CITY OF SANTA CRUZ
809 Center Street
Santa Cruz, California 95060
CITY COUNCIL AGENDA
Special Meeting – August 16, 2022
4:00 p.m. GENERAL BUSINESS AND CONSENT, ZOOM/COUNCIL CHAMBERS IMPORTANT NOTICE:
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8/16/2022 4:00 PM City Council Special Meeting 2
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City Council Special Meeting
4:00 P.M.
Call to Order
Roll Call
General Business
1. Securing Our Water Future City Council Study Session (WT) Receive an update on the Water Department’s progress in implementing the recommendations of the Water Supply Advisory Committee, the Securing Our Water Future initiative, and provide feedback to staff.
Consent Agenda
2. $5M Short-Term Loan for the Purchase of Watsonville Community Hospital (CM)
Motion authorizing the City Manager to execute a short-term loan agreement, in a form approved by the City Attorney, in the amount of $5 million with the County of Santa Cruz to support the purchase of the Watsonville Community Hospital (WCH) by August 31, 2022.
Adjournment
City Council Special Meeting
AGENDA REPORT
DATE: 08/04/2022
AGENDA OF: 08/16/2022
DEPARTMENT: Water
SUBJECT: Securing Our Water Future City Council Study Session (WT) RECOMMENDATION: Receive an update on the Water Department’s progress in implementing the recommendations of the Water Supply Advisory Committee, the Securing Our Water Future initiative, and provide feedback to staff.
BACKGROUND: In November 2015 City Council accepted recommendations of the Councilappointed Water Supply Advisory Committee (WSAC) that called for the City to further consider options for using surface water, advanced purified recycled water or desalinated ocean water to make critically necessary improvements to its water supply reliability. The recommendations specified completing additional planning and technical feasibility analyses work, including pilot testing if and as needed, so that options from all sources could be evaluated and compared for their cost, yield and ability to be implemented within a reasonable timeframe.
From this evaluation, one or more supplemental supply projects would be selected for implementation.
Between 2016 and the present, Water Department staff has initiated and completed a significant body of work that provides additional details about cost, yield and timeliness of using the available supply augmentation sources to improve supply reliability. While all possible options for all possible sources of supply have not been developed to a consistent level of detail, staff is confident that enough is known about the key options to support completing the comparative analysis of a reasonable set of realistic alternatives called for in the WSAC’s recommendations.
DISCUSSION: Once the comparative evaluation of options is completed, staff recommends that the Council consider adopting a policy statement that will guide phased implementation of water supply strategies to improve the reliability of Santa Cruz’s water supply. Staff recognizes, as the WSAC did, that phased implementation of one or more supply augmentation projects is the most likely approach to ultimately addressing the water system’s supply reliability issue.
Moreover, given the reality of impacts of climate change on water supply, for example, the ongoing drought conditions across the state, staff believes that now is the time to complete the WSAC recommended evaluation process so that phased implementation can begin. The Securing Our Water Future process that was initiated in April 2022 by Water staff, working in close collaboration with the Santa Cruz Water Commission, will develop a proposed policy statement for Council consideration later this calendar year.
1.1 This memo will cover 4 topics:
1. 2014- 2015 – WSAC background and overview of key results to date;
2. 2022 – Updated Situation Assessment;
3. Securing Our Water Future initiative;
4. Securing Our Water Future Workplan and Schedule; and
5. Overview of Securing Our Water Future comparative analysis of project concepts and evaluation criteria.
1. 2014 – 2015 – WSAC Background:1
In late 2013 and in response to persistent community opposition, the Santa Cruz City Council took action to pause work on a regional desalination project sponsored by the City and the Soquel Creek Water District that had been under development for most of a decade. Instead, the Council initiated a community-based process to review and develop recommendations on how to address Santa Cruz’s long-standing water supply reliability problem. In early 2014, the Council appointed 14 community members to a group that became known as the Water Supply Advisory Committee (WSAC or Committee) and gave them the charge to develop recommendations on how to improve the reliability of Santa Cruz’s water supply for Council consideration.
Through a process that ultimately lasted 18 months, the WSAC:
• completed a thorough review of Santa Cruz’s water supply situation, • developed a problem statement,
• identified and evaluated dozens of water supply augmentation strategies, • created and evaluated a variety of scenarios to fill a 1.2 billion gallon per year projected worst-year water supply shortage, and
• developed a set of consensus agreements and recommendations for how to move forward with the additional work needed to solve the problem they had identified.
In November 2015, the City Council voted unanimously to accept the WSAC’s recommendations. In addition, Council directed staff to integrate the WSAC’s work into the 2015 Urban Water Management Plan, and to implement follow-up work to fully develop a range of potential solutions for improving the reliability of Santa Cruz’s water supply. These efforts were to culminate in completing a comparative analysis of available options and a set of recommendations to the City Council for a project or portfolio of projects to achieve water supply reliability.
2016 – 2022 – Implementing WSAC’s recommendations
The work plan for WSAC recommended follow-up work is known as the Water Supply Augmentation Strategy (WSAS) and City staff has conducted its work and has reported on progress to the Water Commission on a quarterly basis since 2016.
A summary of the WSAS and key results of the work to date is listed below:
• Conservation – reduce demand through long term conservation by an additional 200 to 250 mg by 2035
1 See Water Supply Advisory Committee October 2015 Final Report on Agreement and Recommendations:
https://www.cityofsantacruz.com/home/showpublisheddocument/84832/637594497619670000
1.2 1. Achieved an additional 600 million gallon sustained long term demand reduction since 2013.
• Explore all the water supply augmentation alternatives:
1. Water transfers and exchanges
a. Completed in lieu water transfer agreement with Soquel Creek Water district, including 2016 and 2021 agreements, surface water/groundwater compatibility assessments and actual transfers in winters of 2018-2019 and 2019-2020 b. Water Rights change petitions needed to allow regional water transfers and exchanges, including completing the EIR and, in early 2022, submitting the proposed changes to the State Water Resources Control Board for action.
2. Aquifer Storage and Recovery
a. Completed multi-phased pilot testing at the City’s Beltz 8 and 12 wells, and implemented 2022 demonstration projects during the winter with – ASR water being used this year
3. Recycled Water
a. Completed Regional Recycled Water Facilities Planning Study in 2018 and initiated Phase 2 studies to identify and evaluate potential projects using advanced treated recycled water to meet regional groundwater sustainability and drought supply needs
b. Collaborated with the Soquel Creek Water District on the development of the Pure Water Soquel project
4. Desalination
a. Completed update of project cost, regulatory and permitting requirements in 2018.
2019 – Action to Pursue Near Term Opportunities for Supply Augmentation In November 2019, following consultation with the Water Commission, and in a joint meeting of the Water Commission and the City Council, Santa Cruz Water Department, staff proposed an adaptation to the November 2015 City Council accepted WSAS work plan and schedule, which the City Council voted to approve. The reasons and methods for developing an adaptation to the WSAS work plan and schedule were included in the Change Management section of the WSAC’s Final Report on Agreements and Recommendations. The WSAC understood that it was important to provide an adaptive management approach for dealing with changed circumstances and built the Change Management Process to serve this purpose.
The WSAS work plan change involved revising the WSAC timeline to acknowledge the opportunity for early action to pursue aquifer storage and recovery (ASR) in the Santa Cruz MidCounty Groundwater Basin (MGB). The work on ASR in the MGB completed between 2016 and 2019 indicated that there was an increment of water storage that could be developed in the near term by using existing infrastructure to deliver treated drinking water to the City’s existing Beltz wellfield. The Department recommended that this work should proceed ahead of the comprehensive evaluation of alternatives outlined by the WSAC both because of the significant water supply reliability benefit of developing any additional storage and because proceeding with an expedited project would provide valuable information that would be useful in further considering options for further development of an ASR project in the MGB or possibly in the Santa Margarita Groundwater Basin (SMGWB).
1.3 As a result of receiving City Council approval for pursuing an expedited ASR project in the MGB, Water Department staff included elements of an ASR project in the MGB in the Santa Cruz Water Rights Project and its environmental review process. In December 2021, the Council certified the Water Rights EIR, including project specific elements of the MGB ASR project as well as the required state Underground Storage Supplement permit. In January 2022, the City’s water rights change petitions and underground storage permit were submitted to the State Water Resources Control Board for its review and action, with action still pending at this time. In the winter 2021-2022, as part of ongoing research, demonstration ASR projects at both Beltz 12 and Beltz 8 wells injected water into the MGB and that water is now being withdrawn and used in the water system.
2018 - 2021 – Regional Groundwater Sustainability Planning At the same time as the Department’s ongoing work on water supply augmentation to address the City’s significant vulnerability to long-term droughts, required groundwater sustainability planning efforts have been completed in both the MGB and in the SMGB, with Department staff being actively engaged with other regional partners in preparing these two Groundwater Sustainability Plans (GSP).
These planning processes have been very useful in creating a clearer understanding of the current and future sustainability opportunities and challenges in the two basins. An example of a challenge in the MGB is the need to identify approaches for operating groundwater systems in a manner that maintains protective groundwater elevations along to coast, which is required in order to protect the aquifer from seawater intrusion.
The two GSPs provide a critically important context for the Department to use in assessing water supply augmentation options that may involve storing treated drinking water or advanced purified recycled water in local groundwater basins. This is important because any supplemental supply project the City might pursue to increase drought supply will need to be developed and operated to contribute to both the supply reliability objectives for the City’s water system and the groundwater sustainability objectives in each basin and their respective GSPs.
2. 2022 – Updated Situation Assessment
After nearly eight years of work implementing the WSAC’s recommendations and working regionally to develop groundwater sustainability plans, City staff started 2022 by pausing and reflecting on what we’ve learned so far and how our understanding of the situation we face has evolved since 2015. Three things stood out for us:
• Climate change isn’t something that is going to happen later; it is happening now, with increased instances of extreme weather and longer, more frequent droughts, a situation that the current system is least able to deal with,
• Our customers have embraced water use efficiency technologies, appliances and behaviors, achieving a level of water use that leaves little discretionary use available to target for curtailment during droughts, and as a result • Neither long term demand management nor customer demand curtailments can play a significant role in future efforts to improve the reliability of Santa Cruz’s water supply.
The last statement warrants additional explanation. In California and elsewhere in the west, customer demand curtailments through approaches such as water rationing, are typically used as
1.4 an important tool to respond to drought conditions. In Santa Cruz, however, routine curtailments are no longer an easy or low-cost drought response strategy because customers have already adopted and implemented water-conserving practices that leave little more water available to be eliminated under restrictions. This analysis is amply documented in the City’s 2021 Updated Water Shortage Contingency Plan.
Without supply reliability improvements, in serious shortage conditions, the City will be required to enforce restrictions that would result in impacts to the local economy and potentially threaten community health and safety. From a water supply reliability perspective, the very real possibility of these kinds of outcomes occurring further increases the urgency for decisionmaking to provide overall direction to supply augmentation project development and implementation. Staff’s response to this urgency is to develop recommendations for moving forward by setting policy level direction through the Securing Our Water Future initiative.
3. The Securing Our Water Future Initiative
The Securing Our Water Future initiative is intended to be the “final act” of the formalized WSAC effort. The WSAC’s recommendations included developing the information necessary to fairly assess all the available options and to use this analysis and the WSAC identified criteria and goals to identify a project or portfolio of projects to be implemented to improve the reliability Santa Cruz’s water supply.
Realistically, however, even with policy level direction set, implementation of supply augmentation projects will occur in phases over time. A phased implementation approach will facilitate considering and responding to additional information that is always generated as part of project development efforts and creates more opportunities for regional collaboration and partnerships, which may be result in mutually beneficial projects that improve regional water supply resiliency and provide an opportunity to share costs.
The key goals of the Securing Our Water Future process are to:
1. Complete the “side-by-side” comparison of water supply alternatives called for in the WSAC’s recommendations,
2. Develop and recommend to the City Council policy direction related to water supply reliability, including setting a policy goal for water supply reliability, and
3. Provide durable direction to staff on the key conditions, criteria and values to be used in evaluating water supply augmentation projects to be implemented to achieve the reliability goal using a phased approach.
The key products of the Securing Our Water Future process are:
1. Council Resolution:
A Council resolution would be developed with recital section providing the context for the action section of the resolution. The Council’s statement of policy would be articulated in the resolution’s “Now Therefore” section.
A well-crafted resolution presents a complete enough summary of the issue and its history so a reader can understand the basis for the decision being made or the direction being established.
1.5 2. Council Policy
On occasion, the City Council has taken action to adopt a policy statement following completion of a major piece of work. Adopting a policy statement is a way of providing both increased visibility for the issue being addressed as well as increased accessibility for the Council’s position on an issue.
An example of the Council’s use of a policy statement for an important issue is Council Policy 11.3 on Timber Harvest on Watershed Area and Preservation of Old Growth Trees.2 This policy statement was adopted by the Council following completion of a task force’s work on the issue of timber harvest on City-owned watershed lands in the late 1990s.
In general, the concept behind this approach would take language included in the “Now Therefore” section of the resolution (discussed above,) and use it as the centerpiece of the Council policy.
A major goal of the Securing Our Water Future process is the need to develop directions and decisions that will stand the test of time. Our community’s water reliability issues are longstanding. While earlier attempts to address these issues have resulted in Santa Cruz becoming a state leader in water efficiency, that accomplishment, as recognized by the WSAC in its problem statement, has not and cannot resolve our water supply reliability problem. Numerous attempts over time have been made to pursue various supply augmentation strategies that would address the City’s long-standing water supply reliability issues, and none have been successful. The WSAC recognized the challenges of creating an adaptable and long-lasting path forward and established a value and criteria-based framework that would support achieving success. The Securing Our Water Future initiative is purposefully designed formalize through policy a durable and community supported framework that would support moving forward to improve the reliability of Santa Cruz’s water supply.
4. Securing Our Water Future Work Plan and Schedule
The Santa Cruz Water Commission is staff’s key partner in developing the Securing Our Water Future recommendations for Council consideration later this year. The work plan for this effort and a brief status of actions already completed is summarized below:
• April 4, 2022 Water Commission Meeting –
o Presentation, discussion of and feedback on the Securing Our Water Future Framework
Water Commission provided feedback on the Securing Our Water Future Project that staff has incorporated
o Presentation and agreement on the Water Supply Reliability Projects to be evaluated
Water Commission acted to approve the project concepts to be used in the comparative analysis
• May 2, 2022 Water Commission Meeting –
o Presentation on and Approval of Evaluation/Decision-Making Criteria Water Commission acted to approve evaluation/decision making criteria for use in the comparative analysis of project concepts.
2 https://www.cityofsantacruz.com/government/city-council/council-policy-manual
1.6 o Update on the water system vulnerability analysis work being done in collaboration with the University of Massachusetts team. • June 6, 2022 Water Commission Meeting –
o Phase 1 of Project Evaluations for Water Supply Reliability Projects Water Commission provided feedback to staff on project evaluation information presented
• July 21, 2022 Water Commission Meeting
o University of Massachusetts presentation on base case (no additional supply projects) water supply vulnerability and reliability analysis with climate change influences
Water Commission participated in a workshop on the results of the vulnerability and reliability analyses results and provided feedback to staff • August 16, 2022 – City Council Study Session on Securing Our Water Future – o Securing Our Water Future work-plan mid-point briefing and Council discussion • August 29, 2022 Water Commission Meeting August/September – o Continuing discussions of University of Massachusetts vulnerability analysis results, with focus on the implications of the information for selecting a recommended water supply reliability goal
o Phase 2 of Project Evaluations, including the impact/influence of the vulnerability assessment work
• October 3, 2022 –
o Initial drafts final technical memoranda on project comparisons, Council Resolution and Council Policy
• November 7, 2022
o Water Commission action on recommendations to Council on Securing Our Water Future, including all the elements described in this report, for Council action on November 22, 2022.
The direction set through this process would inform a follow-up phased implementation approach for supply projects needed to achieve the water supply reliability goal included in the proposed policy. A Water Supply Augmentation Implementation Plan (WSAIP) would be prepared to provide a more detailed implementation road-map and would include project descriptions, implementation schedules and planning level budgets. Required California Environmental Quality Act (CEQA) analysis would be developed in parallel with the WSAIP, likely building from the Council certified Water Rights EIR.
5. Overview of Securing Our Water Future Comparative Analysis Supply Augmentation Alternatives and Evaluation Criteria
Between 2016 and the present, considerable technical feasibility and analytical work focusing on a wide range of supply augmentation options using the City’s available source options, surface water, advanced treated recycled water and desalinated ocean water has been completed.3 For the Securing Our Water Future comparative analysis, however, staff recommended using a more limited range of project options that were identified as meeting two major criteria:
3 Additional analyses have been completed on demand management opportunities and, due to the already highly efficient water use patterns of Santa Cruz’s water service customers, further demand management reductions, as part of the solution to the region’s long-stand supply reliability problems, are not being pursued. The reason for this is that further demand reductions does not and cannot eliminate the underlying supply reliability problem or make the size of the problem to be solved materially different.
1.7 • Whether the project yield, on its own, could either solve or make a significant contribution to solving the water supply reliability problem; and
• Including a representative project for all the potential supply solutions available.
Smaller projects such as in lieu transfers or non-potable recycled water aren’t being eliminated from consideration and would be developed as ancillary projects to the main supply alternatives if/when they are developed and depending on conditions at the time.
Supply Augmentation Project Concepts
The specific recommendations for the Water Commission's consideration for supply augmentation projects to include in the Securing Our Water Future process are as follows:
1. ASR in the MCGB – groundwater modeling shows that ASR in the MCGB can meet approximately 50% of the City’s water supply gap. GW modeling occurring during and subsequent to the MCGB development of the Groundwater Sustainability Plan (GSP) used assumptions about demands, climate, and the operation of PWS, etc., that are being further refined in ongoing work about this project and those results will be reflected in the WSAIP.
2. IPR in the SMGWB – preliminary groundwater modeling performed for the SMGWB GSP characterized that basin’s ability to provide storage for the Department’s drought supply. IPR groundwater replenishment alternatives were also evaluated in the City’s 2018 Phase 1 Recycled Water Feasibility Planning Study (RWFPS)4 and further developed between 2018 and 2022, showing promise as possible storage/supply alternatives.
3. Direct Potable Reuse (DPR) – Also evaluated in the City’s 2018 RWFPS, this alternative sends advanced purified water to the GHWTP for additional treatment and blending with water being produced from that facility. Advance purified water could be supplied by the PWS facility or a new AWPF; and
4. Desalination – based on the updated desalination project reviewed in Dudek’s 2018 memo.5
The WSAC identified three key criteria that they viewed as important to any comparative analysis or selection of supply augmentation projects. developed by WSAC:
1. Cost
2. Yield
3. Timeliness
Attachment 1 summarizes these four projects and provides initial high level comparative information about these three important evaluation metrics.
Evaluation Criteria for Use in Comparative Analysis Supply Augmentation Project Concepts
4 See “July 3, 2018 the Santa Cruz Regional Recycled Water Facilities Planning Study” here:
https://www.cityofsantacruz.com/government/city-departments/water/water-supply-advisory-committeerecommendations 5 See “August 16, 2018 the Final Desalination Feasibility Update Review” here:
https://www.cityofsantacruz.com/government/city-departments/water/water-supply-advisory-committeerecommendations
1.8 The WSAC report also includes additional details about evaluation criteria to be considered in comparing and selecting supply augmentation projects to pursue. Attachment 2 provides the full set of 15 criteria with definitions. Water Commissioners were asked to prioritize theses 15 criteria in order of importance and their composite results from most important to least important is presented in Table 1 below:
Table 1
Water Commission Priority Evaluation Criteria
2. Project’s supply contribution as a % of worst year supply shortfall (% of the 1.2 billion gallon worst year gap) 17
13. Increases resilience to climate change (yes/no) 17
1. Annualized Cost per million gallons of Average Year Yield (ACAYY) ($ per million gallons of average year yield) 31
11. Is understood and accepted by the public and key stakeholders (yes/no) 35
14. Scalable or can be implemented incrementally or in phases (yes/no) 43
6. Technical Feasibility (yes/no) 47
9. Likelihood of project being funded by state or federal grants (highly likely/highly unlikely) 47
10. Opportunity for shared funding (yes/no) 49
4. Greenhouse Gas Emission (MT of CO2e ) 52
5. Time required to for implementation (years) 52
7. Operational complexity (high/medium/low) 58
3. Energy Use (KWh/yr) 59
8. Potential impacts for CEQA required mitigations to impact project cost or timeliness (High/Medium/Low) 65
15. Adaptable to future regulatory or source water changes (yes/no) 65
12. Degree of administrative complexity of regulatory, permitting or right-of-way issues and time required to address and resolve those issues (complexity = high/medium/low; time required = months or years) 73
During the study session, staff will present additional information about the work completed in implementing the WSAC’s recommendations and share initial results from the Securing Our Water Future process as well as describing the ongoing work to develop policy recommendations for Council consideration later in the fall.
FISCAL IMPACT: No fiscal impact from this item at this time.
Prepared/Submitted By:
Rosemary Menard
Water Director
Approved By:
Matt Huffaker
City Manager
1.9 ATTACHMENTS:
1. PROJECTS VS. KEY WSAC EVALUATION CRITERIA.DOCX
2. EVALUATION CRITERIA AND DEFINITIONS.DOCX
1.10 ATTACHMENT 1
1.11 ATTACHMENT 2
WATER SUPPLY PROJECT EVALUATION CATEGORIES, SUB-CATEGORIES AND DEFINITIONS
QUANTITATIVE CATEGORIES
Criterion Definition or Explanation
The criterion provides information about:
Project Costs
Annualized Cost per million gallons of Average
Year Yield (ACAYY) ($ per million gallon of
average year yield)
WSAC Cost Metric that takes the annualized cost
metric above and enhances its comparability with
other project options by specifying that the project
“yield” which is defined as the amount of water
available from that source to meet peak season
demands in an average year.
Project Yield
Project supply contribution as a % of the worst
year supply shortfall (% of the 1.2 billion gallon
worst year supply gap)
The criterion provides information about the
percent contribution to reducing the worst year
supply gap provides information about the degree
to which a project can contribute to closing the
supply gap
QUANTITATIVE CATEGORIES
Criterion Definition or Explanation
The criterion provides information about:
Energy Profile and Climate Mitigation
Energy use (KWh/year) The amount of energy required annually to operate the project.
Greenhouse gas emissions associated with the
project (metric tons of carbon dioxide equivalents
released; MT of CO2e)
The amount of greenhouse gases associated with
the construction and operation of a project.
(similar to the energy version of annualized or lifecycle cost) Timeliness
Time required to begin producing additional an
increment of water that makes a significant
contribution to improving the system’s water
supply reliability issue (months/years)
The number of years required (from date of
evaluation and green light to proceed) to complete
technical feasibility work, pre-design, design,
CEQA, permitting, construction, commissioning
and start-up of a project that produces additional
water supply
Technical Feasibility
Technical Feasibility (yes/no ratings for each
element that comprises a project’s technical
feasibility benchmarks)
o Example sub-elements for technical
feasibility can include constructability,
(add to this list)
The technical and engineering aspects of a project
are realistic and achievable and can and will
contribute to improving supply reliability
Operational complexity (high/medium/low) Whether/how the project’s operation does or does not add significantly to the operational complexity
of the existing system
1.12 Qualitative Categories
Criterion Definition or Explanation
The criterion provides information about:
Environmental Impact
Potential impacts of any CEQA-required
mitigation that could significantly affect project
cost, yield or timeliness parameters
(high/medium/low or additional gradations of this
scale)
The likelihood for any potential large impact to
cost, yield, or timeliness parameters from CEQA
required mitigation for the supply augmentation
project.
Funding and Financing
Likelihood of the project being fundable with
federal or state grant funds (highly likely/unlikely
with gradations)
The potential for the project to be grant funded.
An example is the US Bureau of Reclamation’s
Title XVI grant program that is specifically
designed to fund recycled water projects.
Opportunity for shared funding (yes/no) The potential for shared funding through partnerships with other regional water agencies.
Public Acceptability
Includes a project (or projects) that is understood
and accepted by the general public and key
stakeholders.
(yes/no or some scale that is graded along the lines
of strongly supported/not supported at this time)
The degree to which there is public understanding
and acceptance for the projects under
consideration.
Administrative Feasibility
Degree of complexity with respect to regulatory,
permitting, right of way, or l legal issues and the
time required to address and resolve the identified
issues
(for complexity: high/ medium/low)
(for time requirement: number of months or years)
The complexity and time required to address
regulatory, permitting, right-of-way and/or legal
issues related to a supply augmentation project and
the amount of time needed to address or resolve
those issues.
Adaptive Flexibility
Increases resiliency to climate change (high,
moderate, low) specifically related to:
o Certainty of supply during drought
o Certainty of supply during extreme wet
weather;
o Vulnerability to shifting patterns of
precipitation due to climate change;
o Seawater intrusion;
o Coastal inundation and sea level rise;
o Wildfire
o Seismic events
o Other natural disasters
How a project may (or may not) be able to adapt to
changing conditions or be functional in the face of
climate change, wildfire, seismic or other natural
disasters.
Project includes characteristics that provides for
scalability or provides for it to be implemented
incrementally or in phases over time (yes/no)
The degree to which the project can be relatively
easily expanded or scaled up over time or
implemented in increments or phases.
Adaptability to future uncertainty from regulations
or source water changes
(yes/no)
Whether or how well a project may (or may not)
be able to adapt to changing regulations or source
water quality changes.
1.13 1
Rosemary Balsley
From: Bonnie Bush
Sent: Monday, August 15, 2022 7:32 AM
To: City Council
Cc: Rosemary Menard
Subject: FW: Study Session on Securing Our Water Future Bonnie Bush, CMC
City Clerk
City of Santa Cruz
831-420-5035
Please note: Public Record Act Requests submitted via email, fax, USPS, or dropoff after 5:00 p.m. on a business day, Saturdays, Sundays, or holidays will be processed as received on the next open business day. The 10-day response period begins when the request is received.
From: larry pearson <[email protected]>
Sent: Saturday, August 13, 2022 12:46 PM
To: Bonnie Bush <[email protected]>
Subject: Study Session on Securing Our Water Future
To: Santa Cruz City Council
Fr: Larry Pearson, 120 Annie Lane, Santa Cruz
95062 [email protected]
Re: Study Session on Securing Our Water Future, August 16, 2022 I am a retired planner with the City of Santa Cruz and I was the public information officer during the 1989 earthquake. I am familiar with the history of water policy in Santa Cruz over several years. Following is a suggestion for one of the ways we may secure our water future.
1.14 2
California is an arid state. We have a Mediterranean climate; we get no rain for eight months of the year. The only way that California has been able to support a large population is the Sierra snow pack. It is our reservoir. Climate change and global warming are already reducing the snow pack and that will only get worse. Unless California is able to augment and/or replace this reservoir the future is grim. The only way to do this at sufficient scale is desalination.
In Santa Cruz a policy decision was made during the 2013‐2015 time frame to eliminate desalination as one possibility for the future. Much has changed since that time. Drought has become more common— climate change is here now. One of the objections to desalination at that time was the amount of energy that was required for the process. That has changed too; there are now more forms of renewable energy, and they will continue to expand. Thus as to water challenges, it is a new equation and it requires a new answer.
We are lucky in Santa Cruz; inland cities do not have the option of desalination. We are bordered by the largest reservoir on the face of the planet: the Pacific Ocean. It contains an inexhaustible supply of water. All we have to do is process it.
I am aware that the Coastal Commission recently denied an application for a desalination plant. In due course—as conditions become more dire—the Coastal Commission, other bodies and the public in general will come to realize that in the long‐term desalination will be necessary. Again, as a society, we are lucky to have this option.
Santa Cruz has often been a leader in anticipating the future and taking action. We were instrumental in establishing the Monterey Bay National Marine Sanctuary. We have the opportunity to lead again by recognizing that desalination will become necessary to meet water needs of the
1.15 3
future. I encourage adding this policy to the other policies and programs that are part of our water plans.
Respectfully,
Larry Pearson
1.16 1
SECURING OUR WATER
FUTURE
1.17 Agenda
1. Then and Now – water demand and water supply
2. The Water Supply Advisory Committee (WSAC) and
implementing WSAC’s recommendations;
3. Securing Our Water Future –
1. Completing the WSAC recommended action to compare all water supply augmentation alternatives; and
2. creating a sound, community supported policy framework for improving the reliability and resiliency of Santa Cruz’s water supply.
4. What we’ve learned about climate change and its
impact on water infrastructure and water supply;
1.18 Then and Now
2022
• Average Annual Water
Demand: 2.6 BGY
• Residential Water Use:
44 GPCD
• Water Year Classification
for previous 10 years:
– 2 Wet, 2 Normal, 4 Dry,
2 Critically Dry
• WSCP Implementation for
previous 10 years:
– 6 years out of 10
2013
• Average Annual Water
Demand: 3.2 BGY
• Residential Water Use:
61 GPCD
• Water Year Classification
for previous 10 years:
– 3 Wet, 4 Normal, 2 Dry,
1 Critically Dry
• WSCP Implementation for
previous 10 years:
– 4 years out of 10
1.19 So, What’s Changed about Demand
Over Time?
4 0
2 4
6 8
10 12
14 16
Million gallons per day
Gross Daily Water Consumption
2008 to 2022
2008
2013
2012
2009
2010
2011
2017
2018
2014
2016
2015
2019
2020
2021
2022
Poly. (2008)
Poly. (2013)
Poly. (2012)
Poly. (2009)
Poly. (2010)
Poly. (2011)
Poly. (2017)
Poly. (2017)
Poly. (2018)
Poly. (2014)
Poly. (2016)
Poly. (2015)
Poly. (2019)
Poly. (2020)
Poly. (2021)
Poly. (2022)
1.20 Water Use Comparison:
Then versus Now
5 2002-2004 2016-2018 Change
(Volume)
Percent
Change Direction
Total annual production
(billion gallons) 3.9 2.6 -1.3 -33%
Peak season production
(billion gallons) 2.3 1.5 -0.8 -35%
Peak month
(million gallons) 467 270 -197 -42%
Peak day (million gallons) 15.2 10.4 -4.8 -32%
Average day during peak
season
(million gallons)
12.7 8.0 -4.7 -37%
Population 87,000 97,000 +10,000 +11%
Visitors (tourism) ? ? ?
1.21 Long Term Demand Forecast from
2020 Urban Water Management Plan
2015 2020 2025 2030 2035 2040 2045
Actual Data Long Term Demand Forecast
MG/Year 2,486 2,612 2,645 2,671 2,681 2,742 2,761
0 500
1,000
1,500
2,000
2,500
3,000
Million Gallons per Year
Year
1.22 TACKLING SANTA CRUZ'S 50-YEAR-OLD
WATER SUPPL RELIABILITY ISSUES
1.23 The City of Santa Cruz
Water Supply Advisory Committee
April 2014 – October 2015
Distribution storage
Supply reservoir
River intake (drought conditions)
Small group learning
opportunities for
Committee members
Scenario
planning
working
groups and
presentations
Time for interest group
caucuses
1.24 WSAC’s Problem Statement:
Our System Is Highly Vulnerable to
Drought Caused Shortages Because of:
• Limited storage
• Fish flow requirements
• Highly variable supply
Of these, limited storage is
most significant, and
Conservation alone cannot
solve the problem.
• Climate change is
worsening our problem
1.25 9
WSAC Group Agrees to Consensus
Recommendations– Early October 2015
1.26 Summary
Implementing WSAC Recommendations
• Conservation – reduce demand through long term conservation by about 200 to 250 mg by 2035
1. Achieved approximately 600 million gallon sustained long term demand reduction since 2013.
• Explore all the water supply augmentation alternatives:
1. Water transfers and exchanges
a. Pilot agreement and actual transfers
b. Water Rights EIR
2. Aquifer Storage and Recovery
a. Beltz 8 and 12 Pilot and Demonstration Projects – ASR water being used this year
3. Recycled Water
a. Phase 1 and Phase 2 studies
b. Mid-County and Santa Margarita Groundwater Sustainability Plans c. Pure Water Soquel project moves forward
4. Desalination
a. Updated information on the earlier desalination proposal
1.27 In Lieu Water Transfers December 3, 2018, “Valve
Turning” event for first ever water transfer,
which ran until April 30, 2019
12 Location: O’Neill Ranch well, site of the
Soquel Creek- Santa Cruz water system intertie
1.28 Aquifer Storage and Recovery (ASR)
– Action to Date: Phase 1 feasibility analysis
successfully completed in February 2016, and Phase
2 Pilot Testing of ASR at Beltz 12 successfully
completed June 2019. Second phase Pilot Testing at
Beltz 8 completed winters 2019-20 and 2021.
Demonstration testing Beltz 8 and 12, 2022, with
water being delivered to the system summer 2022.
13 • Direction:
Evaluate the
feasibility of
storing water in
regional aquifers
for future use
during drought.
1.29 Recycled Water
Alternatives Analyzed
1.30 14
Seawater Desalination
• Direction – review and update previous
desalination project assumptions on design,
permitting, and implementation timeline.
– Action – Review completed in 2018
concluding that:
• Project can produce required yield of 1.2 billion
gallons per year.
• New Ocean Plan requirements for subsurface
intake create significant challenges;
• Updated cost would be higher than those used in
2013 Draft EIR
• Timeliness of implementation likely an issue due
to new regulations.
1.31 15
Late 2019 Council Review of WSAS Status
regarding Recycled Water and Desal
Options:
• Continue evaluating potential for advanced
treated wastewater to be developed and used for
groundwater replenishment;
• Stop working on desalination for the foreseeable
future, pending outcomes of work on the other
supply options; and
• Retain desal as a potential future option that may
be developed if needed.
1.32 16
2022 SECURING OUR WATER
FUTURE
1.33 Securing Our Water Future Goals
1. Complete the “side-by-side” comparison of
alternatives called for in the WSAC’s
recommendations;
2. Develop and recommend to the City Council
policy direction related to water supply
reliability, and phased water supply
augmentation project implementation; and
3. Provide durable policy level direction for staff to
use in phased implementation of projects to
improve water supply reliability.
1.34 What Supply Alternatives Are Being
Evaluated?
Selection of alternatives for the side-by-side evaluation of project alternatives was based on 2 major factors:
1. Whether the project yield, on its own, could either solve or make a significant contribution to solving the water supply reliability problem; and
2. Including a representative project for all the potential supply solutions available.
Smaller projects such as in lieu transfers or non-potable recycled water aren’t being eliminated from consideration and would be developed as ancillary projects to the main supply alternatives if/when they are developed and
depending on conditions at the time.
1.35 SOWF Concepts Water Commission Presentation
SOWF – Concept Projects Evaluated
Concept Project Type Description
#1
Aquifer Storage
and Recovery
(ASR)
Groundwater replenishment in the Mid County
Groundwater Basin (MCGB) using available
winter surface water flows treated at Graham
Hill Water Treatment Plant (GHWTP)
#2 Indirect Potable
Reuse (IPR)
Groundwater replenishment in the Santa
Margarita Groundwater Basin (SMGB) using
purified water produced at Pure Water Soquel
(PWS) Chanticleer Advanced Water Treatment
Facility (AWTF)
#3 Direct Potable
Reuse (DPR)
Blending of raw water with purified water
produced at a new AWTF for further treatment
at GHWTP
#4 Seawater
Desalination New desalination facility
20 1.36
SOWF Concepts Water Commission Presentation
Concept #1: Aquifer Storage
and Recovery (ASR) in the
Mid-County Groundwater
Basin (MCGB)
1. Injection of available treated surface
water during winter months in
MCGB
2. Extraction of groundwater from
MCGB
3. Infrastructure Assumptions:
• Conversion of 4 existing Beltz wells
to ASR wells
• 4 New ASR wells
• Upgrades to Beltz WTP
• Upgraded treatment for Beltz 12
• New wellhead treatment for new
ASR wells
• Connections from wells to/from
City’s Potable Water System
New ASR Well Sites
Source: Santa Cruz ASR Project –Phase 1 Feasibility Investigation, Pueblo Water Resources (June 2021)
21 1.37
SOWF Concepts Water Commission Presentation
Expand
AWTF
Capacity
New and
Redeveloped
Injection
Extracted water to Wells
City via Newell
Creek Pipeline
Concept #2: Indirect
Potable Reuse (IPR) in the
Santa Margarita
Groundwater Basin (SMGB)
1. Injection of Purified Water in
SMGB
2. Extraction of groundwater from
SMGB
3. Infrastructure Assumptions:
Expansion of PWS Chanticleer
AWTF to produce additional
1,500 AFY
New Pipeline from AWTF to
Scotts Valley
2 Upgraded injection wells at
El Pueblo
7 New injection wells
2 New extraction wells
New pipeline from extraction
wells to Newell Creek Pipeline
22 1.38
SOWF Concepts Water Commission Presentation
Concept #3: Direct Potable Reuse
(DPR)
via Raw Water Augmentation
1. Production of Purified Water in Santa Cruz
2. Blending of Purified water with Raw
Surface Water
3. Treatment of blended water at Graham Hill
WTP
4. Infrastructure Assumptions:
New AWTF near SC
WWTF Conveyance of
purified water to
Coast Pump Station
23 AWTF: Advanced Water Treatment Facility
SC WWTF: Santa Cruz Wastewater Treatment Facility
1.39 SOWF Concepts Water Commission Presentation
Concept #4: Seawater Desalination
24 1.40
Prioritized Evaluation Criteria for use
in Comparing Projects
2. Project’s supply contribution as a % of worst year supply shortfall (% of the 1.2 billion gallon worst year gap) 17
13. Increases resilience to climate change (yes/no) 17
1. Annualized Cost per million gallons of Average Year Yield (ACAYY) ($ per million gallons of average year yield) 31
11. Is understood and accepted by the public and key stakeholders (yes/no) 35
14. Scalable or can be implemented incrementally or in phases (yes/no) 43
6. Technical Feasibility (yes/no) 47
9. Likelihood of project being funded by state or federal grants (highly likely/highly unlikely) 47
10. Opportunity for shared funding (yes/no) 49
4. Greenhouse Gas Emission (MT of CO2e ) 52
5. Time required to for implementation (years) 52
7. Operational complexity (high/medium/low) 58
3. Energy Use (KWh/yr) 59
8. Potential impacts for CEQA required mitigations to impact project cost or timeliness (High/Medium/Low) 65
15. Adaptable to future regulatory or source water changes (yes/no) 65
12. Degree of administrative complexity of regulatory, permitting or right-of-way issues and time required to address and resolve those issues (complexity = high/medium/low; time required = months or years) 73
1.41 Evaluation Results for Concept Projects
Criteria ASR a IPR b DPR Desal c
Annual Yield Ave: 250 MGY (750 AFY)
Max: 530 MGY (1,620 AFY)
260 MGY
(790 AFY)
1,200 MGY
(3,700 AFY)
1,200 MGY
(3,700 AFY)
% of Supply
gap
44% 21% 100% 100%
ACAYY
($/MG) $12,400 to $26,000 $24,000 $10,700 $13,800 to $17,800 ($/AF) $4,100 to $8,500 $7,800 $3,500 $4,500 to $5,800
GHG
(MT of CO2) 110 to 140 1,210 960 2,500
Energy use
(MWh/yr) 710 to 930 8,220 6,750 17,500
(MWh/AF) 0.6 to 0.9 5.5 1.8 4.7
a. ASR ranges for ACAYY, GHG, and Energy Use are based on average and max yield. b. IPR yield limited by 1,500 AFY production less 710 AFY to restore SMGB groundwater levels. c. Desal range for ACAYY is based on cost for three alternatives ocean intakes. d. Refer to Fact Sheets for additional information and assumptions made for each concept. 1.42 26
TOUCHING BASES WITH OUR
COMMUNITY ON WATER
SUPPLY OPTIONS
1.43 Chart 4
2022
A
68%
B
22%
No
Opinion
10%
Statement Coming Closer to Voter’s Opinion
2014
A
60%
B
35%
No
Opinion
6%
A
45%
GENE BREGMAN& ASSOCIATES
B
47%
No Opinion
8%
A: We need to find new sources of water if we are going to solve our long-term water supply problems B: We can solve most of our long term water supply problems by just using less 2010
1.44 Very Serious Water Supply Issues: 2022
Chart 2
Threat of climate change to reduce water supply F 69%
Inadequate water supplies for our future needs B 60%
Inadequate water for fish and wildlife D 50%
New growth and development threatening our water supplies J 49% Not enough water conservation E 46%
Aging water infrastructure C 46%
Cost of water I 38%
Inadequate water supplies for all our needs today A 37% Too many chemicals and other contaminants in the water G 36% Poor tasting water H 23%
GENE BREGMAN& ASSOCIATES
1.45 Chart 8
StronglyAgree
60%
Somewhat
Agree
22%
Strongly
Disagree
8% Somewhat
Disagree
9%
Some Need for Additional Water
Is Result of Climate Change
Climate Change vs. Too Much Growth & Development
No
Opinion
1%
Somewhat
Agree
27%
Strongly
Disagree
14%e
Somewhat
Disagree
18%
Some Need for Additional Water Is Result
of Too Much Growth & Development
No
Opinion
3%
Climate Change
49%
Growth &
Development
42%
Which
Has Had
Greater Effect
No
Opinion
9%
82%
17%
StronglyAgree
38%
65%
32%
GENE BREGMAN& ASSOCIATES
1.46 Evaluating Ways to Address Water Shortages:
Excellent / Good Idea
Chart 5
Store excess winter water, when available,
in underground aquifers to use at a later time
2022
2019
2022
2019
2022
2019
2022
2019 50%
70%
61%
65%
58%
85%
82%
84% Explore uses for purified recycled water
for potable and non-potable purposes
Increasing mandatory water conservation
Use desalination to produce more water
GENE BREGMAN& ASSOCIATES
1.47 Very Important Considerations
When Developing Strategies to Increase Water Supplies
Chart 7
Environmental impacts, in general B 74%
Quality of new water source E 72%
Quantity of water that could be added to supplies D 65% Effect on rates consumers pay for water C 51%
Cost to build A
Speed with which new water sources F
44%
could be available 43%
GENE BREGMAN& ASSOCIATES
1.48 SETTING A RELIABILITY GOAL –
THE CHALLENGES OF CLIMATE
CHANGE
1.49 Why Do We Need a Reliability Goal?
• A reliability goal guides our sizing of water supply
augmentation solutions for implementation.
• The basic challenge involves balancing the amount
of risk of a shortage we want to be exposed to
against the cost of the solutions.
• In considering the level of risk to accept, we need
to be clear about what steps we would need to
take to respond to the supply shortages we don’t
plan projects to address.
1.50 Recent Droughts in California
1.51 The Santa Cruz Water System Serves
100,000 People Using Highly Variable
Surface Water Resources
-
50,000
100,000
150,000
200,000
250,000
300,000
192119231925192719291931193319351937193919411943194519471949195119531955195719591961196319651967196919711973197519771979198119831985198719891991199319951997199920012003200520072009201120132015201720192021 Total Annual Runoff, San Lorenzo River (acre-feet)
Water Year
Water Year Classification System
Wet Normal Dry Critically Dry
Average Annual Runoff:
90,346 acre-feet
14 out of the last 20
years show below
average cumulative
discharge from the
San Lorenzo River
1.52 1.53
The Department’s Past Efforts to evaluate
Climate impacts involved “down-scaling”
1.54 April 2019 Updates on the “Gap”
Current-System Worst-Drought PeakSeason Shortages (mg) Drought
Year
Historical
Hydrology
GFDL Climate
Change
CMIP 5 Climate
Change
Catalog Climate
Change
3.2 bgy 2.6 bgy 3.2 bgy 2.6 bgy 3.2 bg 2.6 bgy 3.2 bg 2.6 bgy Yr 1 728 0 1,109 419 816 241 1,067 315
Yr 2 1,141 781 956 570 864 454 1,276 834
Yr 3 -- -- -- -- 794 408 -- --
Total 1,869 781 2,066 989 2,474 1,103 2,343 1,149
1.55 We’ve developed a new vulnerability assessment
approach for assessing climate impacts that
doesn’t involve down-scaling and looks at a wide
range of potential future climate conditions
1.56 Creating Climate Scenarios for the Climate Stress Test • Hydrosystems Research Group Page • University of Massachusetts, Amherst 41 Type of Uncertainty Sampling Range Sample Size
Natural climate variability Stochastic realizations
(100-yr long each)
10 realizations
Changes in mean annual
precipitation
-40% to +40% with 5%
increment
17 change factors
Changes in mean annual
temperature
0 to 7 C with 1 C increment 8 change factors
Changes in coefficient of
variation of annual
precipitation
0 to +50% with 10 % increment 6 change factors
Change in mean annual water
demand
Water Demand Forecasts
(2020 urban water
management plan)
5 forecasts
Total 40,800 simulations
(i.e., 4,080,000 years)
1,360 separate
plausible future
climates
1.57 Climate Planning Scenarios
Hydrosystems Research Group
University of Massachusetts, Amherst Page 42
• Planning is currently focusing on a 0% to a -10% change in precipitation • Under RCP8.5 by 2040’s (i.e., 2026-
2055)
• Projected changes in temperature
range from +1C to 4.3C (median
around 2C)
• Projected changes in
precipitation range from -13% to
+17% (median around ‘no
change’)
• Under RCP8.5 by 2070’s (i.e., 2056-
2085):
• Projected changes in temperature
range from +2C to +7C
• Projected changes in
precipitation range from -27% to
+20% (with an outlier above +60%)
1.58 Supply Deficits for 0 to -10% change in
precipitation and +2 C
Hydrosystems Research Group
University of Massachusetts, Amherst Page 43
Deficits at 98th
percentile reliability
(MG) Maximum deficit (MG)
dP
dT
0%
0C
-10%
+2C
0%
0C
-10%
+2C
1-YR 27 (1%) 243 (9%) 923 (35%) 1065 (41%)
2-YR 139 (5%) 650 (25%) 1535 (59%) 2095 (80%)
3-YR 257 (10%) 840 (32%) 1561 (60%) 2205 (85%)
(2020/2.6 Billion Gallons/Year Demand)
1.59 Water Supply Planning in
the Face of Uncertainty
• Water supply planning is inherently uncertain and
climate change is increasing that uncertainty.
• The water supply deficit is significantly affected
by climate change, with many climate projections
indicating an increased in the water supply deficit
• A 10% precipitation decrease causes a deficit increase of almost 10x (one year deficit) to 3x (3-year deficit).
• The frequency of drought also increases rapidly
with precipitation decreases.
1.60 Considering the Direct and Indirect
Costs of Curtailments
• Water supply curtailments, which in our case
means water rationing, are the typical approach to
responding to shortages that aren’t planned for.
• Curtailments aren’t free. To assess their direct
and indirect costs, an economic impact analysis is
being prepared and will be part of the information
considered in developing a recommendation on a
reliability goal.
1.61 Questions
1.62 For Further Reference:
• The Water Commission has been actively engaged
in working with Water Department staff on WSAC
implementation activities since 2016.
• You can find quarterly Water Supply
Augmentation Strategy reports as well as
additional Securing Our Water Future materials in
the April, May, June, and July 2022 meetings at the
Water Commission link below:
https://ecm.cityofsantacruz.com/OnBaseAgendaOnline/Mee
tings/Search?dropid=4&mtids=124
1.63 City Council Special Meeting
AGENDA REPORT
DATE: 08/11/2022
AGENDA OF: 08/16/2022
DEPARTMENT: City Manager
SUBJECT: $5M Short-Term Loan for the Purchase of Watsonville Community Hospital (CM)
RECOMMENDATION: Motion authorizing the City Manager to execute a short-term loan agreement, in a form approved by the City Attorney, in the amount of $5 million with the County of Santa Cruz to support the purchase of the Watsonville Community Hospital (WCH) by August 31, 2022.
BACKGROUND: The owners of Watsonville Community Hospital (WCH) filed for Chapter 11 bankruptcy on December 6, 2021, which led the State of California to bring forth Senate Bill 418 (SB 418) in February 2022. SB 418 helps preserve access to healthcare services for Pajaro Valley residents by forming a healthcare district and for WCH to return to public ownership.
This opportunity allowed public agencies, community benefit organizations, and private donors to facilitate a sale through the bankruptcy process and avoid closure of the hospital.
Currently, WCH serves an area with disproportionately low household income and access to quality housing, transportation, and healthcare. It remains open to protect jobs and ensure access to healthcare services. As approved by the United States Bankruptcy Court, the last date to close the sale is August 31, 2022.
The State of California committed to providing a total of $25 million grant towards purchasing the hospital in the 2022-2023 State Budget Bill. Due to a drafting error in the State Budget Bill language, another entity was inadvertently put in place of the County of Santa Cruz, resulting in the County not receiving funds. While an amendment to the State Budget Bill language is forthcoming, the correction will not be completed by the August 31, 2022 closing deadline.
DISCUSSION: The County is seeking short-term loans from five (5) organizations in the amount of $5 million each, including the City of Santa Cruz, City of Capitola, City of Watsonville, Santa Cruz County Community Foundation, and Salud Para La Gente. To avoid additional expenses and allow the continuation of healthcare services in the Pajaro Valley region, it is critical that the hospital be purchased on the bankruptcy court’s approved deadline.
Approving the $5 million short-term loan to the County of Santa Cruz will help bridge the gap of funds needed to close the $25 million purchase price of WCH by August 31, 2022.
2.1 If the sale fails to close by the August 31, 2022 deadline, the Bankruptcy Court will may amend the bankruptcy plan and change the date, which could lead to a cost increase, cancelation or termination of the deal.
FISCAL IMPACT: If approved, the City of Santa Cruz will provide a short-term loan of $5 million to fund the purchase price of the hospital, as referenced in the agreement (“City – County WCH Loan Agreement”). The loan by the City is to be paid to the County on August 22, 2022.
The County will be required to repay the entire loan balance to the City within 60 days of receipt of the funds from the City. There is no impact to the General Fund as the County has agreed to reimburse the City for any transactional costs and will pay interest at the current LAIF interest rate for the term of the loan.
If the loan is not repaid within 60 days, the County shall pay any additional costs incurred by the City in accordance with the agreement’s late payment section, and a fee for any late payment equal to 1% per month of the overdue amount. The late fee may, however, be waived upon the parties’ mutual consent.
Prepared By:
Emeline Nguyen
Principal Management
Analyst
Submitted By:
Laura Schmidt
Assistant City Manager
Approved By:
Matt Huffaker
City Manager
ATTACHMENTS:
1. CITY-COUNTY LOAN AGREEMENT.DOCX
2.2 SHORT-TERM LOAN AGREEMENT BETWEEN THE CITY OF SANTA CRUZ AND
THE COUNTY OF SANTA CRUZ FOR THE PURPOSE OF FUNDING THE
PURCHASE OF WATSONVILLE COMMUNITY HOPSITAL
This Agreement, effective as of the date of the last signature below, is between THE CITY OF SANTA CRUZ (“City”), a municipal entity, and the COUNTY OF SANTA CRUZ (“County”), a political subdivision of the State of California. The City and the County are sometimes referred to in this Agreement individually as a “Party” or together as the “Parties.”
RECITALS
A. In February 2022, pursuant to Senate Bill 418, the State of California created the Pajaro Valley Health Care District (“District”) for the purpose of bringing Watsonville Community Hospital (“Hospital”) into public ownership, after the current owners declared bankruptcy.
B. A wide variety of community benefit organizations, private donors, and public agencies have joined together to fund the purchase price of the Hospital, and the last date to close the sale, as approved by the United States Bankruptcy Court, is August 31, 2022.
C. The State of California has committed to providing significant funding towards the purchase of the Hospital, as reflected in separate line items for ten million dollars and fifteen million dollars (for a total of $25 million) in the 2022-2023 State Budget Bill.
D. Due to a drafting error in the State Budget Bill language related to the State’s $25 million grant, the wrong entity was inadvertently inserted in place of the County, which was the intended recipient of the funds (to be received on behalf of the District). The result of the error is that the County will not receive the funds necessary to contribute towards the purchase price of the Hospital. This will require an amendment to the original State Budget Bill language, which is forthcoming. However, the necessary correction will not be accomplished quickly enough to accommodate the August 31, 2022, closing deadline.
E. The Parties agree that it is critical that the Hospital purchase be successfully concluded by August 31, 2022, in order to avoid additional unnecessary and exorbitant expenses that would follow a postponement, to ensure that the Hospital successfully transfers to public ownership on the bankruptcy court’s approved timeline, and to preserve the Hospital as a vital operating health care provider for the people of the Pajaro Valley region.
F. Accordingly, the City has agreed to provide the County with a $5 million shortterm loan (not to exceed 60 days) to fund the purchase price of the Hospital. This $5 million will be pooled with money from other community partners to fund the $25 million necessary to bridge the gap in funds needed to close the Hospital purchase transaction by August 31, 2022.
2.3
NOW THEREFORE, the Parties agree as follows:
1. Loan Amount. The City will loan the County five million dollars ($5 million), to be used exclusively for purposes of funding the purchase price for the Hospital as referenced in the above Recitals.
2. Term. The term of the loan is sixty (60) days. City is to pay the loan to the County on August 22, 2022. The County will repay to the City the entire balance of the loan within sixty days of receipt of the funds from the City.
3. No Security Required. The Parties recognize that this loan is backed by the full faith and credit of the County of Santa Cruz, in its capacity as a political subdivision of the State of California, which has pledged the funds necessary to repay the loan amount. Accordingly, this is an unsecured loan.
4. Payment of Costs. The County agrees that, within thirty (30) days of receiving a request for payment from the City, the County will pay the City all costs that the City incurs in providing this loan.
5. Interest. County agrees to pay interest in an amount equal to the LAIF daily interest rate from the date of issuance of the funds by the City to the date of repayment by the County.
6. Late Payment. The Parties agree the loan term is 60 days and shall be repaid by the County within 60 days of its issuance without any notice or request for repayment required from the City. However, if the loan is not repaid within 60 days, the County shall pay any additional costs incurred by the City in accordance with Section 4 related to County’s failure to timely repay the loan. In addition, the County agrees to pay City a fee for any late payment equal to 1.0% per month of the overdue amount (12% annual rate, to be calculated for each day the payment is late). However, the Parties agree this late fee may be waived based on the mutual agreement of the Parties.
7. Waiver. The County acknowledges that the City is entering into and performing this Agreement only as an accommodation to the County, and hereby waives any claim for damages or otherwise against the City, its officials, officers, and employees arising from or in connection with this Agreement.
8. Indemnity. To the fullest extent permitted by law, the County agrees that it will defend, hold harmless, and indemnify the City, its officials, officers, and employees from any claims for damages or otherwise from third parties that may result from this Agreement.
2.4
9. Choice of Law. This Agreement shall be construed in accordance with and governed by the internal laws of the State of California without regard to conflict of law provisions.
10. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.
11. Entire Agreement. This Agreement reflects the entire understanding and agreement of the Parties pertaining to its subject matter, and supersedes any prior oral or written agreements, representations, understandings or discussions between the Parties. No other understanding between the Parties shall be binding on them unless set forth in a further signed document amending this Agreement.
12. Further Assurances. Each Party shall, at the reasonable request of the other Party, execute and deliver to the other Party all further instruments, assignments, assurances and other documents, and take any actions as the other Party reasonably requests in connection with the carrying out of this Agreement.
13. No Third-Party Beneficiary Rights. The Parties do not intend to confer and this Agreement shall not be construed to confer any rights or benefits to any person, firm, group, corporation or entity other than the Parties.
14. No Waiver. No delay or failure to require performance of any provision of this Agreement shall constitute a waiver of that provision as to that or any other instance. Any waiver granted by a Party must be in writing to be effective and shall apply solely to the specific instance expressly stated.
15. Severability. The unenforceability, invalidity or illegality of any provision(s) of this Agreement shall not render the other provisions unenforceable, invalid or illegal.
16. Warranty of Authority. The signatories to this Agreement warrant and represent that each is authorized to execute this Agreement and that their respective signatures serve to legally obligate their respective representatives, agents, successors and assigns to comply with the provisions of this Agreement.
[SIGNATURES ON FOLLOWING PAGE]
2.5
CITY OF SANTA CRUZ
By:
Its: ________________________________
Date:
APPROVED AS TO FORM:
Tony Condotti
City Attorney
COUNTY OF SANTA CRUZ
By:
Manu Koenig
Chairperson, Board of Supervisors
Date:
APPROVED AS TO FORM:
Jason M. Heath
County Counsel
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