COUNCIL AGENDA REPORT
TO: Mayor and City Council
FROM: Shad S. Springer, Director of Utilities
DATE: August 4, 2026
SUBJECT: Adoption of a Resolution Approving a Surplus Water Transfer Agreement with the Central Coast Water Authority
Description:
The City Council will consider adopting a Resolution approving the execution and implementation of a Surplus Water Transfer Agreement with the Central Coast Water Authority for 2026.
Environmental Notice: The Project qualifies for a Class 1 Categorical Exemption pursuant to Section 15301 (Existing Facilities) of the California Environmental Quality Act State Guidelines.
RECOMMENDATION:
1. Adopt a Resolution authorizing the City Manager, or designee, to execute a Surplus Water Transfer Agreement, and any related documents necessary, with the Central Coast Water Authority, in substantially the same form as presented, for the transfer and sale of up to 5,000 acre-feet of surplus State Water; and
2. Take all actions necessary to implement the agreement and complete the transfer consistent with the terms approved by said Resolution.
BACKGROUND:
The Central Coast Water Authority (CCWA) was formed by its member agencies , including the City of Santa Maria, to finance, construct, operate, and maintain the facilities that deliver State Water Project supplies to participating agencies on the Central Coast.
The City of Santa Maria (City) has received State Water through CCWA since 1997.
Imported State Water is blended with local groundwater to impro ve water quality, supplement local groundwater supplies, and meet regulatory requirements, while enhancing the long-term reliability of the City's water supply.
In 2023, CCWA established its Surplus Water Transfer Program to provide a process for member agencies to exchange or transfer surplus State Water when available. The City Council previously authorized participation in the program, allowing the City to pursue exchanges or sales of surplus State Water when conditions warrant.
Favorable State Water P roject conditions have resulted in the City having State Water supplies currently in excess of projected operational needs. Staff estimates that up to 2 5,000 acre-feet (AF) of water can be made available for transfer this year without affecting the City's anticipated water supply needs or long-term water supply reliability.
DISCUSSION:
Based on current State Water Project allocations, projected customer demand, existing groundwater supplies, and operational requirements, staff has determined that up to 5,000 AF of State Water is surplus to the City's 2026 needs and can be made available for transfer this year. The proposed transfer will not affect the City's ability to meet customer demand or comply with water supply obligations.
The City's surplus State W ater is currently stored in San Luis Reservoir. Under State Water Project operating rules, stored water cannot be guaranteed to remain available indefinitely. Depending on reservoir conditions and operational needs, stored water could be lost. A recent analysis by the California Department of Water Resources (DWR) indicates that there is a 50 percent chance of at least some stored water in San Luis Reservoir being lost by the end of September 2026. Selling surplus water allows the City to realize value from water it does not currently need and protects the water from being lost by the City for no value, while maintaining sufficient supplies to meet anticipated demand.
Transfers between State Water Contractors require coordination among DWR , CCWA, and the purchasing State Water Contractor. As the City's State Water delivery agency, CCWA administers these transactions on behalf of its member agencies. To facilitate this transaction, the City will enter into a Surplus Water Transfer Agreement w ith CCWA (Attachment B). Under the agreement, CCWA will coordinate the transfer of the City's surplus State Water to the purchasing agencies, obtain the necessary approvals, receive payment from the purchaser, and distribute the City's share of the proceed s, consistent with the terms of the Transfer Agreement between CCWA and the Westside Districts (Attachment C).
CCWA has negotiated a transfer agreement with the Westside Districts, subject to execution of the Surplus Water Transfer Agreement and completio n of all required approvals. The sale price is $400/AF if the transaction is completed during September 2026 and decreases each month thereafter through December 2026. Staff recommends making available for sale up to 5,000 AF of surplus State Water. At that quantity and price, the transfer is expected to generate approximately $ 2 million in gross revenue for the Water Enterprise Fund.
Execution of the Surplus Water Transfer Agreement does not itself complete the sale.
The transfer remains subject to approval by DWR and execution of the required transfer agreements. Because State Water transfer opportunities are time -sensitive, approval of the Surplus Water Transfer Agreement at this time will allow CCWA to proceed with the transaction at the most favorable terms.
3 Alternative(s)
The City Council may decline to approve the Surplus Water Transfer Agreement. This is not recommended because it would prevent the City from utilizing CCWA to complete the sale of surplus State Water, potentially resulting in both the loss of revenue from the water sales and the loss of water stored in San Luis Reservoir.
Fiscal Considerations
Proceeds from the sale will be credited to the Water Enterprise Fund, generating up to $2 million in revenue , which will help support the co ntinued operation and maintenance of the City's water system. The Water Enterprise Fund will also be responsible for its proportionate share of administrative and transaction costs associated with the transfer as provided in the Surplus Water Transfer Agre ement. Those costs are minor relative to the anticipated sale proceeds.
Impact on the Community
The proposed agreement with CCWA allows the City to maximize the value of surplus State Water while maintaining sufficient water supplies to meet projected demands.
Other Agency Review
Completion of the transfer will require approval and coordination with CCWA, DWR, the purchasing State Water Contractor, and any other approvals required under applicable State Water Project contracts.
ATTACHMENT(S)
A. Resolution
B. Surplus Water Transfer Agreement with Central Coast Water Authority C. 2026 Westside Districts/Central Coast Water Authority Transfer Agreement