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CC 2021-09-14_10a Supplemental No 1 MEMORANDUM TO: CITY COUNCIL FROM: WHITNEY McDONALD, CITY MANAGER SUBJECT: SUPPLEMENTAL INFORMATION AGENDA ITEM 10.a. – SEPTEMBER 14, 2021 CITY COUNCIL MEETING CONSIDERATION OF PARTICIPATION IN CENTRAL COAST BLUE PROJECT AND PRELIMINARY DISCUSSION OF WATER SUPPLY ALTERNATIVES DATE: SEPTEMBER 14, 2021 Attached is correspondence received for the above referenced item. cc: Assistant City Manager/Public Works Director City Attorney City Clerk City Website (or public review binder) From: Jeff Edwards [mailto: Sent: Monday, September 13, 2021 7:37 AM To: Caren Ray Russom <crayrussom@arroyogrande.org>; Jimmy Paulding <jpaulding@arroyogrande.org>; Lan George <lgeorge@arroyogrande.org>; Kristen Barneich <kbarneich@arroyogrande.org>; Keith Storton <kstorton@arroyogrande.org>; Whitney McDonald <wmcdonald@arroyogrande.org> Cc: Will Clemens <will@oceanocsd.org> Subject: Arroyo Grande City Council 9-14-21 Agenda item 10.a. Letter of Oppostion Ladies and Gentlemen, Please find attached a letter in connection with the matter above, including attachments. Please let me know if you have any questions. Thanks, Jeff Edwards Julie Tacker Administrative Assistant J.H. Edwards Company P.O. Box 6070 Los Osos, CA 93412 805.528.3569 - Office J. H. EDWARDS COMPANY A REAL PROPERTY CONCERN Specializing in Water Neutral Development P.O. Box 6070, Los Osos, CA 93412 (805)235-0873 jhedwardscompany@gmail.com ACQUISITION MARKETING LAND USE REDEVELOPMENT September 13, 2021 City of Arroyo Grande 300 E. Branch Street Arroyo Grande, CA 93420 Attention: City Council Subject: September 14, 2021, City Council Meeting Agenda item 10. a. Consideration Of Participation In Central Coast Blue And Preliminary Discussion Of Water Supply Alternatives Dear Arroyo Grande City Council, On April 13, 2021, your Council voted unanimously to rescind the City’s Conditional Approval of the Central Coast Blue (CCB) Operating Agreement, dated March 23, 2021. As a condition of participation in CCB your Council required “robust public participation…throughout the life of the project.” Also stipulated was, “A governance structure that includes equal decision making by all member agencies.” The Draft CCB Project Delivery and Governance Framework provided as Attachment 1 to the staff report does neither. Pismo Beach has retained its status as lead agency and will procure and manage all contracts with consultants and contractors through completion of project construction. So much for compromise. On June 8, 2021, your Council directed City staff to identify and explore water supply options for the Council’s consideration, including costs, as an alternative to participation in CCB. Instead, your staff has included a Water Supply Alternatives Study, dated August 24, 2004, prepared by Wallace Group provided as Attachment 2 to the staff report. Virtually no new research, analysis or cost estimates were performed as directed. Staff simply asserts an update to the 2004 study is underway, with a preliminary draft of options included as Attachment 3, with CCB as one of the options. Is the City of Pismo Beach aware Arroyo Grande staff is proposing a reduction from 39% to 25% participation? This would increase the unsubscribed amount to 19% or about 190 acre-feet per year. Other non-starters suggested in the 2004 Wallace Study include direct purchase of State Water including expensive “buy in” costs, Nacimiento Project Water, desalination, and stormwater capture. The only affordable and reliable option for long-term augmentation of City water supplies is to craft a deal with the Oceano Community Services District (OCSD). The 5-year Agreement with OCSD beginning in 2009 (attached) provided for the sale of 100AFY to Arroyo Grande. The agreement specified groundwater and/or Lopez water as the source and included a provision for payment whether, or not, water was delivered. J. H. EDWARDS COMPANY A REAL PROPERTY CONCERN Specializing in Water Neutral Development P.O. Box 6070, Los Osos, CA 93412 (805)235-0873 jhedwardscompany@gmail.com ACQUISITION MARKETING LAND USE REDEVELOPMENT The staff report discounts the ability of Oceano to enter into a long-term agreement based on the 2012 voter initiative regarding the permanent sale of water. To be clear, Measure B-12 (attached) does not prevent the OCSD from the long-term sale of water, rather it proports to require an election to be held “prior to any permanent sale of water to any entity outside the Oceano Community Services District”. Notably in that regard, since 2012 the OCSD has reduced water demand from 900AF to 743AFY. Today, Oceano uses less than 40% of its total water entitlement (743AFY/1953AFY). Presently, there are limited opportunities in Oceano to expand development and see a significant increase in demand for water over time. In fact, the current downward trend in water demand in the community may continue in the future. Additionally, the OCSD, as a subcontractor has acquired State Project Water Drought Buffer in the amount of 750AFY to complement its Table A allocation of 750AFY. Currently, the OCSD has the unique opportunity to acquire additional Drought Buffer, tripling the amount to 2,250AFY, as an example. Excess Entitlement Policies dated January 14, 2003, were approved by the Board of Supervisors (attached). This would have the effect of providing delivery of all 750AFY at a time of 25% State Project Water deliveries, or greater. Measure B-12 also incorrectly estimated OCSD’s future water demand to be over 1,400AF virtually twice the present consumption. Given the OCSD needs for water infrastructure improvements it is highly likely the voters in Oceano would approve a long-term agreement with the City of Arroyo Grande to avoid significant water rate increases of their own. Moreover, the OCSD, given its diversified water portfolio, would currently and in the future, be capable of providing up to 400AFY to Arroyo Grande. In contrast to the 2009 agreement of temporary sales, a new agreement could establish a minimum delivery amount using 200AF as an example for a payment of $400,000 at $2,000AF. If Arroyo Grande desired additional water the city could pay for it on a per acre foot basis at $2,000 per AF, e.g., 300AF x $2,000= $600,000. Delivery of all 400AF would cost $800,000. The city would only pay for delivered water above 200AF. Unfortunately, this type of analysis was not conducted by your city staff as directed. Staff had over three months since your June 8th meeting to perform the work needed for the council to consider water supply options to CCB now, not sometime after a decision on continuing with CCB had to be made. Any meaningful analysis about water supply options (other than CCB) was merely an afterthought. It appears a couple phone calls may have been made between City Manager McDonald and OCSD General Manager, Will Clemens without any apparent new or creative discussions or advancement through in-depth analysis and negotiation. Importantly, there has been no legal analysis of Measure B-12 which is ostensibly the reason a long-term agreement regarding the sale/purchase of water with the OCSD is discounted/eliminated in the staff report. Working with the OCSD as an existing subcontractor, Arroyo Grande would avoid significant buy-in costs for State Project Water. As such, this source of water has become more affordable, especially for south county communities given the existing delivery infrastructure including storage capability in Lopez Lake. J. H. EDWARDS COMPANY A REAL PROPERTY CONCERN Specializing in Water Neutral Development P.O. Box 6070, Los Osos, CA 93412 (805)235-0873 jhedwardscompany@gmail.com ACQUISITION MARKETING LAND USE REDEVELOPMENT The City of Pismo Beach has applied for and received multiple State and Federal grants totaling about $5,000,000. The grant applications contain many misstatements of facts, untruths and outright lies including dozens if not hundreds of references to non-existent seawater intrusion. A letter from the OCSD dated February 8, 2012, refuting the notion of seawater intrusion is attached. Perpetuating the seawater intrusion scare plays into the narrative of how CCB will protect the water wells serving those poor south county folks. Moreover, the grant applications are exploitative of Environmental Justice issues and the DAC status of Grover Beach and Oceano, even when Oceano is not a CCB partner. The application and the grant awards are likely the result of fraudulent representations made by Pismo Beach. Is this something Arroyo Grande wants to associate itself with? Regional water management has been provided as a reason to remain in CCB. Pismo Beach promotes regionalism when it’s good for Pismo Beach. If it is not, it doesn’t. The most recent glaring example is when Governor Newsom ordered the closure of restaurants and hotels in 2020. Pismo Beach defied all orders and bragged about posting an increase in year-over-year taxes including, transient occupancy tax. It’s OCSD or CCB, you can’t afford both not even at 25% participation in CCB. It is acknowledged the City of Arroyo Grande needs an additional 230-625 AFY of water supply augmentation to achieve community build-out. Why would you buy 250 AFY for $1,000,000, when can buy 400 AFY for $800,000? To do otherwise does not make fiscal sense, nor is it responsible. The fundamental paradox of CCB is that is claims to be a new source of water supply, yet at the same time, there is the suggestion CCB will protect the groundwater basin in the vicinity from the fictional seawater intrusion. One can’t have it both ways. CCB needs to leave the water in the ground if it’s to be a seawater barrier. If that is the case, what water is Arroyo Grande going to get? The centerpiece of the CCB project are the five injection wells to reintroduce treated effluent into the groundwater basin. The Coastal Dunes RV Park and Campground owned by the County of San Luis Obispo along Highway One is the location of three of the five proposed injection wells. Unfortunately, while the experimental extraction well was allowed, none of the injection wells are permitted under current zoning. Pismo Beach will be required to process a Local Coastal Plan amendment which may take many months, if not years to complete the rigorous review process. Pismo Beach will also need to acquire permanent easements in the campground from the county, which may not be possible. CCB is hardly “shovel ready” which is another of many Pismo Beach misrepresentations. Pismo Beach has only wanted Arroyo Grande’s money from the start and that has not changed, e.g., “immediate payment” recommended in the staff report. J. H. EDWARDS COMPANY A REAL PROPERTY CONCERN Specializing in Water Neutral Development P.O. Box 6070, Los Osos, CA 93412 (805)235-0873 jhedwardscompany@gmail.com ACQUISITION MARKETING LAND USE REDEVELOPMENT Please reject the staff recommendation other than to direct staff to engage in a real dialogue with the OCSD to detail a potential transaction. Likewise, in coordination with the OCSD, prepare companion ballot measures for March of 2021 to ask the voters of each community if this is a deal they support. Sincerely, Jeff Edwards Jeff Edwards Attachments: 2009 Agreement with OCSD Measure B-12 Excess Entitlement Policies OCSD seawater intrusion letter, February 8, 2012 TEMPORARY WATER SUPPLY AGREEMENT BETWEEN THE CITY OF ARROYO GRANDE AND THE OCEANO COMMUNITY SERVICES DISTRICT THIS TEMPORARY WATER SUPPLY AGREEMENT (hereinafter referred to as the AgreemenY') is made and entered into as of rtarcn 1 2009, by and between the City of Arroyo Grande, a municipal corporation (hereinafter referred to as the "City") and the Oceano Community Services District, a community services district organized and existing pursuant to California State Law (hereinafter referred to as the "DistricY'), with reference to the following recitals: RECITALS WHEREAS, City desires to temporarily purchase water from District during the City's development of permanent alternate water supply sources; and WHEREAS, City anticipates developing permanent alternate sources of water supply within five (5) years to eliminate the City's need for the water being purchased on a temporary basis; and WHEREAS, the City and the District acknowledge that DistricYs temporary sale of water as provided herein in no way contemplates the permanent transfer of any or all of the DistricYs entitlements or contractual rights to any water rights or water supply that the District holds as of the date of this Agreement; and WHEREAS, the City and the District desire to effectively manage existing water resources to meet the needs of constituents of both jurisdictions in the most cost efficient manner and to communicate to each other on an ongoing basis regarding efforts related to implementation of the terms of this Agreement, as well as efforts by City to replace the temporary purchase of water with permanent water supply sources. NOW THEREFORE, in consideration of the mutual promises, covenants and conditions contained herein, the parties hereto agree as follows: AGREEMENT 1.DISTRICT DELIVERY OF WATER TO CITY. District shall provide City with up to one hundred (100) acre feet of water per year. City shall provide District with at least ten (10) days prior written notice of the amount of water it desires each month. 2. WATER RIGHTS ENTITLEMENTS AND CONTRACTS NOT AFFECTED. This Agreement is solely intended for the purpose of allowing the District to provide temporary water supply for the benefit of City, in an amount not to exceed 100 acre-feet per annum during each year while this Agreement is in effect. No transfer of any interest, including but not limited to overlying, appropriative, or contractual rights or entitlements to water held by the District under California law, is intended by the execution of this Agreement. The parties hereto expressly agree that the temporary supply of water to City agreed to herein does not affect the groundwater resources, determinations or the rights to use of groundwater confirmed respectively to the District and to the City by the Water Management Agreement dated June 10, 2002. The parties expressly agree that nothing in this Agreement shall affect the contractual entitlements of either party with regard to water originating from Lopez Reservoir, which entitlements are specified in the Agreement Between San Luis Obispo County Flood Control & Water Conservation District and County of San Luis Obispo, on Behalf of County Service Area No. 13 For a Water Supply, dated October 24, 1966, as amended Lopez Agreement). The parties also expressly agree that this Agreement is for a temporary arrangement for the sale of water by the District to City that is consistent with Article X of the Califomia Constitution, and with provisions of the California Water Code concerning use and transfer or water, including but not limited to sections 100, 109, 382, 475, 1011, 1014, 1016, 1017, 1244, 1745. 07, 1745.10, and 1745.11. 3.SOURCE OF WATER AND METHOD OF DELIVERY. Water delivered from the District to City shali be from either the Lake Lopez Reservoir through the Lopez Pipeline System from DistricYs allocation under the Lopez Agreement ("Lopez Water") or groundwater from the DistricYs allocation under the Water Management Agreement Groundwater"). District shall have the option of either providing Lopez Water or Groundwater. 4.METHOD OF DELIVERY. Water provided by District pursuant to this Agreement shall be delivered as follows: A. Lopez Water shall be delivered through the Lopez Pipeline and shall be coordinated through and with the San Luis Obispo County Flood Control and Water Conservation District. ("County of San Luis Obispo"). B. Groundwater shall be pumped directly from the groundwater basin by City. If District opts to provide City with Groundwater, City shall monitor and promptly report to District in writing any Groundwater pumped in excess of City's allocation under the Water Management Agreement. C. City will provide meter reports to the District on a quarterly basis showing the amount of water used from each source. 5.PAYMENT FOR WATER. Upon receipt of an invoice from the District, City shall pay to District on a bi-monthly basis the incremental cost for one hundred (100) acre feet of water per year based on a rate of 105% of the actual rate paid by District to the County of San Luis Obispo for Lopez Water, whether any or all of the full amount is used, minus $275 per acre foot of Groundwater used. 6.TERM. This Agreement shall commence on the first date set forth above and shall continue in effect for a five (5) year period. 7.NOTICE. Any and all notices or other communications required or permitted by this Agreement or by law to be delivered to, served on, or given to any party to this Agreement by any other party to this Agreement shall be in writing and shall be deemed properly delivered, served, or given when personally delivered to the party to whom it is directed, or in lieu of such personal service, when deposited in the United States mail, first class, postage pre-paid, addressed to: IF TO CITY: CITY OF ARROYO GRANDE City Manager 214 East Branch Street Arroyo Grande, CA 93420 IF TO THE DISTRICT: OCEANO COMMUNITY SERVICES DISTRICT District Manager P.O. Box 599 Oceano, CA 93475-0599 Any party to this Agreement may change his address for the purposes of this Section by giving written notice of such change in accordance herewith. 8.MODIFICATION. This Agreement may be amended or modified only by an instrument in writing, stating the amendment or modification, executed by the parties hereto. 9.HEIRS AND SUCCESSORS. This Agreement shall be binding on and shall inure to the benefit of the heirs, executors, administrators, successors and assigns of the parties hereto. 10. SEVERABILITY. Should any portion of this Agreement be held unenforceable or inoperative for any reason, such shall not affect any other portion of this Agreement, but the remainder shall be as effective as though such ineffective portion had not been contained herein. IN WITNESS WHEREOF the parties have executed this instrument as of the date and year above first written. CITY OF ARROYO NDE: J v TONYFER A Mayor ATTEST: 4 KELLY ET E Director of A inistrative Services/City Clerk APPROVED AS TO FORM: TI THY . RMEL Cit Attorney OCEANO COMMUNITY SERVICES DISTRICT: i.G `rn-e/ BARBARA J. NN President of the Board of Directors ATTEST: KEVIN WALSH District Interim General Manager APPROVE AS TO FORM: AL SIMAS District Counsel 7/30/2021 Print Preview https://oceanocsd.municipalcodeonline.com/book/print?type=resolutions&name=2012-03_Sale_Of_Water 1/2 2012-03 Sale Of Water RESOLUTION NO.: 2012-03 A RESOLUTION CALLING FOR PLACEMENT OF AN INITIATIVE MEASURE REQUIRING THAT AN ELECTION SHALL BE HELD PRIOR TO ANY SALE OF WATER ON A PERMANENT BASIS The following Resolution is now offered and read: WHEREAS, Elections Code § 9301 allows for any proposed ordinance to be submitted to the District by filing an initiative petition with the county elections official; and WHEREAS, the initiative petition For The Enactment Of An Ordinance By The Oceano Community Services District Requiring That An Election Shall Be Held Prior To Any Sale Of Water On A Permanent Basis was filed with the county elections official on January 24th, 2011 (Petition attached hereto as Attachment 1); and WHEREAS, the Elections Division of the County Clerk-Recorder's Office conducted a random sample verification of the signatures on that petition, and determined that the number of valid signatures was more than the number required to certify the petition; and WHEREAS, on February 23, 2011 the County Clerk-Recorder presented a certificate of sufficiency to the OCSD Board of Directors for the petition; and WHEREAS, pursuant to Elections Code § 9311, the OCSD Board of Directors has decided to submit to the voters of Oceano the question of whether to require an election before making any sale of water on a permanent basis; and WHEREAS, pursuant to Elections Code § 1405(b) the election for a local initiative that qualifies pursuant to Elections Code § 9311 shall be held at the next statewide election occurring not less than 88 days after the date of the order of election; and WHEREAS, the next statewide election date after the order is the General Election on November 6, 2012; NOW, THEREFORE, BE IT RESOLVED AND ORDERED by the Board of Directors of the Oceano Community Services District, as follows: 1. The question of whether to require an election before making any sale of water on a permanent basis, as set forth in Attachment 1, will be placed on the November 6, 2012 General Election ballot as follows: OCEANO COMMUNITY SERVICES DISTRICT ORDINANCE ______ Must an election be held prior to any permanent sale of water to any entity outside the Oceano Community Services District? YES NO 2. The full text of the measure will not be printed in the sample ballot booklet. The full text will be posted on the OCSD website and on the County Clerk-Recorder's website, and a copy of the full text will be mailed to any voter upon request. The statements required by Election Code § 9313 shall be printed in the sample ballot booklet. On motion by President Guerrero, seconded by Director Hurdle, and carried on the following roll call vote, to wit: AYES: President Guerrero, Director Hurdle, Director Angello, VP Lucey 7/30/2021 Print Preview https://oceanocsd.municipalcodeonline.com/book/print?type=resolutions&name=2012-03_Sale_Of_Water 2/2 NOES: ABSENT: Director Searcy ABSTAIN: HISTORY Adopted by Res. 2012-03 on 5/9/2012 State Water Project Excess Entitlement Policies Approved by Board of Supervisors January 14, 2003 Excess Entitlement - Definition The District State Water Project “Excess” Entitlement is the portion of the District’s total entitlement that is not contracted to others for their deliverable or drought buffer uses. Priority of Use 1. Prior to transferring the excess entitlement for any other use, contractors of state water entitlement with capacity in Phase II of the Coastal Aqueduct shall have the first right to utilize the excess entitlement for “drought buffer” (reliability) purposes under the terms of a drought buffer agreement. 2. Preference shall be given to local agencies and water purveyors regardless of whether a transfer is on an annual, multi-year, or a permanent basis. 3. No permanent transfer of the excess entitlement for use outside District boundaries shall be made prior to a final update of the District’s Master Water Plan adopted by the Board of Supervisors, and then only if the transfer is consistent with the then adopted Master Plan. (See ‘Note’ below) 4. No multi-year transfer for use outside District boundaries shall be made with a term in excess of five years prior to a final update to the District’s Master Water Plan adopted by the Board of Supervisors, and then out of District transfers can only take place if the transfer is consistent with the adopted Master Plan. 5. On any out -of-District transfer, preference shall be given to those that provide: a) revenues that recover current costs and some or all of the District’s past costs, b) maintain the District’s right to use the water in the future, or c) which are used for environmental mitigation. 6. The Public Works Director is authorized to determine the annual amount of the excess entitlement to transfer to the State Water Project “Turnback Pools” established under the existing terms of State Water Agreements. In making that determination, the Public Works Director shall first consider local needs and how the use of the Turnback Pool might impact other potential transfers. Note: These policies were adopted by the Board of Supervisors “with the understanding there will be no permanent sales outside the District.”