BOARD AGENDA MEMORANDUM
SUBJECT:
Title
Budget Adjustment for South County Recycled Water Pipeline, Project No. 91094010 (Gilroy) (District 1).
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RECOMMENDATION:
Recommendation
A. Approve a Budget Adjustment in the amount of $2,974,749 from South County Recycled Water Pipeline - Short Term 2 Project (Project No. 91094010, Authorized Project Reserves) to South County Recycled Water Pipeline - Short Term 2 Project (Project No. 91094010); and
B. Authorize the Board Chairperson to Review and Sign a Proposed Letter (to be Developed by Staff) to South County Regional Wastewater Authority Governance (SCRWA) Regarding District Participation in SCRWA’s Governance related to Recycled Water.
Body
SUMMARY:
This item serves as a continuation of the May 8, 2018 Board Item 5.2. Budget Adjustment for South County Recycled Water Pipeline, Project No. 91094010.
Budget Adjustment
On May 14, 2018, the Santa Clara Valley Water District (District) Capital Improvement Program (CIP) Committee received information on existing agreements between the District, South County Regional Wastewater Authority (SCRWA), and cities of Gilroy and Morgan Hill regarding the production, wholesale, and retail of recycled water in south Santa Clara County. The CIP Committee recommends the Board approve a budget adjustment in the amount of $2,974,749, for fiscal year 2018, from South County Recycled Water Pipeline - Short Term 2 Project (Project No. 91094010, authorized Project Reserves) to South County Recycled Water Pipeline - Short Term 2 Project (Project No. 91094010).
The CIP Committee identified the following priorities with regards to the South County Recycled Water Program:
(1) District participation in SCRWA governance;
(2) Uniformity among recycled water agreements throughout the county and discussion on how to bring South County Recycled Water Program agreements to consistent standards with other agreements;
(3) Consideration of how to include expansion of the South County Recycled Water Program into Morgan Hill; and
(4) Consideration of funding for South County Recycled Water Program capital improvements.
In addition, the CIP Committee made the following recommendations:
(1) That staff prepare a letter from the District Board Chair to the Chair of SCRWA regarding District participation in SCRWA governance (Proposed Letter); and
(2) That the Board authorize the Board Chairperson to review and sign the Proposed Letter.
Proposed Letter to SCRWA
The Proposed Letter to SCRWA will request a meeting to discuss alternative structures and principles for joint governance of recycled water projects and operations in South County, involving District Board members as well as SCRWA Board members. It will also request a review of alternative ways to deliver recycled water to the City of Morgan Hill. Staff will prepare and submit the Proposed Letter to the Board Chair for review and signature by June 15, 2018.
Background:
On May 8, 2018, the Board received and considered the request for a budget adjustment in the amount of $2,974,749 and referred the item to the CIP Committee and a future Board meeting.
On September 18, 2017, the District and City of Gilroy (City) executed Agreements 1 and 2, in the combined amount of $2,974,749, for the installation of approximately 8,250 linear feet of recycled water pipeline. Details of Agreement 1 and 2 are as follows:
1. Agreement A4107S - Hecker Pass Development Project (Phases 3 and 4): District cost, in the amount up to $1,493,489.36, to upsize the proposed pipeline inside diameter from 12-inches to 24-inches. Project includes the installation of 4,520 linear feet of recycled water pipeline.
2. Agreement A4108S - Glen Loma Ranch Development Project (Home Ranch and Wild Chestnut Neighborhoods): District cost, in the amount up to $1,481,259.46, to upsize the proposed pipeline inside diameter from 16-inches to 30-inches, and additional lengths of 24-inch and 30-inch inside diameter pipelines. Project includes the installation of 4,000 linear feet of recycled water pipeline.
On January 14, 2014, the Board authorized a $3 million budget adjustment (Project No. 91094010) and authorization to the Chief Executive Officer (CEO) to negotiate and execute an agreement to pay the City for amounts to be reimbursed to a developer (KB Homes) for the design and construction of a recycled water pipeline extension as part of the development, consistent with alignments in the South County Recycled Water Master Plan (Master Plan). KB Homes withdrew from the negotiations with the City and an agreement was never executed.
On September 23, 2014, the Board authorized an additional budget adjustment and the CEO to negotiate and execute subsequent agreements between the District and City, for amounts to be reimbursed to the developers for the design and construction of recycled water pipeline activities, consistent with alignments in the Master Plan, within the Hecker Pass Development (Phases 1 and 2) and Glen Loma Ranch Development (Phase 1A).
Staff is requesting this budget adjustment in fiscal year 2018, to utilize the $3 million budget remaining in the Project Reserves for Project No. 91094010, previously earmarked to reimburse the City for recycled water pipeline work performed by a developer (KB Homes), to fund subsequent recycled water pipeline work performed by developer(s) within the Hecker Pass and Glen Loma Ranch Developments as referenced in agreements A4107S and A4108S.
As outlined in the referenced agreements, the arrangement is for the City to reimburse the developer, and for the District to reimburse the City for the completed installation of upsized recycled water pipelines. The District will own and operate the recycled water pipelines upon completion and acceptance of work.
FINANCIAL IMPACT:
Funding for this work, was previously authorized by the Board and subsequently moved to project reserves. In order to pay for the work associated with Agreements 1 and 2, staff recommends approval of the budget adjustment reallocating $2,974,749 from project reserves to current year budget.
The expenditure associated with Agreement 1 is $1,493,489.36. This includes eligible costs of $1,298,686.40 plus a contingency of $194,802.96 (15 percent). The expenditure associated with Agreement 2 is $1,481,259.46. This includes eligible costs of $1,288,051.70 plus a contingency of $193,207.76 (15 percent).
These projects would be funded 100 percent by South County Zone W-5. Cost recovery would be accomplished through annual capital cost recovery payments over a 30-year time frame beginning when the project is completed. This approach is consistent with the District’s practice for capital projects that benefit South County.
CEQA:
The proposed activities for the Hecker Pass Development and Glen Loma Ranch Development projects, were analyzed at a programmatic level as part of the 2011 Program Environmental Impact Report prepared by the District for the 2004 South County Recycled Water Program Master Plan. In addition, an Environmental Impact Report entitled the Hecker Pass Specific Plan/South Valley Community Church, dated May 24, 2014, was prepared for the City to evaluate the potential impacts of the construction of the homes on the environment. District staff has evaluated these two documents and concluded the proposed project activities have been adequately evaluated and no new mitigation measures are required; therefore, no subsequent environmental document is necessary.
ATTACHMENTS:
Attachment 1: Agreement A4107S
Attachment 2: Agreement A4108S
UNCLASSIFIED MANAGER:
Manager
Garth Hall, 408-630-2750