CC 2024-05-14_11a CCB Update
MEMORANDUM
TO: City Council
FROM: Matthew Downing, City Manager
Bill Robeson, Assistant City Manager/Public Works Director
Nicole Valentine, Administrative Services Director
Shannon Sweeney, City Engineer
Shane Taylor, Utilities Manager
SUBJECT: Water Supply Evaluation, Central Coast Blue Member Agency Status
Update, and Requested Direction
DATE: May 14, 2024
RECOMMENDATION:
Provide direction to staff regarding implementation of City Council input regarding City
water supply and Central Coast Blue Member Agency Status. As a follow up to the April
9, 2024 City Council discussion, staff recommends that the City withdraw from the Central
Coast Blue Regional Recycled Water Authority Joint Powers Agreement, proceed with
Water Master Plan and Water Utility Plan updates once these items are approved in the
FY 2024-25 budget, and defer a State Water ballot measure until at least 2026.
The requested direction from the City Council is not a project subject to the California
any provided direction has no potential in
itself to result in either a direct, or reasonably foreseeable indirect, physical change in the
environment. (State CEQA Guidelines, §§ 15060, subd. (c)(2)-(3), 15378.)
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
In FY 2024-25 $100,000 is recommended to be allocated for the preparation of the Water
Master Plan, in which an updated water supply analysis will be included and $50,000 is
recommended to be allocated for the preparation of a Utility Rate Study update.
Actual progress on these two tasks is contingent on City Council approving funding for
the Water Master Plan and Utility Rate Study updates in the FY 2024-25 Budget.
BACKGROUND:
Since 2021, the City of Arroyo Grande has been committed to augmenting the regional
water supply, most recently by participating in a Joint Powers Authority (JPA) with the
Item 11.a.
City Council
Water Supply Evaluation, Central Coast Blue Member Agency Status Update, and
Requested Direction
May 14, 2024
Page 2
Cities of Grover Beach and Pismo Beach to recycle wastewater through the Central Coast
Blue Project (CCB).
On January 25, 2022, the City Council authorized entering into a Cost Sharing Agreement
(CSA) with the other JPA participants and applying for financial assistance from the
The CSA obligates the City to pay for 25% of
the total costs of CCB. The City of Pismo Beach and the City of Grover Beach will pay
39% and 36% of the costs, respectively. Total costs for CCB at that time were estimated
to be $56,681,853.
On April 9, 2024and the
current status of CCB. At that meeting, the City Council gave direction to investigate
several actions, including initiating the process to withdraw from the CCB CSA while
intending tundertake a new water supply
alternative study
proceeding with a ballot initiative to allow the future purchase of water from the State
Water Project outside of local water emergencies declared by the City Council.
The City of Grover Beach considered a similar item on April 22, 2024. At that time, the
Grover Beach City Council directed staff to initiate withdrawal from CCB and associated
JPA, consider a variety of approaches, including recycled water, to secure additional
rate structure to eliminate funding for CCB while still maintaining funding for water
resiliency efforts.
On April 18, 2024, the City received a letter from the County of San Luis Obispo, included
as Attachment 1. This letter supports continued regional partnerships, indicates that State
policy precludes jurisdictions from pursuing desalination until they fully exhaust
opportunities to use recycled wastewater as water supply, and cautions that State Water
should not be considered an additional primary water supply source for the Five Cities
area due to changing hydrologic patterns and declining State Water allocations.
ANALYSIS OF ISSUES:
As stated previously, on April 9, 2024, the City Council provided direction to investigate
the following items:
partnership in the JPA;
Undertake a new water supply alternative study;
Consider proceeding with a ballot initiative to allow the future purchase of water
from the State Water Project outside of local water emergencies declared by the
City Council.
Item 11.a.
City Council
Water Supply Evaluation, Central Coast Blue Member Agency Status Update, and
Requested Direction
May 14, 2024
Page 3
In response to City Council direction, staff have been working toward implementing these
matters, as reported below.
Letter to Initiate Departure from the CSA; Follow-Up Re: CCB JPA Membership
As directed, staff has prepared a letter to initiate departure from the CCB CSA
(Attachment 2) pursuant to Article V, Section 9 of the CSA (Attachment 3). Per the terms
of the CSA, the City may opt out of the CSA prior to the award of the first Phase 1
construction contract by providing written notice to each party to the CSA personally, by
registered or certified mail, return receipt requested, or by overnight delivery. Upon opting
out of the CSA, the City will still be responsible for its pro rata share 25% - of any Pre-
Construction Costs incurred up to the opt-out date.
In addition to opting out of the CSA, staff is seeking City Council input and possible
direction on whether to withdraw from the CCB JPA Agreement as well (Attachment 4).
The CSA and the CCB JPA agreements are closely intertwined. The parties to the CSA
executed that agreement for the purpose of allotting the costs of Phase 1 of the Central
Coast Blue Project. Pursuant to Article III, Section 3 of the CSA, the CSA also
contemplated the creation of the CCB JPA to own and operate the project, finance the
construction costs for Phase 1, and acquire and own the future facility site for the project.
Similarly, the JPA
and manage the planning and implementation, including but not limited to construction,
operation and administration of, the CCB Project. The CCB JPA also uses the CSA as
the basis for several key JPA functions, including budgeting and the allocation of Phase
1 Pre-Construction and Construction Costs. Member agencies also have obligations to
contribute to JPA costs beyond the scope of the CSA, pursuant to section 6.3.2 of the
JPA Agreement. Accordingly, given
direction to cease its current financial participation in the CSA for the CCB project at this
time, staff recommends that the City Council withdraw from the JPA Agreement and direct
staff to effectuate such withdrawal pursuant to the terms of the JPA Agreement.
If the City Council wishes to withdraw from the JPA Agreement, the City must provide the
under Article 8. Upon withdrawal,
the Ci Board of Directors would also be withdrawn, and, unless
otherwise agreed by the City and JPA Board, the City would relinquish all rights as a
member agency. The City would still be responsible to contribute its share of any
obligation incurred by the JPA during the time the City was a member agency, including
amounts for liabilities and claims accrued during the time the City was a member agency,
and budgeted expenses for the fiscal year in which the notice of intent to withdraw is
given, unless the JPA Board allows the early exit from the JPA. Per Article 6 of the JPA
Agreement, the fiscal year commences on July 1 of each year, so if the City Council
decides to withdraw from the JPA Agreement, notice of its intent to do so should be
provided by June 30, 2024,
of JPA expenses budgeted for the fiscal year beginning July 1, 2024.
Item 11.a.
City Council
Water Supply Evaluation, Central Coast Blue Member Agency Status Update, and
Requested Direction
May 14, 2024
Page 4
pursuant to Section 9.3 of the JPA Agreement
be treated like all other member agencies for the purposes of disbursement of JPA assets
unless otherwise agreed in writing.
Water Supply Analysis Update
Recent staff evaluation of current and future water supply and demand indicate that with
changes to the rules for storing water in Lopez Lake made in October 2022 and
water supply portfolio is adequate to
meet current and build-out demands through a minimum five-year drought scenario. This
information will be peer-reviewed by a third-party consultant as part of a water supply
Water Master Plan, which was including in the 5-Year CIP Budget
in FY 2024-25. The existing Water Master Plan was prepared in 2012 and is due
to be updated. Analyzing current and future water supply is a common task performed as
part of Water Master Planning. Staff will initiate the process for securing a consultant to
perform the Water Master Plan update through a Request for Proposal process as soon
as funding is secured for this task.
Rate Study Update
The Current Water and Wastewater Rate Study covers FY 2021-22 through FY 2025-26,
with the third increase on January 1, 2024. The current rate structure includes two
additional increases on January 1, 2025, and January 1, 2026. Based on Council direction
to withdraw from the CCB CSA staff recommend evaluating the impacts this change has
on the Water and Wastewater Rate structure once the Water Master Plan is updated. The
Water Master Plan update will identify capital improvement projects needed for the City
to meet its buildout water supply, treatment, storage, and distribution needs. Information
in the Water Master Plan is critical to develop an accurate water rate structure. By
performing the Water and Wastewater Rate Study update after the Water Master Plan,
water rates will properly reflect the C,
and infrastructure.
Ballot Measure to Secure Water from the State Water Project Outside of Water
Emergencies
Due to the 2024 Presidential Election in November, the City is positioned to be able to
move forward with placing a measure on the ballot to allow the City to purchase water
from the State Water Project should the opportunity present itself. In 2016, Arroyo Grande
voters passed Measure E-16 to allow the City to purchase water from the State Water
Project during local water emergencies declared by the City Council. A measure on the
2024 General Municipal Election, if directed by the City Council, would request the ability
for the City to purchase water from the State Water Project outside of local water
emergencies. This could enable the City to purchase water from the State Water Project
should supply become available in the future, including from current State Water Project
Item 11.a.
City Council
Water Supply Evaluation, Central Coast Blue Member Agency Status Update, and
Requested Direction
May 14, 2024
Page 5
recipients such as the Oceano Community Services District or the County of San Luis
Obispo.
While there technically remains enough time to place this matter on the 2024 General
Election ballot, six months may not provide adequate time necessary to properly educate
the voters on the scope of that potential measure, or the needs for additional water
supplies that the City Council has discussed. Additionally, due to the ample precipitation
received in the previous two water years, adequate water supplies exist for the City to
continue working toward regional water supply solutions outside of CCB, developing an
appropriate public education campaign, and could place the measure on the 2026 ballot.
For these reasons, staff recommends the City Council defer this effort to be undertaken
for the 2026 General Election.
ALTERNATIVES:
1. Direct staff to withdraw from the JPA, proceed with Water Master Plan and Water
Utility Plan updates once these items are approved in the FY 2024-25 budget, and
defer a State Water ballot measure until at least 2026; or
2. Provide other direction to staff.
ADVANTAGES:
Performing the Water Master Plan and Utility Rate Study updates as directed by City
Council allows City to perform the analysis necessary to ensure that water supplies will
meet future needs and that a rate structure will be in place to meet those needs.
CCB costs have grown from an estimated $56 million in 2022 to a minimum of $134 million
at most recent estimate. The CSA obligates the City of Arroyo Grande for 25% of CCB
costs. Departing the CSA relieves the City from an obligation to pay increasingly higher
costs associated with construction of CCB.
Staff does not believe that it is necessary to pursue a ballot measure to secure the ability
to purchase State Water within the six months before the November elections. Holding
off on this task does not preclude the City from pursuing such a measure at a later date.
Current water conditions indicate that the City has sufficient water supply to meet demand
for at least five years, providing adequate time to pursue the ballot initiative if needed.
DISADVANTAGES:
State policy appears to preclude jurisdictions from pursuing desalination until they fully
exhaust opportunities to use recycled wastewater as water supply. By initiating the
process to depart the CSA, City is divesting itself from the only current opportunity for
using recycled wastewater as water supply. Not pursuing a project that recycles
part of its future
water supply portfolio.
Item 11.a.
City Council
Water Supply Evaluation, Central Coast Blue Member Agency Status Update, and
Requested Direction
May 14, 2024
Page 6
ENVIRONMENTAL REVIEW:
The requested direction from the City Council is not a project subject to the California
itself to result in either a direct, or reasonably foreseeable indirect, physical change in the
environment. (State CEQA Guidelines, §§ 15060, subd. (c)(2)-(3), 15378.)
PUBLIC NOTIFICATION AND COMMENTS:
Government Code Section 54954.2.
ATTACHMENTS:
1. April 18, 2024, Letter from the County of San Luis Obispo
2. Draft Cost Sharing Agreement Departure Letters
3. Cost Sharing Agreement
4. Joint Powers Agreement
Item 11.a.
ATTACHMENT 2
CITY OF
ARROYO GRANDE
CALIFORNIA
May __, 2024
V IA C ERTIFIED M AIL
Jorge Garcia
City Manager for City of Pismo Beach
760 Mattie Road
Pismo Beach, CA 93449
Re:Notice of Opt-Out of Cost Sharing Agreement ForParties’ Participation In The Central
Coast Blue Project
Dear Mr. Garcia:
This letter provides notice that the City of Arroyo Grande (“City”), pursuant to the approval of its City
Council at its May 14, 2024 regular meeting, hereby opts-out of the Cost Sharing Agreement For Parties’
Participation In The Central Coast Blue Project (“Agreement”), between the Cities of Arroyo Grande, Pismo Beach,
and Grover Beach, dated March 14, 2022, as of May 14, 2024 pursuant to Section 9, Article V of the Agreement.
Please contact Matthew Downing, City Manager at (805) 473-5418 or mdowning@arroyogrande.org if
you have any questions.
Sincerely,
Matthew Downing
City Manager
cc:Richards, Watson & Gershon
Attn: Dave Fleishman, Esq.
847 Monterey Street, Suite 206
San Luis Obispo, CA 93401
CITY OF ARROYO GRANDE 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 2
CITY OF
ARROYO GRANDE
CALIFORNIA
May __, 2024
V IA C ERTIFIED M AIL
Matthew Bronson
City Manager for City of Grover Beach
154 S. Eighth Street
Grover Beach, CA 93433
Re:Notice of Opt-Out of Cost Sharing Agreement For Parties’ Participation In The Central
Coast Blue Project
Dear Mr. Bronson:
This letter provides notice that the City of Arroyo Grande (“City”), pursuant to the approval of its City
Council at its May 14, 2024 regular meeting, hereby opts-out of the Cost Sharing Agreement For Parties’
Participation In The Central Coast Blue Project (“Agreement”), between the Cities of Arroyo Grande, Pismo Beach,
and Grover Beach, dated March 14, 2022, as of May 14, 2024 pursuant to Section 9, Article V of the Agreement.
Please contact Matthew Downing, City Manager at (805) 473-5418 or mdowning@arroyogrande.org if
you have any questions.
Sincerely,
Matthew Downing
City Manager
cc:David Hale
City Attorney
1233 W. Shaw Ave. Ste. 106
Fresno, CA 93711
CITY OF ARROYO GRANDE 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