City Council
March 29, 2022
Presented by Colin Close
Senior Water Resources Planner
Water Demand Offset Policy, Fee Study, & Fees
2 WDO Policy and Fees
Public Outreach
Oct. 2021 - Letters to over 170 groups, individuals.
Oct 14, 2021 - presentation to North Coast Builders
Oct 20, 2021- WDO Policy info webpage published
srcity.org/WaterDemandOffset
Presentations at publicly noticed City meetings.
• Oct 5, 2021 – Ci ty Council/Board of Public
Utilities (BPU) Liaison Comm
• Oct 7, 2021 – B PU study session
• Oct 14, 2021 – Pla nning Comm study session
• Oct 26, 2021 – C ity Council study session
• Nov 18, 2021 – B PU report and resolution
• Nov 30, 2021 – C ity Council public hearing
• Mar 17, 2022 – B PU report and resolution
3 Water Shortage
Contingency Plan
(Shortage Plan)
Required by Urban Water Management
Planning Act
• Must be “Stand alone” plan.
• Must have defined shortage levels.
• Must provide road map to conserve
w
ater in each emergency stage.
• Purpose: Maintain suf ficient supply for
human consumption, sanitation, and
fire protection throughout emergency.
4 CA Water Code
Section 350 – A water shortage emergency must be
declared when the ordinary demand of water
customers cannot be satisfied without depleting the
water supply to the extent that there would be
insufficient water for human consumption,
sanitation, and fire protection.
Section 353 – During a shortage emergency, a water
supplier must adopt regulations and restrictions on
water delivery and consumption to conserve supply
for the greatest benefit with particular regard to
domestic use, sanitation, and fire protection.
5 CA Water Code
Section 356 – Regulations and restrictions may
include denying applications for new or additional
service connections and discontinuing service to
consumers who willfully violate regulations and
restrictions.
Section 357 - Restrictions in shortage emergency
prevail over right of individual to receive water
during water shortage emergency.
6 Case Law
Water supplier is empowered to anticipate water shortages and impose regulations and restrictions where, without
controls, water supply will become depleted, and not
sufficient to meet the needs of its existing consumers.
Landowners without water connection do not have a
constitutional right to be treated same as existing water customers.
Water suppliers have discretion to determine how to
respond to shortage emergencies – can impose rationing
on existing customers and can ban new connections.
7 Santa Rosa Water Shortage Stages
Shortage
Stage
Reduction
Needed
Program
Type
Stage 1 10% Voluntary
Stage 2 15% Mandatory
Stage 3 20% Mandatory
Stage 4 25% Mandatory
Stage 5 30% Mandatory
Stage 6 40% Mandatory
Stage 7 50% Mandatory
Stage 8 Over 50% Mandatory
Communitywide
Shared Target
Individual Mandates
(water allocations)
8 Santa Rosa Water Shortage Stages
Shortage
Stage
Reduction
Needed
Program
Type
Stage 1 10% Voluntary
Stage 2 15% Mandatory
Stage 3 20% Mandatory
Stage 4 25% Mandatory
Stage 5 30% Mandatory
Stage 6 40% Mandatory
Stage 7 50% Mandatory
Stage 8 Over 50% Mandatory
Communitywide
Shared Target
Individual Mandates
(water allocations)
Water Shortage
Charges
(temporary rate
increases)
9 Stage Prohibition/Restriction
All Stages Water Waste Ordinance
Stage 1 Hose shut off nozzles required
Prohibit washing hard surfaces with potable water
Stage 2
Institute Water Shortage Charges (5%-45%, Stages 2-8)
Lodging linens washed only on request
Restaurants serve water only on demand
Stage 3 Prohibit power washing, unless variance allowed Limit hours of irrigation to 8PM to 6AM
Stage 4 Prohibit operation of ornamental water features Customers must adhere to restrictions during shortages. 10 Stage Prohibition/Restriction
Stage 5
Institute water allocations (water rationing) (Stages 5-8) Prohibit filling new pools
Require use of recycled water (if available) for construction dust control
Stage 6 Prohibit filling/topping existing pools
Prohibit installing landscaping at new construction
Stage 7 Prohibit replanting landscapes at existing sites Stage 8 Prohibit all irrigation with potable water
Customers must adhere to restrictions during shortages. 11 Normal Water Supply
Sufficient for Growing Demand
Normal
Supply
31,540 Acre
Feet
2025
Projected
Demand
21,660 AF
2035
Projected
Demand
23,652 AF
2045
Projected
Demand
25,097 AF
2020
Demand
(actual)
19,277 AF
12 Supply Can’t Meet Normal Demand
During Severe Water Shortages (Stages 5-8)
13 Increasing Risk of
Severe Shortages
• Lake Sonoma at 30-y ear
historic low.
• If storage drops below
1 00k acre feet, reductions
of 30% or more can be
required by State.
• Climate change likely to
c
ause more frequent and
more severe droughts.
Lake Sonoma
14 Severe shortages trigger
need for offsets
Average water years
• More t han adequate supply for current
and future needs out to at least 2045.
Water Shortage Emergencies
• Water supply can’t meet o rdinary demand.
Stages 5 through 8
• Water allocations: Ration supply a mong
existing customers to maintain sufficient
water for human consumption, sanitation,
and fire protection throughout the
emergency.
• No water available for new demand.
15 Water Allocations (water
rations) are site-specific
limits on water use.
Severe shortages – Stages 5-8
• Top priority: Conserve water to
maintain sufficient supply for human
consumption, sanitation, and fire
protection throughout emergency.
• Individual mandate.
Each customer
must adhere to site-specific, very
restrictive monthly water allocation.
16 Stage 5 Water Shortage Emergency
Water rates increased in Stage 5 by 15% (Water Shortage Charge) Residential
Residential
Comm, Indust, Instit
Comm, Indust, Instit
Irrigation
Irrigation
Normal Demand Stage 5 Supply
30% shortage
17 Stage 6 Water Shortage Emergency
Water rates increased in Stage 6 by 25% (Water Shortage Charge) Residential
Residential
Comm, Indust, Instit
Comm, Indust, Instit
Irrigation
Irrigation
Normal Demand Stage 6 Supply
40% shortage
18 Stage 7 Water Shortage Emergency
Water rates increased in Stage 7 by 35% (Water Shortage Charge) Residential
Residential
Comm, Indust, Instit
Comm, Indust, Instit
Irrigation
Irrigation
Normal Demand Stage 7 Supply
50% shortage
19 Stage 8 Water Shortage Emergency
Water rates increased in Stage 8 by 45% (Water Shortage Charge) Residential
Residential
Comm, Indust, Instit
Comm, Indust, Instit
Irrigation
Normal Demand Stage 8 Supply
60% shortage
20 Development of WDO Policy
Urgency
• Without a WDO policy, there is no water for new
d
emand in severe water shortages (Stages 5-8).
• Lake Sonoma remains at historic low.
• Severe shortages more likely, due to climate change.
Interdepartmental team
• Planning, Economic Development, Building, Dev.
Se
rvices, City Attorney’s Office, & Water Resources.
• May-O ct 2021, with assistance from consulting firm
Woodard & Curran (policy) and Hildebrand (study).
Purpose of policy
• Ensure City can manage severe water shortages while
c
ontinuing to support housing and development.
21 WDO Fee Study
includes the following:
• Method for determining water
d
emand for each major type of
development
• Water savings for three known water
c
onservation programs
• Costs to implement these programs
• Costs to achieve water offsets for new
de
mand
• WDO fee schedule calculated using
ab
ove information
22 WDO Fee Schedule
Type of Development WDO Fee
Residential (per housing unit)
Single Family Residential
Small Lot (6,000 sq ft and under) $ 1,964
Large/Medium Lot (over 6,000 sq ft to 1 acre) $ 2,782
Large Lot (over 1 acre) $ 5,047
Multi Family Residential
Duplex and Triplex $ 1,649
Condos, Apts, Mobile Homes with separate irrig meter $ 1,259 Condos, Apts, Mobile Homes without separate irrig meter $ 1,498 Eligible ADUs, SROs, Senior Housing, High Density Housing $ 868 Commercial, Industrial, Institutional (CII) and Irrigation CII - Per thousand-gallon unit (TGAL) per month $ 415
Irrigation only - Per average TGAL per month $ 415
23 Implementation
~ Applicability
Pertains to construction projects that
• Need a building permit, and
• Subject to new/increased connection fees.
D
eveloper submits WDO application.
• Submit with building permit application.
• Can propose alternative to WDO fee.
WDO
Agreement signed.
• Developer has certainty about cost,
t
iming, and applicability.
• Appellate process available.
B
uilding permit issued.
• Project proceeds.
24 Implementation
~ Due date
WDO Fee (or completed approved
alternative) due when requesting final
inspection or occupancy of any type.
Potential for good news:
Requirement waived if City is not
in a declared a water shortage
emergency that requires water
allocations (rationing) at that time.
25 Implementation
~ Offset projects
• Any collected WDO fees to be deposited in
se
parate WDO account.
• Fees used exclusively to implement WDO
p
rojects to achieve water offsets for new
demand.
• Costs and activities to achieve offsets for
e
ach development to be tracked separately
from other funds and programs.
• Budget for WDO project based on activities
n
eeded to achieve required offsets quickly
for development that paid fee.
26 WDO Project Budget
Example 1: Senior Housing
Example based on: 3575 Mendocino project
(Project not subject to WDO policy; used for illustration purposes only.) • 94 senior housing units
• $56.61 million estimated cost to build
• $81,592 WDO fee ($868/unit x 94 units)
• 0.14% of est. cost to build (less than 1/5 of 1%)
• Approx. 2% of total City fees
27 WDO Project Budget
Example 1 - Senior Housing
94 Units x $868 = $81,592 WDO Fee
WDO Project Budget
Cost per
Bathroom
Conversion
Conversions
to achieve
offset
Total
Budget
Percent of
Budget
City labor $79 104 $8,627 10%
Plumber’s fees, materials $684 104 $71,136 87%
Graphic design, ad buys $21 104 $2,2189 3%
Total $81,592
28 WDO Project Budget
Example 2: Affordable Housing
Example based on: 5173 Highway 12 project
(Project not subject to WDO policy; used for illustration purposes only.) • 99 affordable housing units
• $71.03 million estimated cost to build
• $124,641 WDO fee ($1,259/unit x 99 units)
• 0.18% of est. cost to build (less than 1/5 of 1%)
• Approx. 3% of total City fees
29 WDO Project Budget
Cost per
Bathroom
Conversion
Conversions
to achieve
offset
Total
Budget
Percent of
Budget
City labor $79 159 $112,639 10%
Plumber’s fees, materials $684 159 $108,756 87%
Graphic design, ad buys $21 159 $3,246 3%
Total $124,641
WDO Project Budget
Example 2 - Affordable Housing
99 Units x $1,259 = $124,641 WDO Fee
30 WDO Project Budget
Example 3: Market Rate Apartments
Example based on: 325 Yolanda Ave project
(Project not subject to WDO policy; used for illustration purposes only.) • 248 market rate units
• $38.83 million estimated valuation
• $312,232 WDO fee ($1,259/unit x 248 units)
• 0.80% o f estimated valuation ( 8/10 of 1%)
• Approx. 5% of total City fees
31 WDO Project Budget
Cost per
Bathroom
Conversion
Conversions
to achieve
offset
Total
Budget
Percent of
Budget
City labor $79 397 $31,558 10%
Plumber’s fees, materials $684 397 $272,162 87%
Graphic design, ad buys $21 397 $8,512 3%
Total $312,232
WDO Project Budget
Example 3 – Market Rate Housing
248 Units x $1,259 = $312,262 WDO Fee
32 Single-Family Homes
Comparison based on: $697,498 home value*
(Current projects not subject to policy; for illustration purposes only.) WDO Fee
• Small Lot: $1,964
• 0.28% of home value (less than 1/3 of 1%)
• Lg/Med Lot: $2,782
• 0.39% of home value ( less than 1/2 of 1%)
• Large Lot: $5,047
• 0.72% of home value (less than 3/4 of 1%)
* Average of Jan 2022 values published by Redfin.com, Zillow.com, and Realtor.com
33 Affordable Housing
Rent Calculations
Affordable Housing Program – 5,000 units
• Participant rent based on household
i
ncome and size. Capped at approx.
30% of household income.
Section 8 Program – 2,000 households
• Participant rent based on income.
C
apped at approx. 30-40% of
household income.
34 Alternatives
• 7 alternatives discussed during
C
ouncil study session in
October and public hearing in
November.
• 3 additional alternatives have
be
en identified.
• Proposition 218 prohibits
s
ome alternatives.
35 Proposition 218 prohibits some alternatives.
Voter approved (1996) - California constitutional amendment establishing requirements related to local taxes and fees.
Restricts use of property related fees, including those for water and sewer service.
• Property must be “specially benefitted” by
imp
rovements or services for which fee is imposed.
• Amount of fee or charge may not exceed proportional
c
ost of service attributable to parcel.
36 Alternatives previously discussed
1. Take no action. Maintain status quo.
• De facto moratorium. No water for new demand in Stages 5-8 . • Negative impact on housing development and economic vitality. • Feasible but not recommended by staff.
2. Revise policy. Require moratorium in Stages 5-8.
• Moratorium. New demand prohibited in Stages 5-8 .
• Negative impact on housing development and economic vitality. • Feasible but not recommended by staff.
37 Alternatives previously discussed
3. Adopt policy. Subsidize WDO fee with General Fund.
• Feasible but competing needs, interests. Council purview.
4. Adopt policy. Subsidize WDO fee with existing rate
payer funds.
• Not feasible: Violates Prop 18. Property paying fee must “
specially benefit” from service or improvement being funded.
5. Adopt policy. Subsidize WDO fee w/ cell tower revenue. • Currently used to help low-in come water customers in the Help to Others (H2O) Program.
• Feasible but not recommended by staff.
38 Alternatives previously discussed
6. Revise policy to allow developers to propose alternative to achieve offsets, instead of paying WDO fee.
• Developer may prefer to implement a water conservation pr
oject at existing water customer site(s) in City’s
jurisdiction or provide the City with a fully permitted public water supply.
• Could be expensive and challenging for developers.
• Would be subject to service fee for City to evaluate proposal a
nd conduct inspections, analyses, or other actions to verify approved alternative meets standards and achieves offsets. • Draft WDO Policy has been revised to include this option.
39 Alternatives previously discussed
7. Adopt policy. Subsidize WDO fee with Excess Use Penalties. • Not expected to accrue sufficient funds to subsidize offsets.
St
age 5 analysis: Single Family Home (85% of water services). • Avg home not reducing use = $15 penalty/month.
O
ngoing non-compliance is prohibited.
Would result in water service shut off.
• WDO fee for 1 MFR unit = 58 to 84 penalties.
• WDO fee for 250 MFR units = 14,500 to 21,000 penalties. • Not likely to be viable. Not recommended by staff.
40 Additional Alternatives
8. Adopt policy. Subsidize by adding new WDO fee to water rates. • Not feasible: Violates Prop 218.
9. Revise Policy. Institute smaller WDO fee on all dev’mt, all the time, to gradually accrue funds for all offsets. • Not feasible. Violates Mitigation Fee Act. No “essential nexus” b
etween impact of development and mitigation requirement most of the time (no mitigation required except in shortage Stages 5-8).
10. Revise Shortage Plan. Reduce allocations for existing customers to create allocation for new development.
• Further reduce water allocated to existing customers during emergencies. • May not be sufficient for all new demand. Could delay projects. • Feasible but not recommended by staff.
41 Summary of Alternatives
1. Take no action. Maintain status quo. De facto moratorium. Feasible
2. Revise policy. Require moratorium in Stages 5-8. Feasible
3. Adopt policy. Subsidize WDO fee with General Fund. Feasible
4. Adopt policy. Subsidize WDO fee with existing ratepayer funds. Not feasible
5. Adopt policy. Subsidize WDO fee with cell tower revenue. Feasible
6. Revise draft policy to allow alternative to WDO fee. Included in policy
7. Adopt policy. Subsidize WDO fee with Excess Use Penalties. Not likely viable
8. Adopt policy. Subsidize by adding WDO fee to water rates. Not feasible
9. Adopt policy. Subsidize with small WDO fee for all dev’mt. Not feasible
10. Revise Shortage Plan. Allocate water for new development by reducing allocations for existing customers. Feasible 42 Feasible Options Notes
A. Take no action. Maintain status quo. De facto moratorium in Stages 5-8.
B. Revise policy. Require moratorium in Stages 5-8. Moratorium in Stages 5-8. Requires Shortage Plan amendment.
C. Adopt policy. Subsidize WDO fee with Genl Fund. Council purview. Could be limited to specific types of development, geographic regions, etc.
D. Adopt policy. Subsidize WDO fee with cell tower
revenue.
Currently helps low-income residents in Help to
Others (H2O) program.
E. Revise Shortage Plan. Allocate water for new
demand by reducing rations for existing
customers.
Impacts existing residents, businesses, etc. May not
be sufficient supply for all new demand (would
delay projects). Requires policy revision.
F. Adopt policy Council can institute subsidies at any point in the future (e.g., when declaring Stage 5-8 shortage).
43 If Council wishes to subsidize
WDO fees with General Fund
Council could institute subsidies at any point (e.g., at such time that water conditions warrant declaring Stage 5, 6, 7, or 8).
Council could limit eligibility for WDO subsidies:
1. Projects anywhere in City
a) Only housing projects
b) Projects that are “100% affordable” housing
c) Projects with some “affordable housing”
d) Only the “affordable housing” units within projects
2. Projects located within Priority Development Areas
a) Only housing projects
b) Projects that are “100% affordable” housing
c) Projects with some “affordable housing”
d) Only the “affordable housing” units within projects
44 Recommendation
It is recommended by the Board of Public Utilities and Santa Rosa Water that the City Council, by resolution:
1) adopt the Water Demand Offset Policy;
2) adopt the Water Demand Offset Fee Study;
3) adopt the Water Demand Offset Fees; and
4) authorize the Water Demand Offset Fees to be adjusted on an annual ba
sis to account for inflation at the beginning of the calendar year (January 1) starting in 2023, using the Engineering News Record’s 20- Cities Construction Cost Index.
45 QUESTIONS
Colin Close
Senior Water Resources Planner
[email protected]