CC 2021-06-08_10a Central Coast Blue Project_Approval of Expenditure of FundsMEMORANDUM
TO: CITY COUNCIL
FROM: WHITNEY MCDONALD, CITY MANAGER
BILL ROBESON, ASSISTANT CITY MANAGER/PUBLIC WORKS
DIRECTOR
SUBJECT: CONSIDERATION OF RESPONSES FROM THE CITIES OF PISMO
BEACH AND GROVER BEACH REGARDING THE CENTRAL COAST
BLUE PROJECT, INCLUDING CONSIDERATION OF APPROVAL OF
THE EXPENDITURE OF FUNDS FOR FUTURE PROJECT-RELATED
COSTS
DATE: JUNE 8, 2021
SUMMARY OF ACTION:
Consider the responses received from the cities of Pismo Beach and Grover Beach to the
letter from the Arroyo Grande City Council dated April 16, 2021, as authorized at the April
13, 2021 Council meeting, regarding the proposed Operating Agreement governing
participation in the Central Coast Blue Project (Project). Approval of the steps requested
in the responses will resume negotiations of a cost-sharing or operating agreement with
the cities of Pismo Beach and Grover Beach and will require the expenditure of funds for
going-forward pre-construction costs incurred by the City of Pismo Beach in support of
the Project.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
The letters from the cities of Grover Beach and Pismo Beach request that the City agree
to pay 50% of pre-construction costs incurred by the City of Pismo Beach in support of
the Project while the three cities resume discussions of a revised cost-sharing or
operating agreement. This proposal is consistent with the terms of the previous draft
Operating Agreement. The City’s Fiscal Year 2020-21 budget and proposed Fiscal Years
2021-23 budget include a total of $1,450,100 in the Water Availability Fund for the Project,
which may be expended in meeting this request.
RECOMMENDATION:
It is recommended the City Council consider the responses received from the cities of
Pismo Beach and Grover Beach to the letter from the Arroyo Grande City Council dated
April 16, 2021, regarding the proposed Operating Agreement governing participation in
the Central Coast Blue Project, and authorize (1) participation in a joint meeting of the
three City Councils of the cities of Arroyo Grande, Grover Beach, and Pismo Beach, (2)
participation in the mediated discussions with two Councilmembers and City staff, and (3)
authorize the payment of up to 50% of the going-forward pre-construction costs of the
Item 10.a. - Page 1
CITY COUNCIL
CONSIDERATION OF RESPONSES FROM THE CITIES OF PISMO BEACH AND
GROVER BEACH REGARDING THE CENTRAL COAST BLUE PROJECT,
INCLUDING CONSIDERATION OF APPROVAL OF THE EXPENDITURE OF FUNDS
FOR FUTURE PROJECT-RELATED COSTS
JUNE 8, 2021
PAGE 2
Project, up to the amount included in the City’s adopted Fiscal Year 2020-21 Budget and
proposed in the Fiscal Years 2021-23 Budget from the Water Availability Fund.
BACKGROUND:
The City of Pismo Beach is the lead agency for the Central Coast Blue Project, a regional
recycled water project. The Project has been a multi-agency effort between three of the
four Northern Cities Management Area agencies (the Cities of Arroyo Grande, Grover
Beach, and Pismo Beach) and the South San Luis Obispo County Sanitation District
(SSLOCSD) to construct a regional recycled water project that will enhance supply
reliability by injecting advanced purified water into the Santa Maria Groundwater Basin
(SMGB). The Project will reduce vulnerability to drought and seawater intrusion by
creating a seawater intrusion barrier and supplementing the naturally occurring
groundwater.
On March 23, 2021, Council considered a proposed Central Coast Blue Operating
Agreement and its associated environmental determination in compliance with the
California Environmental Quality Act. After receiving public comment and conducting
discussion and deliberation, Council approved the Operating Agreement and adopted
Statements of Overriding Considerations and a Mitigation, Monitoring, and Reporting
Program, subject to the condition that the cities of Pismo Beach and Grover Beach
separately agree to enter into a Community Workforce Agreement for construction of the
Project.
Following Council’s action on March 23, 2021, City staff immediately began discussions
with management at the cities of Pismo Beach and Grover Beach regarding the
Community Workforce Agreement condition, during which both cities indicated that they
would not agree to the condition. During discussions with the cities of Grover Beach and
Pismo Beach, certain questions and concerns emerged regarding the proposed
Operating Agreement, as detailed in the staff report presented to Council regarding the
proposed Operating Agreement at its April 13, 2021 regular meeting. After receipt of
staff’s presentation, public testimony, and Council deliberations, the following action was
taken by an unanimous vote of the Council:
“Rescind the City’s conditional approval of the Central Coast Blue operating
agreement and to direct the City Manager to draft a letter to the Pismo Beach City
Council and Grover Beach City Council stating:
In order to continue Arroyo Grande’s participation in the CCB project the
following issues shall be addressed in the operating agreement:
•Provisions for robust public participation via a management or oversight
committee subject to the Brown Act throughout the life of the project;
and
Item 10.a. - Page 2
CITY COUNCIL
CONSIDERATION OF RESPONSES FROM THE CITIES OF PISMO BEACH AND
GROVER BEACH REGARDING THE CENTRAL COAST BLUE PROJECT,
INCLUDING CONSIDERATION OF APPROVAL OF THE EXPENDITURE OF FUNDS
FOR FUTURE PROJECT-RELATED COSTS
JUNE 8, 2021
PAGE 3
• A governance structure that includes equal decision making by all
member agencies in order to preserve their fiduciary oversight
responsibilities to their respective ratepayers.
We request notification in writing by May 31, 2021 as to whether these
issues will be negotiated into the operating agreement at a future date to be
determined by the City Managers. Should the responses from either or both
cities be in the negative, or in the absence of an official response by the
stated deadline, Arroyo Grande regretfully withdraws from the Central
Coast Blue project, effective 12:00 a.m. on June 1, 2021.”
In addition, Council approved a letter of support for the Project to the Bureau of
Reclamation in consideration of the WaterSMART Title XVI Water Reclamation and
Reuse Grant application.
As directed, letters to the City Councils of the cities of Grover Beach and Pismo Beach
were sent on April 16, 2021 (Attachment 1). On May 24, 2021, letters were received from
the City Managers of Grover Beach and Pismo Beach responding to Council’s April 16,
2021 letter. Those two letters are provided in Attachment 2 and are presented for
consideration by Council.
ANALYSIS
The two May 24, 2021 response letters from the cities of Pismo Beach and Grover Beach
are virtually identical and state the cities’ commitment to the Project and determination
that the Project is best if all three cities participate. In response to Council’s stated
concerns regarding the proposed Operating Agreement, Pismo Beach and Grover Beach
offer commitments to the following:
In addition, Pismo Beach and Grover Beach request that the City continue to pay its share
of the costs incurred to continue advancing the Project, including “continued project
management, grant application, project design, and other work related to the operating
agreement.” This request does not seek the full payment of pre-construction costs
described in recent staff reports (see Table 1 below) but would be limited to going-forward
Item 10.a. - Page 3
CITY COUNCIL
CONSIDERATION OF RESPONSES FROM THE CITIES OF PISMO BEACH AND
GROVER BEACH REGARDING THE CENTRAL COAST BLUE PROJECT,
INCLUDING CONSIDERATION OF APPROVAL OF THE EXPENDITURE OF FUNDS
FOR FUTURE PROJECT-RELATED COSTS
JUNE 8, 2021
PAGE 4
project-related costs, which the cities of Grover Beach and Arroyo Grande would split until
their total payments become equivalent to Pismo Beach’s prior payments.
Table 1
Table 1 depicts estimated total costs of the Project distributed among the three cities in
accordance with the shares discussed previously among the parties and incorporated into
the proposed Operating Agreement. Participation in the meetings requested in the two
letters, as described above, would not obligate the City to pay the total costs or shares
described in Table 1.
It is recommended that Council discuss and consider the requests of the cities of Grover
Beach and Pismo Beach and provide direction to staff regarding a response. While the
two letters do not explicitly agree to revise the proposed Operating Agreement to include
provisions for a management/oversight committee that will be subject to the Brown Act or
a governance structure that includes equal decision-making by each member agency, the
responses commit to continued discussions regarding governance, oversight,
procurements, and financing. These discussions are proposed to occur through both
mediated discussions with two Councilmembers from each city and city staff and in a joint
meeting of the three City Councils. Staff is hopeful that these discussions will result in an
agreement that will meet the City’s needs.
ALTERNATIVES:
The following alternatives are provided for Council's consideration:
1.Discuss and consider the two response letters received from the cities of Grover
Beach and Pismo Beach and authorize (1) participation in a joint meeting of the three
City Councils of the cities of Arroyo Grande, Grover Beach, and Pismo Beach, (2)
participation in the mediated discussions with two Councilmembers and City staff, and
(3) the payment of up to 50% of the going-forward pre-construction costs of the
Project, up to the amount included in the City’s adopted Fiscal Year 2020-21 Budget
and proposed in the Fiscal Years 2021-23 Budget from the Water Availability Fund.
Item 10.a. - Page 4
CITY COUNCIL
CONSIDERATION OF RESPONSES FROM THE CITIES OF PISMO BEACH AND
GROVER BEACH REGARDING THE CENTRAL COAST BLUE PROJECT,
INCLUDING CONSIDERATION OF APPROVAL OF THE EXPENDITURE OF FUNDS
FOR FUTURE PROJECT-RELATED COSTS
JUNE 8, 2021
PAGE 5
2.Discuss and consider the two response letters received from the cities of Grover
Beach and Pismo Beach and do not authorize one or more of the following: (1)
participation in a joint meeting of the three City Councils of the cities of Arroyo Grande,
Grover Beach, and Pismo Beach, (2) participation in the mediated discussions with
two Councilmembers and City staff, and (3) the payment of up to 50% of the going-
forward pre-construction costs of the Project, up to the amount included in the City’s
adopted Fiscal Year 2020-21 Budget and proposed in the Fiscal Years 2021-23
Budget from the Water Availability Fund.
3.Discuss and consider the two response letters received from the cities of Grover
Beach and Pismo Beach and take no further action.
4.Provide other direction to staff.
ADV ANTAGES:
Consideration of the two response letters received from the cities of Grover Beach and
Pismo Beach to the Arroyo Grande City Council’s letter dated April 13, 2021 regarding
the Central Coast Blue Operating Agreement will enable Council and the public to review
and discuss the requests contained in the responses. Authorizing participation in a joint
meeting of the three City Councils of the cities of Arroyo Grande, Grover Beach, and
Pismo Beach, participation in the mediated discussions with two Councilmembers and
City staff, and the payment of up to 50% of the going-forward pre-construction costs of
the Project, will enable the City to continue negotiating a cost-sharing and operating
agreement that will allow the City to remain a part of the Project while also meeting its
oversight and governance needs.
DISADVANTAGES:
Approving participation in the meetings identified in the two letters from the cities of
Grover Beach and Pismo Beach appears conditioned upon the City agreeing to pay half
of going-forward costs associated with the Project, up to the amount paid to date by Pismo
Beach. If negotiations for a revised cost sharing and operating agreement are not
successful or if the City elects to not proceed with the Project, then these payments would
likely be unrecoverable.
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted at City Hall and on the City’s website in accordance with
Government Code Section 54954.2.
Attachments:
1.April 16, 2021 Letter to the City Council of the City of Pismo Beach
April 16, 2021 Letter to the City Council of the City of Grover Beach
2.May 17, 2021 Letter from the City of Pismo Beach (received May 24, 2021)
May 19, 2021 Letter from the City of Grover Beach (received May 24, 2021)
Item 10.a. - Page 5
.CITY OF
~ ~
1i, :tJ/C_A LIFO RN IA,, tt/i .p: _.,, '-,,
April 16, 2021
City Council
City of Pismo Beach
760 Mattie Road
Pismo Beach, CA 93449
A CITY OF
SUBJECT: Central Coast Blue Operating Agreement
Dear Pismo Beach City Council :
A
CALIFORNIA
On April 13, 2021, the Arroyo Grande City Council continued its consideration of the Central Coast Blue (CCB)
Operating Agreement and voted unanimously to rescind the City's conditional approval of the Central Coast
Blue Operating Agreement made on March 23, 2021, and directed me to request the following:
In order to continue Arroyo Grande's participation in the CCB project, the following issues shall be addressed in
the operating agreement:
• Provisions for robust public participation via a management or oversight committee subject to the Brown
Act throughout the life of the project; and
• A governance structure that includes equal decision making by all member agencies in order to preserve
their fiduciary oversight responsibilities to their respective ratepayers .
We request notification in writing by May 31, 2021 as to whether these issues will be negotiated into the
operating agreement at a future date to be determined by the City Managers . Should the responses from either
or both cities be in the negative, or in the absence of an official response by the stated deadline, Arroyo Grande
regretfully withdraws from the Central Coast Blue project, effective 12:00 a.m . on June 1, 2021.
Sincerely,
Whitney McDonald
City Manager
c: Pismo Beach City Manager
Pismo Beach City Attorney
CITY MANAGER'S OFFICE • 300 E. Branch Street • Arroyo Grande, California 93420
Phone: (805) 473-5400 • FAX: (805) 473-0386 • E-mail : agcity@arroyogrande.org • Website: www.arroyogrande.org
Attachment 1
Item 10.a. - Page 6
April 16, 2021
City Council
City of Grover Beach
154 S 8th Street
Grover Beach, CA 93433
A CITY OF
SUBJECT: Central Coast Blue Operating Agreement
Dear Grover Beach City Council:
A
CALIFORNIA
On April 13, 2021, the Arroyo Grande City Council continued its consideration of the Central Coast Blue (CCB)
Operating Agreement and voted unanimously to rescind the City's conditional approval of the Central Coast
Blue Operating Agreement made on March 23, 2021 , and directed me to request the following :
In order to continue Arroyo Grande's participation in the CCB project, the following issues shall be addressed in
the operating agreement:
• Provisions for robust public participation via a management or oversight committee subject to the Brown
Act throughout the life of the project; and
• A governance structure that includes equal decision making by all member agencies in order to preserve
their fiduciary oversight responsibilities to their respective ratepayers.
We request notification in writing by May 31, 2021 as to whether these issues will be negotiated into the
operating agreement at a future date to be determined by the City Managers. Should the responses from either
or both cit!es be in the negative, or in the absence of an official response by the stated deadline, Arroyo Grande
reg r etfully withdraws from the Central Coast Blue project, effective 12:00 a.m. on June 1, 2021.
Sincerely,
Whitney McDonald
City Manager
c: Grover Beach City Manager
Grover Beach City Attorney
CITY MANAGER'S OFFICE • 300 E. Branch Street• Arroyo Grande, California 93420
Phone: (805) 4 73-5400 • FAX : (805) 4 73 -0386 • E-mail: agcity@arroyogrande.org • Website: www.arroyogrande.org
Item 10.a. - Page 7
May 17, 2021
Whitney McDonald
City Manager
City of Arroyo Grande
300 E. Branch Street
Arroyo Grande, CA 93420
City Manager's Office
City of Pismo Beach
James R. Lewis , City Manager
760 Mattie Road
Pismo Beach, CA 93449
(805)773-7007
jlewis@pismobeach.org
Response to Central Coast Blue Letter of April 16, 2021
Dear City Manag�ald: �
We are in receipt of your letter dated April 16 th regarding the Arroyo Grande City Council's
request to address issues in the Central Coast Blue operating agreement. We want to be very
clear that our City remains committed to the Central Coast Blue project and that we believe the
project is best if all three South County cities continue to participate. As our county and most of
our state is now in a severe drought, it is imperative to continue to move Central Coast Blue
forward without delay.
The operating agreement was drafted over the past year by our three cities in the interest of
defining a level of oversight and expectations for this important project. However, given the
concerns raised by your City Council, the City of Pismo Beach can commit to the following:
•An in-person meeting of all three City Councils open to members of the public to discuss
the project and next steps as soon as it is prudent and safe to do so. We are optimistic
such a meeting could be held by August 2021. During this meeting it would be essential
to discuss project governance and oversight, financing, procurement, timelines, etc.
•Immediately begin technical discussions and mediation on the logistics and agenda for
the aforementioned meeting of the three City Councils, along with further discussions of
the draft operating agreement with two councilmembers from each city being present
with key staff and advisors. These discussions are essential to keep the project and grant
funding efforts on track.
Attachment 2
Item 10.a. - Page 8
Item 10.a. - Page 9
Item 10.a. - Page 10
Item 10.a. - Page 11
THIS PAGE INTENTIONALLY LEFT BLANK
Item 10.a. - Page 12