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CC 2014-05-27_08.i. Support Letter Lopez Surplus WaterMEMORANDUM TO: CITY COUNCIL FROM: ~ . TERESA MCCLISH, COMMUNITY DEVELOPMENT DIRECTOR GEOFF ENGLISH, PUBLIC WORKS DIRECTOR SUBJECT: CONSIDERATION OF LETTER TO SUPPORT THE DECLARATION OF LOPEZ SURPLUS WATER DATE: MAY 27,2014 RECOMMENDATION: It is recommended that the City Council approve and authorize the Mayor to sign the attached letter regarding the declaration of Lopez surplus water to the Board of Supervisors with a copy to the Zone 3 Advisory Board. IMPACT ON FINANCIAL AND PERSONNEL RESOURCES: There is additional cost for groundwater pumping in comparison to Lopez surplus water of approximately $250/AF. Should surplus water not be declared, staff would anticipate pumping approximately an additional 700 acre feet of groundwater, resulting in approximately $175,000 of increased costs. BACKGROUND: The City's water supply includes surface water from the Lopez Reservoir, groundwater from the Santa Maria Groundwater Basin and a small amount from the Pismo Formation as indicated in the chart below: WATER SOURCE ACRE FEET PER YEAR % Santa Maria Groundwater Basin Entitlement 1,323 AFY 35.1 Lake Lopez Entitlement 2,290 AFY 60.7 Pismo Formation Groundwater 160 AFY 4.2 The City also maintains a vigorous conservation program and has committed to reducing the necessity to import water and maximize available local resources. City staff makes all attempts to conjunctively use groundwater and surface water supplies to reduce cost, utilize stored water, maintain water quality and to protect the long-term balance of resources. Lopez Dam and Reservoir were planned, designed and constructed under the auspices of the San Luis Obispo County Flood Control and Water Conservation District Zone 3 (District) to provide water supply for the contracting communities of Arroyo Grande, Grover Beach, Pismo Beach, Oceano and CSA 12 (Avila Beach/San Luis Bay Estates area). Approximately 61% of the City's water supply comes from Lopez. The City has a Item 8.i. - Page 1 CITY COUNCIL CONSIDERATION LETTER RECOMMENDING THE DECLARATION OF LOPEZ SURPLUS WATER MAY 27,2014 PAGE 2 of4 contract with the County of San Luis Obispo that acts as the Flood Control and Water Conservation District [see attached Contract Between San Luis Obispo County Flood Control and Water Conservation District and The City of Arroyo Grande For A Water Supply ("Contract")]. In accordance with Article 4 of the Contract (Attachment 2), during years when less than 8,730 acre feet of combined downstream release and entitlement water is used, then surplus water is available and required to be offered to contracting agencies. Due to above average rainfall in 2010-2012, the City has been utilizing surplus water that has been declared in accordance with the Contract by the County Public Works Director to whom the Board delegated its authority. The annual calculation to declare the existence of surplus water is based on a formula detailed in the Contract and is not discretionary. This year's surplus water declaration has not yet been made and has been referred to the Board of Supervisors/District for consideration. ANALYSIS OF ISSUES: The amount of surplus water available annually is determined at the end of a water year by a mathematical calculation performed by District staff and is based on the amount of water that was not used in the prior year within the lake's safe yield of 8,730 acre feet. The safe yield is a combination of up to 4,200 acre feet made available for downstream release and the 4,530 acre feet of water for the contract agencies. Any unused water within the safe yield is then placed in a pool and offered to the contract agencies on a proportionate basis in the next water year. The City has used its proportionate share of surplus water, but only a portion of its annual entitlement of 2,290 AFY. The unused entitlement is then carried over as a contribution to the surplus pool and becomes available for use in the subsequent year. As a cooperative strategy with other contract agencies, this enables efficient use of stored water. Given that unused water entitlements were carried over last year, staff has anticipated the annual declaration of surplus water with the intention to maintain a reduced pumping regime. This is a prudent measure for the health of the groundwater basin that is experiencing low ground water levels that create a condition favorable to sea water intrusion. Severe state drought conditions have caused all agencies to implement rigorous measures for resource protection. For the Lopez Reservoir, the Contract includes provisions for the declaration of surplus water in order to protect the safe yield of the Reservoir. In years following above average rainfall, particularly drought years, available surplus water can and should be used to protect groundwater without impacting the surface water resource. This is particularly important as some contracting agencies are intending to pump more groundwater to replace state water allocations. Item 8.i. - Page 2 CITY COUNCIL CONSIDERATION LETTER RECOMMENDING THE DECLARATION OF LOPEZ SURPLUS WATER MAY 27; 2014 PAGE 3 of4 County staff has taken the position that surplus water should be a decision of the Board of Supervisors due to the drought and their emergency proclamation. They have indicated that the aggregate entitlements available under the Contract may be reduced, due to restrictions imposed upon the District caused by extreme changes in long-term meteorological patterns that reduce the Safe Yield assumptions for the Project or multi- year drought conditions. While the Contract appears to provide some discretion to the County to reduce water entitlement amounts during certain drought conditions, there are no provisions in the Contract that allow the County to modify surplus water allocations. In addition, protocols are currently being developed by the Zone 3 TAG to clarify procedures when entitlements would be impacted. Therefore, staff also recommends that no decisions be made regarding entitlements until those protocols are established. Finally, there is currently a Low-Level Response Plan (LRRP) in place for the Reservoir and the criteria for modifying releases have not yet been met by existing drought conditions. Lopez Reservoir is currently at 56% capacity and the LRRP is triggered if the amount of water within the Reservoir drops below 20,000 AF, as measured .on April 1st of any given year. Lake levels in 2014 were well above the trigger level. The Zone 3 TAG also actively supports evaluation of the LRRP in conjunction with drought planning, but it is not a factor in the determination of surplus water declaration from the previous water year. It is important to note that on May 15, 2014, the Zone 3 Technical Advisory Committee (TAG) recommended that surplus water be declared in the amount of not less than 2,327 AF based on a modified calculation. From staffs perspective, the declaration of surplus water should be completed in accordance with the provisions of the water supply contract as it has been historically calculated, which would yield slightly less surplus supply. However, as the supply calculations yield similar supplies, staff believes either method of calculation is acceptable for this year's declaration. If the County staff believe that modified calculations be utilized, concurrence from all agencies prior to any future year declaration should be established. Given the above stated conditions and justifications, staff believes that the declaration of Lake Lopez "surplus water'' is warranted and prudent. Staff recommends that the City Council approve and submit the attached letter recommending the declaration of Lopez Surplus Water to the Board of Supervisors. The Cities of Grover Beach and Pismo Beach are sending similar letters also urging the Board to declare surplus water. ALTERNATIVES: The following alternatives are provided for the Council's consideration: • Approve and authorize the Mayor to sign and submit the proposed letter to the County Board of Supervisors; Item 8.i. - Page 3 CITY COUNCIL CONSIDERATION LETTER RECOMMENDING THE DECLARATION OF LOPEZ SURPLUS WATER MAY 27,2014 PAGE4of4 • Modify, approve, and authorize the Mayor to sign and submit the proposed letter; • Do not approve the proposed letter; or • Provide staff direction. ADVANTAGES: Submitting the proposed letter will inform the Board of Supervisors/District, and Zone 3 TAC regarding contractual obligations and the importance and intended use of Lopez Reservoir surplus water for water year 2014-15. DISADVANTAGES: No disadvantages have been identified by Staff. 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, May 22, 2014. The Agenda and staff report were posted on the City's website on Friday, May 23, 2014. No public comments were received. Attachment: 1. Draft letter to the County Board of Supervisors 2. Article 4 of the Contract with the San Luis Obispo County Flood Control and Water Conservation District Item 8.i. - Page 4 Attachment 1 DRAFT LETTER May 28, 2014 Bruce Gibson, Chair, and Supervisors San Luis Obispo County Board of Supervisors and Directors, San Luis Obispo County Flood Control and Water Conservation District Room D-430, County Government Center San Luis Obispo, CA 93408 SUBJECT: COUNTY FLOOD CONTROL AND WATER CONSERVATION DISTRICT- DECLARATION OF SURPLUS WATER Dear Chair Gibson, Supervisors, and Members of the Board: I am writing on behalf of the Arroyo Grande City Council to urge the District to undertake and complete the process of declaring surplus water availability at Lopez Lake in compliance with the provisions of the Water Supply Contract that exists between the District and the City of Arroyo Grande. The City receives its water supply from Lopez Lake and the Santa Maria Ground Water Basin. Since its construction, the City has relied on Lopez Lake and its treatment facility to supply approximately 61% of the City's water needs through the regular allocation under the contract. In addition, the City has used Lake Lopez "surpls water'' which is more appropriately defined as "carry-over entitlement and unused down-stream release" whenever it has been declared. In recent years, the San Luis Opispo County Director of Public Works was given the authority to declare surplus water as the provisions are precisely included in accordance with the contract. According to Article 4. Distribution and Sale of Proiect Water subparagraphs (C) and (D) the amount of Surplus Water available annually is determined by a mathematical calculation performed by the District. This calculation is based on the difference between the amount of entitlement water delivered to the Agencies plus the amount released downstream and the Safe Yield of the reservoir. The safe yield consists of up to 4,200 acre feet made available for downstream release and the total of 4,350 acre feet of project water that is to be distributed to the contract agencies, including Arroyo Grande. The safe yield totals 8, 730 acre feet of water. Any unused project water within the safe yield is then placed in a pool and made available to the contracting agencies on a proportionate share basis as surplus water in the next water year. As noted in the contract, the determination of the existence of surplus water is based on the completion of the process and is not discretionary. Item 8.i. - Page 5 Since 2011, Arroyo Grande, along with the other member agencies, has been managing our Lopez water supply by utilizing the declared surplus before our entitlements. We have each intentionally preserved an amount of entitlement water each year so that it can be carried over to be declared as surplus in the next year and then used as part of that year's supply. In light of the current drought conditions, the City may also use the surplus in the coming year to offset the demand on·the ground water basin and limit the potential for sea water intrusion. While the Contract appears to provide some discretion to the County to reduce water entitlement amounts during certain drought conditions, there are no provisions in the Contract that allow the County to modify surplus water allocations. In addition, protocols are currently being developed by the Zone 3 Technical Advisory Committee (TAC) to clarify procedures when entitlements would be impacted. Therefore, staff also recommends that no decisions be made regarding entitlements until those protocols are established. On May 15, 2014, the Zone 3 Advisory Committee recommended that surplus water be declared in the amount of not less than 2,327 AF based on a modified calculation. From the City's perspective, the declaration of surplus water needs to be completed in accordance with the provisions of the water supply contract as it has been historically calculated which would yield slightly less surplus supply. However, we would support the Zone 3 Advisory Committee's recommendation Ci_S well. Once surplus water is declared, it is the City's intent to use its proportionate share in combination with the City's ongoing conservation efforts to ensure that the City's long-term water sources are balanced and protected. The Arroyo Grande City Council strongly requests that the Board ensure the declaration of surplus water be conducted per the provisions of the agreement or as recommended by the Zone 3 Advisory Committee. Sincerely, T any Ferrara Mayor cc: Zone 3 Advisory Board Item 8.i. - Page 6 ATTACHMENT 2 Agency leading up to and including 1he making of this Contract and the validity of the provisions thereof and hereof. Article 4. Distribution and Sale ofPrpject Water. The following provisions govern the distribution of water from the Project to the Agency, to the Other Agencies and for other pmposes, in the priorities set forth below: (A) Lep11y Requiml Water Releases. The parties hereto acknowledge aDd agree that Project water is subject to certain releases and minimum storage requirements imposed by law which are not affected by the terms hereof. (B) Entitlements. Subject to the foregoing, the District shall make available to the Agency in each WaterY ear, to the extent possible, 2,290 acre-feet ofProject water. The District will, in order to satisfy this entitlement and the entitlements of Other Agencies, set aside from the Safe Yield the total of 4,530 acre-feet of Project water which will be distributed to the Agency and the Qt4er Agencies, as established lD1der Article 4(B) hereof and of their respective W*t Supply Contracts. The Agency's Entitlement comprises SO.SS percent of the aggregate Entitlemt.nts awarded under all the Water Supply Contracts, including this Contract. Such percentage comprises the Agency's Proportionate Share hereunder. Notwithstanding the foregoing, the aggregate Entitlements available under this Contract and under the Water Supply Contracts may be reduced, following written notice given to the Agency from the District, due to ( 1) permanent or long-term restrictions imposed upon the District caused by (i) extleme changes in long-term meteorological patterns that reduce the Safe Yield assumptions for the Project; or (ii) multi-year drought conditions; or (2) temporary or short-term limitations based upon (i) reduced ability of the Project either to treat or distribute water because of force majeure; (ii) drought conditions; or (iii) water quality standards -- which reduce the safe, treated output of the Project at the time. 595300.2 13 Item 8.i. - Page 7 (C) Sumlus Water Bates. Project waterremainingafterthe distribution ofProject water as described in paragraphs (A) and (B) above shall comprise "Sutplus Water" hereunder. Surplus Water shall be sold in accordance with the provisions of this paragraph. 595300.2 (1) Surplus Water shall first be offered by the District to the Agency and the Other Agencies in accordance with their Proportionate Shares, with a price for such Surplus Water to be established based on the Operation and Maintenance Cost of the District incuned in delivering the Surplus Water actually purchased by the Agency or the Other Agencies. If the Agency or any Other Agency shall commit in writing to purchase Surplus Water from the District under this subparagraph, it shall be obligated to pay for such Surplus Water, whether or not in fact ordered from the District or accepted by the Agency, so long as such Surplus Water was in fact available for the period in question. Neither the Agency nor any Other Agency shall resell Surplus Water at any time to third parties, without the prior written consent of all Other Agencies. (2) The District may offer to sell and deliver any Surplus Water not purchased by the Agency or the Other Agencies hereunder to any otherprospectivepurchaserwithoutright of renewal, in a manner and at prices which will return to the District the largest net revenue practicable, but in no event at prices less than those at which such Surplus Water is offered to the Agency, unless the Agency is first allowed another opportunity to purchase such Surplus Water at the lower price, and in each case, attempting tO recapture the Operation and MaintenanC1! Cost, the variable co~ if any, and Debt Service attributable to the volmne of Surplus Water actually purchased by such third parties, at the highest price the market will then bear. 14 Item 8.i. - Page 8 (3) All revenues derived by the District from the sale of Surplus Water to the Agency, any Other Agency or any third party hereunder shall be applied as a ~t to the obligations of the Agency and the Other Agencies, based on the Percentage Shares of the Agency and each Other Agency. (D) SurplusWater, Beginningwiththe2000-01 WaterYear,SurplusWatershall be the portion of the Safe Yield for Project water remaining after distributions of water during the s8id previous Water Year, as described below. Surplus Water shall be calculated for each WaterY ear by subtracting from the Safe Yield of the Project an amount equal to the sum of the quantity of water released downstream during the immediately prior Water Year, which shall not exceed 4,200 acre feet unless legally required by Article 4(A) hereot: and the quantity of Entitlement water delivered to the Agency and the Other Agencies during the immediately prior WaterY ear, excluding downstream releases and Entidement deliv~es that occurred during the period of time that the District determined that continuous spillway flow was occurring at Lopez Dam. The District shall notify the Agency of the total amount of Surplus Water available for the cmrent Water Year, and once so declared by the District, said amount shall not be changed by the District without first obtaining the consent of the Agency and all Other Agencies. Surplus Water plD"Chased by the Agency will be delivered to Agency in the manner provided for the delivery of its Entitlement and to the extent that all of said surplus water purchased by Agency is not so delivered by the end of the Water Year in question, then such undelivered amount shall revert to District and shall not thereafter be available to Agency. Article 5. Water Shortages. From time to time during the term of this Contract, there may occur a shortage in the quantity of Project water available for delivery to the Agency by the 595300.2 15 Item 8.i. - Page 9 THIS PAGE INTENTIONALLY LEFT BLANK Item 8.i. - Page 10