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HomeMy WebLinkAbout11/12/2002, BUS 5 - RECYCLED WATER PRICING POLICY council Nov.ov. 12 2002 acEnaa RepoRt "®N-6 CITY OF SAN LUIS OBISPO FROM: John E.Moss,Utilities Directo*_ Prepared By: Sue Baasch,Administrative Analyst SUBJECT: RECYCLED WATER PRICING POLICY CAO RECOMMENDATION Adopt a resolution setting rates for recycled water at 90%of the potable water rate. DISCUSSION As part of the City's multi-source water strategy to develop adequate water resources, the City has developed a water-recycling program to provide non-potable water for irrigation and other appropriate non-potable uses in the City. For the intended use, irrigation, recycled water is considered an equivalent water supply to potable water. As the project approaches construction and actual application of recycled water,we now need to evaluate and set an appropriate rate for the sale of that water. This report will summarize prior policy direction relative to the recycled water project and recommend establishing a rate for the sale of recycled water in the City. The Project The Water Reuse Project will take the highly treated (tertiary) effluent from the City's Water Reclamation Facility (WRF) and distribute it primarily in the southern portion of town for use as irrigation water for large landscape areas. The new Damon-Garcia sports-fields, the DeVaul detention basin/park and the Laguna Lake Golf Course are examples of recycled water use sites. The project itself consists of constructing storage and pumping facilities at the WRF and approximately 8 miles of distribution pipeline. The project also includes modification of existing user facilities (city parks)necessary to accommodate the use of recycled water. Recycled Water Policies In establishing rate structures for City services, the City follows objectives adopted by Council in 1988 as follows: a. Comply with legal requirements b. Ensure revenue adequacy to fully meet system operating and capital needs c. Encourage conservation d. Provide equity and fairness between classes of customers e. Result in rate structures that are easy to understand by our customers and easy to administer f. Provide for ongoing review in order to facilitate rate stability I Recycled Water Pricing Policy Page 2 of 4 In the development of the Water Reclamation Project Council has previously established policy for the project that should be considered when establishing a rate for recycled water. The following is a list of the related policies: a. Water Management Element (WME) Policy 7.1.1 identifies that "the City shall ...develop and use water supply projects to maintain multi-source water supplies..."Recycled water is perhaps one of our most reliable water sources and as such is a key project in meeting the goal of this policy. b. WME Policy 8.1.4 identifies that recycled water will be counted as a part of the City's safe annual yield as its use is developed,which again supports that recycled water is considered a component of the City's total water resources. c. Ordinance No. 1403 (Nov.6, 2001) mandates the use of recycled water for properties when determined "feasible" by the Utilities Director.. Feasible is further defined when "...reclaimed water can be delivered to the property at an overall cost to the user which does not exceed the overall cost of potable water service." d. Resolution No. 9426 (Nov. 6, 2001) dedicates water fund revenues for the repayment of the State Revolving Fund Loans for the project. e. CIP requests related to the Water Reuse Project and Water Fund analyses previously approved by Council have included the Water Reuse project as a source of supply project of the Water Fund to be paid for through Water Fund revenues, including rates and impact fees. f. Enterprise Fund Fiscal policy that states "The City will set fees and rates at levels which fully recover the total direct and indirect costs..." A review of the above policies and decisions by the Council identify that the Council has already determined the following: recycled water shall be funded by the water fund through rates and fees similar to the City's potable water services; recycled water is an equivalent supply to potable water given its intended uses, and staff should compel its use when feasible; recycled water should not result in increased costs to customers over the use of potable water; and, as with other programs,the rate structure should comply,to the extent reasonable,with the above rate structure objectives. Based on the above actions and policies, establishing a rate structure for recycled water should be relatively simple. The policies identified which require balancing in the development of a recycled water rate structure are ensuring revenue adequacy and providing the recycled water to the user at a cost that does not exceed the overall cost of potable water service. Using Recycled Water To properly balance the above policies, we must consider what additional expenses/costs users of recycled water incur over those using potable water. The two potential sources for increased costs would be the need for additional capital facilities,i.e.modifications of the users irrigation systems to accommodate the use of recycled water, and providing for any operating costs associated with meeting the recycled water monitoring and management requirements. In regards to capital facilities, staff does not anticipate that users will incur any significant additional costs associated with the use of recycled water. In the case of existing users of potable water, the s-a Recycled Water Pricing Policy Page 3 of 4 water fund will be making and paying for system modifications associated with using recycled water, and in the case of new users, no additional costs will be incurred as they will be installing their irrigation system in accordance with the requirements for using recycled water, and should not experience any significant increased costs associated with doing so versus plumbing for potable water. That leaves us with determining the additional costs associated with managing an irrigation system using recycled water. Some additional monitoring is required, an annual cross connection control inspection and some minor reporting. In discussions with other agencies providing recycled water, they have advised that, in general, the additional user effort associated with recycled water is minimal, especially for a properly operated and well managed irrigation system. A review of other user practices associated with the use of recycled water does indicate a need to apply some additional irrigation water for the purpose of leaching salts that build up on the soil through the root zone. Recycled water does have a slightly higher salt concentration than our potable water. The amount of additional water required can be as much as 10% depending on annual rainfall. Additionally, some agencies have provided an incentive rate to-assist in marketing the new product,recycled water. Proposed Rate Based on the leaching requirement, the lack of other significant cost impacts to the users, and the direction provided by previous related policy, staff is recommending a rate set at 90%of the potable water rate as being consistent with the above policies and objectives, and fair to the recycled water user. The impacts to water fund revenues from the reduced rate for the recycled water customers will be negligible. CONCURRENCES The Finance Department concurs with the recommended action. In reviewing the rates for the sale of recycled water of other agencies in California; the recommended rate appears to be relatively consistent with that of other agencies with similar projects. Of course, as we have learned in comparing rates with other agencies, the circumstances driving the rates of other agencies vary considerably as do the rates. For example, agencies looking to reuse as a means of disposal of their wastewater effluent, rather than as a new source of supply, may have significantly lower rates to really encourage use. FISCAL IMPACT There is no immediate fiscal impact associated with the recommended action. A full analysis of the impact of the funding of the water reuse project has been included in the annual water fund review. Any impacts associated with a reduced rate for recycled water will be presented to Council with the 2003 Fund analysis presented to Council in May 2003. At full build-out, recycled water may represent up to 10% of the City's total water supply. If 10%of the customers were to pay 10% less for their water,that represents a potential loss of only 1%of potential Water Fund revenue. �- 3 Recycled Water Pricing Policy Page 4 of 4 ALTERNATIVES 1. Council may wish to consider whether an incentive to encourage recycled water use via an additional reduction in rate is appropriate since recycled water is a new resource for most users. As stated previously, staff does not feel there is a need to incentivise the use of recycled water through rates since we currently have an ordinance that allows the City to require its use, and staff feels that recycled water is an equal product to potable water for its intended uses. This however, does not mean that an incentive would be inappropriate. 2. Council may also direct that recycled water be sold at a rate equivalent to potable water. This alternative would provide additional revenues for the water fund, and would more consistently reflect the cost to provide water service, be administratively simple and easy to explain to customers. This alternative would not provide any incentive for potential users and may place the City in an enforcement mode. This alternative is not recommended. Attachments Attachment 1 -Resolution Attachment 2—Other Agency Recycled Water Rates 6 - 4 MACHMEN RESOLUTION NO. (2002 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO ESTABLISHING A RATE FOR THE SALE OF RECYCLED WATER WHEREAS, the City of San Luis Obispo (City) has identified a need to develop additional water supplies to meet the goals of the adopted General Plan; and WHEREAS, the City will be completing a Water Reuse project to use recycled water for irrigation and other purposes in and around the City as a new water supply project, and WHEREAS,the City has adopted prior policies guiding the establishment of rates, and WHEREAS, it is now necessary for the City to establish a rate for the sale of recycled water consistent with the aforementioned policies. NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo that the sale of recycled water shall be set and remain at a rate equivalent to 90% of the potable water rate. Such recycled water rate shall be changed as potable water rates are changed to retain the 90%relationship: Upon motion of seconded by and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was adopted this day of , 200x. Mayor Allen K. Settle ATTEST: Lee Price, C.M.C. City Clerk APPROVED AS TO FORM: ffr G. Yr en, ty Attomey R S ' � ATTACHMENT 2 ooa0000000a0000 CV «+ s !n N OIAO d' Cp CorOOC7 � M000O CO m co oorncna0n �nrnnaD �nnnaocnrn co E o U cc Q [70nCo0Mq ' m U n co co t� o� Tcoaocou� cov v C7 O r N r r r r H 3 d - m L E � v LO LOON nnvconow �n co ' aV r r r r r r O r N O r r O d 3 03 ca Y •L •L •L 4+ d CD z, 0 0 2�`Z`a z21Z%Z � Uc>z UUUWUUUU U a a a a CL E4-2 m 0 L E CO c C c y a o, *. cn CL CD 0L CI) L Cn 1 q d) O L E fd m a U Ei? M O cm z'm W pl E N R1 m j O V m U U E m O V � O� 0 7 O U 7 U m Qa, y E o U ? y L •p m U� m O m V � C� a C. y p 3028 c a � s o o m o o _ E o _ m E .. m � U a, E � yccs 0 < cc CL ?moo 0L6V � o ca t ai c3 m 0 cc > y m CD U •O y N O U O) y y f6co f0 U N o oia � � r c m R � E c�np o omU 2l y t o vmi .o E- m 'ac c c c c c' d c U S (� I I councit °°°� j agenba RepoRtLP CITY OF SAN LUIS O B I S P O FROM: John Mandeville, Community Development Direct Prepared By: Jeff Hook, Associate Planne` �%� SUBJECT: HOUSING ELEMENT TASK FORCE CAO RECOMMENDATION Adopt a resolution establishing an ad hoc Housing Element Task Force,consistent with direction provided at the October 1, 2002 Council meeting. DISCUSSION Background At the October 1'meeting, Council discussed establishing a task force to assist the City with the Housing Element update. While expressing support for the idea, Council members continued the item with direction, as explained below. This is part of the "outreach effort" built into the update workprogram. The Task Force will provide a community "sounding board" for new housing policies and programs, to provide a broad perspective on housing issues, and where appropriate, to contribute new program ideas. Its role is to advise the Planning Commission and City Council; it would not have approval authority or duplicate the Planning Commission's role. The City's Planning Commission is, under state law, the primary advisor to the Council on long- range planning matters, including preparation of the Housing Element. The Commission would continue to be responsible for guiding the updated element's content and format, and for reviewing the environmental assessment. The Task Force will augment the Commission's role by involving a broad spectrum of community viewpoints in the preparation of the document and help build community consensus on the tough choices necessary to tackle the City's housing needs. While it has been suggested that the Planning Commission have a member on the task force, it will be most appropriate if that were an ex-officio role to avoid conflict with their primary role in the process. This would provide a liaison with the task force that the Planning Commission is seeking. Council Direction Task Force Size. The Task Force should represent a broad spectrum of community interests. This calls for participation by various groups and individuals with a strong interest in housing — an issue that crosses all income levels and geographic boundaries in San Luis Obispo County. As previously proposed by staff, the Task Force could consist of up to 25 persons, representing nine stakeholder groups. Council felt a smaller task force may be more effective and asked staff to condense the list by combining representation where possible and reducing the overall number of persons on the Task Force. Attachment 2 shows a revised Stakeholder List, based on Council's suggestions. For comparison, Attachment 3 is the previous Stakeholders' List. Housing Element Update Task Force Page 2 Residency. City policies require that those serving on standing city advisory bodies must be city residents. At the October 151 meeting, Council members supported city residency as a prerequisite for serving on this ad hoc Task Force. In reviewing the stakeholder groups and their likely representatives, staff found several of the likely representatives were not city residents. For some of the stakeholder groups, a residency requirement would preclude the most knowledgeable or available representative from serving. Consequently, staff recommends that City residents be encouraged from each group, but that Council retain flexibility as needed to achieve a well-informed and diverse mix. Stakeholder groups would be asked to submit names of possible representatives with city residents encouraged, and the list of candidates would come back to the Council in December for action. Council may wish to establish an informal goal of two-thirds residents to one-third non-resident members. Stakeholder Representation. The recommended stakeholder groups are listed in Attachment 2. These groups will be asked to suggest individuals to serve on the Task Force. Those individuals' names would then come back for Council action. In some cases, there may not be an organization representing a particular group or perspective. In those instances, staff will contact individuals active in housing issues for nominations. A concern expressed on October 1" was that business interests might be too heavily represented on the task force. However, it is important to distinguish between general business interests and the private sector housing delivery system. Ideas generated by the Task Force will be of no benefit if they cannot be implemented by those who finance and build housing. Frequency of Meetings. It was suggested that the Task Force might need to meet more frequently than once a month—perhaps as often as twice a month—given the range and number of issues to be addressed. Again, flexibility is warranted here. Staff recommends that Council set the meeting period for January through June, initially with one meeting per month. Monthly meetings will allow staff adequate time to prepare for meetings and to do meeting follow-up (minutes, responses to comments, etc.), and to continue work on the Housing Element update and other on-going staff tasks. Council may wish to give the Task Force and staff discretion to add meetings if determined necessary. Adding meetings will add time to the update process and this needs to be carefully weighed, since the time frame for the update is already tight due to the December 2003 deadline. The draft update is to be sent to the State Department of Housing and Community Development at least 90 days before the element's adoption. Neighborhood Involvement. The proposed Stakeholders List includes Residents For Quality Neighborhoods, an umbrella organization that represents many neighborhoods in the City. Including additional neighborhood parking districts or organizations, as discussed at the It :t meeting, would make it difficult to contain the size of the Task Force. Staff will hold neighborhood meetings as part of the outreach effort, however it will not be possible to include representatives of all the neighborhoods and/or parking districts and still maintain a reasonably- sized working group. LO Housing Element Update Task Force Page 3 Task Force Role and Meeting Schedule With the limited time and resources available, the Task Force's role should be clearly defined and its review streamlined to allow the City to make reasonable progress toward the adoption deadline. Staff suggests linking the Task Force's meetings to specific stages of the update process—possibly as follows: Meeting 1. Organizational and background briefing (to help understand the problem) Meeting 2: Review past Housing Element programs and current issues Meeting 3: Review possible new housing policies and programs Meeting 4: Recommend possible new housing policies and programs Meeting 5: Review draft update of the Housing Element Meeting 6: Summarize and forward comments to the Planning Commission and City Council Meetings should occur once a month, from January through June, with flexibility as noted above. The Task Force would have the responsibility of reviewing, commenting and recommending policies and programs. The Task Force would not have approval authority. While consensus would be desirable, it may not be possible and should not be required for the Task Force to complete its work. Given the group's diversity, it is primarily the range of comments and recommendations that would add value to the process. The Planning Commission and Council will have the benefit of their comments, along with public hearing comments, staff reports and other sources of information before acting on the new Housing Element. Issues To Be Addressed The need for affordable housing is a widely recognized community and statewide concern. While the causes for the current "crisis" are complex and in some cases, outside of City control, there is much the City can do to address the needs and concerns of its residents. This effort will involve simple, short-term changes to City policies and development review, and more significantly, may involve fundamental, long term changes to policies on growth, land use and development standards. These changes will require careful consideration and community consensus to effect. The Task Force, working in concert with the Planning Commission and staff, will provide a broad-based forum to explore these issues, discuss implications and alternatives, and invite public participation. ATTACHMENTS 1. Draft Council Resolution 2. Revised List of Possible Stakeholder Groups and Representation 3. Previous Stakeholders List J:UHOOKViousing Element Update\HousingElementUpdatetaskforceCCrptl 1-12.doc Attachment 1 RESOLUTION NO. (2002 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO ESTABLISHING AN AD HOC HOUSING ELEMENT TASK FORCE WHEREAS, the City is updating its General Plan Housing Element with the goals of expanding housing opportunities for all income groups and complying with state law; and WHEREAS, the Planning Commission and City Council have approved a Housing Element Update work program that promotes community participation in the update process; and WHEREAS, to promote community participation that reflects a wide range of interests, perspectives and needs, the City Council seeks to create a volunteer, ad hoc Housing Element Task Force to advise the Planning Commission and City Council during the Housing Element update process. BE IT RESOLVED by the Council of the City of San Luis Obispo that: SECTION 1. Housing Element Task Force. The City Council hereby establishes the Housing Element Task Force to assist the City during the Housing Element update process. The Task Force shall be an ad hoc, volunteer advisory body serving at the pleasure of the City Council. SECTION 2. Duties of the Task Force. The duties of the Task Force shall be as follows: 1. Review and comment on existing and proposed housing policies and programs in an effort to expand housing opportunities for all income groups. 2. Recommend new housing goals, policies or programs to address community housing needs. 3. Review the Draft Housing Element Update. 4. Other duties as assigned by the City Council. Attachment 1 Council Resolution No. (2002 Series) Page 2 SECTION 3. Term and Meetings. The Task Force shall serve during the term of the Housing Element update, starting January 1, 2003 and ending June 30, 2003, unless extended by the City Council. Meetings shall be once a month, or more frequently during this term if determined necessary by the Community Development Director and the majority of Task Force members, and shall generally be organized as follows: Meeting 1: Organizational and background briefing Meeting 2: Review past Housing Element programs Meeting 3: Review new housing policies and programs Meeting 4: Recommend new housing policies and programs Meeting 5: Review draft Housing Element Update Meeting 6: Summarize and forward comments to the Planning Commission and City Council SECTION 4. Appointment of Task Force Members. Task Force members shall be appointed by a majority vote of the City Council, and shall represent a wide spectrum of community interests, perspectives, and housing needs. Upon motion of , seconded by , and on the following roll call vote: AYES: NOES: ABSENT: the foregoing resolution was adopted this day of , 2002 Mayor Allen Settle ATTEST: Lee Price, City Clerk APPROVED AS TO FORM: ,feffifef G or en ity Attorney jh/Uresolution and ordinances/housingtaskforceccres Attachment 2 y �+ y _ = N w a0i �bA vElU O O � � •G> � O C'y ,� v� C� L .�'. Q C CC � �i ,C '� ❑ a 0 p � � rxr� L1 xWaU a i ° as �'a = 3 a� y o •� C3 W ° N C u _ � o xz Z d p i a. 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