City Council
Report
City Council Meeting: May 27, 2025
Agenda Item: 4.F
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To: Mayor and City Council
From: Rick Valte, Public Works Director, Public Works, Office of Sustainability & the Environment
Subject: Authorize First Modification to Agreement #5059 with Water Heater Warehouse for Heat Pump Water Heater Installation Services Recommended Action
Staff recommends that the City Council:
1. Adopt a finding of Categorical Exemption pursuant to Section 15311 of the California Environmental Quality Act Guidelines
2. Authorize the City Manager to negotiate and execute a first modification to agreement #5059 in the amount of $250,000 with Water Heater Warehouse for heat pump water heater installation services for the Public Works Department.
This will result in a five-year amended agreement with a new total amount not to exceed $500,000, which includes funding for future heat pump water heater services.
Summary
The Public Works Department’s Office of Sustainability and the Environment (OSE) and Facilities Maintenance Division worked with staff from the Southern California Regional Energy Network (SoCalREN) to install water heaters at various City facilities using funding from SoCalREN’s Heat Pump Water Heater Program at no cost to the City in late 2024. This program offers services that promote renewable energy and energy efficiency for public agencies. It is a first-come, first-serve incentive program that offers free technical support and funding to cover up to 100% of the cost of replacing gas water heaters with electric heat pump water heaters. Additional funding has recently become available.
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Replacing gas systems with heat pumps would not only save the City money but would also help reduce carbon emissions and support the electrification goals outlined in the City’s adopted Climate Action & Adaptation Plan (Attachment A). Staff recommends executing a first modification to Agreement #5059 in the amount of $250,000 with the selected vendor for this incentive program, Water Heater Warehouse, for heat pump water heater installation services which would result in a five-year amended agreement with a new total amount not to exceed a budget authority of $500,000.
Discussion
In late 2024, OSE worked with Facilities and SoCalREN staff to install water heaters at the following facilities at no cost to the City:
• Virginia Avenue Park (VAP) Teen Center
• VAP Park Center
• Palisades Park/Camera Obscura
• Memorial Park Gym
• Memorial Park Fitness Room
The project vendor, Water Heater Warehouse, was selected by SoCalREN through a competitive bidding process. The City was not involved in the selection process and is required to use the selected vendor as a program participant. The value of the services provided to the City was $87,039 and was paid directly from SoCalREN to Water Heater Warehouse. To complete this work, the City executed a Contractual Services Agreement with Water Heater Warehouse in an amount not to exceed $250,000. See Table 1 below for a breakdown of potential projects and associated costs. The original contract was not brought before Council because the value of the services provided in 2024 was lower than $250,000 and there was zero cost to the City.
Due to new funding availability by SoCalREN, the City now has the opportunity to install heat pump water heaters at up to ten additional sites in Fiscal Year (FY) 2025-26, four of which are fully funded and six have a cost-share portion to be paid by the City, which would be funded by OSE. The total cost to the City for these projects would be $40,559, 3 of 5
with remaining costs covered by the SoCalREN incentive program. This program may have additional funding in future years, thus staff recommends executing a first modification to contract #5059 in the amount of $250,000 to enable staff to pursue these projects as well as additional heat pump water heater installations if and when incentives are available and if the OSE has budget to cover any required cost-share.
Furthermore, this contract amendment qualifies as an exception to competitive bidding (SMMC 2.24.250(c) & ((f)) since it was competed by SoCalREN and they identified Water Heater Warehouse as the designated program provider. This new recommended not-to-exceed budgetary authority of $500,000 would allow staff to leverage outside funding opportunities to replace additional gas water heaters that are due for replacement in the next five years with efficient electric heat pump water heaters that support the City’s electrification and climate goals. Staff are working with technical consultants to confirm project feasibility before proceeding with any potential water heater projects in Table 1.
Table 1: Completed and Potential Water Heater Projects and Cost-Share Totals Water Heater Location Installation
Cost
Incentive
Funding
Cost to
the City
COMPLETED IN 2024
Virginia Avenue Park - Teen Center $14,598 $14,598 $0
Virginia Avenue Park - Park Center $16,549 $16,549 $0
Memorial Park - Gymnasium $29,980 $29,980 $0
Memorial Park - Fitness Room $14,361 $14,361 $0
Palisades Park/Camera Obscura $11,549 $11,549 $0
Total $87,037 $87,037 $0
POTENTIAL
Fire Station 5 $34,679 $34,679 $0
Fire Station 3 $40,129 $40,129 $0
Fire Station 1 $41,730 $41,730 $0
Annenberg Beach House - Pool House (2) $53,211 $53,211 $0 Annenberg Beach House – Event House $14,529 $13,648 $880 Douglas Park $13,748 $4,835 $8,912
Joslyn Park $13,049 $8,485 $4,563
Marine Park - Day Care $16,549 $8,485 $8,063
Marine Park - Auditorium $14,799 $8,373 $6,425
Reed Park $18,299 $6,585 $11,713
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Total $260,725 $220,165 $40,559
GRAND TOTAL $347,762 $307,202 $40,559
Environmental Review
The agreement is categorically exempt from CEQA pursuant to Section 15301 and Section 15311 of the CEQA Guidelines. Section 15301 (Class 1 - Existing Facilities) the operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of existing public or private structures, facilities, mechanical equipment, or topographical features, involving negligible or no expansion of existing or former use. Section 15311 (Class 11 - Accessory Structures) exempts the construction, or replacement of minor structures accessory to (appurtenant to) existing commercial, industrial, or institutional facilities. The agreement would result in the installation of new heat pump water heaters at existing City facilities and would not expand or materially change existing City facilities. Furthermore, none of the exceptions to Categorical Exemptions set forth in the CEQA Guidelines, Section 15300.2, apply to this exemption. Therefore, the agreement is exempt pursuant to Section 15301 and Section 15311 of the CEQA Guidelines.
Past Council Actions
Meeting Date Description
05/28/2019 (Attachment A) Adopted the Climate Action & Adaptation Plan Financial Impacts and Budget Actions
Staff seeks authority to approve funding from the General Fund to increase the amount of contract #5059 with Water Heater Warehouse for heat pump water heater installation services. Funds are included in the FY 2025-27 Proposed Biennial Budget. Additional funding would come from SoCalREN’s Heat Pump Water Heater Program and would be paid directly from SoCalREN to Water Heater Warehouse.
Contract Modification Request
(Contract #5059 with Water Heater Warehouse)
Funding
Source
Current
Authorized
Amount
FY 2025-26
Modified
Request
Amount
Department Account #
Total
Revised
Contract
Amount
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SoCalREN $250,000* $100,000 N/A $350,000
General
Fund $0 $150,000 01500003.552010.99546 $150,000
Total $500,000
*Paid, or would be paid, directly from SoCalREN to Water Heater Warehouse.
Future year funding is contingent on Council budget approval.
Prepared By: Elias Platte-Bermeo, Sustainability Analyst Approved Forwarded to Council
Attachments:
A. Climate Action & Adaptation Plan (Web Link)
B. Water Heater Warehouse - Original Agreement
C. Water Heater Warehouse - Oaks Initiative
D. Water Heater Warehouse - Levine Act