BOARD AGENDA MEMORANDUM
Government Code § 84308 Applies: Yes ☐ No ☒
(If “YES” Complete Attachment A - Gov. Code § 84308)
SUBJECT:
Title
Conduct a Public Hearing on Proposed Changes to Projects under Priorities A, E, and F of the Renewed Safe, Clean Water and Natural Flood Protection Program.
End
RECOMMENDATION:
Recommendation
A. Open and conduct the public hearing to receive comments on the renewed Safe, Clean Water and Natural Flood Protection Program:
i. Project A1: Pacheco Reservoir Expansion;
ii. Project E8: Upper Guadalupe River Flood Protection
iii. Project F9: Grants and Partnerships for Safe, Clean Water, Flood Protection and Environmental Stewardship
B. Close the public hearing;
C. Review and approve the Proposed Text Adjustments to Project F9: Grants and Partnerships for Safe, Clean Water, Flood Protection and Environmental Stewardship Recommendation;
D. Adopt the resolution APPROVING NOT IMPLEMENTING PROJECT A1: PACHECO RESERVOIR EXPANSION UNDER THE SAFE, CLEAN WATER AND NATURAL FLOOD PROTECTION PROGRAM;
E. Adopt the resolution APPROVING THE MODIFICATION OF PROJECT E8: UPPER GUADALUPE RIVER FLOOD PROTECTION OF THE SAFE, CLEAN WATER AND NATURAL FLOOD PROTECTION PROGRAM; and
F. Adopt the resolution APPROVING THE MODIFICATION OF PROJECT F9: GRANTS AND PARTNERSHIPS FOR SAFE, CLEAN WATER, FLOOD PROTECTION AND ENVIRONMENTAL STEWARDSHIP OF THE SAFE, CLEAN WATER AND NATURAL FLOOD PROTECTION PROGRAM.
Body
SUMMARY:
In recent years, infrastructure construction projects within the renewed Safe, Clean Water and Natural Flood Protection Program (Safe, Clean Water Program) have experienced significant cost escalation, while community expectations for other projects are increasing. The proposed recommendations are designed to address the funding gaps and the community needs while helping maintain the financial health of the Safe, Clean Water Program’s Fund (Fund 26).
Catalyst for Recommended Changes
Project E2: Sunnyvale East and Sunnyvale West Channels Flood Protection (Project E2) slated to begin construction in 2025
In January 2023, in the face of significant project construction cost increases, including approximately $162 million escalation in Project E1: Coyote Creek Flood Protection, the Board held a public hearing in compliance with the Change Control Process (as defined in Attachment 1), and approved staff recommendations to reduce funding allocations for some capital projects. Project E2: Sunnyvale East and Sunnyvale West Channels Flood Protection (Project E2) was among the projects with reduced funding allocation. However, staff committed to continue reassessing funding availability for Project E2 as part of the Capital Improvement Program’s (CIP) annual financial planning process.
Subsequently, in fiscal year 2023-24 (FY2024), Santa Clara Valley Water District (Valley Water) resubmitted regulatory permit applications for Project E2 and expects to receive the permits by the end of 2024, making the project shovel-ready for construction in 2025.
Project E2, which voters first approved in November 2000 as part of the Clean, Safe Creek and Natural Flood Protection Plan, entails upgrading approximately three (3) miles of the existing West Channel (Phase 1) to provide 1% (100-year event) flood protection for 47 acres of highly valuable industrial lands, including the former Onizuka Air Force Base, and approximately 6.4 miles of the existing Sunnyvale East Channel (Phase 2) to provide 1% flood protection to 1,618 parcels.
Construction of Phase 1 of the project is slated for 2025, but due to the existing funding shortfall, Phase 2 awaits funding to commence construction. Constructing both phases without delaying Phase 2 will allow Valley Water to complete the entire project, thus providing 1% flood protection and helping the community to be removed from the FEMA flood zone, pending a Letter of Map Revision. Bundling Phase 1 and 2 construction will also result in potential cost savings, such as saving on leasing costs by utilizing the same large construction staging area for a shorter period. By moving forward with Phase 2 construction without delay, Valley Water will also limit the impact of anticipated future construction cost escalations.
Construction of Phase 2 will also fulfill Valley Water’s Joint Use Agreement with the City of Sunnyvale for trail improvements and recreational uses along the Sunnyvale West and Sunnyvale East Channels. Under the agreement, the city is committed to providing funding ($500,000) to pave the maintenance road on each channel for use as a public trail. After the project is completed, the city will maintain the public trails.
Board direction to enhance Project F5: Good Neighbor Program: Encampment Cleanup (Project F5) level of service
In response to community demands and expectations, the Board directed staff to enhance Project F5’s level of service to clean up encampment-generated trash, debris, and hazardous pollutants along waterways. Per the Board’s direction, in August 2023 (FY2024), Valley Water launched the Portable Toilet Facilities Program, installing portable toilets and wash stations at critical locations along local creeks to improve water quality. Additionally, Valley Water is developing the Clean Camps, Clean Creeks Program, which will provide debit cards to incentivize unsheltered individuals residing along waterways to maintain camp areas free of trash and debris.
While these initiatives will better equip Valley Water to confront challenges posed by encampments of unsheltered people, at the August 22, 2023, Board meeting, staff informed the Board that Project F5 required increased funding to sustain the enhanced level of service (LOS). Staff front-loaded the project to implement the efforts and informed the Board that without additional funding, staff anticipated a funding shortfall in later years, starting FY30. Staff also committed to reassessing funding availability and the LOS required for the project and, if needed, present funding scenarios for the Board’s consideration in compliance with the Safe, Clean Water Program’s Change Control Process.
Staff evaluated various funding scenarios during the FYs 2025-2026 biennial budget development. Under the first-pass proposed long-term forecast (LTF), the enhanced LOS was to be fully funded by the Watershed Stream Stewardship (WSS) Fund 12. However, following the second-pass forecast, which included funding some essential unfunded projects per the Board’s direction, it became evident that Fund 12 could not carry the entire obligation. Subsequently, the latest funding scenario reflects Fund 26 funding a portion of the enhanced LOS, with Fund 12 covering the remainder.
Even with Valley Water successfully securing external grants and low-cost loans, the renewed Safe, Clean Water Program cannot fully fund Project E2 and Project F5 without impacting the financial health of Fund 26. This funding gap has prompted staff to recommend that the Board provide direction on balancing the Safe, Clean Water Fund (Fund 26) to ensure the delivery of the renewed Safe, Clean Water Program.
IMC Recommendations and Need to Expand Project to Deliver Project Objective
In addition, the renewed Safe, Clean Water Program’s Independent Monitoring Committee (IMC), an external monitoring committee, has recommended that Project E8: Upper Guadalupe River Flood Protection (Project E8) key performance indicator (KPI) #2 be modified to include aquatic habitat improvement benefiting all native fish species. Staff concurred with the recommendation, and on March 12, 2024, the Board directed staff to pursue the modification.
Finally, Valley Water staff has identified the need to modify Project F9: Grants and Partnerships for Safe, Clean Water, Flood Protection and Environmental Stewardship (Project F9) to expand the project to initiate a new Creekside Neighbor Rebate Program in response to community need.
Therefore, staff recommends not implementing Project A1: Pacheco Reservoir Expansion (Project A1) by not implementing the fund transfer, resulting in the project being removed from the renewed Safe, Clean Water Program, and modifying Project E8: Upper Guadalupe River Flood Protection and Project F9: Grants and Partnerships.
Proposed Changes
Project A1: Pacheco Reservoir Expansion (Not Implement under Safe, Clean Water Program)
Project A1 is one of the three renewed Safe, Clean Water projects with a fiscal-based KPI, where the deliverable is not to construct a project directly but to allocate a portion of funding to support project construction. In this instance, the project KPI is to provide “up to $10 million” to help construct the Pacheco Reservoir Expansion Project (Pacheco Project). The Safe, Clean Water Program funding of $10 million constitutes less than half a percent (0.36%) of the estimated cost of $2.75 billion, as reflected in the CIP’s Draft Fiscal Years (FYs) 2025-2029 Five-Year Plan. Furthermore, the Safe, Clean Water funding is scheduled to be transferred to the Water Utility Fund over seven years from FY2026 to FY2032, amounting to approximately $1.4 million annually.
The Pacheco Project is primarily funded by the Water Utility Fund and has continued to progress without any contributions from the renewed Safe, Clean Water Program. Additionally, the project, a strategic and long-term investment toward ensuring a more reliable supply of safe, clean drinking water in the face of climate change, is eligible for a $504 million California Water Commission (CWC) funding.
Given the project’s other funding sources and relatively minor contributions from the renewed Safe, Clean Water Program, the absence of a $10 million allocation will not significantly impact its advancement and can be absorbed under the current water rate projection, all else being equal.
Therefore, staff recommends not implementing Project A1 by not implementing its single KPI to “provide a portion of the funds, up to $10 million…” (through the transfer of funds) and removing the project from the Safe, Clean Water Program. The $10 million would be released into the Operating and Capital Reserves of Fund 26, and these can subsequently be allocated to help complete the construction of Project E2, thus providing the much-needed and long-awaited flood protection and bolster Project F5 to meet the growing needs of the community, including the unsheltered community. This additional funding and the strategic and flexible utilization of short-term and long-term debt issuances will provide sufficient funding to advance these critical projects.
Attachment 2 shows Project A1, which is not to be implemented under the Safe, Clean Water Program.
Project E8: Upper Guadalupe River Flood Protection (Modify KPI)
Project E8 continues a project in partnership with the U.S. Army Corps of Engineers (USACE) to plan, design, and construct improvements along 5.5 miles of the channel extending from Interstate 280 to Blossom Hill Road. The project has two KPIs. KPI #1, the preferred project with federal and local funding, is to “Construct a flood protection project to provide 1% (100-year) flood protection to 6,280 homes, 320 businesses, and 10 schools and institutions.”
KPI #2, with local funding only, is to “Construct flood protection improvements along 4,100 feet of Guadalupe River between the Southern Pacific Railroad (SPRR) crossing, downstream of Willow Street, to the Union Pacific Railroad (UPRR) crossing, downstream of Padres Drive, and provide gravel augmentation along approximately 800 linear feet of the Upper Guadalupe River in San José, from approximately the Union Pacific Railroad Bridge to West Virginia Street Bridge to improve aquatic habitat for migrating steelhead and channel stability.”
During its Fiscal Year 2022-23 Safe, Clean Water Program review, the IMC recommended that the KPI be modified to include protecting all native fish species. The KPI currently mentions only steelhead because steelhead are a federally protected species within the creek according to the Endangered Species Act. Project E8 improvements, while targeting to better the habitat for protected steelhead by adding gravel and providing habitat for rearing their young, spawning, and providing food sources, benefit all native fish species. Hence, staff concurred with the recommendation, and on March 12, 2024, the Board directed staff to pursue the modification. Therefore, staff recommends that the Board modify KPI #2 to include all native fish species.
Attachment 3 shows Project E8 with a proposed modification to KPI #2. The proposed change of adding new text is shown in red font.
F9: Grants and Partnerships for Safe, Clean Water, Flood Protection and Environmental Stewardship (Modify KPI)
Project F9 “provides grants and partnerships for agencies, organizations, and individuals for water conservation, pollution prevention, creek cleanups and education, wildlife habitat restoration and wildlife corridors and crossings, and access to trails and open space. Eligible projects include water conservation; recycled water programs and infrastructure; pollution prevention programs; watershed stewardship; creek cleanups; education; and developing plans and/or implementing projects that create or enhance wetland, riparian and tidal marsh habitat; protect special status species; improve fish passage and habitat; remove non-native, invasive plant species; plant native species; partnerships to remove flood-inducing blockages, and provide access to creekside trails or trails that provide a significant link to the creekside trail network.”
The project has four KPIs providing grants and partnerships. While Valley Water has successfully awarded grants and partnerships under KPIs #1, 2, and 3, it has not had any success in delivering KPI #4, which is restricted to partnerships with “small municipalities (defined as under 50,000 people in the most recent census available), or special districts with boundaries substantially within the footprint of small cities.”
Meanwhile, community members have expressed interest in receiving Valley Water assistance to implement watershed activities that provide community benefits, such as bank repair, sediment removal, and downed tree management. Broadening program access beyond small municipalities and special districts to include individuals by offering a rebate program covering watershed stewardship activities will help deliver the project objectives and be responsive to the community's needs.
Therefore, staff recommends that KPI #4 be modified to broaden access beyond small municipalities and special districts and include individuals, with a rebate program covering watershed stewardship activities. Staff also proposes adjusting the project description to align with the proposed KPI modification.
Attachment 4 shows the proposed adjustments to Project F9’s description and the proposed modification to KPI #4, with all proposed changes shown with strike-through for removed text and red font for new text. The attachment also contains a clean copy showing the proposed KPI #2 changes incorporated.
Next Steps
After opening and closing the public hearing, staff is recommending that the Board first review and approve the proposed text adjustments to F9: Grants and Partnerships for Safe, Clean Water, Flood Protection and Environmental Stewardship and then consider the adoption of the resolutions as follows:
1. Adopt the resolution APPROVING NOT IMPLEMENTING PROJECT A1: PACHECO RESERVOIR EXPANSION UNDER THE SAFE, CLEAN WATER AND NATURAL FLOOD PROTECTION PROGRAM;
2. Adopt the resolution APPROVING THE MODIFICATION OF PROJECT E8: UPPER GUADALUPE RIVER FLOOD PROTECTION OF THE SAFE, CLEAN WATER AND NATURAL FLOOD PROTECTION PROGRAM; and
3. Adopt the resolution APPROVING THE MODIFICATION OF PROJECT F9: GRANTS AND PARTNERSHIPS FOR SAFE, CLEAN WATER, FLOOD PROTECTION AND ENVIRONMENTAL STEWARDSHIP OF THE SAFE, CLEAN WATER AND NATURAL FLOOD PROTECTION PROGRAM
ENVIRONMENTAL JUSTICE AND EQUITY IMPACT:
Individual projects may have environmental justice impacts and Valley Water will conduct outreach and engagement to the impacted communities, which will be reported to the Board accordingly.
FINANCIAL IMPACT:
Upon adoption of the resolutions, the 15-year funding allocation for Project A1: Pacheco Reservoir Expansion (fund transfer to Water Utility Fund 61), Project E2: Sunnyvale East and Sunnyvale West Channels Flood Protection (26074002), and Project F5: Good Neighbor Program: Encampment Cleanup (26771027) projects would change. Project A1 would have zero funding after releasing $10.0 million to the Operating and Capital Reserves. The Project F5 cost allocation would increase by $14.5 million from FY25 through FY36. The Total Project Cost (TPC) for Project E2 would increase by $32.0 million to $90.0 million, offset primarily by anticipated additional debt proceeds. Project E2 funding allocations are approximated at this time and will be finalized and implemented in FY2024-25 and incorporated in the CIP’s Final Fiscal Years 2026-2030 Five-Year Plan.
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: Program Background
Attachment 2: A1 Proposed Not Implementation
Attachment 3: E8 Proposed Modification
Attachment 4: F9 Proposed Modification
Attachment 5: Project A1 Resolution
Attachment 6: Project E8 Resolution
Attachment 7: Project F9 Resolution
Attachment 8: Notice of Public Hearing
Attachment 9: PowerPoint
UNCLASSIFIED MANAGER:
Manager
Luz Penilla, 408-630-2228