1 Evidence The State Water Resource Control Board has explicit rules regarding water rights. The Water
Commission Act of 1914 established the
current permit code giving the Water Board
authority to apply permits and licenses for
California surface water. Riparian rights entitles
the landowner to use a correlative share of the
water flowing past their property(naturally in
stream) and do not require permits or licenses
but they cannot entitle a water use to divert
water to storage in a reservoir for use in the
dry season
(
https://www.waterboards.ca.gov/waterrights/b
oard_info/water_rights_process.html).
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 20 Vulnerability Assessment - Section 2: Governance
(To be completed for all Water Infrastructure assets)
Max
Score
Actual
Score
Requirement:
Evidence and/or
Evidence Comments
2.12 Is there a pre‐defined set of priority uses
within the resource pool? (E.g., according
to or in addition to an allocation regime)
1 1 Evidence The California State Water Code defines priority uses in the resource pool:
Municipal and domestic water supply: Uses of
water for community, military, or individual
water supply systems, including, but not limited
to, drinking water supply.
Groundwater extraction: uses of water for
natural or artificial recharge of groundwater for
purposes of future extraction, maintenance of
water quality, or halting saltwater intrusion into
freshwater aquifers.
Existing and potential beneficial uses applicable
to groundwater in the Region include municipal
and domestic water supply (MUN), industrial
water supply (IND), industrial process supply
(PRO), agricultural water supply (AGR),
groundwater recharge (GWR), and freshwater
replenishment to surface waters (FRESH).
https://www.waterboards.ca.gov/sanfranciscob
ay/water_issues/programs/planningtmdls/basin
plan/web/bp_ch2.html
2.13 If there are new entrants and/if
entitlement holders want to increase the
volume of water they use in the resource
pool and the catchment is open, are these
entitlements conditional on either
assessment of third party impacts, an
Environmental Impact Assessment (EIA)
or an existing user(s) forgoing use?
1 1 Evidence Permits are managed by the State Water
Resource Control Board where changes and
issuances of new permits are allowed but have
restrictions. The permit process follows an
environmental review as required by California
Environmental Quality Act before issuing a
permit
(
https://www.waterboards.ca.gov/waterrights/b
oard_info/water_rights_process.html).
2.14 Are withdrawals monitored, with clear and
legally robust sanctions?
1 1 Evidence The State Water Board monitors withdrawal
with clear and legally robust sanctions:
“The State Board also is responsible for
investigating possible illegal, wasteful or
unreasonable uses of water, either in response
to a complaint or on the State Board’s own
initiative. If the State Board’s staff investigation
determines that a misuse of water is occurring,
the Board generally notifies the affected
persons and allows a reasonable period of time
to terminate the misuse. The State Board may
also hold a hearing to determine if a misuse of
water has occurred or is occurring. Water users
who do not terminate a misuse of water are
subject to various administrative enforcement
measures including possible fines and
revocation of a permit or license. In
appropriate cases, the State Board may also
seek judicial relief in the courts.”
https://www.waterboards.ca.gov/waterrights/b
oard_info/water_rights_process.html
2.15 Are there conflict resolution mechanisms in
place?
1 1 Evidence The California State Water Board has conflict resolution mechanisms in place as described in
additional duties here:
https://www.waterboards.ca.gov/waterrights/b
oard_info/water_rights_process.html#additional
Total Governance Score 15 15/15
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 21 Vulnerability Assessment - Section 2: Governance
(To be completed for all Water Infrastructure assets)
Max
Score
Actual
Score
Requirement:
Evidence and/or
Evidence Comments
Eligibility Criterion 2 passed / not passed 100% Passed
Vulnerability Assessment - Section 3: Technical Diagnostics (To be completed for all Water Infrastructure assets)
Max
Score
Actual
Score
Requirement:
Evidence and/or
Evidence Comments
3.1 Does a water resources model of
the proposed investment and
ecosystem (or proposed
modifications to existing
investment and ecosystem) exist?
Specify model types, such as
WEAP, SWAT, RIBASIM, USACE
applications). Scale should be at
least sub‐basin.
1 1 Evidence Bentley’s WaterGEMS platform calibrates the hydraulic models and physical system attributes. The software
improves knowledge of how infrastructure behaves as a
system and reacts to operational strategies and
population increases and demands. More information
about the model is available here:
https://www.bentley.com/software/openflows-
watergems/, https://www.bentley.com/wp-
content/uploads/PDS-WaterGEMS-LTR-EN-HR.pdf
Additionally, InfoWorks was used to look at the piping
and inner systems of the facility to model treatment
process.
The Climate Hydrology Assessment Tool (CHAT) was
developed by the US Army Corps of Engineers and
provides access to climate model data and analytical
results of hydrology around the San Francisco Bay area.
The data provides climate model information for changes in hydrological trends.
(https://climate.sec.usace.army.mil/chat/ )
3.2 Can the system model the
response of the managed water
system to varied hydrologic inputs
and varied climate conditions?
1 1 Evidence Yes, the Bentley WaterGems system can model the response of managed water to varied hydrologic inputs
and the Climate Hydrology Assessment Tool models the
varied climate conditions in hydrological inputs using
global climate models and data.
3.3 Are environmental performance
limits (ecosystem, species,
ecological community) and/or
ecosystem services specified?
1 1 Evidence Ecosystem Performance limits are considered in the WaterGEMS platform and InfoWorks with unlimited
scenarios and global attributes.
3.4 Can these performance limits be
defined and quantified using the
water resources model?
1 1 Evidence Yes, the system can incorporate relevant environmental performance limits using climate data when using the
CHAT tool to understand trends in precipitation,
streamflow, and temperature.
3.5 Have these limits been defined
based on expert knowledge and/or
scientific analysis?
1 1 Evidence The limits are defined by WaterGems, InfoWorks, and CHAT data, and the CHAT tool incorporates scientific
analysis of various ranges and trends in climate
modeling.
3.6 Are these performance limits
linked to infrastructure operating
parameters?
1 1 Evidence The WaterGEMS and InfoWorks model can specify infrastructure operating models looking at water loss and flow capacity of pipes.
3.7 Are these limits linked to an
environmental flows regime?
1 1 Evidence The CHAT tool is linked to climate data and trends regarding environmental flows regimes, instream flows,
precipitation, and temperature.
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 22 Vulnerability Assessment - Section 3: Technical Diagnostics (To be completed for all Water Infrastructure assets)
Max
Score
Actual
Score
Requirement:
Evidence and/or
Evidence Comments
3.8 For new projects, is there an ecolo
gical baseline evaluation
describing the pre‐impact state?
1 1 Evidence The Water Conservation Act of 2009 set a goal to reduce urban water use by 2020 and the Urban Water
Management Plan requires compliance with the act. The
goal is to establish an analysis of historical water use to establish the baseline and conditions.
3.9 For rehabilitation / reoperation
projects, is there an ecological
baseline evaluation available
before the projects was
developed?
1 1 Evidence The Environmental Impact Report from CEQA provides full evaluation of the projects and potential impacts to the environment before the project was constructed in
2013.
https://www.sanjoseca.gov/home/showpublisheddocume
nt/22339/636688403210100000
3.10 Has there been an analysis that
details impacts related to
infrastructure construction and
operation that has been
provided?
1 1 Evidence The 2013 Master Plan describes the impacts related to infrastructure construction on the land around the
treatment plant and how the infrastructure has changed
from the initial plant in 1959 to current day. The Master Plan identifies practices to mitigate construction on
surrounding area.
3.11 Are lost species and/or lost or
modified
ecosystem functions specified for
restoration in the
environmental evaluation?
1 1 Evidence The facility restores and protects habitat for western burrowing owls by restoring marshland habitat and
setting aside 200 acres of facility land for habitat space. https://www.sanjoseca.gov/your-
government/environment/water-utilities/regional-
wastewater-facility/protecting-our-environment
3.12 Have regional protected areas /
nature reserves been included in
the analysis for impacts from the
investment asset and future
climate impacts?
1 1 Evidence Land use principles were established to guide decisions associated with future land uses and facilities to support eh Master Plant Plan. The principles involve restoring
ecological systems, wetland habitats, riparian habitat, and building levees to combat sea level rise (pp. 55-58 https://www.sanjoseca.gov/home/showpublisheddocume
nt/206/636611441889800000)
3.13 Does the model include analysis of
regression relationships between
climate parameters and flow
conditions using time series of
historical climate and stream flow
data?
1 1 Evidence The San Jose Plant Master Plan includes some analysis of climate parameters and flow of wats water to influence
the wastewater flows during the dry and wet season with climate change impact (p. 21,
https://www.sanjoseca.gov/home/showpublisheddocume
nt/206/636611441889800000)
3.14 Does the model include climate
information from a multi modal
ensemble of climate projections
(eg from the Climate Wizard or
the World Bank’s Climate Portal)
to assess the likelihood of climate
risks for the specified investment
horizons (s)?
1 1 Evidence The CHAT model includes climate data from global climate models, CMIP-5 suite models, historical period of water from 1951-2005 and future periods of water from
2006-2099. The modeled time series explorer in the tool describes current and simulated trends for representative concentration pathways (RCP) 4.5 and 8.5.
3.15 Are changes in the frequency and
severity of rare weather events
such as droughts and floods
included?
1 0 Evidence n/a
3.16 Are sub‐annual changes in
precipitation seasonality included?
1 1 Evidence Yes, the CHAT tool measures the changes in precipitation seasonally by using historic and future climate trend
data.
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 23 Vulnerability Assessment - Section 3: Technical Diagnostics (To be completed for all Water Infrastructure assets)
Max
Score
Actual
Score
Requirement:
Evidence and/or
Evidence Comments
3.17 Is GCM climate data
complemented with an analysis of
glacial melt water and sea level
rise risks, where appropriate
(e.g., high or coastal elevation
sites)?
1 1 Evidence The Master Plan discusses the effects of sea level rise on the treatment plant and the potential impact as the plant is located in southern most part of San Francisco Bay by the ocean.
(https://www.sanjoseca.gov/home/showpublisheddocume
nt/206/636611441889800000)
3.18 Is paleo‐climatic data (e.g.,
between 10,000 and >1000 years
before present) included?
1 0 n/a n/a
3.19 Is the number of model runs and
duration of model runs disclosed?
1 0 Evidence n/a
3.20 Has a sensitivity analysis been
performed to understand how the
asset performance and
environmental impacts may
evolve under shifting future flow
conditions?
1 1 Evidence The Wastewater Treatment Facility must meet strict requirements for treated water discharge and use of
recycled water, regulated by the National Pollutant
Discharge Elimination System. The Facility prepares a
detailed Annual Self-Monitoring Report to permit and
satisfy regulations while also detailing information on flows, effluent, water quality, and sensitivity analysis. https://www.sanjoseca.gov/your-
government/environment/regulatory-reports
3.21 Is directly measured climate data
available for
more than 30 years and incorporat
ed into the water
resources model?
1 1 Evidence Yes, the CHAT tool measures historical and future water data from 1950-2005 and 2006-2099.
3.22 Has evidence demonstrated that
climate change has already had
an impact on operations and
environmental targets? Are these
impacts specified and, to the
extent possible, quantified? These
impacts should be responded to
directly in the Adaptation Plan.
1 1 Evidence The San José Plant Master Plan addresses strategies for potential effects from sea level rise with options to build flood control structures, design facilities that tolerate occasional flooding, and allow new shoreline to be
created.
3.23 Does the evidence suggest that
climate change will have an
impact on operations and
environmental targets over the
operational lifespan? Are these
impacts specified and, to the
extent possible, quantified? These
impacts should be responded to
directly in the Adaptation Plan.
1 1 Evidence The San José/Santa Clara Water Pollution Control Plant Master Plan addresses sea level rise and the city’s
adaptation master plan. The Plan summarizes the
potential effects of projected sea level rise by 2050 and 2100. The plant will be inundated with water unless
levees are improved, and projections are adapted into a land use plan.
(
https://www.sanjoseca.gov/home/showpublisheddocume
nt/474/636612853380170000)
3.24 Is there a discussion of the
uncertainties associated with
projected climate impacts on both
operations and environmental
impacts?
1 1 Evidence California Water Resources Department’s Climate Change handbook for Regional Water Planning:
https://www.epa.gov/sites/default/files/2021-
03/documents/climate_change_handbook_regional_water
_planning.pdf
Total Governance Score 16 14/16
Eligibility Criterion passed / not passed 87.5% Passed
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 24 Vulnerability Assessment - Section 4: Nature Based Solutions (to be completed for nature-based solutions and hybrid water infrastructure only) I.e. this section only needs to be completed if:
A. As a nature based solution, the asset reflects the intentional use of natural and / or nature based features, processes, and functions, as an integral part of addressing a human need and doing so in a manner that protects, manages, restores, and / or enhances natural features, processes, and systems in a functioning and sustainable manner.
B. Where feasible, the asset prioritizes natural features over nature – based features. Such features include the protection, restoration, expansion, and / or creation of natural systems and processes as an explicit component of the desired project outcomes.
Section 4.1: Site Inventory
How well do we understand the systems and processes at the project site?
Max
Score
Actual
Score
Requirement:
Evidence and/or
Evidence Comments
4.1.1 Is this a “greenfield site”
(i.e., undeveloped land used
for agriculture, landscape
design, or left to evolve
naturally)? If so, will existing
ecosystem services be
expanded / supported /
maintained?
2 2 Evidence The Water Treatment Plant flows to South Bay Sloughs which is protected habitat by the facility. Approximately 200 acres of the facility land are set aside to be restored as marsh habitats and habitat for western burrowing owls.
https://www.sanjoseca.gov/your-
government/environment/water-utilities/regional-
wastewater-facility/protecting-our-environment
4.1.2 Has an eco-hydrological
model been developed?
Specify model type, such as
WEAP, SWAT, RIBASIM,
USACE.
Is this a quantitative model?
Has it been calibrated
against site data?
Does the model include
water quantity?
2 2 Evidence The City of San José uses InfoWorks Integrated Catchment Modeling which incorporates population data, land use
development, water use and flow monitoring data. The
model can assess system performance for 5–10-year
horizons under wet and dry weather flow scenarios.
The Santa Clara Valley Water uses HEC-RAS riverine models which are hydraulic models developed by the US Army
Corps of Engineers to calculate water surface elevations in creeks for previous flood insurance studies.
(
https://www.valleywater.org/flooding-safety/hec-2-and-
hec-ras-data-library)
The Climate Hydrology Assessment Tool developed by
USACE tracks climate projections of streamflow with
historical and future climate data from 1951-2099. The
model includes streamflow, precipitation, and temperature measurements and variations.
(https://climate.sec.usace.army.mil/chat/)
(p. 17,
https://www.sanjoseca.gov/home/showpublisheddocument/7
1843/637551329081130000)
4.1.3 Has the calibrated eco-
hydrological model been
reviewed by an independent
expert?
2 2 Evidence The eco-hydrological models are reviewed by the USACE.
4.1.4 Have sources of pollution
been analyzed for the
following (even if none have
been found)?
Point source
Nonpoint source
2 2 Evidence Yes, the Environmental Impact Report required that sources of pollution are analyzed at the point source and non-point source
(
https://www.sanjoseca.gov/home/showpublisheddocument/
22339/636688403210100000)
Total Site Inventory Score 8 8/8
Eligibility Criterion passed / not passed 100% Passed DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 25
Section 4.2: Ecological Baselines For Management
Do we understand how the ecological characteristics of the site will evolve over time?
Max
Score
Actual
Score
Requirement:
Evidence and/or
Evidence Comments
4.2.1 Is there an inventory of species that
can be used as a baseline for
vegetation and animal species?
1 1 Evidence Yes, there is a section in the Environmental Impact Report of special status wildlife species
that can be used as a baseline for animal
species.
4.2.2 If there is an inventory of species
that can be used as a baseline for
vegetation and animal species, does
it specify or identify endangered /
threatened species, ecological
communities, or categories of
species?
1 1 Evidence Yes, the Environmental Impact Report specifies species associated with habitats in the region
such as harvest mice, burrowing owls, California
clapper rail, and western snowy plover. These
animals may be affected by the project.
4.2.3 Have studies on current or potential
climate impacts on key species
(e.g., endangered or threatened
species) been included?
1 1 Evidence Yes, climate impacts on key species have been included in the Environmental Impact Report
including sea level rise and changes in salinity
levels.
4.2.4 Is the flow regime used as a basis
for ecological management?
1 1 Evidence Flow regime is used as a basis to determine the Plant’s influent wastewater flows during the dry
and wet season as discussed in the Master Plan.
4.2.5 Is there a climate trends analysis for
the site or region based on at least
30 years of climate data?
1 1 Evidence Yes, there is a climate trends analysis based on 30 years of climate data with the Climate
Hydrology Assessment Tool.
4.2.6 Is there an assessment of exotic
invasive species?
1 1 Evidence Yes, there is an assessment on exotic invasive species in the Environmental Impact Report
4.2.7 If there is an assessment of exotic
invasive species, has a plan been
developed to cope with exotic
invasive species?
1 1 Evidence Yes, there is an assessment on exotic invasive species in the Environmental Impact Report with
mitigation measures to cope with exotic invasive
species.
4.2.8 Has there been an assessment of
trade-offs between reliability vs
environmental benefits to support
decision making processes?
1 1 Evidence Yes, the Environmental Impact Report discusses the reliability of the wastewater treatment and
the environmental benefits of wetland restoration
provided form the improvements. There are few
tradeoffs, with goals to mitigate tradeoffs by
protecting endangered species and providing
habitat area for species.
Total Ecological Management Score 8 8/8
Eligibility Criterion passed / not passed 100% Passed
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 26 Section 4.3: Data Inventories of Localized & Indigenous Assets Do we have access to adequate, credible data about the project site?
Max
Score
Actual
Score
Requirement:
Evidence and/or
Evidence Comments
4.3.1 Is there an inventory of existing water-
related ecosystem services based on 30
or more years of data?
1 1 Evidence The Climate change Vulnerability
Assessment for the North-Central
California Coast and Ocean has an
inventory of existing ecosystem services
based on environmental data since the
1950s and 1990s
(
https://nmssanctuaries.blob.core.windo
ws.net/sanctuaries-
prod/media/archive/science/conservatio
n/pdfs/vulnerability-assessment-
gfnms.pdf).
4.3.2 Does any existing inventory of water-
related ecosystem services related to
runoff / land-use include the following
data?
Fire regime
Sediment / erosion load
Nutrient load
Land-use change
3 3 Evidence The Structured-Decision Making for
Climate Change Adaptation to Conserve
San Francisco Bay Tidal Marsh
Ecosystems project addresses
ecosystem services related to sediment
load and management and nutrient load
and water quality. The project also
addresses managing human
disturbances and land-use change.
(
http://climate.calcommons.org/sites/d
efault/files/basic/SFCADS_Phase_1_Rep
ort_2015.pdf).
4.3.3 Do inventories of water-related ecosystem
services related to water quality include
the following data:
Water quality for environmental
services (e.g., habitat, ecological
communities, erosion)
Water quality for human needs /
services (e.g., drinking water,
agriculture)
2 1 Evidence The Structured-Decision Making for
Climate Change Adaptation to Conserve
San Francisco Bay Tidal Marsh
Ecosystems project addresses
management of water quantity for
environmental services, focusing on
reducing contaminant inputs and
regulating salinity
(
http://climate.calcommons.org/sites/d
efault/files/basic/SFCADS_Phase_1_Rep
ort_2015.pdf).
4.3.4 Is there an existing inventory of water-
related ecosystem services related to
water quantity?
Water quantity for environmental
services (e.g., habitat, flow regime)
Water quality for human needs /
services (e.g., service reliability)
2 2 Evidence The Climate change Vulnerability
Assessment for the North-Central
California Coast and Ocean addresses
management of water quantity for
environmental services, focusing on
water management for both
environmental and human needs.
(
http://climate.calcommons.org/sites/de
fault/files/basic/SFCADS_Phase_1_Repor
t_2015.pdf).
Total Existing Inventories Score 8 7/8
Eligibility Criterion passed / not passed 87.5% Passed
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 27 Section 4.4: Broader Ecosystem Impacts
Do we understand how the project’s impacts may extend beyond the site?
Max
Score
Actual
Score
Requirement:
Evidence and/or
Evidence Comments
4.4.1 Has there been a determination
of proposed / estimated
impacts from project
construction and operations
regarding local, upstream, and
downstream species /
ecological communities?
1 1 Evidence Yes, the Environmental Impacts Report discusses estimated impacts and mitigation techniques from
project construction on local and upstream ecological
communities. There is a list of impacts on biological
resources in the report.
4.4.2 Has there been a determination
of proposed / estimated
impacts on existing local,
upstream, and downstream
eco-hydrological systems from
modification regarding:
Pollution
Downstream flow regime
Groundwater impacts
Land tenure (e.g., public vs
private)
4 3 Evidence Yes, the Environmental Impact Report discusses impacts on upstream and downstream systems with
pollution and flow and groundwater impacts. There is a
section in the EIR that discusses impact on geology
and soils, hazards and hazardous material.
4.4.3 Has there been a determination
of proposed / estimated
impacts and benefits on eco-
hydrological systems from
changes in allocation via the
following?
Relevant environmental
flows management plans
Groundwater management
plans
2 2 Evidence The Santa Clara Valley Water District groundwater plan and the San José Urban Water Management plan
cover impacts and benefits on the ecohydrological
systems from changes in allocation on a short term
and long term basis.
https://s3.us-west-
2.amazonaws.com/assets.valleywater.org/2021_GWM
P_web_version.pdf
4.4.4 Has the monitoring system
contributed to the development
and goals of the basin
management plan?
1 1 Evidence The San Francisco Bay Basin Water Quality Control Plan oversees San José water so the plans must abide
by the Basin plans.
Total Broader Impacts Systems Score 8 7/8
Eligibility Criterion passed / not passed 87.5% Passed
Section 4.5: Monitoring & Management Systems
Do we have effective management processes and tools to maintain ecological integrity over time?
Max
Score
Actual
Score
Requirement:
Evidence and/or
Evidence Comments
4.5.1 Have target performance indicators
been explicitly defined for:
Infrastructure services
Ecosystem services
1 1 Evidence The Plant completed an infrastructure
Condition Assessment on plant facilities to
identify how the Plant can continue to
operate with current technology.
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 28
4.5.2 Is there a monitoring plan in place for
infrastructure performance indicators?
2 2 Evidence The Infrastructure Condition Assessment
reevaluates infrastructure performance to
ensure it is meeting the goals.
4.5.3 Is there a monitoring plan in place for
ecosystem performance indicators?
1 1 Evidence The San José Urban Management Plan has
ecosystem performance objectives,
including changes in climate.
4.5.4 Are monitoring outcomes connected to
the decision making and management
/ operations process?
1 1 Evidence The monitoring outcomes are connected to
the Urban Water Management Plan in
making decisions about future water use
and operations process. The Bay Delta
Ecosystem plan also take the monitoring
into account.
4.5.5 Is there a multi-stakeholder basin
management plan?
1 1 Evidence The San Francisco Bay Basin Water Quality
Control Plan is a multi-stakeholder basin
management plan for San José.
Total Monitoring and Management Systems
Score 6 6/6
Eligibility Criterion passed / not passed 100 % Passed
Section 5: Adaptation Plan
(To be completed for all Water Infrastructure assets)
Max
Score
Actual
Score
Requirement:
Evidence and/or
Evidence Comments
AP.1 Is there a plan to restore
or secure lost/modified
ecosystem functions /
species?
1 1 Evidence The Plant Master Plan will protect and restore ecological systems such as tidal mud flats, salt
marshes, upland habitats, and riparian corridors.
Restoring the Coyote Creek Riparian Habitat and
Artesian Slough Corridor will redistribute the plant’s
discharge to reduce potential adverse effects on the
salt march while regenerating the ecosystem(p. 58
https://www.sanjoseca.gov/home/showpublisheddocu
ment/206/636611441889800000)
AP.2 Is the adaptation plan for
environmental targets /
infrastructure robust
across specified observed
/ recent climate
conditions?
1 1 Evidence The Plan has specified goals in response to observed conditions, including improving habitat and providing
flood control benefits and building levees in response
to sea level rise.
AP.3 Is the adaptation plan for
environmental targets /
infrastructure robust
across specified projected
climate conditions?
1 1 Evidence The Plan addresses risks of sea level rise and flood mitigation with goals to produce levees conforming to
the standards of the Army Corps of Engineers. The
Urban Water Management Plan addresses changes in
water supply due to projected climate change with
measurements in place to reduce water usage in times
of drought.
AP.4 Is there a monitoring
plan designed to track
ongoing progress and
impacts to inform future
decisions?
1 1 Evidence The Urban Water Management Plan for San José is updated every 5 years and complies with the California
Urban Water Conservation Council. This plan addresses
changes in water levels and efforts to reduce water
demand.
AP.5 Is there a plan to
reconsider on a periodic
basis for operational
parameters, governance
1 1 Evidence The Urban Water Management Plan for San José is updated every five years.
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.
Kestrel Verifiers | Climate Bonds Verifier’s Report 29 and allocation shifts, and
environmental
performance targets?
Total Adaptation Plan Score: 5 5/5
Eligibility Criterion passed / not passed 100% Passed
DRAFT--Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
REVISED
to add Appendix I.