BOARD AGENDA MEMORANDUM
SUBJECT:
Title
Adoption of Groundwater Production and Other Water Charges for District Fiscal Year 2018-2019.
End
RECOMMENDATION:
Recommendation
A. Adopt the Resolution DETERMINING GROUNDWATER PRODUCTION CHARGES FOR FISCAL YEAR 2018-2019; and
B. Adopt the Resolution DETERMINING SURFACE WATER, TREATED WATER, AND SOUTH COUNTY RECYCLED WATER CHARGES FOR FISCAL YEAR 2018-2019.
Body
SUMMARY:
The District annually considers adjusting water charges necessary to provide the revenue for the service of providing water supply to Santa Clara County. Pursuant to Section 26 (and its applicable subsection) 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 charge. The rate setting process for groundwater and surface water charges includes a formal protest procedure consistent with Board Resolutions 12-10 and 12-11. If written protests are filed by a majority of well/property owners, or surface water operators/property owners, the groundwater production charge or surface water charge, respectively for that zone, will not be increased.
On April 10, 2018, the Board opened the public hearing on the groundwater production charges for fiscal year 2018-19. The public hearing was continued to the evening of April 12, 2018 in Gilroy and closed on the evening of April 24, 2018 in San Jose. Following the close of the public hearing, the process to validate and tabulate all protests received began. With the oversight of an external, independent third-party auditor from C.G. Uhlenberg and following parameters outlined in Resolution 12-11, the District’s Clerk of the Board has determined that a majority of groundwater well owners and/or parcel owners did not protest in either North County (Zone W-2) or South County (Zone W-5). Additionally, with oversight from the same auditor and following parameters outlined in Resolution 12-10, the District’s Clerk of the Board has determined that a majority of surface water operators and/or parcel owners did not protest in either North County (Zone W-2) or South County (Zone W-5).
The audited counts of the protests were not available at the time of this agenda memo was written. They will be provided in a supplemental agenda item.
Since the valid protests received for Zone W-2 and Zone W-5 from well owners, surface water operators, and respective parcel owners is less than a majority, there is no impediment to proceeding with the water charges that are at or below those recommended by staff.
Staff recommends that the Board adopt by resolution the following proposed Fiscal Year (FY) 2018-19 groundwater production and other water charges, outlined below and in the accompanying table:
1. In the North County (Zone W-2), staff proposes a 9.7% increase in the Municipal and Industrial (M&I) groundwater production charge to $1,289/Acre-Foot (AF). Staff recommends maintaining the treated water contract surcharge at $100/AF and maintaining the treated water non-contract surcharge at $50/AF, which will encourage retail customers to continue taking treated water at current levels as surface water supplies are projected to be adequate. The average household in Zone W-2 would experience an increase in their monthly bill of $3.92 or about 13 cents a day.
2. In the South County (Zone W-5), staff recommends a 7.7% increase in the M&I groundwater production charge to $450/AF. The average household in Zone W-5 would experience an increase in their monthly bill of $1.10 or about 4 cents per day.
3. In both zones, staff recommends a 7.7% increase to the agricultural groundwater production charge to $27.02/AF. An agricultural water user who pumps 2 AF per acre per year would experience an increase of $0.32 per month per acre.
4. Staff recommends a 7.7% increase to the surface water master charge to $35.93/AF. This increase results in a 9.6% increase in the overall North County M&I surface water charge to $1,324.93/AF and 7.7% increase in the overall South County M&I surface water charge to $485.93/AF. The overall agricultural surface water charge in either zone would increase by 7.7% to $62.95/AF. Due to the severity of the recent drought from 2012 to 2016, the District suspended nearly all raw surface water deliveries in 2014. Now that the historic drought is over, the District has restored surface water for those who requested it.
5. For recycled water supplied by the South County Regional Wastewater Authority Facility at Gilroy, staff recommends increasing the M&I charge by 8.0% to $430/AF. For agricultural recycled water, staff recommends a 11.3% increase to $54.41/AF. The increase maximizes cost recovery while concurrently providing an economic incentive to use recycled water. The 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.”
The attached resolutions would officially establish water charges for fiscal year 2018-19, which would become effective July 1, 2018. The proposed increases in water charges are necessary to pay for critical investments in water supply infrastructure rehabilitation and upgrades, and the development of future drought-proof supplies, most notably purified water. For example, the Anderson Dam Seismic Retrofit will help ensure public safety and bolster future water supply reliability. The cost projection for the Anderson Dam Seismic Retrofit project has increased since last year due to the discovery of additional vulnerabilities, which will require a near complete removal of the existing dam, and the determination that the dam’s spillway needs to be fully replaced as it has some of the same weaknesses that Oroville Dam’s spillway had. Additionally, the Rinconada Water Treatment Plant upgrade is more than halfway complete, and will extend the plant’s service life for the next 50 years as well as increase production capacity up to 25%. Lastly, the State of California’s proposed plan for the California Water Fix is anticipated to improve the reliability of the infrastructure through which 40% of the county’s water supply is delivered.
Staff also recommends setting the State Water Project (SWP) tax at $18 million for FY 2018-19. The proposed $18 million SWP tax translates to a property tax bill for the average single family residence of roughly $27.00 per year. If the recommended FY 2018-19 SWP tax is not approved, the M&I groundwater production charge would need to be increased $98/AF in North County and $21/AF in South County. Treated water and surface water charges would be increased by like amounts since a component of those charges is equal to the then-existing groundwater production charges. The open space credit would increase by $525,000. Staff’s recommendation regarding the SWP tax is consistent with the District’s past practice and with the approach of other water districts and agencies that maintain State water supply contracts. The resolution to set the SWP tax is one of the resolutions included in the agenda item to adopt the FY 2018-19 Budget.
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 fiscal year 2018-19.
CEQA:
The recommended action, establishment of groundwater production charges, is not a project under CEQA. CEQA Guidelines Section 15273(a) reads as follows: 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: Resolution, Groundwater Production Charges
Attachment 2: Resolution, Surface, Treated and Recycled Water
*Supplemental Board Agenda Memo
UNCLASSIFIED MANAGER:
Manager
Nina Hawk, 408-630-2736