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CC 2015-07-28_11b Water Conservation Incentive ProgramsTO: FROM: MEMORANDUM CITY COUNCIL DROUGHT TEAM (TERESA MCCLISH, COMMUNITY DEVELOPMENT DIRECTOR; GEOFF ENGLISH, PUBLIC WORKS DIRECTOR; DEBBIE MALICOAT, ADMINISTRATIVE SERVICES DIRECTOR; RYAN CORNELL, ACCOUNTING MANAGER; SHANE TAYLOR, UTILITIES SUPERVISOR; KELLY HEFFERNON, ASSOCIATE PLANNER) SUBJECT: CONSIDERATION OF COUNCIL DIRECTION ON THE CITY'S WATER CONSERVATION INCENTIVE PROGRAMS DATE: JULY 28, 2015 RECOMMENDATION: It is recommended the City Council: 1) Increase funding for the Cash for Grass Program for fiscal year (FY) 2015-16 and 2016-17 and appropriate $131,000 from the Water Neutralization Fund in FY 2015-16 forthe Program; and 2) Eliminate the following water conservation incentive programs for FY 2015-16 and 2016-17: a. Smart Irrigation Controllers b. Landscape Irrigation Retrofit c. System Water Loss Mitigation IMPACT ON FINANCIAL AND PERSONNEL RESOURCES: The Water Conservation Program continues to result in a substantial commitment of staff resources. However, addressing water supply is one of the City's priorities identified in the Critical Needs Action Plan. Currently, the Cash for Grass Program will be over budget by approximately $240,000 if all rebate applications are processed. The Water Conservation Program was designed to achieve the City's water conservation goals by 2020 over an implementation period of 5.5 years. Expenditures currently projected for FY 2015-16 and 2016-17 are as follows: Program Turf Removal Program Washing Machine Rebates Smart Irrigation Controller Program FY 2015-16 $60,000 $8,000 $8,000 FY 2016-17 $60,000 $8,000 $8,000 Item 11.b. - Page 1 CITY COUNCIL CONSIDERATION OF COUNCIL DIRECTION ON THE CITY'S WATER CONSERVATION INCENTIVE PROGRAMS JULY 28, 2015 PAGE2 Landscape Irrigation Retrofit Plumbing Retrofit Program System Water Loss Mitigation City Landscape Irrigation Water Survey Program Public Education Campaign Total $6,000 $52,050 $25,000 $40,000 $20,000 $70.000 $297,050 $6,000 $52,050 $25,000 $40,000 $20,000 $70,000 $297,050 To ensure that sufficient funds are available for the Cash for Grass Program in the current fiscal year, staff recommends that specific Water Conservation Program funds in FY 2016-17 be rolled over to the current year. The proposed budget is as follows: Program Turf Removal Program Washing Machine Rebates Smart Irrigation Controller Program Landscape Irrigation Retrofit Plumbing Retrofit Program System Water Loss Mitigation City Landscape Irrigation Water Survey Program Public Education Campaign Total: Difference: FY 2015-16 $274,000 $8,000 $2,000 $2,000 $52,050 $0 $40,000 $20,000 $30,000 $428,050 $131,000 FY 2016-17 $0 $8,000 $0 $0 $52,050 $0 $40,000 $20,000 $30.000 $150,050 ($147,000) It is anticipated that remaining fund balances at the end of FY 2015-16 for the Water Conservation Program will be rolled over to FY 2016-17 (for reference, approximately 34% of the Cash for Grass applications received have not been completed). The 5.5 year Program is funded from the following projected sources: Existing Water Mitigation Fee Funds $190,000 Future Projected Water Mitigation Fee Revenue $275,000 Annual Funds Programmed in Water Fund for Conservation $275,000 Funding Available from Expiration of OCSD Water Purchase Agreement $825.000 Total $1,565,000 Reallocating funding as detailed above results in a savings of $16,000 over the two-year budget. Item 11.b. - Page 2 CITY COUNCIL CONSIDERATION OF COUNCIL DIRECTION ON THE CITY'S WATER CONSERVATION INCENTIVE PROGRAMS JULY 28, 2015 PAGE3 BACKGROUND: The City has implemented a comprehensive approach to meeting projected water supply demand and water conservation goals. In May of 2003, the City Council adopted a Water Conservation Program. Phase I of the program began in April of 2004, which focused on retrofitting existing residential plumbing with low flow fixtures. In 2008, the City Council appropriated $50,000 from the Water Neutralization Fund to initiate water conservation rebate programs for turf removal, high efficiency washing machines and smart irrigation controllers. At the June 10, 2014 City Council meeting, staff updated comprehensive strategies to address the City's long-term water supply needs. The primary objectives of the recommendations were to address long-term projected water demand through increased water conservation measures, to protect existing water supply by pursuing initial studies for a project that will use recycled water to prevent seawater intrusion, and to coordinate with neighboring jurisdictions to manage the overall water supply in the most effective manner possible. The City Council approved all the recommendations except proposed funding for a water conservation public education program. Consideration of this program was deferred and staff was requested to provide more detail on what the program would entail. Some concerns were also expressed regarding the proposed cost for the program. In addition, it was emphasized that the water supply recommendations were designed to address future projected demand under normal weather and supply conditions and any project aimed at preventing seawater intrusion could take up to 10 years to implement. Therefore, an extended drought would likely cause problems for the City. As a result, staff was directed to establish a Water Shortage Emergency Plan. On August 26, 2014, the City Council approved the water conservation public education program and authorized the City Manager to execute a consultant services agreement with Verdin Marketing, Inc. to develop and implement the water conservation public education program, and directed staff to prepare a contingency Water Emergency Ordinance that was adopted on February 24, 2015. At that meeting, Council asked staff to return with an update on the City's water conservation public education program, which staff provided on March 10, 2015. Subsequently, on April 1, 2015 the Governor issued the fourth in a series of Executive Orders on actions necessary to address California's severe drought conditions, which directed the State Water Board to implement mandatory water reductions in urban areas to reduce potable urban water usage by twenty-five percent (25%) statewide. On May 5, 2015, the State Water Board adopted an emergency conservation regulation in accordance with the Governor's directive. On May 26, 2015, the City Council declared a Stage 1 Water Shortage Item 11.b. - Page 3 CITY COUNCIL CONSIDERATION OF COUNCIL DIRECTION ON THE CITY'S WATER CONSERVATION INCENTIVE PROGRAMS JULY 28, 2015 PAGE4 Emergency and implemented water restrictions and regulations to residential and irrigation water services. During the last drought, the per capita water use went down to 156 gpd in 2010 and then quickly went up the following year 2011 to 170 gpd following heaver than normal rainfall. Our goal is to maintain a sustaining conservation ethic for the City resulting in the same low level of water consumption after the drought is over due to recurring drought cycles. ANALYSIS OF ISSUES: The City's water conservation incentive programs have been tremendously successful during the last six (6) months due to several factors, which include increased awareness about the drought, a robust marketing effort assisted by Verdin Marketing, Inc. and the recently imposed water use restrictions. In particular, citizen participation in the Cash for Grass Program has far exceeded expectations. In 2014, Council integrated a landscape irrigation retrofit program, system water loss mitigation project, City landscape irrigation retrofit program, and a water use survey into the water conservation programs. Due to high participation in some programs and less in others, and due to confidence levels in long-term reliable water savings, each program has been reviewed in order to address budged concerns. An overview of these programs is discussed below. Water Conservation Strategy Below is a pie chart outlining the proposed Water Conservation Strategy to meet the target of 149 gallons per resident per day by 2020. Item 11.b. - Page 4 CITY COUNCIL CONSIDERATION OF COUNCIL DIRECTION ON THE CITY’S WATER CONSERVATION INCENTIVE PROGRAMS JULY 28, 2015 PAGE 5 Summary of Water Conservation Programs  Plumbing Retrofit Program  Cash for Grass Rebate Program  Water Efficient Washing Machine Rebate Program  Smart Irrigation Controller and Sensor Program  Large Area Irrigation Retrofits  Landscape irrigation retrofit program  Public Education Program  System Water Loss Mitigation Project  City Landscape Irrigation Retrofit Program  Water Use Survey Program The Plumbing Retrofit Program replaces old, high water-use fixtures for residential units built prior to 1992. All parts and labor required for the retrofit are provided free of charge. The retrofit includes replacing the following fixtures: Item 11.b. - Page 5 CITY COUNCIL CONSIDERATION OF COUNCIL DIRECTION ON THE CITY'S WATER CONSERVATION INCENTIVE PROGRAMS JULY 28, 2015 PAGES • Toilets -replace with ultra low-flow 1.6 gallons per flush (as of January 1, 2014 the requirement is 1.28 gallons per flush). Cost is $235 -$290 per toilet. • Indoor Faucets -install aerators designed for 2.0 gallons per minute. Cost is $5 per faucet. • Showerheads -replace with 2.5 gallons per minute. Cost is $13 per showerhead. • Pressure Regulator -inspect and adjust or install new regulator not to exceed 80 pounds per square inch (psi). Cost is $135 for a new pressure regulator. This program is voluntary; however, in February 2005 the City Council adopted an ordinance implementing a mandatory plumbing retrofit program upon the change of ownership of any real property. The seller must retrofit the property's plumbing fixtures to meet the criteria of low-water use. Staff estimates that this program saves 7.5 AFY of water. The goal is to retrofit 150 homes per year. Because this is a successful, on- going program that generates long-term water savings, staff recommends that this program be continued. The Cash for Grass Rebate Program provides a financial incentive for homeowners and businesses to remove existing turf and replace it with a less water-intensive landscape. The goal of the program is to encourage a permanent reduction in the amount of water used for landscaping. In 2014, the City increased the rebate payment from $0.50 to $1.00 per square foot of turf removed, and the minimum amount of turf to be removed was increased from 250 to 500 square feet with a maximum amount of eligible turf removal capped at 5,000 square feet. Staff previously estimated that this program saves 3.3 acre feet per year (AFY) of water. This estimate is low based on the gaining popularity of the program and more recent citizen participation. Since program inception, 266 turf removal projects have been completed removing 342,706 square feet (7.9 acres) of grass. Since January 2015, a total of 239 applications have been submitted. For comparison, a total of 310 applications were submitted between March 2009 and December 2014. Hence, forty-four percent (44%) of all applications were submitted within the last seven (7) months. Given that the average turf conversion is 1,300 square feet and 18 gallons of water is saved annually per square foot of turf removed, each application represents approximately 23,400 gallons of water saved per year. With 239 applications pending, this represents a total of 5,592,600 gallons of annual water savings, or 17.37 AFY. To date, $26,417 in rebates has been issued for FY 2015/16, which leaves a program fund balance of $33,583. Approved applications (turf measured within the last six months) total approximately $272,000. This amount does not include applications that have exceeded the six (6) month time limit to complete the turf conversion project. In previous years, the time restriction was not firmly enforced to allow time for customers Item 11.b. - Page 6 CITY COUNCIL CONSIDERATION OF COUNCIL DIRECTION ON THE CITY'S WATER CONSERVATION INCENTIVE PROGRAMS JULY 28, 2015 PAGE7 to complete the project and to ultimately achieve the desired water savings. If the time restriction is waived and all pending rebates are paid, the program would be over budget by roughly $340,000. Staff recommends that the City enforce the time stipulation. · The recommended budget reallocation would allow the program to continue; however, once funds are used the program would cease. Given the current the number of pending applications, the rate of application submittal and the recommended budget amount, it is estimated that this program would extend ten to twelve months. Because this is a very successful, on-going program that generates long-term water savings, staff recommends that this program be continued. The Water Efficient Washing Machine Rebate Program provides a rebate of $200 (increased in 2014 from $150) for CEE Tier 3 washers. On February 10, 2015 the City Council removed the local purchasing requirement for the Water Efficient Washing Machine Rebate Program. On average, a high-efficiency washer uses 20% less energy and 35% less water than regular washers, which can save up to 5,250 gallons per year per household. Since March 2009, a total of 152 rebates have been issued (38 rebates since January 2015). Staff estimates that 0.8 AFY of water is saved with this program. The goal is to replace 40 washers per fiscal year. To date, $2,200 in rebates has been issued for FY 2015/16, which leaves a project fund balance of $5,800, or twenty-nine (29) rebates. Although this program does not represent a relatively large amount of water savings, it is a successful program given the amount of participation and the limited overall cost. Therefore, staff recommends that this program be continued. The Smart Irrigation Controller and Sensor Program provides an irrigation audit with recommendations for system improvements and a smart controller with weather-based sensor technology to replace older controllers for residential properties. The City pays up to $300 for a new controller per residence. The City contracts with Sprinkler King, Inc. to conduct the water audits and provide the controllers to qualifying participants. To date, 99 water audits have been performed, most of which have installed smart controllers. For FY 2015/16, a total of $1,200 in rebates has been issued, leaving a project fund balance of $6,800. The estimated water savings is 0.9 AFY with this program. The goal is to achieve 20 installations per year. Because this program has not received much participation relative to the City's other water conservation incentive programs and is more cumbersome to manage, staff recommends that this program be discontinued. Since 2009, the City has contributed to Large Area Irrigation Retrofits for commercial, institutional and homeowner association (HOA) water users. To date, the City, with the assistance of Sprinkler King, Inc., have retrofitted the following properties: Item 11.b. - Page 7 CITY COUNCIL CONSIDERATION OF COUNCIL DIRECTION ON THE CITY'S WATER CONSERVATION INCENTIVE PROGRAMS JULY 28, 2015 PAGES • Oak Park Blvd Landscaping • Vista Del Mar HOA • Woodland Pocket Park • Wildwood Ranch HOA • Strother Park • Five Cities Center • St. Patrick's School • Kmart Center • Sunrise Terrace Mobilehome Park • Cemetery District • Paulding School • Rancho Grande Park • Ocean View School It is estimated that 17.39 AFY is saved from the Strother Park, Paulding School, Ocean View School, Cemetery District and Rancho Grande Park retrofits (audits for determining post-project water savings have not been completed for the other properties). The goal is to contact other large commercial, institutional and HOA water users to encourage participation in the program. However, because most of the large area irrigation retrofits have already been completed, staff recommends that this program be discontinued. The Landscape Irrigation Retrofit Program includes retrofitting outdated spray heads and drip emitters for existing residences. As mentioned above, Sprinkler King, Inc. has conducted 99 residential irrigation audits for the City and provided information on the average sized landscape retrofit. This includes replacing sprinkler heads with MP rotators and/or drip irrigation emitters. The estimated water savings is 30% per retrofit. The cost for an average residential irrigation retrofit using MP rotators and emitters, less labor costs, is $200. The estimated water savings is 0.8 AFY. The goal is to achieve 20 installations per year. On February 10, 2015 the City Council approved combining the Smart Irrigation Controller Program and the Landscape Irrigation Retrofit Program for a total maximum rebate of $500. Because this program has not received much participation relative to the City's other water conservation incentive programs and is more cumbersome to manage, staff recommends that this program be discontinued. The System Water Loss Mitigation Project was programmed to include a leak detection survey of the City's water distribution system. Staff believes that through a comprehensive leak detection survey and repair of identified water loss locations, a 2% reduction to the City's water system loss is attainable. However, the City's water distribution system is already operating at a minimal loss of about 5%, and funds could Item 11.b. - Page 8 CITY COUNCIL CONSIDERATION OF COUNCIL DIRECTION ON THE CITY'S WATER CONSERVATION INCENTIVE PROGRAMS JULY 28, 2015 . PAGE9 be used for programs with higher water savings. Staff recommends that this program be discontinued. The City-owned Property Landscape Irrigation Retrofit Program provides funding for a comprehensive effort to reduce water use at City parks and landscape areas. This program involves turf removal and irrigation retrofit projects. Turf removal areas are re- landscaped with drought tolerant landscaping. Arroyo Grande in Bloom has been consulted on the re-landscaping designs and final design plans was reviewed by the Arroyo Grande Parks and Recreation Commission on March 11, 2015. It is estimated that this program generates a water savings of approximately 14 AFY. Staff recommends that this program be continued. The Water Use Survey Program involves the use of existing Public Works Utilities Division staff to conduct water use surveys at targeted residential and commercial properties. Funding for this program is programmed to hire a temporary employee to back-fill the duties of one current Utilities Division employee. During the five and one- half year program, staff's goal will be to contact all of our water system customers to arrange for a Water Use Survey. However, the high use customers will be targeted first. Following the Water Use Survey, customers will be referred to existing water conservation programs and other necessary corrections that will help the customer reduce water use. It is estimated that this program will generate water savings of approximately 2.5 AFY in addition to increasing participation in other incentive programs. Public Works staff has prepared the water audit survey tools and will begin full implementation of this program during the summer of 2015. Staff recommends that this program be continued. The Public Education Program includes a consultant team under contract with Verdin Marketing, Inc. with both the City and the City of Pismo Beach to design an extensive public education marketing campaign for a far reaching water conservation education program. The program has been developed and is being implemented. ~ncluded as Attachments 1 is Verdin's summary of accomplishments to date. The estimated total water savings is approximately 23 AFY for this program. It is important to clarify that the purpose of the public education program is to help meet water conservation goals to address the City's long-term future projected water demand. It is not simply designed to educate the public about the immediate need to conserve water due to the drought. The intent of this program is to: 1) promote incentives offered by the City to assist residents in changing water related equipment and appliances that will make permanent reductions in water use; 2) modify ongoing behaviors to use less water during normal daily activities; and 3) provide education on how water savings can be best achieved. Therefore, while the program was anticipated to be most intensive during the first year, some level of ongoing effort will be needed to continue to achieve Item 11.b. - Page 9 CITY COUNCIL CONSIDERATION OF COUNCIL DIRECTION ON THE CITY'S WATER CONSERVATION INCENTIVE PROGRAMS JULY 28, 2015 PAGE10 the water savings on a permanent basis through modified behavior by consistently reinforcing the information. Given that the two cities have already invested in this program and have seen a significant increase in water conservation incentive program participation, staff recommends that this program continue but be limited, at a reduced cost of $30,000 per year for website maintenance and other public outreach activities. The current contract for Verdin Marketing, Inc. will expire on September 14, 2015. Projected Water Savings: It expected that the City will save a total of 124 AFY by 2020 through implementation of the various water conservation programs. Implementation Strategies: The City's Water Conservation Team meets regularly to implement the work program. Staff monitors the programs and provides updates to the City Manager and Council. ALTERNATIVES: The following alternatives are provided for the Council's consideration: Increase funding for the Cash for Grass Program for fiscal year (FY) 2015-16 and 2016-17 and appropriate $131,000 from the Water Neutralization Fund in FY 2015-16 for the Program, and eliminate the following water conservation incentive programs for FY 2015-16 and 2016-17: o Smart Irrigation Controllers o Landscape Irrigation Retrofit o System Water Loss Mitigation Reallocate a reduced amount to the Cash for Grass Program, allow the funds to run out and suspend the Program until FY 2016-17. -Allocate an additional amount of funds from the water fund. However, although the fund is meeting minimum fund balance requirements, the water fund is underperforming due to a combination of water conservation (which negatively impacts water revenues) and a higher than anticipated increase in salary and benefits. On a future date, staff will present a more detailed analysis of the water fund and the options City Council has to maintain a healthy fund balance Do not reallocate additional funding to the Cash for Grass Program, allow the remaining funds to run out and suspend the Program until FY 2016-17. Reduce the Cash for Grass Program rebate amount from $1.00 to $0.50 a square foot, which would be consistent with other agencies (specifically Pismo Beach and Paso Robles). This would extend the program beyond the projected ten to twelve months. Item 11.b. - Page 10 CITY COUNCIL CONSIDERATION OF COUNCIL DIRECTION ON THE CITY'S WATER CONSERVATION INCENTIVE PROGRAMS JULY 28, 2015 PAGE 11 -Reduce the maximum Cash for Grass Program rebate amount from $5,000 to $2,500 (or other amount). -Reallocate all of the Water Conservation Program funds to the Cash for Grass Program. -Suspend all water conservation programs since the City has already achieved its goal as mandated by the State's 20 x 2020 Water Conservation Plan. ADVANTAGES: Conservation efforts are the most cost effective option to address water supply needs and are within the City's control to proceed. It is intended to work in addition to the Northern Cities Management Area (NCMA) work program that is designed to protect the groundwater supply and ensure the City will have access to its full allocation of this water resource in the future. The comprehensive water conservation strategy provides a feasible alternative to meet both demand and State requirements. Support of the Cash for Grass Program promotes a permanent reduction in water use. DISADVANTAGES: Ongoing water conservation programs require ongoing costs and funding. Discontinuing some of the programs reduce incentive options for customers to conserve. ENVIRONMENTAL REVIEW: No environmental review is required for this item. PUBLIC NOTIFICATION AND COMMENTS: The Agenda was posted in front of City Hall on Thursday, July 23, 2015. The Agenda and staff report were posted on the City's website on Friday, July 24, 2015. No public comments were received. Attachment: 1. Verdin Summary of Work Item 11.b. - Page 11 WEBSITE I ATTACHMENT 1 ARROYO GRANDE -PISMO BEACH WATER CONSERVATION JUNE PERFORMANCE REPORT SUMMARY Website traffic continues to grow with over 1600 users visiting the page in June alone, with the majority coming from mobile/tablets {66%). The pages with the highest amount of traffic are the rebates, tips and mandatory restrictions pages, showing that people are interested in participating in conservation and learning ways they can help. SOCIAL MEDIA Facebook continues to remain strong with excellent engagement rates and a growing number of likes and followers. Reach is remaining high despite the small target community suggesting that the content being shared is considered useful and engaging to the user. Twitter continues to grow, although at a much smaller pace, which is reflective of the medium across all indus- tries. Quality of followers on Twitter always trumps quantity, and the Think H20 account has a high quality of users, as the majority of them are local journalists who are actively engaging with the brand. ADVERTISING Digital Advertising is consistently bringing in engagement numbers that are much higher than the national average. Pandora is continuing to be an excellent tool for getting out the message, as many people are engaging with the ad and clicking-thru for more information. Digital Ad creative has been updated and we expect this fresh round of advertising to bring in even higher number in July. Beyond the digital advertising, the Regal Cinemas ad was completed and began running on all screens on June 12. The ad runs 40x daily across all screens and June's estimated attendance was over 40,000. BUSINESS AND COMMUNITY OUTREACH A presentation has been completed by Mike de Milo and arrangements are being made to schedule presentations at local service clubs, the Chamber of Commerce, HOAs, Church Groups, etc. Verdin has also been pricing and designing some large installation marketing pieces, and designing material to use and be distributed at various community water symposiums. All-in-all, the marketing efforts have been a great success as shown by both cities going above and beyond their mandated water conservation numbers from the governor. Conservation is quickly becoming a habit for residents. verdin* 3580 Sacramento Dr. #110, San Luis Obispo, CA 93401 t 805/541/9005 f 805/541/9007 a vision for your brand Item 11.b. - Page 12