BOARD AGENDA MEMORANDUM
Government Code § 84308 Applies: Yes ☐ No ☒
(If “YES” Complete Attachment A - Gov. Code § 84308)
SUBJECT:
Title
Adopt Resolutions Setting Increased Groundwater Production, Surface Water, Treated Water, and South County Recycled Water Charges for Fiscal Year 2024-2025.
End
RECOMMENDATION:
Recommendation
A. Adopt the Resolution DETERMINING GROUNDWATER PRODUCTION CHARGES FOR FISCAL YEAR 2024-2025; and
B. Adopt the Resolution DETERMINING SURFACE WATER, TREATED WATER, AND SOUTH COUNTY RECYCLED WATER CHARGES FOR FISCAL YEAR 2024-2025.
Body
SUMMARY:
The Santa Clara Valley Water District (Valley Water) annually considers adjusting the water charges necessary to provide a reliable water supply to Santa Clara County. Pursuant to Section 26.6 and 26.7 of the District Act, an annual public hearing is held before the Board on or before the fourth Tuesday of April to consider whether or not to levy a groundwater production charge, i.e., a charge on pumping groundwater. For surface water charges, the rate setting process is set forth in Board Resolution 12-10 and includes a formal protest procedure. If written protests are filed by a majority of affected surface water operators or property owners, the surface water charge for that zone will not be increased.
On April 9, 2024, the Board opened the public hearing on the proposed groundwater production charges, surface water charges, and recycled water charges for Fiscal Year 2024-25; the public hearing continued at special board meetings held on April 11, 2024, and again on April 23, 2024. Public comments were accepted at all three meetings, and the public hearing was closed April 23, 2024, before adjourning the board meeting.
Valley Water remains in an era of investment, driven by challenges posed by climate change, which include the likelihood of more frequent and extended droughts. Efforts are underway to expand purified water use within the county, enhance local water storage capacity, and diversify water storage through investments in facilities beyond the County. Concurrently, Valley Water is actively developing its Water Supply Master Plan 2050, which will serve as a crucial roadmap for prioritizing investments in projects and programs to increase future water supply reliability.
The proposed groundwater production charges for FY 2024-25 are necessary to pay for the ongoing maintenance of the existing water distribution system, water supply infrastructure rehabilitation and upgrades, and new water supply reliability investments.
The attached resolutions would officially establish water charges for FY 2024-25, which would become effective on July 1, 2024. These staff recommended rates are necessary to pay for (1) the Anderson Dam Seismic Retrofit, which will improve public safety and restore operational capacity; (2) to fund key infrastructure projects such as the Rinconada Water Treatment Plant reliability improvement and the 10-year pipeline rehabilitation program; (3) to 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.
Staff recommends that the Board adopt by resolution the following proposed Fiscal Year (FY) 2024-25 groundwater production and other water charges, outlined below and in the accompanying table:
1. In the North County (Zone W-2), staff proposes a 12.9% increase in the Municipal and Industrial (M&I) groundwater production charge from $1,974 per acre foot (AF) to $2,229/AF.
2. Maintain the treated water surcharge on treated water delivered under Valley Water’s contracts with retail agencies (located in the North County) at $115/AF, and maintain the non-contract treated water surcharge at $200/AF. Combined with above-described Zone W-2 groundwater charge increase, this equates to a monthly bill increase for the average household of $8.78, or about 29 cents a day.
3. In the Llagas Subbasin (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.
4. In the Coyote Valley (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.
5. In the foothills below the Uvas and Chesbro Reservoirs (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.
6. For agricultural groundwater users, staff proposes an increase of 8% from the prior year, which equates to setting the agricultural groundwater charge at 9.25% 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.
7. Staff recommends a 12.9% increase to the surface water master charge from $54/AF to $61/AF to more closely 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/AF. For South County zones, staff proposes the following M&I surface water charge increases: for Zone W-5, a 7.1% increase to $640/AF; for Zone W-7, a 12.9% increase to $811.50/AF; for Zone W-8, an 8.6% increase to $491/AF. Staff recommends that the total agricultural surface water charge be increased 10.9% in all zones, to $100.80/AF.
8. For recycled water (located in Zone W-5), staff recommends increasing the M&I charge by 6.8%, to $559/AF, and increasing the agricultural charge by 4.4%, 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.”
Customers in both areas of North and South County may also experience additional increases enacted by their retail water providers.
*Note: The total surface water charge is the sum of the basic user charge (which equals the groundwater production charge) plus the water master charge.
**Note: The total treated water contract charge is the sum of the basic user charge (which equals the groundwater production charge) plus the contract surcharge.
***Note: The total treated water non-contract charge is the sum of the basic user charge (which equals the groundwater production charge) plus the non-contract surcharge.
Following the close of the Public Hearing, the Clerk of the Board tabulated all surface water charge protests received. The Clerk reports that Valley Water received zero (0) surface water protest in North County (Zone W-2), zero (0) for the Llagas Subbasin (South County Zone W-5), zero (0) for the Coyote Valley (South County Zone W-7), and zero (0) for the foothills below the Uvas and Chesbro Reservoirs (South County Zone W-8). Pursuant to Valley Water’s surface water rate policy, since protests were not received from a majority of affected surface water users or parcels in any of these zones, Valley Water may enact the surface water charges recommended in the February 2024 Report on the Protection and Augmentation of Water Supplies (<https://online.flipbuilder.com/tkap/ieps/>.)
It is important to note that, in setting all of these above-described water charges, staff assumes and recommends that the Board will set the State Water Project (SWP) tax at $28 million for FY 2024-25, which translates to a property tax bill for the average single-family residence of approximately $42 per year. The recommended SWP tax is necessary to pay for anticipated SWP costs of approximately $31.6 million. Staff believes that, for Fiscal Year 2024-25, it is infeasible to pay for SWP expenses through Valley Water’s groundwater and other water charges. If the SWP Tax is not set at $28 million, then, in order to pay SWP expenses, the M&I groundwater production charge in North County (Zone W-2) would need to increase by an additional $155/AF to $2,384/AF - a 21% increase over last year’s groundwater charge. In South County, the M&I charges would similarly need to be increased by an additional: $33/AF in Zone W-5, to $612/AF; $55/AF in Zone W-7, to $805.50/AF; and $29/AF in Zone W-8, to $459/AF. If SWP expenses were paid through water charges, the agricultural groundwater charge would increase to $42.50/AF in all zones, and the open space credit would increase by $786,588.
A one-year 21% increase in wholesale water charges (which does not take into account additional retail water agency rate increases) would place a severe burden on all rate payers, and especially on low-income residents in Santa Clara County, many of whom are already participating in Valley Water’s residential Water Rate Assistance Program (WRAP) in order to avoid disconnection of their retailer-provided water service.
The proposed resolution to set the SWP tax is included in a separate agenda item, when Valley Water adopts its FY 2024-25 Operating and Capital Budget.
ENVIRONMENTAL JUSTICE AND EQUITY IMPACT:
Valley Water annually considers adjusting water charges necessary to generate necessary revenue for the service of providing water supply to Santa Clara County. Each year the rate setting process is brought forth no fewer than five times, with open discussions being held in November, January and at several Public Hearings in April, providing the Board and public significant opportunity for input. In addition, several Board Advisory committees have opportunities for input in January and April, and the public is invited to an Open House each year in April.
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).
ATTACHMENTS:
Attachment 1: Resolution, Groundwater
Attachment 2: Resolution, Surface Water
UNCLASSIFIED MANAGER:
Manager
Aaron Baker, 408-630-2135