HomeMy WebLinkAbout12/06/2005, - NACIMIENTO WATER SUPPLY PROJECT PARTICIPATION council _ zoc
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CITY OF SAN LUIS O B I S P O
FROM: John E.Moss,Utilities Directo ^—
SUBJECT: NACIMIENTO WATER SUPPLY PROJECT PARTICIPATION
CAO RECOMMENDATION
1. Approve and authorize the Mayor'to execute and forward a letter to the County of San Luis
Obispo Board of Supervisors reflecting the City's non-binding commitment to participate in
the Nacimiento Pipeline Project at 3,380 acre feet per year.
2. Direct staff to initiate focused amendments to the General Plan Water and Wastewater
Management Element policies associated with demand projections, siltation, supplemental
water requirements, multi-source supplies, and allocation of new supplies, to address policy
related to service and reliability and support Council direction to participate_ in the
Nacimiento Water Supply Project.
REPORT IN BRIEF
On February 10;2004, Councilconsidered a range of cost and policy issues associated with the
City's possible participation in the Nacimiento Water Supply Project (Project). Council then
directed. staff to return with possible policy amendments to support the City's continued
participation in the Project at 3,380 acre feet per year(afy).
This report identifies suggested amendments to the Water and Wastewater Management Element
(WME) policies associated with demand projections, siltation, supplemental water requirements;
multi-source supplies, and allocation of new supplies to further support Council direction to
participate in the Project. The recommended policy amendments will not only provide additional
policy support for participation in the project, but may also be seen as strengthening our overall
water supply planning policy in that they further define/refine our water .supply management
strategies and objectives with a particular focus on service reliability. Additionally, the
recommended amendment to WME Policy 8.0 Allocation of New Supplies is provided to
strengthen the tie between our General Plan and water supply availability, thus providing yet
another tool to ensure that new supplies do not induce growth beyond that envisioned in the General
Plan. Other General Plan policy related matters are also discussed including the City's strong
growth management and open space protection programs.
A draft letter to the County Board of Supervisors indicating the City's intent to continue
participation in the Project at 3,380 afy has been prepared for Council's approval and is included as
an attachment to this report.
Nacimiento Water Supply Project Participation Page 2
DISCUSSION
Background
The County of San Luis Obispo (County) has requested agencies interested in participating in the
Nacimiento Pipeline Project (Project) to reaffirm their commitment and participation level so that
they can prepare a final project report, cost analysis, and participation agreement for execution by
the participating agencies. This reaffirmation is non-binding at this time however should represent
the City's true intent within a range of assumed conditions previously considered by Council.
Following reaffirmation by all agencies interested in participating in the Project, the County will
finalize the participation agreements and provide formal offers to participate in the Project to those
agencies. Execution of the participation agreements is anticipated to occur by June 2004 and that
action will be binding upon the City.
On February 10, 2004 Council considered policy and fiscal issues associated with the City's
participation in the Project. The objective of that discussion was to reaffirm the City's participation
in the Project and if so, at what level. Council's action was to direct staff to return with
recommended policy language to support the City's participation,in the Project at 3;380 acre feet
per year (afy), and to forward the City's support for a hybrid cost allocation methodology for the
Project to the County Board of Supervisors (Board). Council directed staff to consider amendments
to our policies relative to siltation, reliability and multi-source water supplies in support of their
decision to continue participation in the Project.
On February 24, 2004 staff presented the Council's action to support the hybrid cost allocation
methodology for the Project to the Board. At that meeting the Board voted to approve the hybrid
cost allocation methodology for the Project. This decision by the Board is key to the City's
participation. The cost analysis and fiscal parameters considered by the Council focused on the
hybrid cost allocation methodology. Additional Council consideration of their decision to
participate would have been required had the Board elected to apply a different cost allocation
methodology.
Staff has reviewed the policies contained in the Water and Wastewater Management Element of the
General Plan and has identified those policies that may be considered for amendment to support the
City's desire to participate in the Project at 3,380 afy. Additionally, the recommended policy
modifications will strengthen our overall policy relative to the service and reliability factors
identified by Council. The staff analysis and recommendation is provided in the body of this report.
Water and Wastewater Management Element Policies
The Water and Wastewater Management Element (WME) of the General Plan contains numerous
policies which relate to the City's development of new water supplies and the allocation and overall
management of the City's water supplies. Based on Council's general direction from the February
10, 2004 discussion, staff recommends Council consider and direct staff to proceed with policy
amendments to WME Policy 3.0 Water Demand Projections, Policy 5.0 Siltation at Salinas and
Whale RockReservoirs,Policy 6.0 Supplemental Water Requirements, and Policy 7.0 Multi-Source
Water Supply. These policies may be viewed as already supporting the City's participation in the
Nacimiento Water Supply Project Participation Page 3
Project, however they can be amended to provide additional support. Additionally, in order to
provide some assurance as to the use of any supplies developed in excess of our projected demand,
staff is recommending amendment to WME Policy 8.0 Allocation of New Water Supplies. A copy
of the current WME is attached for review.
The policies identified below are recommended for amendment to provide support for the City's
participation in the Project and to strengthen our overall water supply planning and management..
Staff is seeking Council's concurrence with the direction of the recommended policy amendments.
With Council concurrence, staff will initiate the General Plan amendment process that will require
public review, consideration by the Planning Commission, environmental review and final
consideration and adoption by the Council prior to Council's consideration and execution of the
final participation agreement for the Project.
WME Policy 3.0 Water Demand Projections
The current policies contained in this section are primarily directed at identifying a planning water
use rate for projecting the long term water demands of the City based on annual average values in
acre feet per year, and using that same water use rate to determine our present water demand.
Council did not direct staff to amend the policy which sets our planning per capita water use rate.
However, one of the potential benefits of the Project previously discussed by Council is the.
Project's ability to provide a third major supply source to ensure the City is able to meet our peak
daily demands with one of our other major supply sources off-line. This is an important concept in
providing reliable and adequate water service to the community. In review of the existing policy it
became clear that the addition of a policy that would provide guidance for ensuring our capability to
meet not only our annual obligations,but our peak daily demands,would provide additional support
for participating in the Project and strengthen our current policy relative to a key water service
factor,i.e. meeting our peak daily demands.
Recommendation Add Policy 3.1.5 Peak Daily Water Demand—The City shall strive to develop
and maintain supplies and facilities appropriate to ensure sufficient supply and system capacity to
provide the peak daily water demand of the City.
Basis—This policy addition reflects the understanding that useldemand is variable with season and
it is necessary for the City to meet the peak daily demands of the community as well as the annual
average needs in order to provide reliable service to our customers.
WME Policy 5.0 Siltation at Salinas and Whale.Rock Reservoirs
The Current policy relative to siltation that occurs at our supply reservoirs identifies an estimated
amount of loss of Safe Annual Yield(SAY) at 10 afy and requires this amount to be subtracted from
the adopted safe annual yield figure on a yearly basis. This policy "accounts" for siltation, but
offers little in terms of planning for siltation into the future.
Recommendation - Amend Policy 5.1.1 to continue to account for siltation by reducing SAY by the
estimated loss of 10 afy (current policy), and as Council considers and develops new supply
opportunities, Council should consider "planning" for additional water to address siltation losses
over a longer term.
Nacimiento Water Supply Project Participation Page 4
Basis - This policy change would continue to. account for siltation, and, include guidelines for
planning for siltation over a longer planning horizon as new supply opportunities are considered by
the Council. Staff is not recommending an appropriate planning horizon at this time since it is not
fully possible to anticipate all of the conditions, yield, etc. associated with future supply projects to
be considered by this and future Councils. Those conditions may influence what the Council
determines is an appropriate amount or planning horizon for siltation at that time. Relative to the
Nacimiento project, staff would recommend that upon initiation of.project construction (which is
when the project yield is considered added to the City's supplies) the Council then consider what, if
any, amount of the project yield should be dedicated to future siltation losses.
WME Policy 6.0 Supplemental Water Requirements
The current WME Policy 6.1.1 identifies that the City should develop additional supplies to meet
the projected General Plan build-out requirements and offset water yield lost due to siltation
(projected to 2025). This policy bases its determination of supplemental water supply needs
primarily upon the planning per capita use rate multiplied by a General Plan build-out population
figure. The policy does not recognize or address other possibly critical supply requirements needed
for service and reliability such as siltation beyond 2025, drought conditions, short or long term loss
of yield from an existing supply source, requirements associated with meeting peak operating
demands, and other unforeseen conditions. The recommended modification to this policy to
identify Secondary Supply Requirements,is very important in that it addresses these key service and
reliability issues.
Recommendation — Amend Policy 6.1.1 to include planning for two levels of supplemental water
supply requirements and development of supplemental water supplies as follows:
1. Primary Supply Requirements - develop supplemental supplies to provide sufficient.water
for General Plan.build-out using the per capita planning use rate identified in Policy 3.1.2
and the projected General Plan Build-out' population, 145 x.build-out population (current
policy), and,
2. Secondary Supply Requirements — develop supplemental supplies to provide additional
yield to account for future siltation losses, drought, loss of yield from an existing supply
source, operational requirements necessary to meet peak operating demands, and other
unforeseen conditions.
Basis — The recommended policy identifies supplemental water supply requirements to include
Primary Supply Requirements as those required to meet our General Plan obligations, and,
Secondary Supply Requirements as those that the City should consider in its service responsibility
to address requirements beyond providing for the annual consumptive needs of the community. The
recommended amendment places priority for the City's supplemental supply development and
recognizes the need to consider development of supplies (Secondary Supplies) beyond those driven
by,General Plan population needs. The recommended policy does not set an amount to be
considered adequate, as staff feels that amount, or adequacy, should be a consideration to be made
by Council at the time they consider a supplemental supply project opportunity.
This policy recommendation to identify Secondary Supply Requirements differs from previous
policy for development of a `°reliability reserve" in that it defines the Secondary Supply
Requirements in a broad sense and allows for their appropriate use over.a broad range of conditions.
Nacimiento Water Supply Project Participation Page 5
Additionally, it does not place the priority for their development above that needed to meet our
General Plan goals and does not quantify the amount required. That amount may be variable and
should be determined by Council based on a variety of conditions, either existing or future, and
should also be considered in the context of available supply opportunities.
Other policies contained under Policy 6.0 Supplemental Water Requirements are adequate and
appropriate as currently written and are not recommended for amendment. Policy 6.1.2
Supplemental Water Sources - identif es criteria by which the City will evaluate supplemental water
sources. This policy supports the City's participation in the Project. The City's participation in the
Project has been and/or will be reviewed and considered by Council under the listed parameters of
this policy. Policy 6.1.3 s Paying for Supplemental Water for New Development - defines or
confirms allocation of cost between rate payers and new development.
WME Policy 7.0 Multi-Source Water Supply
The current policy 7.1.1 identifies the importance and value of developing and maintaining multi-
source water supplies to "reduce reliance on any one source of water supply and increase its (City)
supply options in future droughts or other water supply emergencies." This policy as written is
already supportive of the City's participation in the Project. Council may consider if it is
appropriate to strengthen this policy by including in the justification the ability to provide for
meeting peak operational demands in the event that one of our other major supply sources is
unavailable.
Recommendation -Amend Policy 7.1.1 to include language that identifies the ability to provide for
peak operating demands, in the event that one of our major supply sources is unavailable, as a goal
and benefit of multi-source water supply development.
Basis — This amendment to this policy places an additional and important parameter to consider
when reviewing the adequacy of the City's water supply resources.
WME Policy 8.0 Allocation of New Supplies
The current policy contained in this section identifies not only the priority by which new supplies
are to be allocated,i.e. first to eliminate any deficit between adopted yield and present demand, but
also provides policy for determining the amount of water available for new development,when new
supplies will be considered available for allocation, pre-1994 City boundary infill and
intensification requirements, accounting for reclaimed water and accounting for private water
supplies being used in the City.
In order to address growth related concerns with the development of water supplies beyond those
identified as required to meet General Plan population demands, staff is recommending that Council
consider amendments to the policies which prioritize the allocation/use of new supplies, and policy
which determines how water available for allocation to development is calculated to ensure that the
amount of the City's water supply determined to be available to new development is tied directly to
the General Plan land use.
Recommendation -Amend Policy 8.1.1 to include priority for allocation of new supplies as: "...first
to eliminate any deficit between the adopted safe annual yield and the present demand as defined in
Nacimiento Water Supply Project Participation Page 6
policy 3.1.4" (current policy), and, second to eliminate any deficit between adopted safe yield and
GP build-out, and third to supply for Secondary Supply Requirements as identified in policy 6.1.1.
Basis — This policy amendment expands the priority for which new supplies are to be allocated to
include meeting General Plan build-out needs and Secondary Supply Requirements. The first
priority— eliminating any deficit between adopted safe annual yield and present demand, has been
satisfied and its basis stems from a time when the City's water use had actually exceeded its safe
annual yield. We currently have policies in place that would prohibit that from occurring as a result
of development. However, a new worst case drought or other loss of supply could redefine our safe
annual yield and again make this policy priority applicable.
Recommendation-Amend 8.1.2 Supplying New Development-A.—to include policy which would
calculate water available for allocation to new development by either-the adopted safe annual yield
of the City's supplies minus present demand as identified in policy 3.1.4 (current policy), or the
projected demand at build-out as identified in policy 3.1.3 minus present demand (3.1.4), which
ever is less.
Basis - This policy amendment provides assurance that if/when the City develops water to provide
for the Secondary Supply Requirements identified in the proposed amended policy 6.1.1, its use for
development, beyond the current GP envisioned build-out,requires that the current GP build-out be
evaluated and modified first, based on its own merits and not driven or limited by water supply
availability. There will be no more water identified as available for allocation, than what is called
for based on General Plan population and land use projections. This assurance is seen by staff as an
importanv policy needed to support the City's participation in the project.
GP Growth Management Policies
Water supply affects land use planning because water demand typically increases as land use
intensifies. In San Luis Obispo, water demand is based on population. As population increases,
water demand increases. Therefore, any plans to increase population capacity through land use
have to be coordinated with the availability of a water supply. The City's Water Management
policies direct that water supplies be available to accommodate the population capacity within
the Land Use Element's Urban Reserve. Unintended growth spawned simply by available water
is not possible because the City regulates growth through land use policies. To increase water
available for development, the City must first amend the Land Use Element of the General Plana
In San Luis Obispo, lack of water supplies may become a constraint to population growth; but
only when they are also a constraint to achieving the City's land use goals. The recommended
policy amendments to WME Policy 8.1.2 A. further strengthen this tie.
A summary of General Plan Policies related to management of growth within the City is included as
Attachment 1 to this report. The listing of General Plan policies is provided to demonstrate that we
indeed have a considerable policy basis available to support well planned and regulated growth
within the City. Resource development and managed growth can compatibly coexist. Excessively
constrained resource development may actually be counter to well planned and regulated growth
management. The effectiveness of our overall General Plan orientation toward growth
management (supported by many other policies in addition to those key ones noted in
i
Nacimiento Water Supply Project Participation Page 7
Attachment 1)'has been demonstrated by an annual growth rate averaging well below 1% over
many years when water has been available for development.
Open Space Protection
Along with strong policy protection, physical protection of the community exists through
previous open space acquisitions .and geographic barriers to development. In addition;
aggressive open space protection efforts are underway through our Natural Resource Program.
These efforts, combined with policies that require open space dedications in exchange for
development (or fees that leverage protection in other sensitive areas) are expected to result in
substantial added greenbelt protection as we reach City build-out in 2022. For example, the
Margarita, Orcutt, and Dalidio annexations will require significant open space dedications. The
Airport Area Annexation will result in more open space protection through dedication and a new
fee for creating a "hard" southern city boundary. Open space grant money is being pursued
constantly (over $6.5 million received since 1996), and work on this southern boundary is
underway at the Brughelli Ranch via grant sources. These collective physical strategies add an
important and permanent layer of protection against unwanted growth.
Letter of Intent to Participate in the Project
Included as Attachment 3, is a draft letter of intent for the Mayor's signature. The letter of intent is
consistent with Council's direction from February 10, 2004 indicating a desired participation level
of 3,380 afy. While this letter of intent is non-binding on the City, it should represent the City's
true intent within the range of conditions previously considered by Council.
Future Actions,Decision Points
As noted in previous reports to the Council, there are a number of steps ahead of us before a final
commitment is made to participate in the Project, including amending the General Plan and related
environmental review. The following schedule, previously provided to Council, identifies the key
steps remaining prior to execution of the final participation agreement. At the time the Council
considers the final participation agreement, staff will review the refinedparticipation levels of all
agencies and associated costs to the City.
Acti-on Date
Council decides intended level of participation in the project and directs staff to begin March 9,2004
processing policy amendment(s).
County prepares final cost analysis and presents offer to participate to agencies April.2004
Planning Commission considers policy amendments and environmental review June 2004
documents.
Council approves first step of phased rate increases and adopts higher development May 2004
impact fees.
Council considers General Plan amendment and environmental review documents. June 2.004
Council approves final participation agreement June 2004
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FISCAL IMPACT
The potential fiscal impacts of participation in the Project have been previously discussed based on
the best information available to staff. Staff will return with further fiscal analysis after all agencies
have provided their intended participation, levels to the County and the revisedproject report and
cost analysis is prepared by the County and distributed to the participating agencies with the final
participation agreements. These revised fiscal impacts will be considered by Council with the
(binding)agreements and will;at that time,be an accurate reflection of the City's obligation.
ALTERNATIVES
Alternatives to Policy Amendments
Council may direct staff to initiate WME or other General Plan policy amendments not identified
above, or direct a revised approach to the recommended policy amendments. Staff is comfortable
that the recommended policy amendments will provide the policy support necessary for the City to
participate in the Project at Council's desired participation level, and will provide reasonable
assurance that participation in the Project will not'become a growth inducement beyond that growth
identified in and regulated by the City's General Plan.
Attachments
1. General Plan Growth Management Policy Summary
2. Water.and Wastewater Management Element
3. Draft Letter of Intent