HomeMy WebLinkAbout06/15/2004, BUS 4 - WHEELING OF NACIMIENTO WATER TO AFUERO DE CHORRO MUNICIPAL WATER COMPANY v
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C I TY OF SAN LUIS OBISPO
FROM: John E.Moss,Utilities Director S'&,
Prepared by: Dan Gilmore,Utilities EngineerU)Bk
SUBJECT: WHEELING OF NACB41ENTO WATER TO
AFUERO DE CHORRO MUNICIPAL WATER COMPANY
CAO RECOMMENDATION
Deny the request by Afuero de Chorro Mutual Water Company to treat and wheel Nacimiento water
through the City's water treatment and distribution system.
DISCUSSION
Background
The Afuero de Chorro Mutual Water Company (ADC) has requested the Council consider wheeling
Nacimiento water to them. At the regular City Council meeting on April 6t', Council directed staff
to work with ADC in developing an analysis of the issues and options relative to ADC's request.
The Afuero de Chorro Mutual Water Company (ADC) is adjacent to the City limits, situated
northeasterly of Orcutt Road, near the intersection with Johnson Avenue (see Attachment 1). ADC
serves around twenty homes on large parcels, within a service area of about 100 acres. This area
was once within the City's Urban Reserve Line (URL), but was left out when the URL was redrawn
in 1979, reflecting a belief that the City had adequate infill properties to meet the housing needs of
General Plan build-out.
ADC's existing water system utilizes groundwater, which is unreliable during drought conditions.
This results in significant restrictions on irrigation within the district, and limits fire fighting
capabilities. The existing residents served by ADC are reportedly somewhat mixed in their
opinions of how the extra water could be utilized. Most agree that additional water for irrigation,
fire fighting, and reliability is essential. Some have expressed an interest in possibly subdividing
their lots in the future, or adding secondary units. The amount of Nacimiento project water
currently requested by ADC is fifteen acre-feet per year(15 afy), which equals their current demand
on their groundwater system.
Although ADC has been a participant in the Nacimiento Water Supply Project for more than ten
years, there are a number of issues that would make the project infeasible for them to pursue on
their own. Since the Nacimiento project will deliver raw water, ADC would need to construct a
water treatment facility or rely on another agency for the treatment of their water. The two agencies
that could treat their water are the City of San Luis. Obispo and the California Men's Colony
(CMC). An early Nacimiento project alternative looked at several agencies southerly of the City
receiving Nacimiento water treated at the CMC plant. These several agencies were to also share in
the cost of constructing a pipeline from the CMC water treatment facility, around the City of San
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Council Agenda Report—Wheeling Nacimiento Water to Afuero de Chorro
Page 2
Luis Obispo. Several of the Nacimiento project participants have dropped out of the project, since
they are within the City's URL and are expected to be annexed to the City prior to any significant
development. Others have dropped out of the Nacimiento project due to cost, since they are further
away from the City than ADC and would require that substantial additional pipeline be built in
order to convey the water to them. The cost for ADC to build the pipeline to deliver Nacimiento
water to their district is estimated to be around$15,000,000, which would force them to drop out of
the project,as well.
Wheeling vs.Service
ADC has requested that the City consider wheeling an entitlement of Nacimiento water through the
City's treatment and distribution system. ADC's request is not limited to wheeling, however, since
they would also require treatment of the water. ADC would take delivery of their Nacimiento
entitlement from the County at the City's water treatment plant. The City would then treat the water
and deliver it across town to ADC through existing City infrastructure. The amount of ADC's
entitlement is very small, and generally considered to be insignificant with respect to the capacity of
the City's infrastructure to treat and deliver the water.
Cal Poly receives a similar service, by special agreement with the City. Cal Poly owns an
entitlement of water from Whale Rock Reservoir. In addition, Cal Poly has contributed millions of
dollars towards the construction of the City's Water Treatment Plant, the Whale Rock pipeline, and
other City owned infrastructure. As a result, Cal Poly pays a reduced rate (about 60% of the regular
water rate)for the water treated and delivered to them by the City.
If the City were to treat ADC's Nacimiento water and wheel it through our distribution system,
ADC would be required to pay for the components of the City system that benefit them. Staff has
analyzed the water rates and determined that ADC's "wheeling charge" would be around $930 per
acre-foot (around 70% of our regular water rates), in addition to their per acre-foot cost of the raw
water from the Nacimiento project. The Council resolution setting the rates for regular water
service includes provisions for charging double the normal rates for customers outside the City
limits. If Council agrees to wheel water to ADC, a determination would need to be made as to
whether or not ADC would pay double the calculated rate. If ADC is required to pay double the
wheeling charge, or$1,860/af, their costs for Nacimiento water would likely be prohibitive.
Other entities outside City limits that are currently receiving City services include the County
Airport, the Hidden Hills Mobile Home Park, a couple of property owners on Orcutt Road, and
some residents near Reservoir Canyon. Water and sewer service to the airport was accomplished
through a special agreement with the City, since the airport provides an essential service to the City..
Sewer service to Hidden Hills Mobile Home Park was mandated by the Regional Water Quality
Control Board due to the park's inability to meet wastewater discharge requirements. The two
customers on Orcutt Road pay double the regular water rate. Water service to the residents near
Reservoir Canyon was required as a result of water rights exchanges that occurred over 90 years
ago. Depending on the agreements, these customers get either a certain amount of water free of
charge or they pay double the regular water rate. It is important to note that these arrangements do
not constitute "wheeling". The City currently does not wheel water to any other entity, and making
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Council Agenda Report—Wheeling Nacimiento Water to Afuero de Chorro
Page.3
a decision to do so now may set an undesirable precedent and result in additional requests from
owners of other properties outside of the City limits.
In addition, staff considers the treatment of ADC's entitlement of Nacimiento water to be providing
a City service to customers outside City limits, which is prohibited by Chapter 13.16 of the
Municipal Code. In order to grant ADC's request, Council would have to make a determination
that it does not violate the Municipal Code or grant ADC an exception to the ordinance.
Wheeling Nacimiento water to ADC would help to spread the cost of the Nacimiento project over a
larger participant base. ADC's requested entitlement of 15 afy, however, is quite small when
compared to the City's requested entitlement of 3,380 afy. The effect of reducing the City's overall
cost for Nacimiento water is expected to be negligible.
Without any tangible benefit to the City, Council may determine that it is most appropriate to serve
the ADC properties only after they are duly annexed to the City. Upon annexation, they would be
entitled to all other City services, as well. And, other than mandatory rationing in the event of a
drought, there would be no limitations on the amount of water they could use. The cost of
annexation, however, could be substantial. An area specific plan would typically be required, with
an associated cost of around $100,000. The residents in the ADC area would likely be expected to
provide an open space dedication and pay certain fees similar to the Airport Area Interim
Annexation Fee. Water and Sewer Impact Fees would also need to be paid at the time those
properties connect to the City water and sewer systems.
FISCAL IMPACT
Denial of ADC's request results in no fiscal impact to the City. If Council elects to grant ADC's
request, the premium for wheeling Nacimiento water through the City's water treatment and
distribution system ("wheeling charge") will be designed to offset any fiscal impacts to the City.
Based on the most current cost estimates, the City and Afuero de Chorro would both pay around
$1,726 for Nacimiento water. Afuero de Chorro would also pay the treatment and wheeling charge
of around $930/af to the City, bringing the total cost of their Nacimiento water to $2,656/af. If
Council determines that ADC should pay double the calculated rate, their total cost for Nacimiento
water would be$3,586/af, which would likely be economically prohibitive.
ALTERNATIVES
Approve the request. Direct staff to return to Council with a resolution making findings that
would allow the City to negotiate an agreement for treating and wheeling water to the Afuero de
Chorro Mutual Water Company, without violating the Municipal Code, and return to Council for
approval of the agreement.
Adjust the "Wheeling Charge". This charge could be made higher or lower as deemed
appropriate by Council. However, staff has performed an analysis of the City's water rates and
established a wheeling charge that is consistent with department policies and practices. Staff does
4- 3
Council Agenda Report—Wheeling Nacimiento Water to Afuero de Chorro
Page 4
not recommend adjusting the wheeling charge, since our agreement with Cal Poly is based on the
same principles and it is important to maintain consistency in the application of our water policies.
Condition the request to require annexation. Direct staff to work with ADC to develop an
annexation agreement and pursue annexation of the ADC properties into the City limits. Upon
annexation, the residents of ADC would have the same right to City services as any other property
in the City. An option could include conditioning the request to require that ADC be brought back
into the Urban Reserve.
Attachments:
Attachment 1 —Location of Afuero de Chorro Mutual Water Company
Attachment 2—Letter from Afuero de Chorro Mutual Water Company
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Attachment 2
Afuera de Chorro Mutual Water Co.
3676 Sequoia
San Luis Obispo, Ca. 93401
Office Tel #805-782-6682
March 18, 2004
John Moss
San Luis Obispo Utilities Director
879 "..orro
San Luis Obispo, Ca. 93401
Dear Mr. Moss,
Afuera de Chorro Mutual Water hopes to participate in the Nacimiento Water project for
15 acre feet. We have notified the County of San Luis Obispo that our participation in
the project may depend on the City's willingness to permit our allocation to be treated
and wheeled through the City's infrastructure. Since our district serves existing
residential users and lies adjacent to the City and seeks this water source as a supplement
to existing ground water resources, we expect the City would welcome our participation
in this project.
Therefore we respectfully request your assistance in seeking the City's approval for
treatment and wheeling of the Nacimiento water to our service area.
Thank you for your consideration..
Sincerely,
Robert K. Hather
D ECE11 � d �
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CITY OF SAN LUIS OBISPO
UTILITIES DEPT.
440
From: <robert.hather@tip ,oviasec.com>
To: <slocitycouncil@slocity.org> RECEIVED
Date: 6/14/04 9:35 AM
Subject: Nacimiento water wheeling policy JUN ] 4 7004
CC: <dgiImore@slocity.org>
This is pertaining to staffs report for Tuesday's meeting item #4:
-----Forwarded by Robert Hather/WSEC/WACH on 06/14/2004 09:25 AM-----
"Bob Hather"<rkhather@charter.net> To <robert.hather@wachoviasec.com>
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From:Afuero de Chorro Mutual Water Co.
To: City Council
RED FILE
Date:June, 11, 2004 MEETING AGEN
DATE� l i�ITEM # t-�'
Subject: Wheeling of Nacimiento Water
1.Precedent.The proposed wheeling arrangement with Afuero de Chorro Mutual Water Company is exactly like
the City&•TM's agreement with Cal Poly in that the two agencies aquired their separate entitlements to Whale Rock
water and the City of SLO treats and wheels Cal Poly&•TMs water on a fiscally neutral basis to the City.
2.Annexation.We have had useful and candid meetings with planning officials of the City and other departments.
Annexation is a complex process which will raise a number of issues for both the city,and the residents of the
Afuera de Chorro service area. However,we believe that the Board of Afuera de Chorro would be willing to, as
part of a wheeling agreement,work in good faith and with an open mind with staff to develop a mutually
acceptable annexation agreement and pursue annexation of the properties into the city limits.
3.History. Although no binding commitments were ever made, Afuera de Chorro signed up for Naciemento water
at the encouragement of one or more members of the council, and an Afuera de Chorro representative served
conscientiously as a member of the advisory committee working to bring Naciemento water to the City.Allowing
wheeling now in a way that is fiscally neutral for the City is fair.
4.Fiscal and System Impact.The staff report makes clear that the impact on city infrastructure of handling Afuera
de Chorro&TMs Naciemento is negligible.The physical connections to the City&-TMs facilities will be relatively
simple for the City,since existing City water lines are within roughly 100 feet of the Afuera de Chorro lines. Staff
has calculated a charge that would make this project fiscally neutral for the City, i.e.the City is neither profiting at
Afuera de Chorroa•TMs expense, nor is the City subsidizing Afuera de Chorro.
5..Effect of Section 13.16. A fair reading of this ordinance is that it is intended to avoid overcommiting the
Citya•TMs available water supply by delivering water outside the City limits. The water being delivered
is not City water to begin with, so that is not an issue. It is a stretch to say that treating water is the same
as providing water service