City of Santa Monica
California

Staff Report
2596

Calendar Year 2018 Water Rate Adjustment

Information

Department:Public Works, Water ResourcesSponsors:
Category:09. Public Hearings

Recommended Action

Recommended Action

Staff recommends that the City Council:

  1. Suspend the 9% water rate increase authorized to go into effect on January 1, 2018 and authorize a 5% increase to be in effect until December 31, 2018; and
  2. Authorize the budget changes as outlined in the Financial Impacts & Budget Actions section of this report.

Staff Report Body

Executive Summary

The City of Santa Monica has historically provided water service to our residential and business customers.  Given the statewide challenges surrounding safe and reliable water supply in recent years, Santa Monica has been a leader in efforts to conserve, reuse and safeguard our local water resources.  This report addresses the annual water rate recommendation for calendar year 2018 and provides a progress update on various efforts undertaken to meet the City’s ambitious goal of eliminating use of imported water and becoming water self-sufficient by 2020

 

On February 24, 2015, Council approved a series of five annual 9% water rate increases for the period of March 1, 2015 through December 31, 2019 (Attachment A). The resolution adopting the water rates provided City Council with flexibility to suspend all or a portion of each 9% annual rate increase during the five-year rate period, depending upon circumstances which demonstrate that such increases are unnecessary due to greater than anticipated revenues, decreased operating expenses or decreased capital projects expenditures.  The first 9% increase went into effect on March 1, 2015. On February 23, 2016 and November 22, 2016, due to better than expected financial results, Council approved 5% increases for calendar years 2016 and 2017, respectively, partially suspending scheduled 9% increases (Attachments B and C). Review of Water Fund performance for Fiscal Year 2016-17 indicates that revenues were $0.6 million greater than anticipated and expenditures were $8.6 million less than anticipated, leaving the Water Fund with a $36.7 million fund balance. Staff therefore recommends that City Council adopt a 5% water rate increase for 2018 instead of the previously approved 9% increase. Better than expected financial performance in Fiscal Year 2016-17 has allowed for this reduced rate adjustment while still providing sufficient funds to conduct studies necessary to inform the Sustainable Water Master Plan update and future rate recommendations.

 

The recommended rate adjustment would be sufficient to allow the City to:

1)     Deliver potable water to Santa Monica customers reliably, safely and sustainably in compliance with federal and state regulations; and

2)     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.  Such projects include five FY 2017-18 capital projects to improve reservoir chlorination ($900,000), perform pilot reverse osmosis upgrades at the Arcadia Water Treatment Plant ($250,000), commence preparation of a Groundwater Sustainability Plan for the Santa Monica Basin ($150,000), conduct a supplemental study to refine the Sustainable Yield Analysis ($100,000), and complete a flow modelling study required for future reuse of recycled water ($300,000).

 

The recommended 5% water rate increase would be effective for calendar year 2018 on bills issued on or about March 1, 2018. Proposed and current water and fire line service rates are listed in Attachment D. Council may take action to adjust future rates at the next annual review.

 

The 2014 water rate study was prepared in conjunction with the preparation of the Sustainable Water Master Plan (SWMP). In 2014, City Council adopted the SWMP with the goal of eliminating reliance on imported water from Metropolitan Water District and achieving water self-sufficiency by 2020. Since the adoption of the SWMP and as a result of new water conservation programs/policies implemented in 2015 and 2016, the City has seen a 16 percent reduction in water use while the residential population has grown from 92,321 to 93,282 over the same period. Overall, through its efforts to address the drought, the City has achieved and continues to maintain a nearly 20% reduction in water use relative to its 2013 baseline. This reduction has allowed the City to further reduce its use of imported water by 11 percent. Currently, the City’s water supply consists of approximately 25 percent imported water and 75 percent local groundwater.  Per capita water use has maintained steady at 110 gallons per capita per day (GPCD) in 2016 versus record low usage of 109 GPCD in 2015.

 

Staff initiated a comprehensive update of the Sustainable Water Master Plan earlier this year. Significant progress has been made on the completion of that plan, including completion of a preliminary Santa Monica Basin sustainable yield analysis, which evaluated the rate (volume) at which groundwater can be pumped on a perennial basis without depleting the resource, a key element in achieving the water self-sufficiency goal

 

Based on the work completed to date, staff believes further analysis is needed in order to assess whether the City will meet its water self-sufficiency goal by 2020, including what added measures are needed to eliminate reliance on imported water. .  Specifically, analysis to validate the sustainable yield estimates, determine availability and costs to access potential additional local groundwater resources, and evaluate the cost and viability of additional water conservation programs as requested by the Task Force on the Environment are required.  This work is currently underway and is expected to be completed in late spring 2018 and will be incorporated into an updated SWMP.  The updated SWMP will be presented to Council in mid-2018 and will include a detailed progress report and timeline for achieving the water self-sufficiency goal and maintaining an ongoing sustainable local water supply. 

 

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 fiscal performance and projected fund balances over a five-year period:

 

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%

Actual Increase*

9%

5%

5%

 

 

*Actual Increase adopted by Council based upon review of Water Fund performance

 

Rate increases go into effect automatically on an annual basis unless suspended, all or in part, by Council.  On February 23, 2016, based on an improved financial outlook, Council partially suspended the full 9% increase and approved a 5% increase for calendar year 2016.  On November 22, 2016, based on better than expected financial performance, Council partially suspended the full 9% increase and approved a 5% increase for calendar year 2017.  The rate increase for 2017 provided funding to increase the City’s water main replacement budget from $2 million to $4 million per year in order to meet a 100-year replacement schedule which will increase the resilience of the water system and help to prevent water main breakages.

 

For financial stability, the Water Fund strives to maintain a $7 million minimum reserve balance with revenues sufficient to cover all operating and capital expenditures while meeting various water-related requirements and goals including: 

·         20% reduction in water use from 2013 levels mandated by the State from May 5, 2015 through May 2016, and current City Stage 2 Water Supply Shortage conditions adopted by Council on August 12, 2014 in accordance with the City’s Water Shortage Response Plan;

·         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 water quality and treatment requirements;

·         Achieving Santa Monica's goal of reducing the City's reliance on imported water and attaining 100% water self-sufficiency by 2020;

·         Managing Santa Monica basin groundwater contamination and utilizing groundwater resources in a sustainable manner; and

·         Maintenance and construction 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.

 

The approved 9% annual increases may be suspended in whole or part if revenues are greater than anticipated or expenditures are less than expected, while maintaining a $7 million minimum reserve Water Fund balance at the end of the five-year planning horizon.  

 

Any 2018 rate increase would go into effect for water consumption beginning on January 1, 2018, effective on water bills prepared on or after March 1, 2018 as water meters are read approximately every two months (e.g., a bill issued for a meter read on March 1, 2018 would reflect water usage from January 1 to February 28, 2018).

 

Water Units of Measure, as the City uses, are in units of hundred cubic feet (HCF) for water billing purposes, where 1 HCF = 748 gallons. Discussion in the first portion of the staff report related to water rates, individual customer bills, and Water Fund financial performance will reference quantities in HCF units.  As the City imports water from the Metropolitan Water District (MWD) of Southern California in units of acre-feet (AF), where one acre foot = 325,851 gallons or 435.6 HCF, discussion in the second portion of the staff report related to the City’s overall progress towards water self-sufficiency will reference quantities in acre-feet.

 

Discussion

 

State of the Water Fund and Rate Recommendation

Fiscal Year 2016-17 Financial Performance

In considering whether to suspend all or part of the scheduled 9% rate adjustment for calendar year 2018, staff analyzed the FY 2016-17 actual performance of the Water Fund.  The Water Fund ended Fiscal Year 2016-17 with a fund balance of $36,727,423, $9.2 million better than expected primarily due to lower than expected capital and operating expenditures while achieving revenues just above expectations.  The fund balance includes the one-time infusion of $33.4 million in Charnock Fund MTBE settlement funds at the end of FY 2012-13 which is being used to fund increased capital and conservation programs; and ongoing monitoring, remediation and permitting activities for the Charnock Well Field.

 

·         Revenues – FY 2016-17 potable water sales of 4,991,022 hundred cubic feet (HCF) increased by 2.5% versus record low usage of 4,870,900 HCF in FY 2015-16, resulting in sales revenues exceeding budget by $0.4 million and total Water Fund revenues exceeding expectations by $0.6 million.  Although overall water usage remains approximately 20% below the City’s 2013 baseline, modest year-over-year increases were observed for the three customer classes which account for approximately 93% of City usage:  Multi-Family Residential (+1.7%), Commercial (+2.6%) and Single Family Residential (+2.8%).  

·         Expenditures – FY 2016-17 capital and operating expenditures were $8.6 million less than expected.  Key line items include:

o       Capital Expenditures were $3.6 million less than projected – virtually all of these funds are for ongoing projects and programs which will be rolled over into FY 2017-18 and spent pending bids and completion of design work for projects related to water main replacements ($1.5 million), facility repairs ($1.25 million), irrigation controllers & turf removal at City sites ($540,000), and software and control systems ($312,000).

o       Expenditures for Water Conservation Programs were $1.7 million less than projected – turf removal rebates ($585,000 of $1.5 million budgeted) and multi-family toilet installation program ($80,000 of $678,000 budgeted) expenditures were significantly lower than expected due to staffing vacancies and contracting delays.

o       Water Treatment and System Maintenance Materials & Services were $900,000 less than projected – expenditures for water treatment chemicals, maintenance supplies and professional services were less than expected.

o       Charnock Well Field Operations were $850,000 less than projected –purchases of activated carbon required to treat groundwater to remove Methyl Tertiary Butyl Ether (MTBE) and other contaminants continued to drop as clean-up of the Charnock Sub-basin continues.  Only twenty-one 20,000-lb deliveries of activated carbon were required in FY 2016-17 compared to 40 deliveries in FY 2013-14, which was the highest year of carbon use.

o       Salaries & Wages were $600,000 less than projected – the Water Resources Division experienced several key staff vacancies in FY 2016-17, including four positions vacant for longer than six months.

o       The Cost to purchase water was $300,000 less than projected.

 

Rate Recommendation

Due to an improved financial outlook and the need to do additional analysis to determine the project and financial needs to achieve water self-sufficiency, staff recommends Council partially suspending a portion of the 9% water rate increase authorized by Council and authorize a 5% increase for calendar year 2018.  Comparing rates with the 15 other Metropolitan Water District (MWD) of Southern California member cities, Santa Monica’s tiered rate structure would continue to offer close to the lowest costs in the region for the average user.  For a single-family residence using the City average of 25 HCF (18,700 gallons) over a two-month period, a 5% increase would raise a bi-monthly water bill by $4.63 from $91.64 to $96.27, which works out to about a half-cent per gallon ($0.00515).  Anaheim currently offers the best pricing at $84, followed by Fullerton at $89 and El Segundo at $95 as indicated in the following chart:

 

The 5% rate adjustment would provide for continued delivery of water service, including:

·         Sufficient funding to maintain safe and reliable water deliveries for Santa Monica customers at a reasonable cost while meeting federal and state regulations and City water usage restrictions;

·         Continued funding toward projects and programs needed to continue progress toward the City’s water self-sufficiency goal

·         Continued investment in infrastructure and conservation programs; and

·         Meeting or exceeding bonding capital requirements; and the financial stability to allow for fluctuations in water usage and to address unforeseen operating and capital budget requirements.

 

The following anticipated costs and budgeted projects are included in the Water Fund’s 5-year fund balance projection (Attachment E):

·         Metropolitan Water District (MWD) of Southern California – $5.4 million from FY 2019-20 to FY 2021-22 to ensure sufficient funding for imported water deliveries prior to achieving water self-sufficiency and ongoing access to imported water if needed in case of emergency.  After 2020, the City anticipates costs for continued access to MWD water (including fixed “Readiness to Serve” and “Capacity” charges which have totaled $1.0 million to $1.2 million per year in addition to per acre-foot charges for water imported) to serve as a backup source in case of City water production interruptions or to meet peak demand requirements.

·         Coastal Sub-Basin Exploratory Borings and Well SM-7 Replacement Project –$4.2 million in FY 2017-18 to evaluate groundwater availability and quality in the Coastal sub-basin by drilling three borings/production wells at the Santa Monica Airport, Colorado Yards and 2018 19th Street; and replace an inactive well (SM-7) located near Olympic / Stewart with a new production well.

·         Water Neutrality Ordinance – added $2.1 million in FY 2017-18 costs for contractor services to implement the ordinance for new development permits and to identify/ensure compliance with water usage offsets.  Staff anticipates that Water Neutrality fees effective for permit applications submitted on or after July 1, 2017 coupled with the cessation of Water Demand Mitigation fees ($3 per gallon per day of estimated new net water use collected to fund water conservation programs at municipal sites) will lead to revenues that are approximately $560,000 less than total program costs, which is due to one-time non-recoverable program start-up costs for implementing this water conservation program.  

 

Staff also recommends Council approve funding for five Capital Improvement Program (CIP) projects, which would commence in FY 2017-18, and reduce budgets for two projects for a total of $549,982:

·         Potable Water Reservoir Improvements ($900,000) – To improve chlorination and reduce nitrification at the City’s three reservoirs (Mount Olivet, Riviera and San Vicente), additional mixers, chemical dosing and analyzer equipment would be installed.

·         Arcadia Water Plant Enhanced Reverse Osmosis Recovery Pilot ($250,000) - To increase the efficiency of the City’s water treatment process from the current 82% (82 gallons of finished water are produced from 100 gallons of raw water) to approximately 90%, which could yield an additional 672 acre-feet per year (AFY) from the same amount of groundwater, the City would pilot a new full-scale treatment skid on a rental basis including membranes, pumps and analyzer equipment to process reject water currently disposed into the sewer.  Depending on the success of the pilot, staff would return to Council to consider purchasing the rental equipment (estimated at $2 million), with full cost recovery possible within two to four years due to savings from reduced MWD water purchases.

·         Santa Monica Basin Groundwater Sustainability Plan ($150,000) - To develop a state-required Groundwater Sustainability Plan by January 2022 to manage Santa Monica Basin groundwater in concert with the Los Angeles Department of Water and Power, the County of Los Angeles, the City of Beverly Hills and the City of Culver City, an additional $150,000 in FY 2017-18 would be added to the City’s current $50,000 budget for plan development and facilitation of regular interested party meetings.  Actual costs may be higher or lower dependent on the cost-sharing agreement negotiated with the other signatory agencies of the Santa Monica Basin Groundwater Sustainability Agency.

·         Supplemental DInSAR Study ($100,000) - This study will supplement data collected as part of the preliminary Differential Interferometry Synthetic Aperture Radar or DInSAR subsidence study completed earlier this year.  The study is intended to better assess how the local groundwater basins and sub-basins are recharged and will allow further refinement and finalization of the Sustainable Yield Analysis (SYA) for the basin.

·         US Geological Survey (USGS) Numerical Flow Model ($300,000) – Completion of this model is required for the City to obtain a recharge permit that would allow future injection of treated recycled water from the Sustainable Water Infrastructure Project (SWIP) into local aquifers for reuse.  USGS has completed a detailed groundwater flow model for most of the LA Basin. Staff has met with the USGS to begin the process of working cooperatively to extend the USGS model into the Santa Monica Basin by sharing our existing modeling with the agency. These activities would utilize the City’s currently contracted modeling expert (ICF Engineers) to interface with the USGS modeling team. Work would initially focus on the Charnock and Olympic sub-basins. The objective of the modeling program is to have a preliminary calibrated model for the sub-basins the City currently pumps by 2020. 

·         Arcadia Water Treatment Plant Reverse Osmosis Membrane Replacement Project ($700,000 budget reduction) – in November 2017, the City completed replacement of 1,608 reverse osmosis membranes used in the treatment of potable water.  Initially budgeted at $1.5 million, actual costs were $800,000, yielding $700,000 in savings available to defray the project costs above.   

·         Water / Wastewater Tenant Improvement Projects – to reflect the deferral of Water / Wastewater building modifications at the City Yards to accommodate staff currently located at 1212 5th Street not included in Phase I of the City Yards Master Plan, staff also recommends Council approve FY 2017/18 CIP reductions $450,018 for the Water Fund and $1,950,017 for the Wastewater Fund originally slated for design and construction.  Pending further City Master Plan design and planning work, these modifications will be taken to Council as part of the FY 18-20 Biennial CIP budget submittal with updated cost and timing estimates (currently, approximately $3.9M apiece has been included in the 5-year budget forecasts for both the Water and Wastewater Funds).

Alternatives

As currently modeled, an increase lower than a 5% increase for calendar year 2018 would cause the Water Fund to drop below the $7 million minimum recommended reserve balance by the end of FY 2021-22.  If rates are not increased at all, the fund balance would be projected to drop to $1.6 million at the end of FY 2021-22. 

 

While an increase greater than 5% might provide additional resources for accelerating progress toward the 2020 water self-sufficiency goal, the completion of the ongoing studies will provide a clearer roadmap for making those decisions in the years ahead.

 

Similarly, diverting from the recommended capital investments by adding or deleting proposed projects could either delay or accelerate progress toward the City’s goal of providing safe water, meeting its water self-sufficiency goal and/or meeting the State’s Groundwater Sustainability Plan requirement by 2022.  Again, the completion of the current analyses will provide a better guide for future investments beyond the ones recommended in this report.

 

Despite having a larger than normal $36.7 million Water Fund balance primarily due to the one-time infusion of $33.4 million in Charnock Well Fund MTBE settlement funds at the end of FY 2012-13, it is anticipated that significant investments in capital ($42 million) and conservation ($17 million) programs will cause expenses to outpace revenues in each of the next few years.  The five-year Water Fund forecast currently models in an approved 9% rate increase for calendar year 2019, with any future changes in future years to be determined by a future rate study.  However, actual rate adjustments will be set by Council for 2019 based on an annual financial performance review, which has been better than expected over the past three years leading to reduced rate increases; and for 2020 to 2024 based on an upcoming Water/Wastewater rate study to be considered by Council in 2019 and subject to Proposition 218 notifications to all rate payers and public hearing requirements. 

 

Progress Toward Meeting Water Self-Sufficiency Goal

In 2014, City Council adopted the Sustainable Water Master Plan (SWMP) with the ambitious goal of eliminating reliance on imported water from Metropolitan Water District (MWD) and achieving water self-sufficiency by 2020. Since the adoption of the SWMP and as a result of new water conservation programs and policies implemented in 2015 and 2016, the City has seen a 16 percent reduction in water demand while the residential population has grown about 1 percent over the same period. Overall, through its efforts to address the drought the City has achieved and continues to maintain a 20% reduction in water use relative to its 2013 baseline. This reduction in water demand has allowed the City to further reduce its use of imported water by 11 percent.  Figure 1 below indicates the continuing reduction in the City’s imported water supply over the five-year period from 2012 to 2016.

 

 

 

 

 

Figure 1

From 2007 to 2016, the population increased from 87,860 to 93,282. Nevertheless, as a result of long-standing successful conservation efforts by the City of Santa Monica, per capita water use (total city water use divided by population) has continued to decrease, as indicated in Figure 2 below.

 

Figure 2

 

 

Water Conservation Program Update

The City’s past and current water conservation efforts include a combination of incentive programs, regulations, enforcement, and outreach and education programs. For the 2014-2017 time period, the programs and policies that the Water Conservation Unit within the City’s Office of Sustainability and the Environment (OSE) has implemented and executed can be categorized as follows:

·         2014 Sustainable Water Master Plan programs

·         New program enhancements to existing programs

·         Ordinances for new developments and water waste

 

 

Of all the factors shaping Santa Monica’s water conservation programs since the initial SWMP, the most significant have been the recent five-year (2012-2017) California drought and the resultant mandatory water use reductions and water conservation requirements issued by both the State and the City.

 

Although Water Conservation Unit staff resources were devoted primarily to new water conservation efforts in response to the 2012-2017 California drought, 10 of the programs defined in the 2014 SWMP were initiated with significant progress.

 

 

Water conservation programs implemented by the Water Conservation Unit have significantly reduced water demand since the 2014 SWMP:

·         Total annual demand shrank by 1,578 acre-feet (AF) from 2014 to 2016. Because the SWMP water conservation programs implemented to date have an estimated 317 acre-feet per year (AFY) savings, the additional 1,261 AFY in savings can be primarily attributed to new water conservation programs along with enhancements to long-standing legacy programs.

·         Drought response reduction targets of 20% mandated by the State and the City were consistently met.

·         The City’s Stage 2 Water Supply Shortage and the requirement for 20% reduction in water use remains in effect (via Water Use Allowances and Exceedance Citations), and the City continues to meet this target even with the Drought State of Emergency rescinded and the media spotlight no longer on the drought.

·         The City surpassed the State of California Water Conservation Act of 2009 (SBx7-7) target of 123 gallons per capita per day (GPCD) in 2014 and by 2016 had achieved a water demand of 110 GPCD. In September 2017, the Task Force on the Environment recommended that the City commit to further reductions in water demand to achieve a goal of 90 GPCD by 2025.   As discussed later in this report, a detailed work plan for achieving this goal is being evaluated as part of a comprehensive update of the SWMP, which will be presented to Council in mid-2018.   However, staff expects that increased water conservation necessary to meet this goal could be achieved in part by focusing on untapped areas such as:

o       Yet to be implemented programs from the 2014 SWMP (most notably the Santa Monica-Malibu Unified School District retrofits, St. John’s fixture retrofits and coin-operated laundry machine retrofits).

o       Increased focus on the commercial sector for rebates on water-saving devices (especially flush-o-meter toilets and urinals).

o       Continued aggressive water-waste enforcement.

o       Additional sustainable landscape conversions.

o       Outreach program assisting customers to properly adjust their irrigation timers.

o       New marketing and outreach campaign focusing on permanent conservation in line with the State’s forthcoming framework for “Making Water Conservation a California Way of Life.”

 

Additional Progress on 2014 SWMP Implementation and SWMP Update

Preliminary Sustainable Yield Analysis

As noted above, the City’s water supply currently consists of approximately 25 percent imported water and 75 percent local groundwater. Given the significant City-wide reductions in water use over the past three years and the identification of new opportunities to cultivate local water resources, the City hired Black and Veatch Corporation to complete a comprehensive update to the 2014 Sustainable Water Master Plan.  Work began on this update in July 2017.  To inform this effort staff also hired Richard Slade and Associates to complete a Preliminary Sustainable Yield Analysis (SYA) of the various groundwater sub-basins from which the City is pumping groundwater in the larger Santa Monica Basin.  The Preliminary SYA has been completed and is included as (Attachment F) to this report.

 

The term “sustainable yield” is generally defined as the rate (volume) at which groundwater can be pumped from an aquifer or basin on a perennial basis under specified operating conditions without producing an undesirable result. Undesirable results include, among other things, the unsustainable reduction of the groundwater resource, degradation of groundwater quality, land subsidence and uneconomic pumping conditions. Groundwater in the Basin is replenished primarily from precipitation falling on the entire Basin and along the approximately 36-square-mile front of the Santa Monica Mountains adjacent to the northern boundary of the Basin. Since the Basin is heavily developed and a large portion of the available ground surface has been paved to construct roads and other infrastructure, only a limited portion of exposed soils are impervious and capable of allowing infiltration of surface water into the subsurface water-bearing geologic formation. 

 

The Preliminary SYA study estimated sustainable yields for the Arcadia, Charnock and Olympic sub-basins, which are the only sub-basins currently pumped by the City.  These are presented below in Table 2:

Table 2

GROUNDWATER SUBBASIN

CURRENTLY CALCULATED

SUSTAINABLE YIELD

(AFY)

Arcadia

600 to 800

Charnock

4,600 to 5,900

Olympic

1,600 to 1,700

TOTALS:

6,800 to 8,400

Coastal

Assessment in Progress

Crestal

Yet To Be Determined

 

Previous estimates of sustainable yield of the combined Arcadia, Charnock and Olympic sub-basins by various experts retained by the City have ranged between 9,695 -13,475 acre-feet per year (AFY).  These previous estimates relied heavily on literature searches and localized data. The current study provides an analysis based on actual pumping and recharge data over a period of 30 years.  The information is preliminary, and conservative, based solely on the three basins from which the City currently draws water. As detailed below, additional work is currently underway to refine the preliminary SYA results.  This work involves completing exploratory borings in the Coastal sub-basin, digital land mapping and remote sensing efforts; staff anticipates the safe yield estimates will be adjusted once the additional work is completed in Spring 2018. 

 

Exploratory Borings

The City currently has no wells in the Coastal sub-basin and little reliable geologic data is available.  However, based on a test well drilled adjacent to City Hall in 2017 it is anticipated that the sub-basin could hold significant groundwater reserves.  To assess the availability and quality of groundwater that might be present, the City is drilling three deep (600 ft.) exploratory borings in the sub-basin to document hydrogeological conditions (Council action July 11, 2017, Attachment G). This project began in September 2017 and will be completed in early 2018.  Initial results indicate that at least one of the drilling locations may be suitable for installation of a future production well.  Full results and future recommended actions will be presented to Council as part of the updated Sustainable Water Master Plan in mid-2018.

 

Digital Elevation Mapping

A supplemental study related to the SYA addresses how surface water runoff becomes available for recharge (replenishment of the groundwater supply) and consequently, how water in storage is calculated. The recharge rates used in the preliminary SYA include a simple calculation of recharge from the mountain areas, which likely underestimates recharge to the basin.  Staff has initiated a study utilizing computer-assisted modelling of irregular elevation data to provide a more accurate estimate of available runoff.

 

Differential Interferometry Synthetic Aperture Radar Studies (DInSar)

Differential Interferometry Synthetic Aperture Radar (DInSAR) is a satellite-based remote sensing technique capable of detecting minute variations (deformation) of surface topography over time. In order to evaluate if historic and ongoing groundwater withdrawals by the City may have resulted in large scale sediment compaction (land subsidence) which could adversely affect the amount of groundwater storage in the basin, a preliminary DInSAR study (Attachment H) was conducted as part of the Preliminary SYA.  The study determined that historic or ongoing Basin-wide sediment compaction (land subsidence) was not evident, and also identified previously unknown groundwater recharge pathways in the basin.  Two additional remote sensing studies will be completed to further evaluate this preliminary information and refine the preliminary SYA study.

 

Current and Planned Efforts to Increase Local Supply

In addition to water conservation programs staff have initiated or are planning several projects intended to increase local water supplies and further reduce the need for imported water in order to meet the City’s water self-sufficiency goal. These are summarized below.

 

Clean Beaches Project

In June 2017, Council approved a contract for construction of the Clean Beaches Project for the Pier watershed (Attachment I). The Project involves construction of a below ground stormwater harvesting tank, which will improve beach water quality by collecting stormwater discharges to the ocean at the Pier outfall. The Project will harvest up to 1.6 million gallons (MG) of storm water from any single storm event for advanced treatment, recycling and reuse. The harvested water will be treated at the Santa Monica Urban Runoff Recycling Facility (SMURRF) for non-potable uses such as irrigation and toilet flushing.  Construction began in September 2017 and is expected to be completed by August 2018. 

 

Sustainable Water Infrastructure Project (SWIP)

The SWIP is composed of three integrated project elements to help improve drought resiliency, increase water supply and enhance flexibility in the management of the City’s water resources.  SWIP Element 1 involves the installation of a containerized brackish/saline reverse osmosis and enhanced disinfection treatment system at the SMURRF. When operational, the reverse osmosis/disinfection unit would be utilized to advance treat non-conventional water resources such as urban and wet weather runoff harvested by the Clean Beaches Project for later reuse.  SWIP Element 2 includes the construction of a below ground Advanced Water Treatment Facility (AWTF) at a location beneath the Civic Center parking lot. The AWTF would advance treat approximately 1.0 million gallons per day (MGD) of municipal wastewater for reuse. SWIP Element 3 consists of two below-grade stormwater harvest tanks. One tank (3.0 MG) would be constructed beneath Memorial Park. The other below-grade tank (1.5 MG) would be located adjacent to the AWTF beneath the Civic Center parking lot. Together, the Project elements would produce approximately 1.5 MGD (1,680 acre-feet/year) of new water for immediate non-potable reuse, and when appropriately permitted, for indirect potable reuse via aquifer recharge. City Council approved a funding agreement for the SWIP project on September 12, 2017 (Attachment J).  Following completion of all required permitting approvals construction is expected to begin in Spring 2019 and the project is expected to be operational by late 2020.

 

Enhanced Reverse Osmosis (RO) Recovery

Staff is exploring the use of new technologies that could cost effectively increase the production of the City’s existing Arcadia treatment plant by re-treating brine that is currently discharged to the sewer.  Current recovery rates for water processed through the existing reverse osmosis treatment system stand at about 82%.  In early 2018, staff will begin a feasibility study which includes a pilot test to assess the effectiveness of an emerging technology which may increase the recovery rate to 90%, and possibly beyond.  Preliminary estimates are that an additional 672 AFY may be produced from the brine currently being disposed.  The feasibility study that would evaluate the technology, costs, and water savings will be completed by the end of the fiscal year. 

 

Numerical Groundwater Flow Modeling

In order to more effectively manage its groundwater resources, the City has completed numerical flow modeling of its Olympic and Charnock well fields. Numerical groundwater flow models are based on detailed hydrogeologic data which are compiled into a sophisticated modeling software program that is used by numerous government agencies and other municipalities throughout California. Once calibrated, flow models can be used to identify and plan future groundwater development, better control contamination plumes, and most importantly, provide for adaptive pumping that would allow individual wells or entire supply fields to be better managed in order to sustainably recharge without affecting the City’s overall groundwater production rates. 

The US Geological Survey (USGS) has completed a detailed groundwater flow model for most of the LA Basin. Staff has met with the USGS to begin the process of working cooperatively to extend the USGS model into the Santa Monica Basin by sharing our existing modeling with the agency. These activities would utilize the City’s currently contracted modeling expert (ICF Engineers) to interface with the USGS modeling team. Estimated costs for these activities over the next 12 months are approximately $300,000. Work would initially focus on the Charnock and Olympic sub-basins. The objective of the modeling program is to have a preliminary calibrated model for the sub-basins the City currently pumps by 2020.

 

Advanced Metering Infrastructure (AMI) Pilot – Smart Meters

AMI is an integrated system of smart meters, communications networks, and data management systems that enables two-way communication between the water utility and customers and provides real-time collection and evaluation of water use data. Currently, water meters throughout the city are manually read once every two months.  This infrequent and staff intensive process provides very limited data regarding actual water use patterns at individual sites and throughout the city.  The real-time continuous data provided by AMI allows for the timely identification of leaks and excessive water use, allows customers to accurately budget their water use in order to meet conservation goals, provides more accurate water billing, and can help to improve customer service. In March of 2016 the City partnered with Southern California Gas Company (SCG) and Aclara Technologies (Aclara) to run a proof of concept AMI pilot. The pilot involved retrofitting some 200 City water meters (single family, multi-family, commercial) and using SCG’s network infrastructure to transmit the meter reading data to a network management database and software hosted by Aclara.  Subsequently, an additional 500 meters (roughly all City of Santa Monica municipal accounts and some locations that were challenging for City crews to perform manual meter reads for billing) were retrofitted with AMI technology.  The pilot will run until March 2018.

 

Preliminary indications are that 99.2% of the hourly data transmitted from the meter to the Data Management System has been received without error; the outlier may have been signal interference at one of the SCG’s data collection units.  During the pilot active response to anomalies in the data received (high consumption alerts) have allowed customers to be notified of potential leaks in time to reduce significant water loss.  The continuation of the pilot will address the effectiveness of those services with both smart meters and a consumer engagement overlay called WaterSmart, which helps customers manage their water usage and assists the City to comply with State mandates.  The full findings of the AMI pilot will be presented to Council in 2018 along with recommendations for possible expansion of the AMI system to all Santa Monica customers.

 

Summary of Next Steps

As previously noted in this report, staff initiated a comprehensive update of the Sustainable Water Master Plan (SWMP) earlier this year. It is too soon to tell whether the City will meet its water self-sufficiency goal by 2020.  Significant progress has been made on implementing and updating that plan, including completion of the preliminary sustainable yield analysis (SYA) and integration of new projects such as SWIP, the Clean Beaches Project and improvements in water treatment efficiencies.  However, additional work is required to validate the sustainable yield estimates, determine availability and costs to access potential additional local groundwater resources, and evaluate the cost and viability of additional water conservation programs as requested by the Task Force on the Environment. As detailed above, the additional work required to update the SWMP is currently underway and is expected to be completed in late spring 2018.  The results of that additional analysis will be incorporated into an updated SWMP, which will be presented to Council in mid-2018 and will include a detailed progress report and timeline for achieving the water self-sufficiency goal. 

 

Upcoming Water Studies

Water/Wastewater Rate Study & new 5-year rate adjustment schedule (2020 to 2024)

The current rate schedule was approved in early 2015 and provides potential rate adjustments for calendar years 2015 to 2019.  Staff is preparing to begin a water and wastewater rate study by midyear 2018 in order to bring rate recommendations to Council in the fall of 2019.

 

Sustainable Groundwater Management Act (SGMA)

In May of 2017, Council approved a Memorandum of Understanding (MOU) and the City’s participation in the formation of the Santa Monica Basin Groundwater Sustainability Agency (SMBGSA).  At approximately the same time, Los Angeles County and the cities of Los Angeles, Beverly Hills, and Culver City also executed the MOU to form the SMBGSA.  After the required 90-day posting period to allow public review of the MOU, no challenges to the MOU were received and the SMBGSA was designated the exclusive Groundwater Sustainability Agency (GSA) for the Santa Monica Basin.  Milestone deadlines for the SMBGSA now include:

 

·         Preparation and submittal of a Groundwater Sustainability Plan (GSP) for the basin, January 31, 2022

·         Following the adoption of the GSP, and annually thereafter, the GSA must submit a GSP Monitoring Report, April 1, 2023

·         The GSP must include measurable objectives and milestones in increments of 5 years to achieve sustainability within 20 years of GSP adoption, January 31, 2042

 

The SMBGSA has initiated monthly meetings, led by Santa Monica, to address moving forward expeditiously to retain consultant(s) to assist with the preparation of the GSP, as well as to identify necessary amendments to the MOU as they relate to the potential development of bylaws and cost-sharing issues.  Any amendments to the MOU agreed upon unanimously by the member agencies will be brought to the respective agencies’ governing bodies for approval.

 

 

Task Force on the Environment and Water Advisory Committee Actions

Findings of the preliminary SYA, progress on the update to the Sustainable Water Master Plan, and the Rate Adjustment recommendations were presented to the Environmental Task Force on September 18, 2017 and October 16, 2017.  The same information was presented to the Water Advisory Committee on October 2, 2017, and November 6, 2017.  No action was taken by either body; however during discussions of funding for sustainability projects, the Task Force passed the following two motions:

 

September 18, 2017

The City of Santa Monica Task Force on the Environment reinforces the position that all of the water settlement funds should be used to help the City get to and maintain water self-sufficiency and water perpetuity. 

October 16, 2017

WHEREAS, there is $120 million from previous settlements.

WHEREAS, Water Fund capital improvement program (CIP) projects are estimated at $42 million over the next five years.

WHEREAS, the City is borrowing $56 million from the State of California to fund the Sustainable Water Infrastructure Project (SWIP) to assist in achieving water self-sufficiency by 2020. The total cost of the project is estimated at $69.9 million. 

 

THEREFORE, the Santa Monica Task Force on the Environment strongly supports the projects recommended by staff, but we are not currently recommending the proposed rate increase.

 

With regard to the water settlement funds referenced in the motions from the Task Force, staff prepared an information item dated December 19, 2017 (Attachment K), which outlines the sources and uses of those funds and the remaining balance of unrestricted funds that have been set aside in the General Fund to assist with funding of other priority projects as identified by Council. 

 

To date, Council has made the determination to use both pay-as-you-go and debt financing to fund Sustainable Water Master Plan projects.  The pay-as-you-go funding comes from a combination of ratepayer-generated revenues and the $33.6 million balance of MTBE settlement funds after the completion of remediation work at the Charnock facility.  These funds have been budgeted to pay for capital projects included in the last Water Rate Study approved in February 2015.  For Fiscal Years 2014-15 through 2018-19, capital projects included and will include general system improvements such as emergency generator enhancements, water main replacements, and treatment plant pressure vessel repair, among others.   In September, 2017, the City entered into an agreement with the State Water Resources Control Board to receive a very low interest (1.8%), 30-year loan in the amount of $56.9 million, with $4 million in debt forgiveness, to fund the SWIP projects. With this loan, the City was able to leverage funds at a lower rate than would be possible through other financing, and the $4 million in principal forgiveness further lowered the price of the financing.   In the current economic climate, bond financing for lease revenue bonds or revenue bonds, whether in the General Fund or enterprise funds, is approximately 4-5%.  As a result, the use of a Clean Water State Revolving Fund (CWSRF) loan leveraged funds at a lower price.

 

Staff proposed to transfer $11.1 million in FY 2017-18 from General Fund reserves for the 2009 Gillette water mediation settlement funds to the Water Fund reserves in order to cover ongoing and future costs for remediation of polluted groundwater in the Olympic Well Field / Sub-basin.  $6.5M would be reserved for annual ongoing remediation costs for a ten-year period including monitoring, permitting and reporting required by the State; and $4.6M would be reserved as a contingency for other Olympic remediation-related costs.

 

The larger policy issue of the mix of financing between rate payer and water settlement resources will be addressed in the upcoming Capital Improvement Plan adoption process after the completion of the currently ongoing technical studies.

 

Financial Impacts and Budget Actions

1.     FY 2016-17 water sales increased 2.5% versus FY 2015-16, slightly above the 2% increase projected by staff, resulting in sales revenue $379,440 greater than budgeted.  Although the State has discontinued its mandatory conservation requirement, the City has remained at Stage 2 of its Water Shortage Response Plan (mandatory 20% reduction versus 2013 levels) and implemented the Water Neutrality Ordinance for new developments effective July 1, 2017. As of October 2017, FY 2017-18 water sales of 1,786,912 HCF are down by 1% versus the same period in FY 2016-17 (1,807,373 HCF); therefore, staff projects water sales to finish FY 2017-18 1% lower than FY 2016-17. Based on a 5% water rate increase for calendar year 2018, increase revenue budget at account 25671.402310 in the amount of $161,660.

 

2.  Approval of the recommended action requires the following FY 2017-18 Capital Improvement Program budget appropriations and reductions in the Water Fund:

Account Number 

Amount

C259078.589000 – Groundwater Management Plan

$150,000

C259219.589000 – Arcadia Enhanced RO Recovery

$250,000

C259220.589000 – Reservoir Improvements

$900,000

C259223.589000 – DInSAR Study

$100,000

C259224.589000 – City/USGS Numerical Flow Model

$300,000

C250162.589000 – Water Resources Tenant Improvement

($450,018)

C259209.589000 – Arcadia Water Plant Membrane

($700,000)

Total

$549,982

 

3.  Approval of the recommended action requires a FY 2017-18 Capital Improvement Program budget reduction in the Wastewater Fund in account C310162.589000 in the amount of $1,950,017.

 

4.  Approval of the recommended action requires an interfund transfer of $11,100,000 from Gillette-Boeing water mediation settlement funds in account 01695.570080 to the Water Fund in account 25695.570080.  This also requires a release of fund balance 1.380237 in the amount of $11,100,000.