BOARD AGENDA MEMORANDUM
Government Code § 84308 Applies: Yes ☐ No ☒
(If “YES” Complete Attachment A - Gov. Code § 84308)
SUBJECT:
Title
Conduct Public Hearing on the February 2024 Annual Report on the Protection and Augmentation of Water Supplies and Recommended Increases in Groundwater Production Charges, Surface Water Charges, and Recycled Water Charges for Fiscal Year 2024-25.
End
RECOMMENDATION:
Recommendation
A. Conduct a public hearing pursuant to Section 26.6 of the District Act to consider Santa Clara Valley Water District’s Fiscal Year (FY) 2024-25 Annual Report on the Protection and Augmentation of Water Supplies and recommended increases to groundwater production charges (between 6.6% to 12.9%), surface water charges (between 7.1% to 14.1%) and recycled water charges (between 4.4% to 6.8%);
B. Hear public comments from groundwater producers and any interested persons regarding the Report and recommendations;
C. Consider any written protests to proposed surface water rate increases;
D. Direct staff to review such Report with, and solicit comments from, Santa Clara Valley Water District’s advisory committees;
E. Consider staff’s recommendation to set the State Water Project (SWP) Tax in an amount sufficient to pay all annual SWP costs, which will reduce water rate impacts on low-income residents who are having difficulty paying their water bills; and
F. Continue the public hearing regarding this Report to the April 11, 2024 special meeting, at 7:00 pm.
Body
SUMMARY:
Section 26.5. of Santa Clara Valley Water District’s (Valley Water) District Act requires that Valley Water annually prepare a “written report upon the District's activities in the protection and augmentation of the water supplies of the District.” Section 26.6 of the District Act requires Valley Water to hold a public hearing regarding this annual “Protection and Augmentation of Water Supplies” report on or before the fourth Tuesday of April. This public hearing is conducted to inform the community of the activities performed by Valley Water to ensure a reliable water supply, and staff’s recommended groundwater production charges and other water charges needed to pay for those activities. The hearing provides an opportunity for any interested person to submit comments to the Board.
This year’s groundwater production charge setting process is being conducted consistent with the District Act and Board Resolution 99-21. The raw surface water charge setting process includes a formal protest procedure consistent with Board Resolution 12-10 (See attachment 3). If written protests are filed by a majority of surface water operators, the surface water charge cannot be increased.
The Protection and Augmentation of Water Supplies (PAWS) Report can be found at www.valleywater.org <http://www.valleywater.org>.
Why Groundwater Production Charges Are Necessary
Groundwater production charges are necessary to pay for ongoing operations and maintenance of the existing water utility system, investments in water supply infrastructure rehabilitation and upgrades, and new water supply reliability investments.
The proposed maximum groundwater production charges for FY 2024-25 that are detailed below are necessary to (1) advance the Anderson Dam Seismic Retrofit, which will improve public safety and restore operational capacity; (2) fund key infrastructure projects such as the Rinconada Water Treatment Plant reliability improvement and the 10-year pipeline rehabilitation program; (3) conduct planning work related to the Pacheco Reservoir Expansion, the B.F. Sisk Dam Raise and the Los Vaqueros Reservoir projects, which would provide additional water storage capacity; and (4) to pay for general inflation impacting materials and supplies necessary to complete Water Utility projects.
Groundwater Production and Treated Water Charge Recommendations
Staff proposes a 12.9% increase in the North County Zone W-2 Municipal and Industrial (M&I) groundwater production charge, from $1,974 per acre foot (AF) to $2,229/AF. Staff recommends maintaining the treated water surcharge on treated water delivered under the contracts with retail agencies at $115/AF, and maintaining the non-contract treated water surcharge at $200/AF. The proposal equates to a monthly bill increase for the average household of $8.78 or about 29 cents a day.
In the South County Zone W-5, staff proposes a 6.6% increase in the M&I groundwater production charge from $543.50/AF to $579/AF. The proposal equates to a monthly bill increase for the average household of $1.22 or about 4 cents per day.
In the South County Zone W-7, staff proposes a 14.2% increase in the M&I groundwater production charge from $657.50/AF to $750.50/AF. The proposal equates to a monthly bill increase for the average household of $3.20 or about 11 cents per day.
In the South County Zone W-8, staff proposes an 8% increase in the M&I groundwater production charge from $398/AF to $430/AF. The proposal equates to a monthly bill increase for the average household of $1.10 or about 4 cents per day.
Customers in both areas of North and South County may also experience additional charge increases enacted by their retail water providers.
For agricultural groundwater users, staff proposes an increase of 8 percent from the prior year, which equates to setting the agricultural groundwater charge at 9.25 percent of the lowest M&I rate (Zone W-8). The proposed agricultural groundwater production charge in any groundwater benefit zone would change from $36.85/AF to $39.80/AF, or roughly a $0.49 increase per month per acre, assuming two acre-feet of water usage per acre per year.
Surface Water and Recycled Water Charge Recommendations
Staff recommends a maximum 12.9% increase to the surface water master charge from $54.00/AF to $61.00/AF to align revenues with costs related to managing, operating and billing for surface water diversions. This increase results in a proposed 12.9% increase to the North County (Zone W-2) M&I surface water charge, to $2,290.00/AF. For South County zones, staff proposes the following M&I surface water charge increases: for Zone W-5, a 7.1 percent increase to $640.00/AF; for Zone W-7, a 12.9 percent increase to $811.50/AF; for Zone W-8, an 8.6 percent increase to $491.00/AF. Staff recommends that the total agricultural surface water charge be increased 10.9 percent in all zones, to $100.80/AF.
For recycled water (Zone W-5), staff recommends increasing the M&I charge by 6.8 percent, to $559.00/AF, and increasing the agricultural charge by 4.4 percent, to $70.15/AF. The increase maximizes cost recovery while concurrently providing an economic incentive to use recycled water. This pricing is consistent with the provisions of the “Wholesale-Retailer Agreement for Supply of Recycled Water Between Santa Clara Valley Water District and City of Gilroy.”
Other Water Utility Costs
Staff recommends setting the State Water Project Tax at $28 million for FY 2024-25. This translates to a property tax bill for the average single-family residence of roughly $42.00 per year. This tax amount is necessary to pay for State Water Project costs. If the recommended FY 2024-25 State Water Project Tax is not approved, the impact translates to a needed increase in the M&I groundwater production charge of an additional $155/AF in North County Zone W-2 and in South County an additional $33/AF in Zone W-5, $55/AF in Zone W-7 and $29/AF in Zone W-8 in South County. The open space credit would increase by roughly $786,588.
Valley Water’s 53rd Annual Report on the Protection and Augmentation of Water Supplies, among other information, contains a financial analysis of the Valley Water’s water utility system and additional details about the above recommendations. This report can be found at www.valleywater.org <http://www.valleywater.org>.
ENVIRONMENTAL JUSTICE AND EQUITY IMPACT:
There are no Environmental Justice impacts associated with this item.
FINANCIAL IMPACT:
If the Board approves the recommended groundwater production and other water charges, the Water Utility should have sufficient funding for planned operations and capital improvement projects for FY 2024-25.
CEQA:
The establishment of groundwater production charges and other water charges is not a project under CEQA Guidelines Section 15273(a) (CEQA does not apply to establishment or modification of charges by public agencies which the public agency finds are for the purpose of meeting operating expenses; purchasing or leasing supplies, equipment and materials; meeting financial reserve needs/requirements; and obtaining funds for capital projects needed to maintain service within existing service areas).
ATTACHMENTS:
Attachment 1: Staff Report
Attachment 2: PowerPoint
Attachment 3: SCVWD Resolution No. 12-10
Attachment 4: Notice of Public Hearing
*Handout 3.4-A: Kuhl REVISED
*Handout 3.4-B: Kuhl.pdf
*Handout 3.4-C: Irvin
UNCLASSIFIED MANAGER:
Manager
Aaron Baker, 408-630-2135