BOARD AGENDA MEMORANDUM
Government Code § 84308 Applies: Yes ☐ No ☒
(If “YES” Complete Attachment A - Gov. Code § 84308)
SUBJECT:
Title
Accept Management Response to the Independent Monitoring Committee Report on the Renewed Safe Clean Water Natural Flood Protection Program Annual Report for Fiscal Year 2021-2022.
End
RECOMMENDATION:
Recommendation
A. Accept Management Response to the Independent Monitoring Committee Report on the Renewed Safe Clean Water Natural Flood Protection Program Annual Report for Fiscal Year 2021-2022; and
B. Provide additional direction as necessary.
Body
SUMMARY:
On February 8, 2023, the Independent Monitoring Committee (IMC) issued its report on Santa Clara Valley Water District’s (Valley Water) renewed Safe, Clean Water and Natural Flood Protection Program (Safe, Clean Water Program) Annual Report for Fiscal Year 2021-22 (Annual Report).
Over the past months, project managers, Assistant and Deputy Operating Officers managing projects included in the Safe, Clean Water Program met with the IMC and its subcommittees for Program priorities and finance to review the report, answer questions, and provide follow-up information as necessary. The IMC members have shown passion and dedication to the Safe, Clean Water Program throughout this review process.
In its annual report, the IMC made program-wide as well as some project-specific recommendations. Of the eight (8) program-wide recommendations, staff agrees with seven, in some instances proposing a refined approach or alternative approaches for addressing the recommendations and has a different view on one recommendation, which relates to IMC’s scope.
Of the 32 projects in the renewed Safe, Clean Water Program, the IMC agreed with the status as stated in the Annual Report regarding all but one of the projects, deeming the Coyote Creek Flood Protection Project to be “Not on Target.” The IMC had no recommendations for 26 projects, thus requiring no Board direction for those projects.
The IMC also provided notes for Valley Water’s consideration in developing future year's Annual Reports, which staff will address moving forward.
To address each of the recommendations and notes made by the IMC, a staff response column, providing summarized responses, has been added to the IMC’s report table (Attachment 1). Upon the Board’s approval, staff is prepared to implement the IMC’s recommendations as set forth in the staff response (Attachment 1).
Detailed responses to some of the program-wide recommendation Project E1: Coyote Creek Flood Protection status assessment are provided below.
Program-wide Recommendations
Schedule a new audit immediately to be consistent with the five-year schedule as originally intended (under the 2012 Program), dating back to the end period of the previous audit.
Management Response: Staff agree that an audit should be implemented and recommends two separate audits, one for the renewed Safe, Clean Water Program, which came into effect in FY2021-22, and a closeout audit for the 2012 Program, which ended in FY2020-21. Two audits are recommended because the renewed Safe, Clean Water Program replaced the 2012 Program in its entirety, and while many of the projects were carried forward, the renewed program includes a new priority, new projects, new KPIs, and new funding allocations. If directed by the Board, staff will work to include the audits and associated costs in the FY2023-24 budget and initiate the audit process.
Background:
Voters have passed three (3) Valley Water ballot measures. These are Measure B, the 15-year Clean, Safe Creeks and Natural Flood Protection Plan (CSC Plan) approved in 2000; Measure B, the 15-year Safe, Clean Water and Natural Flood Protection Program (2012 Program) approved in 2012, which replaced the CSC in its entirety; and Measure S, the renewed Safe, Clean Water and Natural Flood Protection Program (Safe, Clean Water Program), approved in 2020 and replaced the 2012 Program in its entirety. The renewed Safe, Clean Water Program took effect on July 1, 2021.
In 2012, the CSC Plan had an independent audit. While developing the subsequent voter measure, the 2012 Program, Valley Water incorporated the requirement for independent audits every five years in the new program. The first audit of the 2012 Program was held in 2017, and the next would have been due in FY2021-22. The renewed Safe, Clean Water Program, which took effect in FY2021-22, also requires independent audits at least every five years.
KPIs be modified to reflect more accurate and meaningful outcomes, as previously recommended in the Moss Adams Audit in 2017. In the Audit, Moss Adams made a finding that “some KPIs focus on outputs rather than outcomes and do not address District success in achieving key objectives.” In a number of situations, the IMC recommends modification of KPIs for these same reasons, and/or to align the KPI to track reasonably necessary measures to meet the priorities of the specific Program.
Management Response: Staff acknowledges the recommendation and believes that a Board-directed audit of the renewed Safe, Clean Water Program will provide an excellent opportunity to review the KPIs and consider the auditor’s recommendations as Valley Water examines the need and approach to modifying these KPIs. See Attachment 2 for an overview of the types of KPIs, the modification process, and the modifications carried out under the 2012 Program and the renewed Safe, Clean Water Program.
Overall, the IMC recommends that Valley Water provide a more nuanced “Confidence Level” system that more succinctly captures the project’s status and the obstacles and challenges. It recommends that there be five confidence levels in next year’s report.
Management Response: Staff agrees and will work with IMC members to refine the process for a more detailed and nuanced confidence-level reporting system. The current system was developed in response to recommendations from the 2012 Program IMC and staff plans to continue to improve upon the system with the IMC for the renewed Safe, Clean Water Program.
In some areas, the jurisdictional complexities category was not clear, and the IMC recommends that more details be provided.
Management Response: Staff agrees and will work to add more details. Staff would like to note that while every agency impacting a project’s jurisdictional complexity may not have been referenced in each project write-up, the information was included in Appendix C: Capital Projects Jurisdictional Complexities (Confidence Levels Regarding Outside Agencies), which provides a list of all the agencies associated with the project and the confidence level for each agency. The current system was developed in response to recommendations from the 2012 Program IMC and staff plans to continue to improve this system with the IMC for the renewed Safe, Clean Water Program.
Although the role of the IMC is to review each Annual Report, the IMC suggests that such a narrow scope prevents a more realistic approach to evaluating Valley Water’s progress in support of the Program objectives. Measure S expressly provides that the IMC may make recommendations to the Board regarding reasonably necessary measures to meet the priorities of the Program (Measure S, Section P). As noted, the IMC no sooner had been provided with Staff’s assessment that a particular program (E-1) was “On Target” as of the end of FY2021-2022, than Staff turned to the Board to request major modifications to cover unexpected cost increases for this same project to the tune of $162 million. The IMC cannot be expected to turn a blind eye to the reality that these extraordinary cost increases only became apparent since the end of FY2021-2022.
Management Response: The IMC conducts its review of Valley Water’s prior fiscal year’s Annual Report during the same time as Valley Water is updating the Capital Improvement Program’s rolling Five-Year Plan in alignment with the water rate setting process and upcoming fiscal years’ biennial budget cycle. Project updates that occur during this time fall outside the IMC’s assigned period of review. Staff acknowledges the challenge the IMC faces on focusing its review backwards. However, staff believes that it is important for the integrity of the reporting process that the IMC operate within the guidelines approved by the voters. IMC's annual review is limited to reviewing Valley Water’s Annual Report, including project statuses, per the information in the Annual Report or applicable to the given fiscal year. Program and project progress made in the subsequent fiscal years will be reflected in the Valley Water Annual Report for those fiscal years. Per the voter-approved measure, the IMC does have the opportunity to “look ahead” every five years in its review of the renewed Program’s Five-Year Plans. The renewed Program’s IMC reviewed the renewed Program’s Five-Year Plan for FY2022-26 in May of 2021.
The Board-adopted Program Resolution No. 20-64 outlines the parameters within which the IMC conducts Program review states:
"An external, independent monitoring committee (IMC) shall be appointed by the Valley Water Board of Directors to conduct an annual review of Valley Water’s fiscal year report and provide an annual report from the IMC to the Board of Directors regarding implementation of the intended results of the Program. The IMC shall also review each proposed five-year implementation plan prior to its submittal for Board approval. Through review of both the annual reports and five-year implementation plans, the IMC may make recommendations to the Valley Water Board of Directors regarding reasonably necessary measures to meet the priorities of the Safe, Clean Water and Natural Flood Protection Program.”
The Board authorize and enable staff to collaborate with the IMC to help it track projects over time by aggregating and summarizing information from IMC’s annual evaluations to create an ongoing “dashboard” summary that covers the life of each project. Multi-year dashboards for the life of each project will better communicate progress on the individual projects. They also will highlight the systemic, external obstacles that are hindering many projects.
Management Response: Staff agrees. Valley Water has a history of working collaboratively with the IMC to make the 2012 Safe, Clean Water Program Annual Reports more transparent and accessible to the IMC and the public. Staff will continue to work with the renewed Safe, Clean Water Program IMC members to develop a reporting process to achieve the desired outcome of aggregating multi-year summaries of each project reflecting the Board-approved project statuses.
Project E1: Coyote Creek Flood Protection
“On Target” Project Status - IMC does not agree with the project status and considers the project to be “Not on Target.”
As referenced in the IMC’s cover letter, “In its Report, Staff noted that it had only expended 77% of the annual budget, noting as follows: The under-expenditure was because real estate transactions for project easements were not completed and the agreement for construction management services was not awarded in FY2021-2022. Also, the level of CEQA documentation had not been finalized in FY2021-2022. (Program Annual Report FY 2021-2022, p. 84).”
It goes without saying that these steps - real estate transactions for project easements, construction management agreements, and CEQA compliance - are not trivial matters. Although not included in the FY2021-2022 Annual Report, but recently reported to Valley Water at a Board meeting held on January 24, 2023, Staff has announced that Project E.1 is facing additional costs of up to $162 million… For the foregoing reasons, the IMC concluded that Project E-1 is “Not on Target” and recommends that the full historical context of these changes over the past two decades be made available to the public.”
Staff Note: Leading up to the split vote of 5 ayes/2 nays/2 abstains, the majority of the discussion surrounding the project’s status was not focused on the FY2021-22 Annual Report and the project status for that year. Instead, it pertained to the project history and failure to progress towards delivery of 1% flood protection under the Clean, Safe Creeks Plan and 2012 Program, along with projected concerns focused on FY2022-23 based on the updated project schedule and the potential that there could be a challenge to the award of a construction contract for the Coyote Creek Flood Management Measures Project (CCFMMP).
Management Response: This year’s IMC report is a review of Valley Water’s annual report for the Safe, Clean Water Program for FY2021-22, which began on July 1, 2021, and ended on June 30, 2022. Based on the project progress during FY2021-22, staff deems the project to be “On Target” and does not concur with IMC’s assessment that the project was “Not on Target” in FY2021-22. As referenced above in staff’s response to the IMC’s scope, staff believes that it is important that the IMC review Valley Water’s Annual Report within the parameters outlined in Resolution No. 20-64. The Resolution states that Valley Water shall file a fiscal year report with the Board no later than January 1 of each year for the prior fiscal year and the IMC would conduct annual review of the fiscal year annual report and provide an annual report to the Board regarding implementation of the intended results of the Program.
Overview:
The Coyote Creek Flood Protection Project (Project E1) KPI to “Construct flood protection improvements along Coyote Creek between Montague Expressway and Tully Road to provide protection from floods up to the level that occurred on February 21, 2017, approximately a 5% (20-year) flood event” is delivered by two projects- the Coyote Creek Flood Management Measures Project (CCFMMP) and the Coyote Creek Flood Protection Project (CCFPP). CCFMMP constitutes 40% of the project and is funded by Water Utility and is part of the Anderson Dam’s Federal Energy Regulatory Commission (FERC) Order Compliance Project (FOCP). The CCFMMP is scheduled to begin construction in FY2022-23. The CCFPP represents the remaining 60% of the project and is funded by the Safe, Clean Water Program and its construction will follow the CCFMMP.
Regarding the project’s status of “On Target,” in FY2021-22, CEQA analysis and compliance were in progress; the right-of-way needs were being determined; and the CCFPP reached a significant milestone with the completion of 30% Design (and has subsequently progressed to 60% Design March 2023).
Project Progress History: Based upon the fact that delivery of CCFMMP is linked to the delivery of the renewed Safe, Clean Water Program’s KPI for the project but funded separately, the slight under-expenditure of 77% of the FY2022-23 budget is not an indication that the project was behind schedule in FY2021-22.
When staff initially prepared the Construction Management (CM) Services RFP, it had planned to award the contract for both the projects; CCFMMP, which is scheduled to begin construction first, and CCFPP. However, later the CCFPP scope was removed from that contract. Regarding the real estate transactions, three properties were identified in the planning study for acquisition in a voluntary sale, however, the property owners were not interested in selling their parcels. Easements will be acquired once the CCFPP Environmental Impact Report (EIR) is completed. The level of CEQA documentation was not determined in FY2021-22 as the consultant was still developing the preliminary analysis to help make the determination. Meanwhile, Valley Water completed multiple voluntary sale acquisitions and acquired easements in FY2021-22 for CCFMMP.
Project Cost Estimate Updates: In FY2022-23, as part of the Capital Improvement Program’s annual cycle to update project plans in the development of the rolling Five-Year Plan in alignment with the upcoming biennial budget cycle and water rates setting process, the CCFMMP and CCFPP project plans were updated, reflecting increased project costs. The CCFPP costs escalated by approximately $162 million and CCFMMP increased by approximately $87 million. The increased costs and the schedule change were presented to Valley Water Board as part of the Preliminary CIP Five-Year Plan on January 10, 2023. To ensure CCFPP has adequate funding and continues to move forward, on January 24, 2023, following a public hearing, the Board modified some Safe, Clean Water projects, making funding available for the CCFPP.
Furthermore, another major project milestone was reached on February 28, 2023, with the Board Authorizing Advertisement for Bids for the Construction of CCFMMP. On March 28, 2023, staff will recommend the Board approve an agreement with Ghirardelli Associates, Inc. for CCFMMP construction management services.
Project E1 Recommendations - In future annual reports:
o Provide the history of the Coyote Creek Flood Protection Project under the 2000, 2012 and the current 2020 programs.
Staff agrees. Under the renewed Safe, Clean Water Program report prepared for the voters, each project included a flooding history and project background section. This background information is currently provided on each project’s web page. For consistency, staff will review the backgrounds for all flood protection projects, update as necessary, and include a summary of each project’s history in future annual reports, with links to the project web pages for the full history. Staff has reviewed and updated the project history for Coyote Creek, which is included as Attachment 3.
o This is the third iteration of the project since initially proposed in 2005.
Staff agrees. Voters have passed three (3) Valley Water ballot measures, each replacing its predecessor in its entirety. These are the 15-year CSC Plan, approved in 2000; the 15-year 2012 Program, approved in 2012; and the renewed Safe, Clean Water Program, approved in 2020. The renewed Safe, Clean Water Program became effective on July 1, 2021.
o Clarify that the project was changed from a 1% flood protection project to a 5% flood protection project.
Staff agrees. The KPI was modified under the 2012 Program in February 2017. The modified status was reported both in the FY2016-17 annual report and in the Status History Tables in subsequent annual reports for the 2012 Program. As the 2012 Program was entirely replaced by the renewed Safe, Clean Water Program and the Coyote Creek project has an updated KPI, it would not be appropriate to reflect a modified status for the new KPI. Instead, staff will include information regarding the modification under the 2012 Program in the project’s history and background section, as referenced above.
Valley Water staff is committed to the success of the renewed Safe, Clean Water Program and to achieving KPIs in a cost-efficient and transparent manner. We appreciate the IMC's commitment and look forward to continuing to engage in an open and responsive review process.
ENVIRONMENTAL JUSTICE IMPACT:
There are no Environmental Justice impacts associated with this item.
FINANCIAL IMPACT:
There is no financial impact associated with this item.
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: Management Response Table
Attachment 2: KPI Overview
Attachment 3: Coyote Creek Project (E1) History
Attachment 4: Project F1 Supplemental Information
Attachment 5: PowerPoint
UNCLASSIFIED MANAGER:
Manager
Melanie Richardson, 408-630-2035