SR 11-22-2016 9A
Ci ty Council
Report
City Council Meeting : November 22, 2016
Agenda Item: 9.A
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To: Mayor and City Council
From: Susan Cline, Director , Public Works, Water Resources
Subject: State of the Water Fund Report and 2017 Water Rate Adjustment
Recommended Action
Staff recommends that the City Council:
1. Suspend the 9% water rate increas e authorized by Council to go into effect on
January 1, 2017 and authorize a 5% increase to be in effect until December 31,
2017; and
2. Authorize the budget changes as outlined in the Financial Impacts & Budget
Actions section of the report.
Executive Su mmary
This report recommends the City Council adopt a 5% water rate increase for 2017
instead of the previously approved 9% increase. This recommendation is based on a
proposed rightsizing of the Water Fund’s capital program which provides for a better
tha n expected five -year Water Fund balance projection and also an increased
investment in the City’s water main replacement capital program to provide a 100 -year
replacement schedule ($4M per year) as recommended in the 2014 Sustainable Water
Master Plan, ins tead of a 200 -year replacement schedule ($2M per year) as currently
budgeted.
On February 24, 2015 (Attachment A), Council approved a series of five annual 9%
water rate increases for the period of March 1, 2015 through December 31, 2019 to go
into effect automatically unless suspended by Council for all or part of each increase.
The first 9% increase went into effect on March 1, 2015. On February 23, 2016
(Attachment B), due to better than expected financial results in Fiscal Year 2014 -15,
Council appro ved a 5% increase for calendar year 2016, partially suspending the
scheduled 9% increase. Based upon review of Water Fund performance for Fiscal Year
2015 -16, revenues were $2.2M greater than anticipated; and expenditures were $16.8M
less than anticipated , leaving the Water Fund with a $41.3M fund balance.
The recommended rate adjustment would be sufficient to allow the City to fund
necessary operating and capital programs; to deliver potable water to Santa Monica
customers reliably, safely and sustaina bly in compliance with federal and state
regulations; and stay on track to achieve water self -sufficiency as planned by 2020.
The recommended 5% water rate increase for 2017 instead of the previously approved
9% increase would be effective for calendar ye ar 2017 on bills issued on or about
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March 1, 2017 to February 28, 2018, with up to 9% increases authorized for 2018 and
2019 pending annual evaluation by Council and staff. Proposed and current water and
fire line service rates are listed in Attachment C. Council may take action to adjust
future rates at the next annual review.
Background
On February 24, 2015, Council approved the following schedule of water rate increases
via resolution subject to an annual State of the Water Fund review analyzing fisca l
performance and projected fund balances over a five -year period:
Calendar Year 2015,
effective
March 1,
2015
2016,
effective
January 1,
2016
2017
effective
January 1,
2017
2018
effective
January 1,
2018
2019
effective
January 1,
2019
Maximum
Authorized Increase
9% 9% 9% 9% 9%
Actual Increase
Adopted by Council
based upon review
of Water Fund
performance
9% 5%
Rate increases go into effect automatically on an annual basis unless suspended all or
in part by Council. On February 23, 2016, based on a n improved financial outlook,
Council partially suspended the full 9% increase and approved a 5% increase.
For financial stability, the Water Fund strives to maintain a $7 million minimum reserve
balance with revenues sufficient to cover all operating a nd capital expenditures while
meeting various water -related requirements and goals including:
20% reduction in water use versus 2013 levels mandated by the State from May
5, 2015 through May 2016 and Stage 2 Water Supply Shortage conditions
adopted by Council on August 12, 2014 in accordance with the City’s Water
Shortage Response Plan (Attachment D);
Meeting a State -required 123 gallon per capita per day usage standard per the
Water Conservation Act of 2009 also known as SBx7 -7;
Federal & State wat er quality and treatment requirements;
Achieving Santa Monica's goal of 100% water self -sufficiency by 2020;
Managing Santa Monica basin groundwater contamination and utilizing
groundwater resources in a sustainable manner; and
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Maintenance and constr uction of water treatment and distribution systems
including facilities, meters, pipelines, pump stations, reservoirs and well fields for
reliable and efficient delivery of potable water for customer use.
Rate increases may be deferred or lowered should r evenues be greater than anticipated
or expenditures be less than expected, while maintaining a $7 million minimum reserve
Water Fund balance.
Any 2017 rate increase would go into effect for water consumption beginning on
January 1, 2017, effective on wa ter bills prepared on or after March 1, 2017 as water
meters are read approximately every two months (e.g. a bill issued for a meter read on
March 1, 2017 would reflect water usage from January 1 to February 28, 2017).
Discussion
Fiscal Year 2015 -16 Fina ncial Performance
In considering whether to suspend all or part of the scheduled 9% rate adjustment for
calendar year 2017, staff analyzed the FY 2015 -16 actual performance of the Water
Fund. As indicated in the Five -Year Water Fund Balance Projection tab les (Attachment
E), the Water Fund ended Fiscal Year 2015 -16 with a fund balance of $41,350,436.
The Water Fund ended the year $19M better than expected due to modestly higher than
expected revenues and significantly lower than expected capital and oper ating
expenditures.
Revenues - Usage reductions for Fiscal Year 2015 -16 were exhibited by all
customer classes compared to the prior fiscal year, including Commercial (-6%),
Multi -Family Residential (-7%), Institutional including City accounts (-13%) an d
Single Family Residential (-14%). Although usage was down compared to the
prior year, actual usage exceeded projected usage, resulting in actual revenues
exceeding budgeted revenues by $2.2 million due to higher than expected water
sales and meter/servi ce line installs.
Expenditures - a higher than normal expenditure budget was planned for FY
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2015 -16 to make investments in an ambitious $13.4M capital project schedule
and implementing an accelerated $5M conservation program as prescribed in the
City's 2 015 Water Shortage Response Plan to meet mandated water use
reductions. Due to lower than expected actual expenditures, a $16.8M surplus
was realized as follows:
o Capital Expenditures - $9.8M surplus - several project budgets were
deferred or continued to FY 2016 -17 pending bids or completion of design
work.
o Water Conservation Rebate and Plumbing Fixture Direct Install Programs
- $3.7M surplus - a plumbing fixture replacement contract for low income
housing was deferred due to permitting issues and $3M in rebate funding
and other water conservation measures will be continued into FY 2016 -17
to encourage further efficiencies in residential and commercial landscape
and plumbing fixture water usage.
o Charnock Well Field Operations (11375 Westminster Avenue) - $1M
surplus - progress made in groundwater pollution plume clean -up of MTBE
and other volatile organic compounds has reduced the need for granular
activated carbon filter media change outs to a bi -weekly frequency,
resulting in $859K in savings. Lower than expected contractor and
operating supplies costs offset higher than expected energy costs
accounting for the remainder of the savings.
o Arcadia Water Treatment Plant Operations (1228 S. Bundy Drive) - $913K
surplus - lower than expected costs were obs erved for electricity and
water treatment chemicals along with deferral of membrane, cartridge filter
and filter media change outs. Reverse osmosis membranes, which are
used as part of the City’s water filtration process, require replacement
every 5 to 6 years and are scheduled to begin in spring 2017 at an
estimated cost of $1.2M.
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o Metropolitan Water District (MWD) imported water purchases - $688K
surplus - the City purchased 2,809 acre -feet of MWD water in FY 2015 -16 -
-the lowest amount in 20+ years. Two Charnock wells were shut down for
repairs at various periods from April to June 2016 requiring the purchase
of an additional 430 acre -feet of MWD water to replace lost local
production; otherwise this surplus would have been higher.
Water Self -Sufficienc y by 2020
Original Conditions
The Sustainable Water Master Plan (SWMP) (Attachment F) was developed by staff in
response to City Council direction in March 2011 to become water self -sufficient by
2020. After various study sessions, Council approved the S WMP on October 28, 2014.
Water supply and demand conditions at the time (Fiscal Year 2012 -13 data formed the
basis for the analysis) led to the development of the following chart as included in the
SWMP:
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In 2013, water demand in Santa Monica was 14,078 Acre -Feet (AF). Projections for
future demand included an analysis of water demand in improved economic conditions.
Applying regression analysis techniques and population growth estimates looking
forward, demand was projected to increase to 15,490 AF by the year 2020. Given the
groundwater production capability at the time of 9,000 AF, the “gap” between local
production and total demand was calculated as the difference of 6,490 AF (stated as
6,500 AF). With an aggressive conservation program reducing de mand by
approximately 1,440 AF and the potential development of approximately 5,000 AF of
new local groundwater, the 6,500 AF gap could be addressed.
Current Conditions / Updated Gap Projection
During Fiscal Year 2015 -16, with California mired in a prolon ged drought, the State
Water Board enacted mandatory conservation measures requiring all water agencies in
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the State to reduce water levels by 20%. Preceding this action by the State, Santa
Monica enacted Stage 2 of its own Water Shortage Response Plan, w hich already had
required a 20% reduction in use.
As a result, and following aggressive investment in conservation programs and
enforcement, total water deliveries dropped to 11,348 acre -feet in Fiscal Year 2015 -16.
Of this amount, 2,809 acre -feet (25% of water sales) of imported water was purchased
from Metropolitan Water District, with the remainder sourced locally from Santa Monica
Basin groundwater. Although the State has backed off from its 20% mandatory
reductions and in its place has requeste d water agencies to “self -certify” water supplies
through the year 2019, Santa Monica remains in Stage 2 of its Water Shortage
Response Plan, which sets a 20 percent conservation mandate. Santa Monica has
certified that sufficient water exists to meet dema nds through 2019, principally because
the Metropolitan Water District certified adequate supplies to meet the demands of its
member agencies. Accounting for the drop in water demand due to successful
conservation efforts, and assuming a slight (2%) increa se in demand this year and
holding through 2020, the future year forecast of water supply and demand conditions is
displayed below. With the drop in demand projecting to 11,575 AF at the year 2020, and
given the existing local groundwater production of 9,0 00 AF, the gap can be restated
now as 2,575 AF to be achieved by 2020.
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Actions to Date
Groundwater treatment capacity at the Arcadia Treatment Plant meets the pumping
capacities of existing wells, with limited spare capacity. As initially calculated t o meet
water self -sufficiency, an additional 5,000 AF of local groundwater supply was required.
Accordingly, additional well production would require additional treatment capacity; in
initially seeking to develop an additional 5,000 AF per year as envisio ned in the original
plan, it was necessary to investigate the feasibility of additional treatment capacity.
Toward this end, a pilot study for a proposed new treatment facility in the Olympic sub -
basin has recently been concluded. The pilot study address ed the removal of
contaminants specific to the Olympic sub -basin (Tetrachloroethylene (PCE),
Trichloroethene (TCE), and 1,4 -Dioxane), identified an appropriate treatment train for
the constituents of concern (greensand filtration, reverse osmosis and advan ced
oxidation), and developed a preliminary cost estimate for the project (approximately
$70M, not including direct owners costs). The Olympic Treatment Plant (OTP) would be
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located at the City Yards to take advantage of existing City -owned land and to rem ain in
close proximity to existing Olympic sub -basin wells. The creation of additional treatment
capacity separate and apart from the Arcadia facility would also create redundancy and
independence in the event of an interruption in service at Arcadia. Fu rthermore, site
planning and initial layout considerations have been made in close coordination with the
ongoing City Yards master planning efforts.
The final recommendation of constructing the OTP has not been made. While the pilot
testing process was necessary in order to fully inform the final design of the OTP,
additional analyses are underway, which will serve to best inform the threshold decision
of whether to proceed with construction of the full -scale OTP. Presently, a sustainable
yield anal ysis of the entire Santa Monica groundwater basin is underway. The results of
the study, to be completed in spring 2017, will identify the sustainable yield of the basin.
As defined in California’s Sustainable Groundwater Management Act of 2014,
sustaina ble yield means the maximum quantity of water – calculated over a base period
representative of long term conditions in the basin and including any temporary surplus
– that can be withdrawn annually from a groundwater supply without causing an
undesirable result.
The findings of the study, specifically the yield available from the Olympic subbasin, and
the adjacent Coastal subbasin, will be considered in making the final recommendation.
Furthermore, pending the findings of the sustainable yield analysis, exploratory wells
will better define the quality characteristics of the water available to the OTP and refine
the final design criteria and cost estimates. Additionally, in order to ensure the best use
of available funding, the feasibility of expanding an d/or enhancing the existing Arcadia
Water Treatment facility will be addressed as an alternative to construction of a new
plant at the City Yards. This analysis of the alternative siting of the OTP will also be
completed in spring 2017.
Also completed over the last year was the drilling of an exploratory bore hole
immediately north of City Hall. The drilling operation met multiple objectives. It was an
opportunity to explore and characterize the subsurface conditions in a part of the City
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where no wel ls currently exist and in doing so further supported basin -wide
sustainability efforts, and it also served to provide an assessment of the potential for a
water supply well to serve the proposed City Services Building.
Closing the Gap
Resiliency and adapt ability in light of changing conditions applies to the approach
towards self -sufficiency. Since the development of the original plan to achieve self -
sufficiency and closing a 6,500 AF gap in supplies, an extensive, prolonged drought has
materially changed the community’s water demands. Recognizing that conservation has
already been incorporated into the water supply portfolio resulting in significant savings,
achieving self -sufficiency by 2020 now means identifying 2,575 AF of additional supply.
While no new wells have been constructed as yet pending the results of the sustainable
yield analysis, additional supply may be realized through the development of projects
not previously envisioned nor included in the original supply projections.
In the continu ing search for alternate water sources to meet self -sufficiency goals, staff
has developed the Sustainable Water Infrastructure Project (SWIP), for which Council
approved the environmental documentation on September 27, 2016 (Attachment G).
Briefly, the SW IP leverages the use of existing City infrastructure by linking together
three distributed water reuse elements into a single cohesive and comprehensive
project. Advanced treated water (runoff, brackish impaired groundwater, and municipal
wastewater) produ ced from the SWIP would be used to meet existing permitted non -
potable reuse demands such as landscape irrigation. When properly permitted, a
significant portion of the advanced treated water would be utilized for future indirect
potable reuse via aquifer recharge. Combined, the three SWIP elements would produce
approximately 1,680 acre -feet per year (AFY) of new water.
Existing wells, which are presently not used or under -utilized, present an opportunity to
increase supply in a more cost efficient and ex pedient manner than the process
involved in creating and permitting new wells. In the Olympic sub -basin, well SM7 was
drilled and completed in 1985. It was never placed in service as a production well
however, due to high levels of volatile organic compo unds (VOCs) detected in the well
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during development. These contaminants are the same as those being treated in water
sourced from nearby wells SM3 and SM4, for which funds are being received by the
City from Gillette and Boeing. Staff is currently review ing the rehabilitation options for
SM7. Limited pumping data for this well indicates it may be possible to recover up to
300 gallons per minute, which equates to 480 AF per year.
Pending the results of the sustainable yield study, the priority for siting and constructing
a new well would be in the Olympic or Coastal sub -basins. At least one additional well,
with a production capacity of 500 gallons per minute at a minimum, would provide 800
AF. A proposed timeline for the projects is presented below.
Cumulatively, these projects would provide 2,960 AF of new production, which is just
over the revised anticipated gap of 2,575 AF. If these production estimates are met and
conservation persists, the City is set to meet self -suf ficiency by 2020 without the OTP
by very narrow margins. Additional studies and analysis will explore more economical
and incremental approaches to cover fluctuating water demands with and without the
OTP.
Other issues relative to self -sufficiency
Santa Monica is actively moving toward closing the remaining gap to attain water self -
sufficiency by 2020. In support of this effort, various programs and policies are in place
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or may soon become effective, pending Council approval, which aim to address
demand and/or increase supplies. The development of additional water treatment
capacity, the Sustainable Yield Study, and the Sustainable Water Infrastructure Project
have been addressed previously in this staff report. Further discussed herein are
conservation programs, development of a Water Neutrality Ordinance, and sustainable
management of groundwater resources.
Conservation Programs
The SWMP included the expansion of water conservation programs and rebates in
addition to the installation of additional g roundwater wells, and greywater and rainwater
harvesting systems to increase local water supplies.
Faced with the threat of continued drought, uncertain local and imported water supplies
and increasing resident and day -time populations, City Council declar ed a Stage 2
Water Shortage on August 12, 2014, requiring mandatory water allocations and a 20%
reduction in water use from 2013 usage.
The City’s drought response policies and programs build upon the programs and
projects outlined in the SWMP. These coo rdinated efforts are achieving water use
reductions while creating a sustainable water portfolio. Since June 2015, citywide water
use has been reduced 19.7% compared to 2013 water usage. In FY 2015 -16, 75% of
Santa Monica’s potable water was sourced from l ocal groundwater with more than 64
days where no imported water was purchased from Metropolitan Water District. Santa
Monica also exceeded the State SBx7 -7 requirement to reduce water use to 123 gallon
per capita per day (gpcd) as noted in the City's 2015 Urban Water Management Plan
(Attachment H), using 113 gpcd in calendar year 2015. FY 2015 -16 water sales of
11,348 acre -feet represents an even more impressive 21.5% savings versus the 20 -
year annual rolling average usage of 14,460 acre -feet from 1996 to 2015 despite
increased population and building density.
Drought Response: Water Use Reduction for FY2015 -16
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The City’s groundwater is recharged by rain. Only five inches of rain fell in the Santa
Monica area during the 2015 -2016 rainy season, which was significantly below the 14
inch average for the region and the 30 inches of rain that was anticipated due to El Niño
conditions. Even though the state lessened its drought response requirements, Santa
Monica continues to take a long -range water management approach to ensure a
resilient and healthy water supply portfolio amid the uncertainty of climate change,
water supply availability, and water demands.
As part of the Stage 2 Water Supply Shortage, water use allowances and penalties
have been implemented in addition to expanded landscape rebates, turn -key toilet
installations, home and business water consultations, and a comprehensive outreach
and marketing plan. To date, 75% of all water customers are within their water use
allowance and are consistently near or at the number each month. The City’s public
landscape and facilities operations have cut water use by 23%. Penalties focused on
high water users and have been effective at encouraging these customers to reduce
their water use. By the end of Septem ber 2016, staff issued 629 penalties to the highest
water wasters and water usage among that group has been reduced by 8% as a result.
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The City’s significant investments in water conservation have helped to achieve this
reduction, but it is uncertain how much of this is due to behavioral changes versus
permanent water -efficiency measures. Although significant reductions in water use
among all customer sectors have been made, water demand has increased in Santa
Monica by 6% in Q1 of FY 2016 -17 compared to Q1 of FY 2015 -16. With the lifting of
the statewide mandatory targets in May 2016 it is anticipated that this trend may
continue. Therefore, staff is redoubling efforts to promote the need for continued
conservation. A new marketing campaign started in e arly July 2016 including social
media, bus ads, street banners, banners at parks, targeted outreach to high -water use
customers, landscape workshops for professionals, participation in the EPA’s Sprinkler
Spruce Up summer marketing campaign, outreach to Ci ty employees, and outreach
through Santa Monica Tourism and Travel, the Chamber of Commerce and the
business districts.
In FY 2015 -16, more than 400 landscape rebates were issued whereby 596,065 square
feet of lawn were removed, and 10,000 water -saving pro ducts and plumbing fixture
rebates were provided to residents and businesses. There are over 280 properties
enrolled in the landscape rebate program this fiscal year that are projected to remove
more than 200,000 square feet of lawn.
Water Conservation Pro grams
SWMP - Water Conservation
Programs
Actuals
2014 to
2016
Target
Amount
by 2020
Percent
Complete
Drought Response Programs Total
2014 -2016
Giveaways: showerheads, aerators, etc. 2,501
Landscape Consultations 494
Water Use Consultations 272
Water Use Allowance Citations 629
Water School 156
Water Waste Complaints 889
Water Waste Warning L etters 786
Water Waste Citations 14
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Toilet Rebates Single Family 391 3,568 11%
Toilet Rebates Multi Family 1,666 4,000 42%
Toilet Rebates Co mmercial 437 200 2 19 %
Toilet Direct Install 1,340 5,496 24%
Clothes Washer Rebates Residential 242 1,424 17%
Controllers Single Family 80 1,920 4%
Urinals Commercial 18 548 3%
Laminar Flow Devices Commercial 125 664 19%
Dry Pump Rebates Commercial – no
customers have applied for this rebate.
0 40 0%
Connectionless Food Steamer
Commercial – no customers have
applied for this rebate.
0 2 0%
Conductivity Controller Commercial –
no customers have applied for this
rebate.
0 2 0%
Faucet Aerators Commerci al – no
customers have applied for this rebate.
0 158 0%
Coin -op Washers Rebates – this
program is launching in 2017.
0 45 0%
St John's Medical Facility – this
program has been declined by client
and is no longer available.
0 N/A 0%
SMMUSD Audits/Retrof its 7 16 44%
WaterSmart Software Participants 5,924 6,000 99%
Lawn Removed (square feet) 596,065 1,100,000 54%
To assist Santa Monica in achieving additional water savings, the City is planning to
invest $3M in FY 2016 -17 in a robust suite of residenti al, commercial and institutional
water conservation programs including landscape, turf removal, appliance and plumbing
fixture rebates, water consultations and plumbing fixture direct installs and giveaways
pending budget approval. Program details may be found online at: smgov.net/water .
Water Neutrality Ordinance
To address future water demand from development, staff is developing a Water
Neutrality ordinance which would requir e new development projects to implement or
fund water savings offsets to mitigate any additional projected water usage related to
the new development. The Office of Sustainability and the Environment (OSE) and a
stakeholder committee are studying various program, financial and legal issues. Staff
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anticipates returning to Council with a proposed ordinance in February 2017.
Groundwater Management.
Prudent management of the local groundwater resources is critically important in
addressing Santa Monica’s drive towards water independence. Local groundwater has
been part of the City’s water supply for nearly 100 years and sensible stewardship and
oversight have allowed the City to withstand recurring droughts and contamination
events in recent years. Chal lenges faced include increased urbanization and industrial
land use changes, with the potential of these changes to result in groundwater
degradation as seen over the last twenty years, as well as climate change challenges
affecting groundwater recharge, s ea level rise, and rising temperatures which have
typically been coupled with a rise in water demand. The City is presently addressing
groundwater management issues on two fronts: evaluation of alternatives to impose a
temporary moratorium on the drilling of private wells until the results of the Sustainable
Yield Analysis are completed, and the development of a basin -wide, multi -jurisdictional
approach to basin management in compliance with the 2014 Sustainable Groundwater
Management Act (SGMA).
Regulati on of Private Wells
The City’s groundwater sources must be protected against overdraft and contamination
so that the City may continue to provide the necessary volume of potable water to its
citizens within the health and welfare guidelines promulgated by the various State and
federal regulatory agencies. Neither State law nor current City ordinances prohibit an
individual property owner from constructing a private well for irrigation purposes on their
property. Only a drilling permit from the Los Angeles County Health Department is
required to construct a well. No City ordinance currently exists which requires any
person or land owner wanting to construct a private well within the City to notify the City,
or provide and information about that well and g roundwater withdrawal from the well to
the City.
On January 24, 2012, Santa Monica adopted a resolution declaring its recognition for
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the fundamental rights of natural communities and ecosystems to exist, thrive and
evolve. The Sustainable Bill of Right s (SBoR) was prepared as a Resolution that
supports sustainable rights and commits to further exploration of how best to protect
these rights and achieve community sustainability goals. On April 9, 2013 Council
adopted a Sustainability Rights Ordinance tha t codified the rights outlined in the SBoR
into the City’s municipal code. These rights include:
Recognizing the right of the people of Santa Monica to clean, affordable, and
accessible water from sustainable sources for human consumption, cooking,
and sa nitary purposes;
Recognizing the fundamental rights of natural communities and ecosystems
to exist, thrive, and evolve; and
Effectuating these rights by modifying local law and policy as needed to better
protect and sustain, for future and current generati ons, the natural
environment upon which we all depend.
The City’s established goal of water self -sufficiency by 2020 is bolstered by the SBoR,
which emphasizes the City’s responsibility to ensure its groundwater resources remain
at heathy levels and conti nue to thrive, and furthermore defines the community’s right to
water from sustainable sources.
Given the City’s experience with past contamination events, current drought conditions,
and required compliance with newly enacted state groundwater manageme nt law, staff
is evaluating alternatives to impose a temporary moratorium on the drilling of private
wells until the results of the Sustainable Yield Analysis are completed. Specifically, City
staff are working with Los Angeles County staff to temporarily suspend the County
issuance of well permits to property owners in Santa Monica. Following completion of
the Sustainable Yield Analysis and additional assessment of local groundwater
resources, staff will report back to Council in November 2017 as part of the State of the
Water Fund report with a more substantive discussion of future regulatory actions which
may be considered by the City relative to the continued regulation of private wells.
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Sustainable Groundwater Management Act
The 2014 Sustainable Gr oundwater Management Act (SGMA) gives local agencies the
authority to manage groundwater in a sustainable manner and allows for limited state
intervention when necessary to protect groundwater resources. The SGMA requires the
creation of Groundwater Sustai nability Agencies (GSAs) to develop and implement local
plans allowing 20 years to achieve sustainability. The SGMA provides a state
framework to regulate groundwater for the first time in California history. Specifically, the
SGMA:
Establishes a definiti on of sustainable groundwater management;
Establishes a framework for local agencies to develop plans and
implement strategies to sustainably manage groundwater resources;
Prioritizes basins with the greatest problems (ranked as high - and
medium -priority ); and
Sets a 20 -year timeline for implementation.
The SGMA includes provisions to promote engagement by interested parties in the
formation of a GSA and development and implementation of a Groundwater
Sustainability Plan. GSAs must identify key parties and maintain records that spell out
plans on how to include their interests in GSA operations and Groundwater
Sustainability Plan development. The Act requires the GSA to provide this information to
the California Department of Water Resources. The GSA is the primary agency
responsible for achieving sustainability within the timeframe.
Groundwater Sustainability Plans must include a physical description of the basin,
including groundwater levels, groundwater quality, subsidence, information on
groundwate r -surface water interaction, data on historical and projected water demands
and supplies, monitoring and management provisions, and a description of how the plan
will affect other plans, including city and county general plans.
The 50 -square mile Santa M onica Basin is currently non -adjudicated and underlies
Santa Monica and portions of Los Angeles. The City is in discussions with neighboring
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agencies including the Los Angeles Department of Water and Power and the City of
Beverly Hills, to establish coope rative agreements relative to the creation of a
Groundwater Sustainability Agency to manage demand and ensure water is utilized in a
sustainable manner throughout the basin. In accordance with SGMA requirements,
formation of a GSA for the Santa Monica Bas in is required by June 2017 and adoption
of a Groundwater Sustainability Plan by is required by 2022.
Recommendation
Due to an improved financial outlook, staff recommends Council partially suspend part
of the 9% water rate increase authorized by Counci l and authorize a 5% increase.
Comparing rates with nine other Southern California providers (Attachment I), Santa
Monica's tiered rate structure currently offers close to the lowest, if not the lowest, rates
in the region for the average user. For a sin gle family residence using the City average
of 24 HCF (17,952 gallons) over a two -month period, a 5% increase would raise a bi -
monthly water bill by $4.06 from $83.08 to $87.14, which works out to less than a half -
cent ($0.00485) per gallon. Burbank offer s the next -best pricing at $95.
Water Main Replacement Program and Capital Expenditures – due to staffing
limitations, the City has expended only an average of $2M on water main replacements
over the past 15 years. Currently, water main replacement is bu dgeted in FY 2016 -17
at $4.4M, while FY 2017 -18 to FY 2019 -20 are budgeted at $2M per year. $2M
provides for replacement of approximately one mile per year. As the City’s water main
system consists of 205 miles of pipeline, the current budget provides fo r a 205 -year
replacement schedule, approximately double the 100 -year replacement schedule
recommended in the City of Santa Monica’s 2014 Sustainable Water Master Plan.
Deferral of water main replacements may lead to breakages due to corrosion and other
ca uses resulting in property damage and water loss similar to those recently
experienced at UCLA and other locations throughout Southern California.
The 5% increase would fund an additional $2M per year for water main replacements
and one new FTE Civil E ngineer ($180K per year) required to address the increased
workload associated with the enhanced main replacement program. This would
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increase the total water main replacement budget to $4M per year, which would fund
two miles annually to achieve a 100 -ye ar replacement schedule. As indicated in Figure
1 below, 4% of the City’s water main system (8 miles) is at or over 100 years old.
Figure 1 - Age Distribution of Water System Pipelines
To partially offset the increased water main replacement costs, staff have identified
$3.4M in FY 2016 -17 capital projects which may be reduced, eliminated or deferred,
including:
Water Resources facility improvement projects related to the City Yards Master
Plan (deferred until onset of constr uction) - $1.5M
Water main and valve replacement projects that cannot be completed in FY
2016 -17 at current staff levels - $1M
Construction projects where funding is no longer required (California Incline,
Expo and Charnock Well Field booster pumps) - $470 K
21 of 24
Technology projects to be deferred or with budget savings that may be returned
to the Water Fund (advanced metering infrastructure, software systems database
reporting, water systems control hardware/software) - $330K
Sustainability projects including gr oundwater management interagency
memorandum of understanding development (work now to be completed by City
staff) and Urban Water Management Plan closeout (plan accepted by the State) -
$155K.
A 5% rate increase would provide sufficient funding to maintai n safe and reliable water
deliveries for Santa Monica customers at a reasonable cost and continue investments in
infrastructure and progress towards water self -sufficiency by 2020 while meeting
Federal and State regulations and Council -mandated water usage restrictions. This
adjustment would also provide the Water Fund the financial stability to allow for
fluctuations in water usage, take action to combat elongated drought conditions,
address unforeseen operating and capital requirements, meet or exceed bo nding capital
requirements at the end of the five -year rate analysis period and, ideally, avoid future
rate shocks in the subsequent five -year rate period (FY 2019 -20 to FY 2024 -25).
Despite having a larger than normal $41.3M Water Fund balance primarily due to the
one -time infusion of $33.4M in Charnock Well Field MTBE settlement funds at the end
of FY 2012 -13, it is anticipated that significant investments in capital ($31M) and
conservation ($18M) programs will cause expenses to outpace revenues in each of the
next few years. As indicated in Attachment E, with a 5% rate increase for 2017, the
Water Fund is projected to drop to a minimum fund balance of $7.6M in FY 2019 -20,
just above the required $7M reserve level.
It is important to note that fluctua ting conditions in water usage, customer behavior,
policies & regulations, weather patterns, unforeseen repair costs, groundwater supplies
& pollution content and other considerations make Water Fund financial predictions
somewhat of a challenge. A modest 5% swing in water usage could lead to a +/- $5M
change to the Water Fund balance over five years. Just two years ago, based on
available data, Santa Monica had a 2014 usage level of 13,987 acre -feet with a twenty -
22 of 24
year previous average of 14,460 acre -feet . With the implementation of a mandatory
20% reduction in water usage versus 2013 levels and the corresponding anticipated
loss of revenue, financial projections had the Water Fund dropping to lower than $1M
despite a $33.4M infusion of MTBE settlement fu nds, 5 years of planned 9% rate
increases and a planned, but no longer needed $10M bond issue in 2018. With revised
revenue estimates, a leaner capital program and lower than expected operating costs,
the Water Fund's financial outlook has improved enough to justify a lower rate increase
while meeting all water -related requirements and goals.
Alternatives
0% Increase (full suspension of 9% rate increase)
A 0% increase for 2017, with the existing $2M annual water main replacement capital
budget unchanged and no additional staffing, would cause the Water Fund to drop to an
estimated $6.9M in FY 2019 -20, slightly below the $7M minimum recommended reserve
level. Also, as this would keep the City on a 205 -year replacement schedule instead of
the recommended 100 -year schedule, this option is not recommended due to the risk of
increased frequency of water line breakages.
3% Increase (partial suspension of 9% rate increase) with Partial Water Main Capital
Program and Staffing Enhancements
With a 3% increase in 2017, the Water Fund could fund a new Civil Engineer FTE and
increase the water main replacement capital budget by $1.2M per year to $3.2M
annually beginning in FY 2017 -18, enough to fund 1.5 miles of water main per year
(136 -year replacement schedule) with a projected fund balance of $7.4M at the end of
FY 2019 -20. The average single family residential water bill (24 HCF) would increase
from $83.08 to $85.64 per bi -monthly billing period, a $2.56 increase. This increase
would be sufficient to fund pla nned operations, but is not preferable because it would
not meet the 100 -year recommended water main replacement schedule.
Task Force on the Environment and Water Advisory Committee Actions
The State of the Water Fund update was presented to the Task For ce on the
Environment on October 24, 2016. Although no formal position was taken by the Task
23 of 24
Force, significant discussion focused on strong support for a rate adjustment which
would support full funding for infrastructure maintenance at a level which wou ld return
the water main replacement cycle to a 100 -year period. Similarly, the same support
was received upon presenting the State of the Water Fund update to the Water
Advisory Committee on November 1, 2016. Both groups voiced support for the 5%
recomme ndation.
Financial Impacts and Budget Actions
FY 2015/16 water sales ended the year approximately $1.6 million greater than budget.
As noted earlier, although usage was down compared to the prior year, actual usage
exceeded projected usage, resulting in actual revenues exceeding budgeted revenues
by $2.2 million. Based on this and that the State has eased mandatory statewide
conservation guidelines and the City remains at Stage 2 of its Water Shortage
Response Plan, staff now projects an additional 2% in crease in water sales for FY
2016/17. The increased revenues generated by this increased water usage will be
partially offset by the reduction of the rate increase from 9% to 5% resulting in a net
revenue increase for the year of approximately $1,130,000. Staff will monitor revenues
and any changes will be reflected in the FY 2016/17 Midyear Report.
The following Water Fund FY 2016 -17 Capital Improvement Program account budgets
will be reduced by the following amounts:
Account Number Reduction
C250136.589000 – Water Main Replacement ($805,841)
C250162.589000 – Water Resources Tenant Improve ($1,500,000)
C250388.589000 – Auto Meter Reading Pilot Prog ($58,335)
C257064.589000 – Expo Water Betterments ($200,000)
C258020.589000 – Water Sy stems Data Integration ($132,000)
C259015.589000 – SCADA Systems Upgrade ($122,294)
C259035.589000 – Booster Pump Charnock ($19,292)
C259040.589000 – Valve Study/Replacement ($186,238)
C259077.589000 – Sustainable Urban Water Master ($5,000)
24 of 24
C259078.589000 – Groundwater Management Plan ($150,000)
C259096.589000 – Calif Incline Construction ($250,000)
Total ($3,429,000)
Prepared By: Gil Borboa, Water Resources Manager
Approved
Forwarded to Council
Attachments:
A. February 24, 2015 Staff Report - Public Hearing to Adopt Water Rates
B. February 23, 2016 Staff Report - State of the Water Fund
C. 2017 Proposed Water Rate Options
D. August 12, 2014 Staff Report - Recomm endation to Adopt a Resolution Declaring
a Stage 2 Water Supply Shortage
E. Water Fund Balance Projections - Three Rate Increase Options
F. Sustainable Water Master Plan - December 2014
G. September 27, 2016 Staff Report - Sustainable Water Infrastructure Project -
CEQA/Initial Study/Mitigated Negative Declaration
H. 2015 Urban Water Management Plan
I. Water Rate Comparison - Average Single Family Account
Tier
Full Suspension /
0% Adjustment
(per HCF)
Partial Suspension
+3% Adjustment
(per HCF)
Partial Suspension
+5% Adjustment
(per HCF)
Usage Range
per Billing Period
(HCF's)
Tier 12.87 $ 2.96 $ 3.01 $ 0 to 14
Tier 24.29 $ 4.42 $ 4.50 $ 15 to 40
Tier 36.44 $ 6.63 $ 6.76 $ 41 to 148
Tier 410.07 $ 10.37 $ 10.57 $ 149+
Tier 12.87 $ 2.96 $ 3.01 $ 0 to 4 per dwelling unit
Tier 24.29 $ 4.42 $ 4.50 $ 5 to 9 per dwelling unit
Tier 36.44 $ 6.63 $ 6.76 $ 10 to 20 per dwelling unit
Tier 410.07 $ 10.37 $ 10.57 $ 21+ per dwelling unit
Tier 14.07 $ 4.19 $ 4.27 $ Depends on meter size*
Tier 210.03 $ 10.33 $ 10.53 $ Depends on meter size*
Recycled Water3.66 $ 3.77 $ 3.84 $ All usage
Meter Size
Full Suspension
Fixed Charge
per Billing Period
Partial Suspension
+3% Adjustment
Fixed Charge
Partial Suspension
+5% Adjustment
Fixed Charge
1 ‐1/2" meter41.00 $ 42.23 $ 43.05 $
2" meter65.78 $ 67.75 $ 69.07 $
3" meter113.21 $ 116.61 $ 118.87 $
4" meter180.94 $ 186.37 $ 189.99 $
6" meter350.20 $ 360.71 $ 367.71 $
8" meter553.32 $ 569.92 $ 580.99 $
10" meter790.29 $ 814.00 $ 829.80 $
*Non ‐Residential Accounts ‐ Tier Designations by Meter Size and Usage Range
Meter Size Tier 1 Usage
(HCF's)
Tier 2 Usage
(HCF's)
3/4" meter0 to 210211+
1" meter0 to 210211+
1 ‐1/2" meter0 to 465466+
2" meter0 to 870871+
3" meter0 to 1,7001,701+
4" meter0 to 2,5502,551+
6"+ meter0 to 5,2805,281+
ATTACHMENT C
Fireline Service Rates
2017 Water Rate Options by Account Type, Tier and Meter Size
Single Family Accounts
Multi ‐Family Accounts
Non ‐Residential Accounts
1 HCF = 1 Hundred Cubic Feet of water = 748 gallons
Each billing period is approximately 61 days (~6 billing periods per year)
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c
h
P
a
s
a
d
e
n
a
E
l
Se
g
u
n
d
o
L
A
D
W
P
G
l
e
n
d
a
l
e
B
e
v
e
r
l
y
Hills Culver City*
Typical Bimonthly Water Bill (24 HCF) Excluding Taxes
AT
T
A
C
H
M
E
N
T
I
Wa
t
e
r
Ra
t
e
Co
m
p
a
r
i
s
o
n
wi
t
h
Ne
i
g
h
b
o
r
i
n
g
Ag
e
n
c
i
e
s
Si
n
g
l
e
Fa
m
i
l
y
Re
s
i
d
e
n
t
i
a
l
Ac
c
o
u
n
t
s
Cu
r
r
e
n
t
Bi
l
l
s
is
s
u
e
d
af
t
e
r
3/
1
/
1
7
w/
5
%
In
c
r
e
a
s
e
*T
h
e
wa
t
e
r
ra
t
e
in
c
l
u
d
e
s
th
e
ac
c
e
s
s
e
d
Ca
l
i
f
o
r
n
i
a
Al
t
e
r
n
a
t
i
v
e
Ra
t
e
fo
r
Wa
t
e
r
(C
A
R
W
)
su
r
c
h
a
r
g
e
.
On
e
h
u
n
d
r
e
d
cu
b
i
c
fe
e
t
(H
C
F
)
of
wa
t
e
r
= 74
8
ga
l
l
o
n
s
.