CC 2013-07-09_08.f. Rule 20A Credits for Undergrounding UtilitiesMEMORANDUM
TO: CITY COUNCIL
FROM: STEVEN ADAMS, CITY MANAGER#"
SUBJECT: CONSIDERATION OF PURCHASE OF RULE 20A CREDITS FOR
UNDERGROUNDING OF UTILITIES ON EAST GRAND AVENUE
DATE: JULY 9, 2013
RECOMMENDATION:
It is recommended the Council authorize the City Manager to execute an agreement
with the County of San Luis Obispo, in a form satisfactory to the City Attorney, for the
purchase of an estimated $3 million in Rule 20A credits for completion of Phase Ill of
the East Grand Avenue Utility Undergrounding project in exchange for an amount
equal to 5% of the credits necessary to complete the project.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
The estimated cost of purchasing the Rule 20A credits is approximately $150,000.
There is currently $147,000 budgeted in FY 2013-14 for undergrounding of utilities
and $50,000 in the Capital Improvement Program from Local Sales Tax funds in FY
2014-15, which is a total of $197,000. Approximately $30,000 will be spent on the
Phase II project for new poles, and an additional $30,000 is projected necessary for
poles for Phase Ill, leaving $137,000. Therefore, an additional $13,000 in Local
Sales Tax funds will need to be budgeted in a future year. There is projected funding
available that can be programmed without impacting other projects.
BACKGROUND:
Most public undergrounding utility projects are funded through Rule 20A credits,
which are issued by PG&E each year to municipal agencies and are derived from an
electric tariff filed with the Public Utilities Commission. For projects to be eligible, an
underground utility district must be formed. When a sufficient amount of credits are
accumulated to fund a project, a request is then made to PG&E to schedule the
project. There has been a significant wait time over the past few years for Rule 20A
projects. A project cannot be placed in the queue until the Rule 20A credits are
available.
The City has been working on undergrounding utilities on East Grand Avenue for
over 15 years. The project was divided into three phases. Phase 1 (Highway 101 to
Halcyon Road) was completed in approximately 2002. The County provided prior
Item 8.f. - Page 1
CITY COUNCIL
CONSIDERATION OF PURCHASE OF RULE 20A CREDITS FOR
UNDERGROUNDING OF UTILITIES ON EAST GRAND AVENUE
JULY 9, 2013
PAGE2
assistance with credits to help complete the first phase. Phase 2 (Oak Park
Boulevard to Elm Street) is under construction at this time, but will deplete and
exceed all the City's remaining Rule 20A credits. Phase 3 (Elm Street to Halcyon
Road) is utility District No. 6. Formation of the district was approved by the City
Council on December 13, 2005.
ANALYSIS OF ISSUES:
Due to construction costs above original estimates, costs for Phase II
undergrounding work has exceeded the City's available Rule 20A credits. While
PG&E will complete the work despite the underfunded amount, they will not proceed
with the next phase until the City has Rule 20A credits sufficient to fund both the
remaining amount for Phase II and the amount needed to construct Phase Ill. This
results in an estimated total cost of approximately $3 million.
The third phase consists of an area entirely built out. Costs for the project are
escalating at a greater rate than the amount of credits that are issued to the City each
year. Therefore, without the County's assistance, utility poles and wires are projected
to remain on this lone segment of East Grand Avenue for at least the next 25 years
or probably much longer. Undergrounding utilities has been one of the City's major
efforts to enhance the East Grand Avenue corridor.
An allocation of Rule 20A credits is also being requested by the City of Pismo Beach.
County staff has determined that both requests can be approved with minimal impact
on County undergrounding projects.
City staff has been working with PG&E and staff from other jurisdictions throughout
the County for several years through a countywide underground utility coordinating
committee that meets on a monthly basis. After several discussions with
representatives of the County Public Works Department, the terms of an agreement
have been reached that County staff have agreed to recommend to the Board of
Supervisors. The key terms of the proposed agreement include the following:
• The County will provide the Rule 20A credits needed to complete the East
Grand Avenue District No. 6 project.
• The City will pay the County an amount equal to 5% of the total value of the
Rule 20A credits needed.
• The payment will be due to the County when design commences on the project.
Staff has contacted other cities that might be interested in selling Rule 20A credits,
but all have a much smaller amount of credits and none have agreed. If approved,
Item 8.f. - Page 2
CITY COUNCIL
CONSIDERATION OF PURCHASE OF RULE 20A CREDITS FOR
UNDERGROUNDING OF UTILITIES ON EAST GRAND AVENUE
JULY 9, 2013
PAGE 3
PG&E has indicated that the project is likely to be completed within the next two to
three year period.
ALTERNATIVES:
The following alternatives are provided for the Council's consideration:
- Approve staffs recommendation;
- Direct staff to instead continue to identify other agencies that may sell their Rule
20A credits, but it is unlikely any will have enough credits and would likely
require a higher cost to acquire;
- Request staff to pursue other terms with the County;
- Do not approve the recommendations and abandon the undergrounding project
at this time; or
- Provide other direction to staff.
ADVANTAGES:
The recommendations likely present the only feasible option for many years to
complete undergrounding of utilities on East Grand Avenue. This will be an important
step in enhancing the East Grand Avenue commercial corridor. The
recommendations provide a very cost effective approach by completing an estimated
$3 million project for approximately only $150,000.
DISADVANTAGES:
The recommendations will result in an expenditure of funds.
ENVIRONMENTAL REVIEW:
No environmental review is required for this item.
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted in front of City Hall on Wednesday, July 3, 2013 and on the
City's website on Friday, July 5, 2013. No comments were received.
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