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SR 06-25-2019 3P City Council Report City Council Meeting: June 25, 2019 Agenda Item: 3.P 1 of 4 To: Mayor and City Council From: Susan Cline, Director, Public Works, Water Resources Subject: Award Professional Services Agreement to Provide Owner's Engineer Services for the Olympic Wellfield Restoration and Arcadia Water Treatment Plant Expansion Project Staff recommends that the City Council: 1. Award RFP# SP2602 Owner’s Engineer Services to GHD Inc. to provide technical and engineering support for the Olympic Wellfield Restoration and Arcadia Water Treatment Plant Expansion Project for the Public Works Department. 2. Authorize the City Manager to negotiate and execute a Professional Services Agreement with GHD in an amount not to exceed $1,251,100 (including 5% contingency) for five years, with future year funding contingent on Council budget approval. Summary The City of Santa Monica is on track to achieve water self-sufficiency by 2023, leading to long-term cost benefits for ratepayers, establishment of a diverse and drought - resilient local water supply, and a reduction in the City’s water supply energ y footprint. In the City’s recently updated Sustainable Water Master Plan (SWMP), the Olympic Wellfield Restoration and Arcadia Water Treatment Plant Expansion Project was outlined as a critical project. This project would offset imported water purchase by approximately 40 percent. Staff is retaining professional engineering services, for an Owner’s Engineer, to provide technical and engineering support for design and construction of the project. The Owner’s Engineer would assist the City with various aspects related to project implementation including engineering design review, value engineering, regulatory permitting, project coordination, field testing, and construction support services. Staff recommends GHD as the best qualified firm to provide Owner’s Engineer services for the project with contract authorization of up to $1,251,100 over the course of the project. 2 of 4 Discussion This proposed project involves constructing a new advanced water treatment facility to treat contaminated groundwater from the Olympic Wellfield, implementing production efficiency upgrades at the Arcadia Water Treatment Plant (WTP), and installing a new pipeline to convey water from the Olympic Wellfield to the Arcadia WTP. The new Olympic Wellfield advanced water treatment facility will restore the Olympic Sub-basin to full production capacity (approximately 3,000 acre-feet per year or 13% of the City’s water supply) and maximize local groundwater resources. Production efficiency enhancements and upgrades at the Arcadia Water Treatment Plant will increase overall production efficiency from 82 percent to 90 percent and increase treatment capacity from 10 to 13 million gallons per day. The updated SWMP presents a refined pathway to achieve water self-sufficiency by 2023. The pathway outlined in the updated SWMP includes the following three components: • Component 1 - continuing and increasing water conservation efforts to permanently reduce water demand; • Component 2 - developing sustainable and drought-resilient alternative water supplies; and • Component 3 - expanding local groundwater production within sustainable yield limits. The project contains elements of components 2 and 3 of the SWMP. The project will upgrade the existing Arcadia WTP with new treatment technology to increase production efficiency and produce additional potable water. The project will also restore the Olympic Wellfield to its full production capacity by providing advanced treatment for the contaminated groundwater in the Olympic Sub-basin, which in turn will allow the City to expand its local groundwater production. In addition, the project will include a new pipeline to separate Olympic Wellfield groundwater from Charnock Wellfield 3 of 4 groundwater for treatment at the Arcadia WTP, which will help reduce overall treatment costs for the contaminated groundwater. Past Council Actions November 27, 2018 (Attachment A) Sustainable Water Master Plan Update and Pathway to Water Self-Sufficiency Vendor Selection RFP Data RFP Posting Date RFP Posted on RFP Advertised In (City Charter & Municipal Code) # of Vendors Downloaded # of Submittals Received Date Publicly Opened 3/8/2019 City’s Online Bidding Site Santa Monica Daily Press 95 5 4/11/2019 RFPs Received Selection Criteria Arcadis Municipal Code SMMC 2.24.190 GHD Evaluation Criteria Past experience, technical competence, ability to meet project requirements, adequacy of response, records of past performance, and demonstrated thoroughness in work approach. Vanir CDM Smith Stantec Justification to Award A five-person committee composed of staff from the Water Resources and Civil Engineering divisions of the Public Works Department evaluated the five proposals based on price, previous experience, technical competence, ability to complete the work plan on schedule, cost of services, and past record of performance (references). Based on the evaluations, staff recommends GHD as the best qualified firm. GHD has the most direct technical experience with all proposed treatment technologies for the project, a cohesive team that has worked together in a similar capacity for several other municipalities in Southern California, including the Water Replenishment District of Southern California, South Coast Water District, and Poseidon Water, and the most comprehensive understanding of the project and proposed timeline that will ensure the project is completed on time and the City achieves its water self -sufficiency goal. 4 of 4 Financial Impacts and Budget Actions Staff seeks authority to award a Professional Services Agreement with GHD to provide technical and engineering support as the Owner’s Engineer for the Olympic Wellfield Restoration and Arcadia Water Treatment Plant Expansion Project. Agreement Request Request Amount FY 2018-19 Budget CIP Account # Total Contract Amount $454,560 C5007740.689000 $454,560 $303,040 C5007750.689000 $303,040 $493,500 C5007370.689000 $493,500 $1,251,100 Total $1,251,100 Prepared By: Chris Aguillon, Water Resources Protection Specialist Approved Forwarded to Council Attachments: A. November 27, 2018 Staff Report B. GHD Inc. Oaks Initiative Disclosure Form City Council Report City Council Meeting: November 27, 2018 Agenda Item: 8.C 1 of 40 To: Mayor and City Council From: Susan Cline, Director, Public Works, Water Resources Subject: Sustainable Water Master Plan Update and Pathway to Water Self - Sufficiency Recommended Action Staff recommends that the City Council: 1. Provide staff with direction to proceed with water self-sufficiency components. 2. Provide staff with direction regarding funding recommendations to achieve water self-sufficiency. 3. Authorize budget changes as outlined in the Financial Impacts and Budget Actions section of this report. 4. Direct staff to return for a public hearing on January 8, 2019, to consider implementation of 9% water rate increase previously approved by Council on February 24, 2015 to go into effect on March 1, 2019. Executive Summary The City of Santa Monica (City) has historically provided water service to residential and business customers allowing for bold efforts in securing resiliency and self -sufficiency for the community. Given the statewide challenges surrounding a safe and reliable water supply in recent years, Council directed staff to develop a water self -sufficiency plan with the goal of meeting 100% of Santa Monica’s water demand using local water sources by 2020. On October 28, 2014, Council adopted the Sustainable Water Master Plan (SWMP), which outlines a strategy to achieve the City’s water self -sufficiency goal (Attachment A). Staff initiated a comprehensive update of the SWMP in 2017 to incorporate new information regarding local groundwater resources and to integrate new water conservation programs and alternative water supply opportunities. On January 9, 2018, staff reported to Council that further analysis was needed to assess whether the City could meet its water self -sufficiency goal by 2020 (Attachment B). The further analyses have been completed and confirm that achieving water self -sufficiency that can be maintained into the future is practical and cost effective, but the projected 2 of 40 date of reaching that goal would be 2023. The delay from the original date is due to new state drinking water requirements implemented in 2018, permitting requirements for alternative water supply projects, and results of recently completed feasibility studies which resulted in longer timelines for project completion relative to previous estimates. The benefits of becoming water self-sufficient when compared to the alternative of continuing to meet a portion of local water demand using imported water include: long - term cost benefits for water ratepayers, establishment of a diverse, sustainable and drought resilient local water supply, and reduction of the City’s water supply energy footprint. It should be noted that in the updated plan proposed by staff, water self - sufficiency equates to approximately 99% locally sourced water, with 1% of the City’s water supply still being purchased from the Metropolitan Water District of Southern California (MWD) to maintain the imported water connection for emergency purposes. The updated proposal to meet water self-sufficiency presented in this staff report includes an optimized water conservation program together with local water supply projects, an updated implementation timeline, and recommended funding toward achieving water self-sufficiency for the City. Following Council direction and approval, the final components will be included in an updated SWMP that will guide City efforts toward achieving the goal through 2023. To achieve self -sufficiency by 2023, staff is proposing to replace imported water purchases with a comprehensive plan consisting of: Component 1 - continuing and increasing water conservation efforts to permanently reduce water demand, Component 2 - developing sustainable and drought resilient alternative water supplies, and Component 3 - expanding local groundwater production within sustainable yield limits. The anticipated cost to implement the components required to meet the self -sufficiency goal is approximately $38 million to increase local water supplies, which includes capacity expansion of the Arcadia Water Treatment Plant (WTP), implementation of 3 of 40 production efficiency enhancements, as well as acquiring an additional groundwater well to enhance resiliency. The $38 million would be funded primarily through the issuance of a water revenue bond and a contribution from the Wastewater Fund ($3.25 million) to the Water Fund to fund the various projects outlined in this staff report, with the debt service on the bonds incorporated into water rates in an upcoming rate study. An additional $64 million from existing water-contamination settlement funds would be used for restoring the Olympic Sub-basin, which would allow additional water production from that sub-basin to support achievement of water self -sufficiency. The proposed water self-sufficiency plan and staff recommendations are based on recently completed studies (e.g., confirmation of sustainable yield analysis, evaluation of new drinking water regulations on the Olympic Sub-basin restoration, and feasibility studies to assess new technologies that increase production efficiency at the Arcadia WTP) in which multiple scenarios were evaluated for cost, benefits and effectiveness. Lastly, staff will return to Council on January 8, 2019, for a public hearing and to recommend a full implementation of the 9% water rate adjustment (within the previously adopted Council authorization) for calendar year 2019 and effective on water bills issued on or about March 1, 2019. The recommended water rate adjustment would ensure a fiscally sustainable comprehensive program for safe, clean, reliable water supply to our community. It would also help offset increased construction costs to keep up with the City’s 100-year water main replacement program and fund preliminary design efforts on the various components required to achieve water self -sufficiency as contemplated in the 2014 rate study. Background On January 25, 2011, City Council directed staff to develop a water self -sufficiency plan with the goal of meeting 100% of Santa Monica’s water demand using local water sources by 2020. On October 28, 2014, Council adopted the SWMP which outlines a comprehensive plan to achieve water self-sufficiency. The SWMP involves a combination of water demand reduction strategies through various water conservation and efficiency programs designed to permanently reduce residential and commercial 4 of 40 water use, along with increased water supply from 1) alternative water sources such as captured rainwater and treated wastewater; 2) increased efficiency of the City’s water treatment systems; and 3) additional pumping from existing groun dwater wells and new wells in the local groundwater basin. Implementation of the SWMP has been proceeding since 2014, with updates provided during Council’s annual consideration of water rate adjustments. The most recent update was provided on January 9, 2 018. Between 2014 and 2018, other elements of the SWMP progressed, including completion of a preliminary Sustainable Yield Analysis (SYA) of the Santa Monica groundwater basin and finalizing plans for the Sustainable Water Infrastructure Project (SWIP) to support further analysis and refinement of alternatives to reduce reliance on imported water supply and meet the City’s self-sufficiency goal. Staff initiated a comprehensive update of the SWMP in 2017 to incorporate new information regarding local groundwater resources, regulatory updates, and to integrate new water conservation programs and alternate water supply opportunities. On January 9, 2018, staff reported to Council that further analysis was needed to assess whether the City could meet its water self-sufficiency goal by 2020. Additional work completed since January 2018 included analysis to validate preliminary SYA estimates of the local groundwater basin, drilling of exploratory water wells in the Coastal sub-basin to evaluate potential new local water production, technical studies to evaluate the cost and viability of increasing the production efficiency of the City’s Arcadia WTP, evaluating the impact of new drinking water regulations (e.g., maximum contaminant level [MCL] for 1,2,3 TCP) on groundwater extraction from the Olympic Sub-basin, and evaluating the cost and viability of additional water conservation programs as requested by the Task Force on the Environment. A timeline summarizing key events related to the development of the SWMP from 2011 is provided in Figure 1. Staff currently anticipates that the City would achieve water self -sufficiency in 2023 based on the plan outlined in this report. In addition to the proposed plan to achieve water self-sufficiency, a Five-Year Rate Study (2020-2024) is also currently underway and will consider potential rate impacts of water self-sufficiency projects. Results of the Five Year Rate Study will be presented to Council in the first half of 2019. 5 of 40 January 25, 2011 City Council directed staff to develop water self-sufficiency plan (100% on local water supplies) Council adopts Sustainable Water Master Plan (Oct ’14) Plan outlines the City’s strategy to achieve water self-sufficiency Olympic Treatment Pilot Project Initiated (Sept ’14) Evaluate treatment technologies to restore pumping capacity at Olympic Sub Basin SWMP Update (Nov ‘18) Staff to present strategy to meet City’s water self- sufficiency goal Conservation Plan Implemented (2015) Increased conservation efforts saw a ~20% reduction in gallon per capita per day (gpcd) water consumption SWMP Update (Jan ‘18) Staff reported to City Council that additional analysis was needed to determine if self- sufficiency goal could be met by 2020 New Contaminant at Olympic Sub Basin (May ‘18) New drinking water regulations required additional analysis of Olympic Sub Basin treatment strategy Water Self- Sufficiency Achieved (2023) Figure 1: Self-Sufficiency Timeline Discussion Goals and Benefits of Water Self-Sufficiency The proposed plan to meet the City’s self-sufficiency goal involves a combination of demand reduction through various water conservation and efficiency programs and the addition of local water supplies which will also provide the following benefits: Long-term cost benefits to ratepayers by maximizing local water resources Provide a more sustainable and drought-resilient water supply through a diversified water supply portfolio Reduce the City’s water supply energy footprint through conservation and locally sourced water supplies With imported water purchase costs from MWD expected to increase annually from 3 to 7 percent over the next 10 years, the primary focus of the updated SWMP was to develop water self-sufficiency scenarios that are both sustainable and economical compared to the continued purchase of imported water from MWD. Development of 6 of 40 cost-effective local, sustainable, and drought resilient water supplies will provide Santa Monica water ratepayers with cost benefits over the long-term and provide the City with greater cost certainty on water rates compared to the continued purchase of imported water from MWD. Providing a sustainable and drought-resilient water supply through a diversified water supply portfolio eliminates the City’s reliance on the purchase of imported water from MWD and maintains reliable production during routine maintenance and unforeseen downtimes of treatment equipment. Lastly, maximizing local water resources instead of purch asing imported water from MWD also has long-term environmental benefits for the community in terms of reduced energy use and the associated reduction in greenhouse gas emissions, which support Council’s goal to achieve carbon neutrality by 2050 or sooner. The addition of alternative water supplies, expansion of local groundwater supplies, and increased conservation will result in a 25-30% reduction of total energy footprint from the City’s water supply compared to continued purchase of imported water from MWD. Marching Toward Water Self-Sufficiency The City’s water supply portfolio has progressively transformed since 2011, with the community making significant strides toward water self-sufficiency and reduced reliance on the purchase of imported water to supplement local water resources as indicated in Figure 2. In 2011, after completion of the Charnock Wellfield Restoration Project, the City was able to meet approximately 51 percent (~6,700 acre -feet per year [AFY]) of its water supply demand through local groundwater resources and reduce the purchase of water from MWD, which is imported from Northern California and the Colorado River, to approximately 48% (~6,400 AFY). 7 of 40 Figure 2: Overview of City’s Water Supply Portfolio from 2011 through 2017 In 2015, the City and its residents responded to severe drought conditions throughout California with conservation efforts that resulted in a decrease in the City’s total water demand of 14,300 AFY in 2014 by about 17% (-2,500 AFY) to approximately 11,800 AFY by 2017. Santa Monica’s population grew by about 1.6% from 92,321 to 93,834 over the same period. Conservation efforts resulted in a decrease in average annual water consumption, measured in gallons per capita per day (GPCD), from 140 GPCD to approximately 110 GPCD as indicated in Figure 3 and continues today even after the governor declared an end to the drought. 8 of 40 Figure 3: Historical Population Growth versus Per Capita Water Consumption From 2015 through 2017, the City was meeting approximately 50-56% of its water supply demand through local water sources (7,400-8,200 AFY) and 26-29% through water conservation (approximately 2,500 AFY), with the amount of imported water purchased from MWD dropping to approximately 26 -29% (3,700-4,100 AFY). In 2017, local groundwater supply temporarily decreased due to an extended shutdown (approximately six months) of one well in the Charnock sub -basin for maintenance and repair. The loss of a single well from the Charnock Sub-basin over the six-month period and loss of approximately 800 AFY of groundwater production highlighted the need to increase resiliency of the local water supply to maintain reliable production as the City continues its march toward water self-sufficiency. Refined SWMP Pathway to Achieve Water Self-Sufficiency Additional analyses of various elements of the SWMP, as outlined at the January 9, 2018 City Council meeting, have been completed, and based on those analyses staff now estimates that water self -sufficiency can be achieved by 2023. To achieve self- sufficiency by 2023, staff is proposing to replace the purchase of imported water from MWD (approximately 50% of the total water supply demand when self -sufficiency efforts were initiated in 2011) with a comprehensive plan consisting of: 1) Component 1 - continuing and increasing water conservation efforts to permanently reduce water demand, 2) Component 2 - developing sustainable and drought resilient alternative 9 of 40 water supplies, and 3) Component 3 - expanding local groundwater production within sustainable yield limits. The delay in achieving the City’s self-sufficiency goal from 2020 to 2023 is due to several factors, including new regulations established by the State Water Resources Control Board’s Division of Drinking Water (DDW) that required further analysis to determine the level of treatment required for the Olympic Sub -basin, the project timeline and permitting schedule for the SWIP project to recharge local groundwater aquifers with purified water, and the need to confirm and refine preliminary SYA estimates with additional data to establish an accurate estimate of the sustainable yield for the Santa Monica Groundwater Basin. The remainder of this staff report is organized as follows to provide detailed descriptions of each component of the updated SWMP and its contribution/benefits toward the City’s self-sufficiency goal: Proposed Plan to Achieve Water Self-Sufficiency SWMP Project Cost and Implementation Schedule Funding Recommendations Proposed Plan to Achieve Water Self-Sufficiency A comprehensive plan was developed through the SWMP and comprises three components that provide a path for the City to achieve water self -sufficiency by 2023. The contribution of each proposed component to eliminate reliance on imported water supply by 2023 is summarized in Figure 4 along with the percent contribution toward replacing imported water purchases. In total, the three components: 1) conservation, 2) alternative water supplies - production efficiency, recycled water, and purified water for recharge, and 3) new local groundwater will contribute approximately 8,057 AFY toward the City’s total water supply and reduce imported water purchase to only 170 AFY. A brief description of each of the recommended components is provided below. 10 of 40 New Local Groundwater, 2,100 AFY, 25% Imported Water (MWD), 170 AFY, 2% Alternative Water Supply - Purified Water (Recharge), 1,100 AFY Alternative Water Supply - Recycled Water , 560 AFYAlternative Water Supply -Production Efficiency, 1,200 AFY Conservation, 3,097 AFY, 38% PROPOSED STRATEGIES TO REPLACE IMPORTED WATER SUPPLY (2023) New Local Groundwater Imported Water (MWD) Alternative Water Supply - Purified Water (Recharge)Alternative Water Supply - Recycled Water Alternative Water Supply - Production Efficiency Conservation Alternative Water Supply, 2,860 AFY, 35% Figure 4: Summary of Proposed Components to Replace Imported Water Supply by 2023 Component 1 - Conservation (38% Reduction in Imported Water Purchases) In 2014, Council authorized the significant expansion of staffing and funding to augment the City’s water conservation efforts to address the state-wide drought and help the City meet its self-sufficiency goal. This contributed to a water demand reduction of approximately 20% over the past three years (2015 -2017), which equates to saving approximately 2,500 AFY. Continued implementation of the existing conservation programs with the addition of supplemental conservation efforts is expected to continue this trend of water demand reduction through 2040, with the staff recommended Optimal conservation plan which is described below. Continuation of existing, and implementation of proposed, conservation programs are essential for the City to eliminate reliance on imported water from MWD. The recommended Optimal conservation plan will contribute approximately 3,100 AFY to the City’s water supply portfolio in 2023 and reduce imported water purchases by roughly 38%. Staff modeled three conservation plans (Optimal, Enhanced, and 90 GPCD), which are presented in gallons per capita per day by 2025 and abbreviated as GPCD. The Optimal Conservation Plan can be completed using existing budgeted resources and would reduce the City’s total water demand by approximately 20%, even after factoring in demand increases associated with expected population growth through 2025. 11 of 40 Increasing conservation efforts from the Optimal to the Enhanced Plan would cost an additional $7.2 million in total program cost, on top of the budget already allocated for the Optimal Conservation Plan, but with a marginal increase in water conserved (approximately 2% additional reduction in GPCD with the Enhanced Plan). The enhanced conservation plan would still require approximately 3,500 to 3,700 AFY of water that would need to be met through the purchase of imported water or from the development of additional local water resources. With marginal gains from increased conservation efforts compared to the additional implementation cost required, staff is recommending continuing with the optimal conservation plan, which costs approximately $708/AF of water saved. A third, aggressive conservation plan was also studied following a request by the Task Force on the Environment to evaluate the cost and feasibility of reducing city -wide water demand to 90 GPCD by 2025. The assessment of the 90 GPCD Plan conducted by staff concluded that reducing overall water demand to 90 GPCD would be extremely costly and may not be feasible for implementation. The overall cost to implement this plan would exceed $56.6 million, with $40 million of the cost incurred over the first five years. In addition to the significant cost premium, this scenario would likely require additional staffing and would be very challenging to achieve by 2025. Staff met with industry experts to review and receive input on the City staff modeling of proposed conservation programs. A panel of outside experts supported both the optimal and enhanced conservation plans and the proposed programs that comprise them. A summary of the conservation scenarios evaluated is provided in Table 1. Table 1: Summary of Conservation Scenarios Considered Description1 Conclusion Cost Optimal, 108 GPCD  Best Conservation option  Does not achieve self-sufficiency goal by itself but supports demand reduction. Within current operating budget $708/AF (over 30 years) 2 Enhanced, 106 GPCD  Feasible but expensive compared to Optimal Plan. Requires 1.5 new staff for 10 years $7.2 million increase in program costs compared to Optimal (2018-2023) 12 of 40  Does not achieve self-sufficiency goal  Not worth the incremental cost for a 2GPCD reduction. 137% increase in budgeted costs (2018-2013) $1,078/AF (over 30 years) 2 Aggressive, 90 GPCD  Potentially feasible but very expensive, requires 2.5+ new staff for 10 years  Does not achieve self-sufficiency goal $40.8M over the first five years; $58.6 M 2019-2040, 800% increase in costs (2018- 2023) compared to Optimal Scenario ~$1,280/AF (over 30 years)2 1GPCD based on water conservation efforts achieved as of 2025 2Excluding ongoing conservation staffing cost. Due to conservation efforts since 2015, the City’s current water demand measured in gallons per capita per day (GPCD) is approximately 110 GPCD. Staff also conducted a theoretical exercise to determine what would be required for the City to become water self-sufficient solely through conservation efforts (assuming no imported water and no additional local water production). Results of that exercise indicated that the total per capita water demand would need to be reduced to 64 GPCD. Staff consulted water conservation experts, analyzed conservation efforts in other cities and evaluated various local conservation scenarios and determined that attempting to achieve the self - sufficiency goal through conservation alone (i.e. achieving 64 GPCD in Santa Monica) is neither financially feasible nor realistic within the time horizon. However, the community should be commended on the conservation efforts already taken to reduce water demand and decrease imported water purchased from MWD. Santa Monica is - and can be - a model for a new ethic of resource self-sufficiency and environmental sustainability. The Council’s recent adoption of the 100% renewable default rate for community electric supply represents this ethos of “living within our means.” Conservation will continue to play a critical role in the City’s march toward water self-sufficiency by continuing to reduce overall water demand in the face of continued population growth from new housing and demand from the commercial and institutional sectors of our local economy. 13 of 40 Based on the modeling described above, staff recommends pursuing the Optimal conservation plan, which continues the successful conservation programs initiated over the past three years and increases water conservation in untapped areas such as: Funding of retrofits in Santa Monica-Malibu Unified School District facilities and landscapes Commercial sector fixture retrofits and enhanced rebates Coin-operated laundry machine retrofits Increase in Water Neutrality offsets and direct installs Rebates for new technologies including gray and black water systems Enhanced water conservation education and enforcement Additional sustainable landscape conversions Outreach to assist customers on how to properly adjust their irrigation timers New marketing and outreach campaign focusing on instilling permanent conservation behaviors consistent with the state’s forthcoming framework for “Making Water Conservation a California Way of Life” Incorporating limited-term employees as part of the permanent water conservation team to ensure new state requirements and regulations are met, as well as maintaining programs at an effective level In developing the water conservation plan to reach and maintain self-sufficiency, the City evaluated the potential for further water efficiency and conservation in all customer sectors. This included an assessment of the current level of water fixtures in the city, as well as identifying where the greatest opportunity for reducing water consumption existed. Based on this analysis, a program plan was developed to reach the City’s long- term objectives via existing and new conservation programs. Table 2 shows the projects planned over the next five years including the number of activities for each program such as number of rebates, consultations and direct installation of water efficient fixtures to replace inefficient fixtures in existing buildings 14 of 40 throughout the city. The projected number of activities is based on historical participation, available market of opportunity, and strategic community engagement campaigns to increase programs over multi-year periods. The table also includes the estimated water savings and total costs from 2018 through 2023 when water self - sufficiency is expected to be reached. Table 2: Summary of Optimal Water Conservation Programs and Results Measure Customer Class Total Activities 2018-2023 Total Water Savings (AF) 2018-2023 Rebates, Single Family (i.e. clothes washers, landscape, soil sensors, toilets, irrigation)Single Family 4,660 286 Water Use Consultations, Single Family Single Family 720 58 Graywater System Incentive Single Family 60 1 Direct Installs, Single Family (i.e. 0.80 gpf toilets, water neutrality) Single Family 0 0 Direct Installs, Multi-Family (0.80 gpf and 1.06 or less gpf toilets)Multi-Family 3,750 124 Rebates, Multi-Family (i.e. high-efficiency clothes washers, landscape, toilets)Multi-Family 1,475 94 Water Use Consultations, Multi-Family Multi-Family 750 90 School Education Program Institutional 2,090 14 Direct Installs, Santa Monica Malibu Unified School District (i.e. 0.80 gpf and 0.125 gpf toilets and urinals, water neutrality) Institutional 537 9 Santa Monica Malibu Unified School District Weather Based Irrigation Controller Incentive Institutional 22 21 Santa Monica Malibu Unified School District Landscape Incentive Institutional 9 8 Rebates, Commercial & Institutional (i.e. ice machines, toilets, urinals, toilets, irrigation)Commercial & Institutional 1,792 260 Direct Installs, Commercial & Institutional (i.e. toilets and urinals) Commercial & Institutional 3,280 517 Water Use Consultations, Commercial & Institutional Commercial & Institutional 300 45 Performance Pays Commercial & Institutional 4 9 Soil Moisture Sensor Rebates Multi-Family, Commercial & Institutional 75 7 Water Saving Devices - Faucet Aerators All 9,240 328 Water Saving Devices - Showerheads All 4,200 160 Community Outreach & Education All 16 1 Pilot Projects All 2 2 32,982 2,034Total The financial summary of the Optimal Conservation Plan is provided in Table 3. Table 3: Financial Summary of Optimal Water Conservation Plan Average Water Savings (AFY) 610 Cost of Savings per Unit Volume ($/AF) 15 of 40 $708 Modeling of the water conservation plan was purposefully conservative and only includes expected water demand reductions directly related to City efforts. Therefore, the projected demand reductions do not include the potential savings from efficiency improvements in California State Plumbing Codes known as “passive conservation.” Passive water conservation is achievable through non -City sponsored programs, such as maximizing current plumbing code enforcement, landscape ordinances, natural fixture replacement rates, as well as future local and state regulations and codes. This includes the impact and enforcement of the legislation, California SB 407, requiring noncompliant plumbing fixtures in any single-family residential and multi-family residential, and commercial properties to be replaced by the property owner with water- conserving plumbing fixtures. Through the currently established programs, proposed new programs, and passive conservation, it is estimated that the City can reach 99 GPCD by 2025 and 96 GPCD by 2030. These efforts would result in an estimated additional annual savings between 680 acre-feet (AF) per year by 2025 and as much as 1,000 AF per year in 2030. The City allocates funding for conservation within the water fund annual operating budget; no additional funding would be required to implement the Optimal Conservation Plan. Staff will return during the Five-Year Rate Study to present long-term staffing options for the recommended Optimal Conservation Program. Component 2 - Alternative Water Supplies (35% Reduction in Imported Water Purchases) To further diversify the City’s water supply portfolio and increase overall resilience , three alternative water supply projects are proposed and collectively offset imported water purchases from MWD by 35 percent (see Figure 4). These projects include: Increase recycled water production through the Sustainable Water Infrastructure Project (SWIP), upgrading the existing Santa Monica Urban Runoff Recycling 16 of 40 Facility (SMURRF) and constructing a new Advanced Water Purification Facility (AWPF) that provides a drought resilient, local water supply. The increase in recycled water production from SMURRF would offset imported water purchases from MWD by approximately 4% (approximately 560 AFY). Recharge local groundwater aquifers in the Olympic Sub-basin to maintain sustainable yield pumping levels with purified water from the SWIP’s AWPF. The purified water from the AWPF would offset imported water purchases from MWD by approximately 7% (approximately 1,100 AFY). Upgrade the City’s Arcadia Water Treatment Plant (WTP) with new technology to increase overall production. Closed Circuit Reverse Osmosis (CCRO) would be added to the Arcadia WTP to treat the Reverse Osmosis concentrate waste stream, which is currently discharged to the sewer system, and increase the overall treatment efficiency at the Arcadia WTP to approximately 90 percent, or greater. The addition of CCRO at the Arcadia WTP would offset imported water purchases from MWD by approximately 8% (approximately 1,200 AFY). The SWIP project is a major component of the alternative water supply for the City as it will provide a sustainable and drought resilient water supply by providing purified water to recharge local groundwater aquifers. In return, the aquifer recharge that will be provided by the SWIP will allow the City to maximize groundwater pumping, within sustainable yield limits, from the Olympic Sub-basin. Component 3 - New Local Groundwater Production (25% Reduction in Imported Water Purchases) To offset the remaining imported water purchased from MWD, local groundwater production would need to be increased to reduce imported water purchases from MWD by 25% and resiliency measures implemented to maintain reliable production. Staff developed and analyzed seven scenarios to expand the City’s groundwater production and carefully vetted each scenario internally and with outside industry experts. The seven scenarios were compared based on project feasibility, capital, and operation cost, and are summarized in Attachment C. All scenarios evaluated assume 17 of 40 that the Optimal Conservation Plan is implemented. Of the seven scenarios evaluated, Scenario 1 - Expansion of Arcadia WTP with Closed Circuit Reverse Osmosis (CCRO) combined with a Separate Olympic Sub-basin Pipeline and Treatment at the Arcadia WTP site is recommended. Scenario 1 combined with the Optimal Conservation Plan is the most cost-effective solution to achieve self-sufficiency and maximize local water resources. Scenario 1 includes the following elements: Expansion of the Arcadia WTP, including CCRO technology (as discussed under component 2 - alternative water supplies), to increase treatment capacity and accommodate future 2040 water demands. Acquisition of a new groundwater well to enhance resiliency. Olympic Sub-basin Restoration: o A new pipeline separating Olympic Sub-basin water, conveying it independently to the Arcadia WTP, thus requiring a smaller treatment facility at the Arcadia WTP to remove contaminants in the Olympic Sub-basin. o Separate contamination treatment facility at the Arcadia WTP for the Olympic basin. Expansion at Arcadia WTP To support development of alternative water supplies and restoration of the Olympic Sub-basin, treatment capacity expansion and plant upgrades are required at the Arcadia WTP to support an overall increase in water production and enhance resiliency to achieve water self-sufficiency. The Arcadia WTP is currently capable of treating up to approximately 11,300 AFY (10 million gallons per day [mgd]) and produce 9,900 AFY (8.9 mgd) of treated water (approximately 82% recovery or efficiency). The proposed expansion and addition of new technologies to increase production efficiency at the Arcadia WTP will increase its treatment capacity to approximately 14,700 AFY (13 mgd) and produce 13,400 AFY (12 mgd) of treated water (approximately 92% recovery or efficiency). The proposed improvements for expanding production capacity at the Arcadia WTP and enhancing water supply resiliency include: 18 of 40 Acquire an additional groundwater well to enhance resiliency and maintain production during routine maintenance or unforeseen downtimes of groundwater wells, while aggressively pumping within the sustainable yield. Install new CCRO to increase overall plant efficiency to 90 percent or greater (as discussed previously under component 2 - alternative water supplies). Expand capacity (e.g., pumps, blowers, cartridge filters, etc.) of the Arcadia WTP to accommodate increased groundwater production and new technologies (e.g., CCRO described in Component 2). Olympic Sub-basin Restoration The Olympic Sub-basin plays a key role in achieving the City’s water self -sufficiency goal as it could provide up to 3,200 AFY of groundwater and is also the location where purified water from the SWIP will be recharged to sustain this pumping rate. However, the Olympic Sub-basin contains several contaminants that would require additional treatment to meet drinking water standards. The key contaminants in the Olympic Sub - basin include: 1,2,3-Trichloropropane (1,2,3-TCP), 1,4-Dioxane, trichloroethylene (TCE), and tetrachloroethylene (PCE). Drinking water regulations, or maximum contaminant levels (MCL), have been in place for TCE and PCE prior to January 2018, and regulations for 1,2,3- TCP were established after January 2018 which required further treatment analysis. 1,4-Dioxane is currently on the State of California’s drinking water Notification Level (NL) list, which is a health-based advisory level and not an MCL. It is anticipated that the NL of 1 microgram per liter (g/L) or part per billion (ppb) for 1,4-Dioxane will likely become an MCL in the near future (within next 5 years). Further analysis of treatment options for the Olympic Sub -basin was required due to a recently established drinking water regulation that established a MCL for 1,2,3 TCP at 5 parts per trillion (ppt), and additional data on 1,4 Dioxane was available to refine the treatment analysis to determine if the current 1 ppb NL (anticipated future MCL) could be met once full production of the Olympic Sub-basin is restored. The Olympic Sub- basin treatment analysis was performed by an outside consultant, Black & Veatch. Key findings of the treatment analysis are listed below: 19 of 40 1,2,3-TCP was only detected at one well, SM-4, and the MCL of 5 ppt could be met through blending with other wells at full production capacity. 1,4-Dioxane is present in all three wells (two existing and one future) and could limit groundwater production from the Olympic Sub-basin to 845 AFY or approximately 25% of the basin’s total sustainable yield. Other contaminants, TCE and PCE, do not impact groundwater production from the Olympic Sub-basin as they would be removed through existing treatment processes at the Arcadia WTP. To maximize groundwater production from the Olympic Sub-basin and comply with regulation on the key contaminants of concern, the following improvements are recommended: Increase groundwater pumping from existing wells (SM -3 and SM-4), complete equipping and permitting of one recently installed new well (SM-8) and install a replacement well (SM-9) to increase local production from this sub-basin to ~3,200 AFY within sustainable yield levels. Please note that purified water from the SWIP will be used to recharge the Olympic Sub-basin that helps maintain the sustainable yield levels by supplementing naturally available groundwater within the sub -basin. Design and procurement efforts are currently underway, and the well projects were previously approved by Council in the FY 19-20 Capital Improvement Budget. Construct a new pipeline to separate Olympic Sub-basin groundwater from Charnock wellfield groundwater for separate treatment at the Arcadia WTP, primarily to target removal of 1,4 Dioxane. This reduces the amount of water needing treatment since only the Olympic Sub-basin flows (3,200 AFY) contain 1,4 Dioxane. If the flows are not separated, 14,700 AFY (Olympic + Charnock) would need to be treated. Construct a new contamination treatment facility for only the Olympic Sub -basin flows to remove 1,4 Dioxane, 1,2,3-TCP, TCE, and PCE at the Arcadia WTP site. The proposed treatment train consists of the ultraviolet light advanced oxidation 20 of 40 process and granular activated carbon. With the new contamination treatment facility and increased production efficiency (90-92% recovery) at the Arcadia WTP, approximately 2,900 AFY of treated water will be produced from the 3,200 AFY extracted from the Olympic Sub-basin. The new contamination treatment facility will provide high-quality drinking water that meets current and future regulatory standards. Sustainable Yield Update The sustainable yield from the Santa Monica Groundwater Basin is a critical component to ensure overall groundwater production is within sustainable limits of the basin and could support the proposed projects described above on an ongoing basis. A preliminary Sustainable Yield Analysis, (SYA), prepared by Richard C. Slade & Associates (Slade) in 2017, was presented to Council in January 2018. Since then, additional work was performed to refine and update the SYA. Additional work included the Coastal Sub-basin Exploratory Boring Program and a digital elevation mapping study that analyzed the potential recharge from the nearby mountain front. The updated report contains findings from this recently completed work as well as 2017 data regarding rainfall, geology, static water levels in key wells, and groundwater withdrawals from active City wells and other known private well owners (Attachment D). The updated SYA estimate from Slade’s analysis for the Santa Monica Basin is between 11,800 and 14,725 AFY. To substantiate the assessment conducted by Slade, City staff contracted with consultants from ICF to perform a separate estimate of the sustainable yield using a water-balance approach. This method compares the amount of water that recharges into a basin (inflow) from a wide range of sources (natural and anthropogenic), with the amount of water leaving the basin (outflow) from losses caused by pumping, evapotranspiration, basin outflow, etc. ICF’s assessment also considered findings from both the digital elevation mapping and Differential Interferometric Synthetic Aperture Radar Study (DInSAR) studies, presented to Council in January 2018. Based on ICF’s water-balance approach, average sustainable yield was estimated to be between 21 of 40 11,416 AFY to 13,722 AFY. The similarity of the sustainable yield estimates developed by Slade and ICF using different modeling methods provide a strong level of confidence that the City can use local groundwater resources in an ongoing manner into the future without negatively impacting the basin or creating overdraft conditions. It should be noted that the estimates developed by Slade and ICF are conservative and do not include a sustainable yield estimate for the Crestal Sub-basin. In addition, all estimates of sustainable yield are transitory due to myriad associated climatic and hydrogeologic factors that are constantly in flux. The State legislature enacted the Sustainable Groundwater Management Act (Water Code sections 10720 et seq.)("SGMA"), which became effective on January 1, 2015. A portion of the 50 -square mile Santa Monica Basin that underlies Santa Monica has been designated by the Department of Water Resources as a "medium-priority" groundwater basin. Any groundwater basin designated as medium -priority must be managed under a groundwater sustainability plan (“GSP”) adopted by a local groundwater sustainability agency and approved by the Department, by January 31, 2022. In light of SGMA, further analysis will be required to determine if future demand will exceed what could be sustainably pumped from the basin. If it is determined that the City’s plans to extract more groundwater is not supported in the approved draft of the GSP, then the City may be precluded from withdrawing groundwater in excess of the then -projected sustainable yield and the City would need to continue purchasing imported water from MWD to meet its potable water demand. The potential limitations on future groundwater withdrawals from the City’s active sub-basins indicate that the City’s approach of pursuing nonconventional resources, indirect potable reuse via aquifer recharge, additional water supply wells in the Coastal sub-basin, replacement of underperforming wells, increasing treatment efficiency at the Arcadia Water Treatment Plant, and continuing conservation efforts are necessary for the City to achieve and sustain its long-term objective of independence from imported water. Future updates of the SYA and numerical models will further refine the sustainable yield for the basin. Going forward, the City is planning to update the SYA approximately every two to three years. Future updates will include additional findings from work being conducted jointly with the US Geo logical Survey (USGS) and an ongoing climate stress test evaluation by the Rand Corporation. The 22 of 40 City plans to produce groundwater within the upper limit of the estimated sustainable yield, while taking into consideration two irrigation pumpers in the Arca dia Sub-basin and one in the Crestal in addition to one diminutive residential irrigation well. Summary of Proposed Plan to Achieve Water Self-Sufficiency The three components proposed in the SWMP will help the City achieve water self - sufficiency by 2023 and eliminate the City’s reliance on imported water purchases from the MWD. The projected makeup of the City’s water supply portfolio is summarized in Figure 5, and contribution from each component to the City’s total water supply is provided in Table 4. The location for each of the three components is provided in Figure 6, and the synergy and inter-relationship between each component is illustrated in Figure 7. Achieving water self-sufficiency through a diversified water supply portfolio also provides the City with greater cost control over water rates as compared to the continued purchase of imported water from the MWD. As noted previously, approximately 1 percent of the water supply would continue to be made up of imported water purchased from the MWD as periodic circulation is required to maintain the supply line as an emergency backup for the City. 23 of 40 New Local Groundwater 13% Imported Water (MWD) 1%Alternative Water Supply -Purified Water (Recharge) Alternative Water Supply - Recycled Water Alternative Water Supply - Production Efficiency Conservation 20% Local Groundwater 47% WATER SELF-SUFFICIENCY BY 2023 New Local Groundwater Imported Water (MWD) Alternative Water Supply - Purified Water (Recharge)Alternative Water Supply - Recycled Water Alternative Water Supply - Production Efficiency Conservation Local Groundwater Alternative Water Supply 19% Figure 5: A Sustainable and Drought Resilient Water Supply Portfolio Achieved through Self Sufficiency 24 of 40 Table 4: Summary of Water Supply Contribution from Each Self-Sufficiency Component Water Self Sufficiency Component Estimated Water Supply Contribution by 2023 (AFY) % Reduction in Imported Water Estimated $/AFY Component 1 - Conservation Optimal Conservation Plan 3,100 38% $708 Component 2 – Alternative Water Supplies Recycled Water from SMURRF 560 7% $4201 Purified Water from SWIP to Recharge Olympic Sub-basin 1,100 13% $1,0171 Increase Production Efficiency at Arcadia WTP 1,200 15% $1,0711 Component 3 – New Local Groundwater Production Arcadia WTP Expansion and Resiliency Enhancement2 N/A N/A $7051 Olympic Sub-basin Restoration 2,100 26% N/A3 Subtotal 8,060 99% Existing Water Resources Existing Local Groundwater (2023 projected costs) 7,330 $1,100 Imported Water from MWD (to maintain for emergency use, 2023 projected costs) 170 $1,248 Subtotal 7,500 TOTAL WATER RESOURCES (2023) 15,560 1Estimated year 1 cost when project is complete and includes savings from avoided imported water purchase cost 2Aracadia WTP upgrades to accommodate increase in production efficiency and Olympic Sub-basin Restoration 3Olympic Sub-basin Restoration will be paid for through settlement funds 25 of 40 •Olympic Sub-Basin Restoration •Recharge with SWIP •Production Efficiency and Capacity Expansion at Arcadia WTP •Separate Olympic Pipeline + New Treatment •CBI Tank •SWIP Well Acquisition to Enhance Resiliency Figure 6: Project Locations of Proposed SWMP Component Toward Self-Sufficiency 26 of 40 Figure 7: Synergy between Proposed Water Supply Components to Achieve Self-Sufficiency SWMP Cost Summary and Implementation Schedule A cost summary for the proposed SWMP components to achieve self -sufficiency by 2023 is provided in Table 5. The funding required to complete the capital projects increasing local water supplies and enhance water supply resiliency is $38 million. A Five-Year Rate Study (2020-2024) is currently underway and will present funding solutions to cover these costs. It is projected that the components of the proposed SWMP may be funded primarily through the issuance of water revenue bonds (approximately $34.75 million), with the debt service on the bonds incorporated into water rates, and from a contribution from the Wastewater Fund (approximately $3.25 million). Staff will return to Council in spring 2019 for a rate study session. An additional $64 million from existing water-contamination settlement funds would be used for restoring the Olympic Sub-basin, which would allow additional water production from 27 of 40 that sub-basin to support water self-sufficiency. The Olympic Sub-basin restoration cost includes an approximate, one-time $20 million capital expenditure for treatment systems and 30 years of ongoing operation and maintenance for an additional $20 million. Based on current modeling projections by ICF, over 80% of the Olympic Sub-basin will be remediated within the first 30 years; however, the Sub -basin may not be completely restored. Thus, the remaining balance in the settlement fund ($24 million) should be reserved to address any contamination that may still be present after 30 years or any new regulations that may impact use of the Olympic Sub-basin. A more detailed discussion on recommended budget appropriations is provided below. Table 5: SWMP Cost Summary for Proposed Components to Achieve Self-Sufficiency Unfunded Projects Additional Cost Arcadia WTP: Expand Capacity and Production Efficiency Enhancement $30M Additional Well and Improvements: Increase Resiliency and Ground Water Production $8M Olympic Sub-basin Restoration, Capital Improvements and 30 years of Operations and Maintenance $40M Olympic Sub-basin Restoration Reliability Reserve $24M Total: $102M Implementing the SWMP and reaching water self-sufficiency by 2023 entails numerous capital projects that are interrelated. An overview of the proposed implementation schedule is provided in Figure 8. Several well projects (SM-8, SM-9 and injection well) were approved by Council on July 11, 2017 and on June 12, 2018 and are on track to be completed by 2021 (Attachments E and F, respectively). A portion of the projects are in the City of Los Angeles and require installation of pipelines. Construction and permitting of pipelines in the City of Los Angeles will take time and was considered in the schedule. The design, construction, and permitting of improvements at the Arcadia WTP, including efficiency upgrades, are expected to be completed in 2023 if procurement starts in December 2018. A schedule contingency of approximately six months has been included to account for unforeseen conditions or new regulations that could impact the plan implementation. 28 of 40 Figure 8: Proposed Implementation Schedule to Achieve Self -Sufficiency by 2023 Alternatives to Water Self-Sufficiency The proposed SWMP components summarized above are a considerable investment towards the City’s future resiliency and achieving water self-sufficiency by 2023. In consideration of the capital investment and impacts to water rates, staff has also evaluated potential alternatives to reduce capital expenditures to potentially provide relief to potential water rate increases (to be confirmed in the Five-Year Rate Study for 2020-2024). A summary of potential alternatives that may reduce upfront capital investment compared to the proposed water self-sufficiency plan is provided in Table 6. The capital cost summarized in Table 6 for each alternative is the capital cost that needs to be funded and does not include the $64 million in settlement funds that will be used for the Olympic Sub-basin restoration. For all alternatives, it is assumed that the Olympic Sub-basin restoration will be implemented. A brief description on which component is implemented and its associated capital cost to be funded is provided. Staff also considered delaying self-sufficiency goal to beyond 2023 and delaying capital expenditures to ease rate increase over the next five years. However, delaying implementation may result in increasing overall project cost due to inflation and negate 29 of 40 any potential up front capital savings. The alternatives summarized in Table 6 only consider reduction in upfront capital cost and do not include projected increase of imported water purchase from MWD (estimated to be at 5% annual increase), which will ultimately be more expensive than locally produced water. Table 6: Summary of Alternatives Considered for Self-Sufficiency Alt. No. Alternatives Description Capital Cost3 Locally Sourced Water + Conservation Imported Water Purchase from MWD Staff Recommended Plan 99% water self- sufficiency1 Component 1 - Conservation Component 2 - Alternative Water Supplies Component 3 - New Local Groundwater $38M 11,730 AFY (Existing Arcadia WTP + Olympic) 3,100 AFY (Conservation) 560 AFY (Recycled Water)2 170 AFY 1 87% water self- sufficiency1 Implement only SWIP and Olympic Sub-Basin Restoration. Acquire new well to enhance resiliency at Arcadia WTP. No expansion and production efficiency enhancements at Arcadia WTP $8M 9,900 AFY (Existing Arcadia WTP + Olympic) 3,100 AFY (Conservation) 560 AFY (Recycled Water)2 2,000 AFY 2 90% water self- sufficiency1 Implement SWIP, Olympic restoration, and expansion at Arcadia WTP. No production efficiency enhancements at Arcadia WTP. Results in loss and negative impact to treatment resiliency. $21M 10,500 AFY (Existing Arcadia WTP + Olympic) 3,100 AFY (Conservation) 560 AFY (Recycled Water)2 1,400 AFY 3 94% water self- sufficiency1 Implement SWIP, Olympic Restoration, expansion $30M 10,900 AFY (Arcadia WTP + Olympic) 3,100 AFY 1,000 AFY 30 of 40 and production efficiency upgrades at Arcadia WTP. Do not acquire a new well to enhance resiliency. (Conservation) 560 AFY (Recycled Water)2 1Percentages are based on year 2023 projected demand. 2560AFY of recycled water to be available in 2023, but actual usage of full capacity may not be until 2040. 3Excluding Olympic Sub-Basin restoration cost, which is funded through settlement funds and SWIP capital costs as it is already funded through a low interest loan from the State of California. The alternatives evaluated by staff are simply presented as scenarios to reduce capital expenditures over the next five years but does not provide a complete solution to achieve the City’s water self-sufficiency goal. Funding Recommendations to Achieve Water Self-Sufficiency A financial analysis for the plan outlined in this report to achieve water self-sufficiency was conducted by staff. The financial analysis includes comparing the future cost of imported water to the projected cost of locally produced water over a 30 -year period. This analysis excluded the Olympic Sub-basin restoration costs, as the recommended funding source would be from groundwater settlement funds received by the City from outside sources to cover the costs for remediating the contaminants in that sub -basin. In summary, locally produced water from the recommended SWMP components outlined in this report is projected to cost between $400/AFY to $1,100/AFY, which is less than the expected cost to purchase imported water from the MWD at $1248/AFY in 2023. Please refer to Table 5, presented previously, for a detailed breakdown on the cost per acre-foot for each local water supply component. A comparison of the projected cost differential between the purchase of imported water from the MWD and production of locally produced water is provided in Table 7. With locally produced water cheaper than imported water costs, the components outlined in the SWMP to achieve water self - sufficiency by 2023 are a positive investment toward the future of the City. Ratepayers will benefit from the implementation of these projects, thus keeping local water costs low compared to the ongoing cost increases for imported water. Not only does the proposed SWMP provide a sustainable and drought resilient water supply for the City, it would also benefit the ratepayers with greater control over future water rates compared with 31 of 40 imported water rates that are projected to increase at a higher rate and are outside the City’s control. Table 7: Future Estimated Imported Water Cost (increased at 5%) Compared to Projected Locally Produced Water Cost. Assuming Efficiency (CCRO) technology is installed and 2,800AFY is produced. As noted previously, staff recommends a combination of bonding and use of settlement funds to fund the capital projects supporting water self-sufficiency and the Olympic Sub- basin restoration. Water Revenue Bond: A rate study is currently being conducted through October 2019 to set water and wastewater rates for calendar years 2020 to 2024. The rate study will address options to support the costs of this plan. A possible funding solution, to be confirmed in the rate study, is the issuing of a 30-year water revenue bond totaling approximately $34.75 million to increase local water supplies and enhance resiliency as outlined in the SWMP. The remaining $3.25 million would be contributed from the Wastewater Fund due to joint property use. The $34.75 million in bonds would cover new well acquisition, treatment capacity expansion and implementation of new 32 of 40 technologies to enhance production efficiency at the Arcadia WTP, and other supporting infrastructure upgrades. The Water Fund would need to cover an annual payment of approximately $2.2 million over the next 30 years to fund the projects outlined in the SWMP. Assuming a bond is issued, Figure 9 illustrates projected annual savings from avoiding imported water purchases and estimated annual bond repayments. In year 2036, where the two lines cross, the City will start saving money for rate payers on an annual basis. This analysis assumes imported water cost from MWD will increase at an annual rate of 5%. The total money borrowed is estimated to be offset by cumulative savings in the year 2048. Figure 9: City’s Projected Annual Savings due to Local Water Production in lieu of Import Water Purchases, compared to the Payments (debt service) for a 30 Year Bond. Settlement Funds Usage - The current balance of Gillette/Boeing funds available to program is $64.1 million. This balance includes $11.1 million transferred and currently 33 of 40 available in the W ater Fund as authorized by Council on January 9, 2018 and $53.0 million in the General Fund. Staff recommends transferring $53.0 million from the General Fund to the Water Fund to be used to restore the Olympic Sub -basin. Additionally, to satisfy the settlement agreement, Boeing still owes the City three payments totaling $11.0 million. Staff recommends depositing these funds directly into the Water Fund. Approximately $20 million would be used to construct a new treatment facility to remove the contaminants currently present in the sub-basin and $20 million would be reserved for operation and maintenance costs of the treatment facility related to restoration of the Olympic Sub-basin over a 30-year period. Due to uncertainty with the Olympic Sub - basin restoration after 30 years, staff recommends setting aside the remaining $24 million of Gillette/Boeing funds as a reliability reserve. The remaining $11.0 million that has been previously transferred to the Water Fund, is currently being used for groundwater modeling, monitoring, and reporting in support of Olympic Sub-basin remediation. With the proposed injection of advanced purified water from the SWIP into the Olympic Sub-basin, staff will revisit this timeframe and report back to Council in the future o nce recharge operation begins. Grants - Staff will identify and apply for state and/or federal grants to help offset the $38 million capital investment and return to Council in early 2019 with resolutions required for grant applications if available for the proposed projects. Staff has engaged a grant consultant to assist in the process. Grants being considered are: MWD, Local Resources Program California Department of Water Resources, Water Quality, Supply, and Infrastructure Improvement Act of 2014 (Proposition 1). Previously Authorized Water Rate Increase 34 of 40 On February 24, 2015, the City Council adopted Resolution Number 10867 (CCS) to authorize water rate increases over a five-year period, beginning March 1, 2015. The five-year water increase schedule was adopted after Council’s consideration of a rate study conducted by Kennedy Jenks Consultants. Resolution Number 10867 (CCS) also contained a provision, giving Council flexibility to approve a suspension of each annual increase, in whole or part, beginning with the 9% scheduled increase for January 1, 2016. This resolution was adopted without a majority protest, following a noticed public hearing in accordance with Proposition 218. Since adoption of this resolution, Council has partially suspended the full increases authorized for 2016-2018, and instead approved 5% increases for each of those years due to: Actual water sales revenues exceeded expectations during 2015 to 2017. Actual operating and capital expenditures lower than expected. Resu lting savings were applied to conservation programs, water main replacements and partially suspending planned 9% annual rate increases to more modest 5% increases. State of the Water Fund and Forthcoming 2019 Rate Adjustment Justification Staff will return to Council on January 8, 2019 for a public hearing and to obtain authorization for the full 9% water rate increase previously approved by Council on February 24, 2015 for calendar year 2019. If approved this would result in a monthly increase of $4.33 to average single-family customer. This is the final year of a five-year rate adjustment cycle approved via resolution as mentioned above. A summary of rate increases from 2015 is provided in Table 8. Table 8: Rate Increase History Calendar Year 2015 2016 2017 2018 2019 Effective Date March 1, 2015 January 1, 2016 January 1, 2017 January 1, 2018 January 1, 2019 Maximum Authorized Increase 9% 9% 9% 9% 9% 35 of 40 Actual Increase* 9% 5% 5% 5% 9%** Date Actual Increase Authorized February 24, 2015 February 23, 2016 November 22, 2016 January 9, 2018 **public hearing on January 8, 2019 The full implementation of the 9% previously authorized adjustment would be sufficient to allow the City to: A) Deliver potable water to Santa Monica customers reliably, safely and sustainably in compliance with federal and state regulations. B) Fund operating and capital budgets that are necessary to implement the City's self-sufficiency goals to encourage water conservation and sustainability, as contemplated in the City's 2014 water rate analysis. C) Continue to implement infrastructure improvements associated with replacing aging existing infrastructure facilities comprised of water mainlines that are approaching the end of their useful lives. The 9% rate increase would provide sufficient funding to complete the following capital projects as contemplated in the City's 2014 water rate analysis and to continue progress toward the City’s water self-sufficiency goal: 1. Additional capacity improvements, which include Preliminary Design for the Arcadia Treatment Capacity Expansion and Enhancement Project - $3.18 million in FY 2018-19. As noted in the prior section, the design would upgrade pumps, blowers, cartridge filters, and other equipment at the treatment plant to accommodate increased groundwater production and new technologies. The design would also incorporate a new process (CCRO) to increase overall plant efficiency to 90% or greater (as discussed previously under component 2 - alternative water supplies. 2. New Groundwater Resiliency Well - $6,825,000 in FY 2018-19 for acquisition of a new groundwater well to enhance resiliency. Also limit future exposure to imported water. 3. Water Main Replacement Cost Escalation - an increase of $2,000,000 starting in FY 19-20. The rate increase is necessary to fund the sharp increase observed in 36 of 40 water main replacement construction costs. Water main contract awards in 2017 and 2018 have returned bids of $600 to $700 per linear foot in the current high - cost construction environment. These costs have increased from a prior $400 per linear foot estimate. The budget was established at $4 million per year. However, staff is now estimating a need of $6 million per year to implement the recommended 100-year water main replacement cycle (2 miles replaced per year for the City’s 205-mile water main system. Maintaining a $4 million per year budget would only yield replacement of 1.1 to 1.25 miles of pipeline per year, thus increasing the replacement cycle from 100 years to approximately 160 to 190 years. Staff recommends staying on a 100-year replacement cycle to maintain operational reliably. Council approval of the full 9% rate increase would also help fund the following ongoing operational expenditures: 1) Metropolitan Water District (MWD) of Southern California - $5 million per year from FY 2020-21 to FY 2022-23 (additional $8.7 million) to ensure sufficient funding for imported water deliveries prior to achieving water self -sufficiency. 2) City Yards Master Plan - Required contribution from the Water Fund for upgrades to City Yards - $4 million modeled, actual costs to be determined. As noted above, staff will return to Council on January 8, 2019 with a recommendation that Council adopt the full 9% rate increase for calendar year 2019 as previously authorized in 2015. The staff report will include a detailed justification for the 9% rate increase as well as a 10-year fund forecast, cost comparison with other water agencies and an analysis of impacts to ratepayers. Funding Summary Table 9 provides a summary of funding recommendations to implement the SWMP. As noted above, staff also recommends that Council approve funding for three Capital Improvement Program (CIP) projects, which would commence in FY 2018 -19: 37 of 40 Arcadia Capacity Expansion and Enhancement Project, Preliminary Design ($3,180,000) New Groundwater Resiliency Well ($6,825,000) Olympic Wellfield Restoration Design ($1,800,000). Table 9: Funding Summary Settlement Funds Available for current remediation and O&M for next 30 years Settlement Funds Available for Future Reserve (Olympic sub- basin Restoration) Water Bond Amount (pending ongoing rate study) Est. Annual Bond Payment (30 yrs): $40 million $24 million $34.75 million $2.2 million Task Force on the Environment and Water Advisory Committee Actions Findings of the Sustainable Yield Analysis, Sustainable Water Master Plan Update and proposed projects, cost and schedules were presented to the Task Force on the Environment on March 19, June 18, and October 15 and to the Task Force on the Environment Water Subcommittee on November 19, 2018. Similar updates were presented to the Water Advisory Committee on March 5, May 7, June 4, September 5 and November 5, 2018. Rate Adjustment recommendations were presented to the Water Advisory Committee on November 5, 2018 and at a Task Force on the Environment Water Subcommittee on November 19, 2018. The Water Subcommittee strongly supports the Sustainable Water Master Plan Update and staff’s recommendations. Financial Impacts and Budget Actions Approval of the recommended action requires the following: 1. Appropriations to the FY 2018-19 Capital Improvement Program in the Water Fund: 38 of 40 Account Number Amount C5007740.689000 - Arcadia Capacity Expansion and Enhancement Project, Preliminary Design $3,180,000 C5007750.689000 - Olympic Wellfield Restoration Design $1,800,000 C5007760.689000 - New Groundwater Resiliency Well $3,575,000 Total $8,555,000 2. An appropriation to the FY 2018-19 Capital Improvement Program in the Wastewater Fund C5107760.689000 - New Groundwater Resiliency Well, Property Joint Use. $3,250,000 Total $3,250,000 3. $53 million cash transfer of Gillette/Boeing settlement funds from the General Fund to the Water Fund and the corresponding release of the remaining fund balance in General Fund account 1.380237. The cash will be recorded in an interest earning restricted cash account in the Water Fund, Olympic Wellfield Remediation account 50.102442. 4. Transfer of two remediation capital projects, appropriated in previous fiscal years and funded with Gillette/Boeing funds, from the General Fund to the Water Fund to consolidate all budgeted Olympic restoration projects in the Water Fund. General Fund Account Number Proposed Water Fund Account Amount C019045.589000 Olympic Sub-basin Remediation C5005880.689000 $1,909,732 C019067.589000 Olympic Sub-basin Well Hydrology C5006050.689000 $1,946,407 5. The following budget items related to Gillette/Boeing water mediation settlement funds were previously taken by Council: 39 of 40 On January 9, 2018, Council authorized staff to make an $11,100,000 transfer of Gillette/Boeing settlement funds from the General Fund to the Water Fund for ongoing and future remediation costs associated with polluted groundwater in the Olympic Wellfield (Attachment B). Staff transferred these funds to account 25695.570080 in FY 2017 -18. On June 12, 2018, Council approved a FY 2018 -19 transfer of $2,300,000 of Gillette/Boeing water mediation settlement funds from the General Fund to the Water Fund (Attachment F). This transfer was to fund the projects for the Olympic Wellfield remediation appropriated in the FY 2018-19 Capital Improvement Program. Account Number Amount C5007460.689410 City / USGS Monitoring Well & Numerical Flow Model $1,800,000 C5007260.689410 Redrill Santa Monica Well #3 $500,000 Total $2,300,000 6. Future Gillette/Boeing settlement funds are to be deposited in the Water Fund, and a corresponding receivable shall be established. The liability associated with current and future pollution remediation utilizing Gillette/Boeing funds will be recorded in the Water Fund. Prepared By: Alex Nazarchuk, Interim Water Resources Manager Approved Forwarded to Council Attachments: A. October 28, 2014 Staff Report (Web Link) B. January 9, 2018 Staff Report C. Summary of Water Self-Sufficiency Scenarios to Expand Groundwater Production 40 of 40 D. Updated Preliminary Sustainable Yield Analysis E. July 11, 2017 Staff Report (Web Link) F. June 12, 2018 Staff Report (Web Link) Rev: 10/23/17  CITY OF SANTA MONICA OAKS INITIATIVE DISCLOSURE FORM In order to facilitate compliance with the requirements of the Oaks Initiative, the City compiles and maintains certain information. That information includes the name of any person or persons who is seeking a “public benefit.” If the “public benefit” is sought by an entity, rather than an individual person, the information includes the name of every person who is: (a) trustee, (b) director, (c) partner, (d) officer, or has (e) more than a ten percent interest in the entity. Public benefits include: 1. Personal services contracts in excess of $25,000 over any 12-month period; 2. Sale of material, equipment or supplies to the City in excess of $25,000 over a 12-month period; 3. Purchase, sale or lease of real property to or from the City in excess of $25,000 over a 12- month period; 4. Non-competitive franchise awards with gross revenue of $50,000 or more in any 12-month period; 5. Land use variance, special use permit, or other exception to an established land use plan, where the decision has a value in excess of $25,000; 6. Tax “abatement, exception, or benefit” of a value in excess of $5,000 in any 12-month period; or 7. Payment of “cash or specie” of a net value to the recipient of $10,000 in any 12-month period. Name(s) of persons or entities receiving public benefit: Prepared by: ____________________________Title: __________________________ Signature: ______________________________________ Date: ________________ Email: ____________________________________ Phone: ____________________ FOR CITY USE ONLY: Bid/PO/Contract # ____________________________ Permit # ___________________________ Paul Hermann Principal/Vice President 5/9/2019 paul.hermann@ghd.com 949-585-5217 GHD Inc. Name(s) of trustees, directors, partners, and officers: See attached Name(s) of persons with more than a 10% equity, participation, or revenue interest: None GHD INC. DIRECTORS & OFFICERS Effective: May 2, 2018 Iver Skavdal Director/President 2235 Mercury Way, Suite 150, Santa Rosa, California 95407 Mike Moran Director/Treasurer 6705 Millcreek Drive, Unit 1, Mississauga, ON L5N 5M4 Stephen Quigley Director/ 445 Phillip Street, Waterloo, ON N2L 3X2 Executive Vice-President Harry Sturdevant Director/ 16701 Melford Blvd, Suite 330, Bowie, Maryland 20715 Executive Vice-President Ashley Wright Director/Chairman 999 Hay Street, Perth, Western Australia 6000 Duncan Findlay Company Secretary 4747 N. 22nd Street, 2nd Floor, Phoenix, AZ 85016 Lindsay Ray Assistant Company Secretary 651 Colby Drive, Waterloo, ON, N2V1C2 REFERENCE: Contract No. 10873 (CCS)