BOARD AGENDA MEMORANDUM
Government Code § 84308 Applies: Yes ☐ No ☒
(If “YES” Complete Attachment A - Gov. Code § 84308)
SUBJECT:
Title
Conduct a Public Hearing to Consider the Santa Clara Valley Water District’s Capital Improvement Program Draft Fiscal Years 2025-29 Five-Year Plan and Adopt a Resolution Approving the Capital Improvement Program Final Fiscal Years 2025-2029 Five-Year Plan.
End
RECOMMENDATION:
Recommendation
A. Open and conduct the Public Hearing continued from April 24, 2024, to receive public comments and Board feedback regarding the Santa Clara Valley Water District’s Capital Improvement Program (CIP) Draft Fiscal Years (FY) 2025-2029 Five-Year Plan;
B. Close the Public Hearing;
C. Direct staff to incorporate the identified changes to the CIP Draft FY 2025-2029 Five-Year Plan and finalize the FY 2025-2029 Five-Year Plan by June 30, 2024; and
D. Adopt the Resolution APPROVING THE CAPITAL IMPROVEMENT PROGRAM FISCAL YEARS 2025-2029 FIVE-YEAR PLAN.
Body
SUMMARY:
Each year, Valley Water’s Capital Improvement Program (CIP) prepares a Five-Year Plan for Board consideration and approval. The CIP Five-Year Plan describes Santa Clara Valley Water District’s (Valley Water) capital investment priorities. It provides information on the planned capital projects and Valley Water’s intended source(s) of funding. Staff presents the CIP Five-Year Plan to the Board at the Preliminary and Draft stages for the Board to make decisions and provide direction. The CIP Final Five-Year Plan is approved with the annual budget, wherein funding is appropriated to the projects for the following fiscal year.
Capital Investments Not Included in the CIP
Not included in the CIP Final Fiscal Years (FY) 2025-29 Five-Year Plan are Valley Water contributions to water infrastructure capital investments led by external agencies. While not included in the CIP, these investments are being evaluated through the development of the Water Supply Master Plan (WSMP) 2050 and budgeted and forecasted through operating projects. They are also included and reflected in the financial modeling analyzed during the CIP Five-Year Plan development. These investments include:
1. Los Vaqueros Reservoir Expansion Project
2. B.F. Sisk Dam Raise and Reservoir Expansion Project
3. Delta Conveyance Project
Additionally, to ensure consistency with Valley Water’s various planning efforts, CIP staff continues coordinating with staff leading the development of the WSMP 2050. The WSMP 2050 baseline assumes no new investments but does assume completion of local dam seismic retrofits by 2035, achieving long-term water conservation goals, and maintaining Valley Water assets, which includes the capital projects in the CIP Final FY 2025-29 Five-Year Plan that are intended to repair/replace existing water supply infrastructure.
CIP Final FY 2025-29 Five-Year Plan
Valley Water’s CIP Final FY 2025-29 Five-Year Plan includes 73 capital projects to be funded, which are categorized as follows: 37 Water Supply, 15 Flood Protection, 13 Water Resources Stewardship, 3 Buildings and Grounds, and 5 Information Technology, for a total cost of $9.570 billion. Approximately $1.205 billion may be funded by external sources through cost-share agreements, partnerships, and grants, resulting in a total CIP cost to Valley Water of $8.365 billion. The full list of projects and planned expenditures for the CIP Final FY 2025-29 Five-Year Plan are included in the Final CIP Financial Overview (Attachment 1) for the Board’s final review and adoption of the CIP Final FY 2025-29 Five-Year Plan.
The Board reviewed and approved the CIP Preliminary FY 2025-29 Five-Year Plan list of projects at its meeting on January 9, 2024. Following the January 9, 2024, Board meeting, staff prepared the CIP Draft FY 2025-29 Five-Year Plan (Attachment 2), and it was presented to the Board at its meeting on February 27, 2024. During that meeting, the Board directed staff to update the CIP Draft FY 2025-29 Five-Year Plan, prior to release for public review, to reflect the staff-recommended assumption presented in the 2024 Protection and Augmentation of Water Supplies (PAWS) Report, released on February 23, 2024, and authorized the release of the CIP Draft Five-Year Plan for public review.
Subsequently, the Palo Alto Purified Water Project was removed from the CIP and placed on the unfunded list to align with the PAWS Report. The updated CIP Draft FY 2025-29 Five-Year Plan was released for public review, and it was transmitted to all cities within Valley Water’s jurisdiction, the County of Santa Clara, the San Jose Water Company, and the Mid-Peninsula Open Space District. Valley Water offered to meet with each of these agencies, and per request, Valley Water staff met with the planning and public works staff at the City of Santa Clara to discuss projects and provide feedback on the CIP Draft FY 2025-29 Five-Year Plan.
As part of this outreach effort, staff requested letters of support. To date, the cities of Campbell, Cupertino, Mountain View, and Palo Alto submitted letters of support indicating that Valley Water’s CIP Draft FY 2025-29 Five-Year Plan is consistent with their applicable General Plans. Attachment 3 includes copies of letters received regarding the adoption of the CIP FY 2025-29 Five-Year Plan. Any additional letters received after agenda publication will be provided as handouts.
The Public Hearing was opened on April 9, 2024, and continued to April 23-24, 2024, and May 14, 2024. The Public Hearing will be closed during this Board meeting, with direction provided to staff to finalize the CIP FY 2025-29 Five-Year Plan incorporating the identified changes.
Expenditure Projections
Valley Water regularly updates operations and capital expenditures based on the best information available. Capital and operations expenditure projections are the foundation for the development of Valley Water’s budget.
Each capital project cost estimate includes the yearly expenditures through completion based on the project’s scope and schedule. The expenditures are monitored regularly and updated when necessary, for example, when there are any changes to a project’s scope, schedule, or cost. A management review process is enforced to ensure only justified expenditure changes are approved.
Construction Cost Escalation Factors
The construction priorities for Valley Water are both significant and complex in nature, and as such have considerable capacity to be impacted by fluctuations in local market conditions. On an annual basis Valley Water hires an independent cost estimator to produce a Market Study Report to review the Construction Cost Escalation Factors and Market Rate Factors and provide forecasted escalation rates to be utilized in the preparation of the CIP Five-Year Plan (Attachment 4). For the FY 2025-29 Market Study Report Valley Water utilized OCMI, an on-call independent cost estimator consultant. Included below is the Escalation Outlook table for FY 2025-39.
Operations and Maintenance Cost Forecast Revisions
New capital projects impact future operations and maintenance (O&M), which is included in the financial analysis. Throughout the various phases of a capital project, projections of this impact are regularly considered and updated as needed to reflect changes in project elements. This information is considered during long-term forecasting by the respective operating project managers.
Changes Identified for Final FY 2025-29 Five-Year Plan
Since the release of the CIP Draft FY 2025-29 Five-Year Plan, staff has identified the following changes. Finalized project plan updates have been incorporated in the Final CIP Financial Overview for the Board’s final review and adoption of the CIP Final FY 2025-29 Five-Year Plan.
A list of the projects with changes is provided below (TPC changes are from the Adopted CIP FY 2024-28 Five-Year Plan):
1. Coyote Creek, Montague Expressway to Tully Rd (E1) (26174043) -
Additional hydraulic analyses and internal drainage studies were conducted, and corresponding analyses were performed for the Environmental Impact Report (EIR). As a result, a necessary flood protection element was added, and design alternatives were developed in coordination with the City of San José, to minimize impacts on City of San José parkland. As a result of the updates, the overall project cost of the Coyote Creek Flood Protection Project has decreased by $3.588M (inflated) due to the construction cost escalation factor being pushed out by one fiscal year.
2. Upper Penitencia Creek, Coyote Creek-Dorel Drive (E4) (26324001) - Additional review of the Planning Study Report (PSR) and the incorporation of an Environmental and Design consultant procurement resulted in the schedule being extended by 2 years to address these unforeseen circumstances. As a result of the updates, the Upper Penitencia Creek, Coyote to Dorel Drive Project has increased by $842K (inflated). Funding for the construction of the project has not yet been secured. Valley Water staff is pursuing grant funding for the project, and the Board remains committed to securing construction funding in the future.
3. Pacheco Reservoir Expansion Project (91954002) - No change to the uninflated total project cost. Unspent funds in FY 24 were carried forward to future fiscal years, eliminating the need for new funds to be budgeted in FY 25. The expenditure changes are a result of a delay to the start of geotechnical investigations. Although some of the 60% design is dependent on this work, portions of the design proceeded while waiting for the geotechnical work to commence. As a result of the updates, the inflated total project cost of the Pacheco Reservoir Expansion Project has decreased by $31.384M (inflated) due to the construction cost escalation factor being moved by one fiscal year.
Administrative Project Plan Updates - Budget Reconciliation and Small Capital Projects Forecast Revisions
Each year between the presentation of the CIP Draft Five-Year Plan and the CIP Final Five-Year Plan, the CIP team conducts a budget reconciliation process and implements small capital forecast revisions.
Reviews are conducted after each pass of the Budget to ensure CIP project planned expenditures for the next two FYs are in alignment with the proposed annual budget. For the CIP Final FY 2025-29 Five-Year Plan, staff has reconciled the planned expenditures in the Five-Year Plan and confirmed that the Final Budget and CIP Final Five-Year Plan presented to the Board are in alignment.
For small capital projects, asset rehabilitation projects are added, removed, and rescheduled based on asset condition and project need. In addition, project costs are updated each year based on market conditions. These revisions to both schedule and costs cause several minor changes in expected expenditures over the forecasted period. The change is not caused by a single asset rehabilitation project but by the cumulative total of multiple changes.
Updates to the following small capital improvement projects are included in the CIP Final FY 2025-29 Five-Year Plan:
1. 91214010s San Felipe (Reaches 1-3)
2. 92764009 Raw Water Transmission
3. 94764006 Treated Water Transmission
4. 93764004 Water Treatment
5. 62084001 Watersheds Asset Rehabilitation
6. 73274008 Software Upgrades & Enhancements
7. 95274003 Water Utility Network Modernization
Projects Planned for Completion and/or Closure
For reporting on FY 2023-24 expenditures, the CIP Final FY 2025-29 Five-Year Plan includes the six (6) projects listed below that are anticipated to be completed and/or closed by June 30, 2024.
Planned for Completion:
1. Cross Valley Pipeline Extension (91864010)
2. Coyote Warehouse (91234011)
3. Permanente Creek, SF Bay to Foothill Expressway (26244001)
4. Berryessa Creek, Lower Penitencia Creek to Calaveras Blvd. - Phase 1 (40174004)
5. IT Disaster Recovery (73274001)
Planned for Closure:
1. Almaden Lake Improvements (26044001)
Communications and Community Outreach
Informing community members about the CIP efforts, process, and program details remains an integral part of Valley Water’s communications and public engagement. Staff regularly invites community members to participate in the CIP public comment period, the CIP Public Hearings, and other milestone dates through frequent social media posts. Staff promotes monthly CIP committee meetings on Nextdoor, Facebook, and Twitter (X) and boosts them on Facebook once the meeting agenda is posted online, typically within the week leading up to those scheduled meetings.
In early December 2023, a detailed blog about the CIP Five-Year Plan and process was shared with the community, and a three-blog series to highlight projects within the CIP launched in January. These blogs were posted on valleywaternews.org and shared in Valley Water’s newsletter, Facebook, and Twitter (X). Staff also posts on the CIP webpage and project pages about how to submit public comments and other reminders about ways community members can participate in the CIP process.
Additionally, Valley Water’s public events, including scheduled Speakers Bureau presentations, serve as venues for staff to remind community members about the CIP efforts and how they can participate. Staff supports all Board-approved CIP efforts with year-round community engagement. CIP project outreach includes distributing information through mailings, social media updates, email blasts, Nextdoor notifications, hosting public meetings, meeting with neighbors as needed, and updating project webpages with details about current project progress. On average, staff posts about CIP projects approximately five times per month across all our platforms.
Next Steps
Upon the Board’s adoption of the resolution approving the CIP Final FY 2025-29 Five-Year Plan (Attachment 5), staff will prepare the Five-Year Plan document, which will be provided to the Board and made available to the public on Valley Water’s website at <https://www.valleywater.org/how-we-operate/five-year-capital-improvement-program>.
ENVIRONMENTAL JUSTICE AND EQUITY IMPACT:
Individual capital projects may have environmental justice impacts. When this occurs, staff will conduct outreach to and engagement with impacted communities, which will be reported to the Board accordingly. Conducting a Public Hearing for the CIP Draft FY 2025-29 Five-Year Plan and adopting a resolution approving the CIP Final FY 2025-29 Five-Year Plan has no environmental justice impact.
The CIP Five-Year Plan is a projection of Valley Water’s capital funding for planned capital projects produced annually on a rolling basis. Its purpose is to document planned capital projects to help integrate Valley Water work with the larger community by aligning Valley Water planning with other local agency planning efforts. The CIP Five-Year Plan documents any changes to capital projects’ planned funding and expenditures. It is updated and brought to the Board of Directors for approval each year in February.
Each February, upon the Board’s direction, staff provides a copy of the CIP Draft Five-Year Plan to all cities and land use authorities in Santa Clara County and the County of Santa Clara to ensure meaningful engagement of all Santa Clara County communities in the decision-making process. It publishes a public notification for review before the Board of Directors adopts the Resolution to Adopt the CIP Final Five-Year Plan in May.
The CIP Five-Year Plan is thus produced each year in collaboration with government, academic, private, non-governmental, and non-profit organizations, as well as diverse and disadvantaged communities, and as such, adheres to the Board’s General Principles and Ends Policies, which are integral in ensuring that Valley Water meets its mission.
FINANCIAL IMPACT:
There is no financial impact associated with this item to conduct and close the Public Hearing on the CIP Draft FY 2025-29 Five-Year Plan and adopt a Board resolution to finalize and approve the CIP Final FY 2025-29 Five-Year Plan. The total value of the CIP Final FY 2025-29 Five-Year Plan is $9.570 billion. Approximately $1.205 billion may be funded by external sources through cost-share agreements, partnerships, and grants, resulting in a total CIP cost to Valley Water of $8.365 billion.
CEQA:
The recommended action does not constitute a project under CEQA because it does not have a potential for resulting in direct or reasonably foreseeable indirect physical change in the environment.
ATTACHMENTS:
Attachment 1: Final CIP Financial Overview
Attachment 2: Draft FY 2025-29 Five-Year Plan
Attachment 3: Agency Letters of Support
Attachment 4: Market Study Report
Attachment 5: Resolution
Attachment 6: PowerPoint
*Handout 3.4-A: Irvin
*Handout 3.4-B: Letters
UNCLASSIFIED MANAGER:
Manager
Luz Penilla, 408-630-2228