BOARD AGENDA MEMORANDUM
Government Code § 84308 Applies: Yes ☐ No ☒
(If “YES” Complete Attachment A - Gov. Code § 84308)
SUBJECT:
Title
Receive an Update on the Development of Santa Clara Valley Water District’s Water Supply Master Plan 2050; and Approve the August 28, 2024, Recycled Water Committee Recommendation to set Potable Reuse Goal of 24,000 Acre-Feet per Year by 2035 and a Long-Term Vision to Maximize Water Reuse in the County up to 32,000 Acre-Feet per Year.
End
RECOMMENDATION:
Recommendation
A. Receive an update on the development of Santa Clara Valley Water District’s Water Supply Master Plan 2050 and provide feedback;
B. Consider and approve the August 28, 2024, recommendation of the Recycled Water Committee to set a potable reuse goal of 24,000 acre-feet per year by 2035, as well as a long-term vision to maximize water reuse in the County up to 32,000 acre-feet per year in the Water Supply Master Plan 2050, including additional potable and non-potable reuse, desalination, stormwater capture, and other alternative water sources; and
C. Provide additional feedback and direction on refined adaptive management framework.
Body
SUMMARY:
The Water Supply Master Plan (WSMP) is Santa Clara Valley Water District’s (Valley Water) guiding document for long-term water supply investments to ensure water supply reliability for Santa Clara County. Updated approximately every five years, this long-range plan assesses projected future county-wide demands and evaluates and recommends water supply and infrastructure projects to meet those demands to achieve Valley Water’s level of service goal through the planning horizon. Valley Water’s level of service goal, as established in Board Ends Policy 2, is to “Meet 100 percent of annual water demand during non-drought years and at least 80 percent of demand in drought years.”
Valley Water is working on developing the WSMP 2050. At the June 25, 2024, Board of Directors (Board) meeting, staff presented the third update on the development of the WSMP 2050, including project evaluation, cost analysis for projects and portfolios, representative portfolios that meet water supply needs under three themes, and a proposed adaptive management approach to support decision-making in the face of uncertainty. As a follow-up to the June meeting, the Board approved the 2050 conservation goal of 126,000 acre-feet per year (AFY) at the July 9, 2024, meeting and requested that the potable reuse goal be further discussed by the Recycled Water Committee.
This memorandum summarizes the progress since July, including the refined potable reuse goal, a discussion of acceptable level of service, cost of shortage discussion, refined road map with recommendations, and incorporates input from the Board and stakeholders.
Potable Reuse Goal
Potable reuse is a locally controlled and drought-resilient supply that is effective in mitigating drought risks. The Recycled Water Committee discussed the potable reuse goal in July and August and recommends a goal of 24,000 AFY of potable reuse by 2035, which can be achieved with a project in collaboration with the Cities of San José and Santa Clara (Attachment 1). In an effort to explore additional potable reuse, the Committee also recommends including a long-term vision to maximize water reuse in the county up to 32,000 AFY. This long-term vision includes additional potable and non-potable reuse, desalination, stormwater capture, and other alternative water sources. Including a 2035 goal with a long-term vision promotes a phased approach that accounts for uncertainty with future demand and wastewater availability while balancing affordability and risk of overinvestment.
Discussion of Level of Service
At the July 9, 2024, Board meeting, Chair Hsueh provided written comments and requested a discussion of the acceptable Level of Service (LOS) in the WSMP update (Attachment 2). The comments asked for elaboration on the potential impacts of a reduced LOS on the local community and Valley Water’s operations and cost, as well as the trade-offs of a reduced LOS vs investment to maintain the current service level.
Valley Water’s current LOS was updated in the WSMP 2040 and subsequently established in Board Ends Policy 2. The LOS was developed with public and stakeholder input and intended to strike a balance between minimizing shortages and the costs associated with the previous higher LOS goal of meeting at least 90 percent of water demand in drought years. Similar to past practices, the WSMP 2050 uses the established LOS goal to identify future water shortages and the required long-term investments to address them. Based on the current LOS, the identified shortages (ranging from 2,000 to 72,000 AFY) mean that without investment, Valley Water will have a lower LOS under all future conditions, except for the best-case future (stable demand and moderately impacted imported water supplies). The shortages were calculated assuming that Valley Water can meet its long-term water conservation goals and achieve an additional 10 to 15 percent water use reduction during droughts for stable and high demand conditions, respectively.
While a reduced service level would reduce or forego the needed level of investment, it could have an immediate and real impact on residents and businesses and adversely and chronically affect economic development in the county. One of the reasons for that is Santa Clara County is already among the most water efficient counties. Currently, Santa Clara County has already achieved a high level of water use efficiency, with an average residential (indoor and outdoor) water use (over last ten years) of 69 gallons per capita per day, lower than the state average and standard. In addition, with State regulations Making Conservation a Way of Life and banning irrigation of non-functional turf (which are factored into the 2050 conservation goal) and as Valley Water works to meet long-term water conservation goals, outdoor use will continue to decline. It is possible that demand hardens, which leaves few areas to make additional reductions in the future to successfully meet drought calls for conservation.
Depending on the demand and water supply situation that develops in the future, a reduced LOS or insufficient water supply could potentially disrupt activity in homes, schools, government, and businesses and adversely affect public health and safety. Some impacts could include lower quality of life (i.e., rationing of water use during certain times of day), disruption of business operations (data centers, restaurants, tourism, recreation, etc.), and no irrigation for parks and trees. Some of these impacts happened during the last drought in the North Bay and communities in the Central Valley. In addition, agricultural production could be impacted by reduced water supply. If the shortage condition becomes chronic, it could lead to permanent land subsidence, which historically happened in the northern portion of the county and took several decades of aggressive investment and management to halt. Impacts of subsidence in today’s highly urbanized Silicon Valley would be much more severe than when the county had substantially more agricultural lands. While Valley Water has the authority to control groundwater pumping, retailers and groundwater pumpers work to cut back during droughts based on voluntary/mandatory calls and incentives. With a lower LOS, it is likely that enforcement mechanisms would need to be developed.
The reduced service level would also negatively impact Valley Water’s operations and finances. As discussed above, groundwater pumping restrictions would likely need to be implemented to avoid resumed subsidence. With a much tighter margin of error and counting on our community to conserve when it is already very efficient, Valley Water may also need to rely on purchasing emergency water supply. Financially, Valley Water will experience additional drought spending including cost of purchasing emergency supplies. During the 2020-2023 drought, Valley Water spent $79.5 million on drought management.
In addition, a reduced service level would put Valley Water outside the normal range of other water agencies' levels of service (Table 1), which are all at or above 80 percent except one. This will undermine Valley Water’s credibility and could have ripple effects on retailers’ operations and their long-range planning and compliance with state regulations, such as Urban Water Management Plans.
Given the above-mentioned impacts of water shortage and reduced LOS, it is critical that Valley Water continues to make necessary investments to maintain the current LOS and mitigate future droughts, to fulfill our mission of providing safe, clean water to Santa Clara County’s residents, businesses, and agricultural community.
Cost of Shortage Discussion
At the last Board update (June 2024), staff presented cost analyses at both project and portfolio levels, including water rate impacts. As part of the overall cost and benefit analysis, a cost of shortage analysis was performed to estimate the economic benefits of water supply investment to help inform investment decisions. The benefits were measured by avoided costs and estimated separately for residential, agricultural, and business sectors because they require different approaches.
The cost of shortage for the residential sector is estimated as the dollar amount that water users would be willing to pay to avoid water shortages. It is based on the economic theory of demand and relies on price elasticities and forecasted demands (among other variables). The calculation used the same approach1 as developed for the WSMP 2040 but with updated data. For representative portfolios, the present value of the cost of shortage (in 2023 dollars) was estimated to be $1.6 billion for the stable demand and $2.8 billion for the high demand, and there is not much difference among portfolios as they can all achieve similar water supply reliability.
The economic impact of water shortages on agricultural communities was estimated based on the county’s crop production. It was assumed that crop production would be reduced in proportion to the estimated water shortage. Using this simple assumption, the present value of the estimated impact on agriculture will range from $220 million to $280 million. In the past 10 years, the agricultural production in the county, however, has remained stable without much impact from droughts, because farmers were able to pump groundwater for irrigation due to Valley Water ensuring healthy groundwater levels. In a 2022 policy brief2, the Public Policy Institute of California (PPIC) estimated that during the last drought, state-wide crop revenue losses and increased pumping costs were at $1.1 billion in 2021. Similar impacts could happen in the county during future droughts, if groundwater availability is not sufficient.
The cost of water shortage for businesses, however, is challenging to estimate because the impacts of water shortage vary by business type depending on how essential water is to them. As a result, the estimate usually requires significant time and effort and involves surveys and/or reviews of various economic activities. Even with a robust analysis, the estimate is generally considered high level. Given this, and time and resource constraints, the economic impact on businesses was drawn by reference from previous studies. In 2022, the Municipal Water District of Orange County did a study on the economic impacts of water shortages in Orange County3, which estimated that a 15 percent water shortage for a year would cost $5.3 billion4 direct reduction in business output and associated indirect impacts, while a 30 percent water shortage could result in $11.2 billion4 of business impacts. Since Santa Clara County is similar to Orange County in Gross Domestic Product (GDP), it could be assumed that water shortage in our county would have a similar level of impact. In 2010, Valley Water did a similar study5, which provided an estimate of approximately $1.2 billion6 sales revenue decrease for 10 percent water rationing and $14.2 billion6 for 30 percent rationing. All costs are escalated to 2023 dollars from originally reported numbers, based on the U.S. Bureau of Labor Statistics (BLS) Consumer Price Index for the San Francisco Area.
In addition, if the shortage condition becomes chronic, groundwater overdraft could lead to land subsidence and widespread and costly infrastructure damage over time. The groundwater basin in northern Santa Clara County managed by Valley Water is vulnerable to land subsidence, with historic overdraft causing up to 14 feet of permanent subsidence in the greater San José metropolitan area7, the heart of Silicon Valley. This resulted in seawater intrusion, increased flood risk, and widespread damage to infrastructure. Historic damage to infrastructure and associated repair was estimated to be more than $756 million in 2013 dollars7. Currently, the San José-Santa Clara Regional Wastewater Facility is below sea level and receives and treats wastewater from more than 1.5 million people and serves a business sector with more than 17,000 main sewer connections. Sewer lines, storm drains, and associated pumping stations can be compromised by subsidence. Similarly, water supply pipelines, supply wells, and other health and safety infrastructure, including levees, roads, bridges, railroad alignments, hospitals, schools, and the power grid are all susceptible to damage if subsidence were to begin again.
While quantifying the potential economic impacts of water shortages is desirable, it is important to note that these types of analysis, by their nature, cannot completely and accurately capture the full spectrum of economic impacts, because of the complex nature of drought impacts on various aspects of society and the difficulty quantifying some benefits (i.e. quality of life, environmental benefits, etc.). At best, they present a snapshot of a high-level, order-of-magnitude estimation of quantifiable benefits with many underlying assumptions, including how water will be distributed and used in the future. Water supply is one of the most critical existential resources for a region’s survival and prosperity; its value is far beyond what can be measured monetarily. Therefore, providing a safe and reliable water supply is not only economically beneficial but also helps secure the future of our county for generations to come.
Water Supply Strategy for Worst-Case Condition
The WSMP 2050 analyzes four future supply and demand conditions (Figure 1) based on different combinations of imported water supplies (moderately or severely impacted) and demand (stable or high). At the June Board update, representative portfolios for three themes (lower cost, local control, diversified) were presented for the future condition of stable demand and severely reduced imports. The portfolios evaluated for this condition generally perform similarly to another middle-of-road condition (high demand and moderately impacted imports). There is very little shortage for the best-case condition (stable demand and moderately impacted imports) that would require investment.
Figure 1 Four Future Conditions for Planning
To complete the full analysis for all four future conditions, further portfolio analysis was completed to identify projects that would be needed to address the worst-case future condition of high demand and severely reduced imports. Since this condition is similar to the middle-of-road condition (stable demand and severely reduced imports) but with higher demand, the portfolios were developed by growing from the three representative portfolios identified for that condition to meet the higher demand.
The analysis suggests that under the worst-case condition, more projects will be needed for the Lower Cost and Local Control themes but not Diversified, which builds in enough resiliency and redundancy to meet higher demand (Table 2). However, given the current trend of urban demand, the worst-case condition may be too conservative to be used as the basis for investment decisions. Therefore, this analysis serves as part of the adaptive management framework to provide a full picture of potential future conditions and how Valley Water can be prepared for any of the four conditions.
Adaptive Management Framework
At the June Board update, an adaptive management approach was proposed to provide the Board with flexibility and the ability to make incremental investment decisions in the face of deep uncertainty associated with future conditions and project development and implementations. The adaptive framework is intended to define a consistent, stepwise process of making project and program investment decisions. The framework includes a roadmap and annual reporting. The roadmap outlines near- and mid-term actions and defines indicators and conditions to guide project decisions. The annual reporting tracks project progress and provides up-to-date information to help inform decision-making.
The proposed roadmap was refined to include more specific recommended actions at different timelines, especially immediate actions as the starting point of the adaptive management framework:
• Now - focus on the Lower Cost strategy, which includes San José Potable Reuse, B.F. Sisk Dam Raise, Delta Conveyance Project, Groundwater Banking, and South County Recharge; Continue planning for Pacheco and Sites; Continue the Desalination feasibility study; Continue implementing conservation programs.
• Near-term (2-3 years) - Assess success/progress on project planning and implementation; Make project funding, participation, or go/no-go decisions based on indicators, new information, and actual conditions; Continue planning for other projects.
• Mid-term (5 years) - Assess progress on project implementation; Update demand projections and water supply outlook; Update WSMP
Staff recommends the lower cost strategy while continuing to plan for other projects as a way to balance affordability and reliability. Given that large water supply projects and partnerships can have uncertain outcomes, continued planning for additional projects is recommended.
Annual reporting through the Monitoring and Assessment Program (MAP) will be a critical component of the adaptive management framework. A standard MAP report will be devised to include key elements of the WSMP, including progress on projects, conditions of indicators, and whether any adjustments are recommended. The timing of the MAP will be aligned with the annual CIP Five-Year Plan and Water Rate-Setting Cycle to support related decision-making.
The list of indicators and metrics that will be tracked in the annual MAP include:
• Progress of negotiations and agreements with other agencies (i.e., Sisk Dam Raise Project or direct potable reuse facility with the Cities of San José and Santa Clara)
• Timing of upcoming project decisions
• Regulatory and permitting issues
• Annual water use
• Annual supply
• Success of Conservation measures (water savings, program participation)
• Growth trend/demand
• Regional collaborative agreements and decisions by other agencies
• Evolving water quality standards
In the next few years, major decisions will come up for several projects. Through this adaptive management framework, the Board will have multiple opportunities along each project’s trajectory to make informed decisions on investments. It also allows the WSMP to be closely linked to the annual CIP and rate-setting processes, fulfilling its role as the guiding document for long-term investment strategy.
Outreach Efforts
Stakeholder engagement is an important component of the WSMP 2050 development process and is carried out throughout the plan development. In October 2024, staff presented updates at the Water Commission, Environmental Water Resources Committee, and retailer meetings. Staff also met with environmental stakeholders to discuss their questions and responses to written comments. In addition, Valley Water continues to use the WSMP webpage (<https://www.valleywater.org/your-water/water-supply-planning/water-supply-master-plan>), stakeholder email list, blogs, social media, and communication newsletter as ongoing opportunities to provide updates and engage the public and stakeholders.
Expert Panel
Valley Water convened an expert panel to support WSMP analyses and provide feedback on this Board update. Valley Water continues engaging the expert panel on various topics. The following experts serve on the panel:
• David Sunding, Professor at University of California, Berkeley
• Newsha Ajami, Chief Development Officer for Research, Lawrence Berkeley National Lab
• Michael Anderson, State Climatologist, Department of Water Resources
• Yung-Hsin Sun, Senior Principal Consultant, Sunzi Consulting LLC
Next Steps
Based on Board feedback and direction, staff will finalize the analysis and roadmap and start drafting the plan.
1 Water Supply Master Plan 2040, Valley Water, 2019
2 ’Policy Brief: Drought and Californias Agriculture <https://www.ppic.org/publication/policy-brief-drought-and-californias-agriculture/>, Public Policy Institute of California, 2022
3 The Economic Impacts of Water Shortages in Orange County, Brattle, 2022.
4 The study reported $5.1 billion for 15 percent water shortage and $10.8 billion for 30 percent shortage in 2022 dollar.
5 Economic Analysis of Water Shortage in Santa Clara County, Berkeley Economic Consulting, 2010.
6 The study reported $883 million for 10 percent shortage and $10.7 billion for 30 percent shortage in 2010 dollar.
7 Land Subsidence from Groundwater Use in California, Borchers and Carpenter, 2014.
ENVIRONMENTAL JUSTICE AND EQUITY IMPACT:
The Water Supply Master Plan addresses water supply equity by ensuring a cost-effective, high-quality supply is available for all of Santa Clara County, including disadvantaged communities.
FINANCIAL IMPACT:
There is no financial impact associated with this item.
CEQA:
The recommended actions do not constitute a project under CEQA because they do not have the potential for resulting in direct or reasonably foreseeable indirect physical change in the environment.
ATTACHMENTS:
Attachment 1: Potable Reuse Goal
Attachment 2: 07092024 Handout 6.1-G, Hsueh
Attachment 3: PowerPoint
*Handout 5.1-A: Irvin
UNCLASSIFIED MANAGER:
Manager
Kirsten Struve, 408-630-3138